<PAGE>
- BT INSTITUTIONAL FUNDS -
INSTITUTIONAL LIQUID ASSETS FUND
SEMI-ANNUAL REPORT
-------------------------------------------------------------
JUNE-1996
<PAGE>
- --------------------------------------------------------------------------------
INSTITUTIONAL LIQUID ASSETS FUND
TABLE OF CONTENTS
- ----------------------------------------------------------------------
<TABLE>
<S> <C>
LETTER TO SHAREHOLDERS.................................................... 3
INSTITUTIONAL LIQUID ASSETS FUND
Statement of Assets and Liabilities................................... 5
Statement of Operations............................................... 5
Statements of Changes in Net Assets................................... 6
Financial Highlights.................................................. 6
Notes to Financial Statements......................................... 7
LIQUID ASSETS PORTFOLIO
Schedule of Portfolio Investments..................................... 8
Statement of Assets and Liabilities................................... 10
Statement of Operations............................................... 10
Statements of Changes in Net Assets................................... 11
Financial Highlights.................................................. 11
Notes to Financial Statements......................................... 12
</TABLE>
2
<PAGE>
- --------------------------------------------------------------------------------
INSTITUTIONAL LIQUID ASSETS FUND
LETTER TO SHAREHOLDERS
- ----------------------------------------------------------------------
We are pleased to present you with this newly-designed semi-annual report
for the BT Institutional Liquid Assets Fund, providing a more detailed review of
the market, the portfolio, and our outlook -- all in an easier-to-read format.
Of course, we continue to include a complete financial
summary of the Fund's operations and a listing of the
Portfolio's holdings.
Through purchase of high quality instruments, flexibility
to adjust maturities, and active market analysis, the manager
of the BT Institutional Liquid Assets Fund ("the Fund) was
able to use the volatility in interest rates over the six months ended June 30,
1996 to the Fund's advantage and produce competitive yields. In fact, the Fund's
annualized 7-day effective yield of 5.36% as of June 25, 1996, was higher than
the 5.17% yield of the IBC First Tier-Institutional Only Money Funds average.
- -------------------------------------------
OBJECTIVE
Seeks high level
of current income
to the extent
consistent with
liquidity and
preservation of
capital.
- -------------------------------------------
MARKET ACTIVITY
In contrast to the strong rally of 1995, the first half of 1996 saw
perceptions of economic activity shift and rates increase dramatically in the
fixed income markets in general and the money markets in particular.
In January, the Federal Reserve Board cut rates by 25
basis points (100 basis points = one percentage point),
leading to general market expectations of a near-term
recession that would drive interest rates even lower. What
happened instead was that the huge 705,000 increase in
non-farm payrolls in February, i.e. the biggest job gain in
13 years, put to rest any belief that the economy was poised to enter a
recessionary period. Overnight, the short-term fixed income market was re-priced
to reflect the expectation of the Fed keeping interest rates steady.
- -------------------------------------------
INVESTMENT
INSTRUMENTS
Bank obligations,
commercial paper,
U.S. Treasury
obligations
and repurchase
agreements.
- -------------------------------------------
There was no change in monetary policy. However, when this surprising
employment data was released, along with evidence of a slowly but steadily
accelerating economy, interest rates began to go up across the yield curve, as
market participants re-evaluated economic fundamentals and security valuations.
The shorter end of the yield curve felt the impact of this dramatic
turnaround. For example, 1-year U.S. Treasury rates increased approximately 50
basis points from mid-February to mid-March, and 2-year U.S. Treasuries backed
up even more, increasing approximately 86 basis points over the same period.
From that point through the end of the semi-annual period, with some
fluctuations, the yield curve remained relatively flat. Still, during the second
quarter, interest rates continued to rise based on fears of a
stronger-than-anticipated economy and possible tightening by the Federal
Reserve. Consumer spending was bolstered by continued improvement in employment,
rising incomes, and low inflation. Housing starts held up surprisingly well,
despite increased mortgage rates.
INVESTMENT REVIEW
Overall, the semi-annual period started on a rather bullish note for the
money markets, quickly became uncertain, and ended with the Fund in a more
bearish, defensive position. More specifically, the Fund started the year with a
bias toward easing. We then shifted to neutral in February. In March, we
adjusted the Fund's average maturity to well below normal levels and kept it
there during the second quarter. The Fund's maturity positioning added value
throughout the semi-annual period.
