BT INSTITUTIONAL FUNDS, 485BPOS, 1996-04-30

BT INSTITUTIONAL FUNDS
485BPOS, 1996-04-30

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1996

File Nos. 33-34079 and 811-06071
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933

POST-EFFECTIVE AMENDMENT NO. 17

AND
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940

AMENDMENT NO. 20

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

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

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

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

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

[ ] immediately upon filing pursuant to paragraph (b) [x] on April 29, 1996
pursuant to paragraph (b) [ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i) [ ] 75 days after filing pursuant to
paragraph (a)(ii) [ ] on (date) pursuant to paragraph (a)(ii) of rule 485.

If appropriate, check the following box:

[ ]

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

CASH MANAGEMENT PORTFOLIO, TREASURY MONEY PORTFOLIO, TAX FREE MONEY PORTFOLIO,
NY TAX FREE MONEY PORTFOLIO, EQUITY INDEX 500 PORTFOLIO, CAPITAL APPRECIATION
PORTFOLIO, SHORT/INTERMEDIATE U.S. GOVERNMENT SECURITIES PORTFOLIO AND BT
INVESTMENT PORTFOLIOS HAVE ALSO EXECUTED THIS REGISTRATION STATEMENT.

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

<PAGE>

BT0449A

BT INSTITUTIONAL FUNDS

INSTITUTIONAL CASH MANAGEMENT FUND
INSTITUTIONAL TREASURY MONEY FUND
INSTITUTIONAL NY TAX FREE MONEY FUND
INSTITUTIONAL TAX FREE MONEY FUND
EQUITY 500 INDEX FUND
INSTITUTIONAL CASH RESERVES
FORM N-1A
CROSS REFERENCE SHEET

Part A
ITEM NO. HEADINGS IN PROSPECTUS

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

2. Synopsis . . . . . . . . . . . .Summary of Fund Expenses

3. Condensed Financial
Information . . . . . . . . . .Fund's Financial History

4. General Description of
Registrant . . . . . . . . . . .Cover Page; Investment Objective and
Policies; Management of the Trust and
Portfolio

5. Management of the Fund . . . . .Management of the Trust and Portfolio

<PAGE>

6. Capital Stock and Other
Securities . . . . . . . . . . .Cover Page; Purchase and Redemption
of Shares; Dividends, Distributions
and Taxes; Management of the Trust
and Portfolio; Performance
Information and Reports;

7. Purchase of Securities Being
Offered . . . . . . . . . . . .Purchase and Redemption of Shares;
Net Asset Value

8. Redemption
or Repurchase . . . . . . . . Purchase and Redemption of Shares

9. Pending Legal Proceedings . . .Not applicable

Part B Headings in Statement of
ITEM NO. ADDITIONAL INFORMATION

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

11. Table of Contents . . . . .Contents

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

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

Part B
ITEM NO.
Headings in Statement of ADDITIONAL INFORMATION

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

15. Control Persons and Principal
Holders of Securities . . . . .See Prospectus -- "Organization of
the Trust"
16. Investment Advisory and Other
Services . . . . . . . . . . . .Management of the Trust and Portfolio

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

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

19. Purchase, Redemption and Pricing
of Securities Being Offered . .Valuation of Securities; Redemption
in Kind

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

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

<PAGE>

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

23. Financial Statements . . . . . .Financial Statements

PART C

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

<PAGE>

BT INSTITUTIONAL FUNDS

PROSPECTUS: APRIL 29, 1996

Please read this Prospectus carefully before investing and retain it for future
reference. It contains important information about the Fund that you should know
and can refer to in deciding whether the Fund's goals match your own.

A Statement of Additional Information with the same date has been filed with the
Securities and Exchange Commission, and is incorporated herein by reference. You
may request a free copy of the Statement by calling the Fund's Service Agent at
1-800-368-4031.

UNLIKE OTHER MUTUAL FUNDS, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY
INVESTING ALL OF ITS INVESTABLE ASSETS IN A SEPARATE INVESTMENT COMPANY (A
"PORTFOLIO") WITH AN IDENTICAL INVESTMENT OBJECTIVE. THE INVESTMENT PERFORMANCE
OF THE FUND WILL CORRESPOND DIRECTLY TO THE INVESTMENT PERFORMANCE OF THE
PORTFOLIO. SEE "SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE" ON
PAGE 10. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, BANKERS TRUST COMPANY AND THE SHARES ARE NOT FEDERALLY INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY. AN INVESTMENT IN THE FUND IS SUBJECT TO RISK THAT MAY CAUSE THE
VALUE OF THE INVESTMENT TO FLUCTUATE, AND WHEN THE INVESTMENT IS REDEEMED, THE
VALUE MAY BE HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY INVESTED BY THE
INVESTOR.

LIKE SHARES OF ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

Equity 500
Index Fund

Seeks to match the performance of the stock market, as represented by the S&P
500 market index, before expenses.

BANKERS TRUST COMPANY
Investment Adviser of the
Portfolio and Administrator

SIGNATURE BROKER-
DEALER SERVICES, INC.
Distributor
6 St. James Avenue
Boston, Massachusetts 02116
<PAGE>

TABLE OF CONTENTS
- ------------------------------------------------------------------------------
PAGE
..............................................................................

Summary of Fund Expenses 3
Fund Financial Highlights 5
Investment Objective, Policies and Risks 6
Risk Factors; Matching the Fund to Your Investment Needs 9
Net Asset Value 11
Purchase and Redemption of Shares 12
Dividends, Distributions and Taxes 15
Performance Information and Reports 16
Management of the Trust and Portfolio 17
Additional Information 21
- ------------------------------------------------------------------------------

<PAGE>

SUMMARY OF FUND EXPENSES
The following table provides (i) a summary of expenses relating to purchases
and sales of the shares of Equity 500 Index Fund (the "Fund") and the annual
operating expenses of the Fund and the expenses of the Equity 500 Index
Portfolio (the "Portfolio"), as a percentage of average net assets of the Fund
and (ii) an example illustrating the dollar cost of such expenses on a $1,000
investment in the Fund. THE TRUSTEES OF BT INSTITUTIONAL FUNDS (THE "TRUST")
BELIEVE THAT THE AGGREGATE PER SHARE EXPENSES OF THE FUND AND THE PORTFOLIO
WILL BE LESS THAN OR APPROXIMATELY EQUAL TO THE EXPENSES WHICH THE FUND WOULD
INCUR IF THE TRUST RETAINED THE SERVICES OF AN INVESTMENT ADVISER AND THE
INVESTABLE ASSETS ("ASSETS") OF THE FUND WERE INVESTED DIRECTLY IN THE TYPE OF
SECURITIES BEING HELD BY THE PORTFOLIO.
- ------------------------------------------------------------------------------

ANNUAL OPERATING EXPENSES
(as a percentage of the average daily net assets of the Fund)
..............................................................................
Investment advisory fee (after reimbursements or waivers) 0.07%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.03
..............................................................................
Total operating expenses (after reimbursements or waivers) 0.10%
..............................................................................
EXAMPLE 1 year 3 years 5 years 10 years
..............................................................................
You would pay the following expenses
on a $1,000 investment, assuming:
(1) 5% annual return and (2) redemption
at the end of each time period $1 $3 $6 $13
- ------------------------------------------------------------------------------

The expense table and the example above show the costs and expenses that an
investor will bear directly or indirectly as a shareholder of the Fund. While
reimbursement of distribution expenses in amounts up to 0.10% of average net
assets are authorized to be made pursuant to the Plan of Distribution under
Rule 12b-1 of the Investment Company Act of 1940, as amended (the "1940 Act"),
it is not expected that any payments will actually be made under that plan in
the foreseeable future. Bankers Trust Company ("Bankers Trust") has
voluntarily agreed to waive a portion of its investment advisory fee. Without
such waiver, the Portfolio's investment advisory fee would be equal to 0.10%.
The expense table and the example reflect a voluntary undertaking by Bankers
Trust or Signature Broker-Dealer Services, Inc. ("Signature") to waive or
reimburse expenses such that the total operating expenses will not exceed
0.10% of the Fund's average net assets annually. In the absence of this
undertaking, for the fiscal year ended December 31, 1995, the total operating
expenses would have been equal to approximately 0.23% of the Fund's average
net assets annually. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN. Moreover, while each example assumes a 5% annual return, actual
performance will vary and may result in a return greater or less than 5%.

The Fund is sold by Signature as the Trust's distributor (the "Distributor")
to customers of Bankers Trust or to customers of another bank or a dealer or
other institution that has a sub-shareholder servicing agreement with Bankers
Trust (along with Bankers Trust, a "Service Agent"). Some Service Agents may
impose certain conditions on their customers in addition to or different from
those imposed by the Fund and may charge their customers a direct fee for
their services. Each Service Agent has agreed to transmit to shareholders who
are its customers appropriate disclosures of any fees that it may charge them
directly.

In addition to the customers of Bankers Trust or other institutions described
above, the Fund is available for (a) accounts where an investment adviser or a
financial planner has discretion over such account and the account holder pays
such person as compensation for its advice and other services an annual fee of
at least 0.50% on the assets in the account; (b) accounts established under a
"wrap fee" program or formal asset allocation program where the account holder
pays the program sponsor an annual fee of at least 0.50% on the assets in the
account; and (c) accounts established through an automated clearing or similar
system established for the use of investment professionals and through which
purchases and redemptions are transmitted to the Fund on an omnibus basis.

For more information with respect to the expenses of the Fund and the
Portfolio see "Management of the Trust and Portfolio" herein.
<PAGE>

FUND FINANCIAL HIGHLIGHTS
The following table shows selected data for a share outstanding, total
investment return, ratios to average net assets and other supplemental data
for the Fund for each period indicated and has been audited by Coopers &
Lybrand L.L.P., the Fund's independent accountants, whose report thereon
appears in the Fund's Annual Report which is incorporated by reference in the
Fund's Statement of Additional Information.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE PERIOD
DECEMBER 31, DECEMBER 31, 1992
----------------------------------------------- (COMMENCEMENT
1995 1994 1993 OF OPERATIONS)
...................................................................................................................
SELECTED PER SHARE DATA
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.44 $10.68 $10.00 $10.00
...................................................................................................................
Income from Investment Operations
Net Investment Income 0.30 0.28 0.25 --
Net Realized and Unrealized Gain
(Loss) on Securities and Futures
Transactions 3.59 (0.13) 0.73 --
..................................................................................................................
Total from Investment Operations 3.89 0.15 0.98 --
..................................................................................................................
Distributions from
Net Investment Income (0.30) (0.28) (0.25) --
Net Realized Gain from Securities
and Futures Transactions (0.06) (0.11) (0.05) --
..................................................................................................................
Total Distributions (0.36) (0.39) (0.30) --
..................................................................................................................
Net Asset Value, End of Period $13.97 $10.44 $10.68 $10.00
..................................................................................................................
TOTAL INVESTMENT RETURN 37.59% 1.40% 9.84% --
RATIOS AND SUPPLEMENTAL DATA
Ratio of Net Investment Income to
Average Net Assets 2.52% 2.84% 2.67% --
Ratio of Expenses to Average Net
Assets, Including Expenses of the
Equity 500 Index Portfolio 0.10% 0.10% 0.10% --
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses
by Bankers Trust 0.13% 0.13% 0.25% --
Net Assets, End of Period (000's
omitted) $800,551 $371,216 $170,508 $9,335
- -------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

INVESTMENT OBJECTIVE, POLICIES AND RISKS
The Fund seeks to provide investment results that, before expenses, correspond
to the total return (i.e., the combination of capital changes and income) of
common stocks publicly traded in the United States, as represented by the
Standard & Poor's 500 Composite Stock Price Index (the "S&P 500"). The Fund
offers investors a convenient means of diversifying their holdings of common
stocks while relieving those investors of the administrative burdens typically
associated with purchasing and holding these instruments.

The Trust seeks to achieve the investment objective of the Fund by investing
all the Assets of the Fund in the Portfolio, which has the same investment
objective as the Fund. There can be no assurances that the investment
objective of either the Fund or the Portfolio will be achieved. The investment
objective of each of the Fund and the Portfolio is not a fundamental policy
and may be changed upon notice to but without the approval of the Fund's
shareholders or the Portfolio's investors, respectively. See "Special
Information Concerning Master-Feeder Fund Structure" on page 10 herein.

EQUITY 500 INDEX PORTFOLIO
The Portfolio is not managed according to traditional methods of "active"
investment management, which involve the buying and selling of securities
based upon economic, financial, and market analyses and investment judgment.
Instead, the Portfolio, utilizing a "passive" or "indexing" investment
approach, attempts to replicate, before expenses, the performance of the S&P
500. There is no assurance that the Portfolio will achieve its investment
objective.

Under normal conditions when the Portfolio's assets are above $10 million, the
Portfolio will invest at least 80% of its assets in common stocks of companies
which compose the S&P 500. In seeking to duplicate the performance of the S&P
500, Bankers Trust, the Portfolio's investment adviser, will attempt over time
to allocate the Portfolio's investments among common stocks in approximately
the same weightings as the S&P 500, beginning with the heaviest-weighted
stocks that make up a larger portion of the Index's value. Over the long term,
Bankers Trust seeks a correlation between the performance of the Portfolio,
before expenses, and that of the S&P 500 of 0.98 or better (.95 or better if
Portfolio asset levels are below $10 million). A figure of 1.00 would indicate
perfect correlation. In the unlikely event that the correlation is not
achieved, the Portfolio's Board of Trustees will consider alternative
structures.

The Adviser utilizes a two-stage sampling approach in seeking to obtain its
objective. Stage one, which encompasses large cap stocks, maintains the stock
holdings at or near their benchmark weights. Large capitalization stocks are
defined as those securities which represent 0.10% or more of the index. In
stage two, smaller stocks are analyzed and selected using risk characteristics
and industry weights in order to match the sector and risk characteristics of
the smaller companies in the S&P 500. This approach helps to maximize
portfolio liquidity while minimizing costs.

Bankers Trust generally will seek to match the composition of the S&P 500 but
usually will not invest the Portfolio's stock portfolio to mirror the Index
exactly. Because of the difficulty and expense of executing relatively small
stock transactions, the Portfolio may not always be invested in the less
heavily weighted S&P 500 stocks, and may at times have its portfolio weighted
differently from the S&P 500, particularly if the Portfolio has a low level of
assets. When the Portfolio's size is greater, Bankers Trust expects to
purchase more of the stocks in the S&P 500 and to match the relative weighting
of the S&P 500 more closely, and anticipates that the Portfolio will be able
to mirror, before expenses, the performance of the S&P 500 with little
variance at asset levels of $10 million or more. In addition, the Portfolio
may omit or remove any S&P 500 stock from the Portfolio if, following
objective criteria, Bankers Trust judges the stock to be insufficiently liquid
or believes the merit of the investment has been substantially impaired by
extraordinary events or financial conditions. Bankers Trust will not purchase
the stock of Bankers Trust New York Corporation, which is included in the
Index, and instead will overweight its holdings of companies engaged in
similar businesses.

Under normal conditions, Bankers Trust will attempt to invest as much of the
Portfolio's assets as is practical in common stocks included in the S&P 500.
However, the Portfolio may maintain up to 20% of its assets in short-term debt
securities and money market instruments hedged with stock index futures and
options to meet redemption requests or to facilitate the investment in common
stocks. See "Additional Information" for further information.

When the Portfolio has cash from new investments in the Portfolio or holds a
portion of its assets in money market instruments, it may enter into stock
index futures or options to attempt to increase its exposure to the stock
market. Strategies the Portfolio could use to accomplish this include
purchasing futures contracts, writing put options, and purchasing call
options. When the Portfolio wishes to sell securities, because of shareholder
redemptions or otherwise, it may use stock index futures or options thereon to
hedge against market risk until the sale can be completed. These strategies
could include selling futures contracts, writing call options, and purchasing
put options.

Bankers Trust will choose among futures and options strategies based on its
judgment of how best to meet the Portfolio's goals. In selecting futures and
options, Bankers Trust will assess such factors as current and anticipated
stock prices, relative liquidity and price levels in the options and futures
markets compared to the securities markets, and the Portfolio's cash flow and
cash management needs. If Bankers Trust judges these factors incorrectly, or
if price changes in the Portfolio's futures and options positions are not well
correlated with those of its other investments, the Portfolio could be
hindered in the pursuit of its objective and could suffer losses. The
Portfolio could also be exposed to risks if it could not close out its futures
or options positions because of an illiquid secondary market.

Short-Term Instruments. The Portfolio intends to stay invested in the
securities described above to the extent practical in light of its objective
and long-term investment perspective. However, the Portfolio's assets may be
invested in short-term instruments with remaining maturities of 397 days or
less to meet anticipated redemptions and expenses or for day-to-day operating
purposes. Short-term instruments consist of (i) short-term obligations of the
U.S. government, its agencies, instrumentalities, authorities or political
subdivisions; (ii) other short-term debt securities rated Aa or higher by
Moody's Investors Service, Inc. ("Moody's") or AA or higher by Standard &
Poor's Corporation ("S&P") or, if unrated, of comparable quality in the
opinion of Bankers Trust; (iii) commercial paper; (iv) bank obligations,
including negotiable certificates of deposit, time deposits and bankers'
acceptances; and (v) repurchase agreements. At the time the Portfolio invests
in commercial paper, bank obligations or repurchase agreements, the issuer or
the issuer's parent must have outstanding debt rated Aa or higher by Moody's
or AA or higher by S&P or outstanding commercial paper or bank obligations
rated Prime-1 by Moody's or A-1 by S&P; or, if no such ratings are available,
the instrument must be of comparable quality in the opinion of Bankers Trust.

ADDITIONAL INVESTMENT LIMITATIONS
As a diversified fund, no more than 5% of the assets of the Portfolio may be
invested in the securities of one issuer (other than U.S. Government
securities), except that up to 25% of the Portfolio's assets may be invested
without regard to this limitation. The Portfolio will not invest more than 25%
of its assets in the securities of issuers in any one industry. In the
unlikely event that the S&P 500 should concentrate to an extent greater than
that amount, the Portfolio's ability to achieve its investment objective may
be impaired. These are fundamental investment policies of the Portfolio which
may not be changed without investor approval. No more than 15% of the
Portfolio's net assets may be invested in illiquid or not readily marketable
securities (including repurchase agreements and time deposits with remaining
maturities of more than seven calendar days). Additional investment policies
of the Portfolio are contained in the Statement of Additional Information.

ABOUT THE S&P 500 INDEX
The S&P 500 is a well-known stock market index that includes common stocks of
500 companies from several industrial sectors representing a significant
portion of the market value of all common stocks publicly traded in the United
States, most of which are listed on the New York Stock Exchange Inc. (the
"NYSE"). Stocks in the S&P 500 are weighted according to their market
capitalization (i.e., the number of shares outstanding multiplied by the
stock's current price). Bankers Trust believes that the performance of the S&P
500 is representative of the performance of publicly traded common stocks in
general. The composition of the S&P 500 is determined by Standard & Poor's
Corporation S&P and is based on such factors as the market capitalization and
trading activity of each stock and its adequacy as a representation of stocks
in a particular industry group, and may be changed from time to time.

The Fund and the Portfolio are not sponsored, endorsed, sold or promoted by
S&P. S&P makes no representation or warranty, express or implied, to the
owners of the Fund or the Portfolio or any member of the public regarding the
advisability of investing in securities generally or in the Fund and the
Portfolio particularly or the ability of the S&P 500 to track general stock
market performance. S&P does not guarantee the accuracy and/or the
completeness of the S&P 500 or any data included therein.

S&P makes no warranty, express or implied, as to the results to be obtained by
the Fund or the Portfolio, owners of the Fund or the Portfolio, or any other
person or entity from the use of the S&P 500 or any data included therein. S&P
makes no express or implied warranties and hereby expressly disclaims all such
warranties of merchantability or fitness for a particular purpose or use with
respect to the S&P 500 or any data included therein.

For more complete information about the S&P 500, see the Statement of
Additional Information.

RISK FACTORS; MATCHING THE FUND TO YOUR INVESTMENT NEEDS

By itself, the Fund does not constitute a balanced investment plan. The Fund
is designed as a relatively low-cost means for investors to diversify their
investment portfolios. As described above, the Portfolio invests in an index
of securities that is representative of the stock market as a whole. While the
performance of the S&P 500 has fluctuated considerably, the long-term
performance of the S&P 500 has been greater than inflation. Thus, the Fund may
make sense for you if you can afford to ride out changes in the stock market.
The Fund's share price, yield and total return will fluctuate and your
investment may be worth more or less than your original cost when you redeem
your shares.

The ability of the Fund and the Portfolio to meet their investment objective
depends to some extent on the cash flow experienced by the Fund and by the
other investors in the Portfolio, since investments and redemptions by
shareholders of the Fund will generally require the Portfolio to purchase or
sell securities. Bankers Trust will make investment changes to accommodate
cash flow in an attempt to maintain the similarity of the Portfolio to the S&P
500. You should also be aware that the performance of the S&P 500 is a
hypothetical number which does not take into account brokerage commissions and
other costs of investing, unlike the Portfolio which must bear these costs.
Finally, since the Portfolio seeks to track the S&P 500, Bankers Trust
generally will not attempt to judge the merits of any particular stock as an
investment.

PORTFOLIO TURNOVER
The frequency of portfolio transactions -- the Portfolio's turnover rate --
will vary from year to year depending on market conditions and the Portfolio's
cash flows. The Portfolio's annual turnover rate is not expected to exceed
100%. The Portfolio's turnover rate for the years ended December 31, 1995,
1994 and 1993 was 6%, 21% and 31%, respectively. The decrease in the
Portfolio's turnover rate from the year 1994 to 1995 was due to the growth of
assets in the period.

DERIVATIVES
The Portfolio may invest in stock index futures and options thereon which are
commonly known as derivatives. Generally, a derivative is a financial
arrangement, the value of which is based on, or "derived" from, a traditional
security, asset or market index. Some "derivatives" such as mortgage-related
and other asset-backed securities are in many respects like any other
investment, although they may be more volatile or less liquid than more
traditional debt securities. There are, in fact, many different types of
derivatives and many different ways to use them. There are a range of risks
associated with those uses. Futures and options are commonly used for
traditional hedging purposes to attempt to protect a fund from exposure to
changing interest rates, securities prices or currency exchange rates and for
cash management purposes as a low cost method of gaining exposure to a
particular securities market without investing directly in those securities.
The Adviser will only use derivatives for cash management purposes.
Derivatives will not be used to increase portfolio risk above the level that
could be achieved using only traditional investment securities or to acquire
exposure to changes in the value of assets or indices that by themselves would
not be purchased for the Portfolio.

SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE
Unlike other open-end management investment companies (mutual funds) which
directly acquire and manage their own portfolio securities, the Fund seeks to
achieve its investment objective by investing all of its Assets in the
Portfolio, a separate registered investment company with the same investment
objective as the Fund. Therefore, an investor's interest in the Portfolio's
securities is indirect. In addition to selling a beneficial interest to the
Fund, the Portfolio may sell beneficial interests to other mutual funds or
institutional investors. Such investors will invest in the Portfolio on the
same terms and conditions and will pay a proportionate share of the
Portfolio's expenses. However, the other investors investing in the Portfolio
are not required to sell their shares at the same public offering price as the
Fund due to variations in sales commissions and other operating expenses.
Therefore, investors in the Fund should be aware that these differences may
result in differences in returns experienced by investors in the different
funds that invest in the Portfolio. Such differences in returns are also
present in other mutual fund structures. Information concerning other holders
of interests in the Portfolio is available from Bankers Trust at (800) 368-
4031.

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

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

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

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

The Fund's investment objective is not a fundamental policy and may be changed
upon notice to but without the approval of the Fund's shareholders. If there
is a change in the Fund's investment objective, the Fund's shareholders should
consider whether the Fund remains an appropriate investment in light of their
then-current needs. The investment objective of the Portfolio is also not a
fundamental policy. Shareholders of the Fund will receive 30 days prior
written notice with respect to any change in the investment objective of the
Fund or the Portfolio. See "Investment Objective, Policies and Risks" for a
description of the fundamental policies of the Portfolio that cannot be
changed without approval by the holders of "a majority of the outstanding
voting securities" (as defined in the 1940 Act) of the Portfolio.

For descriptions of the investment objective, policies and restrictions of the
Portfolio, see "Investment Objective, Policies and Risks." For descriptions of
the management of the Portfolio, see "Management of the Trust and Portfolio"
herein and in the Statement of Additional Information. For descriptions of the
expenses of the Portfolio, see "Management of the Trust and Portfolio" herein.

NET ASSET VALUE
The net asset value per share of the Fund is calculated on each day on which
the NYSE is open (each such day being a "Valuation Day"). The NYSE is
currently open on each day, Monday through Friday, except (a) January 1st,
Presidents' Day (the third Monday in February), Good Friday, Memorial Day (the
last Monday in May), July 4th, Labor Day (the first Monday in September),
Thanksgiving Day (the last Thursday in November) and December 25th; and (b)
the preceding Friday or the subsequent Monday when one of the calendar
determined holidays falls on a Saturday or Sunday, respectively.

The net asset value per share of the Fund is calculated once on each Valuation
Day as of the close of regular trading on the NYSE (the "Valuation Time"),
which is currently 4:00 p.m., New York time or in the event that the NYSE
closes early, at the time of such early closing. The net asset value per share
of the Fund is computed by dividing the value of the Fund's Assets (i.e., the
value of its investment in the Portfolio and other assets), less all
liabilities, by the total number of its shares outstanding. The Portfolio's
securities and other assets are valued primarily on the basis of market
quotations or, if quotations are not readily available, by a method which the
Portfolio's Board of Trustees believes accurately reflects fair value.

Under procedures adopted by the Board, a net asset value for a Fund later
determined to have been inaccurate for any reason will be recalculated.
Purchases and redemptions made at a net asset value determined to have been
inaccurate will be adjusted, although in certain circumstances, such as where
the difference between the original net asset value and the recalculated net
asset value divided by the recalculated net asset value is 0.005% ( 1/2 of 1%)
or less or shareholder transactions are otherwise insubstantially affected,
further action is not required.

PURCHASE AND REDEMPTION OF SHARES
PURCHASE OF SHARES
The Trust accepts purchase orders for shares of the Fund at the net asset
value per share of the Fund next determined on each Valuation Day. See "Net
Asset Value" above. There is no sales charge on the purchase of shares, but
costs of distributing shares of the Fund may be reimbursed from its assets, as
described herein. Excluding retirement plans, the minimum initial investment
in the Trust is $5,000,000. The subsequent minimum investment in the Fund is
$100,000 (excluding retirement plans). 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 the Fund that are received by a Service Agent
and transmitted to Bankers Trust, as the Trust's transfer agent (the "Transfer
Agent"), prior to the Valuation Time (currently 4:00 p.m., New York time or
earlier, should the NYSE close earlier) on any Valuation Day will be effective
at that day's Valuation Time. The Trust and Signature reserve the right to
reject any purchase order.

Shares must be purchased in accordance with procedures established by the
Transfer Agent and Service Agents, including Bankers Trust, in connection with
customers' accounts. It is the responsibility of each Service Agent to
transmit to the Transfer Agent purchase and redemption orders and to transmit
to Bankers Trust as the Trust's custodian (the "Custodian") purchase payments
on behalf of its customers by the following business day (trade date +1) after
an order for shares is placed, and a shareholder must settle with the Service
Agent his or her entitlement to an effective purchase or redemption order as
of a particular time. Because Bankers Trust is the Custodian and Transfer
Agent of the Trust, funds may be transferred directly from or to a customer's
account with Bankers Trust to or from the Fund without incurring the
additional costs or delays associated with the wiring of federal funds.

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

Automatic Investment Plan. The Fund may offer shareholders an automatic
investment plan under which shareholders may authorize some Service Agents to
place a purchase order each month or quarter for Fund shares. For further
information regarding the automatic investment plan, shareholders should
contact their Service Agent.

Service Agents may allow redemptions or exchanges by telephone and may
disclaim liability for following instructions communicated by telephone that
the Service Agent reasonably believes to be genuine. The Service Agent must
provide the investor with an opportunity to choose whether or not to utilize
the telephone redemption or exchange privilege. The Service Agent must employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine. If the Service Agent does not do so, it may be liable for any
losses due to unauthorized or fraudulent instructions. Such procedures may
include, among others, requiring some form of personal identification prior to
acting upon instructions received by telephone, providing written confirmation
of such transactions and/or tape recording of telephone instructions.

Redemption orders are processed without charge by the Trust. A Service Agent
may on at least 30 days' notice involuntarily redeem a shareholder's account
with the Fund having a current value of less than $1,000,000 (excluding
retirement plans), but not if an account is below $1,000,000 due to a change
in market value.

Automatic Cash Withdrawal Plan. The Fund may offer shareholders an automatic
cash withdrawal plan, under which shareholders who own shares of the Fund may
elect to receive periodic cash payments. Retirement plan accounts are eligible
for automatic cash withdrawal plans only where the shareholder is eligible to
receive qualified distributions. For further information regarding the
automatic cash withdrawal plan, shareholders should contact their Service
Agent.

EXCHANGE PRIVILEGE
Shareholders may exchange their shares for shares of certain other funds in
the BT Family of Funds registered in their state. The Fund reserves the right
to terminate or modify the exchange privilege in the future. To make an
exchange, follow the procedures indicated in "Purchase of Shares" and
"Redemption of Shares." Before making an exchange, please note the following:

* Call your Service Agent for information and a prospectus. Read the
prospectus for relevant information.

* Complete and sign an application, taking care to register your new account
in the same name, address and taxpayer identification number as your
existing account(s).

* Each exchange represents the sale of shares of one fund and the purchase of
shares of another, which may produce a gain or loss for tax purposes. Your
Service Agent will send a written confirmation of each exchange transaction.

TAX-SAVING RETIREMENT PLANS
Retirement plans offer significant tax savings and are available to
individuals, partnerships, small businesses, corporations, nonprofit
organizations and other institutions. Contact your Service Agent or Bankers
Trust for further information. Bankers Trust can set up your new account in
the Fund under a number of several tax-sheltered plans. These plans contain
special tax advantages and let you invest for retirement while sheltering your
investment income from current taxes. Minimums may differ from those listed
elsewhere in the Prospectus.

* Individual Retirement Accounts (IRAs): personal savings plans that offer
tax advantages for individuals to set aside money for retirement and allow
new contributions of $2,000 per tax year.

* Rollover IRAs: tax-deferred retirement accounts that retain the special tax
advantages of lump sum distributions from qualified retirement plans and
transferred IRA accounts.

* Simplified Employee Pension Plans (SEP): a relatively easy and inexpensive
alternative to retirement planning for sole proprietors, partnerships and
corporations. Under a SEP, employers make tax-deductible contributions to
their own and to eligible employees' IRA accounts. Employee contributions
are available through a "Salary Deferral" SEP for businesses with fewer than
25 eligible employees.

* Keogh Plans: defined contribution plans available to individuals with self-
employed income and nonincorporated businesses such as sole proprietors,
professionals and partnerships. Contributions are tax-deductible to the
employer and earnings are tax-sheltered until distribution.

* Corporate Profit-Sharing and Money-Purchase Plans: defined contribution
plans available to corporations to benefit their employees by making
contributions on their behalf and in some cases permitting their employees
to make contributions.

* 401(k) Programs: defined contribution plans available to corporations
allowing tax-deductible employer contributions and permitting employees to
contribute a percentage of their wages on a tax-deferred basis.

* 403(b) Custodian Accounts: defined contribution plans open to employees of
most nonprofit organizations and educational institutions.

* Deferred Benefit Plans: plan sponsors may invest all or part of their
pension assets in the Fund.

DIVIDENDS, DISTRIBUTIONS AND TAXES
Distributions. The Fund distributes substantially all of its net investment
income and capital gains to shareholders each year. Income dividends are
distributed on the first business day in April, July and October. In December,
another income dividend will be distributed plus any net capital gains. Unless
a shareholder instructs the Trust to pay such dividends and distributions in
cash, they will be automatically reinvested in additional shares of the Fund.

Federal Taxes. The Trust intends to qualify the Fund as a regulated investment
company, as defined in the Internal Revenue Code of 1986, as amended (the
"Code"). Provided the Fund meets the requirements imposed by the Code and
distributes all of its income and gains, the Fund will not pay any Federal
income or excise taxes. The Portfolio will also not be required to pay any
Federal income or excise taxes.

Distributions from the Fund's income and short-term capital gains are taxed as
dividends, and long-term capital gain distributions are taxed as long-term
capital gains. The Fund's distributions are taxable when they are paid,
whether you take them in cash or reinvest them in additional shares.
Distributions declared to shareholders of record in November and December and
paid in January are taxable as if paid on December 31. The Fund will send each
shareholder a tax statement by January 31 showing the tax status of the
distributions received in the past year.

Capital Gains. You may realize a capital gain or loss when you redeem (sell)
or exchange shares. Because the tax treatment also depends on your purchase
price and your personal tax position, you should keep your regular account
statements to use in determining your tax.

"Buying a Dividend." On the ex-date for a distribution from income and/or
capital gains, the Fund's share value is reduced by the amount of the
distribution. If you buy shares just before the ex-date ("buying a dividend"),
you will pay the full price for the shares and then receive a portion of the
price back as a taxable distribution.

Other Tax Information. In addition to Federal taxes, you may be subject to
state or local taxes on your investment, depending on the laws in your area.
You should consult with your own tax adviser concerning the application of
Federal, state and local taxes to your distributions from the Fund.

PERFORMANCE INFORMATION AND REPORTS
The Fund's performance may be used from time to time in advertisements,
shareholder reports or other communications to shareholders or prospective
shareholders. Performance information may include the Fund's investment results
and/or comparisons of its investment results to various unmanaged indices, such
as the S&P 500, or results of other mutual funds or investment or savings
vehicles. In addition, the Fund may compare various Portfolio characteristics
such as beta, price earnings ratio and sector diversification to those of
various unmanaged indices or other mutual funds or investment or savings
vehicles. The Fund's investment results as used in such communications will be
calculated on a yield or total rate of return basis in the manner set forth
below. From time to time, fund rankings may be quoted from various sources, such
as Lipper Analytical Services, Inc., Value Line and Morningstar, Inc.

The Trust may provide period and average annualized "total return" quotations
for the Fund. The Fund's "total return" refers to the change in the value of an
investment in the Fund over a stated period based on any change in net asset
value per share and including the value of any shares purchasable with any
dividends or capital gains distributed during such period. Period total return
may be annualized. An annualized total return is a compounded total return which
assumes that the period total return is generated over a one-year period, and
that all dividends and capital gain distributions are reinvested. An annualized
total return will be higher than a period total return if the period is shorter
than one year, because of the compounding effect.

The Trust may provide annualized "yield" quotations for the Fund. The "yield" of
the Fund refers to the income generated by an investment in the Fund over a
30-day or one-month period (which period shall be stated in any such
advertisement or communications). This income is then annualized; that is, the
amount generated by the investment over the period is assumed to be generated
over a one-year period and is shown as a percentage of investment.

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

Shareholders will receive financial reports semi-annually that include the
Portfolio's financial statements, including a listing of investment securities
held by the Portfolio at those dates. Annual reports are audited by independent
accountants.

MANAGEMENT OF THE TRUST AND PORTFOLIO
BOARD OF TRUSTEES
The affairs of the Trust and the Portfolio are managed under the supervision of
their respective Boards of Trustees. By virtue of the responsibilities assumed
by Bankers Trust, the administrator of the Trust and Portfolio, neither the
Trust nor the Portfolio requires employees other than its executive officers.
None of the executive officers of the Trust or Portfolio devotes full time to
the affairs of the Trust or the Portfolio.

The Trustees of the Trust who are not "interested persons" (as defined in the
1940 Act) (the "Independent Trustees") of the Trust or of the Portfolio, as
the case may be, have adopted written procedures reasonably appropriate to
deal with potential conflicts of interest, up to and including creating
separate boards of trustees, arising from the fact that several of the same
individuals are Trustees of the Trust and the Portfolio. For more information
with respect to the Trustees of both the Trust and the Portfolio, see
"Management of the Trust and the Portfolio" in the Statement of Additional
Information.

INVESTMENT ADVISER
The Trust has not retained the services of an investment adviser since the Trust
seeks to achieve the investment objective of the Fund by investing all the
Assets of the Fund in the Portfolio. The Portfolio has retained the services of
Bankers Trust, as investment adviser. Mr. Frank Salerno, Managing Director of
Bankers Trust, is responsible for the day-to-day management of the Portfolio.
Mr. Salerno has been employed by Bankers Trust since prior to 1989 and has
managed the Portfolio's assets since the Portfolio commenced operations.

Bankers Trust, a New York banking corporation with principal offices at 280 Park
Avenue, New York, New York 10017, is a wholly owned subsidiary of Bankers Trust
New York Corporation. Bankers Trust conducts a variety of general banking and
trust activities and is a major wholesale supplier of financial services to the
international and domestic institutional market. As of December 31, 1995,
Bankers Trust New York Corporation was the ninth largest bank holding company in
the United States with total assets of approximately $104 billion. Bankers Trust
is a worldwide merchant bank dedicated to servicing the needs of corporations,
governments, financial institutions and private clients through a global network
of over 120 offices in more than 40 countries. Investment management is a core
business of Bankers Trust, built on a tradition of excellence from its roots as
a trust bank founded in 1903. The scope of Bankers Trust's investment management
capability is unique due to its leadership positions in both active and passive
quantitative management and its presence in major equity and fixed income
markets around the world. Bankers Trust is one of the nation's largest and most
experienced investment managers, with approximately $200 billion in assets under
management globally. Of that total, approximately $82 billion are in U.S. equity
index assets alone. When bond and international funds are included, Bankers
Trust manages over $94 billion in total index assets. This makes Bankers Trust
one of the nation's leading managers of index funds.

Bankers Trust has more than 50 years of experience managing retirement assets
for the nation's largest corporations and institutions. In the past, these
clients have been serviced through separate account and commingled fund
structures. Bankers Trust's officers have had extensive experience in managing
investment portfolios having objectives similar to those of the Portfolio.

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

Under its Investment Advisory Agreement, Bankers Trust receives a fee from the
Portfolio, computed daily and paid monthly, at the annual rate of 0.10% (before
waiver) of the average daily net assets of the Portfolio.

Bankers Trust has been advised by its counsel that, in counsel's opinion,
Bankers Trust currently may perform the services for the Trust and the Portfolio
described in this Prospectus and the Statement of Additional Information without
violation of the Glass-Steagall Act or other applicable banking laws or
regulations. State laws on this issue may differ from the interpretations of
relevant Federal law and banks and financial institutions may be required to
register as dealers pursuant to state securities law.

ADMINISTRATOR
Under its Administration and Services Agreement with the Trust, Bankers Trust
calculates the net asset value of the Fund and generally assists the Board of
Trustees of the Trust in all aspects of the administration and operation of
the Trust. The Administration and Services Agreement provides for the Trust to
pay Bankers Trust a fee, computed daily and paid monthly, at the annual rate
of 0.05% of the average daily net assets of the Fund.

Under an Administration and Services Agreement with the Portfolio, Bankers Trust
calculates the value of the assets of the Portfolio and generally assists the
Board of Trustees of the Portfolio in all aspects of the administration and
operation of the Portfolio. The Administration and Services Agreement provides
for the Portfolio to pay Bankers Trust a fee, computed daily and paid monthly,
at the rate of 0.05% of the average daily net assets of the Portfolio. Under
each Administration and Services Agreement, Bankers Trust may delegate one or
more of its responsibilities to others, including Signature, at Bankers Trust's
expense. For more information see the Statement of Additional Information.

DISTRIBUTOR
Under its Distribution Agreement with the Trust, Signature, as Distributor,
serves as the Trust's principal underwriter on a best efforts basis. In
addition, Signature provides the Trust with office facilities. Signature is a
wholly owned subsidiary of Signature Financial Group, Inc. ("SFG"). SFG and its
affiliates currently provide administration and distribution services for other
registered investment companies. The principal business address of SFG and
Signature is 6 St. James Avenue, Boston, Massachusetts 02116.

Pursuant to the terms of the Trust's Plan of Distribution pursuant to Rule 12b-1
under the 1940 Act (the "Plan"), Signature may seek reimbursement in an amount
not exceeding 0.10% of the Fund's average daily net assets annually for expenses
incurred in connection with any activities primarily intended to result in the
sale of the Fund's shares, including, but not limited to: compensation to and
expenses (including overhead and telephone expenses) of account executives or
other employees of Signature who, as their primary activity, engage in or
support the distribution of shares; printing of prospectuses, statements of
additional information and reports for other than existing Fund shareholders in
amounts in excess of that typically used in connection with the distribution of
shares of the Fund; costs of placing advertising in various media; services of
parties other than Signature or its affiliates in formulating sales literature;
and typesetting, printing and distribution of sales literature. All costs and
expenses in connection with implementing and operating the Plan will be paid by
the Fund, subject to the 0.10% of net assets limitation. All costs and expenses
associated with preparing the prospectuses and statements of additional
information and in connection with printing them for and distributing them to
existing shareholders and regulatory authorities, which costs and expenses would
not be considered distribution expenses for purposes of the Plan, will also be
paid by the Fund. To the extent expenses of Signature under the Plan in any
fiscal year of the Trust exceed amounts payable under the Plan during that year,
those expenses will not be reimbursed in any succeeding fiscal year. Expenses
incurred in connection with distribution activities will be identified to the
Fund or the other series of the Trust involved, although it is anticipated that
some activities may be conducted on a Trust-wide basis, with the result that
those activities will not be identifiable to any particular series. In the
latter case, expenses will be allocated among the series of the Trust on the
basis of their relative net assets. It is not expected that any payments will be
made under the Plan in the foreseeable future.

SERVICE AGENT
All shareholders must be represented by a Service Agent. Bankers Trust acts as a
Service Agent pursuant to its Administration and Services Agreement with the
Trust and receives no additional compensation from the Fund for such shareholder
services. The service fees of any other Service Agents, including
broker-dealers, will be paid by Bankers Trust from its fees. The services
provided by a Service Agent may include establishing and maintaining shareholder
accounts, processing purchase and redemption transactions, arranging for bank
wires, performing shareholder sub-accounting, answering client inquiries
regarding the Trust, assisting clients in changing dividend options, account
designations and addresses, providing periodic statements showing the client's
account balance, transmitting proxy statements, periodic reports, updated
prospectuses and other communications to shareholders and, with respect to
meetings of shareholders, collecting, tabulating and forwarding to the Trust
executed proxies and obtaining such other information and performing such other
services as the Administrator or the Service Agent's clients may reasonably
request and agree upon with the Service Agent. Service Agents may separately
charge their clients additional fees only to cover provision of additional or
more comprehensive services not already provided under the Administration and
Services Agreement with Bankers Trust, or of the type or scope not generally
offered by a mutual fund, such as cash management services or enhanced
retirement or trust reporting. In addition, investors may be charged a
transaction fee if they effect transactions in Fund shares through a broker or
agent. Each Service Agent has agreed to transmit to shareholders, who are its
customers, appropriate disclosures of any fees that it may charge them directly.

CUSTODIAN AND TRANSFER AGENT
Bankers Trust acts as Custodian of the assets of the Trust and the Portfolio and
serves as the Transfer Agent for the Trust and the Portfolio under the
Administration and Services Agreement with the Trust and the Portfolio.

ORGANIZATION OF THE TRUST
The Trust was organized on March 26, 1990 under the laws of the Commonwealth of
Massachusetts. The Fund is a separate series of the Trust. The Trust offers
shares of beneficial interest of separate series, par value $0.001 per share.
The shares of the other series of the Trust are offered through separate
prospectuses. No series of shares has any preference over any other series.

The Trust is an entity commonly known as a "Massachusetts business trust." Under
Massachusetts law, shareholders of such a business trust may, under certain
circumstances, be held personally liable as partners for its obligations.
However, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Trust itself was unable to meet its obligations.

When matters are submitted for shareholder vote, shareholders of the Fund will
have one vote for each full share held and proportionate, fractional votes for
fractional shares held. A separate vote of the Fund is required on any matter
affecting the Fund on which shareholders are entitled to vote. Shareholders of
the Fund are not entitled to vote on Trust matters that do not affect the
Fund. There normally will be no meetings of shareholders for the purpose of
electing Trustees unless and until such time as less than a majority of
Trustees holding office have been elected by shareholders, at which time the
Trustees then in office will call a shareholders' meeting for the election of
Trustees. Any Trustee may be removed from office upon the vote of shareholders
holding at least two-thirds of the Trust's outstanding shares at a meeting
called for that purpose. The Trustees are required to call such a meeting upon
the written request of shareholders holding at least 10% of the Trust's
outstanding shares.

The Portfolio, in which all the Assets of the Fund will be invested, is
organized as a trust under the laws of the State of New York. The Portfolio's
Declaration of Trust provides that the Fund and other entities investing in the
Portfolio (e.g., other investment companies, insurance company separate accounts
and common and commingled trust funds) will each be liable for all obligations
of the Portfolio. However, the risk of the Fund incurring financial loss on
account of such liability is limited to circumstances in which both inadequate
insurance existed and the Portfolio itself was unable to meet its obligations.
Accordingly, the Trustees of the Trust believe that neither the Fund nor its
shareholders will be adversely affected by reason of the Fund's investing in the
Portfolio.

Each series in the Trust will not be involved in any vote involving a Portfolio
in which it does not invest its Assets. Shareholders of all of the series of the
Trust will, however, vote together to elect Trustees of the Trust and for
certain other matters. Under certain circumstances, the shareholders of one or
more series could control the outcome of these votes.

EXPENSES OF THE TRUST
The Fund bears its own expenses. Operating expenses for the Fund generally
consist of all costs not specifically borne by Bankers Trust or Signature,
including administration and services fees, fees for necessary professional
services, amortization of organizational expenses, and costs associated with
regulatory compliance and maintaining legal existence and shareholder relations.
Bankers Trust and Signature have agreed to reimburse the Fund to the extent
required by applicable state law for certain expenses that are described in the
Statement of Additional Information. The Portfolio bears its own expenses.
Operating expenses for the Portfolio generally consist of all costs not
specifically borne by Bankers Trust or Signature, including investment advisory
and administration and services fees, fees for necessary professional services,
amortization of organizational expenses, the costs associated with regulatory
compliance and maintaining legal existence and investor relations.

ADDITIONAL INFORMATION
Repurchase Agreements. In a repurchase agreement the Portfolio buys a security
and simultaneously agrees to sell it back at a higher price. In the event of the
bankruptcy of the other party to either a repurchase agreement or a securities
loan, the Portfolio could experience delays in recovering either its cash or the
securities it lent. To the extent that, in the meantime, the value of the
securities repurchased had decreased or the value of the securities lent had
increased, the Portfolio could experience a loss. In all cases, Bankers Trust
must find the creditworthiness of the other party to the transaction
satisfactory. A repurchase agreement is considered a collateralized loan under
the 1940 Act.

Securities Lending. The Portfolio is permitted to lend up to 30% of the total
value of its securities. These loans must be secured continuously by cash or
equivalent collateral or by a letter of credit at least equal to the market
value of the securities loaned plus accrued income. By lending its securities,
the Portfolio can increase its income by continuing to receive income on the
loaned securities as well as by the opportunity to receive interest on the
collateral. Any gain or loss in the market price of the borrowed securities
which occurs during the term of the loan inures to the Portfolio and its
investors. In lending securities to brokers, dealers and other organizations,
the Portfolio is subject to risk which, like those associated with other
extensions of credit, includes delays in recovery and possible loss of rights in
the collateral should the borrower fail financially.

When-Issued and Delayed Delivery Securities. The Portfolio may purchase
securities on a when-issued or delayed delivery basis. Delivery of and payment
for these securities may take place as long as a month or more after the date of
the purchase commitment. The value of these securities is subject to market
fluctuation during this period and no income accrues to the Portfolio until
settlement takes place. The Portfolio maintains with the Custodian a segregated
account containing high grade liquid securities in an amount at least equal to
these commitments. When entering into a when-issued or delayed delivery
transaction, the Portfolio will rely on the other party to consummate the
transaction; if the other party fails to do so, the Portfolio may be
disadvantaged.

Options on Stock Indices. The Portfolio may purchase and write put and call
options on stock indices listed on stock exchanges. A stock index fluctuates
with changes in the market values of the stocks included in the index.

Options on stock indices are generally similar to options on stock except that
the delivery requirements are different. Instead of giving the right to take or
make delivery of stock at a specified price, an option on a stock index gives
the holder the right to receive a cash "exercise settlement amount" equal to (a)
the amount, if any, by which the fixed exercise price of the option exceeds (in
the case of a put) or is less than (in the case of a call) the closing value of
the underlying index on the date of exercise, multiplied by (b) a fixed "index
multiplier." Receipt of this cash amount will depend upon the closing level of
the stock index upon which the option is based being greater than, in the case
of a call, or less than, in the case of a put, the exercise price of the option.
The amount of cash received will be equal to such difference between the closing
price of the index and the exercise price of the option expressed in dollars
times a specified multiple. The writer of the option is obligated, in return for
the premium received, to make delivery of this amount. The writer may offset its
position in stock index options prior to expiration by entering into a closing
transaction on an exchange or the option may expire unexercised.

Because the value of an index option depends upon movements in the level of the
index rather than the price of a particular stock, whether the Portfolio will
realize a gain or loss from the purchase or writing of options on an index
depends upon movements in the level of stock prices in the stock market
generally or, in the case of certain indices, in an industry or market segment,
rather than movements in the price of a particular stock. Accordingly,
successful use by the Portfolio of options on stock indices will be subject to
Bankers Trust's ability to predict correctly movements in the direction of the
stock market generally or of a particular industry. This requires different
skills and techniques than predicting changes in the price of individual stocks.

Futures Contracts on Stock Indices. The Portfolio may enter into contracts
providing for the making and acceptance of a cash settlement based upon changes
in the value of an index of securities ("Futures Contracts"). This investment
technique is designed only to hedge against anticipated future change in general
market prices which otherwise might either adversely affect the value of
securities held by the Portfolio or adversely affect the prices of securities
which are intended to be purchased at a later date for the Portfolio. A Futures
Contract may also be entered into to close out or offset an existing futures
position.

In general, each transaction in Futures Contracts involves the establishment of
a position which will move in a direction opposite to that of the investment
being hedged. If these hedging transactions are successful, the futures
positions taken for the Portfolio will rise in value by an amount which
approximately offsets the decline in value of the portion of the Portfolio's
investments that are being hedged. Should general market prices move in an
unexpected manner, the full anticipated benefits of Futures Contracts may not be
achieved or a loss may be realized.

Although Futures Contracts would be entered into for cash management purposes
only, such transactions do involve certain risks. These risks could include a
lack of correlation between the Futures Contract and the equity market being
hedged, a potential lack of liquidity in the secondary market and incorrect
assessments of market trends which may result in poorer overall performance than
if a Futures Contract had not been entered into.

Brokerage costs will be incurred and "margin" will be required to be posted and
maintained as a good-faith deposit against performance of obligations under
Futures Contracts written for the Portfolio. The Portfolio may not purchase or
sell a Futures Contract if immediately thereafter its margin deposits on its
outstanding Futures Contracts would exceed 5% of the market value of the
Portfolio's total assets.

Options on Futures Contracts. The Portfolio may invest in options on such
Futures Contracts for similar purposes.

Asset Coverage. The Portfolio will cover the Portfolio's transactions in futures
and related options, as well as in when-issued and delayed delivery, as required
under applicable interpretations of the SEC, either by owning the underlying
securities or by establishing a segregated account with the Portfolio's
Custodian containing high grade liquid debt securities in an amount at all times
equal to or exceeding the Portfolio's commitment with respect to these
instruments or contracts.
<PAGE>

INVESTMENT ADVISER OF THE PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY

DISTRIBUTOR
SIGNATURE BROKER-DEALER SERVICES, INC.

CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY

INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.

COUNSEL
WILLKIE FARR & GALLAGHER
..............................................................................

No person has been authorized to give any information or to make any
representations other than those contained in the Trust's Prospectuses, its
Statements of Additional Information or the Trust's official sales literature in
connection with the offering of the Trust's shares and, if given or made, such
other information or representations must not be relied on as having been
authorized by the Trust. This Prospectus does not constitute an offer in any
state in which, or to any person to whom, such offer may not lawfully be made.
..............................................................................
<PAGE>

BT INSTITUTIONAL FUNDS

PROSPECTUS: APRIL 29, 1996

A Statement of Additional Information (SAI) with the same date has been filed
with the Securities and Exchange Commission, and is incorporated herein by
reference. You may request a free copy of the Statement by calling the Fund's
Service Agent at 1-800-368-4031.

SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, BANKERS TRUST COMPANY AND THE SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY. THE FUND INTENDS TO MAINTAIN A CONSTANT $1.00 PER SHARE NET ASSET VALUE,
ALTHOUGH THERE CAN BE NO ASSURANCE THAT IT WILL BE ABLE TO DO SO.

Cash Management Fund

A money market fund that provides high current income to the extent consistent
with liquidity and capital preservation.

BANKERS TRUST COMPANY
Investment Adviser of the
Portfolio and Administrator

SIGNATURE BROKER-
DEALER SERVICES, INC.
Distributor
6 St. James Avenue
Boston, Massachusetts 02116
<PAGE>
TABLE OF CONTENTS
- ------------------------------------------------------------------------------
PAGE
..............................................................................
Summary of Fund Expenses 3
Fund Financial Highlights 5
Investment Objective and Policies 6
Risk Factors; Matching the Fund to Your Investment Needs 10
Net Asset Value 11
Purchase and Redemption of Shares 12
Dividends, Distributions and Taxes 15
Performance Information and Reports 16
Management of the Trust and Portfolio 17
- ------------------------------------------------------------------------------
<PAGE>

SUMMARY OF FUND EXPENSES
The following table provides (i) a summary of expenses relating to purchases
and sales of shares of the Institutional Cash Management Fund (the "Fund") and
the aggregate annual operating expenses of the Fund and the expenses of the
Cash Management Portfolio (the "Portfolio"), as a percentage of average net
assets of the Fund and (ii) an example illustrating the dollar cost of such
expenses on a $1,000 investment in the Fund. THE TRUSTEES OF THE BT
INSTITUTIONAL FUNDS (THE "TRUST") BELIEVE THAT THE AGGREGATE PER SHARE
EXPENSES OF THE FUND AND THE PORTFOLIO WILL BE LESS THAN OR APPROXIMATELY
EQUAL TO THE EXPENSES WHICH THE FUND WOULD INCUR IF THE TRUST RETAINED THE
SERVICES OF AN INVESTMENT ADVISER AND THE INVESTABLE ASSETS ("ASSETS") OF THE
FUND WERE INVESTED DIRECTLY IN THE TYPE OF SECURITIES BEING HELD BY THE
PORTFOLIO.
- ------------------------------------------------------------------------------

ANNUAL OPERATING EXPENSES
(as a percentage of the average daily net assets of the Fund)
..............................................................................
Investment advisory fee 0.15%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.08
..............................................................................
Total operating expenses (after reimbursements or waivers) 0.23%
..............................................................................
EXAMPLE 1 year 3 years 5 years 10 years
..............................................................................
You would pay the following
expenses on a $1,000 investment,
assuming: (1) 5% annual return
and (2) redemption at the end of
each time period $2 $7 $13 $29
- ------------------------------------------------------------------------------

The expense table and the example above show the costs and expenses that an
investor will bear directly or indirectly as a shareholder of the Fund. While
reimbursement of distribution expenses in amounts up to 0.10% of average net
assets are authorized to be made pursuant to the Plan of Distribution under
Rule 12b-1 of the Investment Company Act of 1940, as amended (the "1940 Act"),
it is not expected that any payments will actually be made under that plan in
the foreseeable future. The expense table and the example reflect a voluntary
undertaking by Bankers Trust Company ("Bankers Trust") or Signature Broker-
Dealer Services, Inc. ("Signature") to waive or reimburse expenses such that
the total operating expenses will not exceed 0.23% of the Fund's average net
assets annually. In the absence of this undertaking, for the fiscal year ended
December 31, 1995 the total operating expenses would have been equal to
approximately 0.27% of the Fund's average net assets annually. THE EXAMPLE
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Moreover, while each
example assumes a 5% annual return, actual performance will vary and may
result in a return greater or less than 5%.

For more information with respect to the expenses of the Fund and the
Portfolio see "Management of the Trust and Portfolio" herein.
<PAGE>

FUND FINANCIAL HIGHLIGHTS

The following table shows selected data for a share outstanding, total
investment return, ratios to average net assets and other supplemental data
for the Fund for each period indicated and has been audited by Coopers &
Lybrand L.L.P., the Fund's independent accountants, whose report thereon
appears in the Fund's Annual Report which is incorporated by reference in the
Fund's Statement of Additional Information.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 25, 1990
FOR THE YEAR ENDED DECEMBER 31, (COMMENCEMENT OF
------------------------------------------------------------------------- OPERATIONS) TO
1995 1994 1993 1992 1991 DECEMBER 31, 1990
.................................................................................................................................
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning
of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
.................................................................................................................................
Income from Investment
Operations
Net Investment Income 0.06 0.04 0.03 0.04 0.06 0.03
Net Realized Gain (Loss)
from Securities
Transactions 0.00+ (0.01) 0.00+ 0.00+ 0.00+ --
.................................................................................................................................
Total from Investment
Operations 0.06 0.03 0.03 0.04 0.06 0.03
.................................................................................................................................
Contribution of Capital -- 0.01 -- -- -- --
.................................................................................................................................
Distributions From:
Net Investment Income (0.06) (0.04) (0.03) (0.04) (0.06) (0.03)
Distributions from Net
Realized Gain from
Securities
Transactions -- -- (0.00)+ (0.00)+ (0.00)+ --
.................................................................................................................................
Total Distributions (0.06) (0.04) (0.03) (0.04) (0.06) (0.03)
.................................................................................................................................
Net Asset Value, End of
Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
................................................................................................................................
TOTAL INVESTMENT RETURN 5.89% 4.18%++ 3.05% 3.58% 6.20% 8.29%*
RATIOS AND SUPPLEMENTAL DATA
Ratio of Net Investment
Income to Average Net
Assets 5.72% 3.98% 3.01% 3.48% 5.82% 7.90%*
Ratio of Expenses to
Average Net Assets,
Including Expenses of
the Cash Management
Portfolio 0.23% 0.23% 0.25% 0.25% 0.25% 0.25%*
Decrease Reflected in
Above Expense Ratio Due
to Absorption of
Expenses by Bankers
Trust 0.04% 0.03% 0.02% 0.04% 0.09% 0.21%*
Net Assets, End of Period
(000's omitted) $1,010,874 $664,149 $1,850,222 $1,334,517 $806,690 $301,546
- -----------------------------------------------------------------------------------------------------------------------------------
*Annualized
+Less than $0.01 per share
++Increased by 0.91% due to Contribution of Capital.
</TABLE>

<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks a high level of current income consistent with liquidity and
the preservation of capital through investment in high quality money market
instruments. The Fund offers investors a convenient means of diversifying
their holdings of short-term securities while relieving those investors of the
administrative burdens typically associated with purchasing and holding these
instruments, such as coordinating maturities and reinvestments, providing for
safekeeping and maintaining detailed records. High quality short-term
instruments may result in a lower yield than instruments with a lower quality
or a longer term.

The Trust seeks to achieve the investment objective of the Fund by investing
all the Assets of the Fund in the Portfolio, which has the same investment
objective as the Fund. There can be no assurances that the investment
objective of either the Fund or the Portfolio will be achieved. The investment
objective of each of the Fund and the Portfolio is a fundamental policy and
may not be changed without the approval of the Fund's shareholders or the
Portfolio's investors, respectively. See "Special Information Concerning
Master-Feeder Fund Structure" on page 10 herein.

CASH MANAGEMENT PORTFOLIO
The Portfolio will attempt to achieve its investment objective by investing in
the following money market instruments:

Bank Obligations. The Portfolio may invest in fixed rate or variable rate
obligations of U.S. or foreign banks which have total assets at the time of
purchase in excess of $1 billion and are rated Prime-1 by Moody's Investors
Service, Inc. ("Moody's") or A-1 or higher by Standard & Poor's Corporation
("S&P") or, if not rated, are believed by Bankers Trust, acting under the
supervision of the Board of Trustees of the Portfolio, to be of comparable
quality. Bank obligations in which the Portfolio invests include certificates
of deposit, bankers' acceptances, time deposits and other U.S. dollar-
denominated instruments issued or supported by the credit of U.S. or foreign
banks. If Bankers Trust, acting under the supervision of the Board of Trustees
of the Portfolio, deems the instruments to present minimal credit risk, the
Portfolio may invest in obligations of foreign banks or foreign branches of
U.S. banks, which include subsidiaries of U.S. banks located in the United
Kingdom, Grand Cayman Island, Nassau, Japan and Canada. Investments in these
obligations may entail risks that are different from those of investments in
obligations of U.S. domestic banks because of differences in political,
regulatory and economic systems and conditions. These risks include future
political and economic developments, currency blockage, the possible
imposition of withholding taxes on interest payments, differing reserve
requirements, reporting and recordkeeping requirements and accounting
standards, possible seizure or nationalization of foreign deposits, difficulty
or inability of pursuing legal remedies and obtaining judgments in foreign
courts, possible establishment of exchange controls or the adoption of other
foreign governmental restrictions that might affect adversely the payment of
principal and interest on bank obligations. Under normal market conditions,
the Portfolio will invest more than 25% of its assets in the foreign and
domestic bank obligations described above. The Portfolio's concentration of
its investments in bank obligations will cause the Portfolio to be subject to
the risks peculiar to the domestic and foreign banking industries to a greater
extent than if its investments were not so concentrated. A description of the
ratings set forth above is provided in the Appendix to the Statement of
Additional Information.

Commercial Paper. The Portfolio may invest in fixed rate or variable rate
commercial paper, including variable rate master demand notes, issued by U.S.
or foreign corporations. Commercial paper when purchased by the Portfolio must
be rated Prime-1 by Moody's or A-1 or higher by S&P or, if not rated, must be
believed by Bankers Trust, acting under the supervision of the Board of
Trustees of the Portfolio, to be of comparable quality. Any commercial paper
issued by a foreign corporation and purchased by the Portfolio must be U.S.
dollar-denominated and must not be subject to foreign withholding tax at the
time of purchase. Investing in foreign commercial paper generally involves
risks similar to those described above relating to obligations of foreign
banks or foreign branches of U.S. banks.

Variable rate master demand notes are unsecured instruments that permit the
indebtedness thereunder to vary and provide for periodic adjustments in the
interest rate. Because variable rate master demand notes are direct lending
arrangements between the Portfolio and the issuer, they are not normally
traded. Although no active secondary market may exist for these notes, the
Portfolio will purchase only those notes under which it may demand and receive
payment of principal and accrued interest daily or may resell the note to a
third party. While the notes are not typically rated by credit rating
agencies, issuers of variable rate master demand notes must satisfy Bankers
Trust, acting under the supervision of the Board of Trustees of the Portfolio,
that the same criteria as set forth above for issuers of commercial paper are
met. In the event an issuer of a variable rate master demand note defaulted on
its payment obligation, the Portfolio might be unable to dispose of the note
because of the absence of a secondary market and could, for this or other
reasons, suffer a loss to the extent of the default.

Other Corporate Debt Obligations. The Portfolio may invest in bonds, notes and
debentures issued by U.S. corporations that at the time of purchase have
outstanding commercial paper meeting the above rating requirements, or if such
commercial paper is unrated or if no such commercial paper is outstanding, are
rated at least AA by S&P or Aa by Moody's. Such obligations, at the time of
investment, must have or be deemed to have less than 397 days to maturity.

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

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

Securities Lending. The Portfolio is permitted to lend up to 20% of the total
value of its securities to brokers, dealers and other financial organizations.
These loans must be secured continuously by cash or equivalent collateral or
by a letter of credit at least equal to 100% of the current market value of
the securities loaned plus accrued income. By lending its securities, the
Portfolio can increase its income by continuing to receive income on the
loaned securities as well as by the opportunity to receive interest on the
collateral. Any gain or loss in the market price of the borrowed securities
which occurs during the term of the loan inures to the Portfolio and its
investors. There may be risks of delay in receiving additional collateral or
risks of delay in recovery of the securities or even loss of rights in the
collateral should the borrower of the securities fail financially.

ADDITIONAL INVESTMENT TECHNIQUES
The Portfolio may enter into reverse repurchase agreements. See "Investment
Objectives and Policies" in the Statement of Additional Information for a more
detailed description of reverse repurchase agreements.

PORTFOLIO QUALITY AND MATURITY
The Portfolio will maintain a dollar-weighted average maturity of 90 days or
less. All securities in which the Portfolio invests will have or be deemed to
have remaining maturities of 397 days or less on the date of their purchase,
will be denominated in U.S. dollars and will have been granted the required
ratings established herein by two nationally recognized statistical rating
organizations ("NRSRO") (or one such NRSRO if that NRSRO is the only such
NRSRO which rates the security), or if unrated, are believed by Bankers Trust,
under the supervision of the Portfolio's Board of Trustees, to be of
comparable quality. A description of such ratings is provided in the Appendix
to the Statement of Additional Information. Bankers Trust, acting under the
supervision of and procedures adopted by the Board of Trustees of the
Portfolio, will also determine that all securities purchased by the Portfolio
present minimal credit risks. Bankers Trust will cause the Portfolio to
dispose of any security as soon as practicable if the security is no longer of
the requisite quality, unless such action would not be in the best interest of
the Portfolio.

ADDITIONAL INVESTMENT LIMITATIONS
The Fund's and the Portfolio's investment objectives, together with the
investment restrictions described in this paragraph and the Statement of
Additional Information, except as noted, are "fundamental policies," which
means that they may not be changed without the approval of the holders of the
Fund's and the Portfolio's outstanding voting securities. The Fund has the
same investment restrictions as the Portfolio, except that the Fund may invest
all of its Assets in another open-end investment company with the same
investment objective, such as the Portfolio. The Portfolio may not invest more
than 25% of its total assets in the securities of issuers in any single
industry, except that, under normal market conditions, more than 25% of the
total assets of the Portfolio will be invested in foreign and domestic bank
obligations. As an operating policy, the Portfolio may not invest more than 5%
of its total assets in the obligations of any one issuer except for U.S.
Government Obligations and repurchase agreements, which may be purchased
without limitation. The Portfolio is also authorized to borrow, including
entering into reverse repurchase transactions, in an amount up to 5% of its
total assets for temporary purposes, but not for leverage, and to pledge its
assets to the same extent in connection with these borrowings. See the
Statement of Additional Information for additional information with respect to
reverse repurchase transactions. At the time of an investment, the Portfolio's
aggregate holdings of repurchase agreements having a remaining maturity of
more than seven calendar days (or which may not be terminated within seven
calendar days upon notice by the Portfolio), time deposits having remaining
maturities of more than seven calendar days, illiquid securities, restricted
securities and securities lacking readily available market quotations will not
exceed 10% of the Portfolio's net assets. If changes in the liquidity of
certain securities cause the Portfolio to exceed such 10% limit, the Portfolio
will take steps to bring the aggregate amount of its illiquid securities back
below 10% of its net assets as soon as practicable, unless such action would
not be in the best interest of the Portfolio. The Statement of Additional
Information contains further information on the Fund's and the Portfolio's
investment restrictions.

RISK FACTORS; MATCHING THE FUND TO YOUR INVESTMENT NEEDS
The Fund is designed for conservative investors looking for high current
income approximating money market rates while remaining conveniently liquid
with a stable share price. The Portfolio follows practices which enable the
Fund to attempt to maintain a $1.00 share price: limiting average maturity of
the securities held by the Portfolio to 90 days or less; buying securities
which mature in 397 days or less; and buying only high quality securities with
minimal credit risks. Of course, the Fund cannot guarantee a $1.00 share
price, but these practices help to minimize any price fluctuations that might
result from rising or declining interest rates. While the Portfolio invests in
high quality money market securities, you should be aware that your investment
is not without risk. All money market instruments, including U.S. Government
securities, can change in value when interest rates or an issuer's
creditworthiness changes.

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

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

For descriptions of the investment objective, policies and restrictions of the
Portfolio, see "Investment Objective and Policies." For descriptions of the
management of the Portfolio, see "Management of the Trust and Portfolio"
herein and in the Statement of Additional Information. For descriptions of the
expenses of the Portfolio, see "Management of the Trust and Portfolio" herein.

NET ASSET VALUE
The net asset value per share of the Fund is calculated on each day on which
the Fund is open (each such day being a "Valuation Day"). The Fund is
currently open on each day, Monday through Friday, except (a) January 1st,
Martin Luther King, Jr.'s Birthday (the third Monday in January); Presidents'
Day (the third Monday in February), Good Friday, Memorial Day (the last Monday
in May), July 4th, Labor Day (the first Monday in September), Columbus Day
(the second Monday in October), Veteran's Day (November 11th), Thanksgiving
Day (the last Thursday in November) and December 25th; and (b) the preceding
Friday or the subsequent Monday when one of the calendar determined holidays
falls on a Saturday or Sunday, respectively.

The net asset value per share of the Fund is calculated on each Valuation Day
as of the close of regular trading on the New York Stock Exchange Inc. (the
"NYSE"), which is currently 4:00 p.m., New York time or in the event that the
NYSE closes early, at the time of such early closing. The net asset value per
share of the Fund is computed by dividing the value of the Fund's assets
(i.e., the value of its investment in the Portfolio and other assets), less
all liabilities, by the total number of its shares outstanding. The Fund's net
asset value will normally be $1.00.

The assets of the Portfolio are valued by using the amortized cost method of
valuation. This method involves valuing each security held by the Portfolio at
its cost at the time of its purchase and thereafter assuming a constant
amortization to maturity of any discount or premium. Accordingly, immaterial
fluctuations in the market value of the securities held by the Portfolio will
not be reflected in the Fund's net asset value. The Board of Trustees of the
Portfolio will monitor the valuation of assets by this method and will make
such changes as it deems necessary to assure that the assets of the Portfolio
are valued fairly and in good faith.

Under procedures adopted by the Board, a net asset value for a Fund later
determined to have been inaccurate for any reason will be recalculated.
Purchases and redemptions made at a net asset value determined to have been
inaccurate will be adjusted, although in certain circumstances, such as where
the difference between the original net asset value and the recalculated net
asset value divided by the recalculated net asset value is 0.005% (1/2 of 1%)
or less or shareholder transactions are otherwise insubstantially affected,
further action is not required.

PURCHASE AND REDEMPTION OF SHARES
PURCHASE OF SHARES
The Trust accepts purchase orders for shares of the Fund at the net asset
value per share of the Fund next determined on each Valuation Day. See "Net
Asset Value" above. There is no sales charge on the purchase of shares, but
costs of distributing shares of the Fund may be reimbursed from its assets, as
described herein. Excluding retirement plans, the minimum initial investment
in the Trust is $1,000,000 which may be allocated in amounts not less than
$100,000 per fund in certain funds in the BT Family of Funds. The subsequent
minimum investment in the Fund is $100,000 (excluding retirement plans).
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 the Fund will receive, on any Valuation Day, the
net asset value next determined following receipt by the Service Agent and
transmission to Bankers Trust, as the Trust's transfer agent (the "Transfer
Agent") of such order. If the purchase order is received by the Service Agent
and transmitted to the Transfer Agent prior to 4:00 p.m. (New York time or
earlier, should the NYSE close earlier), and if payment in the form of federal
funds is received on that day by Bankers Trust, as the Trust's custodian (the
"Custodian"), the shareholder will receive the dividend declared on that day.
The Trust and Signature reserve the right to reject any purchase order.

Shares must be purchased in accordance with procedures established by the
Transfer Agent and Service Agents, including Bankers Trust, in connection with
customers' accounts. It is the responsibility of each Service Agent to
transmit to the Transfer Agent purchase and redemption orders and to transmit
to the Custodian purchase payments on behalf of its customers in a timely
manner, and a shareholder must settle with the Service Agent his or her
entitlement to an effective purchase or redemption order as of a particular
time. Because Bankers Trust is the Custodian and Transfer Agent of the Trust,
funds may be transferred directly from or to a customer's account with Bankers
Trust to or from the Fund without incurring the additional costs or delays
associated with the wiring of federal funds.

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

Checkwriting. Shareholders of the Fund may redeem shares by check. Checks may
not be used to close an account. Shareholders will continue to earn dividends
on shares to be redeemed until the check clears. Checks will be returned to
shareholders at the end of the month. There is no charge for redemption of
shares by check. Additional information regarding the checkwriting privilege
may be obtained from a Service Agent.

* Call your Service Agent for information and a prospectus. Read the
prospectus for relevant information.

* Complete and sign an application, taking care to register your new account
in the same name, address and taxpayer identification number as your
existing account(s).

* Individual Retirement Accounts (IRAs): personal savings plans that offer tax
advantages for individuals to set aside money for retirement and allow new
contributions of $2,000 per tax year.

* Rollover IRAs: tax-deferred retirement accounts that retain the special tax
advantages of lump sum distributions from qualified retirement plans and
transferred IRA accounts.

* 403(b) Custodian Accounts: defined contribution plans open to employees of
most nonprofit organizations and educational institutions.

* Deferred Benefit Plans: plan sponsors may invest all or part of their
pension assets in the Fund.

DIVIDENDS, DISTRIBUTIONS AND TAXES
The Portfolio determines its net income and realized capital gains, if any, on
each Valuation Day and allocates all such income and gain pro rata among the
Fund and the other investors in the Portfolio at the time of such
determination. The Fund declares dividends from its net income (i.e., the
Fund's pro rata share of the net income of the Portfolio) on each Valuation
Day and pays dividends for the preceding month within the first five Valuation
Days of each month. The Fund reserves the right to include realized short-term
gains, if any, in such daily dividends. Distributions of the Fund's pro rata
share of the Portfolio's net realized long-term capital gains, if any, and any
undistributed net realized short-term capital gains are normally declared and
paid annually at the end of the fiscal year in which they were earned to the
extent they are not offset by any capital loss carryforwards. Since the Fund
is subject to a 4% nondeductible excise tax on certain undistributed amounts
of ordinary income and capital gains, the Fund expects to make such other
distributions as are necessary to avoid the application of this tax. Unless a
shareholder instructs the Fund to pay dividends or capital gains distributions
in cash, dividends and distributions will automatically be reinvested at net
asset value in additional shares of the Fund.

The Trust intends to qualify the Fund as a regulated investment company, as
defined in the Internal Revenue Code of 1986, as amended (the "Code".)
Provided the Fund meets the requirements imposed by the Code, the Fund will
not pay any Federal income or excise taxes. The Portfolio will also not be
required to pay any Federal income or excise taxes. Dividends paid by the Fund
from its taxable net investment income and distributions by the Fund of its
net realized short-term capital gains are taxable to shareholders as ordinary
income, whether received in cash or reinvested in additional shares of the
Fund. The Trust does not expect that the Fund will realize long-term capital
gains and thus does not contemplate paying distributions taxable to
shareholders as long-term capital gains. The Fund's dividends and
distributions will not qualify for the dividends-received deduction for
corporations.

PERFORMANCE INFORMATION AND REPORTS
From time to time, the Trust may advertise "current yield" and/or "effective
yield" for the Fund. All yield figures are based on historical earnings and
are not intended to indicate future performance. The "current yield" of the
Fund refers to the income generated by an investment in the Fund over a seven-
day period (which period will be stated in the advertisement). This income is
then "annualized;'" that is, the amount of income generated by the investment
during that week is assumed to be generated each week over a 52-week period
and is shown as a percentage of the investment. The "effective yield" is
calculated similarly but, when annualized, the income earned by an investment
in the Fund is assumed to be reinvested. The "effective yield" will be
slightly higher than the "current yield" because of the compounding effect of
this assumed reinvestment. The Trust may include this information in sales
material and advertisements for the Fund.

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

From time to time, advertisements or reports to shareholders may compare the
yield of the Fund to that of other mutual funds with similar investment
objectives or to that of a particular index. The yield of the Fund might be
compared with, for example, the IBC/Donoghue's Taxable First Tier
Institutional Only Money Fund Average which is an average compiled by IBC/
Donoghue's Money Fund Report, a widely recognized, independent publication
that monitors the performance of money market mutual funds. Similarly, the
yield of the Fund might be compared with rankings prepared by Micropal Limited
and/or Lipper Analytical Services, Inc., which are widely recognized,
independent services that monitor the investment performance of mutual funds.
The yield of the Fund might also be compared with the average yield reported
by the Bank Rate Monitor for money market deposit accounts offered by the 50
leading banks and thrift institutions in the top five standard metropolitan
areas. Shareholders may make inquiries regarding the Fund, including current
yield quotations and performance information, by contacting any Service Agent.

MANAGEMENT OF THE TRUST AND PORTFOLIO
BOARD OF TRUSTEES
The affairs of the Trust and Portfolio are managed under the supervision of
their respective Board of Trustees. By virtue of the responsibilities assumed
by Bankers Trust, the administrator of the Trust and Portfolio, neither the
Trust nor Portfolio require employees other than its executive officers. None
of the executive officers of the Trust or Portfolio devotes full time to the
affairs of the Trust or Portfolio.

The Trustees of the Trust who are not "interested persons" (as defined in the
1940 Act) (the "Independent Trustees") of the Trust or of the Portfolio, as
the case may be, have adopted written procedures reasonably appropriate to
deal with potential conflicts of interest, up to and including creating
separate boards of trustees, arising from the fact that several of the same
individuals are Trustees of the Trust and the Portfolio. For more information
with respect to the Trustees of both the Trust and the Portfolio, see
"Management of the Trust and Portfolios" in the Statement of Additional
Information.

Bankers Trust, a New York banking corporation with principal offices at 280
Park Avenue, New York, New York 10017, is a wholly-owned subsidiary of Bankers
Trust New York Corporation. Bankers Trust conducts a variety of general
banking and trust activities and is a major wholesale supplier of financial
services to the international and domestic institutional markets. As of
December 31, 1995, Bankers Trust New York Corporation was the ninth largest
bank holding company in the United States with total assets of approximately
$104 billion. Bankers Trust is a worldwide merchant bank dedicated to
servicing the needs of corporations, governments, financial institutions and
private clients through a global network of over 120 offices in more than 40
countries. Investment management is a core business of Bankers Trust, built on
a tradition of excellence from its roots as a trust bank founded in 1903. The
scope of Bankers Trust's investment management capability is unique due to its
leadership positions in both active and passive quantitative management and
its presence in major equity and fixed income markets around the world.
Bankers Trust is one of the nation's largest and most experienced investment
managers, with approximately $200 billion in assets under management globally.
Of that total, approximately $45 billion are in cash assets alone. This makes
Bankers Trust one of the nation's leading managers of cash funds.

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

Under its Investment Advisory Agreement, Bankers Trust receives a fee from the
Portfolio, computed daily and paid monthly, at the annual rate of 0.15% of the
average daily net assets of the Portfolio.

Bankers Trust has been advised by its counsel that, in counsel's opinion,
Bankers Trust currently may perform the services for the Trust and the
Portfolio described in this prospectus and the statement of additional
information without violation of the Glass-Steagall Act or other applicable
banking laws or regulations. State laws on this issue may differ from the
interpretations of relevant Federal law and banks and financial institutions
may be required to register as dealers pursuant to state securities law.

Under an Administration and Services Agreement with the Portfolio, Bankers
Trust calculates the value of the assets of the Portfolio and generally
assists the Board of Trustees of the Portfolio in all aspects of the
administration and operation of the Portfolio. The Administration and Services
Agreement provides for the Portfolio to pay Bankers Trust a fee, computed
daily and paid monthly, at the annual rate of 0.05% of the average daily net
assets of the Portfolio. Under each Administration and Services Agreement,
Bankers Trust may delegate one or more of its responsibilities to others,
including Signature, at Bankers Trust's expense. For more information, see the
Statement of Additional Information.

DISTRIBUTOR
Under its Distribution Agreement with the Trust, Signature, as Distributor,
serves as the Trust's principal underwriter on a best efforts basis. In
addition, Signature provides the Trust with office facilities. Signature is a
wholly-owned subsidiary of Signature Financial Group, Inc. ("SFG"). SFG and
its affiliates currently provide administration and distribution services for
other registered investment companies. The principal business address of SFG
and Signature is 6 St. James Avenue, Boston, Massachusetts 02116.

Pursuant to the terms of the Trust's Plan of Distribution pursuant to Rule
12b-1 under the 1940 Act (the "Plan"), Signature may seek reimbursement in an
amount not exceeding 0.10% of the Fund's average daily net assets annually for
expenses incurred in connection with any activities primarily intended to
result in the sale of the Fund's shares, including, but not limited to:
compensation to and expenses (including overhead and telephone expenses) of
account executives or other employees of Signature who, as their primary
activity, engage in or support the distribution of shares; printing of
prospectuses, statements of additional information and reports for other than
existing Fund shareholders in amounts in excess of that typically used in
connection with the distribution of shares of the Fund; costs of placing
advertising in various media; services of parties other than Signature or its
affiliates in formulating sales literature; and typesetting, printing and
distribution of sales literature. All costs and expenses in connection with
implementing and operating the Plan will be paid by the Fund, subject to the
0.10% of net assets limitation. All costs and expenses associated with
preparing the prospectuses and statements of additional information and in
connection with printing them for and distributing them to existing
shareholders and regulatory authorities, which costs and expenses would not be
considered distribution expenses for purposes of the Plan, will also be paid
by the Fund. To the extent expenses of Signature under the Plan in any fiscal
year of the Trust exceed amounts payable under the Plan during that year,
those expenses will not be reimbursed in any succeeding fiscal year. Expenses
incurred in connection with distribution activities will be identified to the
Fund or other series of the Trust involved, although it is anticipated that
some activities may be conducted on a Trust-wide basis, with the result that
those activities will not be identifiable to any particular series. In the
latter case, expenses will be allocated among the series of the Trust on the
basis of their relative net assets. It is not expected that any payments will
be made under the Plan in the foreseeable future.

SERVICE AGENT
All shareholders must be represented by a Service Agent. Bankers Trust acts as
a Service Agent pursuant to its Administration and Services Agreement with the
Trust and receives no additional compensation from the Fund for such
shareholder services. The service fees of any other Service Agent, including
broker-dealers, will be paid by Bankers Trust from its fees. The services
provided by a Service Agent may include establishing and maintaining
shareholder accounts, processing purchase and redemption transactions,
arranging for bank wires, performing shareholder sub-accounting, answering
client inquiries regarding the Trust, assisting clients in changing dividend
options, account designations and addresses, providing periodic statements
showing the client's account balance, transmitting proxy statements, periodic
reports, updated prospectuses and other communications to shareholders and,
with respect to meetings of shareholders, collecting, tabulating and
forwarding to the Trust executed proxies and obtaining such other information
and performing such other services as the Administrator or the Service Agent's
clients may reasonably request and agree upon with the Service Agent. Service
Agents may separately charge their clients additional fees only to cover
provision of additional or more comprehensive services not already provided
under the Administration and Services Agreement with Bankers Trust, or of the
type or scope not generally offered by a mutual fund, such as cash management
services or enhanced retirement or trust reporting. In addition, investors may
be charged a transaction fee if they effect transactions in Fund shares
through a broker or agent. Each Service Agent has agreed to transmit to
shareholders, who are its customers, appropriate disclosures of any fees that
it may charge them directly.

CUSTODIAN AND TRANSFER AGENT
Bankers Trust acts as Custodian of the assets of the Trust and the Portfolio
and serves as the Transfer Agent for the Trust and the Portfolio under the
respective Administration and Services Agreement with the Trust and the
Portfolio.

ORGANIZATION OF THE TRUST
The Trust was organized on March 26, 1990 under the laws of the Commonwealth
of Massachusetts. The Fund is a separate series of the Trust. The Trust offers
shares of beneficial interest of separate series, par value $0.001 per share.
The shares of the other series of the Trust are offered through separate
prospectuses. No series of shares has any preference over any other series.

The Trust is an entity commonly known as a "Massachusetts business trust."
Under Massachusetts law, shareholders of such a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.

The Portfolio, in which all the Assets of the Fund will be invested, is
organized as a trust under the laws of the State of New York. The Portfolio's
Declaration of Trust provides that the Fund and other entities investing in
the Portfolio (e.g., other investment companies, insurance company separate
accounts and common and commingled trust funds) will each be liable for all
obligations of the Portfolio. However, the risk of the Fund incurring
financial loss on account of such liability is limited to circumstances in
which both inadequate insurance existed and the Portfolio itself was unable to
meet its obligations. Accordingly, the Trustees of the Trust believe that
neither the Fund nor its shareholders will be adversely affected by reason of
the Fund's investing in the Portfolio.

Each series in the Trust will not be involved in any vote involving a
Portfolio in which it does not invest its Assets. Shareholders of all the
series of the Trust will, however, vote together to elect Trustees of the
Trust and for certain other matters. Under certain circumstances, the
shareholders of one or more series could control the outcome of these votes.

EXPENSES OF THE TRUST
The Fund bears its own expenses. Operating expenses for the Fund generally
consist of all costs not specifically borne by Bankers Trust or Signature,
including administration and services fees, fees for necessary professional
services, the costs of regulatory compliance and costs associated with
maintaining legal existence and shareholder relations. Bankers Trust and
Signature have agreed to reimburse the Fund to the extent required by
applicable state law for certain expenses that are described in the Statement
of Additional Information. The Portfolio bears its own expenses. Operating
expenses for the Portfolio generally consist of all costs not specifically
borne by Bankers Trust or Signature, including investment advisory and
administration and services fees, fees for necessary professional services,
amortization of organizational expenses, the costs associated with regulatory
compliance and maintaining legal existence and investor relations.

<PAGE>
INVESTMENT ADVISER OF THE PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY

DISTRIBUTOR
SIGNATURE BROKER-DEALER SERVICES, INC.

CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY

INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.

COUNSEL
WILLKIE FARR & GALLAGHER
................................................................................

No person has been authorized to give any information or to make any
representations other than those contained in the Trust's Prospectuses, its
Statement of Additional Information or the Trust's official sales literature
in connection with the offering of the Trust's shares and, if given or made,
such other information or representations must not be relied on as having been
authorized by the Trust. This Prospectus does not constitute an offer in any
state in which, or to any person to whom, such offer may not lawfully be made.
..............................................................................
<PAGE>
BT INSTITUTIONAL FUNDS

PROSPECTUS: APRIL 29, 1996
Please read this Prospectus carefully before investing and retain it for future
reference. It contains important information about the Fund that you should know
and can refer to in deciding whether the Fund's goals match your own.

Institutional
Cash Reserves

A money market fund that provides high current income to the extent consistent
with liquidity and capital preservation.

BANKERS TRUST COMPANY
Investment Adviser of the
Portfolio and Administrator

SIGNATURE BROKER-
DEALER SERVICES, INC.
Distributor
6 St. James Avenue
Boston, Massachusetts 02116
<PAGE>

TABLE OF CONTENTS
- ------------------------------------------------------------------------------
PAGE
..............................................................................
Summary of Fund Expenses 3
Fund Financial Highlights 5
Investment Objective and Policies 6
Risk Factors; Matching the Fund to Your Investment Needs 10
Net Asset Value 11
Purchase and Redemption of Shares 12
Dividends, Distributions and Taxes 15
Performance Information and Reports 16
Management of the Trust and Portfolio 17
- ------------------------------------------------------------------------------

<PAGE>

SUMMARY OF FUND EXPENSES
The following table provides (i) a summary of expenses relating to purchases and
sales of shares of Institutional Cash Reserves (the "Fund") and the aggregate
annual operating expenses of the Fund and the expenses of the Cash Management
Portfolio (the "Portfolio"), as a percentage of average net assets of the Fund
and (ii) an example illustrating the dollar cost of such expenses on a $1,000
investment in the Fund. THE TRUSTEES OF THE BT INSTITUTIONAL FUNDS (THE "TRUST")
BELIEVE THAT THE AGGREGATE PER SHARE EXPENSES OF THE FUND AND THE PORTFOLIO WILL
BE LESS THAN OR APPROXIMATELY EQUAL TO THE EXPENSES WHICH THE FUND WOULD INCUR
IF THE TRUST RETAINED THE SERVICES OF AN INVESTMENT ADVISER AND THE INVESTABLE
ASSETS (THE "ASSETS") OF THE FUND WERE INVESTED DIRECTLY IN THE TYPE OF
SECURITIES BEING HELD BY THE PORTFOLIO.

- ------------------------------------------------------------------------------
ANNUAL OPERATING EXPENSES
(as a percentage of the average daily net assets of the Fund)
..............................................................................
Investment advisory fee 0.15%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.03
..............................................................................
Total operating expenses (after reimbursements or waivers) 0.18%
..............................................................................
EXAMPLE 1 year 3 years 5 years 10 years
..............................................................................
You would pay the following expenses
on a $1,000 investment, assuming:
(1) 5% annual return and (2)
redemption at the end of each time period $2 $5 $9 $18
- -------------------------------------------------------------------------------

The expense table and the example above show the costs and expenses that an
investor will bear directly or indirectly as a shareholder of the Fund. While
reimbursement of distribution expenses in amounts up to 0.20% of average net
assets are authorized to be made pursuant to the Plan of Distribution under Rule
12b-1 of the Investment Company Act of 1940, as amended (the "1940 Act"), it is
not expected that any payments will actually be made under that plan in the
foreseeable future. The expense table and the example reflect a voluntary
undertaking by Bankers Trust Company ("Bankers Trust") or Signature Broker-
Dealer Services, Inc. ("Signature") to waive or reimburse expenses such that the
total operating expenses will not exceed 0.18% of the Fund's average net assets
annually. In the absence of this undertaking, for the fiscal year ended December
31, 1995 the total operating expenses would have been equal to 0.25% of the
Fund's average net assets annually. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN. Moreover, while each example assumes a 5% annual return,
actual performance will vary and may result in a return greater or less than 5%.

The Fund is sold by Signature as the Trust's distributor (the "Distributor") to
customers of Bankers Trust or to customers of another bank or a dealer or other
institution that has a sub-shareholder servicing agreement with Bankers Trust
(along with Bankers Trust, a "Service Agent"). Some Service Agents may impose
certain conditions on their customers in addition to or different from those
imposed by the Fund and may charge their customers a direct fee for their
services. Each Service Agent has agreed to transmit to shareholders who are its
customers appropriate disclosures of any fees that it may charge them directly.

For more information with respect to the expenses of the Fund and the Portfolio
see "Management of the Trust and Portfolio" herein.
<PAGE>

FUND FINANCIAL HIGHLIGHTS
The following table shows selected data for a share outstanding, total
investment return, ratios to average net assets and other supplemental data
for the Fund for each period indicated and has been audited by Coopers &
Lybrand L.L.P., the Fund's independent accountants, whose report thereon
appears in the Fund's Annual Report which is incorporated by reference in the
Fund's Statement of Additional Information.
- ------------------------------------------------------------------------------
FOR THE PERIOD
JANUARY 25,
FOR THE (COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
DECEMBER 31, 1995 DECEMBER 31, 1994
..............................................................................
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $1.00 $1.00
..............................................................................
Income from Investment Operations
Net Investment Income 0.06 0.04
Net Realized Gain (Loss) from Securities
Transactions 0.00 (0.01)
..............................................................................
Total from Investment Operations 0.06 0.03
..............................................................................
Contribution of Capital -- 0.01
..............................................................................
Distributions From:
Net Investment Income (0.06) (0.04)
..............................................................................
Net Asset Value, End of Period $1.00 $1.00
..............................................................................
TOTAL INVESTMENT RETURN 5.94% 4.32
RATIOS AND SUPPLEMENTAL DATA
Ratio of Net Investment Income to Average
Net Assets 5.80% 4.32%*
Ratio of Expenses to Average Net Assets,
Including Expenses of the Cash
Management Portfolio 0.18% 0.18%*
Decrease Reflected in Above Expense Ratio
Due to Absorption of Expenses by Bankers
Trust 0.07% 0.08%*
Net Assets, End of Period
(000's omitted) $820,973 $920,722
- ------------------------------------------------------------------------------
*Annualized
+Increased by 0.81% due to Contribution of Capital.

<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks a high level of current income consistent with liquidity and the
preservation of capital through investment in high quality money market
instruments. The Fund offers investors a convenient means of diversifying their
holdings of short-term securities while relieving those investors of the
administrative burdens typically associated with purchasing and holding these
instruments, such as coordinating maturities and reinvestments, providing for
safekeeping and maintaining detailed records. High quality, short-term
instruments may result in a lower yield than instruments with a lower quality or
a longer term.

The Trust seeks to achieve the investment objective of the Fund by investing all
the Assets of the Fund in the Portfolio, which has the same investment objective
as the Fund. There can be no assurances that the investment objective of either
the Fund or the Portfolio will be achieved. The investment objective of each of
the Fund and the Portfolio is a fundamental policy and may not be changed
without the approval of the Fund's shareholders or the Portfolio's investors,
respectively. See "Special Information Concerning Master-Feeder Fund Structure"
on page 10 herein.

CASH MANAGEMENT PORTFOLIO
The Portfolio will attempt to achieve its investment objective by investing in
the following money market instruments:

Bank Obligations. The Portfolio may invest in fixed rate or variable rate
obligations of U.S. or foreign banks which have total assets at the time of
purchase in excess of $1 billion and are rated Prime-1 by Moody's Investors
Service, Inc. ("Moody's") or A-1 or higher by Standard & Poor's Corporation
("S&P") or, if not rated, are believed by Bankers Trust, acting under the
supervision of the Board of Trustees of the Portfolio, to be of comparable
quality. Bank obligations in which the Portfolio invests include certificates of
deposit, bankers' acceptances, time deposits and other U.S. dollar-denominated
instruments issued or supported by the credit of U.S. or foreign banks. If
Bankers Trust, acting under the supervision of the Board of Trustees of the
Portfolio, deems the instruments to present minimal credit risk, the Portfolio
may invest in obligations of foreign banks or foreign branches of U.S. banks,
which include subsidiaries of U.S. banks located in the United Kingdom, Grand
Cayman Island, Nassau, Japan and Canada. Investments in these obligations may
entail risks that are different from those of investments in obligations of U.S.
domestic banks because of differences in political, regulatory and economic
systems and conditions. These risks include future political and economic
developments, currency blockage, the possible imposition of withholding taxes on
interest payments, differing reserve requirements, reporting and recordkeeping
requirements and accounting standards, possible seizure or nationalization of
foreign deposits, difficulty or inability of pursuing legal remedies and
obtaining judgments in foreign courts, possible establishment of exchange
controls or the adoption of other foreign governmental restrictions that might
affect adversely the payment of principal and interest on bank obligations.
Under normal market conditions, the Portfolio will invest more than 25% of its
assets in the foreign and domestic bank obligations described above. The
Portfolio's concentration of its investments in bank obligations will cause the
Portfolio to be subject to the risks peculiar to the domestic and foreign
banking industries to a greater extent than if its investments were not so
concentrated. A description of the ratings set forth above is provided in the
Appendix to the Statement of Additional Information.

Commercial Paper. The Portfolio may invest in fixed rate or variable rate
commercial paper, including variable rate master demand notes, issued by U.S. or
foreign corporations. Commercial paper when purchased by the Portfolio must be
rated Prime-1 by Moody's or A-1 or higher by S&P or, if not rated, must be
believed by Bankers Trust, acting under the supervision of the Board of Trustees
of the Portfolio, to be of comparable quality. Any commercial paper issued by a
foreign corporation and purchased by the Portfolio must be U.S.
dollar-denominated and must not be subject to foreign withholding tax at the
time of purchase. Investing in foreign commercial paper generally involves risks
similar to those described above relating to obligations of foreign banks or
foreign branches of U.S. banks.

Variable rate master demand notes are unsecured instruments that permit the
indebtedness thereunder to vary and provide for periodic adjustments in the
interest rate. Because variable rate master demand notes are direct lending
arrangements between the Portfolio and the issuer, they are not normally traded.
Although no active secondary market may exist for these notes, the Portfolio
will purchase only those notes under which it may demand and receive payment of
principal and accrued interest daily or may resell the note to a third party.
While the notes are not typically rated by credit rating agencies, issuers of
variable rate master demand notes must satisfy Bankers Trust, acting under the
supervision of the Board of Trustees of the Portfolio, that the same criteria as
set forth above for issuers of commercial paper are met. In the event an issuer
of a variable rate master demand note defaulted on its payment obligation, the
Portfolio might be unable to dispose of the note because of the absence of a
secondary market and could, for this or other reasons, suffer a loss to the
extent of the default.

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

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

Securities Lending. The Portfolio is permitted to lend up to 20% of the total
value of its securities to brokers, dealers and other financial organizations.
These loans must be secured continuously by cash or equivalent collateral or by
a letter of credit at least equal to 100% of the current market value of the
securities loaned plus accrued income. By lending its securities, the Portfolio
can increase its income by continuing to receive income on the loaned securities
as well as by the opportunity to receive interest on the collateral. Any gain or
loss in the market price of the borrowed securities which occurs during the term
of the loan inures to the Portfolio and its investors. There may be risks of
delay in receiving additional collateral or risks of delay in recovery of the
securities or even loss of rights in the collateral should the borrower of the
securities fail financially.

ADDITIONAL INVESTMENT TECHNIQUES

The Portfolio may enter into reverse repurchase agreements. See "Investment
Objectives and Policies" in the Statement of Additional Information for a more
detailed description of reverse repurchase agreements.

PORTFOLIO QUALITY AND MATURITY

The Portfolio will maintain a dollar-weighted average maturity of 90 days or
less. All securities in which the Portfolio invests will have or be deemed to
have remaining maturities of 397 days or less on the date of their purchase,
will be denominated in U.S. dollars and will have been granted the required
ratings established herein by two nationally recognized statistical rating
organizations ("NRSRO") (or one such NRSRO if that NRSRO is the only such NRSRO
which rates the security), or if unrated, are believed by Bankers Trust, under
the supervision of the Portfolio's Board of Trustees, to be of comparable
quality. A description of such ratings is provided in the Appendix to the
Statement of Additional Information. Bankers Trust, acting under the supervision
of and procedures adopted by the Board of Trustees of the Portfolio, will also
determine that all securities purchased by the Portfolio present minimal credit
risks. Bankers Trust will cause the Portfolio to dispose of any security as soon
as practicable if the security is no longer of the requisite quality, unless
such action would not be in the best interest of the Portfolio.

ADDITIONAL INVESTMENT LIMITATIONS

The Fund's and the Portfolio's investment objectives, together with the
investment restrictions described in this paragraph and the Statement of
Additional Information, except as noted, are "fundamental policies," which means
that they may not be changed without the approval of the holders of the Fund's
and the Portfolio's outstanding voting securities. The Fund has the same
investment restrictions as the Portfolio, except that the Fund may invest all of
its assets in another open-end investment company with the same investment
objective, such as the Portfolio. The Portfolio may not invest more than 25% of
its total assets in the securities of issuers in any single industry, except
that, under normal market conditions, more than 25% of the total assets of the
Portfolio will be invested in foreign and domestic bank obligations. As an
operating policy, the Portfolio may not invest more than 5% of its total assets
in the obligations of any one issuer except for U.S. Government Obligations and
repurchase agreements, which may be purchased without limitation. The Portfolio
is also authorized to borrow, including entering into reverse repurchase
transactions, in an amount up to 5% of its total assets for temporary purposes,
but not for leverage, and to pledge its assets to the same extent in connection
with these borrowings. See the Statement of Additional Information for
additional information with respect to reverse repurchase transactions. At the
time of an investment, the Portfolio's aggregate holdings of repurchase
agreements having a remaining maturity of more than seven calendar days (or
which may not be terminated within seven calendar days upon notice by the
Portfolio), time deposits having remaining maturities of more than seven
calendar days, illiquid securities, restricted securities and securities lacking
readily available market quotations will not exceed 10% of the Portfolio's net
assets. If changes in the liquidity of certain securities cause the Portfolio to
exceed such 10% limit, the Portfolio will take steps to bring the aggregate
amount of its illiquid securities back below 10% of its net assets as soon as
practicable, unless such action would not be in the best interest of the
Portfolio. The Statement of Additional Information contains further information
on the Fund's and the Portfolio's investment restrictions.

RISK FACTORS; MATCHING THE FUND TO YOUR INVESTMENT NEEDS

The Fund is designed for conservative investors looking for high current income
approximating money market rates while remaining conveniently liquid with a
stable share price. The Portfolio follows practices which enable the Fund to
attempt to maintain a $1.00 share price: limiting average maturity of the
securities held by the Portfolio to 90 days or less; buying securities which
mature in 397 days or less; and buying only high quality securities with minimal
credit risks. Of course, the Fund cannot guarantee a $1.00 share price, but
these practices help to minimize any price fluctuations that might result from
rising or declining interest rates. While the Portfolio invests in high quality
money market securities, you should be aware that your investment is not without
risk. All money market instruments, including U.S. Government securities, can
change in value when interest rates or an issuer's creditworthiness changes.

SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE

Unlike other open-end management investment companies (mutual funds) which
directly acquire and manage their own portfolio securities, the Fund seeks to
achieve its investment objective by investing all of its Assets in the
Portfolio, a separate registered investment company with the same investment
objective as the Fund. Therefore, an investor's interest in the Portfolio's
securities is indirect. In addition to selling a beneficial interest to the
Fund, the Portfolio may sell beneficial interests to other mutual funds or
institutional investors. Such investors will invest in the Portfolio on the same
terms and conditions and will pay a proportionate share of the Portfolio's
expenses. However, the other investors investing in the Portfolio are not
required to sell their shares at the same public offering price as the Fund due
to variations in sales commissions and other operating expenses. Therefore,
investors in the Fund should be aware that these differences may result in
differences in returns experienced by investors in the different funds that
invest in the Portfolio. Such differences in returns are also present in other
mutual fund structures. Information concerning other holders of interests in the
Portfolio is available from Bankers Trust at (800) 368-4031.

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

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

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

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

For descriptions of the investment objective, policies and restrictions of the
Portfolio, see "Investment Objective and Policies." For descriptions of the
management of the Portfolio, see "Management of the Trust and Portfolio" herein
and in the Statement of Additional Information. For descriptions of the expenses
of the Portfolio, see "Management of the Trust and Portfolio" herein.

NET ASSET VALUE

The net asset value per share of the Fund is calculated on each day on which the
Fund is open (each such day being a "Valuation Day"). The Fund is currently open
on each day, Monday through Friday, except (a) January 1st, Martin Luther King,
Jr.'s Birthday (the third Monday in January), Presidents' Day (the third Monday
in February), Good Friday, Memorial Day (the last Monday in May), July 4th,
Labor Day (the first Monday in September), Columbus Day (the second Monday in
October), Veteran's Day (November 11th), Thanksgiving Day (the last Thursday in
November) and December 25th: and (b) the preceding Friday or the subsequent
Monday when one of the calendar determined holidays falls on a Saturday or
Sunday, respectively.

The net asset value per share of the Fund is calculated on each Valuation Day as
of the close of regular trading on the New York Stock Exchange Inc. ("NYSE"),
which is currently 4:00 p.m., New York time or in the event that the NYSE closes
early, at the time of such early closing. The net asset value per share of the
Fund is computed by dividing the value of the Fund's assets (i.e., the value of
its investment in the Portfolio and other assets), less all liabilities, by the
total number of its shares outstanding. The Fund's net asset value will normally
be $1.00.

The assets of the Portfolio are valued by using the amortized cost method of
valuation. This method involves valuing each security held by the Portfolio at
its cost at the time of its purchase and thereafter assuming a constant
amortization to maturity of any discount or premium. Accordingly, immaterial
fluctuations in the market value of the securities held by the Portfolio will
not be reflected in the Fund's net asset value. The Board of Trustees of the
Portfolio will monitor the valuation of assets by this method and will make such
changes as it deems necessary to assure that the assets of the Portfolio are
valued fairly and in good faith.

Under procedures adopted by the Board, a net asset value for a Fund later
determined to have been inaccurate for any reason will be recalculated.
Purchases and redemptions made at a net asset value determined to have been
inaccurate will be adjusted, although in certain circumstances, such as where
the difference between the original net asset value and the recalculated net
asset value divided by the recalculated net asset value is 0.005% (1/2 of 1%)
or less or shareholder transactions are otherwise insubstantially affected,
further action is not required.

PURCHASE AND REDEMPTION OF SHARES
PURCHASE OF SHARES

The Trust accepts purchase orders for shares of the Fund at the net asset value
per share of the Fund next determined on each Valuation Day. See "Net Asset
Value" above. There is no sales charge on the purchase of shares, but costs of
distributing shares of the Fund may be reimbursed from its assets, as described
herein. Excluding retirement plans, the minimum initial investment in the Trust
is $50,000,000 which may be allocated in amounts not less than $1,000,000 per
fund in certain funds in the BT Family of Funds. The subsequent minimum
investment in the Fund is $1,000,000 (excluding retirement plans). 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 the Fund will receive, on any Valuation Day, the
net asset value next determined following receipt by the Service Agent and
transmission to Bankers Trust, as the Trust's transfer agent (the "Transfer
Agent") of such order. If the purchase order is received by the Service Agent
and transmitted to the Transfer Agent prior to 4:00 p.m. (New York time or
earlier, should the NYSE close earlier) and if payment in the form of federal
funds is received on that day by Bankers Trust, as the Trust's custodian (the
"Custodian"), the shareholder will receive the dividend declared on that day.
The Trust and Signature reserve the right to reject any purchase order.

Shares must be purchased in accordance with procedures established by the
Transfer Agent and Service Agents, including Bankers Trust, in connection with
customers' accounts. It is the responsibility of each Service Agent to transmit
to the Transfer Agent purchase and redemption orders and to transmit to the
Custodian purchase payments on behalf of its customers in a timely manner, and a
shareholder must settle with the Service Agent his or her entitlement to an
effective purchase or redemption order as of a particular time. Because Bankers
Trust is the Custodian and Transfer Agent of the Trust, funds may be transferred
directly from or to a customer's account with Bankers Trust to or from the Fund
without incurring the additional costs or delays associated with the wiring of
federal funds.

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

REDEMPTION OF SHARES

Service Agents may allow redemptions or exchanges by telephone and may disclaim
liability for following instructions communicated by telephone that the Service
Agent reasonably believes to be genuine. The Service Agent must provide the
investor with an opportunity to choose whether or not to utilize the telephone
redemption or exchange privilege. The Service Agent must employ reasonable
procedures to confirm that instructions communicated by telephone are genuine.
If the Service Agent does not do so, it may be liable for any losses due to
unauthorized or fraudulent instructions. Such procedures may include, among
others, requiring some form of personal identification prior to acting upon
instructions received by telephone, providing written confirmation of such
transactions and/or tape recording of telephone instructions.

Redemption orders are processed without charge by the Trust. A Service Agent may
on at least 30 days' notice involuntarily redeem a shareholder's account with
the Fund having a current value of less than $1,000,000 (excluding retirement
plans).

Automatic Cash Withdrawal Plan. The Fund may offer shareholders an automatic
cash withdrawal plan, under which shareholders who own shares of the Fund may
elect to receive periodic cash payments. Retirement plan accounts are eligible
for automatic cash withdrawal plans only where the shareholder is eligible to
receive qualified distributions. For further information regarding the automatic
cash withdrawal plan, shareholders should contact their Service Agent.

Checkwriting. Shareholders of the Fund may redeem shares by check. Checks may
not be used to close an account. Shareholders will continue to earn dividends on
shares to be redeemed until the check clears. Checks will be returned to
shareholders at the end of the month. There is no charge for redemption of
shares by check. Additional information regarding the checkwriting privilege may
be obtained from a Service Agent.

EXCHANGE PRIVILEGE

Shareholders may exchange their shares for shares of certain other funds in the
BT Family of Funds registered in their state. The Fund reserves the right to
terminate or modify the exchange privilege in the future. To make an exchange,
follow the procedures indicated in "Purchase of Shares" and "Redemption of
Shares." Before making an exchange, please note the following:

* Call your Service Agent for information and a prospectus. Read the
prospectus for relevant information.

* Complete and sign an application, taking care to register your new account in
the same name, address, and taxpayer identification number as your existing
account(s).

TAX-SAVING RETIREMENT PLANS

Retirement plans offer significant tax savings and are available to individuals,
partnerships, small businesses, corporations, nonprofit organizations and other
institutions. Contact your Service Agent or Bankers Trust for further
information. Bankers Trust can set up your new account in the Fund under a
number of several tax-sheltered plans. These plans contain special tax
advantages and let you invest for retirement while sheltering your investment
income from current taxes. Minimums may differ from those listed elsewhere in
the Prospectus.

* Individual Retirement Accounts (IRAs): personal savings plans that offer tax
advantages for individuals to set aside money for retirement and allow new
contributions of $2,000 per tax year.

* Rollover IRAs: tax-deferred retirement accounts that retain the special tax
advantages of lump sum distributions from qualified retirement plans and
transferred IRA accounts.

* Simplified Employee Pension Plans (SEP): a relatively easy and inexpensive
alternative to retirement planning for sole proprietors, partnerships and
corporations. Under a SEP, employers make tax-deductible contributions to
their own and to eligible employees' IRA accounts. Employee contributions are
available through a "Salary Deferral" SEP for businesses with fewer than 25
eligible employees.

* 401(k) Programs: defined contribution plans available to corporations allowing
tax-deductible employer contributions and permitting employees to contribute a
percentage of their wages on a tax-deferred basis.

* 403(b) Custodian Accounts: defined contribution plans open to employees of
most nonprofit organizations and educational institutions.

* Deferred Benefit Plans: plan sponsors may invest all or part of their
pension assets in the Fund.

DIVIDENDS, DISTRIBUTIONS AND TAXES

The Portfolio determines its net income and realized capital gains, if any, on
each Valuation Day and allocates all such income and gain pro rata among the
Fund and the other investors in the Portfolio at the time of such determination.
The Fund declares dividends from its net income (i.e., the Fund's pro rata share
of the net income of the Portfolio) on each Valuation Day and pays dividends for
the preceding month within the first five Valuation Days of each month. The Fund
reserves the right to include realized short-term gains, if any, in such daily
dividends. Distributions of the Fund's pro rata share of the Portfolio's net
realized long-term capital gains, if any, and any undistributed net realized
short-term capital gains are normally declared and paid annually at the end of
the fiscal year in which they were earned to the extent they are not offset by
any capital loss carryforwards. Since the Fund is subject to a 4% nondeductible
excise tax on certain undistributed amounts of ordinary income and capital
gains, the Fund expects to make such other distributions as are necessary to
avoid the application of this tax. Unless a shareholder instructs the Fund to
pay dividends or capital gains distributions in cash, dividends and
distributions will automatically be reinvested at net asset value in additional
shares of the Fund.

The Trust intends to qualify the Fund as a regulated investment company, as
defined in the Internal Revenue Code of 1986, as amended (the "Code"). Provided
the Fund meets the requirements imposed by the Code, the Fund will not pay any
Federal income or excise taxes. The Portfolio will also not be required to pay
any Federal income or excise taxes. Dividends paid by the Fund from its taxable
net investment income and distributions by the Fund of its net realized
short-term capital gains are taxable to shareholders as ordinary income, whether
received in cash or reinvested in additional shares of the Fund. The Trust does
not expect that the Fund will realize long-term capital gains and thus does not
contemplate paying distributions taxable to shareholders as long-term capital
gains. The Fund's dividends and distributions will not qualify for the
dividends-received deduction for corporations.

PERFORMANCE INFORMATION AND REPORTS

From time to time, the Trust may advertise "current yield" and/or "effective
yield" for the Fund. All yield figures are based on historical earnings and are
not intended to indicate future performance. The "current yield" of the Fund
refers to the income generated by an investment in the Fund over a seven-day
period (which period will be stated in the advertisement). This income is then
"annualized;'" that is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned by an investment in the Fund
is assumed to be reinvested. The "effective yield" will be slightly higher than
the "current yield" because of the compounding effect of this assumed
reinvestment. The Trust may include this information in sales material and
advertisements for the Fund.

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

From time to time, advertisements or reports to shareholders may compare the
yield of the Fund to that of other mutual funds with similar investment
objectives or to that of a particular index. The yield of the Fund might be
compared with, for example, the IBC/Donoghue's Taxable First Tier Institutional
Only Money Fund Average, which is an average compiled by IBC/ Donoghue's Money
Fund Report, a widely recognized, independent publication that monitors the
performance of money market mutual funds. Similarly, the yield of the Fund might
be compared with rankings prepared by Micropal Limited and/or Lipper Analytical
Services, Inc., which are widely recognized, independent services that monitor
the investment performance of mutual funds. The yield of the Fund might also be
compared with the average yield reported by the Bank Rate Monitor for money
market deposit accounts offered by the 50 leading banks and thrift institutions
in the top five standard metropolitan areas. Shareholders may make inquiries
regarding the Fund, including current yield quotations and performance
information, by contacting any Service Agent.

MANAGEMENT OF THE TRUST AND PORTFOLIO
BOARD OF TRUSTEES

The affairs of the Trust and the Portfolio are managed under the supervision of
their respective Board of Trustees. By virtue of the responsibilities assumed by
Bankers Trust, the administrator of the Trust and 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.

The Trustees of the Trust who are not "interested persons" (as defined in the
1940 Act) (the "Independent Trustees") of the Trust or of the Portfolio, as the
case may be, have adopted written procedures reasonably appropriate to deal with
potential conflicts of interest, up to and including creating separate boards of
trustees, arising from the fact that several of the same individuals are
Trustees of the Trust and the Portfolio. For more information with respect to
the Trustees of both the Trust and the Portfolio, see "Management of the Trust
and Portfolios" in the Statement of Additional Information.

INVESTMENT ADVISER

The Trust has not retained the services of an investment adviser since the Trust
seeks to achieve the investment objective of the Fund by investing all the
Assets of the Fund in the Portfolio. The Portfolio has retained the services of
Bankers Trust, as investment adviser.

Bankers Trust, a New York banking corporation with principal offices at 280 Park
Avenue, New York, New York 10017, is a wholly-owned subsidiary of Bankers Trust
New York Corporation. Bankers Trust conducts a variety of general banking and
trust activities and is a major wholesale supplier of financial services to the
international and domestic institutional markets. As of December 31, 1995,
Bankers Trust New York Corporation was the ninth largest bank holding company in
the United States with total assets of approximately $104 billion. Bankers Trust
is a worldwide merchant bank dedicated to servicing the needs of corporations,
governments, financial institutions and private clients through a global network
of over 120 offices in more than 40 countries. Investment management is a core
business of Bankers Trust, built on a tradition of excellence from its roots as
a trust bank founded in 1903. The scope of Bankers Trust's investment management
capability is unique due to its leadership positions in both active and passive
quantitative management and its presence in major equity and fixed income
markets around the world. Bankers Trust is one of the nation's largest and most
experienced investment managers, with approximately $200 billion in assets under
management globally. Of that total, approximately $45 billion are in money
market instruments alone. This makes Bankers Trust one of the nation's leading
managers of cash funds.

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

Bankers Trust has been advised by its counsel that, in counsel's opinion,
Bankers Trust currently may perform the services for the Trust and the Portfolio
described in this prospectus and the statement of additional information without
violation of the Glass-Steagall Act or other applicable banking laws or
regulations. State laws on this issue may differ from the interpretations of
relevant federal law and banks and financial institutions may be required to
register as dealers pursuant to state securities law.

ADMINISTRATOR

Under its Administration and Services Agreement with the Trust, Bankers Trust
calculates the net asset value of the Fund and generally assists the Board of
Trustees of the Trust in all aspects of the administration and operation of the
Trust. The Administration and Services Agreement provides for the Trust to pay
Bankers Trust a fee, computed daily and paid monthly, at the annual rate of
0.05% of the average daily net assets of the Fund.

Under an Administration and Services Agreement with the Portfolio, Bankers Trust
calculates the value of the assets of the Portfolio and generally assists the
Board of Trustees of the Portfolio in all aspects of the administration and
operation of the Portfolio. The Administration and Services Agreement provides
for the Portfolio to pay Bankers Trust a fee, computed daily and paid monthly,
at the annual rate of 0.05% of the average daily net assets of the Portfolio.
Under each Administration and Services Agreement, Bankers Trust may delegate one
or more of its responsibilities to others, including Signature, at Bankers
Trust's expense. For more information, see the Statement of Additional
Information.

DISTRIBUTOR

Under its Distribution Agreement with the Trust, Signature, as Distributor,
serves as the Trust's principal underwriter on a best efforts basis. In
addition, Signature provides the Trust with office facilities. Signature is a
wholly-owned subsidiary of Signature Financial Group, Inc. ("SFG"). SFG and its
affiliates currently provide administration and distribution services for other
registered investment companies. The principal business address of SFG and
Signature is 6 St. James Avenue, Boston, Massachusetts 02116.

Pursuant to the terms of the Trust's Plan of Distribution pursuant to Rule 12b-1
under the 1940 Act (the "Plan"), Signature may seek reimbursement in an amount
not exceeding 0.20% of the Fund's average daily net assets annually for expenses
incurred in connection with any activities primarily intended to result in the
sale of the Fund's shares, including, but not limited to: compensation to and
expenses (including overhead and telephone expenses) of account executives or
other employees of Signature who, as their primary activity, engage in or
support the distribution of shares; printing of prospectuses, statements of
additional information and reports for other than existing Fund shareholders in
amounts in excess of that typically used in connection with the distribution of
shares of the Fund; costs of placing advertising in various media; services of
parties other than Signature or its affiliates in formulating sales literature;
and typesetting, printing and distribution of sales literature. All costs and
expenses in connection with implementing and operating the Plan will be paid by
the Fund, subject to the 0.20% of net assets limitation. All costs and expenses
associated with preparing the prospectuses and statements of additional
information and in connection with printing them for and distributing them to
existing shareholders and regulatory authorities, which costs and expenses would
not be considered distribution expenses for purposes of the Plan, will also be
paid by the Fund. To the extent expenses of Signature under the Plan in any
fiscal year of the Trust exceed amounts payable under the Plan during that year,
those expenses will not be reimbursed in any succeeding fiscal year. Expenses
incurred in connection with distribution activities will be identified to the
Fund or other series of the Trust involved, although it is anticipated that some
activities may be conducted on a Trust-wide basis, with the result that those
activities will not be identifiable to any particular series. In the latter
case, expenses will be allocated among the series of the Trust on the basis of
their relative net assets. It is not expected that any payments will be made
under the Plan in the foreseeable future.

SERVICE AGENT

All shareholders must be represented by a Service Agent. Bankers Trust acts as a
Services Agent pursuant to its Administration and Service Agreement with the
Trust and receives no additional compensation from the Fund for such shareholder
services. The service fee of any other Service Agent, including broker-dealers,
will be paid by Bankers Trust from its fees. The services provided by a Service
Agent may include establishing and maintaining shareholder accounts, processing
purchase and redemption transactions, performing shareholder sub-accounting,
answering client inquiries regarding the Trust, investing client cash account
balances automatically in Fund shares and processing redemption transactions at
the request of clients, assisting clients in changing dividend options, account
designations and addresses, providing periodic statements showing the client's
account balance and integrating these statements with those of other
transactions and balances in the client's other accounts serviced by the Service
Agent, transmitting proxy statements, periodic reports, updated prospectuses and
other communications to shareholders and, with respect to meetings of
shareholders, collecting, tabulating and forwarding to the Trust executed
proxies, arranging for bank wires and obtaining such other information and
performing such other services as the Administrator or the Service Agent's
clients may reasonably request and agree upon with the Service Agent. Service
Agents may separately charge their clients additional fees only to cover
provision of additional or more comprehensive services not already provided
under the Administration and Services Agreement with Bankers Trust, or of the
type or scope not generally offered by a mutual fund, such as cash management
services or enhanced retirement or trust reporting. In addition, investors may
be charged a transaction fee if they effect transactions in Fund shares through
a broker or agent. Each Service Agent has agreed to transmit to shareholders,
who are its customers, appropriate disclosures of any fees that it may charge
them directly.