- -------------------------------------------
DIVERSIFICATION OF PORTFOLIO INVESTMENTS
BY ASSET TYPE AS OF JUNE 30, 1996 (UNAUDITED)
(PERCENTAGES ARE BASED ON MARKET VALUE)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Certificates of Deposit 2.36%
Eurodollar Certificates of
Deposit 10.16%
Yankee Certificates of
Deposit 14.04%
U.S. Treasury Bills 0.51%
Eurodollar Time Deposits 4.19%
Floating Rate Notes 7.52%
Time Deposits 12.20%
Commercial Paper 42.55%
U.S. Treasury Notes 1.31%
Repurchase Agreements 5.16%
</TABLE>
3
<PAGE>
- --------------------------------------------------------------------------------
INSTITUTIONAL LIQUID ASSETS FUND
- --------------------------------------------------------------------------------
With the perception over the last quarter that the next
move in interest rates should be higher, we also began
purchasing high quality, floating rate notes. Our current
strategy is to maintain a large cash position to reinvest at
higher yields and to continue to purchase floaters if the
opportunities present themselves.
- -------------------------------------------
STATUS AT
JUNE 30, 1996
(UNAUDITED)
Seven day
effective yield:
5.39%
Average maturity:
36 days
Net Assets:
$1,917.8 million
- -------------------------------------------
LOOKING AHEAD
The wisdom of the Fund's cautious strategy was confirmed in early July, as
the June unemployment figures were again stronger than expected. The most
disturbing aspect of this new data was a nine cent increase in hourly wages, the
sharpest monthly jump since 1965.
As the economy continues to perk along, wage increases are expected to
gradually accelerate and push inflation a bit higher. This, in turn, would keep
upward pressure on interest rates. The Federal Reserve Board maintained its
5.25% Federal Funds rate at their June meeting, but persisting economic
strength, moderate though it may be, suggests that a 25 basis point increase is
likely between now and the end of August.
We will, of course, continue to closely observe economic conditions and how
they affect the financial markets, as we seek to provide high current income
consistent with liquidity and capital preservation.
* * *
We value your ongoing support of the BT Institutional Liquid Assets Fund and
look forward to continuing to serve your investment needs in the years ahead.
[SIG]
John Burgess
PORTFOLIO MANAGER OF
LIQUID ASSETS PORTFOLIO
June 30, 1996
4
<PAGE>
- --------------------------------------------------------------------------------
INSTITUTIONAL LIQUID ASSETS FUND
STATEMENT OF ASSETS AND LIABILITIES JUNE, 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in Liquid Assets Portfolio, at Value..................................... $1,925,853,746
Deferred Organizational Expenses.................................................... 8,883
Prepaid Expenses.................................................................... 5,118
Due from Bankers Trust.............................................................. 24,962
--------------
Total Assets............................................................................ 1,925,892,709
--------------
LIABILITIES
Dividends Payable................................................................... 8,064,071
Accrued Expenses and Other.......................................................... 14,313
--------------
Total Liabilities....................................................................... 8,078,384
--------------
NET ASSETS ($0.001 Par Value Per Share, Unlimited Number of Shares of Beneficial
Interest Authorized).................................................................. $1,917,814,325
--------------
--------------
SHARES OUTSTANDING...................................................................... 1,917,815,522
--------------
--------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE.......................................... $ 1.00
--------------
--------------
COMPOSITION OF NET ASSETS
Paid-in Capital..................................................................... $1,917,815,522
Accumulated Net Realized Loss from Investment Transactions.......................... (1,197)
--------------
NET ASSETS, JUNE 30, 1996............................................................... $1,917,814,325
--------------
--------------
</TABLE>
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Income Allocated from Liquid Assets Portfolio, net................................. $ 44,534,704
-------------
EXPENSES
Administration and Services........................................................ 420,863
Shareholders Reports............................................................... 11,856
Registration....................................................................... 2,752
Professional....................................................................... 5,763
Trustees........................................................................... 2,636
Amortization of Organizational Expenses............................................ 995
Miscellaneous...................................................................... 959
-------------
Total Expenses..................................................................... 445,824
Less: Expenses Absorbed by Bankers Trust........................................... (445,824)
-------------
Net Expenses................................................................... --
-------------
NET INVESTMENT INCOME.................................................................. 44,534,704
-------------
NET REALIZED LOSS FROM INVESTMENT TRANSACTIONS......................................... (17,880)
-------------
NET INCREASE IN NET ASSETS FROM OPERATIONS............................................. $ 44,516,824
-------------
-------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGE 7
5
<PAGE>
- --------------------------------------------------------------------------------
INSTITUTIONAL LIQUID ASSETS FUND
STATEMENTS OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
DECEMBER 11,
1995
FOR THE SIX (COMMENCEMENT OF
MONTHS ENDED OPERATIONS) TO
JUNE 30, 1996 DECEMBER 31,
(UNAUDITED) 1995
--------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net Investment Income.................................................... $ 44,534,704 $ 4,187,751
Net Realized Gain (Loss) from Investment Transactions.................... (17,880) 16,683
--------------- ----------------
Net Increase in Net Assets from Operations................................... 44,516,824 4,204,434
--------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income.................................................... (44,534,704) (4,187,751)
--------------- ----------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net Increase from Transactions in Shares of Beneficial Interest.......... 440,431,077 1,477,384,445
--------------- ----------------
TOTAL INCREASE IN NET ASSETS................................................. 440,413,197 1,477,401,128
NET ASSETS
Beginning of Period.......................................................... 1,477,401,128 --
--------------- ----------------
End of Period................................................................ $ 1,917,814,325 $1,477,401,128
--------------- ----------------
--------------- ----------------
</TABLE>
FINANCIAL HIGHLIGHTS
- ----------------------------------------------------------------------
Contained below are selected data for a share outstanding, total investment
return, ratios to average net assets and other supplemental data for each of the
periods indicated for the Institutional Liquid Assets Fund.