CUSTODIAN AND TRANSFER AGENT

Bankers Trust acts as Custodian of the assets of the Trust and the Portfolio and
serves as the Transfer Agent for the Trust and the Portfolio under the
respective Administration and Services Agreement with the Trust and the
Portfolio.

ORGANIZATION OF THE TRUST

The Trust was organized on March 26, 1990 under the laws of the Commonwealth of
Massachusetts. The Fund is a separate series of the Trust. The Trust offers
shares of beneficial interest of separate series, par value $0.001 per share.
The shares of the other series of the Trust are offered through separate
prospectuses. No series of shares has any preference over any other series.

When matters are submitted for shareholder vote, shareholders of the Fund will
have one vote for each full share held and proportionate, fractional votes for
fractional shares held. A separate vote of the Fund is required on any matter
affecting the Fund on which shareholders are entitled to vote. Shareholders of
the Fund are not entitled to vote on Trust matters that do not affect the Fund.
There normally will be no meetings of shareholders for the purpose of electing
Trustees unless and until such time as less than a majority of Trustees holding
office have been elected by shareholders, at which time the Trustees then in
office will call a shareholders' meeting for the election of Trustees. Any
Trustee may be removed from office upon the vote of shareholders holding at
least two-thirds of the Trust's outstanding shares at a meeting called for that
purpose. The Trustees are required to call such a meeting upon the written
request of shareholders holding at least 10% of the Trust's outstanding shares.

Each series in the Trust will not be involved in any vote involving a Portfolio
in which it does not invest its Assets. Shareholders of all the series of the
Trust will, however, vote together to elect Trustees of the Trust and for
certain other matters. Under certain circumstances, the shareholders or one or
more series could control the outcome of these votes.

EXPENSES OF THE TRUST

The Fund bears its own expenses. Operating expenses for the Fund generally
consist of all costs not specifically borne by Bankers Trust or Signature,
including administration and services fees, fees for necessary professional
services, amortization of organizational expenses, the costs of regulatory
compliance and costs associated with maintaining legal existence and shareholder
relations. Bankers Trust and Signature have agreed to reimburse the Fund to the
extent required by applicable state law for certain expenses that are described
in the Statement of Additional Information. The Portfolio bears its own
expenses. Operating expenses for the Portfolio generally consist of all costs
not specifically borne by Bankers Trust or Signature, including investment
advisory and administration and services fees, fees for necessary professional
services, the costs associated with regulatory compliance and maintaining legal
existence and investor relations.

<PAGE>

INVESTMENT ADVISER OF THE PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY

DISTRIBUTOR
SIGNATURE BROKER-DEALER SERVICES, INC.

CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY

INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.

COUNSEL

WILLKIE FARR & GALLAGHER

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

BT INSTITUTIONAL FUNDS

PROSPECTUS: APRIL 29, 1996
Please read this Prospectus carefully before
investing and retain it for future reference. It
contains important information about the Fund that you should know and can refer
to in deciding whether the Fund's goals match your own.

UNLIKE MOST OTHER MUTUAL FUNDS, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT
OBJECTIVE BY INVESTING ALL OF ITS INVESTABLE ASSETS IN A SEPARATE INVESTMENT
COMPANY (THE "PORTFOLIO") WITH AN IDENTICAL INVESTMENT OBJECTIVE. THE INVESTMENT
PERFORMANCE OF THE FUND WILL CORRESPOND DIRECTLY TO THE INVESTMENT PERFORMANCE
OF THE PORTFOLIO. SEE "SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND
STRUCTURE" ON PAGE 12.

SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, BANKERS TRUST COMPANY AND THE SHARES ARE NOT FEDERALLY GUARANTEED OR INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE U.S. GOVERNMENT, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY. THE FUND INTENDS TO MAINTAIN A CONSTANT $1.00
PER SHARE NET ASSET VALUE, ALTHOUGH THERE CAN BE NO ASSURANCE THAT IT WILL BE
ABLE TO DO SO.

Institutional
Liquid Assets
Fund

Seeks a high level of current income to the extent consistent with liquidity and
the preservation of capital.

BANKERS TRUST COMPANY
Investment Adviser of the
Portfolio and Administrator

SIGNATURE BROKER-
DEALER SERVICES, INC.
Distributor
6 St. James Avenue
Boston, Massachusetts 02116
<PAGE>

TABLE OF CONTENTS
- ------------------------------------------------------------------------------
PAGE
..............................................................................
Summary of Fund Expenses 3
Fund Financial Highlights 5
Investment Objective and Policies 6
Risk Factors; Matching the Fund to Your Investment Needs 11
Net Asset Value 13
Purchase and Redemption of Shares 14
Dividends, Distributions and Taxes 16
Performance Information and Reports 17
Management of the Trust and BT Investment Portfolios 18
- ------------------------------------------------------------------------------

<PAGE>

SUMMARY OF FUND EXPENSES
The following table provides (i) a summary of expenses relating to purchases
and sales of shares of Institutional Liquid Assets Fund (the "Fund") and the
aggregate annual operating expenses of the Fund and the expenses of the Liquid
Assets Portfolio (the "Portfolio"), as a percentage of average net assets of
the Fund and (ii) an example illustrating the dollar cost of such expenses on
a $1,000 investment in the Fund. THE TRUSTEES OF BT INSTITUTIONAL FUNDS (THE
"TRUST") BELIEVE THAT THE AGGREGATE PER SHARE EXPENSES OF THE FUND AND THE
PORTFOLIO WILL BE LESS THAN OR APPROXIMATELY EQUAL TO THE EXPENSES WHICH THE
FUND WOULD INCUR IF THE TRUST RETAINED THE SERVICES OF AN INVESTMENT ADVISER
AND THE INVESTABLE ASSETS ("ASSETS") OF THE FUND WERE INVESTED DIRECTLY IN THE
TYPE OF SECURITIES BEING HELD BY THE PORTFOLIO.
- ------------------------------------------------------------------------------
ANNUAL OPERATING EXPENSES
(as a percentage of the average daily net assets of the Fund)
..............................................................................
Investment advisory fee 0.15%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.01
..............................................................................
Total operating expenses (after reimbursements or waivers) 0.16%
..............................................................................
Example 1 year 3 years 5 years 10 years
..............................................................................
You would pay the following
expenses on a $1,000 investment,
assuming: (1) 5% annual return and
(2) redemption at the end of each time
period $2 $5 $9 $20
- -------------------------------------------------------------------------------

The expense table and the example above show the costs and expenses that an
investor will bear directly or indirectly as a shareholder of the Fund. While
reimbursement of distribution expenses in amounts up to 0.10% of average net
assets are authorized to be made pursuant to the Plan of Distribution under Rule
12b-1 of the Investment Company Act of 1940, as amended (the "1940 Act"), it is
not expected that any payments will actually be made under that plan in the
foreseeable future. The expense table and the example reflect a voluntary
undertaking by Bankers Trust or Signature Broker-Dealer Services, Inc.
("Signature") to waive or reimburse expenses such that the total operating
expenses will not exceed 0.16% of the Fund's average net assets annually. In
addition, until the granting by the Securities and Exchange Commission ("SEC")
of an application for an exemptive order filed by the Fund and Bankers Trust
(see "Risk Factors -- Matching the Fund to Your Investment Needs"), Bankers
Trust or Signature also has agreed to waive or reimburse all of the Fund's and
Portfolio's operating expenses. In the absence of these undertakings, assuming
total assets of $1.4 billion in the Fund and in the Portfolio, it is estimated
that the total operating expenses would be equal to approximately 0.27% of the
Fund's average net assets annually. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN. Moreover, while each example assumes a 5% annual return,
actual performance will vary and may result in a return greater or less than 5%.

The Fund is sold by Signature as the Trust's distributor (the "Distributor") to
customers of Bankers Trust or to customers of another bank or a dealer or other
institution that has a sub-shareholder servicing agreement with Bankers Trust
(along with Bankers Trust, a "Service Agent"). Some Service Agents may impose
certain conditions on their customers in addition to or different from those
imposed by the Fund and may charge their customers a direct fee for their
services. Each Service Agent has agreed to transmit to shareholders who are its
customers appropriate disclosures of any fees that it may charge them directly.

In addition to the customers of Bankers Trust or other institutions described
above, the Fund is available for (a) accounts where an investment advisor or a
financial planner has discretion over such account and the account holder pays
such person as compensation for its advice and other services an annual fee of
at least 0.50% on the assets in the account; (b) accounts established under a
"wrap fee" program or formal asset allocation program where the account holder
pays the program sponsor an annual fee of at least 0.50% on the assets in the
account; and (c) accounts established through an automated clearing or similar
system established for the use of investment professionals and through which
purchases and redemptions are transmitted to the Fund on an omnibus basis.

For more information with respect to the expenses of the Fund and the Portfolio
see "Management of the Trust and BT Investment Portfolios" herein.

<PAGE>

The Trust seeks to achieve the investment objective of the Fund by investing all
the Assets of the Fund in the Portfolio, which has the same investment objective
as the Fund. The Portfolio is a series of BT Investment Portfolios (the
"Portfolio Trust"), an open-end management investment company. There can be no
assurance that the investment objective of either the Fund or the Portfolio will
be achieved. The Fund's investment objective is not a fundamental policy and may
be changed upon 30 days written notice to, but without the approval of, the
Fund's shareholders. The investment objective of the Portfolio is a fundamental
policy which may only be changed by a majority vote of the investors in the
Portfolio. See "Special Information Concerning Master-Feeder Fund Structure" on
page 12.

Since the investment characteristics of the Fund will correspond directly to
those of the Portfolio, the following is a discussion of the various investments
and investment policies of the Portfolio. Additional information about the
investment policies of the Portfolio appears in the Statement of Additional
Information of the Fund.

LIQUID ASSETS PORTFOLIO
The Portfolio will attempt to achieve its investment objective by investing in
the following money market instruments:

Bank Obligations. The Portfolio may invest in U.S. dollar-denominated fixed rate
or variable rate obligations of U.S. or foreign banks which are rated in the
highest short term rating category by any two nationally recognized statistical
rating organizations ("NRSROs") (or one NRSRO if that NRSRO is the only such
NRSRO which rates such obligations) or, if not so rated, are believed by Bankers
Trust, acting under the supervision of the Board of Trustees of the Portfolio
Trust, to be of comparable quality. Bank obligations in which the Portfolio
invests include certificates of deposit, bankers' acceptances, time deposits and
other U.S. dollar-denominated instruments issued or supported by the credit of
U.S. or foreign banks. If Bankers Trust, acting under the supervision of the
Board of Trustees of the Portfolio Trust, deems the instruments to present
minimal credit risk, the Portfolio may invest in obligations of foreign banks or
foreign branches and subsidiaries of U.S. and foreign banks. 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 deposits, difficulty or inability of pursuing
legal remedies and obtaining judgments in foreign courts, possible establishment
of exchange controls or the adoption of other foreign governmental restrictions
that might affect adversely the payment of principal and interest on bank
obligations. Under normal market conditions, the Portfolio will invest more than
25% of its assets in the foreign and domestic bank obligations described above.
The Portfolio's concentration of its investments in bank obligations will cause
the Portfolio to be subject to the risks peculiar to the domestic and foreign
banking industries to a greater extent than if its investments were not so
concentrated.

Commercial Paper. The Portfolio may invest in fixed rate or variable rate
commercial paper, including variable rate master demand notes, issued by U.S. or
foreign corporations. Commercial paper when purchased by the Portfolio must be
rated in the highest short term rating category by any two NRSROs (or one NRSRO
if that NRSRO is the only such NRSRO which rates such security) or, if not so
rated, must be believed by Bankers Trust, acting under the supervision of the
Board of Trustees of the Portfolio Trust, to be of comparable quality. Any
commercial paper issued by a foreign corporation and purchased by the Portfolio
must be U.S. dollar-denominated and must not be subject to foreign withholding
tax at the time of purchase. Investing in foreign commercial paper generally
involves risks similar to those described above relating to obligations of
foreign banks or foreign branches and subsidiaries of U.S. and foreign banks.

Variable rate master demand notes are unsecured instruments that permit the
indebtedness thereunder to vary and provide for periodic adjustments in the
interest rate. Because variable rate master demand notes are direct lending
arrangements between the Portfolio and the issuer, they are not normally traded.
Although no active secondary market may exist for these notes, the Portfolio
will purchase only those notes under which it may demand and receive payment of
principal and accrued interest daily or may resell the note to a third party.
While the notes are not typically rated by credit rating agencies, issuers of
variable rate master demand notes must satisfy Bankers Trust, acting under the
supervision of the Board of Trustees of the Portfolio Trust, that the same
criteria as set forth above for issuers of commercial paper are met. In the
event an issuer of a variable rate master demand note defaulted on its payment
obligation, the Portfolio might be unable to dispose of the note because of the
absence of a secondary market and could, for this or other reasons, suffer a
loss to the extent of the default.

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

Other Debt Obligations. The Portfolio may invest in deposits, bonds, notes and
debentures of issuers that at the time of purchase have outstanding short term
obligations meeting the above short term rating requirements, or if there are no
such short term ratings, are determined by Bankers Trust to be of comparable
quality and are rated in the top two highest long term rating categories by two
NRSROs (or one NRSRO if that NRSRO is the only such NRSRO which rates the
security).

The Portfolio may also invest in securities generally referred to as asset-
backed securities, which directly or indirectly represent a participation
interest in, or are secured by and payable from, a stream of payments generated
by particular assets such as motor vehicle or credit card receivables.
Asset-backed securities provide periodic payments that generally consist of both
interest and principal payments. Consequently, the life of an asset-backed
security varies with the prepayment and loss experience of the underlying
assets.

Repurchase Agreements. The Portfolio may engage in repurchase agreement
transactions with banks and governmental securities dealers approved by the
Board of Trustees of the Portfolio. Under the terms of a typical repurchase
agreement, the Portfolio would acquire U.S. Government Obligations of 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 collateral securities,
including the risk of a possible decline in the value of the underlying
securities during the period in which the Portfolio seeks to assert these
rights. Bankers Trust, acting under the supervision of the Board of Trustees of
the Portfolio Trust, reviews the creditworthiness of those banks and dealers
with which the Portfolio enters into repurchase agreements and monitors on an
ongoing basis the value of the securities subject to repurchase agreements to
ensure that it is maintained at the required level.

Securities Lending. The Portfolio is permitted to lend up to 20% of the total
value of its securities to brokers, dealers and other financial organizations.
These loans must be secured continuously by cash or equivalent collateral or by
a letter of credit at least equal to 100% of the current market value of the
securities loaned plus accrued income. By lending its securities, the Portfolio
can increase its income by continuing to receive income on the loaned securities
as well as by the opportunity to receive interest on the collateral. Any gain or
loss in the market price of the borrowed securities which occurs during the term
of the loan inures to the Portfolio and its investors. There may be risks of
delay in receiving additional collateral or risks of delay in recovery of the
securities or even loss of rights in the collateral should the borrower of the
securities fail financially.

Reverse Repurchase Agreements. The Portfolio may enter into reverse repurchase
agreements. In a reverse repurchase agreement the Portfolio agrees to sell
portfolio securities to financial institutions such as banks and broker-dealers
and to repurchase them at a mutually agreed date and price. At the time the
Portfolio enters into a reverse repurchase agreement it will place in a
segregated custodial account cash, U.S. Government Obligations or other high
grade, liquid debt instruments having a value equal to the repurchase price,
including accrued interest. Reverse repurchase agreements involve the risk that
the market value of the securities sold by the Portfolio may decline below the
repurchase price of the securities. Reverse repurchase agreements are considered
to be borrowings by the Portfolio for purposes of the limitations described in
"Additional Investment Limitations" below and in the Trust's Statement of
Additional Information.

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

Securities purchased on a when-issued or delayed-delivery basis may expose the
Portfolio to risk because the securities may experience fluctuations in value
prior to their actual delivery. The Portfolio does not accrue income with
respect to a when-issued or delayed-delivery security prior to its stated
delivery date. Purchasing securities on a when-issued or delayed-delivery basis
can involve the additional risk that the yield available in the market when the
delivery takes place may be higher than that obtained in the transaction itself.
Upon purchasing a security on a when-issued or delayed- delivery basis, the
Portfolio will maintain a segregated account at the Portfolio's custodian
containing cash, U.S. Government Obligations or other high grade liquid debt
instruments in an amount at least equal to the when- issued or delayed-delivery
commitment.

Illiquid Securities. The Portfolio may not invest more than 10% of its net
assets in securities which are illiquid or otherwise not readily marketable. If
a security becomes illiquid after purchase by the Portfolio, the Portfolio will
normally sell the security unless to do so would not be in the best interests of
shareholders.

PORTFOLIO QUALITY AND MATURITY

The Portfolio will maintain a dollar-weighted average maturity of 90 days or
less. All securities in which the Portfolio invests will have or be deemed to
have remaining maturities of 397 days or less on the date of their purchase,
will be denominated in U.S. dollars and will have been granted the required
ratings established herein by two NRSROs (or one NRSRO if that NRSRO is the only
such NRSRO which provides such ratings), or if not so rated, are believed by
Bankers Trust, under the supervision of the Portfolio Trust's Board of Trustees,
to be of comparable quality. Currently, there are six rating agencies which have
been designated by the SEC as an NRSRO. These organizations and their highest
short term rating category (which also may be modified by a "+") are: Duff
and Phelps, Inc., D-1; Fitch Investors Services, LP, F-1; Moody's Investors
Service Inc., Prime- 1; Standard & Poor's Corp., A-1; IBCA Limited and IBCA
Inc., A-1; Thomson Bank Watch, Inc., TBW-1. A description of all short and long
term ratings is provided in the Appendix to the Statement of Additional
Information. Bankers Trust, acting under the supervision of and procedures
adopted by the Board of Trustees of the Portfolio Trust, will also determine
that all securities purchased by the Portfolio present minimal credit risks.
Bankers Trust will cause the Portfolio to dispose of any security as soon as
practicable if the security is no longer of the requisite quality, unless such
action would not be in the best interest of the Portfolio.

ADDITIONAL INVESTMENT LIMITATIONS

The Fund has the same investment restrictions as the Portfolio, except that the
Fund may invest all of its Assets in another open-end investment company with
substantially the same investment objectives, such as the Portfolio. The
Portfolio may not invest more than 25% of its total assets in the securities of
issuers in any single industry (excluding U.S. Government Obligations and
repurchase agreements), except that, under normal market conditions, more than
25% of the total assets of the Portfolio will be invested in foreign and
domestic bank obligations. As an operating policy, the Portfolio may not invest
more than 5% of its total assets in the obligations of any one issuer except for
U.S. Government Obligations and repurchase agreements, which may be purchased
without limitation. The Portfolio is also authorized to borrow, including
entering into reverse repurchase transactions, in an amount up to 10% of its
total assets for temporary purposes, but not for leverage, and to pledge its
assets to the same extent in connection with these borrowings. At the time of an
investment, the Portfolio's aggregate holdings of repurchase agreements having a
remaining maturity of more than seven calendar days (or which may not be
terminated within seven calendar days upon notice by the Portfolio), time
deposits having remaining maturities of more than seven calendar days and other
illiquid securities will not exceed 10% of the Portfolio's net assets. If
changes in the liquidity of certain securities cause the Portfolio to exceed
such 10% limit, the Portfolio will take steps to bring the aggregate amount of
its illiquid securities back below 10% of its net assets as soon as practicable,
unless such action would not be in the best interest of the Portfolio. The
Fund's and the Portfolio's limitations on investment in a single industry and on
borrowing may not be changed without the approval of the shareholders of the
Fund or the investors in the Portfolio, as the case may be. All other investment
policies and limitations described in this prospectus may be changed by a vote
of the Trustees of the Trust or the Portfolio Trust, as applicable. The
Statement of Additional Information contains further information on the Fund's
and the Portfolio's investment restrictions.

RISK FACTORS; MATCHING THE FUND TO YOUR INVESTMENT NEEDS

The Fund is designed as a cash management vehicle for institutional investors
seeking high current income approximating money market rates while remaining
conveniently liquid with a stable share price. The Portfolio follows practices
which enable the Fund to attempt to maintain a $1.00 share price: limiting
average dollar-weighted maturity of the securities held by the Portfolio to 90
days or less; buying securities with remaining maturities of 397 days or less as
determined under Rule 2a-7 under the 1940 Act; and buying only high quality
securities with minimal credit risks. Of course, the Fund cannot guarantee a
$1.00 share price, but these practices help to minimize any price fluctuations
that might result from rising or declining interest rates. While the Portfolio
invests in high quality money market securities, you should be aware that your
investment is not without risk. All money market instruments, including U.S.
Government Obligations, can change in value when interest rates or an issuer's
creditworthiness changes.

It is expected that the majority of investors in the Fund will issue standing
orders, effective in the late afternoon of each day on which the Fund is open
(each such day, a "Valuation Day"), to "sweep" into the Fund cash balances
remaining in accounts at Bankers Trust. Because the Fund may receive significant
purchase orders late in a Valuation Day, the Portfolio may be unable to take
advantage of suitable investment opportunities on that date. To assist the
Portfolio in remaining fully invested, the Portfolio intends to request that the
SEC grant it an order permitting the Portfolio and Bankers Trust jointly to
enter into repurchase agreements and other investments with non-affiliated
banks, broker-dealers or other issuers with respect to amounts estimated to be
received on any day through the operation of the sweep program. Such investments
will be apportioned between the Portfolio and Bankers Trust in such a manner as
to maximize the investment of cash by the Portfolio. While in the past the SEC
has granted orders permitting similar sweep programs, there is no assurance that
it will continue to do so.

Until such an order is granted, the Portfolio will be unable to engage in such
transactions with Bankers Trust and may have significant uninvested cash
balances at the end of each Valuation Day. Accordingly, Bankers Trust or
Signature has agreed to waive or reimburse the Fund and the Portfolio for all
operating expenses until the order is granted. It is expected that these waivers
and reimbursements will be sufficient to offset the impact of the uninvested
cash; however it is possible that they may be insufficient to do so.

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 series of a separate registered investment company with the same
investment objective as the Fund. Therefore, an investor's interest in the
Portfolio's securities is indirect. In addition to selling a beneficial interest
to the Fund, the Portfolio may sell beneficial interests to other mutual funds
or institutional investors. Such investors will invest in the Portfolio on the
same terms and conditions and will pay a proportionate share of the Portfolio's
expenses. However, the other investors investing in the Portfolio are not
required to sell their shares at the same public offering price as the Fund due
to variations in sales commissions and other operating expenses. Therefore,
investors in the Fund should be aware that these differences may result in
differences in returns experienced by investors in the different funds that
invest in the Portfolio. Such differences in returns are also present in other
mutual fund structures. Information concerning other holders of interests in the
Portfolio is available from Bankers Trust at (800) 368-4031.

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

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

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

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

For descriptions of the investment objective, policies and restrictions of the
Portfolio, see "Investment Objective and Policies." For descriptions of the
management of the Portfolio, see "Management of the Trust and BT Investment
Portfolios" herein and "Management of the Trust and Portfolios" in the Statement
of Additional Information. For descriptions of the expenses of the Portfolio,
see "Management of the Trust and BT Investment Portfolios" herein.

NET ASSET VALUE

The net asset value per share of the Fund is calculated on each Valuation Day,
currently each Monday through Friday, except (a) January 1st, Martin Luther
King, Jr.'s Birthday (the third Monday in January), Presidents' Day (the third
Monday in February), Memorial Day (the last Monday in May), July 4th, Labor Day
(the first Monday in September), Columbus Day (the second Monday in October),
Veteran's Day (November 11th), Thanksgiving Day (the last Thursday in November)
and December 25th; and (b) the preceding Friday or the subsequent Monday when
one of the calendar determined holidays falls on a Saturday or Sunday,
respectively.

The net asset value per share of the Fund is calculated on each Valuation Day as
of the close of regular trading on the New York Stock Exchange Inc. (the
"NYSE"), which is currently 4:00 p.m., New York time or in the event that the
NYSE closes early, at the time of such early closing. The net asset value per
share of the Fund is computed by dividing the value of the Fund's assets (i.e.,
the value of its investment in the Portfolio and other assets), less all
liabilities, by the total number of its shares outstanding. The Fund's net asset
value per share will normally be $1.00.

The assets of the Portfolio are valued by using the amortized cost method of
valuation. This method involves valuing each security held by the Portfolio at
its cost at the time of its purchase and thereafter assuming a constant
amortization to maturity of any discount or premium. Accordingly, immaterial
fluctuations in the market value of the securities held by the Portfolio will
not be reflected in the Fund's net asset value. The Board of Trustees of the
Portfolio Trust will monitor the valuation of assets by this method and will
make such changes as it deems necessary to assure that the assets are valued
fairly and in good faith by the Portfolio.

PURCHASE AND REDEMPTION OF SHARES

PURCHASE OF SHARES

The Trust accepts purchase orders for shares of the Fund at the net asset value
per share of the Fund next determined on each Valuation Day. See "Net Asset
Value" above. There is no sales charge on the purchase of shares, but costs of
distributing shares of the Fund may be reimbursed from its assets, as described
herein. The minimum initial investment in the Fund is $10 million. The
subsequent minimum investment in the Fund is $500,000. 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 the Fund will receive, on any Valuation Day, the
net asset value next determined following receipt by the Service Agent and
transmission to Bankers Trust, as the Trust's transfer agent (the "Transfer
Agent") of such order. If the purchase order is received by the Service Agent
and transmitted to the Transfer Agent prior to 4:00 p.m. (New York time or
earlier, should the NYSE close earlier) and if payment in the form of federal
funds is received on that day by Bankers Trust, as the Trust's custodian (the
"Custodian"), the shareholder will receive the dividend declared on that day. If
the purchase order is received by the Service Agent and transmitted to the
Transfer Agent after 4:00 p.m. (New York time), the shareholder will receive the
dividend declared on the following day even if the Custodian receives federal
funds on that day. The Trust and Signature reserve the right to reject any
purchase order.

Shares must be purchased in accordance with procedures established by the
Transfer Agent and Service Agents, including Bankers Trust, in connection with
customers' accounts. It is the responsibility of each Service Agent to transmit
to the Transfer Agent purchase and redemption orders and to transmit to the
Custodian purchase payments on behalf of its customers in a timely manner, and a
shareholder must settle with the Service Agent his or her entitlement to an
effective purchase or redemption order as of a particular time. Because Bankers
Trust is the Custodian and Transfer Agent of the Trust, funds may be transferred
directly from or to a customer's account with Bankers Trust to or from the Fund
without incurring the additional costs or delays associated with the wiring of
federal funds.

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

REDEMPTION OF SHARES

Shareholders may redeem shares at the net asset value per share next determined
on each Valuation Day. Redemption requests should be transmitted by customers in
accordance with procedures established by the Transfer Agent and the
shareholder's Service Agent. Redemption requests for shares of the Fund received
by the Service Agent and transmitted to the Transfer Agent prior to the close of
the NYSE (currently 4:00 p.m., New York time or earlier should the NYSE close
earlier) on each Valuation Day will be redeemed at the net asset value per share
next determined and the redemption proceeds normally will be delivered to the
shareholder's account with the Service Agent on that day; no dividend will be
paid on the day of redemption. Redemption requests received by the Service Agent
and transmitted to the Transfer Agent after 4:00 p.m. (New York time) or after
the close of the NYSE on each Valuation Day will be redeemed at the net asset
value per share next determined and redemption proceeds normally will be
delivered to the shareholder's account with the Service Agent the following day;
shares redeemed in this manner will receive the dividend declared on the day of
the redemption. Payments for redemptions will in any event be made within seven
calendar days following receipt of the request.

Service Agents may allow redemptions 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
privilege. The Service Agent must employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. If the Service Agent does
not do so, it may be liable for any losses due to unauthorized or fraudulent
instructions. Such procedures may include, among others, requiring some form of
personal identification prior to acting upon instructions received by telephone,
providing written confirmation of such transactions and/or tape recording of
telephone instructions.

DIVIDENDS, DISTRIBUTIONS AND TAXES

PERFORMANCE INFORMATION AND REPORTS

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

From time to time, advertisements or reports to shareholders may compare the
yield of the Fund to that of other mutual funds with similar investment
objectives or to that of a particular index. The yield of the Fund might be
compared with, for example, the IBC/Donoghue's Taxable First Tier Institutional
Only Money Fund Average, which is an average compiled by IBC/ Donoghue's Money
Fund Report, a widely recognized, independent publication that monitors the
performance of money market mutual funds. Similarly, the yield of the Fund might
be compared with rankings prepared by Micropal Limited and/or Lipper Analytical
Services, Inc., which are widely recognized, independent services that monitor
the investment performance of mutual funds. The yield of the Fund might also be
compared with the average yield reported by the Bank Rate Monitor for money
market deposit accounts offered by the 50 leading banks and thrift institutions
in the top five standard metropolitan areas. Shareholders may make inquiries
regarding the Fund, including current yield quotations and performance
information, by contacting any Service Agent.

MANAGEMENT OF THE TRUST AND BT INVESTMENT PORTFOLIOS

BOARD OF TRUSTEES

The affairs of the Trust and BT Investment Portfolios are managed under the
supervision of their respective Board of Trustees. By virtue of the
responsibilities assumed by Bankers Trust, the administrator of the Trust and BT
Investment Portfolios, neither the Trust nor BT Investment Portfolios require
employees other than its executive officers. None of the executive officers of
the Trust or BT Investment Portfolios devotes full time to the affairs of the
Trust or BT Investment Portfolios.

The Trustees of the Trust who are not "interested persons" (as defined in the
1940 Act) (the "Independent Trustees") of the Trust or of the Portfolio, as the
case may be, have adopted written procedures reasonably appropriate to deal with
potential conflicts of interest, up to and including creating separate boards of
trustees, arising from the fact that several of the same individuals are
Trustees of the Trust and the Portfolio. For more information with respect to
the Trustees of both the Trust and BT Investment Portfolios, see "Management of
the Trust and Portfolios" in the Statement of Additional Information.

INVESTMENT ADVISER

The Trust has not retained the services of an investment adviser since the Trust
seeks to achieve the investment objective of the Fund by investing all the
Assets of the Fund in the Portfolio. BT Investment Portfolios has retained the
services of Bankers Trust, as investment adviser.

Bankers Trust, a New York banking corporation with principal offices at 280 Park
Avenue, New York, New York 10017, is a wholly-owned subsidiary of Bankers Trust
New York Corporation. Bankers Trust conducts a variety of general banking and
trust activities and is a major wholesale supplier of financial services to the
international and domestic institutional markets. As of December 31, 1995,
Bankers Trust New York Corporation was the ninth largest bank holding company in
the United States with total assets of approximately $104 billion. Bankers Trust
is a worldwide merchant bank dedicated to servicing the needs of corporations,
governments, financial institutions and private clients through a global network
of over 120 offices in more than 40 countries. Investment management is a core
business of Bankers Trust, built on a tradition of excellence from its roots as
a trust bank founded in 1903. The scope of Bankers Trust's investment management
capability is unique due to its leadership positions in both active and passive
quantitative management and its presence in major equity and fixed income
markets around the world. Bankers Trust is one of the nation's largest and most
experienced investment managers, with approximately $200 billion in assets under
management. Of that total, approximately $45 billion are in cash assets alone.
This makes Bankers Trust one of the nation's leading managers of cash funds.

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

Under its Investment Advisory Agreement, Bankers Trust receives a fee from the
Portfolio, computed daily and paid monthly, at the annual rate of 0.15% (before
waiver) of the average daily net assets of the Portfolio.

Bankers Trust has been advised by its counsel that, in counsel's opinion,
Bankers Trust currently may perform the services for the Trust and the
Portfolios described in this Prospectus and the Statement of Additional
Information without violation of the Glass-Steagall Act or other applicable
banking laws or regulations. State laws on this issue may differ from the
interpretations of relevant Federal law and banks and financial institutions may
be required to register as dealers pursuant to state securities law.

ADMINISTRATOR

Under its Administration and Services Agreement with the Trust, Bankers Trust
calculates the net asset value of the Fund and generally assists the Board of
Trustees of the Trust in all aspects of the administration and operation of the
Trust. Under its Administration and Services Agreement with the Trust, Bankers
Trust receives a fee, computed daily and paid monthly, at the annual rate of
0.05% (before waiver) of the average daily net assets of the Fund.

Under an Administration and Services Agreement with BT Investment Portfolios,
Bankers Trust calculates the value of the assets of the Portfolio and generally
assists the Board of Trustees of BT Investment Portfolios in all aspects of the
administration and operation of BT Investment Portfolios. Under its
Administration and Services Agreement with the Portfolio Trust, Bankers Trust
receives a fee, computed daily and paid monthly, at the annual rate of 0.05%
(before waiver) of the average daily net assets of the Portfolio. Under each
Administration and Services Agreement, Bankers Trust may delegate one or more of
its responsibilities to others, including Signature, at Bankers Trust's expense.
For more information, see the Statement of Additional Information.

DISTRIBUTOR

Pursuant to the terms of the Trust's Plan of Distribution pursuant to Rule 12b-1
under the 1940 Act (the "Plan"), Signature may seek reimbursement in an amount
not exceeding 0.10% of the Fund's average daily net assets annually for expenses
incurred in connection with any activities primarily intended to result in the
sale of the Fund's shares, including, but not limited to: compensation to and
expenses (including overhead and telephone expenses) of account executives or
other employees of Signature who, as their primary activity, engage in or
support the distribution of shares; printing of prospectuses, statements of
additional information and reports for other than existing Fund shareholders in
amounts in excess of that typically used in connection with the distribution of
shares of the Fund; costs of placing advertising in various media; services of
parties other than Signature or its affiliates in formulating sales literature;
and typesetting, printing and distribution of sales literature. All costs and
expenses in connection with implementing and operating the Plan will be paid by
the Fund, subject to the 0.10% of net assets limitation. All costs and expenses
associated with preparing the prospectuses and statements of additional
information and in connection with printing them for and distributing them to
existing shareholders and regulatory authorities, which costs and expenses would
not be considered distribution expenses for purposes of the Plan, will also be
paid by the Fund. To the extent expenses of Signature under the Plan in any
fiscal year of the Trust exceed amounts payable under the Plan during that year,
those expenses will not be reimbursed in any succeeding fiscal year. Expenses
incurred in connection with distribution activities will be identified to the
Fund or other series of the Trust involved, although it is anticipated that some
activities may be conducted on a Trust-wide basis, with the result that those
activities will not be identifiable to any particular series. In the latter
case, expenses will be allocated among the series of the Trust on the basis of
their relative net assets. It is not expected that any payments will be made
under the Plan in the foreseeable future.

SERVICE AGENT

All shareholders must be represented by a Service Agent. Bankers Trust acts as a
Service Agent pursuant to its Administration and Services Agreement with the
Trust and receives no additional compensation from the Fund for such shareholder
services. The service fees of any other Service Agents, including
broker-dealers, will be paid by Bankers Trust from its fees.The services
provided by a Service Agent may include establishing and maintaining shareholder
accounts, processing purchase and redemption transactions, performing
shareholder sub-accounting, answering client inquiries regarding the Trust,
investing client cash account balances automatically in Fund shares and
processing redemption transactions at the request of clients, assisting clients
in changing dividend options, account designations and addresses, providing
periodic statements showing the client's account balance and integrating these
statements with those of other transactions and balances in the client's other
accounts serviced by the Service Agent, transmitting proxy statements, periodic
reports, updated prospectuses and other communications to shareholders and, with
respect to meetings of shareholders, collecting, tabulating and forwarding to
the Trust executed proxies, arranging for bank wires and obtaining such other
information and performing such other services as the Administrator or the
Service Agent's clients may reasonably request and agree upon with the Service
Agent. Service Agents may separately charge their clients additional fees only
to cover provision of additional or more comprehensive services not already
provided under the Administration and Services Agreement with Bankers Trust, or
of the type or scope not generally offered by a mutual fund, such as cash
management services or enhanced retirement or trust reporting. In addition,
investors may be charged a transaction fee if they effect transactions in Fund
shares through a broker or agent. Each Service Agent has agreed to transmit to
shareholders, who are its customers, appropriate disclosures of any fees that it
may charge them directly.

CUSTODIAN AND TRANSFER AGENT

Bankers Trust acts as Custodian of the assets of the Trust and BT Investment
Portfolios and serves as the Transfer Agent for the Trust and BT Investment
Portfolios under the respective Administration and Services Agreement with the
Trust and BT Investment Portfolios.

ORGANIZATION OF THE TRUST

When matters are submitted for shareholder vote, shareholders of the Fund will
have one vote for each full share held and proportionate, fractional votes for
fractional shares held. A separate vote of the Fund is required on any matter
affecting the Fund on which shareholders are entitled to vote. Shareholders of
the Fund are not entitled to vote on Trust matters that do not affect the Fund.
There normally will be no meetings of shareholders for the purpose of electing
Trustees unless and until such time as less than a majority of Trustees holding
office have been elected by shareholders, at which time the Trustees then in
office will call a shareholders' meeting for the election of Trustees. Any
Trustee may be removed from office upon the vote of shareholders holding at
least two-thirds of the Trust's outstanding shares at a meeting called for that
purpose. The Trustees are required to call such a meeting upon the written
request of shareholders holding at least 10% of the Trust's outstanding shares.

Liquid Assets Portfolio is a subtrust (or "series") of BT Investment Portfolios,
an open-end management investment company. BT Investment Portfolios was
organized as a master trust fund under the laws of the State of New York. BT
Investment Portfolios' Declaration of Trust provides that the Fund and other
entities investing in the Portfolio (e.g., other investment companies, insurance
company separate accounts and common and commingled trust funds) will each be
liable for all obligations of the Portfolio. However, the risk of the Fund
incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance existed and the Portfolio
itself was unable to meet its obligations. Accordingly, the Trustees of the
Trust believe that neither the Fund nor its shareholders will be adversely
affected by reason of the Fund's investing in the Portfolio. The interest in BT
Investment Portfolios are divided into separate series, such as the Portfolio.
No series of BT Investment Portfolios has any preference over any other series.

Each series in the Trust will not be involved in any vote involving a Portfolio
in which it does not invest its Assets. Shareholders of all the series of the
Trust will, however, vote together to elect Trustees of the Trust and for
certain other matters. Under certain circumstances, the shareholders of one or
more series could control the outcome of these votes.

The series of the BT Investment Portfolios will vote separately or together in
the same manner as the series of the Trust. Under certain circumstances, the
investors in one or more series of BT Investment Portfolios could control the
outcome of these votes.

EXPENSES OF THE TRUST

The Fund bears its own expenses. Operating expenses for the Fund generally
consist of all costs not specifically borne by Bankers Trust or Signature,
including administration and services fees, fees for necessary professional
services, amortization of organizational expenses, the costs of regulatory
compliance and costs associated with maintaining legal existence and shareholder
relations. Bankers Trust and Signature have agreed to reimburse the Fund to the
extent required by applicable state law for certain expenses that are described
in the Statement of Additional Information. The Portfolio bears its own
expenses. Operating expenses for the Portfolio generally consist of all costs
not specifically borne by Bankers Trust or Signature, including investment
advisory and administration and services fees, fees for necessary professional
services, amortization of organizational expenses, amortization of
organizational expenses, the costs associated with regulatory compliance and
maintaining legal existence and investor relations.
<PAGE>

INVESTMENT ADVISER OF THE PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY

DISTRIBUTOR
SIGNATURE BROKER-DEALER SERVICES, INC.

CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY

INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.

COUNSEL

WILLKIE FARR & GALLAGHER

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

No person has been authorized to give any information or to make any
representations other than those contained in the Fund's Prospectuses, its
Statement of Additional Information or the Fund's official sales literature in
connection with the offering of the Fund's shares and, if given or made, such
other information or representations must not be relied on as having been
authorized by the Trust. This Prospectus does not constitute an offer in any
state in which, or to any person to whom, such offer may not lawfully be made.
..............................................................................
<PAGE>
BT INSTITUTIONAL FUNDS

PROSPECTUS: APRIL 29, 1996

Please read this Prospectus carefully before investing and retain it for future
reference. It contains important information about the Funds that you should
know and can refer to in deciding whether a Fund's goals match your own.

UNLIKE OTHER MUTUAL FUNDS, EACH FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE
BY INVESTING ALL OF ITS INVESTABLE ASSETS IN A SEPARATE INVESTMENT COMPANY (A
"PORTFOLIO") WITH AN IDENTICAL INVESTMENT OBJECTIVE. THE INVESTMENT PERFORMANCE
OF EACH FUND WILL CORRESPOND DIRECTLY TO THE INVESTMENT PERFORMANCE OF THE
CORRESPONDING PORTFOLIO. SEE "SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND
STRUCTURE" ON PAGE 16.

SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, BANKERS TRUST COMPANY AND THE SHARES ARE NOT FEDERALLY INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY. EACH FUND INTENDS TO MAINTAIN A CONSTANT $1.00 PER SHARE NET ASSET
VALUE, ALTHOUGH THERE CAN BE NO ASSURANCE THAT IT WILL BE ABLE TO DO SO.

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

* A family of money market funds, each of which provides high current income to
the extent consistent with liquidity and capital preservation.

BANKERS TRUST COMPANY
Investment Adviser of the Portfolio and Administrator

SIGNATURE BROKER-DEALER SERVICES, INC.
Distributor
6 St. James Avenue
Boston, Massachusetts 02116
<PAGE>

TABLE OF CONTENTS
- ------------------------------------------------------------------------------
PAGE

..............................................................................
Summary of the Funds Expenses 3
Fund Financial Highlights 4
Investment Objectives and Policies 6
Risk Factors; Matching the Funds to Your Investment Needs 15
Net Asset Value 17
Purchase and Redemption of Shares 18
Dividends, Distributions and Taxes 22
Performance Information and Reports 23
Management of the Trust and Portfolios 24
- ------------------------------------------------------------------------------
<PAGE>

SUMMARY OF THE FUNDS EXPENSES
The following tables provide (i) a summary of expenses relating to purchases
and sales of shares of Institutional Cash Management Fund, Institutional
Treasury Money Fund, Institutional NY Tax Free Money Fund and Institutional
Tax Free Money Fund (each, a "Fund" and collectively, the "Funds") and the
aggregate annual operating expenses of each Fund and the expenses of the
corresponding Portfolio (as defined below), as a percentage of average net
assets of that Fund and (ii) examples illustrating the dollar cost of such
expenses on a $1,000 investment in each Fund. THE TRUSTEES OF THE BT
INSTITUTIONAL FUNDS (THE "TRUST") BELIEVE THAT THE AGGREGATE PER SHARE
EXPENSES OF EACH FUND AND CASH MANAGEMENT PORTFOLIO, TREASURY MONEY PORTFOLIO,
NY TAX FREE MONEY PORTFOLIO OR TAX FREE MONEY PORTFOLIO (EACH A "PORTFOLIO"
AND COLLECTIVELY, THE "PORTFOLIOS") WILL BE LESS THAN OR APPROXIMATELY EQUAL
TO THE EXPENSES WHICH THAT FUND WOULD INCUR IF THE TRUST RETAINED THE SERVICES
OF AN INVESTMENT ADVISER AND THE INVESTABLE ASSETS ("ASSETS") OF THAT FUND
WERE INVESTED DIRECTLY IN THE TYPE OF SECURITIES BEING HELD BY THE
CORRESPONDING PORTFOLIO.

- ------------------------------------------------------------------------------
ANNUAL OPERATING EXPENSES: INSTITUTIONAL TREASURY MONEY, INSTITUTIONAL
TAX FREE MONEY AND INSTITUTIONAL NY TAX FREE MONEY FUNDS
(as a percentage of the average daily net assets of each Fund)
..............................................................................
Investment advisory fee 0.15%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.10
..............................................................................
Total operating expenses (after reimbursements or waivers) 0.25%
..............................................................................
EXAMPLE 1 year 3 years 5 years 10 years
..............................................................................
You would pay the following
expenses on a $1,000
investment, assuming: (1) 5%
annual return and (2)
redemption at the end of each
time period $3 $8 $14 $32
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
ANNUAL OPERATING EXPENSES: INSTITUTIONAL CASH MANAGEMENT FUND
(as a percentage of the average daily net assets of the Fund)
..............................................................................
Investment advisory fee 0.15%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.08
..............................................................................
Total operating expenses (after reimbursements or waivers) 0.23%
..............................................................................
EXAMPLE 1 year 3 years 5 years 10 years
..............................................................................
You would pay the following
expenses on a $1,000
investment, assuming: (1) 5%
annual return and (2)
redemption at the end of each
time period $2 $7 $13 $29
- ------------------------------------------------------------------------------

The expense tables and the examples above show the costs and expenses that an
investor will bear directly or indirectly as a shareholder of each of the
Funds. While reimbursment of distribution expenses in amounts up to 0.10% of
average net assets are authorized to be made pursuant to the Plan of
Distribution under Rule 12b-1 of the Investment Company Act of 1940, as
amended (the "1940 Act"), it is not expected that any payments will actually
be made under that plan in the foreseeable future. The expense tables and the
examples reflect a voluntary undertaking by Bankers Trust Company ("Bankers
Trust") or Signature Broker-Dealer Services, Inc. ("Signature") to waive or
reimburse expenses such that the total operating expenses of Institutional
Treasury Money, Institutional Tax Free Money and Institutional NY Tax Free
Money Funds will not exceed 0.25% of the Fund's average net assets annually
and the total operating expenses of Institutional Cash Management Fund will
not exceed 0.23% of its average daily net assets annually. In the absence of
these undertakings, for the fiscal year ended December 31, 1995 the total
operating expenses would have been equal to approximately 0.32% and 0.27%,
respectively, of the Institutional Treasury Money and the Institutional Cash
Management Funds' average net assets annually. The estimated total operating
expenses for the Institutional Tax Free Money and Institutional N.Y. Tax Free
Money Funds (which have not commenced investment operations) are each
approximately 0.32% assuming total assets of $200 million in each Fund. THE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Moreover, while
each example assumes a 5% annual return, actual performance will vary and may
result in a return greater or less than 5%.

The Funds are sold by Signature as the Trust's distributor (the "Distributor")
to customers of Bankers Trust or to customers of another bank or a dealer or
other institution that has a sub-shareholder servicing agreement with Bankers
Trust (along with Bankers Trust, a "Service Agent"). Some Service Agents may
impose certain conditions on their customers in addition to or different from
those imposed by the Funds and may charge their customers a direct fee for
their services. Each Service Agent has agreed to transmit to shareholders who
are its customers appropriate disclosures of any fees that it may charge them
directly.

In addition to the customers of Bankers Trust or other institutions described
above, the Funds are available for (a) accounts where an investment adviser or
a financial planner has discretion over such account and the account holder
pays such person as compensation for its advice and other services an annual
fee of at least 0.50% on the assets in the account; (b) accounts established
under a "wrap fee" program or formal asset allocation program where the
account holder pays the program sponsor an annual fee of at least 0.50% on the
assets in the account; and (c) accounts established through an automated
clearing or similar system established for the use of investment professionals
and through which purchases and redemptions are transmitted to the Funds on an
omnibus basis.

For more information with respect to the expenses of the Funds and the
Portfolios see "Management of the Trust and Portfolios" herein.

FUND FINANCIAL HIGHLIGHTS
The following tables show selected data for a share outstanding, total
investment return, ratios to average net assets and other supplemental data
for each Fund for the periods indicated and have been audited by Coopers &
Lybrand L.L.P., the Funds' independent accountants, whose reports thereon
appear in the Funds' Annual Reports which are incorporated by reference in the
Funds' Statement of Additional Information. The Institutional Tax Free Money
Fund and the Institutional NY Tax Free Money Fund did not commence operations
as of December 31, 1995.
<PAGE>

INSTITUTIONAL CASH MANAGEMENT FUND
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 25, 1990
FOR THE YEAR ENDED DECEMBER 31, (COMMENCEMENT OF
---------------------------------------------------------------------------------- OPERATIONS) TO
1995 1994 1993 1992 1991 DECEMBER 31, 1990
..............................................................................................................................
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value,
Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
..............................................................................................................................
Income from
Investment Operations
Net Investment Income 0.06 0.04 0.03 0.04 0.06 0.03
Net Realized Gain (Loss)
from Securities
Transactions 0.00+ (0.01) 0.00+ 0.00+ 0.00+ --
..............................................................................................................................
Total from Investment
Operations 0.06 0.03 0.03 0.04 0.06 0.03
..............................................................................................................................
Contribution of Capital -- 0.01 -- -- -- --
..............................................................................................................................
Distributions From:
Net Investment Income (0.06) (0.04) (0.03) (0.04) (0.06) (0.03)
Net Realized Gain from
Securities Transactions -- -- (0.00)+ (0.00)+ (0.00)+ --
..............................................................................................................................
Total Distributions (0.06) (0.04) (0.03) (0.04) (0.06) (0.03)
..............................................................................................................................
Net Asset Value,
End of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
..............................................................................................................................
TOTAL INVESTMENT RETURN 5.89% 4.18%++ 3.05% 3.58% 6.20% 8.29%*
RATIOS AND SUPPLEMENTAL DATA
Ratio of Net Investment
Income to Average Net
Assets 5.72% 3.98% 3.01% 3.48% 5.82% 7.90%*
Ratio of Expenses to
Average Net Assets,
Including Expenses of
the Cash Management
Portfolio 0.23% 0.23% 0.25% 0.25% 0.25% 0.25%*
Decrease Reflected in
Above Expense Ratio
Due to Absorption of
Expenses by Bankers
Trust 0.04% 0.03% 0.02% 0.04% 0.09% 0.21%*
Net Assets, End of
Period (000's
omitted) $1,010,874 $664,149 $1,850,222 $1,334,517 $806,690 $301,546
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
* Annualized
+ Less than $0.01 per share

++ Increased by 0.91% due to Contribution of Capital.
</TABLE>
<PAGE>

INSTITUTIONAL TREASURY MONEY FUND
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>

FOR THE PERIOD
JULY 25, 1990
FOR THE YEAR ENDED DECEMBER 31, (COMMENCEMENT OF
--------------------------------------------------------------------------- OPERATIONS) TO
1995 1994 1993 1992 1991 DECEMBER 31, 1990
..............................................................................................................................
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning
of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
..............................................................................................................................
Income from Investment
Operations
Net Investment Income 0.06 0.04 0.03 0.04 0.06 0.03
Net Realized Gain (Loss) from
Securities Transactions 0.00+ (0.00)+ 0.00+ 0.00+ 0.00+ 0.00+
..............................................................................................................................
Total from Investment Operations 0.06 0.04 0.03 0.04 0.06 0.03
..............................................................................................................................
Distributions From:
Net Investment Income (0.06) (0.04) (0.03) (0.04) (0.06) (0.03)
Net Realized Gain from
Securities Transactions (0.00)+ -- (0.00)+ (0.00)+ (0.00)+ (0.00)+
..............................................................................................................................
Total Distributions (0.06) (0.04) (0.03) (0.04) (0.06) (0.03)
..............................................................................................................................
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
..............................................................................................................................
TOTAL INVESTMENT RETURN 5.71% 3.92% 2.94% 3.56% 5.84% 7.90%*
RATIOS AND SUPPLEMENTAL DATA
Ratio of Net Investment Income to
Average Net Assets 5.53% 3.97% 2.88% 3.47% 5.54% 7.36%*
Ratio of Expenses to Average
Net Assets, Including Expenses
of the Treasury Money Portfolio 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%*
Decrease Reflected in Above
Expense Ratio Due to Absorption
of Expenses by Bankers Trust 0.07% 0.04% 0.03% 0.04% 0.12% 0.39%*
Net Assets, End of Period
(000's omitted) $1,325,069 $182,101 $143,966 $102,182 $131,406 $57,184
- -----------------------------------------------------------------------------------------------------------------------------------
* Annualized
+ Less than $0.01 per share
</TABLE>

INVESTMENT OBJECTIVES AND POLICIES
Each Fund seeks a high level of current income consistent with liquidity and
the preservation of capital through investment in high quality money market
instruments. The Funds offer investors a convenient means of diversifying
their holdings of short-term securities while relieving those investors of the
administrative burdens typically associated with purchasing and holding these
instruments, such as coordinating maturities and reinvestments, providing for
safekeeping and maintaining detailed records. High quality short-term
instruments may result in a lower yield than instruments with a lower quality
or a longer term.

The Trust seeks to achieve the investment objective of each Fund by investing
all the Assets of the Fund in the corresponding Portfolio, each of which has
the same investment objective as the corresponding Fund. There can be no
assurances that the investment objective of either the Funds or the Portfolios
will be achieved. The investment objective of each Fund and each Portfolio is
a fundamental policy and may not be changed without the approval of the Fund's
shareholders or the Portfolio's investors, respectively. See "Special
Information Concerning Master-Feeder Fund Structure" on page 16 herein.

CASH MANAGEMENT PORTFOLIO
The Cash Management Portfolio will attempt to achieve its investment
objectives by investing in the following money market instruments:

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

Securities Lending. The Portfolio is permitted to lend up to 20% of the total
value of its securities. These loans must be secured continuously by cash or
equivalent collateral or by a letter of credit at least equal to the market
value of the securities loaned plus accrued income. By lending its securities,
the Portfolio can increase its income by continuing to receive income on the
loaned securities as well as by the opportunity to receive interest on the
collateral. Any gain or loss in the market price of the borrowed securities
which occurs during the term of the loan inures to the Portfolio and its
investors. There may be risks of delay in receiving additional collateral or
risks of delay in recovery of the securities or even loss of rights in the
collateral should the borrower of the securities fail financially.

TREASURY MONEY PORTFOLIO
The Treasury Money Portfolio will attempt to achieve its investment objectives
by investing only in (a) direct obligations of the U.S. Treasury, including
Treasury Bills, Notes and Bonds, and (b) repurchase agreements with respect to
those obligations. Information about the repurchase agreements in which the
Portfolio may invest appears under the caption "Cash Management Portfolio--
Repurchase Agreements." While obligations of the U.S. Treasury are guaranteed
by the U.S. Government as to the timely payment of principal and interest, the
market value of such obligations is not guaranteed and may rise and fall in
response to changes in interest rates. The shares of Institutional Treasury
Money Fund and the interests in the Treasury Money Portfolio are not
guaranteed or insured by the U.S. Government.

TAX FREE MONEY PORTFOLIO AND NY TAX FREE MONEY PORTFOLIO
Tax Free Money Portfolio. The Tax Free Money Portfolio will attempt to achieve
its investment objectives by investing, under normal market conditions, no
less than 80% of its net assets in obligations issued by states and their
authorities, agencies, instrumentalities and political subdivisions which are
exempt from Federal income taxes ("Municipal Obligations"). While the
Portfolio is authorized to invest up to 20% of its net assets in taxable
securities, it is anticipated that ordinarily the Portfolio's assets will be
substantially fully invested in Municipal Obligations. Although not a policy
of the Portfolio, the Portfolio generally intends to invest no more than 25%
of its assets in Municipal Obligations of issuers in any one state, territory
or possession of the United States.

NY Tax Free Money Portfolio. The NY Tax Free Money Portfolio will attempt to
achieve its investment objectives by investing, under normal market
conditions, no less than 80% of its net assets in Municipal Obligations and no
less than 65% of its net assets in Municipal Obligations of the State of New
York and its authorities, agencies, instrumentalities and political
subdivisions, as well as of certain other governmental issuers, such as Puerto
Rico, which are exempt from New York State and City income taxes ("New York
Municipal Obligations"). While the Portfolio is authorized to invest up to 20%
of its net assets in taxable securities, it is anticipated that ordinarily the
Portfolio's assets will be substantially fully invested in New York Municipal
Obligations. Dividends paid by the Portfolio that are derived from interest
attributable to New York Municipal Obligations will be excluded from gross
income for Federal income tax purposes and exempt from New York State and New
York City personal income taxes. Dividends derived from interest on Municipal
Obligations other than New York Municipal Obligations will be exempt from
Federal income tax, but will be subject to New York State and New York City
income taxes.

The Tax Free Money Portfolio and the NY Tax Free Money Portfolio may invest in
securities of other investment companies that invest in high quality, short-
term securities in which the Portfolio could itself invest and that determine
their net asset value per share based on the amortized cost method, provided
that the investments are within the limits prescribed by the 1940 Act. Under
the 1940 Act, the Portfolio may not invest in securities of other investment
companies, except in connection with a merger, consolidation, acquisition or
reorganization, if: (i) more than 10% of the market value of the Portfolio's
total assets would be invested in securities of other investment companies;
(ii) more than 5% of the market value of the Portfolio's total assets would be
invested in the securities of any one investment company; or (iii) the
Portfolio would own more than 3% of any other investment company's voting
securities. The Portfolio will not invest in any investment company which is,
or the investment adviser of which is, an "affiliated person" under the 1940
Act of the Portfolio or the Trust.

The NY Tax Free Money Portfolio is classified as a non-diversified investment
company under the 1940 Act, which means that the Portfolio is not limited by
the 1940 Act in the proportion of its assets that it may invest in obligations
of a single issuer. However, the Portfolio intends to conduct its operations
so that each of its investors may qualify as a "regulated investment company"
for purposes of the Internal Revenue Code of 1986, as amended (the "Code"),
which will relieve each investor of any liability for Federal income tax to
the extent its earnings are distributed to its shareholders. To permit such
qualification, among other requirements, the Portfolio will limit its
investments so that, at the close of each quarter of the taxable year: (i) not
more than 25% of the market value of the Portfolio's total assets will be
invested in the securities of a single issuer; and (ii) with respect to 50% of
the market value of its total assets, not more than 5% of the market value of
its total assets will be invested in the securities of a single issuer and the
Portfolio will not own more than 10% of the outstanding voting securities of a
single issuer. The Portfolio's assumption of large positions in the
obligations of a small number of issuers may cause the Portfolio's yield to
fluctuate to a greater extent than that of a diversified company, such as the
Tax Free Money Portfolio, as a result of changes in the financial condition or
in the market's assessment of the issuers.

SPECIAL CONSIDERATIONS AFFECTING THE NY TAX FREE MONEY PORTFOLIO AND THE FUND
The Portfoio's ability to achieve its investment objective is dependent upon
the ability of the issuers of New York Municipal Obligations to meet their
continuing obligations for the payment of principal and interest. New York
State and New York City face long-term economic problems that could seriously
affect their ability and that of other issuers of New York Municipal
Obligations to meet their financial obligations.

Certain substantial issuers of New York Municipal Obligations (including
issuers whose obligations may be acquired by the Portfolio) have experienced
serious financial difficulties in recent years. These difficulties have at
times jeopardized the credit standing and impaired the borrowing abilities of
all New York issuers and have generally contributed to higher interest costs
for their borrowings and fewer markets for their outstanding debt obligations.
In recent years, several different issues of municipal securities of New York
State and its agencies and instrumentalities and of New York City have been
downgraded by S&P and Moody's. On the other hand, strong demand for New York
Municipal Obligations has at times had the effect of permitting New York
Municipal Obligations to be issued with yields relatively lower, and after
issuance, to trade in the market at prices relatively higher, than comparably
rated municipal obligations issued by other jurisdictions. A recurrence of the
financial difficulties previously experienced by certain issuers of New York
Municipal Obligations could result in defaults or declines in the market
values of those issuers' existing obligations and, possibly, in the
obligations of other issuers of New York Municipal Obligations. Although as of
the date of this Prospectus, no issuers of New York Municipal Obligations are
in default with respect to the payment of their municipal obligations, the
occurrence of any such default could affect adversely the market values and
marketability of all New York Municipal Obligations and, consequently, the net
asset value of the Portfolio's investments.

Other considerations affecting the Portfolio's investments in New York
Municipal Obligations are summarized in the Statement of Additional
Information.

Municipal Obligations. The two principal classifications of Municipal
Obligations consist of "notes" and "bonds." Municipal Obligations are further
classified as "general obligation" and "revenue" issues and the securities
held by the Portfolios may include "moral obligation" issues, which are
normally issued by special purpose authorities. General obligation bonds are
secured by the issuer's pledge of its full faith, credit and taxing power for
the payment of principal and interest. Revenue bonds are payable only from the
revenues derived from a particular facility or class of facilities or in some
cases, from the proceeds of a special excise tax or other specific revenue
source, such as the user of the facility being financed. The Portfolios may
invest in "private activity" bonds, described below, which as a general rule
will be revenue bonds and, accordingly, are not payable from the unrestricted
revenues of the issuer. Among other instruments, the Portfolios may purchase
tax-exempt commercial paper and short-term municipal notes, such as tax
anticipation notes, bond anticipation notes, revenue anticipation notes,
construction loan notes and other forms of short-term loans. These notes are
issued with a short-term maturity in anticipation of the receipt of tax funds,
the proceeds of bond placements or other revenues. The Portfolios may also
acquire participations in privately negotiated loans to municipal borrowers.
The types, forms and offerings of Municipal Obligations are continually
changing, and the Portfolios could invest in instruments that may be developed
and offered in the market place in the future, provided they meet the
Portfolios' investment quality and Federal income tax criteria. These new
instruments will be described in the Funds' then current prospectus prior to
an investment by a Portfolio. A more detailed discussion of the categories of
Municipal Obligations is contained in the Statement of Additional Information.

Interest income on certain types of private activity bonds issued after August
7, 1986 to finance nongovernmental activities is a specific tax preference
item for purposes of the Federal individual and corporate alternative minimum
taxes. Individual and corporate shareholders of the Funds may be subject to a
Federal alternative minimum tax to the extent the Portfolios' income is
derived from interest on these bonds. Accordingly, these private activity
bonds are not included in the term "Municipal Obligations" for purposes of
determining compliance with the 80% test described under "Additional
Investment Limitations" below. However, while up to 20% of the Portfolios' net
assets may be invested in these private activity bonds, it is anticipated that
they will ordinarily not constitute a significant portion of the securities
held by each Portfolio. Dividends paid by the Funds which are derived from
interest income on Municipal Obligations are a "current earnings" adjustment
item for purposes of the Federal corporate alternative minimum tax.

Certain Municipal Obligations bear interest at rates that are not fixed, but
that vary with changes in specified market rates or indices. Certain of these
obligations may carry a demand feature that permits the Portfolios to tender
them back to the issuer or remarketing agent at par value prior to maturity.
The Portfolios may invest in floating rate and variable rate obligations
carrying stated maturities in excess of one year at the date of purchase by
the Portfolios if the obligations carry demand features that comply with
conditions established by the Securities and Exchange Commission (the "SEC")
or its staff. Each Portfolio will limit, its purchases of floating rate and
variable rate Municipal Obligations to those meeting the quality standards set
forth below. Frequently these obligations are secured by letters of credit or
other credit support arrangements provided by banks. The quality of the
underlying credit or of the bank as the case may be, must also be equivalent
to the quality standards set forth below, as determined by Bankers Trust under
the supervision of the Boards of Trustees of the Portfolios.

The Portfolios may invest in the following Municipal Obligations: (i) notes
rated MIG-1 or VMIG-1 by Moody's or SP-1 or higher by S&P (or an equivalent
rating by another nationally recognized statistical rating organization
("NRSRO")) or which are considered to be of comparable quality by Bankers
Trust pursuant to guidelines established and maintained in good faith by the
Board of Trustees of the respective Portfolio; or (ii) other Municipal
Obligations issued by issuers with municipal notes outstanding, comparable in
priority and security, meeting the rating criteria described herein or, if no
such notes are outstanding or if they are unrated, are rated at least AA by
S&P or Aa by Moody's. The NY Tax Free Money Portfolio may also invest in
municipal notes rated MIG-2 or VMIG-2 by Moody's or SP-2 by S&P when Bankers
Trust deems it advisable. A description of the ratings set forth above is
provided in the Appendix to the Statement of Additional Information.

The Portfolios may invest in Municipal Obligations the income on which may be
derived from economically related projects or projects of a similar type. To
the extent that a Portfolio's assets are concentrated in Municipal Obligations
payable from revenues on economically related projects and facilities, or
issued by issuers in particular states, the Portfolio will be subject to the
particular risks presented by those projects, facilities or states to a
greater extent than it would be if the Portfolio's assets were not so
concentrated. In addition, the Portfolios may invest in private activity bonds
the interest on which is not subject to an alternative minimum tax, as
described above, and may invest without limitation in Municipal Obligations
backed by letters of credit or guarantees issued by banks or other financial
institutions.

Taxable Investments. When, in the opinion of Bankers Trust, adverse market
conditions exist for Municipal Obligations or New York Municipal Obligations
and a "defensive" investment posture is warranted, each Portfolio may
temporarily invest more than 20% of its total assets in "Taxable Investments,"
which are money market instruments having maturity and quality characteristics
comparable to those discussed above for Municipal Obligations, but that
produce interest not exempt from Federal income taxation; and the NY Tax Free
Money Portfolio may temporarily invest more than 35% of its total assets in
instruments that produce income excluded from gross income for Federal income
tax purposes but subject to New York State and New York City personal income
taxation. Periods when a defensive posture is warranted include those periods
when the NY Tax Free Money Portfolio's monies available for investment exceed
the New York Municipal Obligations available for purchase that meet the
Portfolio's rating, maturity and other investment criteria. Each Portfolio may
invest in Taxable Investments pending the investment of proceeds from sales of
shares or portfolio securities into Municipal Obligations or in anticipation
of redemptions. Each Portfolio also has the right to hold cash reserves as it
deems necessary for temporary defensive purposes. While each Portfolio is
authorized to invest up to 20% of its net assets under normal market
conditions in Taxable Investments, it is anticipated that they will not
ordinarily constitute a significant portion of either Portfolio's investments.

Taxable Investments will be limited to: (i) U.S. Government securities; (ii)
commercial paper and certificates of deposit, bankers' acceptances and short-
term obligations of foreign and domestic banks with total assets of $1 billion
or more, in each case rated Prime-1 by Moody's or A-1 or higher by S&P, or, if
not rated, believed to be of equivalent investment quality by Bankers Trust
acting under the supervision of the Board of Trustees; (iii) short-term
corporate debt obligations of issuers which have commercial paper outstanding
meeting the rating requirements described herein or, if such commercial paper
is unrated, or if no such commercial paper is outstanding, are rated at least
Aa by Moody's or AA by S&P; and (iv) repurchase agreements with an underlying
security that would otherwise qualify for investment by the Portfolio. Taxable
Investments are described in more detail under the caption "Cash Management
Portfolio."

ADDITIONAL INVESTMENT TECHNIQUES
The Cash Management Portfolio and Treasury Money Portfolio may enter into
reverse repurchase agreements and lend securities held by it to brokers,
dealers and other financial organizations. Loans of securities by a Portfolio,
if and when made, may not exceed 20% of the Portfolio's total assets and will
be collateralized by cash, letters of credit or U.S. Government Obligations
that are maintained at all times in an amount equal to at least 100% of the
current market value of the loaned securities. The Tax Free Money Portfolio
and the NY Tax Free Money Portfolio may also enter into reverse repurchase
agreements and purchase participation interests and standby commitments. See
"Investment Objectives and Policies" in the Statement of Additional
Information for a more detailed description of reverse repurchase agreements,
participation interests and standby commitments.

PORTFOLIO QUALITY AND MATURITY
Each Portfolio will maintain a dollar-weighted average maturity of 90 days or
less. All securities in which each Portfolio invests will have or be deemed to
have remaining maturities of 397 days or less on the date of their purchase,
will be denominated in U.S. dollars and will have been granted the required
ratings established herein by two NRSROs (or one such NRSRO if that NRSRO is
the only such NRSRO which rates the security), or if unrated, are believed by
Bankers Trust, under the supervision of the respective Portfolio's Board of
Trustees, to be of comparable quality. A description of such ratings is
provided in the Appendix to the Statement of Additional Information. Bankers
Trust, acting under the supervision of and procedures adopted by the Board of
Trustees of each Portfolio, will also determine that all securities purchased
by a Portfolio present minimal credit risks. Bankers Trust will cause a
Portfolio to dispose of any security as soon as practicable if the security is
no longer of the requisite quality, unless such action would not be in the
best interest of that Portfolio.

ADDITIONAL INVESTMENT LIMITATIONS
Each Fund's and Portfolio's investment objectives, together with the
investment restrictions described in this paragraph and the Statement of
Additional Information, except as noted, are "fundamental policies," which
means that they may not be changed without the approval of the holders of each
Fund's and each Portfolio's outstanding voting securities. Each Fund has the
same investment restrictions as the Portfolios, except that the Funds may
invest all of its Assets in another open-end investment company with the same
investment objectives, such as the corresponding Portfolio. The Tax Free Money
Portfolio and the NY Tax Free Money Portfolio will invest at least 80% of
their respective net assets in tax-exempt Municipal Obligations under normal
market conditions. Each Portfolio may not invest more than 25% of its total
assets in the securities of issuers in any single industry, except that, under
normal market conditions, more than 25% of the total assets of the Cash
Management Portfolio will be invested in foreign and domestic bank
obligations. As an operating policy, the Cash Management Portfolio and the
Treasury Money Portfolio may not invest more than 5% of its total assets in
the obligations of any one issuer except for U.S. Government Obligations and
repurchase agreements, which may be purchased without limitation. The same is
true with respect to 75% of the assets of the Tax Free Money Portfolio. This
restriction, however, shall not preclude the purchase by the Tax Free Money
Portfolio of issues backed by letters of credit or guarantees of banks or
other financial institutions, even though any such bank or financial
institution provides a letter of credit or guarantee with respect to
securities that in the aggregate represent more than 5%, but not more than
10%, of the total assets of the Portfolio, and will consider the issuer of the
security (and not the letter of credit or guarantee) the principal obligor of
the obligation. Each Portfolio is also authorized to borrow, including
entering into reverse repurchase transactions, in an amount up to 5% of its
total assets for temporary purposes, but not for leverage, and to pledge its
assets to the same extent in connection with these borrowings. See the
Statement of Additional Information for additional information with respect to
reverse repurchase transactions. At the time of an investment, a Portfolio's
aggregate holdings of repurchase agreements having remaining maturities of
more than seven calendar days (or which may not be terminated within seven
calendar days upon notice by the Portfolio), time deposits having a remaining
maturity of more than seven calendar days, illiquid securities (including
floating and variable rate Municipal Obligations having a demand feature of
more than seven calendar days), restricted securities and securities lacking
readily available market quotations will not exceed 10% of the Portfolio's net
assets. If changes in the liquidity of certain securities cause a Portfolio to
exceed such 10% limit, that Portfolio will take steps to bring the aggregate
amount of its illiquid securities back below 10% of its net assets as soon as
practicable, unless such action would not be in the best interest of the
Portfolio. The Statement of Additional Information contains further
information on the Funds' and the Portfolios' investment restrictions.

RISK FACTORS; MATCHING THE FUNDS TO YOUR INVESTMENT NEEDS
Each Fund is designed for conservative investors looking for high current
income approximating taxable or tax free, as the case may be, money market
rates while remaining conveniently liquid with a stable share price. Each
Portfolio follows practices which enable the corresponding Fund to attempt to
maintain a $1.00 share price: limiting average maturity of the securities held
by the Portfolio to 90 days or less; buying securities which mature in 397
days or less; and buying only high quality securities with minimal credit
risks. Of course, the Funds cannot guarantee a $1.00 share price, but these
practices help to minimize any price fluctuations that might result from
rising or declining interest rates. While each Portfolio invests in high
quality money market securities, you should be aware that your investment is
not without risk. All money market instruments, including U.S. Government
securities, can change in value when interest rates or an issuer's
creditworthiness changes.

SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE
Unlike other open-end management investment companies (mutual funds) which
directly acquire and manage their own portfolio securities, each Fund seeks to
achieve its investment objective by investing all of its Assets in a
corresponding Portfolio, a separate registered investment company with the
same investment objectives as the Fund. Therefore, an investor's interest in a
Portfolio's securities is indirect. In addition to selling a beneficial
interest to each Fund, each Portfolio may sell beneficial interests to other
mutual funds or institutional investors. Such investors will invest in that
Portfolio on the same terms and conditions and will pay a proportionate share
of the Portfolio's expenses. However, the other investors investing in the
Portfolio are not required to sell their shares at the same public offering
price as the respective Fund due to variations in sales commissions and other
operating expenses. Therefore, investors in each of the Funds should be aware
that these differences may result in differences in returns experienced by
investors in the different funds that invest in each of the Portfolios. Such
differences in returns are also present in other mutual fund structures.
Information concerning other holders of interests in any of the Portfolios is
available from Bankers Trust at (800) 368-4031.

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

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

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

For descriptions of the investment objectives, policies and restrictions of
the Portfolios, see "Investment Objectives and Policies." For descriptions of
the management of the Portfolios, see "Management of the Trust and Portfolios"
herein and in the Statement of Additional Information. For descriptions of the
expenses of the Portfolios, see "Management of the Trust and Portfolios"
herein.

NET ASSET VALUE
The net asset value per share of each Fund is calculated on each day on which
the Funds are 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 net asset value per share of the Institutional Tax Free Money Fund and
Institutional NY Tax Free Money Fund is calculated twice on each Valuation Day
as of 12:00 noon, New York time and as of the close of regular trading on the
New York Stock Exchange Inc. (the "NYSE"), which is currently 4:00 p.m., New
York time or in the event that the NYSE closes early, at the time of such early
closing. The net asset value of the Institutional Treasury Money Fund is
calculated twice on each Valuation Day as of 2:00 p.m., New York time and as of
the close of regular trading on the NYSE which is currently 4:00 p.m., New York
time or earlier, should the NYSE close earlier. The net asset value per share of
Institutional Cash Management Fund is calculated as of the close of regular
trading on the NYSE (currently 4:00 p.m., New York time or earlier, should the
NYSE close earlier). The net asset value per share of each Fund is computed by
dividing the value of the Fund's assets (i.e., the value of its investment in
the corresponding Portfolio and other assets), less all liabilities, by the
total number of its shares outstanding. Each Fund's net asset value will
normally be $1.00.

The assets of each Portfolio are valued by using the amortized cost method of
valuation. This method involves valuing each security held by a Portfolio at
its cost at the time of its purchase and thereafter assuming a constant
amortization to maturity of any discount or premium. Accordingly, immaterial
fluctuations in the market value of the securities held by a Portfolio will
not be reflected in the corresponding Fund's net asset value. The Board of
Trustees of each Portfolio will monitor the valuation of assets by this method
and will make such changes as it deems necessary to assure that assets are
valued fairly and in good faith by that Portfolio.

Under procedures adopted by the Board, a net asset value for a Fund later
determined to have been inaccurate for any reason will be recalculated.
Purchases and redemptions made at a net asset value determined to have been
inaccurate will be adjusted, although in certain circumstances, such as where
the difference between the original net asset value and the recalculated net
asset value divided by the recalculated net asset value is 0.005% (1/2 of 1%)
or less or shareholder transactions are otherwise insubstantially affected,
further action is not required.

PURCHASE AND REDEMPTION OF SHARES
PURCHASE OF SHARES
The Trust accepts purchase orders for shares of each Fund at the net asset
value per share of the Fund next determined on each Valuation Day. See "Net
Asset Value" above. There is no sales charge on the purchase of shares, but
costs of distributing shares of the Funds may be reimbursed from their
respective assets, as described herein. Excluding retirement plans, the
minimum initial investment in the Trust is $1,000,000 which may be allocated
in amounts not less than $100,000 per fund in certain funds in the BT Family
of Funds. The subsequent minimum investment in each Fund is $100,000
(excluding retirement plans). Service Agents may impose initial and subsequent
investment minimums that differ from these amounts. Shares of the Funds may be
purchased in only those states where they may be lawfully sold.

Purchase orders for shares of the Funds will receive, on any Valuation Day,
the net asset value next determined following receipt by the Service Agent and
transmission to Bankers Trust, as the Trust's transfer agent (the "Transfer
Agent") of such order. If a purchase order is so received and transmitted
prior to 12:00 noon (New York time) for Institutional Tax Free Money Fund and
Institutional NY Tax Free Money Fund, 2:00 p.m. (New York time) for
Institutional Treasury Money Fund and 4:00 p.m. (New York time) for
Institutional Cash Management Fund, prior to the close of the NYSE, and
payment in the form of federal funds is received on that day by Bankers Trust,
as the Trust's custodian (the "Custodian"), the shareholder will receive the
dividend declared on that day. If the purchase order is received by the
Service Agent and transmitted to the Transfer Agent after 12:00 noon (New York
time) for Institutional Tax Free Money Fund and Institutional NY Tax Free
Money Fund, 2:00 p.m. (New York time) for Institutional Treasury Money Fund
and the close of regular trading on the NYSE (currently 4:00 p.m. New York
time or earlier, should the NYSE close earlier) for Institutional Cash
Management Fund, the shareholder will receive the dividend declared on the
following day even if the Custodian receives federal funds on that day. The
Trust and Signature reserve the right to reject any purchase order.

Shares must be purchased in accordance with procedures established by the
Transfer Agent and Service Agents, including Bankers Trust, in connection with
customers' accounts. It is the responsibility of each Service Agent to
transmit to the Transfer Agent purchase and redemption orders and to transmit
to the Custodian purchase payments on behalf of its customers in a timely
manner, and a shareholder must settle with the Service Agent his or her
entitlement to an effective purchase or redemption order as of a particular
time. Because Bankers Trust is the Custodian and Transfer Agent of the Trust,
funds may be transferred directly from or to a customer's account with Bankers
Trust to or from a particular Fund without incurring the additional costs or
delays associated with the wiring of federal funds.

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

REDEMPTION OF SHARES
Shareholders may redeem shares at the net asset value per share next
determined on each Valuation Day. Redemption requests should be transmitted by
customers in accordance with procedures established by the Transfer Agent and
the shareholder's Service Agent. Redemption requests for shares of the Funds
received by the Service Agent and transmitted to the Transfer Agent prior to
12:00 noon (New York time) for Institutional Tax Free Money Fund and
Institutional NY Tax Free Money Fund, 2:00 p.m. (New York time) for
Institutional Treasury Money Fund and 4:00 p.m. (New York time) for
Institutional Cash Management Fund, and prior to the close of the NYSE on each
Valuation Day will be redeemed at the net asset value per share next
determined for each respective Fund and the redemption proceeds normally will
be delivered to the shareholder's account with the Service Agent on that day;
no dividend will be paid on the day of redemption. Redemption requests
received by the Service Agent and transmitted to the Transfer Agent after
12:00 noon (New York time) for Institutional Tax Free Money Fund and
Institutional NY Tax Free Money Fund, after 2:00 p.m. for Institutional
Treasury Money Fund and after the close of regular trading on the NYSE
(currently 4:00 p.m. New York time or earlier should the NYSE close earlier)
for Institutional Cash Management Fund, will be redeemed at the net asset
value per share next determined for each respective Fund and the redemption
proceeds normally will be delivered to the shareholder's account with the
Service Agent the following day; shares redeemed in this manner will receive
the dividend declared on the day of the redemption. Payments for redemptions
will in any event be made within seven calendar days following receipt of the
request.

Redemption orders are processed without charge by the Trust. A Service Agent
may on at least 30 days' notice involuntarily redeem a shareholder's account
with a Fund having a current value of less than $100,000 (excluding retirement
plans).

Automatic Cash Withdrawal Plan. The Funds may offer shareholders an automatic
cash withdrawal plan, under which shareholders who own shares of the Fund may
elect to receive periodic cash payments. Retirement plan accounts are eligible
for automatic cash withdrawal plans only where the shareholder is eligible to
receive qualified distributions. For further information regarding the
automatic cash withdrawal plan, shareholders should contact their Service
Agent.

Checkwriting. Shareholders of the Funds may redeem shares by check. Checks may
not be used to close an account. Shareholders will continue to earn dividends
on shares to be redeemed until the check clears. Checks will be returned to
shareholders at the end of the month. There is no charge for redemption of
shares by check. Additional information regarding the checkwriting privilege
may be obtained from a Service Agent.

EXCHANGE PRIVILEGE
Shareholders may exchange their shares for shares of certain other funds in
the BT Family of Funds registered in their state. The Funds reserve the right
to terminate or modify the exchange privilege in the future. To make an
exchange, follow the procedures indicated in "Purchase of Shares" and
"Redemption of Shares." Before making an exchange, please note the following:

* Call your Service Agent for information and a prospectus. Read the
prospectus for relevant information.

* Complete and sign an application, taking care to register your new account
in the same name, address and taxpayer identification number as your
existing account(s).

* Individual Retirement Accounts (IRAs): personal savings plans that offer tax
advantages for individuals to set aside money for retirement and allow new
contributions of $2,000 per tax year.

* Rollover IRAs: tax-deferred retirement accounts that retain the special tax
advantages of lump sum distributions from qualified retirement plans and
transferred IRA accounts.

* 403(b) Custodian Accounts: defined contribution plans open to employees of
most nonprofit organizations and educational institutions.

* Deferred Benefit Plans: plan sponsors may invest all or part of their
pension assets in the Fund.

DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Portfolio determines its net income and realized capital gains, if any,
on each Valuation Day and allocates all such income and gain pro rata among
the corresponding Fund and the other investors in that Portfolio at the time
of such determination. Each Fund declares dividends from its net income (i.e.,
that Fund's pro rata share of the net income of the corresponding Portfolio)
on each Valuation Day and pays dividends for the preceding month within the
first five Valuation Days of each month. Each Fund reserves the right to
include realized short-term gains, if any, in such daily dividends.
Distributions of each Fund's pro rata share of the corresponding Portfolio's
net realized long-term capital gains, if any, and any undistributed net
realized short-term capital gains are normally declared and paid annually at
the end of the fiscal year in which they were earned to the extent they are
not offset by any capital loss carryforwards. Since each Fund is subject to a
4% nondeductible excise tax on certain undistributed amounts of ordinary
income and capital gains, each Fund expects to make such other distributions
as are necessary to avoid the application of this tax. Unless a shareholder
instructs the Trust to pay dividends or capital gains distributions in cash,
dividends and distributions will automatically be reinvested at net asset
value in additional shares of the Fund that paid the dividend or distribution.

The Trust intends to qualify each Fund as a regulated investment company, as
defined in the Code. Provided each Fund meets the requirements imposed by the
Code, that Fund will not pay any Federal income or excise taxes. Each
Portfolio will also not be required to pay any Federal income or excise taxes.
Dividends paid by a Fund from its taxable net investment income and
distributions by a Fund of its net realized short-term capital gains (whether
from tax-exempt or taxable obligations) are taxable to shareholders as
ordinary income, whether received in cash or reinvested in additional shares
of that Fund. The Trust does not expect that any Fund will realize long-term
capital gains and thus does not contemplate paying distributions taxable to
shareholders as long-term capital gains. Exempt-interest dividends may be
excluded by shareholders of a Fund from their gross income for Federal income
tax purposes although (i) a portion of these dividends will be a specific
preference item for purposes of the Federal individual and corporate
alternative minimum taxes to the extent they are derived from cetain types of
private activity bonds issued after August 7, 1986 and (ii) all exempt-
interest dividends will be a component of the "curent earnings" adjustment
item for purposes of the Federal corporate alternative minimum tax. In
addition, corporate shareholders may incur a greater Federal "environmental"
tax liability through receipt of Fund dividends and distributions. Each Fund's
dividends and distributions will not qualify for the dividends-received
deduction for corporations.

Statements as to the tax status of each shareholder's dividends and
distributions, if any, are mailed annually. Each shareholder will also
receive, if appropriate, various written notices after the end of a Fund's
prior taxable year as to the Federal income tax status of his or her dividends
and distributions which were received from that Fund during that year.
Furthermore, if appropriate, the statements from the Institutional Tax Free
Money Fund will set forth the dollar amount of the shareholder's exempt-
interest dividends which is excluded from Federal income taxation, and the
statements from the Institutional NY Tax Free Money Fund will set forth the
dollar amount of the shareholder's exempt-interest dividends which is excluded
from Federal income and exempt from New York State and City personal income
taxes. These statements will also designate the amount of exempt-interest
dividends that is a specific preference item for purposes of the Federal
individual and corporate alternative minimum taxes. Shareholders should
consult their tax advisers to assess the consequences of investing in a Fund
under state and local laws and to determine whether dividends paid by a Fund
that represent interest derived from U.S. Government Obligations are exempt
from any applicable state or local income taxes.

PERFORMANCE INFORMATION AND REPORTS
From time to time, the Trust may advertise "current yield," "effective yield"
and/or "tax equivalent yield" for a Fund. All yield figures are based on
historical earnings and are not intended to indicate future performance. The
"current yield" of a Fund refers to the income generated by an investment in
the Fund over a seven-day period (which period will be stated in the
advertisement). This income is then "annualized;'" that is, the amount of
income generated by the investment during that week is assumed to be generated
each week over a 52-week period and is shown as a percentage of the
investment. The "effective yield" is calculated similarly but, when
annualized, the income earned by an investment in a Fund is assumed to be
reinvested. The "effective yield" will be slightly higher than the "current
yield" because of the compounding effect of this assumed reinvestment. The
"tax equivalent yield" demonstrates the yield on a taxable investment
necessary to produce an after-tax yield equal to a Fund's tax free yield. It
is calculated by increasing the yield shown for the Fund to the extent
necessary to reflect the payment of specified tax rates. The Trust may include
this information in sales material and advertisements for the Fund.

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

From time to time, advertisements or reports to shareholders may compare the
yield of a Fund to that of other mutual funds with similar investment
objectives or to that of a particular index. The yield of the Institutional
Cash Management Fund might be compared with, for example, the IBC/Donoghue's
Taxable First Tier Institutional Only Money Fund Average, that of the
Institutional Treasury Money Fund might be compared with IBC/Donoghue's
Government Only/Institutional Only Money Fund Average, and that of the
Institutional Tax Free Money Fund and the Institutional NY Tax Free Money Fund
might be compared with IBC/Donoghue's Tax Free Stockbroker and General Purpose
Money Fund Average, which are averages compiled by IBC/Donoghue's Money Fund
Report, a widely recognized, independent publication that monitors the
performance of money market mutual funds. Similarly, the yield of a Fund might
be compared with rankings prepared by Micropal Limited and/or Lipper
Analytical Services, Inc., which are widely recognized, independent services
that monitor the investment performance of mutual funds. The yield of a Fund
might also be compared with the average yield reported by the Bank Rate
Monitor for money market deposit accounts offered by the 50 leading banks and
thrift institutions in the top five standard metropolitan areas. Shareholders
may make inquiries regarding the Funds, including current yield quotations and
performance information, by contacting any Service Agent.

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

MANAGEMENT OF THE TRUST AND PORTFOLIOS
BOARD OF TRUSTEES
The affairs of the Trust and Portfolios are managed under the supervision of
their respective Board of Trustees. By virtue of the responsibilities assumed
by Bankers Trust, the administrator of the Trust and each Portfolio, neither
the Trust nor any Portfolio require employees other than its executive
officers. None of the executive officers of the Trust or any Portfolio devote
full time to the affairs of the Trust or a Portfolio.

The Trustees of the Trust who are not "interested persons" (as defined in the
1940 Act) (the "Independent Trustees") of the Trust or of the Portfolios, as
the case may be, have adopted written procedures reasonably appropriate to
deal with potential conflicts of interest, up to and including creating
separate boards of trustees, arising from the fact that several of the same
individuals are Trustees of the Trust and the Portfolios. For more information
with respect to the Trustees of both the Trust and the Portfolios, see
"Management of the Trust and Portfolios" in the Statement of Additional
Information.

INVESTMENT ADVISER
The Trust has not retained the services of an investment adviser since the
Trust seeks to achieve the investment objective of each Fund by investing all
the Assets of the Fund in the corresponding Portfolio. Each Portfolio has
retained the services of Bankers Trust, as investment adviser.

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

Under its Investment Advisory Agreement, Bankers Trust receives a fee from
each Portfolio, computed daily and paid monthly, at the annual rate of 0.15%
of the average daily net assets of the Portfolio.

Bankers Trust has been advised by its counsel that, in counsel's opinion,
Bankers Trust currently may perform the services for the Trust and the
Portfolios described in this Prospectus and the Statement of Additional
Information without violation of the Glass-Steagall Act or other applicable
banking laws or regulations. State laws on this issue may differ from the
interpretations of relevant Federal law and banks and financial institutions
may be required to register as dealers pursuant to state securities law.

ADMINISTRATOR
Under its Administration and Services Agreement with the Trust, Bankers Trust
calculates the net asset value of each Fund and generally assists the Board of
Trustees of the Trust in all aspects of the administration and operation of
the Trust. The Administration and Services Agreement provides for the Trust to
pay Bankers Trust a fee, computed daily and paid monthly, at the annual rate
of 0.05% of the average daily net assets of each Fund.

Under an Administration and Services Agreement with each Portfolio, Bankers
Trust calculates the value of the assets of that Portfolio and generally
assists the Board of Trustees of the Portfolio in all aspects of the
administration and operation of that Portfolio. Each Administration and
Services Agreement provides for the Portfolio to pay Bankers Trust a fee,
computed daily and paid monthly, at the annual rate of 0.05% of the average
daily net assets of that Portfolio. Under each Administration and Services
Agreement, Bankers Trust may delegate one or more of its responsibilities to
others, including Signature, at Bankers Trust's expense. For more information,
see the Statement of Additional Information.

DISTRIBUTOR
Under its Distribution Agreement with the Trust, Signature, as Distributor,
serves as the Trust's principal underwriter on a best efforts basis. In
addition, Signature provides the Trust with office facilities. Signature is a
wholly-owned subsidiary of Signature Financial Group, Inc. ("SFG"). SFG and
its affiliates currently provide administration and distribution services for
other registered investment companies. The principal business address of SFG
and Signature is 6 St. James Avenue, Boston, Massachusetts 02116.

Pursuant to the terms of the Trust's Plan of Distribution pursuant to Rule
12b-1 under the 1940 Act (the "Plan"), Signature may seek reimbursement in an
amount not exceeding 0.10% of each Fund's average daily net assets annually
for expenses incurred in connection with any activities primarily intended to
result in the sale of the Fund's shares, including, but not limited to:
compensation to and expenses (including overhead and telephone expenses) of
account executives or other employees of Signature who, as their primary
activity, engage in or support the distribution of shares; printing of
prospectuses, statements of additional information and reports for other than
existing Fund shareholders in amounts in excess of that typically used in
connection with the distribution of shares of that Fund; costs of placing
advertising in various media; services of parties other than Signature or its
affiliates in formulating sales literature; and typesetting, printing and
distribution of sales literature. All costs and expenses in connection with
implementing and operating the Plan will be paid by the Funds, subject to the
0.10% of net assets limitation. All costs and expenses associated with
preparing the prospectuses and statements of additional information and in
connection with printing them for and distributing them to existing
shareholders and regulatory authorities, which costs and expenses would not be
considered distribution expenses for purposes of the Plan, will also be paid
by the Funds. To the extent expenses of Signature under the Plan in any fiscal
year of the Trust exceed amounts payable under the Plan during that year,
those expenses will not be reimbursed in any succeeding fiscal year. Expenses
incurred in connection with distribution activities will be identified to the
Fund or other series of the Trust involved, although it is anticipated that
some activities may be conducted on a Trust-wide basis, with the result that
those activities will not be identifiable to any particular series. In the
latter case, expenses will be allocated among the Funds on the basis of their
relative net assets. It is not expected that any payments will be made under
the Plan in the foreseeable future.

SERVICE AGENT
All shareholders must be represented by a Service Agent. Bankers Trust acts as
a Service Agent pursuant to its Administration and Services Agreement with the
Trust and receives no additional compensation from the Funds for such
shareholder services. The service fees of any other Service Agents, including
broker-dealers, will be paid by Bankers Trust from its fees. The services
provided by a Service Agent may include establishing and maintaining
shareholder accounts, processing purchase and redemption transactions,
performing shareholder sub-accounting, answering client inquiries regarding
the Trust, investing client cash account balances automatically in Fund shares
and processing redemption transactions at the request of clients, assisting
clients in changing dividend options, account designations and addresses,
providing periodic statements showing the client's account balance and
integrating these statements with those of other transactions and balances in
the client's other accounts serviced by the Service Agent, transmitting proxy
statements, periodic reports, updated prospectuses and other communications to
shareholders and, with respect to meetings of shareholders, collecting,
tabulating and forwarding to the Trust executed proxies, arranging for bank
wires and obtaining such other information and performing such other services
as the Administrator or the Service Agent's clients may reasonably request and
agree upon with the Service Agent. Service Agents may separately charge their
clients additional fees only to cover provision of additional or more
comprehensive services not already provided under the Administration and
Service Agreement with Bankers Trust, or of the type or scope not generally
offered by a mutual fund, such as cash management services or enhanced
retirement or trust reporting. In addition, investors may be charged a
transaction fee if they effect transactions in Fund shares through a broker or
agent. Each Service Agent has agreed to transmit to shareholders, who are its
customers, appropriate disclosures of any fees that it may charge them
directly.

CUSTODIAN AND TRANSFER AGENT
Bankers Trust acts as Custodian of the assets of the Trust and each Portfolio
and serves as the Transfer Agent for the Trust and each Portfolio under the
respective Administration and Services Agreement with the Trust and each
Portfolio.

ORGANIZATION OF THE TRUST
The Trust was organized on March 26, 1990 under the laws of the Commonwealth
of Massachusetts. Each Fund is a separate series of the Trust. The Trust
offers shares of beneficial interest of separate series, par value $0.001 per
share. The shares of the other series of the Trust are offered through
separate prospectuses. No series of shares has any preference over any other
series.

The Trust is an entity commonly known as a "Massachusetts business trust."
Under Massachusetts law, shareholders of such a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.

When matters are submitted for shareholder vote, shareholders of each Fund
will have one vote for each full share held and proportionate, fractional
votes for fractional shares held. A separate vote of a Fund is required on any
matter affecting the Fund on which shareholders are entitled to vote.
Shareholders of one Fund are not entitled to vote on a matter that does not
affect that Fund. There normally will be no meetings of shareholders for the
purpose of electing Trustees unless and until such time as less than a
majority of Trustees holding office have been elected by shareholders, at
which time the Trustees then in office will call a shareholders' meeting for
the election of Trustees. Any Trustee may be removed from office upon the vote
of shareholders holding at least two-thirds of the Trust's outstanding shares
at a meeting called for that purpose. The Trustees are required to call such a
meeting upon the written request of shareholders holding at least 10% of the
Trust's outstanding shares.

Each Portfolio, in which all the Assets of a corresponding Fund will be
invested, is organized as a trust under the laws of the State of New York.
Each Portfolio's Declaration of Trust provides that a Fund and other entities
investing in that Portfolio (e.g., other investment companies, insurance
company separate accounts and common and commingled trust funds) will each be
liable for all obligations of that Portfolio. However, the risk of a Fund
incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance existed and that Portfolio
itself was unable to meet its obligations. Accordingly, the Trustees of the
Trust believe that neither a Fund nor its shareholders will be adversely
affected by reason of a Fund's investing in the corresponding Portfolio.

EXPENSES OF THE TRUST
Each Fund bears its own expenses. Operating expenses for each Fund generally
consist of all costs not specifically borne by Bankers Trust or Signature,
including administration and services fees, fees for necessary professional
services, the costs of regulatory compliance and costs associated with
maintaining legal existence and shareholder relations. Bankers Trust and
Signature have agreed to reimburse a Fund to the extent required by applicable
state law for certain expenses that are described in the Statement of
Additional Information. Each Portfolio bears its own expenses. Operating
expenses for each Portfolio generally consist of all costs not specifically
borne by Bankers Trust or Signature, including investment advisory and
administration and services fees, fees for necessary professional services,
the costs associated with regulatory compliance and maintaining legal
existence and investor relations.

<PAGE>

INVESTMENT ADVISER OF EACH PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY

DISTRIBUTOR
SIGNATURE BROKER-DEALER SERVICES, INC.

CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY

INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.

COUNSEL
WILLKIE FARR & GALLAGHER

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

..............................................................................
<PAGE>

BT0472G

BT ADVISOR FUNDS

Prospectus-Institutional Class Shares
January 16, 1996, as amended April 29, 1996

U.S. BOND INDEX FUND
EQUITY 500 EQUAL WEIGHTED INDEX FUND

SMALL CAP INDEX FUND
EAFE(R) EQUITY INDEX FUND1

INSTITUTIONAL EQUITY 500 INDEX FUND

BT Advisor Funds (the "Trust") is an open-end, management investment company
(mutual fund) which currently consists of ten funds. With the exception of the
Institutional Equity 500 Index Fund (the "Equity 500 Index Fund"), each of the
diversified funds listed above (each, a "Fund") is a separate series of the
Trust and each offers two classes of shares. The shares offered by this
prospectus are the Institutional Class Shares (the "Shares"). The Equity 500
Index Fund is a series of BT Institutional Funds, an open-end management
investment company (together with the Trust, the "Trusts"). Each Fund seeks to
replicate as closely as possible the performance of a selected market index
before the deduction of the expenses, allocable to the Shares of the Fund and
the corresponding Portfolio (the "Expenses"). There is no assurance, however,
that each Fund will achieve its stated objective.

UNLIKE OTHER OPEN-END MANAGEMENT INVESTMENT COMPANIES (MUTUAL FUNDS), EACH FUND
SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING ALL OF ITS INVESTABLE
ASSETS ("ASSETS") IN A SEPARATE INVESTMENT COMPANY (THE "PORTFOLIO") WITH AN
IDENTICAL INVESTMENT OBJECTIVE. THE INVESTMENT PERFORMANCE OF EACH FUND WILL
CORRESPOND DIRECTLY TO THE INVESTMENT PERFORMANCE OF THE CORRESPONDING
PORTFOLIO. SEE "SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE" ON
PAGE 19.

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

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

To learn more about each Fund and its investments, investors can obtain a copy
of the Funds' Statement of Additional Information (the "SAI"), dated January 16,
1996, as amended April 29, 1996, which contains each Portfolio's most recent
financial report and portfolio listing. The SAI has been filed with the
Securities and Exchange Commission (the "SEC") and is incorporated herein by
reference. For a free copy of this document, call (800)

<PAGE>

368-4031 or contact the Trusts at 6 St. James Avenue, Boston, MA
02116, or a Service Agent.

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

1The EAFE index is the exclusive property of Morgan Stanley. Morgan Stanley
Capital International is a service mark of Morgan Stanley and has been licensed
for use by Bankers Trust Company.

2
<PAGE>

CONTENTS

THE FUNDS 5 WHO MAY WANT TO INVEST
6 INVESTMENT PRINCIPLES AND RISKS Each

Fund's overall approach to investing.

6 EXPENSE SUMMARY Each Fund's annual
operating expenses.
9 FUND FINANCIAL HIGHLIGHTS Selected data
for a share outstanding, total
investment return, ratios to average net
assets and other supplemental data for the Fund.

THE FUNDS IN DETAIL 11 INVESTMENT OBJECTIVES AND POLICIES
17 RISK FACTORS AND CERTAIN SECURITIES
AND INVESTMENT PRACTICES

19 SPECIAL INFORMATION CONCERNING
MASTER-FEEDER FUND STRUCTURE
20 SECURITIES AND INVESTMENT PRACTICES
24 PERFORMANCE How each Fund has done

over time.

26 MANAGEMENT OF THE TRUSTS AND THE

PORTFOLIOS

ACCOUNT INFORMATION 29 TYPES OF ACCOUNTS Different ways to
setup your account, including
tax-sheltered retirement plans.
30 HOW TO BUY SHARES Opening an
account and making additional investments.
32 HOW TO SELL SHARES Taking money out
and closing your account.
34 INVESTOR SERVICES To help you
manage your account.

SHAREHOLDER AND

ACCOUNT POLICIES 35 DIVIDENDS, CAPITAL GAINS AND

TAXES

37 VALUATION DETAILS Share price
calculations and the timing of
purchases and redemptions.
39 EXCHANGE LIMITATIONS
40 ADDITIONAL INFORMATION ABOUT THE

TRUSTS AND THE PORTFOLIOS

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THE FUNDS

The U.S. BOND INDEX FUND seeks to replicate as closely as possible (before
deduction of Expenses) the investment performance of the Lehman Brothers
Aggregate Bond Index (the "Aggregate Bond Index"), a broad market weighted index
which encompasses U.S. Treasury and agency securities, corporate investment
grade bonds, international (dollar-denominated)

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investment grade bonds, and mortgage-backed securities. The Fund will be
invested primarily in fixed income securities of the U.S. Government or any
agency thereof, publicly issued fixed rate domestic debt of industrial,
financial, and utility corporations, and U.S. dollar denominated fixed income
securities of foreign and supranational entities issued publicly in the United
States. The Fund will also invest in mortgage pass-through securities issued by
the Government National Mortgage Association, the Federal Home Loan Mortgage
Corporation, and the Federal National Mortgage Association. The U.S. Bond Index
Fund invests all of its Assets in the U.S. Bond Index Portfolio.

The EQUITY 500 EQUAL WEIGHTED INDEX FUND seeks to replicate as closely as
possible the total return of the Standard & Poor's 500 Equal Weighted Index (the
"S&P 500 Equal Weighted Index"). The S&P 500 Equal Weighted Index is comprised
of all stocks that make up the Standard & Poor's 500 Composite Stock Price Index
with each security having the same weight. The S&P 500 Equal Weighted Index is
re-balanced to these equal weights at the end of each calendar month. The Fund
will include the common stock of each company included in the S&P 500, other
than Bankers Trust New York Corporation, in such a manner that the market value
of the Fund's holding of each stock will be approximately equal to the market
value of each other stock held in the Fund. The Equity 500 Equal Weighted Index
Fund invests all of its Assets in the Equity 500 Equal Weighted Index Portfolio.

The SMALL CAP INDEX FUND seeks to replicate as closely as possible (before
deduction of Expenses) the total return of the Russell 2000 Small Stock Index
(the "Russell 2000"), an index consisting of 2,000 small-capitalization common
stocks. The Fund will include the common stock of one or more companies included
in the Russell 2000 Index, on the basis of computer-generated statistical data,
that are deemed representative of the industry diversification of the entire
Russell 2000 Index. The Small Cap Index Fund invests all of its Assets in the
Small Cap Index Portfolio.

The EAFE(R) EQUITY INDEX FUND seeks to replicate as closely as possible (before
deduction of Expenses) the total return of the Morgan Stanley Capital
International Europe, Australia, Far East (EAFE) Index with net dividends (the
"EAFE Index"), a capitalization-weighted index containing approximately 1,100
equity securities of companies located outside the United States.
The Fund will be invested primarily in equity securities of business
enterprises organized and domiciled outside of the United States or for which
the principal trading market is outside the United States. Statistical methods
will be employed to replicate the Index by buying most of the relevant Index
securities. Securities purchased for the Fund will generally, but not
necessarily, be traded on a foreign securities exchange. The EAFE(R) Equity
Index Fund invests all of its Assets in the International Equity Index
Portfolio.

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The EQUITY 500 INDEX FUND seeks to replicate as closely as possible (before
deduction of Expenses) the total return of the Standard & Poor's 500 Composite
Stock Price Index (the "S&P 500"), an index emphasizing large-capitalization
stocks. The Fund will include the common stock of those companies included in
the S&P 500, other than Bankers Trust New York Corporation, selected on the
basis of computer generated statistical data, that are deemed representative of
the industry diversification of the entire S&P 500. The Equity 500 Index Fund
invests all of its Assets in the Equity 500 Index Portfolio.

WHO MAY WANT TO INVEST

Shares of each Fund are offered through this Prospectus to institutional
investors.

The Trusts seek to achieve the investment objective of each Fund by investing
all the Assets of the Fund in the corresponding Portfolio. The Portfolios are
not managed according to traditional methods of "active" investment management,
which involve the buying and selling of securities based upon economic,
financial and market analysis and investment judgment. Instead, the Portfolios,
utilizing a "passive" or "indexing" investment approach and attempt to replicate
the investment performance of their respective indices through statistical
procedures.

The U.S. BOND INDEX PORTFOLIO represents all major sectors of the investment
grade fixed-income securities markets. The U.S. Bond Index Fund may be a
suitable investment vehicle for those investors seeking ownership in the "bond
market" as a whole, without regard to particular sectors. The U.S. Bond Index
Fund is also suitable for those investors with common stock holdings who are
seeking a complementary fixed-income investment to create a more balanced asset
mix.

THE EQUITY 500 EQUAL WEIGHTED, SMALL CAP INDEX, EAFE(R) EQUITY INDEX AND EQUITY
500 INDEX FUNDS may be appropriate for investors who are willing to ride out
domestic and/or foreign stock market fluctuations in pursuit of potentially
higher long-term returns. Each corresponding Portfolio invests for growth and
does not pursue income. Over time, stocks, although more volatile, have shown
greater growth potential than other types of securities. In the shorter term,
however, stock prices can fluctuate dramatically in response to market factors.

The EAFE(R) EQUITY INDEX FUND may be appropriate for investors who want to
pursue their investment goals in markets outside of the United States. By
including international investments in their portfolio, investors can achieve an
extra level of

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diversification and also participate in opportunities around the world. However,
there are additional risks involved with international investing. The
performance of international funds depends upon currency values, the political
and regulatory environment, and overall economic factors in the countries in
which a Portfolio invests.

The Trusts are intended to be a long-term investment vehicle and is not
designated to provide investors with a means of speculating on short-term market
movements. Investors who engage in excessive account activity generate
additional costs which are borne by all the Trusts' shareholders. In order to
minimize such costs, each Trust has adopted the following policies. Each Trust
reserves the right to reject any purchase request (including exchange purchases
from other BT Advisor Funds ) that is reasonably deemed to be disruptive to
efficient portfolio management, either because of the timing of the investment
or previous excessive trading by the investor. Additionally, each Trust has
adopted exchange privilege limitations as described in the section "Exchange
Limitations." Finally, each Trust reserves the right to suspend the offering of
its shares.

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

INVESTMENT PRINCIPLES AND RISKS

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

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

Because many foreign investments are denominated in foreign currencies, changes
in the value of these currencies can significantly affect the EAFE(R) Equity
Index Fund's share price. General economic factors in the various world markets
can also impact the value of an investor's investment. When an investor sell
their Fund Shares, they may be worth more or less than what they paid for them.
See "Risk Factors and Certain Securities and Investment Practices" for more
information.

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EXPENSE SUMMARY

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

The following table provides: (i) a summary of expenses relating to purchases
and sales of the Shares of each Fund and the annual operating expenses of the
Fund and expenses of the corresponding Portfolio, in the aggregate, as a
percentage of average daily net assets of each Fund; and (ii) an example
illustrating the dollar cost of such expenses on a $1,000 investment in each
Fund. THE TRUSTEES OF EACH TRUST BELIEVE THAT THE EXPENSES OF EACH FUND AND
EXPENSES OF THE CORRESPONDING PORTFOLIO, IN THE AGGREGATE, WILL BE LESS THAN OR
APPROXIMATELY EQUAL TO THE EXPENSES WHICH THE FUND WOULD INCUR IF EACH TRUST
RETAINED THE SERVICES OF AN INVESTMENT ADVISER AND THE ASSETS OF EACH FUND WERE
INVESTED DIRECTLY IN THE TYPE OF SECURITIES BEING HELD BY THE CORRESPONDING
PORTFOLIO.

SHAREHOLDER TRANSACTION EXPENSES

Maximum Sales Charge on Purchases
(as a percentage of offering price) None*

Maximum Sales Charge on Reinvested
Distributions None

Redemption Fee None*

Exchange Fee None

Shareholder transaction expenses are charges paid when investors buy, sell,
exchange, or hold Shares of a Fund. See " Account Information" for an
explanation of how and when these charges apply.

* A TRANSACTION FEE OF 0.25% IS DEDUCTED FROM PURCHASES, REDEMPTIONS AND
EXCHANGES INTO AND OUT OF THE SMALL CAP INDEX FUND AND THE EAFE(R) EQUITY INDEX
FUND. THESE TRANSACTION FEES ARE PAID TO THE RESPECTIVE FUNDS AND ARE DEDUCTED
AUTOMATICALLY FROM THE AMOUNT INVESTED, EXCHANGED OR REDEEMED. THE FEE APPLIES
TO ALL REDEMPTIONS AND AN INITIAL INVESTMENT IN EITHER OF THESE FUNDS AND ALL
SUBSEQUENT PURCHASES (INCLUDING PURCHASES MADE BY EXCHANGE FROM ANOTHER BT
ADVISOR FUNDS FUND), BUT NOT TO REINVESTED DIVIDEND OR CAPITAL GAIN
DISTRIBUTIONS.

THE PURPOSE OF THE 0.25% TRANSACTION FEE IS TO ALLOCATE TRANSACTION COSTS
ASSOCIATED WITH PURCHASES, REDEMPTIONS AND EXCHANGES TO INVESTORS MAKING THOSE
PURCHASES, REDEMPTIONS AND EXCHANGES, THUS INSULATING EXISTING SHAREHOLDERS FROM
THOSE

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<PAGE>

TRANSACTION COSTS. THESE COSTS INCLUDE: (1) BROKERAGE COSTS; (2) THE EFFECT OF
THE "BID-ASK" SPREAD IN SMALL AND MEDIUM SIZED COMPANY STOCK AND INTERNATIONAL
MARKETS; AND (3) TAXES IN SOME COUNTRIES. SINCE THE INVESTORS, NOT THE FUND,
BEARS THESE COSTS, THE FUND IS EXPECTED TO BE ABLE TRACK ITS BENCHMARK INDEX
MORE CLOSELY.

ANNUAL OPERATING EXPENSES

U.S. BOND INDEX FUND
Investment advisory fee
(after reimbursement or waiver) 0.10%
Other expenses
(after reimbursements or waivers) 0.15
TOTAL OPERATING EXPENSES
(after reimbursements or waivers) 0.25%

EQUITY 500 EQUAL WEIGHTED INDEX FUND
Investment advisory fee
(after reimbursement or waiver) 0.15%
Other expenses
(after reimbursements or waivers) 0.15
TOTAL OPERATING EXPENSES
(after reimbursements or waivers) 0.30%

SMALL CAP INDEX FUND
Investment advisory fee
(after reimbursement or waiver) 0.10%
Other expenses
(after reimbursements or waivers) 0.15
TOTAL OPERATING EXPENSES
(after reimbursements or waivers) 0.25%

EAFE(R) EQUITY INDEX FUND
Investment advisory fee
(after reimbursement or waiver) 0.20%
Other expenses
(after reimbursements or waivers) 0.20
TOTAL OPERATING EXPENSES
(after reimbursements or waivers) 0.40%

EQUITY 500 INDEX FUND
Investment advisory fee
(after reimbursement or waiver) 0.07%
12b-1 fees 0.00
Other expenses
(after reimbursements or waivers) 0.03
----
TOTAL OPERATING EXPENSES
(after reimbursements or waivers) 0.10%
=====

EXPENSE TABLE EXAMPLE: An investor would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2) redemption at the end of each
time period:

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EXAMPLES

U.S. BOND INDEX FUND 1 Year 3 Years

$3 $8

EQUITY 500 EQUAL WEIGHTED INDEX FUND 1 Year 3 Years

$3 $10

SMALL CAP INDEX FUND 1 Year 3 Years

$8 $14

EAFE(R)EQUITY INDEX FUND 1 Year 3 years

$9 $19

EQUITY 500 INDEX FUND 1 Year 3 Years 5 Years 10 Years

$1 $3 $6 $13

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The expense table and the example above show the costs and expenses that an
investor will bear directly or indirectly as a

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shareholder of a Fund. Bankers Trust has voluntarily agreed to waive a portion
of its investment advisory fee with respect to each Portfolio. Without such
waiver, each Portfolio's investment advisory fee would be equal to the
following: U.S. Bond Index Portfolio -- 0.15%; Equity 500 Equal Weighted Index
Portfolio -- 0.25%; Small Cap Index Portfolio -- 0.15%; EAFE(R) Equity Index
Portfolio --0.25%; and Equity 500 Index Portfolio -- 0.10%. The expense table
and the example reflect a voluntary undertaking by Bankers Trust or Signature
Broker-Dealer Services, Inc. ("SBDS"), as the distributor (the "Distributor") of
the Shares of each Fund, to waive or reimburse expenses such that the total
operating expenses of each Fund and the corresponding Portfolio, with the
exception of the Equity 500 Index Fund and Equity 500 Index Portfolio, (as a
percentage of the Fund's average daily net assets) would be equal to the
following: U.S. Bond Index -- 0.25%; Equity 500 Equal Weighted Index -- 0.30%;
Small Cap Index -- 0.25%; and EAFE(R) Equity Index -- 0.40%. In the absence of
this undertaking, assuming total assets of $100 million in each Fund, it is
estimated that "Total Operating Expenses" for the Fund and its corresponding
Portfolio would be as follows: U.S. Bond Index -- 0.55%; Equity 500 Equal
Weighted Index -- 0.60%; Small Cap Index -- 0.55%; and EAFE(R) Equity Index --
0.65%. With respect to the Equity 500 Index Fund and the Equity 500 Index
Portfolio, in the absence of this undertaking, for the fiscal year ended
December 31, 1995, the total operating expenses would have been equal to
approximately 0.23% of the Fund's average net assets annually. THE EXAMPLE
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Moreover, while each example
assumes a 5% annual return, actual performance will vary and may result in a
return greater or less than 5%.

CURRENTLY, THE FUNDS (WITH THE EXCEPTION OF THE EQUITY 500 INDEX FUND) HAVE
ISSUED TWO CLASSES OF SHARES. THE FUNDS OFFER BY SEPARATE PROSPECTUS ANOTHER
CLASS OF SHARES. BECAUSE THE EXPENSES VARY BETWEEN THE CLASSES, PERFORMANCE WILL
VARY WITH RESPECT TO EACH CLASS. ADDITIONAL INFORMATION CONCERNING THE FUNDS'
OTHER CLASS OF SHARES IS AVAILABLE FROM BANKERS TRUST, AS ADMINISTRATOR, AT
(800) 730-1313.

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

FUND FINANCIAL HIGHLIGHTS

The following table shows the selected data for a share outstanding, total
investment return, ratios to average net assets and other supplemental data of
the Equity 500 Index Fund for the periods indicated. The Fund's Equity 500 Index
Annual Report has been audited by Coopers & Lybrand L.L.P., the Fund's
independent accountants, whose report thereon appears in the

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Fund's Annual Report. The Fund's Annual Report
is incorporated by reference in the Trusts' SAI.

FOR THE
PERIOD
12/31/92
FOR THE YEAR ENDED (COMMENCEMENT
DECEMBER 31, OF
1995 1994 1993 OPERATIONS)

SELECTED PER SHARE DATA
Net Asset Value,
Beginning of Period $10.44 $10.68 $10.00 $10.00

Income from Investment
Operations

Net Investment Income 0.30 0.28 0.25 __
Net Realized and

Unrealized Gain (Loss) on
Securities and Futures

Transactions 3.59 (0.13) 0.73 __

Total from Investment

Operations 3.89 0.15 0.98 __
Distributions from
Net Investment Income (0.30) (0.28) (0.25) __
Net Realized
Gain from Securities and
Futures Transactions (0.06) (0.11) (0.05) __

Total
Distributions (0.36) (0.39) (0.30) __
Net Asset Value,
End of Period $13.97 $10.44 $10.68 $10.00

TOTAL INVESTMENT RETURN 37.59% 1.40% 9.84% __

RATIOS AND SUPPLEMENTAL
DATA
Ratio of Net Investment
Income to Average Net

Assets 2.52% 2.84% 2.67% __
Ratio of Expenses to
Average Net Assets,
Including Expenses of
the Equity 500 Index
Portfolio 0.10% 0.10% 0.10% __
Decrease Reflected in

Above Expense Ratio
Due to Absorption of
Expenses by

Bankers Trust 0.13% 0.13% 0.25% __

Net Assets, End of
Period

(000's omitted) $800,551 $371,216 $170,508 $9,335

<PAGE>

THE FUNDS IN DETAIL

INVESTMENT OBJECTIVES AND POLICIES

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

The U.S. BOND INDEX PORTFOLIO seeks to replicate as closely as possible (before
deduction of Expenses) the investment performance of the Aggregate Bond Index, a
broad market weighted index which encompasses four major classes of investment
grade fixed-income securities in the United States: U.S. Treasury and agency
securities, corporate bonds, international (dollar-denominated) bonds, and
mortgage-backed securities, with maturities greater than one year.

As of December 31, 1995, the major classes of fixed-income securities
represented the following proportions of the Index's total market value:

AGGREGATE
BOND INDEX

U.S. Treasury and
agency securities 53%

Corporate bonds 14%

International (dollar-
denominated) bonds 3%

Mortgage-backed securities 29%

Asset Backed Securities 1%

Dollar-weighted average
maturity (Years) 8.5 yrs

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The U.S. Bond Index Portfolio will be unable to hold all of the individual
issues which comprise the Index because of the large number of securities
involved. Instead, the Portfolio will hold a representative sample of the
securities in the Index, selecting one or two issues to represent entire
"classes" or types of securities in the Index. The Portfolio will be constructed
so as to match as closely as possible the composition of the Index by investing
in fixed-income securities approximating their relative proportion of the
Index's total market value.

At the broadest level, the U.S. Bond Index Portfolio will seek to hold
securities and other investments which reflect the weighting of the major asset
classes in the Index. These classes include U.S. Treasury and agency securities,
corporate bonds, and mortgage-backed securities. For example, if U.S. Treasury
and agency securities represent approximately 60% of the Index's interest rate
risk, then approximately 60% of the Portfolio's interest rate risk will come
from such securities and other investments. Similarly, if corporate bonds
represent 20% of the interest rate risk of the Index, then they will represent
approximately 20% of the interest rate risk of the Portfolio. Such a sampling
technique is expected to be an effective means of substantially replicating the
income and capital returns provided by the Index before deduction of Fund and
Portfolio expenses.

The Portfolio may, from time to time, substitute one type of investment grade
bond for another. For instance, a Portfolio may hold more short-term corporate
bonds (and, in turn, hold fewer short U.S. Treasury bonds) than represented in
the Index so as to increase income. This corporate substitution strategy will
entail the assumption of additional credit risk; however, substantial
diversification within the corporate sector should moderate issue-specific
credit risk. Overall, credit risk is expected to be very low for the U.S. Bond
Index Portfolio.

Fixed-income securities will be primarily of investment grade quality - i.e.,
those rated at least Baa by Moody's Investors Service, Inc. ("Moody's") or
BBB-by Standard & Poor's Corporation ("S&P"). Securities rated Baa or BBB
possess some speculative
characteristics.

The Portfolio may invest in U.S. Treasury bills, notes and bonds
and other "full faith and credit" obligations of the U.S.
Government and in U.S. Government agency securities, which are
debt obligations issued or guaranteed by agencies or
instrumentalities of the U.S. Government ("U.S. Government
Securities"). Such "agency" securities may NOT be backed by the
"full faith and credit" of the U.S. Government. Such U.S.
Government agencies may include the Federal Farm Credit Banks,
the Resolution Trust Corporation and the Government National
Mortgage Association. Even though they all carry top (AAA)
credit ratings, "agency" obligations are not explicitly
guaranteed by the U.S. Government and so are perceived as

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somewhat riskier than comparable Treasury bonds.

As a mutual fund investing primarily in fixed-income securities,
the Portfolio is subject to interest rate, income, call and
credit risks. Since the Portfolio also invests in
mortgage-backed securities, it is also subject to prepayment
risk. See "Risk Factors and Certain Securities and Investment
Practices."

The EQUITY 500 EQUAL WEIGHTED INDEX PORTFOLIO seeks to replicate as closely as
possible the total return of the S&P 500 Equal Weighted Index. The S&P 500 Equal
Weighted Index is comprised of all stocks that make up the Standard & Poor's 500
Composite Stock Price Index with each security having the same weight. The S&P
500 Equal Weighted Index is re-balanced to these equal weights at the end of
each calendar month. The S&P 500 Equal Weighted Index is calculated by Wilshire
Associates. Investing in a fund designed to replicate this benchmark provides
investors with diversified equity exposure with a small cap tilt and value
investment attributes.

The Equity 500 Equal Weighted Index Portfolio allocates its assets equally among
the equity securities which compose the S&P 500 Equal Weighted Index. The
Portfolio may omit or remove any S&P 500 Equal Weighted Index stock from the
Portfolio if, following objective criteria, Bankers Trust judges the stock to be
insufficiently liquid or believes the merit of the investment has been
substantially impaired by extraordinary events or financial conditions. Bankers
Trust will not purchase the stock of Bankers Trust New York Corporation, which
is included in the Index, and instead will overweight its holdings of companies
engaged in similar businesses.

The Equity 500 Equal Weighted Index Fund and the Equity 500 Equal Weighted Index
Portfolio are not sponsored, endorsed, sold or promoted by Wilshire Associates.
Wilshire makes no representation or warranty, express or implied, to the
shareholders of the Fund or investors in the Portfolio or any member of the
public regarding the advisability of investing in securities generally or in the
Fund or the Portfolio particularly or the ability of the index to track general
stock market performance.

The SMALL CAP INDEX PORTFOLIO seeks to replicate as closely as possible (before
deduction of expenses of the Fund and corresponding Portfolio) the total return
of the Russell 2000.

The Russell 2000 Index is composed of approximately 2,000 small-capitalization
common stocks. A company's stock market capitalization is the total market value
of its floating outstanding shares. As of December 31, 1995, the average stock
market capitalization of the Russell 2000 was $280 million and the weighted
average stock market capitalization of the Russell 2000 was $540 million.

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The Small Cap Portfolio is neither sponsored by nor affiliated with the Frank
Russell Company. Frank Russell's only relationship to the Portfolio is the
licensing of the use of the Russell 2000 Small Stock Index. Frank Russell
Company is the owner of the trademarks and copyrights relating to the Russell
indices.

The Small Cap Portfolio invests in a statistically selected sample of the
approximately 2,000 stocks included in the Russell 2000 Index. The stocks of the
Russell 2000 to be included in the Small Cap Index Portfolio will be selected
utilizing a statistical sampling technique known as "optimization." This process
selects stocks for the Portfolio so that various industry weightings, market
capitalizations and fundamental characteristics (e.g. price-to-book,
price-to-earnings, debt-to-asset ratios, and dividend yields) closely
approximate those of the Russell 2000. For instance, if 10% of the
capitalization of the Russell 2000 consists of utility companies with relatively
small capitalizations, then the Small Cap Portfolio is constructed so that
approximately 10% of the Portfolio's assets are invested in the stocks of
utility companies with relatively small capitalizations. The stocks held by the
Portfolio are weighted to make the Portfolio's aggregate investment
characteristics similar to those of the Russell 2000 Index as a whole.

The EAFE(R) EQUITY INDEX PORTFOLIO seeks to replicate as closely as possible
(before deduction of expenses of the Fund and corresponding Portfolio) the total
return of the EAFE Index. The Portfolio attempts to achieve this objective by
investing in a statistically selected sample of the equity securities included
in the EAFE Index.

The EAFE Index is a capitalization-weighted index containing approximately 1,100
equity securities of companies located outside the United States. The countries
currently included in the EAFE Index are Australia, Austria, Belgium, Denmark,
Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, Malaysia, The
Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland and
United Kingdom.

Inclusion of a security in the EAFE Index in no way implies an opinion by Morgan
Stanley as to its attractiveness as an investment. Neither the Fund nor the
Portfolio is neither sponsored by nor affiliated with Morgan Stanley.

The EAFE(R) Equity Index Portfolio is constructed to have aggregate investment
characteristics similar to those of the EAFE Index. The Portfolio invests in a
statistically selected sample of the securities included in the EAFE Index,
although not all companies within a country will be represented in the Portfolio
at the same time. Stocks are selected for inclusion in the Portfolio based on
country of origin, market capitalization, yield, volatility and industry sector.
Banker Trust will manage the Portfolio

17
<PAGE>

using advanced statistical techniques to determine which stocks are to be
purchased or sold to replicate the EAFE Index. From time to time, adjustments
may be made in the Portfolio because of changes in the composition of the EAFE
Index, but such changes should be infrequent.

This Fund is not sponsored, endorsed, sold or promoted by Morgan Stanley. Morgan
Stanley makes no representation or warranty, express or implied, to the owners
of this Fund or any member of the public regarding the advisability of investing
in securities generally or in this Fund particularly or the ability of the EAFE
Index to track general stock market performance. Morgan Stanley is the licensor
of certain trademarks, service marks and trade names of Morgan Stanley and of
the EAFE Index which is determined, composed and calculated by Morgan Stanley
without regard to the issuer of this Fund or this Fund. Morgan Stanley has no
obligation to take the needs of the issuer of this Fund or the owners of this
Fund into consideration in determining, composing or calculating the EAFE Index.
Inclusion of a security in the EAFE Index in no way implies an opinion by Morgan
Stanley as to its attractiveness as an investment. Morgan Stanley is not
responsible for and has not participated in the determination of the timing of,
prices at, or quantities of this Fund to be issued or in the determination or
calculation of the equation by which this Fund is redeemable for cash. Morgan
Stanley has no obligation or liability to owners of this Fund in connection with
the administration, marketing or trading of this Fund. This Fund is neither
sponsored by nor affiliated with Morgan Stanley.

ALTHOUGH MORGAN STANLEY SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN
THE CALCULATION OF THE INDICES FROM SOURCES WHICH MORGAN STANLEY CONSIDERS
RELIABLE, MORGAN STANLEY DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS
OF THE INDICES OR ANY DATA INCLUDED THEREIN. MORGAN STANLEY MAKES NO WARRANTY,
EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, LICENSEE'S
CUSTOMERS AND COUNTERPARTIES, OWNERS OF THE PRODUCTS, OR ANY OTHER PERSON OR
ENTITY FROM THE USE OF THE INDICES OR ANY DATA INCLUDED THEREIN IN CONNECTION
WITH THE RIGHTS LICENSED HEREUNDER OR FOR ANY OTHER USE. MORGAN STANLEY MAKES NO
EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE INDICES
OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT
SHALL MORGAN STANLEY HAVE ANY LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL,
PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF
NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.

The EQUITY 500 INDEX PORTFOLIO seeks to replicate as closely as possible (before
deduction of expenses of the Fund and the corresponding Portfolio) the total
return of the S&P 500.

The S&P 500 is an index of 500 common stocks, most of which trade
on the New York Stock Exchange Inc. (the "NYSE"). Bankers Trust

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believes that the S&P 500 is representative of the performance of
publicly traded common stocks in the U.S. in general.

In seeking to replicate the performance of the S&P 500, before deduction of Fund
and Portfolio expenses, Bankers Trust will attempt over time to allocate the
Equity 500 Index Portfolio's investment among common stocks in approximately the
same proportions as they are represented in as the S&P 500, beginning with the
heaviest weighted stocks that make up a larger portion of the Index's value.

The Adviser utilizes a two-stage sampling approach in seeking to obtain its
objective. Stage one, which encompasses large cap stocks, maintains the stock
holdings at or near their benchmark weights. Large capitalization stocks are
defined as those securities which represent 0.10% or more of the index. In stage
two, smaller stocks are analyzed and selected using risk characteristics and
industry weights in order to match the sector and risk characteristics of the
smaller companies in the S & P 500. This approach helps to maximize portfolio
liquidity while minimizing costs.

Bankers Trust generally will seek to match the composition of the S&P 500 but
usually will not invest the Equity 500 Index Portfolio's stock portfolio to
mirror the Index exactly. Because of the difficulty and expense of executing
relatively small stock transactions, the Portfolio may not always be invested in
the less heavily weighted S&P 500 stocks, and may at times have its portfolio
weighted differently from the S&P 500, particularly if the Portfolio has a low
level of assets. In addition, the Portfolio may omit or remove any S&P 500 stock
from the Portfolio if, following objective criteria, Bankers Trust judges the
stock to be insufficiently liquid or believes the merit of the investment has
been substantially impaired by extraordinary events or financial conditions.
Bankers Trust will not purchase the stock of Bankers Trust New York Corporation,
which is included in the Index, and instead will overweight its holdings of
companies engaged in similar businesses.

ABOUT THE S&P 500. The S&P 500 is composed of 500 common stocks, which are
chosen by S&P on a statistical basis to be included in the Index. The inclusion
of a stock in the S&P 500 in no way implies that S&P believes the stock to be an
attractive investment. The 500 securities, most of which trade on the NYSE,
represented, as of December 31, 1995, approximately 81% of the market value of
all U.S. common stocks. Each stock in the S&P 500 is weighted by its market
value. Bankers Trust believes that the performance of the S&P 500 is
representative of the performance of publicly traded common stocks in general.
The composition of the S&P 500 is determined by S&P and is based on such factors
as the market capitalization and trading activity of each stock and its adequacy
as a representation of stocks in a particular industry group, and may be changed
from time to time.

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<PAGE>

The Equity 500 Index Fund and the Equity 500 Index Portfolio are not sponsored,
endorsed, sold or promoted by Standard & Poor's Corporation. S&P makes no
representation or warranty, express or implied, to the shareholders of the Fund
or investors in the Portfolio or any member of the public regarding the
advisability of investing in securities generally or in the Fund or the
Portfolio particularly or the ability of the S&P 500 to track general stock
market performance.

S&P does not guarantee the accuracy and/or the completeness of the S&P 500 or
any data included therein.

S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE RESULTS TO BE OBTAINED BY
THE FUND OR THE PORTFOLIO, OWNERS OF THE FUND OR THE PORTFOLIO, OR ANY OTHER
PERSON OR ENTITY FROM THE USE OF THE S&P 500 OR ANY DATA INCLUDED THEREIN. S&P
MAKES NO EXPRESS OR IMPLIED WARRANTIES AND HEREBY EXPRESSLY DISCLAIMS ALL SUCH
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH
RESPECT TO THE S&P 500 OR ANY DATA INCLUDED THEREIN.

For more information about the performance of the S&P 500, see
"Appendix."

GENERAL

Over time, the correlation between the performance of each Fund, before the
deduction of Expenses, and the respective Index is expected to be 0.95 or higher
before deduction of Expenses of the Fund and expenses of the Portfolio. A
correlation of 1.00 would indicate perfect correlation, which would be achieved
when the net asset value of the Fund, including the value of its dividend and
any capital gain distributions, increases or decreases in exact proportion to
changes in the Index. Each Fund's ability to track its respective index may be
affected by, among other things, transaction costs, administration and other
expenses incurred by the Funds or the corresponding Portfolio, changes in either
the composition of the Index or the assets of a Portfolio, and the timing and
amount of Portfolio investor contributions and withdrawals, if any. In the
unlikely event that a high correlation is not achieved, the Trusts' Boards of
Trustees will consider alternatives. Because each Portfolio seeks to track the
respective index, Bankers Trust will not attempt to judge the merits of any
particular stock as an investment.

Under normal circumstances, each Portfolio will invest at least 80% of its
assets in the securities of its respective Index.

As diversified funds, no more than 5% of the assets of each Portfolio may be
invested in the securities of one issuer (other than U.S. Government
Securities), except that up to 25% of each Portfolio's assets may be invested
without regard to this limitation. Each Portfolio will not invest more than 25%
of its assets in the securities of issuers in any one industry. In the unlikely
event that the S&P 500 should concentrate to an extent greater than that amount,
each of the Portfolio's ability to achieve its investment objective may be
impaired. These are fundamental investment policies of the Portfolios which may

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<PAGE>

not be changed without investor approval. No more than 15% of each Portfolio's
net assets may be invested in illiquid or not readily marketable securities
(including repurchase agreements and time deposits with remaining maturities of
more than seven calendar days). Additional investment policies of each Portfolio
are contained in the SAI.

Each Portfolio may maintain up to 20% of its assets in short-term debt
securities and money market instruments to meet redemption requests or to
facilitate investment in the securities of the respective Index. Securities
index futures contracts and related options, warrants, convertible securities
and swap agreements may be used for several reasons: to simulate full investment
in the underlying Index while retaining a cash balance for fund management
purposes, to facilitate trading, or to reduce transaction costs or to seek
higher investment returns when a futures contract, option, warrant, convertible
security or swap agreement is priced more attractively than the underlying
equity security or Index. These instruments may be considered derivatives. See
"Risk Factors and Certain Securities and Investment Practices -- Derivatives."

The use of derivatives for non-hedging purposes may be considered speculative.
While each of these securities can be used as leveraged investments, a Portfolio
may not use them to leverage its net assets. No Portfolio will invest in such
instruments as part of a temporary defensive strategy (such as altering the
aggregate maturity of the Portfolio) to protect the Portfolio against potential
market declines.

Each Portfolio may lend its investment securities and purchase securities on a
when-issued and a delayed delivery basis. The U.S. Bond Index Portfolio may
invest in mortgage-related and other asset-backed securities. The EAFE(R) Equity
Index Portfolio may engage in foreign currency forward and futures transactions
for the purpose of enhancing portfolio returns or hedging against foreign
exchange risk arising from the Portfolio's investment or anticipated investment
in securities denominated in foreign currencies. See "Risk Factors and Certain
Securities and Investment Practices" for more information about the investment
practices of the Portfolios.

RISK FACTORS AND CERTAIN SECURITIES AND INVESTMENT PRACTICES

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

Bankers Trust may not buy all of these instruments or use all of
these techniques to the full extent permitted unless it believes
that doing so will help a Portfolio achieve its goal. Holdings

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<PAGE>

and recent investment strategies are described in the financial reports of a
Fund and the corresponding Portfolio, which are sent to Fund shareholders twice
a year. For a free SAI or financial report, call your Service Agent or Bankers
Trust.

FIXED INCOME SECURITY RISK - U.S. BOND INDEX FUND Investors in the U.S. Bond
Index Fund are exposed to four types of risk from fixed income securities: (1)
Interest rate risk is the potential for fluctuations in bond prices due to
changing interest rates; (2) Income risk is the potential for a decline in a
Portfolio's income due to falling market interest rates; (3) Credit risk is the
possibility that a bond issuer will fail to make timely payments of either
interest or principal to the Portfolio; and (4) Prepayment risk or call risk is
the likelihood that, during periods of falling interest rates, securities with
high stated interest rates will be prepaid (or "called") prior to maturity,
requiring the Portfolio to invest the proceeds at generally lower interest
rates.

MARKET RISK - EQUITY 500 INDEX FUND, EQUITY 500 EQUAL WEIGHTED INDEX FUND, SMALL
CAP INDEX FUND AND EAFE(R) EQUITY INDEX FUND As mutual funds investing primarily
in common stocks, these Portfolios are subject to market risk -- i.e., the
possibility that common stock prices will decline over short or even extended
periods. The U.S. and foreign stock markets tend to be cyclical, with periods
when stock prices generally rise and periods when prices generally decline.

RISKS OF INVESTING IN MEDIUM- AND SMALL-CAPITALIZATION STOCKS SMALL CAP INDEX
FUND Historically, medium- and small-capitalization stocks have been more
volatile in price that the larger-capitalization stocks included in the S&P 500.
Among the reasons for the greater price volatility of these securities are the
less certain growth prospects of smaller firms, the lower degree of liquidity in
the markets for such stocks, and the greater sensitivity of medium- and
small-size companies to changing economic conditions. In addition to exhibiting
greater volatility, medium- and small-size company stocks may fluctuate
independently of larger company stocks. Medium- and small-size company stocks
may decline in price as large company stocks rise, or rise in prices as large
company stocks decline.

RISKS OF INVESTING IN FOREIGN SECURITIES - EAFE(R) EQUITY INDEX PORTFOLIO
Investors should realize that investing in securities of foreign issuers
involves considerations not typically associated with investing in securities of
companies organized and operated in the United States. Investors should realize
that the value of a Portfolio's foreign investments may be adversely affected by
changes in political or social conditions, diplomatic relations, confiscatory
taxation, expropriation, nationalization, limitation on the removal of funds or
assets, or imposition of (or change in) exchange control or tax regulations in
foreign countries. In

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<PAGE>

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

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

SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE Unlike other
open-end management investment companies (mutual funds) which directly acquire
and manage their own portfolio securities, each Fund seeks to achieve its
investment objective by investing all of its Assets in the corresponding
Portfolio, a separate registered investment company with the same investment
objectives as the Fund. Therefore, an investor's interest in the Portfolio's
securities is indirect, like investments in other investment companies and
pooled investment vehicles. In addition to selling a beneficial interest to the
corresponding Fund, each Portfolio may sell beneficial interests to other mutual
funds or institutional investors. Such investors will invest in a Portfolio on
the same terms and conditions and will pay a proportionate share of the
Portfolio's expenses. However, the other investors investing in a Portfolio are
not required to sell their shares at the same public offering price as the Fund
due to variations in sales commissions and other operating expenses. Therefore,
investors in a Fund should be aware that these differences may result in
differences in returns experienced by

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<PAGE>

investors in the different funds that invest in the Portfolio. Such differences
in returns are also present in other mutual fund structures. Information
concerning other holders of interests in the Portfolio is available from Bankers
Trust, as the Administrator, at (800) 368-4031.

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

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

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

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<PAGE>

Each Fund's investment objective is not a fundamental policy and may be changed
upon notice to but without the approval of the Fund's shareholders. If there is
a change in a Fund's investment objective, the Fund's shareholders should
consider whether the Fund remains an appropriate investment in light of their
then-current needs. The investment objective of each Portfolio is also not a
fundamental policy. Shareholders of the Funds will receive 30 days prior written
notice with respect to any change in the investment objective of a Fund or the
corresponding Portfolio. See "Risk Factors and Certain Securities and Investment
Practices" in the SAI for a description of the fundamental policies of each
Portfolio that cannot be changed without approval by "the vote of a majority of
the outstanding voting securities" (as defined in the Investment Company Act of
1940, as amended (the "1940 Act") of the Portfolio.

For descriptions of the investment objective, policies and restrictions of each
Portfolio, see "The Funds in Detail" herein and "Risk Factors and Certain
Securities and Investment Practices" in this Prospectus and in the SAI. For
descriptions of the management of the Trusts and the Portfolios, see "Management
of the Trusts and the Portfolios" herein and in the SAI. For descriptions of the
expenses of the Portfolio, see "The Funds--Expense Summary," herein and
"Management of the Trusts and the Portfolios" herein and in the SAI.

SECURITIES AND INVESTMENT
PRACTICES

SHORT-TERM INVESTMENTS. Each Portfolio may invest in certain short-term fixed
income securities. Such securities may be used to invest uncommitted cash
balances, to maintain liquidity to meet shareholder redemptions or to serve as
collateral for the obligations underlying a Portfolio's investment in securities
index futures or related options or warrants. These securities include:
obligations issued or guaranteed by the U.S. Government or any of its agencies
or instrumentalities or by any of the states, repurchase agreements, time
deposits, certificates of deposit, bankers' acceptances and commercial paper.

U.S. GOVERNMENT SECURITIES are obligations of, or guaranteed by, the U.S.
Government, its agencies or instrumentalities. Some U.S. Government securities,
such as Treasury bills, notes and bonds, are supported by the full faith and
credit of the United States; others, such as those of the Federal Home Loan
Banks, are supported by the right of the issuer to borrow from the Treasury;
others, such as those of the Federal National Mortgage Association, are
supported by the discretionary authority of the U.S. Government to purchase the
agency's obligations; and still others, such as those of the Student Loan
Marketing Association, are supported only by the credit of the instrumentality.

SECURITIES LENDING. Each Portfolio may lend its investment
securities to qualified institutional investors for either
short-term or long-term purposes of realizing additional income.

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<PAGE>

Loans of securities by a Portfolio will be collateralized by cash, letters of
credit, or securities issued or guaranteed by the U.S. Government or its
agencies. The collateral will equal at least 100% of the current market value of
the loaned securities, and such loans may not exceed 30% of the value of a
Portfolio's net assets. The risks in lending portfolio securities, as with other
extensions of credit, consist of possible loss of rights in the collateral
should the borrower fail financially. In determining whether to lend securities,
Bankers Trust will consider all relevant facts and circumstances, including the
creditworthiness of the borrower.

WHEN ISSUED AND DELAYED DELIVERY SECURITIES. Each Portfolio may purchase
securities on a when-issued or delayed delivery basis. Delivery of and payment
for these securities may take place as long as a month or more after the date of
the purchase commitment. The value of these securities is subject to market
fluctuation during this period and no income accrues to the Portfolio until
settlement takes place. The Portfolio maintains with the Custodian a segregated
account containing high grade liquid securities in an amount at least equal to
these commitments.

MORTGAGE-RELATED SECURITIES. As part of its effort to replicate the investment
performance of its Index, the U.S. Bond Index Portfolio may invest in
mortgage-backed securities. Mortgage-backed securities represent an interest in
an underlying pool of mortgages. Unlike ordinary fixed-income securities, which
generally pay a fixed rate of interest and return principal upon maturity,
mortgage-backed securities repay both interest income and principal as part of
their periodic payments. Because the mortgages underlying mortgage-backed
certificates can be prepaid at any time by homeowners or corporate borrowers,
mortgage-backed securities give rise to certain unique "pre-payment" risks.

The U.S. Bond Index Portfolio may purchase mortgage-backed securities issued by
the Government National Mortgage Association (GNMA), the Federal Home Loan
Mortgage Corporation (FHLMC), the Federal National Mortgage Association (FNMA),
and the Federal Housing Authority (FHA). GNMA securities are guaranteed by the
U.S. Government as to the timely payment of principal and interest; securities
from other Government-sponsored entities are generally not secured by an
explicit pledge of the U.S. Government. The U.S. Bond Index Portfolio may also
invest in conventional mortgage securities, which are packaged by private
corporation and are not guaranteed by the U.S. Government. Mortgage securities
that are guaranteed by the U.S. Government are guaranteed only as to the timely
payment of principal and interest. The market value of such securities is not
guaranteed and may fluctuate.

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DERIVATIVES

Each Portfolio may invest in stock index futures and options thereon which are
commonly known as derivatives. Generally, a derivative is a financial
arrangement, the value of which is based on, or "derived" from, a traditional
security, asset, or market index. Some "derivatives" such as mortgage-related
and other asset-backed securities are in many respects like any other
investment, although they may be more volatile or less liquid than more
traditional debt securities. There are, in fact, many different types of
derivatives and many different ways to use them. There are a range of risks
associated with those uses. Futures and options are commonly used for
traditional hedging purposes to attempt to protect a fund from exposure to
changing interest rates, securities prices, or currency exchange rates and as a
low cost method of gaining exposure to a particular securities market without
investing directly in those securities. The Adviser will only use derivatives
for cash management purposes. Derivatives will not be used to increase portfolio
risk above the level that could be achieved using only traditional investment
securities or to acquire exposure to changes in the value of assets or indices
that by themselves would not be purchased for the Portfolio.

SECURITIES INDEX FUTURES AND RELATED OPTIONS. Each Portfolio may enter into
securities index futures contracts and related options provided that not more
than 5% of its assets are required as a margin deposit for futures contracts or
options [and provided that not more than 20% of a Portfolio's assets are
invested in futures and options at any time.] When a Portfolio has cash from new
investments in the Portfolio or holds a portion of its assets in money market
instruments, it may enter into index futures or options to attempt to increase
its exposure to the market. Strategies the Portfolio could use to accomplish
this include purchasing futures contracts, writing put options, and purchasing
call options. When the Portfolio wishes to sell securities, because of
shareholder redemptions or otherwise, it may use index futures or options to
hedge against market risk until the sale can be completed. These strategies
could include selling futures contracts, writing call options, and purchasing
put options.

SWAP AGREEMENTS. Each Portfolio may enter into swap agreements only to the
extent that obligations under such agreements represent not more than 10% of the
Portfolio's total assets. Swap agreements are contracts between parties in which
one party agrees to make payments to the other party based on the change in
market value of a specified index or asset. In return, the other party agrees to
make payments to the first party based on the return of a different specified
index or asset.

Although swap agreements entail the risk that a party will default on its
payment obligations thereunder, a Portfolio will minimize this risk by entering
into agreements that mark to market no less frequently than quarterly. Swap
agreements also

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<PAGE>

bear the risk that a Portfolio will not be able to meet its obligation to the
counterparty. This risk will be mitigated by investing a Portfolio in the
specific asset for which it is obligated to pay a return.

WARRANTS. Each Portfolio's investment in warrants will not exceed more than 5%
of its assets (2% with respect to warrants not listed on the New York or
American Stock Exchanges). Warrants are instruments which entitle the holder to
buy underlying equity securities at a specific price for a specific period of
time. A warrant tends to be more volatile than its underlying securities and
ceases to have value if it is not exercised prior to its expiration date. In
addition, changes in the value of a warrant do not necessarily correspond to
changes in the value of its underlying securities.

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

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

FURTHER RISKS ASSOCIATED WITH THE USE OF FUTURES CONTRACTS, OPTIONS, WARRANTS,
CONVERTIBLE SECURITIES AND SWAP AGREEMENTS. The risk of loss associated with
futures contracts in some strategies can be substantial due to both the low
margin deposits required and the extremely high degree of leverage involved in
futures pricing. As a result, a relatively small price movement in a futures
contract may result in an immediate and substantial loss or gain. However, the
Portfolios will not use futures contracts, options, warrants, convertible
securities and swap agreements for speculative purposes or to leverage their net
assets. Accordingly, the primary risks associated with the use

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<PAGE>

of futures contracts, options, warrants, convertible securities and swap
agreements by the Portfolios are: (i) imperfect correlation between the change
in market value of the securities held by a Portfolio and the prices of futures
contracts, options, warrants, convertible securities and swap agreements; and
(ii) possible lack of a liquid secondary market for a futures contract and the
resulting inability to close a futures position prior to its maturity date. The
risk of imperfect correlation will be minimized by investing only in those
contracts whose behavior is expected to resemble that of a Portfolio's
underlying securities.
The risk that a Portfolio will be unable to close out a futures position will
be minimized by entering into stock transactions on an exchange with an active
and liquid secondary market. However options, warrants, convertible securities
and swap agreements purchased or sold over-the-counter may be less liquid than
exchange-traded securities. Illiquid securities, in general, may not represent
more than 15% of the net assets of a Portfolio.

FOREIGN CURRENCY FORWARD, FUTURES AND RELATED OPTIONS TRANSACTIONS. The EAFE(R)
Equity Index Portfolio may enter into foreign currency forward and foreign
currency futures contracts in order to maintain the same currency exposure as
the EAFE Index. The Portfolio may not enter into such contracts as a way of
protecting against anticipated adverse changes in exchange rates between foreign
currencies and the U.S. dollar. A foreign currency forward contract is an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. Such contracts do not
eliminate fluctuations in the underlying prices of securities held by the
Portfolios. Although such contracts tend to minimize the risk of loss due to a
decline in the value of a currency that has been sold forward, and the risk of
loss due to an increase in the value of a currency that has been purchased
forward, at the same time they tend to limit any potential gain that might be
realized should the value of such currency increase.

ASSET COVERAGE. To assure that a Portfolio's use of futures and related options,
as well as when-issued and delayed-delivery securities, interest rate swaps and
foreign currency forward futures and related options transactions are not used
to achieve excessive investment leverage, a Portfolio will cover such
transactions, as required under applicable interpretations of the SEC, either by
owning the underlying securities, entering into an off-setting transaction, or
by establishing a segregated account with the Portfolio's custodian containing
high grade liquid debt securities in an amount at all times equal to or
exceeding the Portfolio's commitment with respect to these instruments or
contracts.

PORTFOLIO TURNOVER
The frequency of Portfolio transactions-the Portfolio's portfolio
turnover rate-will vary from year to year depending on market
conditions and the Portfolio's cash flows. Each Portfolio's

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<PAGE>

annual portfolio turnover rate is not expected to exceed 100%. The Equity 500
Index Portfolio's portfolio turnover rate for the years ended December 31, 1995,
1994 and 1993 was 6%, 21% and 31%, respectively. The decrease in the Portfolio's
turnover rate from the year 1994 to 1995 was due to the growth of assets in the
period.

PERFORMANCE

Each Portfolio's recent strategies and holdings, and the corresponding Fund's
performance, is detailed twice a year in the Funds' financial reports (not
available during the first year for each Fund other than the Equity 500 Index
Fund), which are sent to all Fund shareholders.

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

Mutual fund performance is commonly measured as TOTAL RETURN and/or YIELD. Each
Fund's performance is affected by the expenses of that Fund.

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

TOTAL RETURNS
Average Annual
Total Return
Total Return for the Period
for the period from commencement
Total Return commencement of of operations
for the 1 year operations through through
ended 12/31/95 12/31/95 12/31/95

Equity 500 Index
Fund(a) 37.59% 53.23% 15.29%

(a) Fund commenced operations on December 31, 1992.
<PAGE>

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

YIELDS

The 30-day SEC yield for the period ended December 31, 1995, for the Equity 500
Index Fund was 2.36%.

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

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

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

MANAGEMENT OF THE TRUSTS AND THE PORTFOLIOS

BOARD OF TRUSTEES
The Trusts and each Portfolio is governed by a Board of Trustees which is
responsible for protecting the interests of investors. A majority of the
Trustees who are not "interested persons" (as defined in the 1940 Act) of each
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 the same individuals are Trustees of the Trusts and the
Portfolios, up to and including creating separate

31
<PAGE>

boards of trustees. See "Management of the Trusts and the Portfolios" in the SAI
for more information with respect to the Trustees and officers of the Trusts and
each Portfolio.

INVESTMENT ADVISER
The Trusts have not retained the services of an investment adviser since the
Trusts seek to achieve the investment objective of each Fund by investing all
the Assets of the Fund in the corresponding Portfolio. Each Portfolio has
retained the services of Bankers Trust as investment adviser.

BANKERS TRUST COMPANY AND ITS AFFILIATES Bankers Trust Company, a New York
banking corporation with principal offices at 280 Park Avenue, New York, New
York 10017, is a wholly owned subsidiary of Bankers Trust New York Corporation.
Bankers Trust conducts a variety of general banking and trust activities and is
a major wholesale supplier of financial services to the international and
domestic institutional market.

As of December 31, 1995, Bankers Trust New York Corporation was the ninth
largest bank holding company in the United States with total assets of
approximately $104 billion. Bankers Trust is a worldwide merchant bank dedicated
to servicing the needs of corporations, governments, financial institutions and
private clients through a global network of over 120 offices in more than 40
countries. Investment management is a core business of Bankers Trust, built on a
tradition of excellence from its roots as a trust bank founded in 1903. The
scope of Bankers Trust's investment management capability is unique due to its
leadership positions in both active and passive quantitative management and its
presence in major equity and fixed income markets around the world. Bankers
Trust is one of the nation's largest and most experienced investment managers
with approximately $200 billion in assets under management globally. Of that
total, approximately $84 billion are in U.S. equity index assets alone. When
bond and international funds are included, Bankers Trust manages approximately
$97 billion in total index assets. This makes Bankers Trust one of the nation's
leading managers of index funds.

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

Bankers Trust, subject to the supervision and direction of the Board of Trustees
of each Portfolio, manages each Portfolio in

32
<PAGE>

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

The Investment Advisory Agreements provide for each Portfolio to pay Bankers
Trust a fee from each Portfolio, accrued daily and paid monthly, equal on an
annual basis to the following percentages of the average daily net assets of the
Portfolio for its then-current fiscal year: U.S. Bond Index Portfolio, 0.15%;
Equity 500 Equal Weighted Index Portfolio, 0.25%; Small Cap Index Portfolio,
0.15%; EAFE(R) Equity Index Portfolio, 0.25%; and Equity 500 Index Portfolio,
0.10%.

Bankers Trust has been advised by its counsel that, in counsel's opinion,
Bankers Trust currently may perform the services for the Trusts and the
Portfolios described in this Prospectus and the SAI without violation of the
Glass-Steagall Act or other applicable banking laws or regulations. State laws
on this issue may differ from the interpretations of relevant Federal law, and
banks and financial institutions may be required to register as dealers pursuant
to state securities law.

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

PORTFOLIO MANAGERS
Frank Salerno, Managing Director of Bankers Trust, is responsible for the
management of the Equity 500 Equal Weighted Index Portfolio, the Small Cap
Portfolio and the Equity 500 Index Portfolio. Mr. Salerno oversees
administration, management and trading of international and domestic equity
index strategies. He has been employed by Bankers Trust since 1981 and has
managed the Portfolios' assets since each Portfolio commenced operations.

Richard J. Vella, Managing Director of Bankers Trust, is
responsible for the day-to-day management of the EAFE(R) Equity

33
<PAGE>

Index Portfolio. Mr. Vella has been employed by Bankers Trust
since 1985 and has ten years of trading and investment
experience.

Louis R. D'Arienzo, Vice President of Bankers Trust, is
responsible for the day-to-day management of the U.S. Bond Index
Portfolio. Mr. D'Arienzo has been employed by Bankers Trust
since 1981 and has twelve years of trading and investment
experience in fixed income securities.

ADMINISTRATOR
Under its Administration and Services Agreement with each Trust, Bankers Trust
calculates the net asset value of each Fund and generally assists the Board of
Trustees of the Trust in all aspects of the administration and operation of the
Funds. The Administration and Services Agreement provides for the respective
Trust to pay Bankers Trust a fee, accrued daily and paid monthly equal on an
annual basis to the following percentages of the average daily net assets of the
Fund, attributable to the Class, for its then-current fiscal year: U.S. Bond
Index Fund, 0.20%; Equity 500 Equal Weighted Index Fund, 0.15%; Small Cap Index
Fund, 0.20%; EAFE(R) Equity Index Fund, 0.15%; and Equity 500 Index Fund, 0.05%.

Under an Administration and Services Agreement with each Portfolio, Bankers
Trust calculates the value of the assets of the Portfolio and generally assists
the respective Board of Trustees in all aspects of the administration and
operation of the Portfolios. The Administration and Services Agreement provides
for each Portfolio to pay Bankers Trust a fee, accrued daily and paid monthly,
equal on an annual basis to the following percentages of the Portfolio's average
daily net assets for its then-current fiscal year: U.S. Bond Index Portfolio,
0.05%; Equity 500 Equal Weighted Index Portfolio, 0.05%; Small Cap Index
Portfolio, 0.05%; EAFE(R) Equity Index Portfolio, 0.10%; and Equity 500 Index
Portfolio, 0.05%. Under each Administration and Services Agreement, Bankers
Trust may delegate one or more of its responsibilities to others, including
SBDS, at Bankers Trust's expense.

DISTRIBUTOR
Under its Distribution Agreement with each Trust, SBDS, as Distributor, serves
as the Trusts' principal underwriter on a best efforts basis. In addition, SBDS
provides the Trusts with office facilities. SBDS is a wholly owned subsidiary of
Signature Financial Group, Inc. ("SFG"). SFG and its affiliates currently
provide administration and distribution services for other registered investment
companies. The principal business address of SFG and SBDS is 6 St. James Avenue,
Boston, Massachusetts 02116.

CUSTODIAN AND TRANSFER AGENT
Bankers Trust acts as custodian of the assets of the Trusts and each Portfolio
and serves as the transfer agent (the "Transfer

34
<PAGE>

Agent") for the Trusts and each Portfolio under the Administration and Services
Agreement with the Trusts and each Portfolio.

ACCOUNT INFORMATION

TYPES OF ACCOUNTS

The account guidelines that follow may not apply to certain Funds or to certain
retirement accounts. Some of the services and features of this Prospectus may
not be available to you. Certain features of the Funds, such as minimum initial
or subsequent investment amounts, may be modified in these programs, and
administrative charges may be imposed for the services rendered.

The different ways to set up (register) your account with Bankers Trust are
listed below.

The account guidelines that follow may not apply to certain Funds or to certain
retirement accounts. If your employer offers a Fund through a retirement
program, contact your employer for more information. Otherwise, call your
Service Agent directly.

WAYS TO SET UP YOUR ACCOUNT

INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS

Individual accounts are owned by one person. Joint accounts can have two or more
owners (tenants). Joint accounts may only be joint tenants in common or joint
tenants with rights of survivorship.

RETIREMENT
TO SHELTER YOUR RETIREMENT SAVINGS FROM TAXES Retirement plans allow individuals
to shelter investment income and capital gains from current taxes. In addition,
contributions to these accounts may be tax deductible. Retirement accounts
require special applications and typically have lower minimums.

O INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow anyone of legal age under 70 1/2
with earned income to invest up to $2,000 per tax year.

O ROLLOVER IRAS retain special tax advantages for certain distributions from
employer sponsored retirement plans.

O SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS) provide small business owners or
those with self-employed income (and their eligible employees) with many of the
same advantages as a Keogh, but with fewer administrative requirements.

O 401(K) PLANS allow employees of corporations of all sizes to contribute a
percentage of their wages on a tax deferred basis.

35
<PAGE>

These accounts need to be established by the trustee of the plan.

MONEY PURCHASE/PROFIT SHARING PLANS (Keogh Plans) are tax deferred pension
accounts designated for employees of unincorporated businesses or for persons
who are self-employed.

GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA) TO INVEST FOR A CHILD'S EDUCATION OR
OTHER FUTURE NEEDS These custodial accounts provide a way to give money to a
child and obtain tax benefits. An individual can give up to $10,000 a year per
child without paying federal gift tax. Depending on state laws, you can set up a
custodial account under the Uniform Gifts to Minors Act (UGMA) or the Uniform
Transfers to Minors Act (UTMA). Contact your Service Agent or Bankers Trust.

TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.

BUSINESS OR ORGANIZATION

FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS Contact your Service Agent or Bankers Trust.

HOW TO BUY SHARES

Shares are purchased at the Fund's net asset value ("NAV") next calculated after
your investment is received and accepted. The NAV is normally calculated at 4:00
p.m. Eastern time.

36
<PAGE>

If you are placing your order through a Service Agent, it is the responsibility
of your Service Agent to transmit your order to buy Shares to the Transfer Agent
before 4:00 p.m. Eastern time.

The Transfer Agent must receive payment by the following business day (trade
date + 1) after an order for Shares is placed; otherwise your purchase order may
be canceled and you could be held liable for resulting fees and/or losses.

Share certificates are not available for Shares of the Funds.

IF YOU ARE NEW TO THE BT FAMILY OF FUNDS, complete and sign an account
application and mail it along with your check. If there is no account
application accompanying this Prospectus, call your Service Agent or Bankers
Trust.

IF YOU ALREADY HAVE MONEY INVESTED IN A FUND IN THE BT FAMILY OF FUNDS, you can:

o Mail an account application with a check,
o Wire money into your account,
o Open an account by exchanging from another fund in the BT
Family of Funds or
o Contact your Service Agent.

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 Service
Agent or Bankers Trust for more information and a retirement account
application.

Investments by individual employees participating in a retirement program are
made through their Program Sponsor's recordkeeper, who is responsible for
transmitting all orders for the purchase, redemption or exchange of Shares of
the Funds. The availability of each Fund, and the procedures for investing,
depend upon the provisions of the Program and whether the Program Sponsor has
contracted with the Trusts or their transfer agent for special processing
services, including subaccounting. Individual investors who separate from a
program, other institutional investors and Individual Retirement Account
investors must arrange for services through BT Institutional Service Center, the
Manager, by contacting them at (800) 368-4031, P.O. Box 419210, Kansas City, MO
64141-6210.

MINIMUM INVESTMENT (excluding retirement plans)
TO OPEN AN ACCOUNT $5 MILLION

TO ADD TO AN ACCOUNT NO MINIMUM

MINIMUM BALANCE $1 MILLION

37
<PAGE>

For further information on opening an account, please consult your Service Agent
or refer to the account application.
<TABLE>
<S> <C> <C>

TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT

PHONE YOUR SERVICE Contact your Service Agent. Contact your Service Agent or
If you are an existing call 1-(800) 368-4031. You may

AGENT shareholder, you may exchange exchange from another Bankers Trust
from another Bankers Trust account with the same registration,

account with the same registration, including name, address and taxpayer
including name, address, and ID number.
taxpayer ID number.
- ------------------------------------------------------------------------------------------------------------------

MAIL Complete and sign the account Make your check payable to the complete
application. Make your check name of the Fund of your choice. Indicate
payable to the complete name of your Fund account number on your check and
the Fund of your choice. Mail mail to the address printed on you account
to the appropriate address on statement. Exchange by mail: call your Service
the application. Agent or Bankers Trust for instructions.
- -------------------------------------------------------------------------------------------------------------------

IN PERSON Take your account application Take your check to your Service Agent.
and check to your Service Agent.
- -------------------------------------------------------------------------------------------------------------------

WIRE Not available. Call your Service Agent or Bankers Trust
or wire to:
ROUTING NO.: 021001033

ATTN: Bankers Trust
IFTC Deposit

DDA: #00-226-296
FBO: (Account name)

(Account number)
CREDIT: Fund Number
U.S. Bond Index Fund - 511
Equity 500 Equal Weighted Index Fund - 512
Small Cap Index Fund - 513
EAFE(R) Equity Index Fund - 514
Equity 500 Index Fund - 525

Specify the complete name of
the fund of your choice, and
include your account number
and your name.
- -------------------------------------------------------------------------------------------------------------------

AUTOMATICALLY Not available. To use the Systematic Investment Program,

sign up for this service when opening your
account, or call your Service Agent to begin
the program. The initial minimum investment
in this program is $1,000.
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>

HOW TO SELL SHARES

You can arrange to take money out of your fund account at any time by selling
(redeeming) some or all of your Shares. Your Shares shall be sold at the next
NAV calculated after an order is received by the Transfer Agent. NAV is normally
calculated at 4:00 p.m. Eastern time.

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
1-800- 943-2222.

IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR NON-RETIREMENT

39
<PAGE>

ACCOUNT SHARES, leave at least $1,000,000 worth of Shares in the account to keep
it open.

TO SELL SHARES BY BANK WIRE you will need to sign up for these services in
advance when completing your account application.

CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to protect
you and Bankers Trust from fraud. Your request must be made in writing and
include a signature guarantee if any of the following situations apply:

o You wish to redeem more than $100,000 worth of Shares, o Your account
registration has changed within the last 30 days,

o The check is being mailed to a different address than the one on your account
(record address), o The check is being made payable to someone other than the
account owner, o The redemption proceeds are being transferred to a Bankers
Trust account with a different registration, or o You wish to have redemption
proceeds wired to a non-predesignated bank 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.

SELLING SHARES IN WRITING

Write a "letter of instruction" with:

o Your name,
o The Fund's name and Fund's number,
o Your Fund account number,
o The dollar amount or number of Shares to be redeemed and o Any other
applicable requirements listed in the following table.

Deliver your letter to your Service Agent, or mail it to the following address:

Bankers Trust Company
P.O. Box 419210
Kansas City, MO 64141-6210

overnight mailings:
Bankers Trust Company
210 West 10th Street, 8th Floor
Kansas City, MO 64105-1716

Unless otherwise instructed, the Transfer Agent will send a check to the record
address.

ADDITIONAL INFORMATION ABOUT SELLING SHARES

40
<PAGE>

ACCOUNT TYPE SPECIAL REQUIREMENTS

PHONE All account types Maximum check request: $100,000.
YOUR SERVICE AGENT except retirement

All account types You may exchange to
other funds in the BT Family of Funds if both accounts are
registered with the same name(s), address, and taxpayer ID
number.
- --------------------------------------------------------------------------------------------------------------------------

MAIL OR IN PERSON Individual, Joint Tenant, Sole The letter of instruction (with UGMA, UTMA
Proprietorship, signature guaranteed, if required) must be
signed by all persons required to sign for
transactions, exactly as their names appear on
the account and sent to your Service Agent or
the Transfer Agent.

Retirement account The account owner should complete a

retirement distribution form. Contact your Service Agent or call
1-800- 943-2222.

Trust 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.

At least one person authorized by
Business or Organization corporate resolution to act on
the account must sign the letter.

Executor, Administrator, For instructions contact your
Conservator/Guardian Service Agent or call 1-800- 368-4031.

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

WIRE All account types except retirement You must sign up for the

wire feature before using it. To verify that it is in place,
contact your Service Agent or call 1-800- 368-4031.

Minimum wire: $500.

Your wire redemption request must be
received by the Transfer Agent before 4:00 p.m.
Eastern time for money to be wired on the next
business day.
- --------------------------------------------------------------------------------------------------------------------------

AUTOMATICALLY Not available. Use the Systematic
Withdrawal Program. Sign up for this service
when opening your account, or call your
Service Agent to begin the program.

- --------------------------------------------------------------------------------------------------------------------------
</TABLE>

INVESTOR SERVICES

The BT Family of Funds provides a variety of services to help you manage your
account.

INFORMATION SERVICES
STATEMENTS AND REPORTS that your Service Agent or the Transfer Agent will send
to you include the following:

o Confirmation statements (after every transaction that affects your account
balance, including distributions or your account registration) o Account
statements (quarterly) o Financial reports (every six months)

To reduce expenses, only one copy of most financial reports will be mailed, even
if you have more than one account in the Fund. Call your Service Agent if you
need additional copies of financial reports.

TRANSACTION SERVICES

42
<PAGE>

EXCHANGE PRIVILEGE. You may sell your Shares and buy Shares of other funds in
the BT Family of Funds by telephone or in writing.

Note that exchanges out of a Fund may be limited to four per calendar year and
that they may have tax consequences for you. For detail on policies and
restrictions governing exchanges including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see page 39.

SYSTEMATIC INVESTMENT, WITHDRAWAL AND EXCHANGE PROGRAM

One easy way to pursue your financial goals is to invest money regularly. The BT
Family of Funds offers convenient services that let you transfer money into your
fund account, out of your fund account or between fund accounts automatically.
While regular investment plans do not guarantee a profit and will not protect
you against loss in a declining market, they can be an excellent way to invest
for retirement, a home, educational expenses, and other long-term financial
goals. Certain restrictions apply for retirement accounts. Call your Service
Agent for more information.

SHAREHOLDER AND ACCOUNT POLICIES

DIVIDENDS, CAPITAL GAINS, AND TAXES

Each Fund distributes substantially all of its net income and capital gains to
shareholders each year. Each Fund distributes capital gains annually. Normally,
income dividends for the Equity 500 Index Fund and Equity 500 Equal Weighted
Index Fund are distributed quarterly; income dividends for the Small Cap Index
Fund and EAFE(R) Equity Index Fund are distributed annually; and income
dividends for the U.S. Bond Index Fund are distributed monthly.

DISTRIBUTION OPTIONS
When you open an account, specify on your account application how you want to
receive distributions. The Trust offers four options:

1. REINVESTMENT OPTION. Your dividend and capital gain
distributions will be automatically reinvested in additional
Shares of the Fund. If you do not indicate a choice on your
application you will be assigned this option.

2. INCOME-EARNED OPTION. Your capital gain distributions will
be automatically reinvested in additional Shares of the Fund, but
you will be sent a check for each dividend distribution.

3. CASH OPTION. You will be sent a check for your dividend and
capital gain distributions.

4. AUTOMATIC DIVIDENDS PROGRAM. Your dividend and capital gain
distributions be automatically invested in Shares of another fund
in the BT Family of Funds as long as the minimums for that

43
<PAGE>

account are met.

If you select distribution option 2 or 3 and the U.S. Postal Service cannot
deliver your checks, or if your checks remain uncashed for six months, those
checks will be reinvested in your account at the current NAV and your election
may be converted to the Reinvestment Option. You may change distribution option
at anytime by notifying the Transfer Agent in writing.

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

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

FEDERAL TAXES.
The Trusts intend to qualify each Fund as a regulated investment
company, as defined in the Internal Revenue Code of 1986, as amended (the
"Code"). Provided each Fund meets the requirements imposed by the Code and
distributes all of its income and gains, each Fund will not pay any Federal
income or excise taxes. Each Portfolio will also not be required to pay any
Federal income or excise taxes.

Distributions from the Funds' income and short-term capital gains are taxed as
dividends , and long-term capital gain distributions are taxed as long-term
capital gains. The Funds' distributions

44
<PAGE>

are taxable when they are paid, whether you take them in cash or reinvest them
in additional shares. Distributions declared to shareholders of record in
November and December and paid in January are taxable as if paid on December 31.
The Funds will send each shareholder a tax statement by January 31 showing the
tax status of the distributions received in the past year.

CAPITAL GAINS. You may realize a capital gain or loss when you redeem (sell), or
exchange shares. Because the tax treatment also depends on your purchase price
and your personal tax position, you should

keep your regular account statements to use in determining your tax.

"BUYING A DIVIDEND." On the ex-date for a distribution from
income and/or capital gains, the Fund's share value is reduced by
the amount of the distribution.

If you buy shares just before the ex-date ("buying a dividend"), you will pay
the full price for the shares and then receive a portion of the price back as a
taxable distribution.

<PAGE>

OTHER TAX INFORMATION. In addition to Federal taxes, you may be subject to state
or local taxes on your investment, depending on the laws in your area. You
should consult with your own tax adviser concerning the application of Federal,
state and local taxes to your distributions from the Fund.

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

VALUATION DETAILS

WITH THE EXCEPTION OF THE EAFE(R) EQUITY INDEX FUND, THE FUNDS are open for
business each day the NYSE is open. Each Fund's NAV is calculated as of the
close of regular trading on the NYSE, currently 4:00 p.m. Eastern time or in the
event that the NYSE closes early, at the time of such early closing. The EAFE(R)
Equity Index Fund will not process orders on any day when either the NYSE or the
Tokyo Stock Exchange is closed. Orders received on such days will be priced on
the next day the Fund computes its NAV. As such, investors may experience a
delay in purchasing or redeeming Shares of the EAFE(R) Equity Index Fund.

A FUND'S NAV is the value of a single Share. The NAV of each Fund is computed by
dividing the value of the Fund's Assets (i.e., the value of its investment in
the Portfolio and other assets), less all liabilities, allocable to the
Institutional Class Shares by the total number of its Shares outstanding. Each
Portfolio's securities and other assets are valued primarily on the basis of
market quotations or, if quotations are not readily available, by Bankers Trust
pursuant to procedures adopted by the Portfolio's Board of Trustees. These
procedures require Bankers Trust to value such a security at the same value as
an equivalent security which is readily marketable and, in making such
comparisons, to consider all relevant factors under applicable guidelines of the
SEC.

Under procedures adopted by the Board, a net asset value for a Fund later
determined to have been inaccurate for any reason will be recalculated.
Purchases and redemptions made at a net asset value determined to have been
inaccurate will be adjusted, although in certain circumstances, such as where
the difference between the original net asset value and the recalculated net
asset value divided by the recalculated net asset value is $0.005 (1/2 of 1%) or
less or shareholder transactions are otherwise insubstantially affected, further
action is not required.

WHEN INVESTORS SIGN THEIR ACCOUNT APPLICATION, they will be asked to certify
that their social security or taxpayer identification number is correct and that
they are not subject to 31% backup withholding for failing to report income to
the IRS. If investors violate IRS regulations, the IRS can require a Fund to
withhold 31% of their taxable distributions and redemptions.

INVESTORS MAY INITIATE MANY TRANSACTIONS BY TELEPHONE: A Service Agent or the
Transfer Agent may only be liable for losses resulting from unauthorized
transactions if they do not follow reasonable procedures designed to verify the
identity of the caller. A Service Agent or the Transfer Agent will request
personalized security codes or other information, and may also record calls.
Investors should verify the accuracy of the confirmation statements immediately
after receipt. If investors do not want the ability to redeem and exchange by
telephone, they

46
<PAGE>

should call their Service Agent or the Transfer Agent for instructions.
Additional documentation may be required from corporations, associations and
certain fiduciaries.

EACH FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period of
time. Each Fund also reserves the right to reject any specific purchase order,
including certain purchases by exchange. Purchase orders may be refused if, in
Bankers Trust's opinion, they would disrupt management of a Fund.

WHEN INVESTORS PLACE AN ORDER TO BUY SHARES, their Shares will be purchased at
the next NAV or offering price, as applicable, calculated after the order is
received and accepted by the Transfer Agent. Note the following:

o All checks should be made payable to the specific Fund.

o All purchases must be made in U.S. dollars and checks must
be drawn on U.S. banks.

o The Funds do not accept third party checks, except those payable to an
existing shareowner who is a natural person (not a corporation or
partnership), credit cards or cash.

o When making a purchase with more than one check, each check must have a
value of at least $50.

o Each Fund reserves the right to limit the number of checks
processed at one time.

o If a check does not clear, the purchase will be cancelled and the
investor could be liable for any losses or fees a Fund or the Transfer
Agent has incurred.

o When purchases are made by check or periodic automatic investment,
redemptions will not be allowed until the investment being redeemed has
been in the account for 15 business days.

o Direct Purchases: In the case of the U.S. Bond Index Fund,
investors begin to earn dividends as of the first business
day following the day the Fund receives payment.

o Automated Order Purchases: In the case of the U.S. Bond
Index Fund, investors begin to earn dividends as of the
business day an order is received and accepted.

AUTOMATED ORDERS PURCHASE. Shares of the Funds can be purchased or sold through
Service Agents utilizing an automated order placement and settlement system that
guarantees payment for orders on a specified date.

TO AVOID THE COLLECTION PERIOD associated with check purchases, investors should
consider buying Shares by bank wire, U.S. Postal money order, U.S. Treasury
check, or Federal Reserve check.

47
<PAGE>

WHEN INVESTORS PLACE AN ORDER TO SELL SHARES, Shares will be sold at the next
NAV calculated after the order is received and accepted. Note the following:

o Normally, redemption proceeds will be mailed on the next business day,
but if making immediate payment could adversely affect a Fund it may
take up to seven days to pay you.

o Shares of the Funds will earn dividends through the date of redemption;
however, in the case of the U.S. Bond Index Fund, Shares redeemed on a
Friday or prior to a holiday will continue to earn dividends until the
next business day.

o Each Fund may hold payment on redemptions until it is reasonably
satisfied that investments made by check have been collected which can
take up to seven business days.

o Redemptions may be suspended or payment dates postponed when the NYSE
is closed (other than weekends or holidays), when trading on the NYSE
is restricted, or as permitted by the SEC.

THE TRANSFER AGENT MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its services.

EXCHANGE LIMITATIONS

As a shareholder, investors have the privilege of exchanging Shares of a Fund
for Shares of other funds in the BT Family of Funds at NAV. However, investors
should note the following:

o The Fund an investor exchanges into must be registered for
sale in their state.

o Investors may only exchange between accounts that are registered in the
same name, address, and taxpayer identification number.

o Before exchanging into a Fund, investors should read its
Prospectus.

o Exchanges between the Funds described in this Prospectus and Funds
described in other BT Family of Funds' Prospectuses are restricted
during the 90 days following purchase. Exchanges among Funds described
in this Prospectus are permitted any time after purchase.

o If an investor exchanges into the EAFE(R) Equity Index Fund ON a day
when the NYSE or the Tokyo Stock Exchange is closed, the exchange out
of the other BT Fund will be processed on that day, but the EAFE(R)
Equity Index Fund Shares will not bE purchase until the day the EAFE(R)
Equity Index Fund reopens. If an investor exchanges out of the EAFE(R)
Equity Index Fund

48
<PAGE>

on a day when the NYSE is open and the Tokyo Stock Exchange is closed,
the exchange will be delayed until the EAFE(R) Equity Index Fund
reopens.

o Exchanges may have tax consequences for you.

o Because excessive trading can hurt Fund performance and
shareholders, each Fund reserves the right to temporarily or
permanently terminate the exchange privilege of any investor
who makes more than four exchanges out of the Fund per
calendar year. Accounts under common ownership or control,
including accounts with the same taxpayer identification
number, will be counted together for purposes of the four
exchange limit.

o Each Fund reserves the right to refuse exchange purchases by any person
or group if, in Bankers Trust's judgment, the Fund would be unable to
invest the money effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely
affected.

o Exchanges may be restricted or refused if a Fund receives or
anticipates simultaneous orders affecting significant portions of the
Fund's assets. In particular, a pattern of exchanges that coincide with
a "market timing" strategy may be disruptive to a Fund.

o Although the Funds will attempt to give prior notice whenever they are
reasonably able to do so, they may impose these restrictions at any
time. The Funds reserve the right to terminate or modify the exchange
privilege in the future on 60 days' notice to shareholders.

ADDITIONAL INFORMATION ABOUT THE TRUST AND PORTFOLIOS

Each Fund is a mutual fund: an investment that pools shareholders' money and
invests it toward a specified goal. Each Fund (with the exception of the Equity
500 Index Fund) is a separate diversified series of BT Advisor Funds, a
Massachusetts business trust. The Equity 500 Index Fund is a separate
diversified series of BT Institutional Funds. Each Fund (with the exception of
the Equity 500 Index Fund) offers two classes of Shares of beneficial interest,
Institutional Class Shares and Advisor Class Shares. Each of the U.S. Bond Index
Portfolio, Equity 500 Equal Weighted Index Portfolio, Small Cap Index Portfolio,
and EAFE(R) Equity Index Portfolio is a separate diversified series of BT
Investment Portfolios, a New York master trust fund. The Equity 500 Index
Portfolio is a New York trust.

Each Portfolio (other than the Equity 500 Index Portfolio) is a separate
subtrust (or "Series") of BT Investment Portfolios. Each Trust and BT Investment
Portfolios reserves the right to add additional series in the future. The Trust
also reserves the right to issue additional classes of Shares of each Fund.

The Trusts or a Portfolio may hold special meetings and mail

49
<PAGE>

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

When matters are submitted for shareholder vote, shareholders of each Fund will
have one vote for each full share held and proportionate, fractional votes for
fractional shares held. A separate vote of one of the Funds or classes is
required on any matter affecting only that Fund or class on which shareholders
are entitled to vote. Shareholders of a Fund or class are not entitled to vote
on Trust matters that do not affect that Fund or class, respectively, and do not
require a separate vote of the Fund or class. All series of each Trust and all
classes will vote together on certain matters, such as electing trustees or
approving independent public auditors. There normally will be no meetings of
shareholders for the purpose of electing Trustees unless and until such time as
less than a majority of Trustees holding office have been elected by
shareholders, at which time the Trustees then in office will call a
shareholders' meeting for the election of Trustees. Any Trustee may be removed
from office upon the vote of shareholders holding at least two-thirds of that
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 that Trust's outstanding shares. Each Trust will also
assist shareholders in communicating with one another as provided for in the
1940 Act.

Each series of a Trust will vote separately on any matter involving the
corresponding Portfolio. Shareholders of all of the series of a Trust will,
however, vote together to elect Trustees of that Trust and for certain other
matters. Under certain circumstances, the shareholders of one or more series
could control the outcome of these votes. The series of BT Investment Portfolios
will vote together or separately on matters in the same manner, and in the same
circumstances, as do the series of the Trusts. As with the Trusts, the investors
in one or more series of BT Investment Portfolios could control the outcome of
these votes.

The Trusts are each an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.

The Declaration of Trust of each of BT Investment Portfolios and the Equity 500
Index Portfolio provides that each Fund and other entities investing in a
Portfolio (e.g., other investment companies, insurance company separate accounts
and common and

50
<PAGE>

commingled trust funds) will each be liable for all obligations of that
Portfolio. However, the risk of a Fund incurring financial loss on account of
such liability is limited to circumstances in which both inadequate insurance
existed and a Portfolio itself was unable to meet its obligations. Accordingly,
the Trustees of the Trusts believe that neither the Funds nor their shareholders
will be adversely affected by reason of the Funds' investing in the Portfolios.
No series of BT Investment Portfolios has any preference over any other series.

BT0472G

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<PAGE>

BT INSTITUTIONAL FUNDS
EQUITY 500 INDEX FUND APRIL 29, 1996

STATEMENT OF ADDITIONAL INFORMATION

The Fund seeks to provide investment results that, before expenses,
correspond to the total return (I.E., the combination of capital changes and
income) of common stocks publicly traded in the United States, as represented by
the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500" or the
"Index").

As described in the Prospectus, the Trust seeks to achieve the
investment objective of the Fund by investing all the investable assets of the
Fund in the Equity 500 Index Portfolio (the "Portfolio"), an open-end management
investment company having the same investment objective as the Fund.

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.

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

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

BANKERS TRUST COMPANY
<PAGE>

INVESTMENT ADVISER OF THE PORTFOLIO AND ADMINISTRATOR
SIGNATURE BROKER-DEALER SERVICES, INC.
DISTRIBUTOR

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

368-4031

2
<PAGE>

INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS

INVESTMENT OBJECTIVES

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

INVESTMENT POLICIES

The Fund seeks to achieve its investment objective by investing all of
its Assets in the Portfolio. The Trust may withdraw the Fund's 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 Fund to do so.

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

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

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

ILLIQUID SECURITIES. Historically, illiquid securities have

3
<PAGE>

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

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

4
<PAGE>

LENDING OF PORTFOLIO SECURITIES. The Portfolio has the authority to lend
portfolio securities to brokers, dealers and other financial organizations. The
Portfolio will not lend securities to Bankers Trust, Signature or their
affiliates. By lending its securities, the Portfolio can increase its income by
continuing to receive interest on the loaned securities as well as by either
investing the cash collateral in short-term securities or obtaining yield in the
form of interest paid by the borrower when U.S. Government obligations are used
as collateral.

There may be risks of delay in receiving additional collateral or risks of
delay in recovery of the securities or even loss of rights in the collateral
should the borrower of the securities fail financially. The Portfolio will
adhere to the following conditions whenever its securities are loaned: (i) the
Portfolio must receive at least 100 percent cash collateral or equivalent
securities from the borrower; (ii) the borrower must increase this collateral
whenever the market value of the securities including accrued interest rises
above the level of the collateral; (iii) the Portfolio must be able to terminate
the loan at any time; (iv) the Portfolio must receive reasonable interest on the
loan, as well as any dividends, interest or other distributions on the loaned
securities, and any increase in market value; (v) the Portfolio may pay only
reasonable custodian fees in connection with the loan; and (vi) voting rights on
the loaned securities may pass to the borrower; provided, however, that if a
material event adversely affecting the investment occurs, the Board of Trustees
must terminate the loan and regain the right to vote the securities.

INDEX FUTURES CONTRACTS AND OPTIONS ON INDEX FUTURES CONTRACTS

FUTURES CONTRACTS. The Portfolio may enter into contracts for the
purchase or sale for future delivery of the Index. U.S. futures contracts have
been designed by exchanges which have been designated "contracts markets" by the
Commodity Futures Trading Commission ("CFTC"), and must be executed through a
futures commission merchant, or brokerage firm, which is a member of the
relevant contract market. Futures contracts trade on a number of exchange
markets, and, through their clearing corporations, the exchanges guarantee
performance of the contracts as between the clearing members of the exchange.

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

5
<PAGE>

reflects any decline or increase in the contract's value.

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

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

In addition, futures contracts entail risks. Although the Adviser
believes that use of such contracts will benefit the Portfolio, if the Adviser's
investment judgment about the general direction of the Index is incorrect, the
Portfolio's overall performance would be poorer than if it had not entered into
any such contract. For example, if the Portfolio has hedged against the
possibility of a decrease in the Index which would adversely affect the value of
securities held in its portfolio and securities prices increase instead, the
Portfolio will lose part or all of the benefit of the increased value of its
securities which it has hedged because it will have offsetting losses in its
futures positions. In addition, in such situations, if the Portfolio has
insufficient cash, it may have to sell securities from its portfolio to meet
daily variation margin requirements. Such sales of securities may be, but will
not necessarily be, at increased prices which reflect the rising market. The
Portfolio

6
<PAGE>

may have to sell securities at a time when it may be
disadvantageous to do so.

OPTIONS ON INDEX FUTURES CONTRACTS. The Portfolio may purchase and
write options on futures contracts with respect to the Index. The purchase of a
call option on an index futures contract is similar in some respects to the
purchase of a call option on such an index. Depending on the pricing of the
option compared to either the price of the futures contract upon which it is
based or the price of the underlying securities, it may or may not be less risky
than ownership of the futures contract or underlying securities. As with the
purchase of futures contracts, when the Portfolio is not fully invested it may
purchase a call option on an index futures contract to hedge against a market
advance.

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

The purchase of a put option on a futures contract with respect to the
Index is similar in some respects to the purchase of protective put options on
the Index. For example, the Portfolio may purchase a put option on an index
futures contract to hedge against the risk of lowering securities values.

The amount of risk the Portfolio assumes when it purchases an option on
a futures contract with respect to the Index is the premium paid for the option
plus related transaction costs. In addition to the correlation risks discussed
above, the purchase of such an option also entails the risk that changes in the
value of the underlying futures contract will not be fully reflected in the
value of the option purchased.

7
<PAGE>

The Board of Trustees of the Portfolio has adopted the requirement that
index futures contracts and options on index futures contracts be used only for
cash management purposes a hedge and not for speculation. The Portfolio will not
enter into any futures contracts or options on futures contracts if immediately
thereafter the amount of margin deposits on all the futures contracts of the
Portfolio and premiums paid on outstanding options on futures contracts owned by
the Portfolio would exceed 5% of the market value of the total assets of the
Portfolio.

OPTIONS ON SECURITIES INDEXES. The Portfolio may write (sell) covered
call and put options to a limited extent on the Index ("covered options") in an
attempt to increase income. Such options give the holder the right to receive a
cash settlement during the term of the option based upon the difference between
the exercise price and the value of the index. The Portfolio may forgo the
benefits of appreciation on the Index or may pay more than the market price of
the Index pursuant to call and put options written by the Portfolio.

By writing a covered call option, the Portfolio forgoes, in exchange
for the premium less the commission ("net premium"), the opportunity to profit
during the option period from an increase in the market value of the Index above
the exercise price. By writing a covered put option, the Portfolio, in exchange
for the net premium received, accepts the risk of a decline in the market value
of the Index below the exercise price.

The Portfolio may terminate its obligation as the writer of a call or
put option by purchasing an option with the same exercise price and expiration
date as the option previously written.

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

8
<PAGE>

The Portfolio may purchase call and put options on the Index. The
Portfolio would normally purchase a call option in anticipation of an increase
in the market value of the Index. The purchase of a call option would entitle
the Portfolio, in exchange for the premium paid, to purchase the underlying
securities at a specified price during the option period. The Portfolio would
ordinarily have a gain if the value of the securities increased above the
exercise price sufficiently to cover the premium and would have a loss if the
value of the securities remained at or below the exercise price during the
option period.

The Portfolio would normally purchase put options in anticipation of a
decline in the market value of the Index ("protective puts"). The purchase of a
put option would entitle the Portfolio, in exchange for the premium paid, to
sell the underlying securities at a specified price during the option period.
The purchase of protective puts is designed merely to offset or hedge against a
decline in the market value of the Index. The Portfolio would ordinarily
recognize a gain if the value of the Index decreased below the exercise price
sufficiently to cover the premium and would recognize a loss if the value of the
Index remained at or above the exercise price. Gains and losses on the purchase
of protective put options would tend to be offset by countervailing changes in
the value of the Index.

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

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

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

9
<PAGE>

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

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

Because options on securities indices require settlement in cash, the
Adviser may be forced to liquidate portfolio securities to meet settlement
obligations.

RATING SERVICES

The ratings of rating services represent their opinions as to the
quality of the securities that they undertake to rate. It should be emphasized,
however, that ratings are relative and subjective and are not absolute standards
of quality. Although these ratings are an initial criterion for selection of
portfolio investments, Bankers Trust also makes its own evaluation of these
securities, subject to review by the Board of Trustees. After purchase by 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
Bankers Trust will consider such an event in its determination of whether the
Portfolio should continue to hold the obligation. A description of the ratings
used herein and in the Fund's Prospectus is set forth in the Appendix to this
Statement of Additional Information.

INVESTMENT RESTRICTIONS

The following investment restrictions are "fundamental policies" of the
Fund and the Portfolio and may not be changed with respect to the Fund or the
Portfolio without the approval of a "majority of the outstanding voting
securities" of the Fund or the Portfolio, as the case may be. "Majority of the
outstanding voting securities" under the Investment Company Act of 1940, as
amended (the "1940 Act"), and as used in this Statement of Additional
Information and the Prospectus, means, with respect to the Fund (or the
Portfolio), the lesser of (i) 67% or more of the outstanding voting securities
of the Fund (or of the total beneficial interests of the Portfolio) present at a
meeting, if the holders of more than 50% of the outstanding voting securities of
the Fund or of the total beneficial interests of the

10
<PAGE>

Portfolio) are present or represented by proxy, or (ii) more than 50% of the
outstanding voting securities of the Fund (or of the total beneficial interests
of the Portfolio). Whenever the Trust is requested to vote on a fundamental
policy of 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.
Fund shareholders who do not vote will not affect the Trust's votes at the
Portfolio meeting. The percentage of the Trust's votes representing Fund
shareholders not voting will be voted by the Trustees of the Trust in the same
proportion as the Fund shareholders who do, in fact, vote.

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

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

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

11
<PAGE>

securities of types distributed publicly or privately;

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

(5) concentrate its investments in any particular industry
(excluding U.S. Government securities), but if it is deemed
appropriate for the achievement of the Portfolio's (Fund's)
investment objective, up to 25% of its total assets may be
invested in any one industry; and

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

STATE AND FEDERAL RESTRICTIONS. In order to comply with certain state and
Federal statutes and policies the Portfolio (or the 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 objective):

(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

12
<PAGE>

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, except in the
case of merger or consolidation, the Portfolio
(Fund) 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) invest more than 15% of the Portfolio's (Fund's) net assets
(taken at the greater of cost or market value) in securities
that are illiquid or not readily marketable not including (a)
Rule 144A securities that have been determined to be liquid by
the Board of Trustees;

13
<PAGE>

and (b) commercial paper that is sold under section 4(2) of
the 1933 Act which: (i) is not traded flat or in default as to
interest or principal; and (ii) is rated in one of the two
highest categories by at least two nationally recognized
statistical rating organizations and

the Portfolio's (Fund's) Board of Trustees have determined the commercial paper
to be liquid; or (iii) is rated in one of the two highest categories by one
nationally recognized statistical rating agency and the Portfolio's (Fund's)
Board of Trustees have determined that the commercial paper is equivalent
quality and is liquid;

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

(ix) no more than 5% of the Portfolio's (Fund's) total assets are
invested in securities issued by issuers which (including
predecessors) have been in operation less than three years;

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

(xi) if the Portfolio (Fund) is a "diversified" fund with

14
<PAGE>

respect to 75% of its assets, invest more than 5% of
its total assets in the securities (excluding U.S.
Government securities) of any one issuer;

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

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

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

15
<PAGE>

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

16
<PAGE>

entities or listed on non-U.S. securities or commodities exchanges; (b)
the aggregate premiums paid on all such options which are held
at any time do not exceed 20% of the Portfolio's (Fund's)
total net assets; and (c) the aggregate margin deposits
required on all such futures or options thereon held at any
time do not exceed 5% of the Portfolio's (Fund's) total
assets.

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 TRANSACTIONS AND BROKERAGE COMMISSIONS

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

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

17
<PAGE>

performed, making internal and external comparisons.

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

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

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

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

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

In certain instances there may be securities which are
suitable for the Portfolio as well as for one or more of the

18
<PAGE>

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

For the years ended December 31, 1995, 1994 and 1993, Equity 500 Index
Portfolio paid brokerage commissions in the amount of $172,924, $97,069 and
$63,408, respectively.

PERFORMANCE INFORMATION

STANDARD PERFORMANCE INFORMATION

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

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

Income calculated for the purposes of calculating the Fund's yield
differs from income as determined for other accounting

19
<PAGE>

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

The 30-day Securities and Exchange Commission (the "SEC") yield for the
period ended December 31, 1995 was 2.36%.

TOTAL RETURN: The Fund's average annual total return will be calculated
for certain periods by determining the average annual compounded rates
of return over those periods that would cause an investment of $1,000
(made at the maximum public offering price with all distributions
reinvested) to reach the value of that investment at the end of the
periods. The Fund may also calculate total return figures which
represent aggregate performance over a period or year-by-year
performance.

The Fund's average annual total return for the period from December
31, 1992 (commencement of operations) to December 31, 1995 was 15.29%. The
Fund's total return for the year ended December 31, 1995 and for the period from
December 31, 1992 (commencement of operations) to December 31, 1995 was 37.59%
and 53.23%, respectively.

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

COMPARISON OF FUND PERFORMANCE

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

In connection with communicating its performance to current

20
<PAGE>

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

ASIAN WALL STREET JOURNAL, a weekly Asian newspaper that often reviews U.S.
mutual funds investing internationally.

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

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

CHANGING TIMES, THE KIPLINGER MAGAZINE, a monthly investment advisory
publication that periodically features the performance of a variety of
securities.

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

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

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

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

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

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

INVESTOR'S DAILY, a daily newspaper that features financial, economic and
business news.

LIPPER ANALYTICAL SERVICES, INC.'S MUTUAL FUND PERFORMANCE
ANALYSIS, a weekly publication of industry-wide mutual fund
averages by type of fund.

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

MORNINGSTAR, INC., a publisher of financial information and mutual fund
research.

21
<PAGE>

NEW YORK TIMES, a nationally distributed newspaper which regularly covers
financial news.

PERSONAL INVESTING NEWS, a monthly news publication that often reports on
investment opportunities and market conditions.

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

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

U.S. NEWS AND WORLD REPORT, a national business weekly that
periodically reports mutual fund performance data.

VALUE LINE, a biweekly publication that reports on the largest 15,000 mutual
funds.

WALL STREET JOURNAL, a Dow Jones and Company, Inc. newspaper
which regularly covers financial news.

WEISENBERGER INVESTMENT COMPANIES SERVICES, an annual compendium of information
about mutual funds and other investment companies, including comparative data on
funds' backgrounds, management policies, salient features, management results,
income and dividend records, and price ranges.

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

VALUATION OF SECURITIES; REDEMPTION IN KIND

Equity and debt securities (other than short-term debt obligations
maturing in 60 days or less), including listed securities and securities for
which price quotations are available, will normally be valued on the basis of
market valuations furnished by a pricing service. Short-term debt obligations
and money market securities maturing in 60 days or less are valued at amortized
cost, which approximates market. Other assets are valued at fair value using
methods determined in good faith by the Portfolio's Board of Trustees.

The Trust, on behalf of the Fund, and the Portfolio reserve the right,
if conditions exist which make cash payments undesirable, to honor any request
for redemption or repurchase order by making payment in whole or in part in
readily marketable securities chosen by the Trust, or the Portfolio, as the case
may be, and valued as they are for purposes of computing the Fund's or the
Portfolio's net asset value, as the case may be (a

22
<PAGE>

redemption in kind). If payment is made to a Fund shareholder in securities, an
investor, including the Fund, the shareholder may incur transaction expenses in
converting these securities into cash. The Trust, on behalf of the Fund, and the
Portfolio have elected, however, to be governed by Rule 18f-1 under the 1940 Act
as a result of which the Fund and the Portfolio are obligated to redeem shares
or beneficial interests, as the case may be, with respect to any one investor
during any 90-day period, solely in cash up to the lesser of $250,000 or 1% of
the net asset value of the Fund or the Portfolio, as the case may be, at the
beginning of the period.

The Portfolio has agreed to make a redemption in kind to the Fund
whenever the Fund wishes to make a redemption in kind and therefore shareholders
of the Fund that receive redemptions in kind will receive portfolio securities
of the Portfolio and in no case will they receive a security issued by the
Portfolio. The Portfolio has advised the Trust that the Portfolio will not
redeem in kind except in circumstances in which the Fund is permitted to redeem
in kind or unless requested by the Fund.

Each investor in the Portfolio, including the Fund, may add to or
reduce its investment in the Portfolio on each day that the NYSE is open for
business and New York chartered banks are not closed owing to customary or local
holidays. As of the close of the NYSE, currently 4:00 p.m. (New York time or
earlier if the NYSE closes earlier) on each such day, the value of each
investor's interest in the Portfolio will be determined by multiplying the net
asset value of the Portfolio by the percentage representing that investor's
share of the aggregate beneficial interests in the Portfolio. Any additions or
reductions which are to be effected on that day will then be effected. The
investor's percentage of the aggregate beneficial interests in 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 the NYSE on such day plus or minus, as the case may be, the
amount of net additions to or reductions in the investor's investment in the
Portfolio effected on such day and (ii) the denominator of which is the
aggregate net asset value of the Portfolio as of 4:00 p.m. or the close of the
NYSE on such day plus or minus, as the case may be, the amount of net additions
to or reductions in the aggregate investments in the Portfolio by all investors
in the Portfolio. The percentage so determined will then be applied to determine
the value of the investor's interest in the Portfolio as of 4:00 p.m. or the
close of the NYSE on the following day the NYSE is open for trading.

The Fund may, at its own option, accept securities in payment for
shares. The securities delivered in payment for shares are valued by the method
described under "Net Asset Value" as of the day the Fund receives the
securities. This is a

23
<PAGE>

taxable transaction to the shareholder. Securities may be accepted in payment
for shares only if they are, in the judgment of Bankers Trust, appropriate
investments for the Fund's Portfolio. In addition, securities accepted in
payment for shares must: (i) meet the investment objective and policies of the
acquiring Fund's Portfolio; (ii) be acquired by the applicable Fund for
investment and not for resale (other than for resale to the Fund's Portfolio);
(iii) be liquid securities which are not restricted as to transfer either by law
or liquidity of market; and (iv) if stock, have a value which is readily
ascertainable as evidenced by a listing on a stock exchange, over-the-counter
market or by readily available market quotations from a dealer in such
securities. When securities are used as payment for shares or as a redemption in
kind from the fund, the transaction fee will not be assessed. However, the
shareholder will be charged the costs associated with receiving or delivering
the securities. These costs include security movement costs and taxes and
registration costs. The Fund reserves the right to accept or reject at its own
option any and all securities offered in payment for its shares.

MANAGEMENT OF THE TRUST AND PORTFOLIO

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

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

TRUSTEES OF THE TRUST

CHARLES P. BIGGAR (age 65) -- Trustee; Retired; Director of Chase/NBW
Bank Advisory Board; Director, Batemen, Eichler, Hill Richards Inc.; formerly
Vice President of International Business Machines and President of the National
Services and the Field Engineering Divisions of IBM. His address is 12 Hitching
Post
Lane, Chappaqua, New York 10514.

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

RICHARD J. HERRING (age 50) -- Trustee; Professor, Finance
Department, The Wharton School, University of Pennsylvania. His

24
<PAGE>

address is The Wharton School, University of Pennsylvania Finance
Department, 3303 Steinberg Hall/Dietrich Hall, Philadelphia,
Pennsylvania 19104.

BRUCE E. LANGTON (age 64) -- 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 PORTFOLIO

Lane, Chappaqua, New York 10514.

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

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

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

OFFICERS OF THE TRUST AND PORTFOLIO

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

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

25
<PAGE>

DAVID G. DANIELSON (age 31) -- Assistant Treasurer; Assistant Manager,
SFG (since May, 1991); Graduate Student, Northeastern University (from April,
1990 to March, 1991); Tax Accountant & Systems Analyst, Putnam Companies (prior
to March, 1990).

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

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

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

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

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

1989).

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

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

No person who is an officer or director of Bankers Trust is
an officer or Trustee of the Trust or the Portfolio. No

26
<PAGE>

director, officer or employee of Signature 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. The Trust pays each Trustee who is not a
director, officer or employee of the Adviser, the Distributor, the Administrator
or any of their affiliates an annual fee of $10,000, respectively, per annum
plus $1,250, respectively, per meeting attended and reimburses them for travel
and out-of-pocket expenses. The Portfolio and Cash Management, Treasury Money,
Tax Free Money, NY Tax Free Money, International Equity, Utility,
Short/Intermediate U.S. Government Securities, Capital Appreciation,
Intermediate Tax Free, Asset Management and BT Investment Portfolios (together
with the Trust, the "Fund Complex") collectively pay each Trustee who is not a
director, officer or employee of the Adviser, the Distributor, the Administrator
or any of their affiliates an annual fee of $10,000, respectively, per annum
plus $1,250, respectively, per meeting attended and reimburses them for travel
and out-of-pocket expenses.

For the year ended December 31, 1995, the Fund incurred Trustees fees
equal to $6,491. For the same period, the Portfolio incurred Trustees fees of
$1,868.

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

TRUSTEE COMPENSATION TABLE

AGGREGATE
TOTAL COMPENSATION
NAME OF PERSON, COMPENSATION
FROM FUND COMPLEX
POSITION FROM TRUST
PAID TO TRUSTEES

Richard J. Herring,

Trustee of Trust $12,500
$12,500

Bruce E. Langton,

Trustee of Trust $12,500
$12,500

Charles P. Biggar,
Trustee of Trust
and Portfolio none $12,500

27
<PAGE>

S. Leland Dill,

Trustee of Portfolio none
$12,500

Philip Saunders, Jr.,
Trustee of Portfolio none $12,500

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, 1996, the Trustees and officers of the Trust and the
Portfolio owned in the aggregate less than 1% of the shares of the Fund or the
Trust (all series taken together). As of that same date, Northern Telecom
Omnibus Account, 34 Exchange Place, Jersey City, New Jersey, Northern Trust
Company TTEE, Thiokal Corp., P.O. Box 92956, Chicago, Illinois, and Zions First
National Bank TTEE, P.O. Box 30880, Salt Lake City , Utah were beneficial owners
of 14.40%, 8.01% and 6.08%, respectively, of the outstanding shares of the Fund.
Shareholders owning 25% or more of the outstanding shares of a Fund may diminish
the voting power of other shareholders proportionately.

INVESTMENT ADVISER

Under the terms of the Portfolio's investment advisory agreement with
Bankers Trust (the "Advisory Agreement"), Bankers Trust manages the Portfolio
subject to the supervision and direction of the Board of Trustees of the
Portfolio. Bankers Trust will: (i) act in strict conformity with the Portfolio's
Declaration of Trust, the 1940 Act and the Investment Advisers Act of 1940, as
the same may from time to time be amended; (ii) manage the Portfolio in
accordance with the Portfolio's investment objective, restrictions and policies;
(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

28
<PAGE>

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, Signature or any of their affiliates; SEC fees and state Blue Sky
qualification fees; charges of custodians and transfer and dividend disbursing
agents; certain insurance premiums; outside auditing and legal expenses; costs
of maintenance of corporate existence; costs attributable to investor services,
including, without limitation, telephone and personnel expenses; costs of
preparing and printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders; costs of
shareholders' reports and meetings of shareholders, officers and Trustees of the
Trust or the Portfolio; and any extraordinary expenses.

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.

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

For the years ended December 31, 1995, 1994 and 1993, Bankers Trust
earned $770,530, $428,346 and $74,893, respectively, as compensation for
investment advisory services provided to the Portfolio. During the same periods,
Bankers Trust reimbursed $418,814, $249,230 and $72,112, respectively, to the
Portfolio to cover expenses.

ADMINISTRATOR

Under administration and services agreements, Bankers Trust

29
<PAGE>

is obligated on a continuous basis to provide such administrative services as
the Board of Trustees of the Trust and the Portfolio reasonably deem necessary
for the proper administration of the Trust or 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), internal auditing,
executive and administrative services, and stationery and office supplies;
prepare reports to shareholders or investors; prepare and file tax returns;
supply financial information and supporting data for reports to and filings with
the SEC and various state Blue Sky authorities; supply supporting documentation
for meetings of the Board of Trustees; provide monitoring reports and assistance
regarding compliance with Declarations of Trust, by-laws, investment objectives
and policies and with Federal and state securities laws; arrange for appropriate
insurance coverage; calculate net asset values, net income and realized capital
gains or losses; and negotiate arrangements with, and supervise and coordinate
the activities of, agents and others to supply services.

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

For the years ended December 31, 1995, 1994 and 1993, Bankers Trust
earned $270,327, $139,997 and $36,735, respectively, in compensation for
administrative and other services provided to the Fund. During the same period,
Bankers Trust reimbursed $421,776, $194,084 and $112,866, respectively, to the
Fund to cover expenses. For the years ended December 31, 1995, 1994 and 1993,
Bankers Trust earned $385,265, $214,173 and $37,446, respectively, in
compensation for administrative and other services provided to the Portfolio.

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

30
<PAGE>

the next $70 million of average annual net assets and 1.5% of the remaining
average annual net assets.

CUSTODIAN AND TRANSFER AGENT

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

USE OF NAME

The Trust and Bankers Trust have agreed that the Trust may use "BT" as
part of its name for so long as Bankers Trust serves as investment adviser to
the Portfolio. 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 counsel's
opinion, Bankers Trust currently may perform the services for the Trust and the
Portfolio contemplated by the investment advisory agreement and other activities
for the Fund and the Portfolio described in the Prospectus and this Statement of
Additional Information without violation of the Glass-Steagall Act or other
applicable banking laws or regulations. However, counsel has pointed out that
future changes in either Federal or state statutes and regulations concerning
the permissible activities of banks or trust companies, as well as future
judicial or administrative decisions or interpretations of present and future
statutes and regulations, might prevent Bankers Trust from continuing to perform
those services for the Trust and the Portfolio. State laws on this issue may
differ from the interpretations of relevant Federal law and banks and financial
institutions may be required to register as dealers pursuant to state securities
law. If the circumstances described above should change, the Boards of Trustees
would review the

31
<PAGE>

relationships with Bankers Trust and consider taking all actions
necessary in the circumstances.

COUNSEL AND INDEPENDENT ACCOUNTANTS

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

ORGANIZATION OF THE TRUST

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

Massachusetts law provides that shareholders could under certain
circumstances be held personally liable for the obligations of the Trust.
However, the Trust's Declaration of Trust disclaims shareholder liability for
acts or obligations of the Trust and requires that notice of this disclaimer be
given in each agreement, obligation or instrument entered into or executed by
the Trust or a Trustee. The Declaration of Trust provides for indemnification
from the Trust's property for all losses and expenses of any shareholder held
personally liable for the obligations of the Trust. Thus, the risk of a
shareholder's incurring financial loss on account of shareholder liability is
limited to circumstances in which the Trust itself would be unable to meet its
obligations, a possibility that the Trust believes is remote. Upon payment of
any liability incurred by the Trust, the shareholder paying the liability will
be entitled to reimbursement from the general assets of the Trust. The Trustees
intend to conduct the operations of the Trust in a manner so as to avoid, as far
as possible, ultimate liability of the shareholders for liabilities of the
Trust.

The Trust was organized on March 15, 1990.

TAXATION

TAXATION OF THE FUND

The Trust intends to qualify annually and to elect the Fund to be
treated as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code").

<PAGE>

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

33
<PAGE>

DISTRIBUTIONS

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

TAXATION OF THE PORTFOLIOS

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

<PAGE>

BACKUP WITHHOLDING

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

FOREIGN SHAREHOLDERS

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

OTHER TAXATION

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

35
<PAGE>

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

36
<PAGE>

FINANCIAL STATEMENTS

The following financial statements for the Equity 500 Index Fund and
Equity 500 Index Portfolio are incorporated herein by reference from its current
reports to shareholders filed with the SEC pursuant to Section 30(b) of the 1940
Act and Rule 30b2-1 thereunder. A copy of each such report will be provided,
without charge, to each person receiving this Statement of Additional
Information.

EQUITY 500 INDEX FUND:

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

EQUITY 500 INDEX PORTFOLIO

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

Financial Highlights: Selected ratios and supplemental
data for

each of the periods presented
Schedule of Portfolio Investments, December 31,
1995

Notes to Financial Statements
Report of Independent Accountants

37
<PAGE>

APPENDIX

COMMERCIAL PAPER RATINGS

Set forth below are descriptions of the ratings of Moody's

A-1
<PAGE>

and S&P, which represent their opinions as to the quality of the securities
which they undertake to rate. It should be emphasized, however, that ratings are
relative and subjective and are not absolute standards of quality.

S&P'S COMMERCIAL PAPER RATINGS

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

MOODY'S COMMERCIAL PAPER RATINGS

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

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

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

FITCH INVESTORS SERVICE AND DUFF & PHELPS COMMERCIAL PAPER
RATINGS

Commercial paper rated "Fitch-1" is considered to be the
highest grade paper and is regarded as having the strongest
degree of assurance for timely payment. "Fitch-2" is considered

A-2
<PAGE>

very good grade paper and reflects an assurance of timely payment only slightly
less in degree than the strongest issue.

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

A-3
<PAGE>

APPENDIX B

The table on the following page shows the performance of the S&P 500 Composite
Stock Price Index for the periods indicated. Stock prices fluctuated widely
during the periods but were higher at the end than at the beginning. The results
shown should not be considered as a representation of the income or capital gain
or loss which may be generated by the Index in the future. Nor should this be
considered as a representation of the past or future performance of the Fund.

A-1
<PAGE>

STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX*

Year Total Return Year Total Return

1995 37.49% 1960 0.47%

1994 1.32% 1959
11.96%

1993 9.99% 1958 43.36%

1992 7.67% 1957 -10.78%

1991 30.55% 1956 6.56%

-3.17% 1955 31.56%
1990

1989 31.49% 1954 52.62%

1988 16.81% 1953 -0.99%

1987 1952 18.73%
5.23%

1986 18.47% 1951 24.02%

1985 32.16% 1950 31.71%

1984 6.27% 18.79%
1949

1983 22.51% 1948 5.50%

1982 21.41% 1947 5.71%

1981 -4.91% 1946
-8.07%

1980 32.42% 1945 36.44%

1979 18.44% 1944 19.75%

1978 6.56% 1943 25.90%

1977 -7.18% 1942 20.34%

1976 23.84% 1941 -11.59%

1975 37.20% 1940 -9.78%

1974 1939 -0.41%
-26.47%

1973 -14.66% 1938 31.12%

1972 18.98% 1937 -35.03%

1971 1936 33.92%
14.31%

1970 4.01% 1935 47.67%

1969 -8.51% 1934 -1.44%

1968 11.06% 53.99%
1933

1967 23.98% 1932 -8.19%

1966 -10.06% 1931 -43.34%

1965 12.45% -24.90%
1930

1964 16.48% 1929 -8.42%

1963 22.08% 1928 43.61%

1962 -8.73% 1927
37.49%

1961 26.89% 1926 11.62%

</TABLE>

*Source: Ibbotson Associates

A-2
<PAGE>

CONTENTS

Investment Objectives, Policies and Restrictions....................... 2

Performance Information................................................ 15
Valuation of Securities; Purchases and Redemptions in Kind............. 18
Management of the Trust and Portfolio................................... 19

Organization of the Trust.............................................. 25
Taxation................................................................ 26
Financial Statements.....................................................28

Appendix A............................................................. A-1

Appendix B............................................................. B-1

INVESTMENT ADVISER OF THE PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY

DISTRIBUTOR
SIGNATURE BROKER-DEALER SERVICES, INC.

CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY

INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.

COUNSEL
WILLKIE FARR & GALLAGHER

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

No person has been authorized to give any information or to make any
representations other than those contained in the Fund's Prospectus, its
Statement of Additional Information or the Fund's official sales literature in
connection with the offering of its shares and, if given or made, such other
information or representations must not be relied on as having been authorized
by the Trust. Neither the Prospectus nor this Statement of Additional
Information constitutes an offer in any state in which, or to any person to
whom, such offer may not lawfully be made.
--------------------

BT0326C
<PAGE>

BT INSTITUTIONAL FUNDS

INSTITUTIONAL CASH MANAGEMENT FUND

INSTITUTIONAL CASH RESERVES April 29, 1996
INSTITUTIONAL LIQUID ASSETS FUND

INSTITUTIONAL TREASURY MONEY FUND
INSTITUTIONAL TAX FREE MONEY FUND
INSTITUTIONAL NY TAX FREE MONEY FUND

STATEMENT OF ADDITIONAL INFORMATION

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

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

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

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

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

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

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

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

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

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

The Trust's prospectuses, which may be amended from time to time (each,
a "Prospectus"), with respect to Institutional Cash Management Fund,
Institutional Treasury Fund, Institutional Liquid Assets Fund, Institutional Tax
Free Money Fund, Institutional NY Tax Free Money Fund and Institutional Cash
Reserves are dated April 29, 1996. The Prospectuses provide the basic
information investors should know before investing, may be obtained without
charge by calling the Trust at the telephone number listed below or by
contacting any Service Agent. This Statement of Additional Information, which is
not a Prospectus, is intended to provide additional information regarding the
activities and operations of the Trust and should be read in conjunction with
the Prospectuses. Capitalized terms not otherwise defined in this Statement of
Additional Information have the meanings accorded to them in the Trust's
Prospectuses.

BANKERS TRUST COMPANY

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

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

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INVESTMENT OBJECTIVES AND POLICIES

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

BANK OBLIGATIONS

For purposes of the Portfolios' investment policies with respect to
bank obligations, the assets of a bank will be deemed to include the assets of
its domestic and foreign branches. Obligations of foreign branches of U.S. banks
and foreign banks may be general obligations of the parent bank in addition to
the issuing bank or may be limited by the terms of a specific obligation and by
government regulation. If Bankers Trust, acting under the supervision of the
Board of Trustees, deems the instruments to present minimal credit risk, each
Portfolio other than Treasury Money Portfolio may invest in obligations of
foreign banks or foreign branches of U.S. banks which include banks located in
the United Kingdom, Grand Cayman Island, Nassau, Japan and Canada. Investments
in these obligations may entail risks that are different from those of
investments in obligations of U.S. domestic banks because of differences in
political, regulatory and economic systems and conditions. These risks include
future political and economic developments, currency blockage, the possible
imposition of withholding taxes on interest payments, 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 that those applicable to
domestic branches of U.S. banks.

COMMERCIAL PAPER

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

U.S. GOVERNMENT OBLIGATIONS

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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 U.S., are supported by the right of the issuer to
borrow from the U.S. Treasury; others, such as those of the Federal National
Mortgage Association are solely the obligations of the issuing entity but are
supported by the discretionary authority of the U.S. Government to purchase the
agency's obligations; and still others, such as those of the Student Loan
Marketing Association, are supported by the credit of the instrumentality. No
assurance can be given that the U.S. Government would provide financial support
to U.S. Government-sponsored instrumentalities if it is not obligated to do so
by law.

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

LENDING OF PORTFOLIO SECURITIES

The Portfolios, other than Tax Free Money Portfolio and NY Tax Free
Money Portfolio, have the authority to lend portfolio securities to brokers,
dealers and other financial organizations.
The Portfolios will not lend securities to Bankers Trust, Signature or their
affiliates. By lending its securities, a Portfolio can increase its income by
continuing to receive interest on the loaned securities as well as by either
investing the cash collateral in short-term securities or obtaining yield in the
form of interest paid by the borrower when U.S. Government Obligations are used
as collateral. There may be risks of delay in receiving additional collateral or
risks of delay in recovery of the securities or even loss of rights in the
collateral should the borrower of the securities fail financially. Each
Portfolio will adhere to the following conditions whenever its securities are
loaned: (i) the Portfolio must receive at least 100% cash collateral or
equivalent securities from the borrower; (ii) the borrower must increase this
collateral whenever the market value of the securities including accrued
interest rises above the level of the collateral; (iii) the Portfolio must be
able to terminate the loan at any time; (iv) the Portfolio must receive
reasonable interest on the loan, as well as any dividends, interest or other
distributions on the loaned securities, and any

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increase in market value; (v) the Portfolio may pay only reasonable custodian
fees in connection with the loan; and (vi) voting rights on the loaned
securities may pass to the borrower; provided, however, that if a material event
adversely affecting the investment occurs, the Board of Trustees must terminate
the loan and regain the right to vote the securities.

REVERSE REPURCHASE AGREEMENTS

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

PARTICIPATION INTERESTS

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

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redemptions or to maintain a high quality investment portfolio. In the event an
issuer of a demand feature defaulted on its payment obligation, the Portfolio
might be unable to dispose of the participation interest because of the absence
of a secondary market and could, for this or other reasons, suffer a loss to the
extent of the default.

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

STANDBY COMMITMENTS

Tax Free Money Portfolio and NY Tax Free Money Portfolio each may
acquire standby commitments or "puts" solely to facilitate portfolio liquidity;
neither Portfolio intends to exercise its rights thereunder for trading
purposes. The maturity of 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.

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 Investors Service, Inc. ("Moody's") or AA or better by
Standard & Poor's Corporation ("S&P"), or will be of comparable quality in
Bankers Trust's opinion, or such put writers' 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

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above-described criteria, or becomes a recognizable credit risk. Neither
Portfolio is able to predict whether all or any portion of any loss sustained
could subsequently be recovered from a put writer in the event that a put writer
should default on its obligation to repurchase an underlying security.

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

MUNICIPAL OBLIGATIONS

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

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

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

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

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

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

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

Tax-Exempt Commercial Paper. Tax-exempt commercial paper is

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

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

Municipal bonds include:

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

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

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

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principal and interest on these bonds is dependent solely on the
ability of the facility's user to meet its financial obligations
and generally the pledge, if any, of real and personal property
so financed as security for payment.
Special Considerations Relating to New York Municipal Obligations

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

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

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

The unemployment rate in the State dipped below the national rate in
the second half of 1981 and remained lower until 1991. It stood at 6.9% in 1994.
The total employment growth rate in the State has been below the national
average since 1984 and is expected to slow to less than 0.5% in 1995. State per
capita personal income remains above the national average. State per capita
income for 1994 was estimated at $25,999, which was 19.2% above the 1994
estimated national average of $21,809. During the past ten years, total personal
income in the State rose slightly faster than the national average only in 1986
through 1989.

STATE BUDGET. The State Constitution requires the

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

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

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

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

The 1995-96 State Financial Plan included actions that will have an
effect on the budget outlook for State fiscal year 1996-97 and beyond. The
Division of the Budget estimated that the 1995-96 State Financial Plan contained
actions that provide

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

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

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

The State issued its second quarterly update to the 1995-96 State
Financial Plan on October 26, 1995. The Mid-Year Update projected continued
balance in the 1995-96 State Financial Plan, with estimated receipts reduced by
a net $71 million and estimated disbursements reduced by a net $30 million as
compared to the First Quarter Update. The resulting General Fund balance
decreased from $213 million in the First Quarter Update to $172 million in the
Mid-Year Update, reflecting the use of $41 million from the contingency reserve
fund for payments of litigation and disallowance expenses.

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

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

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

To make progress toward addressing recurring budgetary imbalances, the
1996-97 Executive Budget proposes significant actions to align recurring
receipts and disbursements in future fiscal years. The Governor has proposed
closing the 1996-97 fiscal year imbalance primarily through General Fund
expenditure reductions and without increases in taxes or deferrals of scheduled
tax reductions. However, there can be no assurance that the Legislature will
enact the Governor's proposals or that the State's actions will be sufficient to
preserve budgetary balance or to align recurring receipts and disbursements in
future fiscal years. The 1996-97 Executive Budget includes action that will have
an effect on the budget outlook for the State fiscal year 1997-98 and beyond.
The net impact of these

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and other factors is expected to produce a potential imbalance in receipts and
disbursements in State fiscal year 1997-98, which the Governor proposes to close
with further spending reductions. The Executive Budget contains projections of a
potential imbalance in the 1997-98 fiscal year of $1.4 billion and in the
1998-99 fiscal year of $2.5 billion, assuming implementation of the 1996-97
Executive Budget recommendations.

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

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

RECENT FINANCIAL RESULTS. The General Fund is the principal operating fund of
the State and is used to account for all financial transactions, except those
required to be accounted for in another fund. It is the State's largest fund and
receives almost all State taxes and other resources not dedicated to particular
purposes.

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

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

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

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

DEBT LIMITS AND OUTSTANDING DEBT. There are a number of methods by which the
State of New York may incur debt. Under the State Constitution, the State may
not, with limited exceptions for emergencies, undertake long-term general
obligation borrowing (I.E., borrowing for more than one year) unless the
borrowing is authorized in a specific amount for a single work or purpose by the
Legislature and approved by the voters. There is no limitation on the amount of
long-term general obligation debt

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that may be so authorized and subsequently incurred by the State.

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

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

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

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

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

In June 1994, the Legislature passed a proposed constitutional
amendment that would significantly change the long-term financing practices of
the State and its public authorities. The

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

Before the approved constitutional amendment can be presented to the
voters for their consideration, it must be passed by a separately elected
legislature. The amendment must therefore be passed by

17
<PAGE>

the newly elected Legislature in 1995 prior to presentation to the voters in
November 1995. The amendment was passed by the Senate in June 1995, and the
Assembly is expected to pass the amendment shortly.
If approved by the voters, the amendment would become effective January 1,
1996.

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

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

Principal and interest payments on general obligation bonds and
interest payments on bond anticipation notes and on tax and revenue anticipation
notes were $793.3 million for the 1994-95 fiscal year, and are estimated to be
$774.4 million for the 1995-96 fiscal year. These figures do not include
interest payable on State General Obligation Refunding Bonds issued in July 1992
( "Refunding Bonds") to the extent that such interest was paid from an escrow
fund established with the proceeds of such Refunding Bonds. Principal and
interest payments on fixed rate and variable rate bonds issued by LGAC were
$239.4 million for the 1994-95 fiscal year, and are estimated to be $328.2
million for 1995-96. State lease-purchase rental and contractual obligation
payments for 1994-95, including State installment payments relating to
certificates of participation, were $1.607 billion and are estimated to be
$1.641 billion in 1995-96.

New York State has never defaulted on any of its general

18
<PAGE>

obligation indebtedness or its obligations under lease-purchase or
contractual-obligation financing arrangements and has never been called upon to
make any direct payments pursuant to its guarantees.

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

the constitutionality of the treatment of certain moneys held in a Supplemental
Reserve Fund; and (10) a challenge to

the constitutionality of a State lottery game.

19
<PAGE>

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

The legal proceedings noted above involve State finances, State
programs and miscellaneous tort, real property and contract claims in which the
State is a defendant and the monetary damages

20
<PAGE>

sought are substantial. These proceedings could affect adversely the financial
condition of the State . Adverse developments in these proceedings or the
initiation of new proceedings could affect the ability of the State to maintain
a balanced 1995-96 State Financial Plan. An adverse decision in any of these
proceedings could exceed the amount of the 1995-96 State Financial Plan reserve
for the payment of judgments and, therefore, could affect the ability of the
State to maintain a balanced 1995-96 State Financial Plan. In its audited
financial statements for the fiscal year ended March 31, 1995, the State
reported its estimated liability for awarded and anticipated unfavorable
judgments to be $676 million.

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

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

Authorities are generally supported by revenues generated by the
projects financed or operated, such as fares, user fees on bridges, highway
tolls and rentals for dormitory rooms and housing. In recent years, however, New
York State has provided financial assistance through appropriations, in some
cases of a recurring nature, to certain of the 18 Authorities for operating and
other expenses and, in fulfillment of its commitments on moral obligation
indebtedness or otherwise, for debt service. This operating assistance is
expected to continue to be required in future years. In addition, certain
statutory arrangements provide for State local assistance payments otherwise
payable to

21
<PAGE>

localities to be made under certain circumstances to certain Authorities. The
State has no obligation to provide additional assistance to localities whose
local assistance payments have been paid to Authorities under these
arrangements. However, in the event that such local assistance payments are so
diverted, the affected localities could seek additional State funds.

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

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

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

22
<PAGE>

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

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

<PAGE>

From time to time, the Control Board staff, OSDC, the City comptroller and
others issue reports and make public statements regarding the City's financial
condition, commenting on, among other matters, the City's financial plans,
projected revenues and expenditures

and actions by the City to eliminate projected operating deficits. Some of these
reports and statements have warned that the City may have underestimated certain
expenditures and overestimated certain revenues and have suggested that the City
may not have adequately provided for future contingencies. Certain of these
reports have analyzed the City's future economic and social conditions and have
questioned whether the City has the capacity to generate sufficient revenues in
the future to meet the costs of its expenditure increases and to provide
necessary services.

The City submitted to the Control Board on July 21, 1995 a fourth
quarter modification to the City's financial plan for the 1995 fiscal year (the
"1995 Modification"), which projects a balanced budget in accordance with GAAP
for the 1995 fiscal year,

24
<PAGE>

after taking into account a discretionary transfer of $75 million. On July 11,
1995, the City submitted to the Control Board the Financial Plan for the 1996
through 1999 fiscal years (the "1996-1999 Financial Plan").

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

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

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

Contracts with all of the City's municipal unions either expired in the
1995 fiscal year or will expire in the 1996 fiscal years. The 1996-1999
Financial Plan provided no additional wage increases for City employees after
the 1995 fiscal year. Each 1% wage increase for all union contracts commencing
in the 1995 or 1996 fiscal year would cost the City an additional $141 million
for the 1996 fiscal year and $161 million each year thereafter above the amounts
provided for in the 1996-1999 Financial Plan.

25
<PAGE>

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

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

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

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

Municipalities and school districts have engaged in substantial
short-term and long-term borrowings. In 1993, the total indebtedness of all
localities in New York State

26
<PAGE>

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

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

RATING SERVICES

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

THE FOLLOWING FUNDAMENTAL INVESTMENT RESTRICTIONS AND NON-FUNDAMENTAL
INVESTMENT OPERATING POLICIES HAVE BEEN ADOPTED BY THE TRUST, WITH
RESPECT TO THE RESPECTIVE FUND, AND BY EACH RESPECTIVE PORTFOLIO
BECAUSE OF REQUIREMENTS OF FEDERAL OR STATE SECURITIES LAWS OR
REGULATIONS. UNLESS AN INVESTMENT INSTRUMENT OR TECHNIQUE IS DESCRIBED
IN THE RESPECTIVE PROSPECTUS OR

27
<PAGE>

ELSEWHERE HEREIN, THE RESPECTIVE FUND AND THE CORRESPONDING
PORTFOLIO MAY NOT INVEST IN THAT INVESTMENT INSTRUMENT OR ENGAGE
IN THAT INVESTMENT TECHNIQUE.

INVESTMENT RESTRICTIONS

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

EACH PORTFOLIO (FUND) EXCEPT LIQUID ASSETS PORTFOLIO (FUND)

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 Institutional Cash Management Fund, Institutional Cash
Reserves, Institutional Treasury Money Fund and Institutional Tax Free
Money Fund (and Cash Management Portfolio, Treasury Money Portfolio and
Tax Free Money Portfolio), and all of the assets of Institutional NY
Tax

28
<PAGE>

Free Money Fund (and NY Tax Free Money Portfolio), may be invested
without regard to this restriction, and (ii) this restriction shall not
preclude the purchase by Institutional 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 substantially 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 Institutional Cash
Management Fund and Institutional Cash Reserves (and Cash Management
Portfolio) will be invested in obligations of foreign and U.S. Banks;
and (iii) with respect to Institutional Tax Free Money Fund and
Institutional 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 substantially the same investment objectives as
such Fund.

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

6. Underwrite the securities issued by others (except to the
extent the Fund or Portfolio may be deemed to be an underwriter under
the Federal securities laws in connection with the disposition of its
portfolio securities) or knowingly purchase restricted securities,
except that Institutional Tax Free Money Fund and Institutional 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

29
<PAGE>

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
substantially 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 Institutional Cash Management Fund, Institutional Cash
Reserves, and Institutional Treasury Money Fund (and Cash Management
Portfolio and Treasury Money Portfolio), the lending of portfolio
securities.

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

12. Issue any senior securities, except insofar as it

30
<PAGE>

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 Statement of Additional
Information.

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

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

15. As to Institutional Tax Free Money Fund and Institutional
NY Tax Free Money Fund (or Tax Free Money Portfolio and NY Tax Free
Money Portfolio), neither Fund (or 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
substantially the same investment objectives as such Fund.

LIQUID ASSETS PORTFOLIO (FUND)

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

1. Borrow money or mortgage or hypothecate assets of the
Portfolio (Fund), except that in an amount not to exceed 1/3 of the
current value of the Portfolio's (Fund's) total assets, it may borrow
money as a temporary measure for extraordinary or emergency purposes
and enter into reverse repurchase agreements or dollar roll
transactions, and except that it may pledge, mortgage or hypothecate
not more than 1/3 of such assets to secure such borrowings (it is
intended that money would be borrowed only from banks and only either
to accommodate requests for the withdrawal of beneficial interests
(redemption of shares) while effecting

31
<PAGE>

an orderly liquidation of portfolio securities or to maintain liquidity
in the event of an unanticipated failure to complete a portfolio
security transaction or other similar situations) or reverse repurchase
agreements, provided that collateral arrangements with respect to
options and futures, including deposits of initial deposit and
variation margin, are not considered a pledge of assets for purposes of
this restriction and except that assets may be pledged to secure
letters of credit solely for the purpose of participating in a captive
insurance company sponsored by the Investment Company Institute; for
additional related restrictions, see clause (i) under the caption
"State and Federal Restrictions" below. (As an operating policy, the
Portfolio may not engage in dollar roll transactions);

2. Underwrite securities issued by other persons except
insofar as the Portfolio (Trust or the Fund) may technically be deemed
an underwriter under the Securities Act of 1933, as amended (the "1933
Act"), in selling a portfolio security;

3. Make loans to other persons except (a) through the lending
of the Portfolio's (Fund's) portfolio securities and provided that any
such loans not exceed 20% of the Portfolio's (Fund's) total assets
(taken at market value), (b) through the use of repurchase agreements
or the purchase of short-term obligations or (c) by purchasing a
portion of an issue of debt securities of types distributed publicly or
privately;

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

5. Concentrate its investments in any particular
industry (excluding U.S. Government securities), but if it
is deemed appropriate for the achievement of the Portfolio's
(Fund's) investment objective, up to 25% of its total assets
may be invested in any one industry; and

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

32
<PAGE>

restriction.

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

(i) borrow money (including through reverse repurchase agreements)
for any purpose in excess of 10% of the Portfolio's (Fund's)
total assets (taken at cost);

(ii) acquire any illiquid securities, such as repurchase agreements
with more than seven days to maturity or fixed time deposits
with a duration of over seven calendar days, if as a result
thereof, more than 10% of the market value of the Portfolio's
(Fund's) net assets would be in investments that are illiquid;

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

(iv) no more than 5% of the Portfolio's (Fund's) total assets are
invested in securities issued by issuers which (including
predecessors) have been in operation less than three years;

(v) invest in warrants (other than warrants acquired

33
<PAGE>

by the Portfolio (Fund) as part of a unit or attached to
securities at the time of purchase) if, as a result, the
investments (valued at the lower of cost or market) would
exceed 5% of the value of the Portfolio's (Fund's) net assets
or if, as a result, more than 2% of the Portfolio's (Fund's)
net assets would be invested in warrants not listed on a
recognized United States or foreign stock exchange, to the
extent permitted by applicable state securities laws;

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

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

34
<PAGE>

(viii) sell securities it does not own such that the dollar amount of
such short sales at any one time exceeds 25% of the net equity
of the Portfolio (Fund), and the value of securities of any
one issuer in which the Portfolio (Fund) is short exceeds the
lesser of 2.0% of the value of the Portfolio's (Fund's) net
assets or 2.0% of the securities of any class of any U.S.
issuer and, provided that short sales may be made only in
those securities which are fully listed on a national
securities exchange or a foreign exchange (This provision does
not include the sale of securities of the Portfolio (Fund)
contemporaneously owns or has the right to obtain securities
equivalent in kind and amount to those sold, i.e., short sales
against the box.);

(ix) 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;

(x) The Portfolio (Fund) will not make investments in oil, gas,
and other mineral leases and the Portfolio (Fund) will not
purchase or sell real property (including limited partnership
interests, but excluding readily marketable interests in real
estate investment trusts or readily marketable securities of
companies which invest in real estate), except that nothing in
this restriction shall prohibit the Portfolio (Fund) from
owning and selling real estate acquired as a result of the
Portfolio's (Fund's) ownership of securities or from owning
real estate used principally for its own office space;

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

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

(xiii) invest more than 10% of the Portfolio's (Fund's) total assets
(taken at the greater

35
<PAGE>

of cost or market value) in securities (excluding Rule 144A
securities) that are restricted as to resale under the 1933
Act (other than Rule 144A securities deemed liquid by the
Portfolio's (Fund's) Board of Trustees);

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

36
<PAGE>

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

Each Fund will comply with the state securities laws and regulations of all
states in which it is registered. Each Portfolio will comply with the permitted
investments and investment limitations in the securities laws and regulations of
all states in which the 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 Portfolio may attempt to increase yields by trading to take
advantage of short-term market variations, which results in

37
<PAGE>

higher portfolio turnover. However, this policy does not result in higher
brokerage commissions to the Portfolios as the purchases and sales of portfolio
securities are usually effected as principal transactions. The Portfolios'
turnover rates are not expected to have a material effect on their income and
have been and are expected to be zero for regulatory reporting purposes.

PORTFOLIO TRANSACTIONS

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

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

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

In selecting brokers or dealers to execute portfolio transactions on
behalf of a Portfolio, Bankers Trust seeks the best overall terms available. In
assessing the best overall terms available for any transaction, Bankers Trust
will consider

38
<PAGE>

the factors it deems relevant, including the breadth of the market in the
investment, the price of the investment, the financial condition and execution
capability of the broker or dealer and the reasonableness of the commission, if
any, for the specific transaction and on a continuing basis. In addition,
Bankers Trust is authorized, in selecting parties to execute a particular
transaction and in evaluating the best overall terms available, to consider the
brokerage, but not research, services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934, as amended) provided to the
Portfolio involved, the other Portfolios and/or other accounts over which
Bankers Trust or its affiliates exercise investment discretion. Bankers Trust's
fees under its agreements with the Portfolios are not reduced by reason of its
receiving brokerage services.

NET ASSET VALUE

The Prospectuses discuss the time(s) at which the net asset values of
the Funds are determined for purposes of sales and redemptions. The net asset
value of a Fund's investment in a Portfolio is equal to the Fund's pro rata
share of the total investment of the Fund and of the other investors in the
Portfolio less the Fund's pro rata share of the Portfolio's liabilities. The
following is a description of the procedures used by the Portfolios in valuing
their assets.

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

The Portfolios' use of the amortized cost method of valuing their
securities is permitted by a rule adopted by the SEC. Under this rule, the
Portfolios must 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

39
<PAGE>

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.

PURCHASE AND REDEMPTION INFORMATION

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

40
<PAGE>

permitted such suspension; or (d) an emergency exists as
determined by the SEC.

Under the terms of a Distribution Agreement, Signature acts as
distributor on a "best efforts" basis to solicit orders for the sale of shares
of the Funds and will undertake such advertising and promotion as it believes
reasonable in connection with soliciting orders. In addition to Signature's
duties as distributor, Signature may, in its discretion, perform additional
functions in connection with transactions in the shares of the Funds. Pursuant
to the terms of the Trust's Distribution Plan (the "Plan"), pursuant to Rule
12b-1 under the 1940 Act, Signature may seek reimbursement in an amount not
exceeding 0.10% of the Trust's net assets annually for expenses incurred in
connection with any activities primarily intended to result in the sale of the
Funds' shares, which are described in the Prospectuses.

The Plan provides that it will continue in effect from year to year
only if its continuance is approved annually by the Trust's Board of Trustees,
including a majority of the Trustees who are not "interested persons," as
defined by the 1940 Act, of the Trust and who have no direct or indirect
financial interest in the operation of the Plan or any agreements related
thereto (the "Qualified Trustees"). The Plan may not be amended to increase
materially the amount to be spent for the services provided by Signature without
shareholder approval and all material amendments of the Plan must also be
approved by the Trustees in the manner described above. The Plan may be
terminated with respect to a Fund at any time by majority vote of the Qualified
Trustees or a majority of the shares of the Fund outstanding. Pursuant to the
Plan, Signature will provide to the Board of Trustees periodic reports of any
amounts expended under the Plan and the purpose for which expenditures were
made.

Signature did not seek reimbursement under the Plan during the Trust's
fiscal years ended December 31, 1992, 1993 , 1994 and 1995.

MANAGEMENT OF THE TRUST AND PORTFOLIOS

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

41
<PAGE>

St. James Avenue, Boston, Massachusetts 02116.

TRUSTEES OF THE TRUST

RICHARD J. HERRING (age 50) -- Trustee; Professor, Finance Department,
The Wharton School, University of Pennsylvania. His address is The Wharton
School, University of Pennsylvania Finance Department, 3303 Steinberg
Hall/Dietrich Hall, Philadelphia,

Pennsylvania 19104.

BRUCE E. LANGTON (age 64) -- 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.

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

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

TRUSTEES OF THE PORTFOLIOS

Lane, Chappaqua, New York 10514.

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

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

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<PAGE>

OFFICERS OF THE TRUST AND THE PORTFOLIOS

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

DAVID G. DANIELSON (age 31) -- Assistant Treasurer; Assistant Manager,
SFG (since May, 1991); Graduate Student, Northeastern University (from April,
1990 to March, 1991); Tax Accountant and Systems Analyst, Putnam Companies
(prior to March, 1990).

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

BARBARA M. O'DETTE (age 36) -- Assistant Treasurer;

Assistant Treasurer, SFG (since December, 1988); Assistant Treasurer, Signature
(since April, 1989).

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

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

MOLLY S. MUGLER (age 44) -- Assistant Secretary; Legal Counsel and
Assistant Secretary, SFG (since December, 1988); Assistant Secretary, Signature
(since April, 1989).

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

43
<PAGE>

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

For the year ended December 31, 1995, Institutional Cash Management
Fund, Institutional Treasury Money Fund and Institutional Cash Reserves incurred
Trustees fees equal to $6,416, $6,366 and $6,416, respectively. For the same
period, Cash Management Portfolio, Treasury Money Portfolio, Tax Free Money
Portfolio and NY Tax Free Money Portfolio incurred Trustees fees equal to
$1,868, $1,868, $1,918 and $1,918, respectively. For the period ended December
31, 1995, Institutional Liquid Asset Fund and Liquid Assets Portfolio incurred
Trustees fees equal to $750 and $1,365, respectively. As of the year ended
December 31, 1995, Institutional Tax Free Money Fund, Institutional NY Tax Free
and Money Fund had not commenced investment operations and, therefore, incurred
no Trustees fees.

TRUSTEE COMPENSATION TABLE

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

44
<PAGE>

AGGREGATE TOTAL COMPENSATION
NAME OF PERSON, COMPENSATION FROM FUND
COMPLEX
POSITION FROM TRUST PAID TO
TRUSTEES

Richard J. Herring, $12,5000
Trustee of Trust

Bruce E. $12,500
Langton, $12,500
Trustee of Trust

Charles P. Biggar, $12,500 $12,500
Trustee of Trust
and Portfolios

S. Leland $12,5000
Dill,
Trustee of Portfolios

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

As of March 31, 1996, the Trustees and officers of the Trust and the
Trustees of each Portfolio, owned in the aggregate less than 1% of the shares of
any Fund or of the Trust (all series taken together). As of March 31, 1996,
Bankers Trust on behalf of its customers is the record owner of the 18.08% and
100% of the outstanding shares of Institutional Cash Reserves and Institutional
Liquid Assets Fund, respectively. As of the same date, MBNA, 400 Christiana
Road, Newark, Delaware, MBNA Master Trust Prin. Coll.

45
<PAGE>

A/C, 4 Albany Street, New York, New York, Thrifty Rental Car, 4 Albany Street,
New York, New York were the beneficial owners of 9.33%, 7.65% and 7.65%,
respectively, of the Institutional Cash Reserves ; Arkansas Power and Light
Company, 4 Albany Street, New York, New York and Apex/AFS Escrow, 4 Albany
Street, New York, New York were beneficial owners of 6.79% and 6.19%,
respectively, of the Institutional Treasury Money Fund; and James Hardie (USA),
Inc. 241 Ridge Road, Reno, Nevada, First Deposit Master Trust, 88 Kearney
Street, San Francisco, California, The Money Store Collection A/C, 7 River Park
East, Fresno, California, and Individual Small Group Demographic Pool, 730
Broadway, New York, New York were beneficial owners of 5.46%, 5.94%, 12.33% and
5.30%, respectively, of the Institutional Cash Management Fund. Shareholders
owning 25% or more of the outstanding shares of a Fund may diminish the voting
power of other shareholders proportionately.

INVESTMENT ADVISER

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

Bankers Trust bears all expenses in connection with the performance of
services under the Advisory Agreement. The Trust and each Portfolio bears
certain other expenses incurred in its operation, including: taxes, interest,
brokerage fees and commissions, if any; fees of Trustees of the Trust or
Portfolio who are not officers, directors or employees of Bankers Trust,
Signature or any of their affiliates; SEC fees and state Blue Sky qualification
fees, if any; 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; and printing prospectuses and
statements of additional information for regulatory purposes and for
distribution to existing shareholders; costs of shareholders' reports and
meetings of shareholders, officers and Trustees of the Trust or the Portfolio;
and any extraordinary expenses.

For the years ended December 31, 1995, 1994 and 1993, Bankers Trust
earned $3,847,729, $3,807,085 and

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<PAGE>

$2,687,216 , respectively, in compensation for investment advisory services
provided to Cash Management Portfolio. During the same periods, Bankers Trust
reimbursed $578,251, $537,651 and $54,176, respectively, to Cash Management
Portfolio to cover expenses.

For the period ended December 31, 1995, the year ended December 31,
1994 and the period June 7, 1993 (commencement of operations) through December
31, 1993, Bankers Trust earned $127,704, $22,347 and $7,355, respectively, in
compensation for investment advisory services provided to Liquid Assets
Portfolio. During the same periods, Bankers Trust reimbursed $178,381, $44,908
and $27,897, respectively, to Liquid Assets Portfolio to cover expenses.

For the years ended December 31, 1995, 1994 and 1993, Bankers Trust
earned $1,764,890, $1,176,759 and $1,676,140 , respectively, in compensation for
investment advisory services provided to Treasury Money Portfolio. During the
same periods, Bankers Trust reimbursed $69,965, $65,359 and $55,599 ,
respectively, to Treasury Money Portfolio to cover expenses.

For the years ended December 31, 1995, 1994 and 1993, Bankers Trust
earned $180,724, $182,954 and $232,055 , respectively, in compensation for
investment advisory services provided to Tax Free Money Portfolio. During the
same periods, Bankers Trust reimbursed $31,541, $33,719 and $35,603 ,
respectively, to Tax Free Money Portfolio to cover expenses.

For the years ended December 31, 1995, 1994 and 1993, Bankers Trust
earned $125,340, $140,928 and $160,781 , respectively, in compensation for
investment advisory services provided to NY Tax Free Money Portfolio. During the
same periods, Bankers Trust reimbursed $29,751, $30,759 and $35,080 ,
respectively, to NY Tax Free Money Portfolio to cover expenses.

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

47
<PAGE>

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

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

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

48
<PAGE>

Fund's first $30 million of average annual net assets, 2.0% of the next $70
million of average annual net assets and 1.5% of the remaining average annual
net assets.

For the years ended December 31, 1995, 1994 and 1993, Bankers Trust
earned $327,340, $429,664 and $839,392 , respectively, in compensation for
administrative and other services provided to Institutional Cash Management Fund
and $274,216, $74,378 and $73,396 , respectively, in compensation for such
services provided to the Institutional Treasury Money Fund.

During the same periods, Bankers Trust reimbursed $129,230, $59,280 and
$230,842 , respectively, to the Institutional Cash Management Fund to cover
expenses and $340,378, $46,491 and $43,167 , respectively, to Institutional
Treasury Money Fund to cover expenses.

For the period December 11, 1995 (commencement of operations) to
December 31, 1995, Bankers Trust earned $38,038 in compensation for
administrative and other services provided to the Institutional Liquid Assets
Fund.

For the year ended December 31, 1995 and the period January 25, 1994
(commencement of operations) to December 31, 1994, Bankers Trust earned $462,879
and $414,739, respectively in compensation for administrative and other services
provided to the Institutional Cash Reserves. During the same periods, Bankers
Trust reimbursed $508,395 and $452,281, respectively to the Institutional Cash
Reserves to cover expenses.

As of the year ended December 31, 1995, the Institutional Tax Free
Money Fund and the Institutional NY Tax Free Money Fund have not commenced
investment operations and, therefore, paid no administrative services fees.

For the years ended December 31, 1995, 1994 and 1993 , Bankers Trust
earned compensation of $1,282,576, $1,269,028 and $895,738 , respectively, for
administrative and other services provided to the Cash Management Portfolio.

For the years ended December 31, 1995, 1994 and 1993 , Bankers Trust
earned compensation of $588,297, $392,252 and $558,713 , respectively, for
administrative and other services provided to the Treasury Money Portfolio.

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

49
<PAGE>

, Bankers Trust earned $60,241, $60,985 and $77,352 , respectively, for
administrative and other services provided to the Tax Free Money Portfolio.

For the years ended December 31, 1995, 1994 and 1993 , Bankers Trust
earned $41,780, $46,976 and $53,594 , respectively, for administrative and other
services provided to the NY Tax Free Money Portfolio.

CUSTODIAN AND TRANSFER AGENT

Bankers Trust, 280 Park Avenue, New York, New York 10017, serves as
custodian and transfer agent for the Trust and as custodian for each Portfolio
pursuant to the administration and services agreements discussed above. As
custodian, Bankers Trust holds the Funds' and each Portfolio's assets. For such
services, Bankers Trust receives monthly fees from each Fund and Portfolio,
which are included in the administrative services fees discussed above. As
transfer agent for the Trust, Bankers Trust maintains the shareholder account
records for each Fund, handles certain communications between shareholders and
the Trust and causes to be distributed any dividends and distributions payable
by the Trust. Bankers Trust is also reimbursed by the Funds for its
out-of-pocket expenses. Bankers Trust will comply with the self-custodian
provisions of Rule 17f-2 under the 1940 Act.

USE OF NAME

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

BANKING REGULATORY MATTERS

50
<PAGE>

regulations, might prevent Bankers Trust from continuing to perform those
services for the Trust or the Portfolios. If the circumstances described above
should change, the Trust's Board of Trustees would review the Trust's
relationship with Bankers Trust and consider taking all actions necessary in the
circumstances. In addition, state securities law on this issue may differ from
interpretations of Federal law as expressed herein and banks and financial
institutions may be required to register as dealer pursuant to state law.

COUNSEL AND INDEPENDENT ACCOUNTANTS

Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street,
New York, New York 10022-4669, serves as Counsel to the Trust and from time to
time provides certain legal services to Bankers Trust. Coopers & Lybrand L.L.P.,
1100 Main Street, Suite 900, Kansas City, Missouri 64105 has been selected as
Independent Accountants for the Trust.

ORGANIZATION OF THE TRUST AND PORTFOLIOS

The Trust was organized on March 15, 1990 as a series Trust.
The shares of each series participate equally in the earnings,
dividends and assets of the particular series. The Trust may create and issue
additional series of shares. The 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.

The Trust is not required to hold annual meetings of shareholders but
will hold special meetings of shareholders when in the judgement of the Trustees
it is necessary or desirable to submit matters for a shareholder vote.
Shareholders have under certain circumstances the right to communicate with
other shareholders in connection with requesting a meeting of shareholders for
the purpose of removing one or more Trustees without a meeting. Upon liquidation
of a Fund, shareholders of that Fund would be entitled to share pro rata in the
net assets of the Fund available for distribution to shareholders.

Massachusetts law provides that shareholders could under
certain circumstances be held personally liable for the

51
<PAGE>

obligations of the Trust. However, the Declaration of Trust disclaims
shareholder liability for acts or obligations of the Trust and requires that
notice of this disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Trust or a Trustee. The Declaration of Trust
provides for indemnification from the Trust's property for all losses and
expenses of any shareholder held personally liable for the obligations of the
Trust. Thus, the risk of shareholders incurring financial loss on account of
shareholder liability is limited to circumstances in which the Trust itself
would be unable to meet its obligations, a possibility that the Trust believes
is remote. Upon payment of any liability incurred by the Trust, the shareholder
paying the liability will be entitled to reimbursement from the general assets
of the Trust. The Trustees intend to conduct the operations of the Trust in a
manner so as to avoid, as far as possible, ultimate liability of the
shareholders for liabilities of the Trust.

Whenever the Trust is requested to vote on a matter pertaining to a
Portfolio, the Trust will vote its shares without a meeting of shareholders of
the respective Fund if the proposal is one, if which made with respect to a
Fund, would not require the vote of shareholders of that Fund as long as such
action is permissible under applicable statutory and regulatory requirements.
For all other matters requiring a vote, the Trust will hold a meeting of
shareholders of the respective Funds and, at the meeting of investors in a
Portfolio, the Trust will cast all of its votes in the same proportion as the
votes all its shares at the Portfolio meeting, other investors with a greater
pro rata ownership of the Portfolio could have effective voting control of the
operations of the Portfolio.

TAXES

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

As described above and in the Funds' Prospectus: (i) Institutional Cash
Management Fund, Institutional Treasury Money Fund , Institutional Cash Reserve
and the Institutional Liquid Assets Fund are designed to provide investors with
current income; (ii) Institutional Tax Free Money Fund is designed to provide
investors with current income excluded from gross income for Federal income tax
purposes and (iii) Institutional 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

52
<PAGE>

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

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

While each Fund does not expect to realize net long-term capital gains,
any such gains realized will be distributed annually as described in the Funds'
Prospectus. Such distributions ("capital gain dividends"), if any, will be
taxable to shareholders as long-term capital gains, regardless of how long a
shareholder has held Fund shares, and will be designated as capital gain
dividends in a written notice mailed by the Fund to shareholders after the close
of the Fund's prior taxable year.

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

Because the Institutional Tax Free Money Fund and Institutional 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

53
<PAGE>

shares of these Funds will not be deductible for Federal income and New York
State and New York City personal income tax purposes. In addition, the Code may
require a shareholder of these Funds, if he receives exempt-interest dividends,
to treat as taxable income a portion of certain otherwise nontaxable social
security and railroad retirement benefit payments. Furthermore, that portion of
any exempt-interest dividend paid by one of these Funds which represents income
from private activity bonds held by the Fund may not retain its tax-exempt
status in the hands of a shareholder who is a "substantial user" of a facility
financed by such bonds, or a "related person" thereof. Moreover, as noted in the
Prospectuses for these Funds, (i) some or all of a Fund's dividends and
distributions may be specific preference items, or a component of an adjustment
item, for purposes of the Federal individual and corporate alternative minimum
taxes and (ii) the receipt of a Fund's dividends and distributions may affect a
corporate shareholder's Federal "environmental" tax liability. In addition, the
receipt of Fund dividends and distributions may affect a foreign corporate
shareholder's Federal "branch profits" tax liability and a Subchapter S
corporate shareholder's Federal "excess net passive income" tax liability.
Shareholders should consult their own tax advisers as to whether they are (i)
"substantial users" with respect to a facility or "related" to such users within
the meaning of the Code and (ii) subject to a Federal alternative minimum tax,
the Federal "environmental" tax, the Federal "branch profits" tax or the Federal
"excess net passive income" tax.

Each Institutional Tax Free Money Fund shareholder will receive after the close
of the calendar year an annual statement as to the Federal income tax status of
his dividends and distributions from the Fund for the prior calendar year. Each
Institutional NY Tax Free Money Fund shareholder will receive after the close of
the calendar year an annual statement as to the Federal income and New York
State and City personal income tax status of his dividends and 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. Each
shareholder will also receive, if appropriate, various written notices after the
close of the Funds' prior taxable year as to the federal income status of his
dividends and distributions which were received from the Funds during the Funds'
prior taxable year. Shareholders should

54
<PAGE>

consult their tax advisers as to any state and local taxes that may apply to
these dividends and distributions. The dollar amount of dividends excluded from
Federal income taxation or exempt from New York State and City personal income
taxation, and the dollar amount subject to such income taxation, if any, will
vary for each shareholder depending upon the size and duration of each
shareholder's investment in a Fund. To the extent that the Funds earn taxable
net investment income, each of the Funds intends to designate as taxable
dividends the same percentage of each day's dividend as its taxable net
investment income bears to its total net investment income earned on that day.
Therefore, the percentage of each day's dividend designated as taxable, if any,
may vary from day to day.

PERFORMANCE INFORMATION

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

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

The yields are then calculated as follows:

Base Period Return = NET CHANGE IN ACCOUNT VALUE
Beginning Account Value

Current Yield = Base Period Return x 365/7

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

Tax Equivalent Yield = CURRENT YIELD
(1 - Tax Rate)

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<PAGE>

The following table sets forth various measures of the
performance for the indicated Funds for the seven days ended
December 31, 1995. (As of the date hereof, Institutional
Tax Free Money Fund and Institutional NY Money
Fund had not commenced investment
operations.)

Institutional Institutional Liquid Assets Fund
Cash Management Fund

Institutional Institutional Cash Reserves
Treasury Money

Fund
<S> <C> <C> <C> <C>

5.56% 5.35% 5.60% 5.47%
Current Yield

Effective Yield 5.71% 5.49% 5.75%
5.62%
</TABLE>

FINANCIAL STATEMENTS

The following financial statements are incorporated herein by reference
from the respective annual report dated December 31, 1995, as previously filed
with the SEC pursuant to Section 30(b) of the 1940 Act thereunder. A copy of
such reports will be provided, without charge, to each person receiving this
Statement of Additional Information.

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

<PAGE>

INSTITUTIONAL
LIQUID ASSETS FUND:
Statement of Assets and Liabilities, December 31, 1995
Statement of Operations for the period ended December 31, 1995
Statement of Changes in Net Assets for the period ended
December 31, 1995
Financial Highlights:
Selected ratios and supplemental data for
the period presented
Notes to Financial Statements
Report of Independent Accountants

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

57
<PAGE>

INSTITUTIONAL CASH MANAGEMENT FUND AND
INSTITUTIONAL TREASURY MONEY FUND:
Statement of Assets and Liabilities, December 31, 1995
Statement of Operations for the year ended December 31, 1995
Statements of Changes in Net Assets for the years ended
December 31, 1995 and 1994
Financial Highlights:
Supplemental data for each of the period presented
Notes to Financial Statements
Report of Independent Accountants

INSTITUTIONAL CASH RESERVES:
Statement of Assets and Liabilities, December 31, 1995
Statement of Operations for the year ended December 31, 1995
Statements of Changes in Net Assets for the year ended December 31,
1995 and the period January 25, 1994 (commencement of operations)
to December 31, 1994
Financial Highlights: Supplemental data for each of the periods
presented
Notes to Financial Statements
Report of Independent Accountants

<PAGE>

APPENDIX
DESCRIPTION OF SECURITIES RATINGS

DESCRIPTION OF S&P'S 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

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<PAGE>

is secure. While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the fundamentally
strong position of such issues.

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

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

DESCRIPTION OF FITCH INVESTORS SERVICE'S CORPORATE BOND RATINGS:

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

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

DESCRIPTION OF DUFF & PHELPS' CORPORATE BOND RATINGS:

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<PAGE>

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

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<PAGE>

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 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'S 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-2/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 INVESTORS SERVICE'S COMMERCIAL PAPER
RATINGS:

F-1+--Exceptionally Strong Credit Quality. Issues assigned
this rating are regarded as having the strongest degree of

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<PAGE>

assurance for timely payment.

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

DESCRIPTION OF DUFF & PHELPS' COMMERCIAL PAPER RATINGS:

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

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

DESCRIPTION OF IBCA'S LONG-TERM RATINGS:

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

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

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

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

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

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

CCC--Obligations for which there is a current perceived
possibility of default. Timely repayment of principal and

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<PAGE>

interest is dependent on favourable business, economic or
financial conditions.

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

C--Obligations which are currently in default.

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

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

DESCRIPTION OF IBCA'S SHORT-TERM RATINGS:

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

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

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

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

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

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

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

DESCRIPTION OF THOMSON BANK WATCH SHORT-TERM RATINGS:

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

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

TBW-3--The lowest investment-grade category; indicates that while the
obligation is more susceptible to adverse developments

65
<PAGE>

(both internal and external) than those with higher ratings, the capacity to
service principal and interest in a timely fashion is considered adequate.

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

DESCRIPTION OF THOMSON BANKWATCH LONG-TERM RATINGS:

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

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

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

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

NON-INVESTMENT GRADE
(ISSUES REGARDED AS HAVING SPECULATIVE CHARACTERISTICS IN THE LIKELIHOOD OF
TIMELY REPAYMENT OF PRINCIPAL AND INTEREST.)

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

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

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

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

D--Default

These long-term debt ratings can also be applied to local

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<PAGE>

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.

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<PAGE>

CONTENTS

Investment Objectives and Policies.................................. 3

Net Asset Value...................................................... 29

Purchase and Redemption Information................................ 31
Management of the Trust and Portfolios............................. 31
Organization of the Trust and Portfolios........................... 39
Taxes............................................................... 40
Performance Information.............................................. 42
Financial Statements................................................. 43

Appendix: Description of Securities Ratings........................ A-1

INVESTMENT ADVISER OF EACH PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY

DISTRIBUTOR
SIGNATURE BROKER-DEALER SERVICES, INC.

CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY

INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.

COUNSEL
WILLKIE FARR & GALLAGHER

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

No person has been authorized to give any information or to make any
representations other than those contained in the Fund's Prospectus, its
Statement of Additional Information or the Fund's official sales literature in
connection with the offering of the Fund's shares and, if given or made, such
other information or representations must not be relied on as having been
authorized by the Trust. This Prospectus does not constitute an offer in any
state in which, or to any person to whom, such offer may not lawfully be made.
--------------------

BT0440A

<PAGE>

STATEMENT OF
ADDITIONAL INFORMATION

JANUARY 16, 1996, AS AMENDED APRIL 29, 1996

BT ADVISOR FUNDS -- INSTITUTIONAL CLASS SHARES

U.S. BOND INDEX FUND
EQUITY 500 EQUAL WEIGHTED INDEX FUND
SMALL CAP INDEX FUND
EAFE(R) EQUITY INDEX FUND
INSTITUTIONAL EQUITY 500 INDEX FUND

BT Advisor Funds (the "Trust") is comprised of ten funds. The funds
listed above (with the exception of Institutional Equity 500 Index Fund) (each,
a "Fund") are each a series of the Trust and offers two classes of shares (each
a "Class" and collectively the "Classes"). This Statement of Additional
Information describes the Institutional Class Shares. Institutional Equity 500
Index Fund (the "Equity 500 Index Fund") is a series of the BT Institutional
Funds (together with the Trust, the "Trusts").

As described in the Prospectus, the Trusts seek to achieve the
investment objectives of each Fund by investing all the investable assets
("Assets") of the Fund in a diversified open-end management investment company
(or a series thereof) having the same investment objectives as such Fund. These
investment companies are, respectively, Equity 500 Index Portfolio and BT
Investment Portfolios. U. S. Bond Index Portfolio, Equity 500 Equal Weighted
Index Portfolio, Small Cap Index Portfolio and EAFE(R) Equity Index Portfolio
are each a series of BT Investment Portfolios.
<PAGE>

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

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

The Trusts' Prospectus for the Funds is dated January 16, 1996, as
amended April 29, 1996. The Prospectus provides the basic information investors
should know before investing and may be obtained without charge by calling the
Trust at the telephone number listed below or by contacting your Investment
Professional. This Statement of Additional Information, 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 Funds' Prospectus. This Statement of Additional Information is not an offer
of any Fund for which an investor has not received a Prospectus. Capitalized
terms not otherwise defined in this Statement of Additional Information have the
meanings accorded to them in the Fund's Prospectus.

2
<PAGE>

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

6 ST. JAMES AVENUE BOSTON, MASSACHUSETTS 02116 (800) 368-4031

3
<PAGE>

RISK FACTORS AND CERTAIN SECURITIES AND INVESTMENT PRACTICES

INVESTMENT OBJECTIVES

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

INVESTMENT PRACTICES

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

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

For a description of commercial paper ratings, see the Appendix A to
this Statement of Additional Information.

4
<PAGE>

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

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

The Adviser will monitor the liquidity of Rule 144A securities in each
Portfolio's portfolio under the supervision of the Portfolio's Board of
Trustees. In reaching liquidity decisions, the Adviser will consider, among
other things, the following factors: (i) the frequency of trades and quotes for
the security; (ii) the number of dealers and other potential

5
<PAGE>

purchasers wishing to purchase or sell the security; (iii) dealer undertakings
to make a market in the security and (iv) the nature of the security and of the
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers and the mechanics of the transfer).

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

SHORT-TERM INSTRUMENTS. When a Portfolio experiences large cash inflows
through the sale of securities and desirable equity securities, that are
consistent with the Portfolio's investment objective, which are unavailable in
sufficient quantities or at attractive prices, the Portfolio may hold short-term
investments for a limited time pending availability of such equity securities.
Short-term instruments consist of foreign and domestic: (i) short-term
obligations of sovereign governments, their agencies, instrumentalities,
authorities or political subdivisions; (ii) other short-term debt securities
rated AA or higher by S&P or Aa or higher by Moody's or, if unrated, of
comparable quality in the opinion of Bankers Trust; (iii) commercial paper; (iv)
bank obligations, including negotiable certificates of deposit, time deposits
and banker's acceptances; and (v) repurchase agreements. At the time the
Portfolio invests in commercial paper, bank obligations or repurchase
agreements, the issuer of the issuer's parent must have outstanding debt rated
AA or higher by S&P or Aa or higher by Moody's or outstanding commercial paper
or bank obligations rated A-1 by S&P

6
<PAGE>

or Prime-1 by Moody's; or, if no such ratings are available, the instrument must
be of comparable quality in the opinion of Bankers Trust. These instruments may
be denominated in U.S dollars or in foreign currencies.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. Each Portfolio may
purchase securities on a when-issued or delayed delivery basis. For example,
delivery of and payment for these securities can take place a month or more
after the date of the purchase commitment. The purchase price and the interest
rate payable, if any, on the securities are fixed on the purchase commitment
date or at the time the settlement date is fixed. The value of such securities
is subject to market fluctuation and no interest accrues to a Portfolio until
settlement takes place. At the time a Portfolio makes the commitment to purchase
securities on a when-issued or delayed delivery basis, it will record the
transaction, reflect the value each day of such securities in determining its
net asset value and, if applicable, calculate the maturity for the purposes of
average maturity from that date. At the time of settlement a when-issued
security may be valued at less than the purchase price. To facilitate such
acquisitions, each Portfolio will maintain with the Custodian a segregated
account with liquid assets, consisting of cash, U.S. Government securities or
other appropriate securities, in an amount at least equal to such commitments.
On delivery dates for such transactions, each Portfolio will meet its
obligations from maturities or sales of the securities held in the segregated
account and/or from cash flow. If a Portfolio chooses to dispose of the right to
acquire a when-issued security prior to its acquisition, it could, as with the
disposition of any other portfolio obligation, incur a gain or loss due to
market fluctuation. It is the current policy of each Portfolio not to enter into
when-issued commitments exceeding in the aggregate 15% of the market value of
the Portfolio's total assets, less liabilities other than the obligations
created by when-issued commitments.

ADDITIONAL U.S. GOVERNMENT OBLIGATIONS. Each Portfolio may invest in
obligations issued or guaranteed by U.S. Government agencies or
instrumentalities. These obligations may or may not be backed by the "full faith
and credit" of the United States. In the case of securities not backed by the
full faith and credit of the United States, each Portfolio must look principally
to the federal agency issuing or guaranteeing the obligation for ultimate
repayment, and may not be able to assert a claim against the United States
itself in the event the agency or instrumentality does not meet its commitments.
Securities in which each Portfolio may invest that are not backed by the full
faith and credit of the United States include, but are not limited to,
obligations of the Tennessee Valley Authority, the Federal Home Loan Mortgage
Corporation and the U.S. Postal Service, each of which has the right to borrow
from the U.S. Treasury to meet its obligations, and obligations of the Federal
Farm Credit System and the Federal Home Loan Banks, both of whose

7
<PAGE>

obligations may be satisfied only by the individual credits of each issuing
agency. Securities which are backed by the full faith and credit of the United
States include obligations of the Government National Mortgage Association, the
Farmers Home
Administration, and the Export-Import Bank.

EQUITY INVESTMENTS. With the exception of the U.S. Bond Index
Portfolio, each Portfolio may invest in equity securities listed on any domestic
or foreign securities exchange or traded in the over-the-counter market as well
as certain restricted or unlisted securities. They may or may not pay dividends
or carry voting rights. Common stock occupies the most junior position in a
company's capital structure.

SWAP AGREEMENTS. Swap agreements are contracts entered into by two
parties, primarily institutional investors, for periods ranging from a few weeks
to more than one year. In a standard swap transaction, two parties agree to
exchange the returns (or differentials in rates of return) earned or realized on
particular predetermined investments or instruments. The gross returns to be
exchanged or swapped between the parties are calculated with respect to a
notional amount, I.E., the return on or increase in value of a particular dollar
amount invested at a particular interest rate, in a particular foreign currency,
or in a basket of securities representing a particular index. The notional
amount of the swap agreement is only a fictive basis on which to calculate the
obligations which the parties to a swap agreement have agreed to exchange. A
Portfolio's obligations (or rights) under a swap agreement will generally be
equal only to the net amount to be paid or received under the agreement based on
the relative values of the positions held by each party to the agreement (the
"net amount"). A Portfolio's obligations under a swap agreement will be accrued
daily (offset against any amounts owing to the Portfolio) and any accrued but
unpaid net amounts owed to a swap counterparty will be covered by the
maintenance of a segregated account consisting of cash, U.S. Government
securities, or high grade debt obligations, to avoid any potential leveraging of
the Portfolio's portfolio.

The use of swap agreements will be successful in furthering its
investment objective will depend on the Adviser's ability to correctly predict
whether certain types of investments are likely to produce greater returns than
other investments. Swap agreements may be considered to be illiquid because they
are two party contracts and because they may have terms of greater than seven
days. Moreover, a Portfolio bears the risk of loss of the amount expected to be
received under a swap agreement in the event of the default or bankruptcy of a
swap agreement counterparty. A Portfolio will enter into swap agreements only
with counterparties that would be eligible for consideration as repurchase
agreement counterparties under the Portfolio's repurchase agreement guidelines.
Certain restrictions imposed on the Portfolios by the Internal Revenue Code may
limit the Portfolios' ability to use swap agreements. The swaps market is

8
<PAGE>

a relatively new market and is largely unregulated. It is possible that
developments in the swaps market, including potential government regulation,
could adversely affect a Portfolio's ability to terminate existing swap
agreements or to realize amounts to be received under such agreements.

Certain swap agreements are exempt from most provisions of the
Commodity Exchange Act (the "CEA") and, therefore, are not regulated as futures
or commodity option transactions under the CEA, pursuant to regulations approved
by the Commodity Futures Trading Commission (the "CFTC") effective February 22,
1993. To qualify for this exemption, a swap agreement must be entered into by
eligible participants, which includes the following, provided the participant's
total assets exceed established levels: a bank or trust company, savings
association or credit union, insurance company, investment company subject to
regulation under the Investment Company Act of 1940, as amended (the "1940
Act"), commodity pool, corporation, partnership, proprietorship, organization,
trust or other entity, employee benefit plan, governmental entity,
broker-dealer, futures commission merchant, natural person, or regulated foreign
person. To be eligible, natural persons and most other entities must have total
assets exceeding $10 million; commodity pools and employee benefit plans must
have asset exceeding $5 million. In addition, an eligible swap transaction must
meet three conditions. First, the swap agreement may not be part of a fungible
class of agreements that are standardized as to their material economic terms.
Second, the creditworthiness of parties with actual or potential obligations
under the swap agreement must be a material consideration in entering into or
determining the terms of the swap agreement, including pricing, cost or credit
enhancement terms. Third, swap agreements may not be entered into and traded on
or through a multilateral transaction execution facility.

This exemption is not exclusive, and participants may continue to rely
on existing exclusions for swaps, such as the Policy Statement issued in July
1989 which recognized a "safe harbor" for swap transactions from regulation as
futures or commodity option transactions under the CEA or its regulations. The
Policy Statement applies to swap transactions settled in cash that: (i) have
individually tailored terms; (ii) lack exchange style offset and the use of a
clearing organization or margin system; (iii) are undertaken in conjunction with
a line of business; and (iv) are not marketed to the public.

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

9
<PAGE>

debt obligations having a value equal to the repurchase price, including accrued
interest. Reverse repurchase agreements involve the risk that the market value
of the securities sold by a Portfolio may decline below the repurchase price of
those securities. Reverse repurchase agreements are considered to be borrowings
by a Portfolio.

WARRANTS. Warrants entitle the holder to buy common stock from the
issuer at a specific price (the strike price) for a specific period of time. The
strike price of warrants sometimes is much lower than the current market price
of the underlying securities, yet warrants are subject to similar price
fluctuations. As a result, warrants may be more volatile investments than the
underlying securities.

Warrants do not entitle the holder to dividends or voting rights with
respect to the underlying securities and do not represent any rights in the
assets of the issuing company. Also, the value of the warrant does not
necessarily change with the value of the underlying securities and a warrant
ceases to have value if it is not exercised prior to the expiration date.

CONVERTIBLE SECURITIES. Convertible securities may be a debt security
or preferred stock which may be converted into common stock or carries the right
to purchase common stock. Convertible securities entitle the holder to exchange
the securities for a specified number of shares of common stock, usually of the
same company, at specified prices within a certain period of time.

The terms of any convertible security determine its ranking in a
company's capital structure. In the case of subordinated convertible debentures,
the holders' claims on assets and earnings are subordinated to the claims of
other creditors, and are senior to the claims of preferred and common
shareholders. In the case of convertible preferred stock, the holders' claims on
assets and earnings are subordinated to the claims of all creditors and are
senior to the claims of common shareholders.

GINNIE MAE CERTIFICATES. Ginnie Mae is a wholly-owned corporate
instrumentality of the United States within the Department of Housing and Urban
Development. The National Housing Act of 1934, as amended (the "Housing Act"),
authorizes Ginnie Mae to guarantee the timely payment of the principal of and
interest on certificates that are based on and backed by a pool of mortgage
loans insured by the Federal Housing Administration under the Housing Act, or
Title V of the Housing Act of 1949 ("FHA Loans"), or guaranteed by the
Department of Veterans Affairs under the Servicemen's Readjustment Act of 1944,
as amended ("VA Loans"), or by pools of other eligible mortgage loans. The
Housing Act provides that the full faith and credit of the U.S. Government is
pledged to the payment of all amounts that may be required to be paid under any
GNMA guaranty. In order to meet its obligations under such guaranty, Ginnie Mae
is

10
<PAGE>

authorized to borrow from the U.S. Treasury with no limitations
as to amount.

The Ginnie Mae Certificates in which the U.S. Bond Index Portfolio will
invest will represent a pro rata interest in one or more pools of the following
types of mortgage loans: (i) fixed-rate level payment mortgage loans; (ii)
fixed-rate graduated payment mortgage loans; (iii) fixed-rate growing equity
mortgage loans; (iv) fixed-rate mortgage loans secured by manufactured (mobile)
homes; (v) mortgage loans on multifamily residential properties under
construction; (vi) mortgage loans on completed multifamily projects; (vii)
fixed-rate mortgage loans as to which escrowed funds are used to reduce the
borrower's monthly payments during the early years of the mortgage loans
("buydown" mortgage loans); (viii) mortgage loans that provide for adjustments
in payments based on periodic changes in interest rates or in other payment
terms of the mortgage loans; and (ix) mortgage-backed serial notes. All of these
mortgage loans will be FHA Loans or VA Loans and, except as otherwise specified
above, will be fully-amortizing loans secured by first liens on one- to
four-family housing units.

FANNIE MAE CERTIFICATES. Fannie Mae is a federally
chartered and privately owned corporation organized and existing
under the Federal National Mortgage Association Charter Act of
1938. The obligations of FNMA are not backed by the full faith
and credit of the U.S. Government.

Each Fannie Mae Certificate will represent a pro rata interest in one
or more pools of FHA Loans, VA Loans or conventional mortgage loans (I.E.,
mortgage loans that are not insured or guaranteed by any governmental agency) of
the following types: (i) fixed-rate level payment mortgage loans; (ii)
fixed-rate growing equity mortgage loans; (iii) fixed-rate graduated payment
mortgage loans; (iv) variable rate mortgage loans; (v) other adjustable rate
mortgage loans; and (vi) fixed-rate and adjustable mortgage loans secured by
multifamily projects.

FREDDIE MAC CERTIFICATES. Freddie Mac is a corporate instrumentality of
the United States created pursuant to the Emergency Home Finance Act of 1970, as
amended (the "FHLMC Act").
The obligations of Freddie Mac are obligations solely of Freddie Mac and are
not backed by the full faith and credit of the U.S. Government.

Freddie Mac Certificates represent a pro rata interest in a group of
mortgage loans (a "Freddie Mac Certificate group") purchased by Freddie Mac. The
mortgage loans underlying the Freddie Mac Certificates will consist of
fixed-rate or adjustable rate mortgage loans with original terms to maturity of
between ten and thirty years, substantially all of which are secured by first
liens on one-to four-family residential properties or multifamily projects. Each
mortgage loan must meet the

11
<PAGE>

applicable standards set forth in the FHLMC Act. A Freddie Mac Certificate group
may include whole loans, participating interests in whole loans and undivided
interests in whole loans and participations comprising another Freddie Mac
Certificate group.

ADJUSTABLE RATE MORTGAGES - INTEREST RATE INDICES. Adjustable rate
mortgages in which the U.S. Bond Index Portfolio invests may be adjusted on the
basis of one of several indices. The One Year Treasury Index is the figure
derived from the average weekly quoted yield on U.S. Treasury Securities
adjusted to a constant maturity of one year. The Cost of Funds Index reflects
the monthly weighted average cost of funds of savings and loan associations and
savings banks whose home offices are located in Arizona, California and Nevada
(the "FHLB Eleventh District") that are member institutions of the Federal Home
Loan Bank of San Francisco (the "FHLB of San Francisco"), as computed from
statistics tabulated and published by the FHLB of San Francisco. The FHLB of San
Francisco normally announces the Cost of Funds Index on the last working day of
the month following the month in which the cost of funds was incurred.

A number of factors affect the performance of the Cost of Funds Index
and may cause the Cost of Funds Index to move in a manner different from indices
based upon specific interest rates, such as the One Year Treasury Index. Because
of the various origination dates and maturities of the liabilities of members of
the FHLB Eleventh District upon which the Cost of Funds Index is based, among
other things, at any time the Cost of Funds Index may not reflect the average
prevailing market interest rates on new liabilities of similar maturities. There
can be no assurance that the Cost of Funds Index will necessarily move in the
same direction or at the same rate as prevailing interest rates since as longer
term deposits or borrowings mature and are renewed at market interest rates, the
Cost of Funds Index will rise or fall depending upon the differential between
the prior and the new rates on such deposits and borrowings. In addition,
dislocations in the thrift industry in recent years have caused and may continue
to cause the cost of funds of thrift institutions to change for reasons
unrelated to changes in general interest rate levels. Furthermore, any movement
in the Cost of Funds Index as compared to other indices based upon specific
interest rates may be affected by changes instituted by the FHLB of San
Francisco in the method used to calculate the Cost of Funds Index. To the extent
that the Cost of Funds Index may reflect interest changes on a more delayed
basis than other indices, in a period of rising interest rates, any increase may
produce a higher yield later than would be produced by such other indices, and
in a period of declining interest rates, the Cost of Funds Index may remain
higher than other market interest rates which may result in a higher level of
principal prepayments on mortgage loans which adjust in accordance with the Cost
of Funds Index than mortgage loans which adjust in accordance with other
indices.

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<PAGE>

LIBOR, the London interbank offered rate, is the interest rate that the
most creditworthy international banks dealing in U.S. dollar-denominated
deposits and loans charge each other for large dollar-denominated loans. LIBOR
is also usually the base rate for large dollar-denominated loans in the
international market. LIBOR is generally quoted for loans having rate
adjustments at one, three, six or twelve month intervals.

ASSET-BACKED SECURITIES. The asset-backed securities in which the U.S.
Bond Index Portfolio may invest are limited to those which are readily
marketable, dollar-denominated and rated BBB or higher by Standard & Poor's
Corporation ("S&P") or Baa or higher by Moody's Investors Services, Inc.
("Moody's"). Asset-backed securities present certain risks that are not
presented by mortgage-backed securities. Primarily, these securities do not have
the benefit of the same type of security interest in the related collateral.
Credit card receivables are generally unsecured and the debtors are entitled to
the protection of a number of state and federal consumer credit laws, many of
which give such debtors the right to avoid payment of certain amounts owed on
the credit cards, thereby reducing the balance due. Most issuers of automobile
receivables permit the servicer to retain possession of the underlying
obligations. If the servicer were to sell these obligations to another party,
there is a risk that the purchaser would acquire an interest superior to that of
the holders of the related automobile receivables. In addition, because of the
large number of vehicles involved in a typical issuance and technical
requirements under state laws, the trustee for the holders of the automobile
receivables may not have a proper security interest in all of the obligations
backing such receivables. Therefore, there is the possibility that recoveries on
repossessed collateral may not, in some cases, be available to support payments
on these securities.

MORTGAGE-BACKED SECURITIES AND ASSET-BACKED SECURITIES--TYPES OF CREDIT
SUPPORT. The mortgage-backed securities in which the U.S. Bond Index Portfolio
may invest are limited to those relating to residential mortgages.
Mortgage-backed securities and asset-backed securities are often backed by a
pool of assets representing the obligations of a number of different parties. To
lessen the effect of failure by obligors on underlying assets to make payments,
such securities may contain elements of credit support. Such credit support
falls into two categories: (i) liquidity protection and (ii) protection against
losses resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the pass-through of
payments due on the underlying pool occurs in a timely fashion. Protection
against losses resulting from ultimate default enhances the likelihood of
ultimate payment of the obligations on at least a portion of the assets in the
pool. Such protection may be provided through guarantees, insurance

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<PAGE>

policies or letters of credit obtained by the issuer or sponsor from third
parties, through various means of structuring the transaction or through a
combination of such approaches. The U.S. Bond Index Portfolio will not pay any
additional fees for such credit support, although the existence of credit
support may increase the price of a security.

The ratings of mortgage-backed securities and asset-backed securities
for which third-party credit enhancement provides liquidity protection or
protection against losses from default are generally dependent upon the
continued creditworthiness of the provider of the credit enhancement. The
ratings of such securities could be subject to reduction in the event of
deterioration in the creditworthiness of the credit enhancement provider even in
cases where the delinquency and loss experience on the underlying pool of assets
is better than expected.

Examples of credit support arising out of the structure of the
transaction include "senior-subordinated securities" (multiple class securities
with one or more classes subordinate to other classes as to the payment of
principal thereof and interest thereon, with the result that defaults on the
underlying assets are borne first by the holders of the subordinated class),
creation of "reserve funds" (where cash or investments, sometimes funded from a
portion of the payments on the underlying assets, are held in reserve against
future losses) and "over-collateralization" (where the scheduled payments on, or
the principal amount of, the underlying assets exceed those required to make
payment of the securities and pay any servicing or other fees). The degree of
credit support provided for each issue is generally based on historical
information with respect to the level of credit risk associated with the
underlying assets. Delinquency or loss in excess of that which is anticipated
could adversely affect the return on an investment in such a security.

STRIPPED MORTGAGE-BACKED SECURITIES. The cash flows and yields on IO
and PO classes are extremely sensitive to the rate of principal payments
(including prepayments) on the related underlying mortgage assets. For example,
a rapid or slow rate of principal payments may have a material adverse effect on
the yield to maturity of IOs or POs, respectively. If the underlying mortgage
assets experience greater than anticipated prepayments of principal, an investor
may fail to recoup fully its initial investment in an IO class of a stripped
mortgage-backed security, even if the IO class is rated AAA or Aaa. Conversely,
if the underlying mortgage assets experience slower than anticipated prepayments
of principal, the yield on a PO class will be affected more severely than would
be the case with a traditional mortgage-backed security.

FOREIGN SECURITIES: SPECIAL CONSIDERATIONS CONCERNING HONG
KONG, MALAYSIA, SINGAPORE AND JAPAN. Many Asian countries may be
subject to a greater degree of social, political and economic
instability than is the case in the United States and European

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<PAGE>

countries. Such instability may result from (i) authoritarian governments or
military involvement in political and economic decision-making; (ii) popular
unrest associated with demands for improved political, economic and social
conditions; (iii) internal insurgencies; (iv) hostile relations with neighboring
countries; and (v) ethnic, religious and racial disaffection.

The economies of most of the Asian countries are heavily dependent upon
international trade and are accordingly affected by protective trade barriers
and the economic conditions of their trading partners, principally, the United
States, Japan, China and the European Community. The enactment by the United
States or other principal trading partners of protectionist trade legislation,
reduction of foreign investment in the local economies and general declines in
the international securities markets could have a significant adverse effect
upon the securities markets of the Asian countries.

Hong Kong's impending return to Chinese dominion in 1997 has not
initially had a positive effect on its economic growth which was vigorous in the
1980s. However, authorities in Beijing have agreed to maintain a capitalist
system for 50 years that, along with Hong Kong's economic growth, continued to
further strong stock market returns. In preparation for 1997, Hong Kong has to
develop trade with China, where it is the largest foreign investor, while also
maintaining its longstanding export relationship with the United States.
Spending on infrastructure improvements is a significant priority of the
colonial government while the private sector continues to diversify abroad based
on its position as an established international trade center in the Far East.

The Hong Kong stock market is undergoing a period of growth and change
which may result in trading volatility and difficulties in the settlement and
recording of transactions, and in interpreting and applying the relevant law and
regulations.

The Malaysian economy continued to perform well, growing at an average
annual rate of 9% from 1987 through 1991. This placed Malaysia as one of the
fastest growing economies in the Asian-Pacific region. Malaysia has become the
world's third-largest producer of semiconductor devices (after the US and Japan)
and the world's largest exporter of semiconductor devices.
More remarkable is the country's ability to achieve rapid economic growth with
relative price stability (2% inflation over the past five years) as the
government followed prudent fiscal/monetary policies. Malaysia's high export
dependence level leaves it vulnerable to a recession in the Organization for
Economic Cooperation and Development countries or a fall in world commodity
prices.

Singapore has an open entrepreneurial economy with strong service and
manufacturing sectors and excellent international trading links derived from its
entrepot history. During the

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<PAGE>

1970's and early 1980's, the economy expanded rapidly, achieving an average
annual growth rate of 9%. Per capita GDP is among the highest in Asia. Singapore
holds a position as a major oil refining and services center.

Investing in Japanese securities may involve the risks associated with
investing in foreign securities generally. In addition, because it invests in
Japan, the EAFE(R) Equity Index Portfolio will be subject to the general
economic and political conditions in Japan.

Share prices of companies listed on Japanese stock exchanges and on the
Japanese OTC market reached historical peaks (which were later referred to as
the "bubble") as well as historically high trading volumes in 1989 and 1990.
Since then, stock prices in both markets decreased significantly, with listed
stock prices reaching their lowest levels in the third quarter of 1992 and OTC
stock prices reaching their lowest levels in the fourth quarter of 1992. During
the period from January 1, 1989 through December 31, 1994, the highest Nikkei
stock average and Nikkei OTC average were 38,915.87 and 4,149.20, respectively,
and the lowest for each were 14,309.41 and 1,099.32, respectively. There can be
no assurance that additional market corrections will not occur.

The common stocks of many Japanese companies continue to trade at high
price earnings ratios in comparison with those in the United States, even after
the recent market decline. Differences in accounting methods make it difficult
to compare the earnings of Japanese companies with those of companies in other
countries, especially the United States.

Since the EAFE(R) Equity Index Portfolio invests in securitieS
denominated in yen, changes in exchange rates between the U.S. dollar and the
yen affect the U.S. dollar value of the EAFE(R) Equity Index Portfolio's assets.
Such rate of exchange is determined by forces of supply and demand on the
foreign exchange markets. These forces are in turn affected by the international
balance of payments and other economic, political and financial conditions,
government intervention, speculation and other factors.

Japanese securities held by the EAFE(R) Equity Index PortfoliO are not
registered with the SEC nor are the issuers thereof subject to its reporting
requirements. There may be less publicly available information about issuers of
Japanese securities than about U.S. companies and such issuers may not be
subject to accounting, auditing and financial reporting standards and
requirements comparable to those to which U.S. companies are subject.

Japan's success in exporting its products has generated a sizeable
trade surplus. Such trade surplus has caused tensions at times between Japan and
some of its trading partners. In particular, Japan's trade relations with the
United States have

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<PAGE>

recently been the subject of discussion and negotiation between the two nations.
The United States has imposed certain measures designed to address trade issues
in specific industries. These measures and similar measures in the future may
adversely affect the performance of the EAFE(R) Equity Index Portfolio.

Japan's economy has typically exhibited low inflation and low interest
rates. There can be no assurance that low inflation and low interest rates will
continue, and it is likely that a reversal of such factors would adversely
affect the Japanese economy. Moreover, the Japanese economy may differ,
favorably or unfavorably, from the U.S. economy in such respects as growth of
gross national product, rate of inflation, capital reinvestment, resources,
self-sufficiency and balance of payments position.

Japan has a parliamentary form of government. In 1993 a coalition
government was formed which, for the first time since 1955, did not include the
Liberal Democratic Party. Since mid-1993, there have been several changes in
leadership in Japan. What, if any, effect the current political situation will
have on prospective regulatory reforms of the economy in Japan cannot be
predicted. Recent and future developments in Japan and neighboring Asian
countries may lead to changes in policy that might adversely affect the EAFE(R)
Equity Index Portfolio.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

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

Successful use of the futures contract and related options are subject
to special risk considerations. A liquid secondary market for any futures or
options contract may not be available when a futures or options position is
sought to be closed. In addition, there may be an imperfect correlation between
movements in the securities or currency in the Portfolio. Successful use of
futures or options contracts is further dependent on Bankers Trust's ability to
correctly predict movements in the securities or foreign currency markets and no
assurance can be given that its judgement will be correct. Successful use of
options on securities or stock indices are subject to similar risk
considerations. In addition, by writing covered call options, the Portfolio
gives up the opportunity, while the option is in

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<PAGE>

effect, to profit from any price increase in the underlying securities above the
options exercise price.

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

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

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

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<PAGE>

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

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

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<PAGE>

speculators, the margin deposit requirements in the futures market are less
onerous than margin requirements in the securities market. Therefore, increased
participation by speculators in the futures market may cause temporary price
distortions. Due to the possibility of distortion, a correct forecast of general
interest rate trends by the Adviser may still not result in a successful
transaction.

In addition, futures contracts entail risks. Although the Adviser
believes that use of such contracts will benefit the Portfolios, if the
Adviser's investment judgment about the general direction of interest rates is
incorrect, a Portfolio's overall performance would be poorer than if it had not
entered into any such contract. For example, if a Portfolio has hedged against
the possibility of an increase in interest rates which would adversely affect
the price of debt securities held in its portfolio and interest rates decrease
instead, the Portfolio will lose part or all of the benefit of the increased
value of its debt securities which it has hedged because it will have offsetting
losses in its futures positions. In addition, in such situations, if a Portfolio
has insufficient cash, it may have to sell debt securities from its portfolio to
meet daily variation margin requirements. Such sales of bonds may be, but will
not necessarily be, at increased prices which reflect the rising market. A
Portfolio may have to sell securities at a time when it may be disadvantageous
to do so.

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

The writing of a call option on a futures contract constitutes a
partial hedge against declining prices of the underlying security or foreign
currency which is deliverable upon exercise of the futures contract. If the
futures price at expiration of the option is below the exercise price, a
Portfolio will retain the full amount of the option premium which provides a
partial hedge against any decline that may have occurred in the Portfolio's
portfolio holdings. The writing of a put option on a futures contract
constitutes a partial hedge against increasing prices of the underlying security
or foreign currency which is deliverable upon exercise of the futures contract.
If the futures price at expiration of the option is higher than the exercise
price, the Portfolio will retain the full amount of the option premium which
provides a partial hedge against any

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<PAGE>

increase in the price of securities which the Portfolio intends to purchase. If
a put or call option the Portfolio has written is exercised, the Portfolio will
incur a loss which will be reduced by the amount of the premium it receives.
Depending on the degree of correlation between changes in the value of its
portfolio securities and changes in the value of its futures positions, the
Portfolio's losses from existing options on futures may to some extent be
reduced or increased by changes in the value of portfolio securities.

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

The amount of risk a Portfolio assumes when it purchases an option on a
futures contract is the premium paid for the option plus related transaction
costs. In addition to the correlation risks discussed above, the purchase of an
option also entails the risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the option purchased.

The Board of Trustees of each Portfolio has adopted the requirement
that futures contracts and options on futures contracts be used as a hedge and
may also use stock index futures on continual basis to equitize cash so that the
fund may maintain 100% equity exposure. In addition to this requirement, the
Board of Trustees of each Portfolio has also adopted a restriction that the
Portfolio will not enter into any futures contracts or options on futures
contracts if immediately thereafter the amount of margin deposits on all the
futures contracts of the Portfolio and premiums paid on outstanding options on
futures contracts owned by the Portfolio (other than those entered into for bona
fide hedging purposes) would exceed 5% of the market value of the total assets
of the Portfolio.

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

Conversely, where a rise in the dollar value of a currency

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<PAGE>

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

The EAFE(R) Equity Index Portfolio may write options on foreign
currencies for the same types of hedging purposes. For example, where the
Portfolio anticipates a decline in the dollar value of foreign currency
denominated securities due to adverse fluctuations in exchange rates it could,
instead of purchasing a put option, write a call option on the relevant
currency. If the expected decline occurs, the options will most likely not be
exercised, and the diminution in value of portfolio securities will be offset by
the amount of the premium received.

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

The EAFE(R) Equity Index Portfolio intends to write covered call
options on foreign currencies. A call option written on a foreign currency by
the Portfolio is "covered" if the Portfolio owns the underlying foreign currency
covered by the call or has an absolute and immediate right to acquire that
foreign currency without additional cash consideration (or for additional cash
consideration held in a segregated account by its Custodian) upon conversion or
exchange of other foreign currency held in its portfolio. A call option is also
covered if the Portfolio has a call on the same foreign currency and in the same
principal amount as the call written where the exercise price of the call held
(a) is equal to or less than the exercise price of the call written or (b) is
greater than the exercise price of the call

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<PAGE>

written if the difference is maintained by the Portfolio in cash, U.S.
Government securities and other high quality liquid debt securities in a
segregated account with its custodian.

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

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

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

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<PAGE>

the event of adverse market movements.

The purchase and sale of exchange-traded foreign currency options,
however, is subject to the risks of the availability of a liquid secondary
market described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
political and economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the OCC may, if it determines
that foreign governmental restrictions or taxes would prevent the orderly
settlement of foreign currency option exercises, or would result in undue
burdens on the OCC or its clearing member, impose special procedures on exercise
and settlement, such as technical changes in the mechanics of delivery of
currency, the fixing of dollar settlement prices or prohibitions on exercise.

As in the case of forward contracts, certain options on foreign
currencies are traded over-the-counter and involve liquidity and credit risks
which may not be present in the case of exchange-traded currency options. A
Portfolio's ability to terminate over-the-counter options will be more limited
than with exchange-traded options. It is also possible that broker-dealers
participating in over-the-counter options transactions will not fulfill their
obligations. Until such time as the staff of the SEC changes its position, each
Portfolio will treat purchased over-the-counter options and assets used to cover
written over-the-counter options as illiquid securities. With respect to options
written with primary dealers in U.S. Government securities pursuant to an
agreement requiring a closing purchase transaction at a formula price, the
amount of illiquid securities may be calculated with reference to the repurchase
formula.

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

OPTIONS ON SECURITIES. Each Portfolio may write (sell)
covered call and put options to a limited extent on its portfolio

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<PAGE>

securities ("covered options") in an attempt to increase income. However, the
Portfolio may forgo the benefits of appreciation on securities sold or may pay
more than the market price on securities acquired pursuant to call and put
options written by the Portfolio.

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

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

A Portfolio may terminate its obligation as the writer of a call or put
option by purchasing an option with the same exercise price and expiration date
as the option previously written. This transaction is called a "closing purchase
transaction." The Portfolio will realize a profit or loss for a closing purchase
transaction if the amount paid to purchase an option is less or more, as the
case may be, than the amount received from the sale thereof. To close out a
position as a purchaser of an option, the Portfolio, may make a "closing sale
transaction" which involves liquidating the Portfolio's position by selling the
option previously purchased. Where the Portfolio cannot effect a closing
purchase transaction, it may be forced to incur brokerage commissions or dealer
spreads in selling securities it receives or it may be forced to hold underlying
securities until an option is exercised or expires.

When a Portfolio writes an option, an amount equal to the
net premium received by the Portfolio is included in the

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<PAGE>

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

A Portfolio may purchase call and put options on any securities in
which it may invest. The Portfolio would normally purchase a call option in
anticipation of an increase in the market value of such securities. The purchase
of a call option would entitle the Portfolio, in exchange for the premium paid,
to purchase a security at a specified price during the option period. The
Portfolio would ordinarily have a gain if the value of the securities increased
above the exercise price sufficiently to cover the premium and would have a loss
if the value of the securities remained at or below the exercise price during
the option period.

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

Each Portfolio has adopted certain other nonfundamental policies
concerning option transactions which are discussed

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<PAGE>

below. The Portfolio's activities in options may also be restricted by the
requirements of the Internal Revenue Code of 1986, as amended (the "Code"), for
qualification as a regulated investment company.

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

A Portfolio may engage in over-the-counter options transactions with
broker-dealers who make markets in these options. At present, approximately ten
broker-dealers, including several of the largest primary dealers in U.S.
Government securities, make these markets. The ability to terminate
over-the-counter option positions is more limited than with exchange-traded
option positions because the predominant market is the issuing broker rather
than an exchange, and may involve the risk that broker-dealers participating in
such transactions will not fulfill their obligations. To reduce this risk, the
Portfolio will purchase such options only from broker-dealers who are primary
government securities dealers recognized by the Federal Reserve Bank of New York
and who agree to (and are expected to be capable of) entering into closing
transactions, although there can be no guarantee that any such option will be
liquidated at a favorable price prior to expiration. The Adviser will monitor
the creditworthiness of dealers with whom the Portfolio enters into such options
transactions under the general supervision of the Portfolios' Trustees.

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

EAFE(R) Equity Index Portfolio may, to the extent allowed by Federal
and state securities laws, invest in securities indices instead of investing
directly in individual foreign securities.

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

Use of options on securities indices also entails the risk

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<PAGE>

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

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

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. Because each Portfolio may
buy and sell securities denominated in currencies other than the U.S. dollar and
receives interest, dividends and sale proceeds in currencies other than the U.S.
dollar, each Portfolio from time to time may enter into foreign currency
exchange transactions to convert to and from different foreign currencies and to
convert foreign currencies to and from the U.S. dollar. A Portfolio either
enters into these transactions on a spot (I.E., cash) basis at the spot rate
prevailing in the foreign currency exchange market or uses forward contracts to
purchase or sell foreign currencies.

A forward foreign currency exchange contract is an obligation by a
Portfolio to purchase or sell a specific currency at a future date, which may be
any fixed number of days from the date of the contract. Forward foreign currency
exchange contracts establish an exchange rate at a future date. These contracts
are transferable in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. A forward foreign
currency exchange contract generally has no deposit requirement and is traded at
a net price without commission. Each Portfolio maintains with its custodian a
segregated account of high grade liquid assets in an amount at least equal to
its obligations under each forward foreign currency exchange contract. Neither
spot transactions nor forward foreign currency exchange contracts eliminate
fluctuations in the prices of the Portfolio's securities or in foreign exchange
rates, or prevent loss if the prices of these securities should decline.

Each Portfolio may enter into foreign currency hedging transactions in
an attempt to protect against changes in foreign currency exchange rates between
the trade and settlement dates of specific securities transactions or changes in
foreign currency exchange rates that would adversely affect a portfolio position
or an anticipated investment position. Since consideration of the prospect for
currency parities will be incorporated into Bankers Trust's long-term investment
decisions, a Portfolio will not routinely enter into foreign currency hedging
transactions with respect to security transactions; however, Bankers Trust

28
<PAGE>

believes that it is important to have the flexibility to enter into foreign
currency hedging transactions when it determines that the transactions would be
in the Portfolio's best interest. Although these transactions tend to minimize
the risk of loss due to a decline in the value of the hedged currency, at the
same time they tend to limit any potential gain that might be realized should
the value of the hedged currency increase. The precise matching of the forward
contract amounts and the value of the securities involved will not generally be
possible because the future value of such securities in foreign currencies will
change as a consequence of market movements in the value of such securities
between the date the forward contract is entered into and the date it matures.
The projection of currency market movements is extremely difficult, and the
successful execution of a hedging strategy is highly uncertain.

While these contracts are not presently regulated by the CFTC, the CFTC
may in the future assert authority to regulate forward contracts. In such event
the Portfolio's ability to utilize forward contracts in the manner set forth in
the Prospectus may be restricted. Forward contracts may reduce the potential
gain from a positive change in the relationship between the U.S. dollar and
foreign currencies. Unanticipated changes in currency prices may result in
poorer overall performance for the Portfolio than if it had not entered into
such contracts. The use of foreign currency forward contracts may not eliminate
fluctuations in the underlying U.S. dollar equivalent value of the prices of or
rates of return on a Portfolio's foreign currency denominated portfolio
securities and the use of such techniques will subject a Portfolio to certain
risks.

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

RATING SERVICES

29
<PAGE>

investments, Bankers Trust also makes its own evaluation of these securities,
subject to review by the Board of Trustees. After purchase by a Portfolio, an
obligation may cease to be rated or its rating may be reduced below the minimum
required for purchase by the Portfolio. Neither event would require a Fund to
eliminate the obligation from its portfolio, but Bankers Trust will consider
such an event in its determination of whether a Fund should continue to hold the
obligation. A description of the ratings used herein and in the Funds'
Prospectus is set forth in the Appendix A herein.

INVESTMENT RESTRICTIONS

The following investment restrictions are "fundamental policies" of
each Fund and each Portfolio and may not be changed with respect to the Fund or
the Portfolio without the approval of a "majority of the outstanding voting
securities" of the Fund or the Portfolio, as the case may be. "Majority of the
outstanding voting securities" under the 1940 Act, and as used in this Statement
of Additional Information and the Prospectus, means, with respect to the Fund
(or the Portfolio), the lesser of (i) 67% or more of the outstanding voting
securities of the Fund (or of the total beneficial interests of the Portfolio)
present at a meeting, if the holders of more than 50% of the outstanding voting
securities of the Fund or of the total beneficial interests of the Portfolio)
are present or represented by proxy or (ii) more than 50% of the outstanding
voting securities of the Fund (or of the total beneficial interests of the
Portfolio). Whenever the Trust is requested to vote on a fundamental policy of a
Portfolio, the Trust will hold a meeting of the corresponding Fund's
shareholders and will cast its vote as instructed by that Fund's shareholders.
Fund shareholders who do not vote will not affect the Trust's votes at the
Portfolio meeting. The percentage of the Trust's votes representing Fund
shareholders not voting will be voted by the Trustees of the Trust in the same
proportion as the Fund shareholders who do, in fact, vote.

As a matter of fundamental policy, no Portfolio (or Fund) may (except
that no investment restriction of a Fund shall prevent a Fund from investing all
of its Assets in an open-end investment company with substantially the same
investment objectives):

(1) borrow money or mortgage or hypothecate assets of the Portfolio
(Fund), except that in an amount not to exceed 1/3 of the current value of the
Portfolio's (Fund's) assets, it may borrow money as a temporary measure for
extraordinary or emergency purposes and enter into reverse repurchase agreements
or dollar roll transactions, and except that it may pledge, mortgage or
hypothecate not more than 1/3 of such assets to secure such borrowings (it is
intended that money would be borrowed only from banks and only either to
accommodate requests for the withdrawal of beneficial interests (redemption of
shares)

30
<PAGE>

while effecting an orderly liquidation of portfolio securities or to maintain
liquidity in the event of an unanticipated failure to complete a portfolio
security transaction or other similar situations) or reverse repurchase
agreements, provided that collateral arrangements with respect to options and
futures, including deposits of initial deposit and variation margin, are not
considered a pledge of assets for purposes of this restriction and except that
assets may be pledged to secure letters of credit solely for the purpose of
participating in a captive insurance company sponsored by the Investment Company
Institute; for additional related restrictions, see clause (i) under the caption
"State and Federal Restrictions" below (as an operating policy, the Portfolios
may not engage in dollar roll transactions);

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

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

(5) concentrate its investments in any particular industry
(excluding U.S. Government securities), but if it is deemed
appropriate for the achievement of a Portfolio's (Fund's)
investment objective(s), up to 25% of its total assets may be
invested in any one industry; and

31
<PAGE>

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

(i) borrow money (including through reverse repurchase or forward
roll transactions) for any purpose in excess of 5% of the
Portfolio's (Fund's) total assets (taken at cost), except that
the Portfolio (Fund) may borrow for temporary or emergency
purposes up to 1/3 of its total assets;

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

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

(iv) sell securities it does not own such that the dollar amount of
such short sales at any one time exceeds 25% of the net equity
of the Portfolio (Fund), and the value of securities of any
one issuer in which the Portfolio (Fund) is short exceeds the
lesser of 2.0% of the value of the Portfolio's (Fund's) net
assets or 2.0% of the securities of any class of any U.S.
issuer and, provided that short sales may be made only in
those securities which are fully listed on a national
securities exchange or a foreign exchange (This provision does
not include the sale of securities of the Portfolio (Fund)
contemporaneously owns or has the right to obtain securities
equivalent in kind and amount to those sold, i.e., short sales
against the box.) (the Portfolios (Funds) have no current
intention to engage in short selling);

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

(vi) purchase securities issued by any investment company

32
<PAGE>

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

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

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

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<PAGE>

categories by one nationally recognized statistical rating
agency and the Portfolio's (Fund's) Board of Trustees have
determined that the commercial paper is equivalent quality and
is liquid;

(ix) no more than 5% of the Portfolio's (Fund's) total assets are
invested in securities issued by issuers which (including
predecessors) have been in operation less than three years;

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

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<PAGE>

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

(xiii) invest in warrants (other than warrants acquired by the
Portfolio (Fund) as part of a unit or attached to securities
at the time of purchase) if, as a result, the investments
(valued at the lower of cost or market) would exceed 5% of the
value of the Portfolio's (Fund's) net assets or if, as a
result, more than 2% of the Portfolio's (Fund's) net assets
would be invested in warrants not listed on a recognized
United States or foreign stock exchange, to the extent
permitted by applicable state securities laws;

(xiv) write puts and calls on securities unless each of the
following conditions are met: (a) the security underlying the
put or call is within the Investment Practices of the
Portfolio (Fund) and the option is issued by the Options
Clearing Corporation, except for put and call options issued
by non-U.S. entities or listed on non-U.S. securities or
commodities exchanges; (b) the aggregate value of the
obligations underlying the puts determined as of the date the
options are sold shall not exceed 5% of the Portfolio's
(Fund's) net assets; (c) the securities subject to the
exercise of the call written by the Portfolio (Fund) must be
owned by the Portfolio (Fund) at the time the call is sold and
must continue to be owned by the Portfolio (Fund) until the
call has been exercised, has lapsed, or the Portfolio (Fund)
has purchased a closing call, and such

35
<PAGE>

purchase has been confirmed, thereby extinguishing the
Portfolio's (Fund's) obligation to deliver securities pursuant
to the call it has sold; and (d) at the time a put is written,
the Portfolio (Fund) establishes a segregated account with its
custodian consisting of cash or short-term U.S. Government
securities equal in value to the amount the Portfolio (Fund)
will be obligated to pay upon exercise of the put (this
account must be maintained until the put is exercised, has
expired, or the Portfolio (Fund) has purchased a closing put,
which is a put of the same series as the one previously
written); and

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

There will be no violation of any investment restriction if that
restriction is complied with at the time the relevant action is taken
notwithstanding a later change in market value of an investment, in net or total
assets, in the securities rating of the investment, or any other later change.

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

PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS

The Adviser is responsible for decisions to buy and sell securities,
futures contracts and options on such securities and futures for each Portfolio,
the selection of brokers, dealers and futures commission merchants to effect
transactions and the

36
<PAGE>

negotiation of brokerage commissions, if any. Broker-dealers may receive
brokerage commissions on portfolio transactions, including options, futures and
options on futures transactions and the purchase and sale of underlying
securities upon the exercise of options. Orders may be directed to any
broker-dealer or futures commission merchant, including to the extent and in the
manner permitted by applicable law, Bankers Trust or its subsidiaries or
affiliates. Purchases and sales of certain portfolio securities on behalf of a
Portfolio are frequently placed by the Adviser with the issuer or a primary or
secondary market-maker for these securities on a net basis, without any
brokerage commission being paid by the Portfolio. Trading does, however, involve
transaction costs. Transactions with dealers serving as market-makers reflect
the spread between the bid and asked prices. Transaction costs may also include
fees paid to third parties for information as to potential purchasers or sellers
of securities. Purchases of underwritten issues may be made which will include
an underwriting fee paid to the underwriter.

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

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

37
<PAGE>

qualified broker-dealers for similar services.

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

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

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

For the years ended December 31, 1995, 1994 and 1993, Equity 500 Index
Portfolio paid brokerage commissions in the amount of $172,924, $97,069 and
$63,408, respectively.

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<PAGE>

PERFORMANCE INFORMATION

STANDARD PERFORMANCE INFORMATION

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

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

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

TOTAL RETURN: A Fund's average annual total return is calculated for
certain periods by determining the average annual compounded rates of
return over those periods that would cause an investment of $1,000
(made at the maximum public offering price with all distributions
reinvested) to reach the value of that investment at the end of the
periods. A Fund may also calculate total return figures which represent
aggregate performance over a period or year-by-year performance.

PERFORMANCE RESULTS: Any total return quotation provided for a Fund
should not be considered as representative of the performance of the
Fund in the future since the net asset value and public offering price
of shares of the Fund will vary based not only on the type, quality and
maturities of the securities held in the corresponding Portfolio, but
also

39
<PAGE>

on changes in the current value of such securities and on changes in
the expenses of the Fund and the corresponding Portfolio. These factors
and possible differences in the methods used to calculate total return
should be considered when comparing the total return of a Fund to total
returns published for other investment companies or other investment
vehicles. Total return reflects the performance of both principal and
income.

COMPARISON OF FUND PERFORMANCE

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

In connection with communicating its performance to current or
prospective shareholders, a Fund also may compare these figures to the
performance of other mutual funds tracked by mutual fund rating services or to
unmanaged indices which may assume reinvestment of dividends but generally do
not reflect deductions for administrative and management costs.

Evaluations of a Fund's performance made by independent sources may
also be used in advertisements concerning the Fund. Sources for a Fund's
performance information could include the following:

ASIAN WALL STREET JOURNAL, a weekly Asian newspaper that often reviews
U.S. mutual funds investing internationally.

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

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

CHANGING TIMES, THE KIPLINGER MAGAZINE, a monthly investment advisory
publication that periodically features the performance of a variety of
securities.

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

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

FINANCIAL WORLD, a general business/financial magazine that

40
<PAGE>

includes a "Market Watch" department reporting on activities in
the mutual fund industry.

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

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

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

INVESTOR'S DAILY, a daily newspaper that features financial, economic
and business news.

LIPPER ANALYTICAL SERVICES, INC.'S MUTUAL FUND PERFORMANCE
ANALYSIS, a weekly publication of industry-wide mutual fund
averages by type of fund.

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

MORNINGSTAR INC., a publisher of financial information and mutual fund
research.

NEW YORK TIMES, a nationally distributed newspaper which regularly
covers financial news.

PERSONAL INVESTING NEWS, a monthly news publication that often reports
on investment opportunities and market conditions.

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

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

U.S. NEWS AND WORLD REPORT, a national business weekly that
periodically reports mutual fund performance data.

VALUE LINE, a biweekly publication that reports on the largest 15,000
mutual funds.

WALL STREET JOURNAL, a Dow Jones and Company, Inc.
newspaper which regularly covers financial news.

WEISENBERGER INVESTMENT COMPANIES SERVICES, an annual compendium of
information about mutual funds and other investment companies, including
comparative data on funds' backgrounds,

41
<PAGE>

management policies, salient features, management results, income and dividend
records, and price ranges.

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

VALUATION OF SECURITIES; REDEMPTIONS AND PURCHASES IN KIND

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

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

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

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

The Trust, on behalf of each Fund, and each Portfolio

42
<PAGE>

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

Each Portfolio has agreed to make a redemption in kind to the
corresponding Fund whenever the Fund wishes to make a redemption in kind and
therefore shareholders of the Fund that receive redemptions in kind will receive
portfolio securities of the corresponding Portfolio and in no case will they
receive a security issued by the Portfolio. The Portfolio has advised the Trust
that the Portfolio will not redeem in kind except in circumstances in which the
Fund is permitted to redeem in kind or unless requested by the Fund.

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

43
<PAGE>

Each Fund may, at its own option, accept securities in payment for
shares. The securities delivered in payment for shares are valued by the method
described under "Net Asset Value" as of the day the Fund receives the
securities. This is a taxable transaction to the shareholder. Securities may be
accepted in payment for shares only if they are, in the judgment of Bankers
Trust, appropriate investments for the Fund's corresponding Portfolio. In
addition, securities accepted in payment for shares must: (i) meet the
investment objective and policies of the acquiring Fund's corresponding
Portfolio; (ii) be acquired by the applicable Fund for investment and not for
resale (other than for resale to the Fund's corresponding Portfolio); (iii) be
liquid securities which are not restricted as to transfer either by law or
liquidity of market; and (iv) if stock, have a value which is readily
ascertainable as evidenced by a listing on a stock exchange, over-the-counter
market or by readily available market quotations from a dealer in such
securities. When securities are used as payment for shares or as a redemption in
kind from the fund, the transaction fee will not be assessed. However, the
shareholder will be charged the costs associated with receiving or delivering
the securities. These costs include security movement costs and taxes and
registration costs. Each Fund reserves the right to accept or reject at its own
option any and all securities offered in payment for its shares.

MANAGEMENT OF THE TRUSTS AND THE PORTFOLIOS

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

TRUSTEES OF THE BT ADVISOR FUNDS

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

44
<PAGE>

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

MARTIN J. GRUBER (age 58) -- Trustee; Chairman of the
Finance Department and Nomura Professor of Finance, Leonard N.
Stern School of Business, New York University (since 1964).

BRUCE E. LANGTON (age 64) -- 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.

RICHARD J. HERRING (age 50) -- Trustee; Professor, Finance
Department, The Wharton School, University of Pennsylvania. His
address is The Wharton School, University of Pennsylvania Finance
Department, 3303 Steinberg Hall/Dietrich Hall, Philadelphia,

Pennsylvania 19104.

HARRY VAN BENSCHOTEN (age 68) -- Trustee; retired (since 1987);
Corporate Vice President, Newmont Mining Corporation (prior to 1987); Director,
Canada Life Insurance Company of New York and Competitive Technologies, Inc., a
public company listed on the American Stock Exchange. His address is 6581
Ridgewood Drive, Naples, Florida 33963.

TRUSTEES OF BT INSTITUTIONAL FUNDS

Lane, Chappaqua, New York 10514.

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

RICHARD J. HERRING (age 50) -- Trustee; Professor, Finance
Department, The Wharton School, University of Pennsylvania. His
address is The Wharton School, University of Pennsylvania Finance
Department, 3303 Steinberg Hall/Dietrich Hall, Philadelphia,
Pennsylvania 19104.

45
<PAGE>

TRUSTEES OF THE PORTFOLIOS

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

Lane, Chappaqua, New York 10514.

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

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

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

OFFICERS OF THE TRUSTS AND PORTFOLIOS

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

JOHN R. ELDER (age 47) - Treasurer; Vice President, SFG (since April,
1995); Treasurer, Phoenix Family of Mutual Funds (prior to April, 1995); Audit
Manager, Price Waterhouse (prior to 1983).

46
<PAGE>

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

BARBARA M. O'DETTE (age 36) -- Assistant Treasurer; Assistant
Treasurer, SFG (since December, 1988) and Signature (since April, 1989);
Administrative Controller, Massachusetts Financial Services Company (prior to
December, 1988).

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

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

Ropes & Gray (prior to November, 1989).

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

MOLLY S. MUGLER (age 44) -- Assistant Secretary; Legal Counsel and
Assistant Secretary, SFG (since December, 1988); Assistant Secretary, Signature
(since April, 1989).

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

No person who is an officer or director of Bankers Trust is an officer
or Trustee of the Trusts or the Portfolios. No director, officer or employee of
Signature or any of its affiliates will receive any compensation from the Trusts
or the Portfolios for serving as an officer or Trustee of the Trusts or the
Portfolios. Each Portfolio and International Equity, Capital Appreciation, Cash
Management, Treasury Money, Tax Free Money, NY

47
<PAGE>

Tax Free Money, Utility, Short/Intermediate U.S. Government Securities,
Intermediate Tax Free, Asset Management and BT Investment Portfolios (together
with the Trusts, the "Fund Complex") collectively pay each Trustee who is not a
director, officer or employee of the Adviser, the Distributor, the Administrator
or any of their affiliates an annual fee of $10,000, respectively, per annum
plus $1,250, respectively, per meeting attended and reimburses them for travel
and out-of-pocket expenses.

For the year ended December 31, 1995, the Equity 500 Index Fund
incurred Trustees fees equal to $6,491. For the year ended December 31, 1995,
the Equity 500 Index Portfolio incurred
Trustees fees of $1,868.

Bankers Trust reimbursed the Equity 500 Index Fund and Equity 500 Index
Portfolio for a portion of its their Trustees fees for the period above. See
"Investment

Adviser" and "Administrator" below.

As of March 31, 1996, the Trustees and officers of the Trusts and the
Portfolios owned in the aggregate less than 1% of the shares of any Fund or
Trust (all series taken together). As of March 31, 1996, Bankers Trust, on
behalf of its customers, was the record owner of 30.54% of the outstanding
shares of the EAFE(R) Equity Index Fund. As of the same date, Pacificorp Master
Retirement Trust, 700 N.E. Multinomah St., Portland, Oregon and Fox Family
Portfolio Partnership, 1015 Locust Street, St. Louis, Missouri were the
beneficial owners of 47.31% and 21.91% of the outstanding share of the EAFE(R)
Equity Index Fund. Sharholders owning 25% or more of the outstanding shares of
the Fund may diminish the voting power of other shareholders proportionately.

The following table reflects fees paid to the Trustees of BT
Institutional Funds (the "Institutional Trust") and Portfolio for
the year ended December 31, 1995.

TRUSTEE COMPENSATION TABLE

AGGREGATE TOTAL COMPENSATION
NAME OF PERSON, COMPENSATION FROM FUND
COMPLEX
POSITION FROM TRUST PAID TO
TRUSTEES

Richard J. Herring,
Trustee of Institutional
Trust $12,500 $12,500

Bruce E. Langton,
Trustee of Institutional
Trust $12,500 $12,500

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<PAGE>

Charles P. Biggar,
Trustee of Portfolio and
Institutional Trust none $12,500

S. Leland Dill,
Trustee of Portfolio none $12,500

Philip Saunders, Jr.,
Trustee of Portfolio none $12,500

INVESTMENT ADVISER

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

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

For the years ended December 31, 1995, 1994 and 1993, Bankers Trust
accrued $770,530, $428,346 and $74,893, respectively, in compensation for
investment advisory services provided to the Equity 500 Index Portfolio. During
the same periods, Bankers Trust reimbursed $418,814, $249,230 and $72,112,
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

49
<PAGE>

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.

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

ADMINISTRATOR

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

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<PAGE>

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

For the years ended December 31, 1995, 1994 and 1993, Bankers Trust
earned $270,327, $139,997 and $36,735, respectively as compensation for
administrative and other services provided to Equity 500 Index Fund. During the
same periods, Bankers Trust reimbursed $421,776, $194,084 and $112,866,
respectively, to Equity 500 Index Fund to cover expenses.

For the years ended December 31, 1995, 1994 and 1993, Bankers Trust
earned $385,265, $214,173 and $37,446, respectively, as compensation for
administrative and other services provided to the Equity 500 Index Portfolio.

Bankers Trust has agreed that if in any fiscal year the aggregate
expenses of any Fund and its respective Portfolio (including fees pursuant to
the Advisory Agreement, but excluding interest, taxes, brokerage and, if
permitted by the relevant state securities commissions, extraordinary expenses)
exceed the expense limitation of any state having jurisdiction over a Fund or
Class, Bankers Trust will reimburse that Fund for the excess expense to the
extent required by state law. As of the date of this Statement of Additional
Information, the most restrictive annual expense limitation applicable to any
Fund or Class is 2.50% of the Fund's or Class' first $30 million of average
annual net assets, 2.00% of the next $70 million of average annual net assets
and 1.50% of the remaining average annual net assets.

CUSTODIAN AND TRANSFER AGENT

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

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<PAGE>

USE OF NAME

The Trusts and Bankers Trust have agreed that each Trust may use "BT"
as part of its name for so long as Bankers Trust serves as investment adviser to
the Portfolios. The Trusts have 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.

Each 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 each Trust, but
there would be no other material effect on the Trusts, their shareholders or
activities.

BANKING REGULATORY MATTERS

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

COUNSEL AND INDEPENDENT ACCOUNTANTS

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

ORGANIZATION OF THE TRUSTS

Shares of each 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

52
<PAGE>

to the election of Trustees and the ratification of the selection
of independent accountants.

Massachusetts law provides that shareholders could under certain
circumstances be held personally liable for the obligations of each Trust.
However, each Trust's Declaration of Trust disclaims shareholder liability for
acts or obligations of the respective 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. The Declaration of Trust provides for
indemnification from each Trust's property for all losses and expenses of any
shareholder held personally liable for the obligations of each Trust. Thus, the
risk of a shareholder's incurring financial loss on account of shareholder
liability is limited to circumstances in which each Trust itself would be unable
to meet its obligations, a possibility that a 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
respective 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 that Trust.

TAXATION

TAXATION OF THE FUNDS

The Trust intends to qualify annually and to elect each Fund to be
treated as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code").

<PAGE>

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

<PAGE>

, and therefore does not anticipate incurring a Federal income tax liability.

DISTRIBUTIONS

TAXATION OF THE PORTFOLIOS

55
<PAGE>

The Portfolios are not subject to 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.

Distributions received by a Fund from the corresponding Portfolio
generally will not result in the Fund recognizing any gain or loss for Federal
income tax purposes, except that: (i) gain will be recognized to the extent that
any cash distributed exceeds the Fund's basis in its interest in the Portfolio
prior to the distribution; (ii) income or gain may be realized if the
distribution is made in liquidation of the Fund's entire interest in the
Portfolio and includes a disproportionate share of any unrealized receivables
held by the Portfolio; and (iii) loss may be recognized if the distribution is
made in liquidation of the Fund's entire interest in the Portfolio and consists
solely of cash and/or unrealized receivables. A Fund's basis in its interest in
the corresponding Portfolio generally will equal the amount of cash and the
basis of any property which the Fund invests in the Portfolio, increased by the
Fund's share of income from the Portfolio, and decreased by the amount of any
cash distributions and the basis of any property distributed from the Portfolio.

SALE OF SHARES

Any gain or loss realized by a shareholder upon the sale or other
disposition of shares of a Class of the Fund, or upon receipt of a distribution
in complete liquidation of a Fund, generally will be a capital gain or loss
which will be long-term or short-term, generally depending upon the
shareholder's holding period for the shares. Any loss realized on a sale or
exchange will be disallowed to the extent the shares disposed of are replaced
(including shares acquired pursuant to a dividend reinvestment plan) within a
period of 61 days beginning 30 days before and ending 30 days after disposition
of the shares. In such a case, the basis of the shares acquired will be adjusted
to reflect the disallowed loss. Any loss realized by a shareholder on a
disposition of a Class' shares held by the shareholder for six months or less
will be treated as a long-term capital loss to the extent of any distributions
of net capital gains received by the shareholder with respect to such shares.

FOREIGN WITHHOLDING TAXES

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

BACKUP WITHHOLDING

56
<PAGE>

FOREIGN SHAREHOLDERS

OTHER TAXATION

Each Trust is organized as a Massachusetts business trust and, under
current law, neither the Trusts nor any Fund is liable for any income or
franchise tax in the Commonwealth of Massachusetts, provided that the Fund
continues to qualify as a regulated investment company under Subchapter M of the
Code. The investment by each Fund in the corresponding Portfolio does not cause
the Fund to be liable for any income or franchise tax in the State of New York.

BT Investment Portfolios and Equity 500 Index Portfolio are each a New
York master trust fund. Each Portfolio is not subject to any income or franchise
tax in the State of New York or the Commonwealth of Massachusetts.

<PAGE>

FINANCIAL STATEMENTS

The Statement of Assets and Liabilities and report of Independent Accountants
for each Fund and Portfolio, except the Equity 500 Index Fund and Equity 500
Index

Portfolio, are attached hereto.

The following financial statements for the Equity 500 Index Fund and Equity 500
Index Portfolio are incorporated herein by reference from its current reports to
shareholders filed with the SEC pursuant to Section 30(b) of the 1940 Act and
Rule 30b2-1 thereunder. A copy of each such report will be provided, without
charge, to each person receiving this

58
<PAGE>

Statement of Additional Information.

EQUITY 500 INDEX FUND

Statement of Assets and Liabilities, December 31,
1995
Statement of Operations for the Year Ended December 31,
1995
Statements of Changes in Net Assets for the
Years Ended
December 31, 1995 and 1994

Financial Highlights: Selected Ratios and Supplemental
Data for

each of the periods presented

Notes to Financial Statements
Report of Independent Accountants

EQUITY 500 INDEX PORTFOLIO

Statement of Assets and Liabilities, December 31,
1995
Statement of Operations for the Year Ended December 31,
1995
Statements of Changes in Net Assets for the
Years Ended
December 31, 1995 and 1994

Financial Highlights: Selected Ratios and Supplemental
Data for

each of the periods presented
Schedule of Portfolio Investments, December 31,
1995

Notes to Financial Statements
Report of Independent Accountants

<PAGE>

BT ADVISOR FUNDS --
INSTITUTIONAL U.S. BOND INDEX FUND
STATEMENT OF ASSETS AND LIABILITIES

JANUARY 2, 1996

ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . . .$ 10
Deferred organization expenses . . . . . . . . . . . . 9,000
Total assets . . . . . . . . . . . . . . . . . 9,010

LIABILITIES:
Accrued organization expenses . . . . . . . . . . . . 9,000
Net assets . . . . . . . . . . . . . . . . . .$ 10

NET ASSET VALUE PER SHARE OF BENEFICIAL
INTEREST ($10.00 / 1 SHARES OUTSTANDING) . . . . . . . . . $10.00

NOTES:

(1) BT Advisor Funds, a Massachusetts business trust (the "Trust"), was
organized on July 24, 1995 and has been inactive since that date with
respect to Institutional U.S. Bond Index Fund (the "Fund") except for
matters relating to the organization of the Trust, the Fund's
establishment and designation as a series of the Trust, and the
registration under the Securities Act of 1933 of the Fund's shares of
beneficial interest ("Shares") and the sale of one Share ("Initial
Shares") of the Fund to Signature Financial Group, Inc. ("SFG"). The
Trust will invest all of the Fund's investable assets in U.S. Bond
Index Portfolio (the "Portfolio"), a series of BT Investment
Portfolios, an investment company registered under the Investment
Company Act of 1940, as amended. The Fund is one of ten series of the
Trust.

Initial Shares of the Fund redeemed to the number of the Initial Shares
of the Fund then outstanding after taking into account any prior
redemptions of the Initial Shares of the Fund. The amount of such
reduction in excess of the unamortized organization expenses of the
Fund shall be contributed by the Fund to the Portfolio.

(3) The Trust has entered into an Administration and Services Agreement
with Bankers Trust Company under which Bankers Trust Company provides
administration, custody and transfer agency services to the Trust.
<PAGE>

BT ADVISOR FUNDS --
INSTITUTIONAL EQUITY 500 EQUAL WEIGHTED INDEX FUND
STATEMENT OF ASSETS AND LIABILITIES

JANUARY 2, 1996

ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . . .$ 10
Deferred organization expenses . . . . . . . . . . . . 9,000
Total assets . . . . . . . . . . . . . . . . . 9,010

LIABILITIES:
Accrued organization expenses . . . . . . . . . . . . 9,000
Net assets . . . . . . . . . . . . . . . . . .$ 10

NET ASSET VALUE PER SHARE OF BENEFICIAL
INTEREST ($10.00 / 1 SHARES OUTSTANDING) . . . . . . . . . $10.00

NOTES:

(1) BT Advisor Funds, a Massachusetts business trust (the "Trust"), was
organized on July 24, 1995 and has been inactive since that date with
respect to Institutional Equity 500 Equal Weighted Index Fund (the
"Fund") except for matters relating to the organization of the Trust,
the Fund's establishment and designation as a series of the Trust, and
the registration under the Securities Act of 1933 of the Fund's shares
of beneficial interest ("Shares") and the sale of one Share ("Initial
Shares") of the Fund to Signature Financial Group, Inc. ("SFG"). The
Trust will invest all of the Fund's investable assets in Equity 500
Equal Weighted Portfolio (the "Portfolio"), a series of BT Investment
Portfolios, an investment company registered under the Investment
Company Act of 1940, as amended. The Fund is one of ten series of the
Trust.

(2) Organization expenses of the Fund are being deferred and will be
amortized on a straight-line basis over a period not to exceed five
years from the commencement of investment operations of the Fund. The
amount paid by the Trust on any redemption by SFG or any other
then-current holder of the Initial Shares of the Fund will be reduced
by a portion of any unamortized organization expenses of the Fund and
the Portfolio, determined by the proportion of the number of the
Initial Shares of the Fund redeemed to the number of the Initial Shares
of the Fund then outstanding after taking into account any prior
redemptions of the Initial Shares of the Fund. The amount of such
reduction in excess of the unamortized organization expenses of the
Fund shall be contributed by the Fund to the Portfolio.

BT ADVISOR FUNDS --
INSTITUTIONAL SMALL CAP INDEX FUND
STATEMENT OF ASSETS AND LIABILITIES

JANUARY 2, 1996

ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . . .$ 10
Deferred organization expenses . . . . . . . . . . . . 9,000
Total assets . . . . . . . . . . . . . . . . . 9,010

LIABILITIES:
Accrued organization expenses . . . . . . . . . . . . 9,000
Net assets . . . . . . . . . . . . . . . . . .$ 10

NET ASSET VALUE PER SHARE OF BENEFICIAL
INTEREST ($10.00 / 1 SHARES OUTSTANDING) . . . . . . . . . $10.00

NOTES:

(1) BT Advisor Funds, a Massachusetts business trust (the "Trust"), was
organized on July 24, 1995 and has been inactive since that date with
respect to Institutional Small Cap Index Fund (the "Fund") except for
matters relating to the organization of the Trust, the Fund's
establishment and designation as a series of the Trust, and the
registration under the Securities Act of 1933 of the Fund's shares of
beneficial interest ("Shares") and the sale of one Share ("Initial
Shares") of the Fund to Signature Financial Group, Inc. ("SFG"). The
Trust will invest all of the Fund's investable assets in Small Cap
Index Portfolio (the "Portfolio"), a series of BT Investment
Portfolios, an investment company registered under the Investment
Company Act of 1940, as amended. The Fund is one of ten series of the
Trust.

BT ADVISOR FUNDS --
INSTITUTIONAL EAFE(R) EQUITY INDEX FUND
STATEMENT OF ASSETS AND LIABILITIES

JANUARY 2, 1996

ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . . .$ 10
Deferred organization expenses . . . . . . . . . . . . 9,000
Total assets . . . . . . . . . . . . . . . . . 9,010

LIABILITIES:
Accrued organization expenses . . . . . . . . . . . . 9,000
Net assets . . . . . . . . . . . . . . . . . .$ 10

NET ASSET VALUE PER SHARE OF BENEFICIAL
INTEREST ($10.00 / 1 SHARES OUTSTANDING) . . . . . . . . . $10.00

NOTES:

(1) BT Advisor Funds, a Massachusetts business trust (the "Trust"), was
organized on July 24, 1995 and has been inactive since that date with
respect to Institutional EAFE(R) Equity Index Fund (the "Fund") except
for matters relating to the organization of the Trust, the Fund's
establishment and designation as a series of the Trust, and the
registration under the Securities Act of 1933 of the Fund's shares of
beneficial interest ("Shares") and the sale of one Share ("Initial
Shares") of the Fund to Signature Financial Group, Inc. ("SFG"). The
Trust will invest all of the Fund's investable assets in EAFE(R) Equity
Index Portfolio (the "Portfolio"), a series of BT Investment
Portfolios, an investment company registered under the Investment
Company Act of 1940, as amended. The Fund is one of ten series of the
Trust.

BT INVESTMENT PORTFOLIOS --

U.S. BOND INDEX PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES

JANUARY 2, 1996

ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . . .$ 10
Deferred organization expenses . . . . . . . . . . . . 9,000
Total assets . . . . . . . . . . . . . . . . . 9,010

LIABILITIES:
Accrued organization expenses . . . . . . . . . . . . 9,000
Net assets . . . . . . . . . . . . . . . . . .

$ 10.00

NOTES:

(1) BT Investment Portfolios, a New York master trust, (the "Portfolio
Trust") was organized on March 27, 1993 and has been inactive since
that date with respect to U.S. Bond Index Portfolio (the "Portfolio")
except for matters relating to the Portfolio's establishment and
designation as a subtrust or series of the Portfolio Trust, and the
sale of a beneficial interest therein at the purchase price of $10.00
to BT Advisor Funds --Institutional U.S. Bond Index Fund (the "Fund")
(the "Initial Interests"). The Portfolio is one of fifteen series of
the Portfolio Trust.

(2) Organization expenses of the Portfolio are being deferred and will be
amortized on a straight-line basis over a period not to exceed five
years from the commencement of investment operations of the Portfolio.
Any amount received by the Portfolio from the Fund as a result of a
redemption by Signature Financial Group, Inc. will be applied so as to
reduce the amount of unamortized organization expenses. The amount paid
by the Portfolio Trust on any withdrawal by the Fund of an Initial
Interest in the Portfolio will be reduced by a portion of any
unamortized organization expenses of the Portfolio, determined by the
proportion of the amount of the Initial Interest withdrawn to the
aggregate amount of the Initial Interests in the Portfolio
then-outstanding after taking into account any prior withdrawals of any
of the Initial Interests in the Portfolio.

(3) At 4:00 p.m., New York time, on each business day of the Portfolio, the
value of an investor's beneficial interest in the Portfolio is equal to
the product of (i) the aggregate net asset value of the Portfolio
multiplied by (ii) the percentage representing that investor's share of
the aggregate beneficial interests in the Portfolio effective for that
day.

(4) The Portfolio Trust has entered into an Investment Advisory Agreement
with Bankers Trust Company and an Administration and Services Agreement
with Bankers Trust Company under which Bankers Trust Company provides
administration, custody and transfer agency services to the Portfolio
Trust.
<PAGE>

BT INVESTMENT PORTFOLIOS --

EQUITY 500 EQUAL WEIGHTED INDEX PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES

JANUARY 2, 1996

ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . . .$ 10
Deferred organization expenses . . . . . . . . . . . . 9,000
Total assets . . . . . . . . . . . . . . . . . 9,010

LIABILITIES:
Accrued organization expenses . . . . . . . . . . . . 9,000
Net assets . . . . . . . . . . . . . . . . . .

$ 10.00

NOTES:

(1) BT Investment Portfolios, a New York master trust, (the "Portfolio
Trust") was organized on March 27, 1993 and has been inactive since
that date with respect to Equity 500 Equal Weighted Index Portfolio
(the "Portfolio") except for matters relating to the Portfolio's
establishment and designation as a subtrust or series of the Portfolio
Trust, and the sale of a beneficial interest therein at the purchase
price of $10.00 to BT Advisor Funds -- Institutional Equity 500 Equal
Weighted Index Fund (the "Fund") (the "Initial Interests"). The
Portfolio is one of fifteen series of the Portfolio Trust.

(4) The Portfolio Trust has entered into an Investment Advisory
Agreement with Bankers Trust Company and an Administration
and Services Agreement with Bankers Trust Company under
which Bankers Trust Company provides administration, custody and
transfer agency services to the Portfolio Trust.
<PAGE>

BT INVESTMENT PORTFOLIOS --

SMALL CAP INDEX PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES

JANUARY 2, 1996

ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . . .$ 10
Deferred organization expenses . . . . . . . . . . . . 9,000
Total assets . . . . . . . . . . . . . . . . . 9,010

LIABILITIES:
Accrued organization expenses . . . . . . . . . . . . 9,000
Net assets . . . . . . . . . . . . . . . . . .

$ 10.00

NOTES:

(1) BT Investment Portfolios, a New York master trust, (the "Portfolio
Trust") was organized on March 27, 1993 and has been inactive since
that date with respect to Small Cap Index Portfolio (the "Portfolio")
except for matters relating to the Portfolio's establishment and
designation as a subtrust or series of the Portfolio Trust, and the
sale of a beneficial interest therein at the purchase price of $10.00
to BT Advisor Funds --Institutional Small Cap Index Fund (the "Fund")
(the "Initial Interests"). The Portfolio is one of fifteen series of
the Portfolio Trust.

BT INVESTMENT PORTFOLIOS --

EAFE(R) EQUITY INDEX PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES

JANUARY 2, 1996

ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . . .$ 10
Deferred organization expenses . . . . . . . . . . . . 9,000

Total assets . . . . . . . . . . . . . . . . .$ 9,010

LIABILITIES:
Accrued organization expenses . . . . . . . . . . . . 9,000
Net assets . . . . . . . . . . . . . . . . . .

$ 10.00

NOTES:

(1) BT Investment Portfolios, a New York master trust, (the "Portfolio
Trust") was organized on March 27, 1993 and has been inactive since
that date with respect to EAFE(R) Equity Index Portfolio (the
"Portfolio") except for matters relating to the Portfolio's
establishment and designation as a subtrust or series of the Portfolio
Trust, and the sale of a beneficial interest therein at the purchase
price of $10.00 to BT Advisor Funds --Institutional EAFE(R) Equity
Index Fund (the "Fund") (the "Initial Interests"). The Portfolio is one
of fifteen series of the Portfolio Trust.

(4) The Portfolio Trust has entered into an Investment Advisory
Agreement with Bankers Trust Company and an Administration
and Services Agreement with Bankers Trust Company under
which Bankers Trust Company provides administration, custody and
transfer agency services to the Portfolio Trust.
<PAGE>

APPENDIX A

DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS:

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

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

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

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

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

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

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

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

A-1
<PAGE>

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

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

DESCRIPTION OF S&P'S CORPORATE BOND RATINGS:

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

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

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

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

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

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

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

A-2
<PAGE>

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

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

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

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

A-3
<PAGE>

APPENDIX B

The tables on the following pages shows the performance of the S&P 500, the
Russell 2000, the Aggregate Bond Index and the EAFE Index for the periods
indicated. Stock prices fluctuated widely during the period but were higher at
the end than at the beginning. The results shown should not be considered as a
representation of the income or capital gain or loss which may be generated by
the respective Index in the future. Nor should this be considered as a
representation of the past or future performance of the Fund.

B-1
<PAGE>

STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX*
<TABLE>
<S> <C> <C> <C>

Year Total Return Year Total Return

1995 37.49% 1960 0.47%

1994 1.32% 1959
11.96%

1993 9.99% 1958 43.36%

1992 7.67% 1957 -10.78%

1991 30.55% 1956 6.56%

-3.17% 1955 31.56%
1990

1989 31.49% 1954 52.62%

1988 16.81% 1953 -0.99%

1987 5.23% 1952 18.73%

1986 18.47% 1951 24.02%

1985 32.16% 1950 31.71%

1984 6.27% 1949 18.79%

1983 22.51% 1948 5.50%

1982 21.41% 1947 5.71%

1981 -4.91% 1946
-8.07%

1980 32.42% 1945 36.44%

1979 18.44% 1944 19.75%

1978 6.56% 1943 25.90%

-7.18% 1942 20.34%
1977

1976 23.84% 1941 -11.59%

1975 37.20% 1940 -9.78%

1974 1939 -0.41%
-26.47%

1973 -14.66% 1938 31.12%

1972 18.98% 1937 -35.03%

1971 14.31% 1936 33.92%

1970 4.01% 1935 47.67%

1969 -8.51% 1934 -1.44%

1968 11.06% 53.99%
1933

1967 23.98% 1932 -8.19%

1966 -10.06% 1931 -43.34%

1965 12.45% -24.90%
1930

1964 16.48% 1929 -8.42%

1963 22.08% 1928 43.61%

1962 -8.73% 1927
37.49%

1961 26.89% 1926 11.62%

</TABLE>

*Source: Ibbotson Associates

B-2
<PAGE>

LEHMAN BROTHERS AGGREGATE BOND INDEX*

TOTAL
YEAR RETURN

1994 -2.92%
1993 9.75%
1992 7.40%
1991 16.00%
1990 8.96%
1989 14.53%
1988 7.89%
1987 2.76%
1986 15.26%
1985 22.10%
1984 15.15%
1983 8.36%
1982 32.62%
1981 6.25%
1980 2.71%
1979 1.93%
1978 1.39%
1977 3.04%
1976 15.60%
*Source: Lipper Analytical Services, Inc.

RUSSELL 2000 SMALL STOCK INDEX*
TOTAL
YEAR RETURN
1995 28.44%
1994 - 1.82%
1993 18.91%
1992 18.42%
1991 46.05%
1990 -19.51%
1989 16.24%
1988 24.89%
1987 -8.77%
1986 5.68%
1985 31.05%
1984 -7.19%
1983 29.13%

B-5
<PAGE>

1982 24.95%

1981 2.03%

1980 35.58%

1979 42.80%

*Source: Frank Russell Company

B-6
<PAGE>

MORGAN STANLEY CAPITAL INTERNATIONAL
EAFE INDEX*

TOTAL
YEAR RETURN

1995 11.21%
1994 10.10%
1993 32.56%

1992 -12.17%
1991 12.13%
1990 -23.45%
1989 10.54%
1988 28.57%
1987 24.63%
1986 69.44%
1985 56.16%
1984 7.38%
1983 23.69%
1982 -1.86%
1981 -2.28%
1980 22.58%
1979 4.75%
1978 32.62%
1977 18.06%
1976 2.54%
1975 35.39%
1974 -23.16%
1973 -14.92%
1972 36.35%
1971 29.59%
1970 -11.66%

*Source: Morgan Stanley Capital International (MSCI) EAFE Index

B-8
<PAGE>

STANDARD & POOR'S 500 EQUAL WEIGHTED WILSHIRE INDEX

TOTAL
YEAR RETURN
1972 11.70%
1973 -21.86%
1974 -24.33%
1975 55.30%
1976 36.51%
1977 -1.61%
1978 10.70%
1979 28.87%
1980 30.72%
1981 4.89%
1982 29.41%
1983 31.05%
1984 3.25%
1985 31.14%
1986 17.54%
1987 5.37%
1988 20.72%
1989 25.88%
1990 -11.91%
1991 35.78%
1992 14.88%
1993 14.85%
1994 1.11%
1995 32.30%
*Source: Wilshire Associates

B-10
<PAGE>

CONTENTS

Risk Factors and Certain Securities and Investment Practices............ 3
Performance Information................................................. 32
Valuation of Securities; Redemptions and Purchases in Kind.............. 35
Management of the Trusts and the Portfolios............................. 37
Organization of the Trusts.............................................. 43
Taxation................................................................ 44
Financial Statements.................................................... 47
Appendix A.............................................................. A-1
Appendix B.............................................................. B-1

INVESTMENT ADVISER OF EACH PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY

DISTRIBUTOR

SIGNATURE BROKER-DEALER SERVICES, INC.

CUSTODIAN AND TRANSFER AGENT

BANKERS TRUST COMPANY

INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.

COUNSEL
WILLKIE FARR & GALLAGHER

____________________

No person has been authorized to give any information or to make any
representations other than those contained in the Trust's Prospectuses, its
Statements of Additional Information or the Trust's official sales literature in
connection with the offering of the Trust's shares and, if given or made, such
other information or representations must not be relied on as having been
authorized by the Trust. Neither the Prospectuses nor this Statement of
Additional Information constitutes an offer in any state in which, or to any
person to whom, such offer may not lawfully be made.
____________________

BT0473H
<PAGE>

PART C

OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

(a) FINANCIAL STATEMENTS INCLUDED IN PART B

FOR THE REGISTRANT:

Institutional Cash Management Fund, Institutional Treasury Money Fund, Equity
500 Index Fund, Institutional Cash Reserves and
Institutional Liquid Assets Fund:

Statement of Assets and Liabilities, December 31, 1995 Statement of
Operations for the periods indicated Statements of Changes in Net
Assets for the periods indicated Financial Highlights: Selected data
for the periods indicated Notes to Financial Statements Report of
Independent Accountants

FOR CASH MANAGEMENT PORTFOLIO, TREASURY MONEY PORTFOLIO, TAX FREE MONEY
PORTFOLIO, NY TAX FREE MONEY PORTFOLIO, EQUITY 500 INDEX PORTFOLIO AND
LIQUID ASSETS PORTFOLIO:

Statement of Assets and Liabilities, December 31, 1995 Statement of
operations for the periods indicated Statements of Changes in Net
Assets for the periods indicated Financial Highlights: Supplemental
ratios and selected data for the periods indicated Schedule of
Portfolio Investments, December 31, 1995 Notes to Financial Statements
Report of Independent Accountants

(b) EXHIBITS:

(1A) Amended and Restated Declaration of Trust of the Trust.5

(1B) Fifth Amended and Restated Establishment and Designation of
Series of the Trust.5

(1C) Sixth Amended and Restated Establishment and Designation of
Series of the Trust.5

(1D) Seventh Amended and Restated Establishment and Designation of
Series of the Trust.5

(1E) Eighth Amended and Restated Establishment and Designation of
Series of the Trust.5
<PAGE>

(1F) Ninth Amended and Restated Establishment and Designation of
Series of the Trust.5

(1G) Tenth Amended and Restated Establishment and Designation of
Series of the Trust.5

(2) By-Laws of the Trust.5

(3) Inapplicable.

(4) Specimen stock certificates for shares of beneficial interest
of the Trust.1

(5) Inapplicable.

(6) Distribution Agreement.5

(7) Inapplicable.

(8) See Item (9).

(9A) Administration and Services Agreement.5

(9B) Schedule of fees under Administration and Service Agreement.7

(10) Opinion of counsel.5

(11) Consent of independent accountants.6

(12) Inapplicable.

(13A) Investment representation letter of initial shareholder of the
Equity 500 Index Fund.3

(13B) Investment representation letter of initial shareholder of the
Institutional Liquid Assets Fund.5

(14) Inapplicable.

(15A) Plan of Distribution pursuant to Rule 12b-l under the
Investment Company Act of 1940, as amended (the "1940 Act").4

(15B) Schedule of fees under Plan of Distribution.5

(16A) Method of computation of performance information for money
market funds.2

(16B) Method of computation of performance information for non-money
market funds.3

(17) Financial Data Schedules.6

(25) Powers of Attorney.4
<PAGE>

1 Incorporated herein by reference from Pre-Effective Amendment No. 1 to
the Registration Statement as filed with the SEC on July 20, 1990.

2 Incorporated herein by reference from Post-Effective Amendment No. 1 to
the Registration Statement as filed with the SEC on February 29, 1991.

3 Incorporated herein by reference from Post-Effective Amendment No. 4 to
the Registration Statement as filed with the SEC on April 30, 1992.

4 Incorporated herein by reference from Post-Effective Amendment No. 6 to
the Registration Statement as filed with the SEC on January 29, 1993.

5 Incorporated herein by reference from Post-Effective Amendment No. 15
to the Registration Statement as filed with the SEC on July 5, 1995.

6 Filed herewith.

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE TRUST.

Inapplicable.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES.

TITLE OF CLASS: NUMBER OF RECORD HOLDERS (AS OF APRIL 15, 1996)
- ---------------------------------------------------------------------------

Institutional Cash Management Fund: 621
Institutional Treasury Money Fund: 434
Institutional Tax Free Money Fund: 0
Institutional NY Tax Free Money Fund: 0
Equity 500 Index Fund: 45
BT Institutional Capital Appreciation Fund: 0
Liquid Assets Fund:
Institutional Cash Reserves: 208

ITEM 27. INDEMNIFICATION.

Under Article XI, Section 2 of the Trust's Declaration of Trust, any
past or present Trustee or officer of the Trust (including persons who serve at
the Trust's request as directors, officers or trustees of another organization
in which the Trust has any interest as a shareholder, creditor or otherwise
[hereinafter referred to as a "Covered Person"]) is indemnified to the fullest
extent permitted by law against liability and all expenses reasonably incurred
by him in connection with any action, suit or proceeding to which he may be a
party or otherwise involved by reason of his being or having been a Covered
Person. This provision does not authorize indemnification when it is determined,
in the manner specified in the Declaration of Trust, that such Covered Person
has not acted in good faith in the reasonable belief that his actions were in or
not opposed to the best interests of the Trust. Moreover, this provision does
not authorize indemnification when it is determined, in the manner specified in
the Declaration of Trust, that such Covered Person would otherwise be liable to
the Trust or its shareholders by reason of
<PAGE>

willful misfeasance, bad faith, gross negligence or reckless disregard of his
duties. Expenses may be paid by the Trust in advance of the final disposition of
any action, suit or proceeding upon receipt of an undertaking by such Covered
Person to repay such expenses to the Trust in the event that it is ultimately
determined that indemnification of such expenses is not authorized under the
Declaration of Trust and either (i) the Covered Person provides security for
such undertaking, (ii) the Trust is insured against losses from such advances or
(iii) the disinterested Trustees or independent legal counsel determines, in the
manner specified in the Declaration of Trust, that there is reason to believe
the Covered Person will be found to be entitled to indemnification.

Insofar as indemnification for liability arising under the Securities
Act of 1933, as amended (the "1933 Act"), may be permitted to Trustees, officers
and controlling persons of the Trust pursuant to the foregoing provisions, or
otherwise, the Trust has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Trust of expenses incurred or
paid by a Trustee, officer or controlling person of the Trust in the successful
defense of any action, suit or proceeding) is asserted by such Trustee, officer
or controlling person in connection with the securities being registered, the
Trust will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the 1933 Act and will be governed by the final adjudication of such
issue.

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.

Inapplicable.

ITEM 29. PRINCIPAL UNDERWRITERS.

(a) Signature Broker-Dealer Services, Inc. ("Signature"), the distributor of
the Shares of the Trust, also serves as principal underwriter for other
investment companies.

(b) Set forth below are the names, principal business addresses and
positions of each director and officer of Signature. Unless otherwise
noted, the principal business address of these individuals is Signature
Broker-Dealer Services, Inc., 6 St. James Avenue, Boston, Massachusetts
02116. Unless otherwise specified, none of the officers and directors of
Signature serve as officers and Trustees of the Trust.

PHILIP W. COOLIDGE: Chief Executive Officer, President and Director of
Signature and President and Trustee of the Registrant.

LINWOOD C. DOWNS: Treasurer of Signature.

JOHN R. ELDER: Assistant Treasurer of Signature and Treasurer of the
Registrant.

JOAN GULINELLO: Secretary of Signature.

THOMAS M. LENZ: Assistant Secretary of Signature and Assistant Secretary of
the Registrant.

MOLLY S. MUGLER: Assistant Secretary of Signature and Assistant Secretary of
the Registrant.

LINDA T. GIBSON: Assistant Secretary of Signature and Assistant Secretary of
the Registrant.

ANDRES E. SALDANA: Assistant Secretary of Signature and Assistant Secretary
of the Registrant.

SUSAN JAKUBOSKI: Assistant Treasurer of Signature.

DAVID G. DANIELSON: Assistant Treasurer of the Registrant.

DANIEL E. SHEA: Assistant Treasurer of the Registrant.

BARBARA M. O'DETTE: Assistant Treasurer of Signature and Assistant Treasurer
of the Registrant.

BETH A. REMY: Assistant Treasurer of Signature.

JULIE J. WYETZNER: Product Management Officer of Signature.

ROBERT G. DAVIDOFF: Director of Signature; CMNY Capital, L.P, 135 East 57th
Street, New York, NY 10022.

DONALD S. CHADWICK: Director of Signature; Scarborough & Company, 110 East
42nd Street, New York, NY 10017.

LEEDS HACKETT: Director of Signature; National Credit Management Corporation,
10155 York Road, Cockeysville, MD 21030.

LAURENCE E. LEVINE: Director of Signature; First International Capital, Ltd.,
130 Sunrise Avenue, Palm Beach, FL 33480.

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.

BT INSTITUTIONAL FUNDS: 6 St. James Avenue, Boston, MA 02116.

BANKERS TRUST COMPANY: 280 Park Avenue, New York, NY 10017.
<PAGE>

INVESTORS FIDUCIARY TRUST COMPANY: 127 West 10th Street, Kansas City, MO
64105.

SIGNATURE BROKER-DEALER SERVICES, INC.: 6 St. James Avenue, Boston, MA 02116.

ITEM 31. MANAGEMENT SERVICES.

Not applicable.

ITEM 32. UNDERTAKINGS.

(a) The Registrant undertakes to file a post-effective amendment,
including financials, which need not be certified, within four to six months
following the effectiveness of the Fund. The financial statements included in
such amendment(s) will be as of and for the time period ended on a date
reasonably close or as soon as practicable to the date of the filing of this
post-effective amendment.

(b) The Registrant undertakes to furnish to each person to whom a
prospectus is delivered a copy of the Registrant's latest annual report, with
respect to the respective series of the Trust, to shareholders upon request and
without charge.

(c) The Registrant undertakes to comply with Section 16(c) of the 1940
Act as though such provisions of the Act were applicable to the Registrant
except that the request referred to in the third full paragraph thereof may only
be made by shareholders who hold in the aggregate at least 10% of the
outstanding shares of the Registrant, regardless of the net asset value or
values of shares held by such requesting shareholders.
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 (the "1933
Act") and the Investment Company Act of 1940, as amended, the Registrant
certifies that it meets all the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the 1933 Act and that it
has duly caused this Amendment to Registrant's Registration Statement on Form
N-1A to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Boston and the Commonwealth of Massachusetts on the 24th day of
April, 1996.

BT INSTITUTIONAL FUNDS

By: /S/PHILIP W. COOLIDGE

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

Philip W. Coolidge
President

Pursuant to the requirements of the Securities Act of 1933, this
Amendment has been signed below by the following persons in the capacities
indicated on April 24, 1996.

/S/PHILIP W. COOLIDGE

- --------------------------------------
Philip W. Coolidge, President and Trustee

CHARLES P. BIGGAR

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

Charles P. Biggar, Trustee

BRUCE E. LANGTON*
- --------------------------------------

Bruce E. Langton, Trustee

RICHARD J. HERRING*
- --------------------------------------
Richard J. Herring, Trustee

/S/John R. Elder

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

John R. Elder, Treasurer (Principal Financial and Principal
Accounting Officer)

*By: /S/PHILIP W. COOLIDGE

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

Philip W. Coolidge

as Attorney-in-Fact pursuant to a Power of Attorney previously filed.
<PAGE>
SIGNATURES

Cash Management Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of BT Institutional Funds (File No.
33-34079) to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston and the Commonwealth of Massachusetts on the
24th day of April, 1996.

CASH MANAGEMENT PORTFOLIO

By: /S/Philip W. Coolidge

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

Philip W. Coolidge
President

This Amendment to the Registration Statement on Form N-1A of BT
Institutional Funds (File No. 33-34079) has been signed below by the following
persons in the capacities indicated on April 24, 1996.

/S/PHILIP W. COOLIDGE

- --------------------------------------
Philip W. Coolidge, President and Trustee

PHILIP SAUNDERS, JR.

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

Philip Saunders, Jr., Trustee of Cash Management Portfolio

CHARLES P. BIGGAR*
- -----------------------------------------

Charles P. Biggar, Trustee of Cash Management Portfolio

S. LELAND DILL*
- -----------------------------------------
S. Leland Dill, Trustee of Cash Management Portfolio

/S/JOHN R. ELDER

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

John R. Elder, Treasurer (Principal Financial and Principal
Accounting Officer)

*By: /S/PHILIP W. COOLIDGE

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

Philip W. Coolidge

as Attorney-in-Fact pursuant to a Power of Attorney previously filed.
<PAGE>
SIGNATURES

Treasury Money Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of BT Institutional Funds (File No.
33-34079) to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston and the Commonwealth of Massachusetts on the
24th day of April, 1996.

TREASURY MONEY PORTFOLIO

By: /S/Philip W. Coolidge

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

Philip W. Coolidge
President

This Amendment to the Registration Statement on Form N-1A of BT
Institutional Funds (File No. 33-34079) has been signed below by the following
persons in the capacities indicated on April 24, 1996.

/S/PHILIP W. COOLIDGE

- --------------------------------------
Philip W. Coolidge, President and Trustee

PHILIP SAUNDERS, JR.

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

Philip Saunders, Jr., Trustee of Treasury Money Portfolio

CHARLES P. BIGGAR*
- -----------------------------------------

Charles P. Biggar, Trustee of Treasury Money Portfolio

S. LELAND DILL*
- -----------------------------------------
S. Leland Dill, Trustee of Treasury Money Portfolio

/S/JOHN R. ELDER

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

John R. Elder, Treasurer (Principal Financial and Principal
Accounting Officer)

*By: /S/PHILIP W. COOLIDGE

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

Philip W. Coolidge

as Attorney-in-Fact pursuant to a Power of Attorney previously filed.
<PAGE>
SIGNATURES

Tax Free Money Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of BT Institutional Funds (File No.
33-34079) to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston and the Commonwealth of Massachusetts on the
24th day of April, 1996.

TAX FREE MONEY PORTFOLIO

By: /S/Philip W. Coolidge

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

Philip W. Coolidge
President

This Amendment to the Registration Statement on Form N-1A of BT
Institutional Funds (File No. 33-34079) has been signed below by the following
persons in the capacities indicated on April 24, 1995.

/S/PHILIP W. COOLIDGE

- --------------------------------------
Philip W. Coolidge, President and Trustee

PHILIP SAUNDERS, JR.

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

Philip Saunders, Jr., Trustee of Tax Free Money Portfolio

CHARLES P. BIGGAR*
- -----------------------------------------

Charles P. Biggar, Trustee of Tax Free Money Portfolio

S. LELAND DILL*
- -----------------------------------------
S. Leland Dill, Trustee of Tax Free Money Portfolio

/S/JOHN R. ELDER

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

John R. Elder, Treasurer (Principal Financial and Principal
Accounting Officer)

*By: /S/PHILIP W. COOLIDGE

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

Philip W. Coolidge

as Attorney-in-Fact pursuant to a Power of Attorney previously filed.
<PAGE>
SIGNATURES

NY Tax Free Money Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of BT Institutional Funds (File No.
33-34079) to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston and the Commonwealth of Massachusetts on the
24th day of April, 1996.

NY TAX FREE MONEY PORTFOLIO

By: /S/Philip W. Coolidge

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

Philip W. Coolidge
President

This Amendment to the Registration Statement on Form N-1A of BT
Institutional Funds (File No. 33-34079) has been signed below by the following
persons in the capacities indicated on April 24, 1996.

/S/PHILIP W. COOLIDGE

- --------------------------------------
Philip W. Coolidge, President and Trustee

PHILIP SAUNDERS, JR.

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

Philip Saunders, Jr., Trustee of NY Tax Free Money Portfolio

CHARLES P. BIGGAR*
- -----------------------------------------

Charles P. Biggar, Trustee of NY Tax Free Money Portfolio

S. LELAND DILL*
- -----------------------------------------
S. Leland Dill, Trustee of NY Tax Free Money Portfolio

/S/JOHN R. ELDER

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

John R. Elder, Treasurer (Principal Financial and Principal
Accounting Officer)

*By: /S/PHILIP W. COOLIDGE

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

Philip W. Coolidge

as Attorney-in-Fact pursuant to a Power of Attorney previously filed.
<PAGE>
SIGNATURES

BT Investment Portfolios has duly caused this Amendment to the
Registration Statement on Form N-1A of BT Institutional Funds (File No.
33-34079) to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston and the Commonwealth of Massachusetts on the
24th day of April, 1996.

BT INVESTMENT PORTFOLIOS

By: /S/Philip W. Coolidge

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

Philip W. Coolidge
President

This Amendment to the Registration Statement on Form N-1A of BT
Institutional Funds (File No. 33-34079) has been signed below by the following
persons in the capacities indicated on April 24, 1996.

/S/PHILIP W. COOLIDGE

- --------------------------------------
Philip W. Coolidge, President and Trustee

PHILIP SAUNDERS, JR.

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

Philip Saunders, Jr., Trustee of BT Investment Portfolios

CHARLES P. BIGGAR*
- -----------------------------------------

Charles P. Biggar, Trustee of BT Investment Portfolios

S. LELAND DILL*
- -----------------------------------------
S. Leland Dill, Trustee of BT Investment Portfolios

/S/JOHN R. ELDER

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

John R. Elder, Treasurer (Principal Financial and Principal
Accounting Officer)

*By: /S/PHILIP W. COOLIDGE

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

Philip W. Coolidge

as Attorney-in-Fact pursuant to a Power of Attorney previously filed.
<PAGE>
SIGNATURES

Equity 500 Index Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of BT Institutional Funds (File No.
33-34079) to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston and the Commonwealth of Massachusetts on the
24th day of April, 1996.

EQUITY 500 INDEX PORTFOLIO

By: /S/Philip W. Coolidge

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

Philip W. Coolidge
President

This Amendment to the Registration Statement on Form N-1A of BT
Institutional Funds (File No. 33-34079) has been signed below by the following
persons in the capacities indicated on April 24, 1996.

/S/PHILIP W. COOLIDGE

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

Philip W. Coolidge, President and Trustee of Equity 500 Index Portfolio

PHILIP SAUNDERS, JR.

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

Philip Saunders, Jr., Trustee of Equity 500 Index Portfolio

CHARLES P. BIGGAR*
- -----------------------------------------
Charles P. Biggar, Trustee of Equity 500 Index
portfolio

S. LELAND DILL*
- -----------------------------------------

S. Leland Dill, Trustee of Equity 500 Index Portfolio

/S/JOHN R. ELDER

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

John R. Elder, Treasurer (Principal Financial and Principal
Accounting Officer)

*By: /S/PHILIP W. COOLIDGE

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

Philip W. Coolidge

as Attorney-in-Fact pursuant to a Power of Attorney previously filed.
<PAGE>

BT INSTITUTIONAL FUNDS
EXHIBITS
TO
REGISTRATION STATEMENT ON
FORM N-1A

EXHIBIT INDEX

EXHIBIT NO.

(11) Consent of independent accountants.

(17) Financial Data Schedules