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX DECEMBER 11, 1995
MONTHS ENDED (COMMENCEMENT OF
JUNE 30, 1996 OPERATIONS) TO
(UNAUDITED) DECEMBER 31, 1995
------------- -----------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD........................................... $ 1.00 $ 1.00
------------- -----------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income...................................................... 0.03 0.00+
Net Realized Gain (Loss) from Investment Transactions...................... (0.00)+ 0.00+
------------- -----------------
Total from Investment Operations............................................... 0.03 0.00+
------------- -----------------
DISTRIBUTION TO SHAREHOLDERS
Net Investment Income...................................................... (0.03) (0.00)+
------------- -----------------
NET ASSET VALUE, END OF PERIOD................................................. $ 1.00 $ 1.00
------------- -----------------
------------- -----------------
TOTAL INVESTMENT RETURN........................................................ 2.66% 5.88%*
SUPPLEMENTAL DATA AND RATIOS:
Net Assets, End of Period (000's omitted).................................. $1,917,814 $1,477,401
Ratios to Average Net Assets
Net Investment Income.................................................... 5,29%* 5.50%*
Expenses, including Expenses of the Liquid Assets Portfolio.............. 0.00%* 0.01%*
Decrease Reflected in Above Expense Ratio Due to Absorption of Expenses
by Bankers Trust....................................................... 0.25%* 0.97%*
</TABLE>
- ------------------
* Annualized
+ Less than $0.01 per share
SEE NOTES TO FINANCIAL STATEMENTS ON PAGE 7
6
<PAGE>
- --------------------------------------------------------------------------------
INSTITUTIONAL LIQUID ASSETS FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION
BT Institutional Funds ("the Trust") is registered under the Investment Company
Act of 1940 ("the Act"), as amended, as an open-end management investment
company. The Trust was organized on March 26, 1990, as a business trust under
the laws of the Commonwealth of Massachusetts. The Institutional Liquid Assets
Fund (the "Fund") is one of the funds offered to investors by the Trust. The
Fund commenced operations and began offering shares of beneficial interest on
December 11, 1995. The Fund invests substantially all of its assets in the
Liquid Assets Portfolio (the "Portfolio"). The Portfolio is an open-end
management investment company registered under the Act. The Fund seeks to
achieve its investment objective by investing all of its investable assets in
the Portfolio. The value of such investment in the Portfolio reflects the Fund's
proportionate interest in the net assets of the Portfolio. At June 30, 1996, the
Fund's investment was approximately 100% of the Portfolio.
The financial statements of the Portfolio, including the Schedule of Portfolio
Investments, are contained elsewhere in this report.
B. INVESTMENT INCOME
The Fund earns income, net of expenses, daily on its investment in the
Portfolio. All of the net investment income and realized gains and losses from
the security transactions of the Portfolio are allocated pro rata among the
investors in the Portfolio at the time of such determination.
C. ORGANIZATIONAL EXPENSES
Costs incurred by the Fund in connection with its organization and initial
registration are being amortized over a five year period on a straight-line
basis.
D. DIVIDENDS
It is the Fund's policy to declare dividends daily and pay monthly to
shareholders from net investment income. Dividends payable to shareholders are
recorded by the Fund on the ex-dividend date, which is the same as the
declaration date. Distributions of net realized short-term and long-term capital
gains, if any, earned by the Fund will be made annually to the extent they are
not offset by any capital loss carryforwards.
E. FEDERAL INCOME TAXES
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code. Therefore, no federal income tax provision is required.
F. OTHER
The Trust accounts separately for the assets, liabilities, and operations of the
Fund. Expenses directly attributable to the Fund are charged to that Fund, while
expenses which are attributable to all of the Trust's funds are allocated among
them.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements.
NOTE 2 -- FEES AND TRANSACTIONS WITH AFFILIATES
The Fund has entered into an Administration and Services Agreement with Bankers
Trust Company ("Bankers Trust"). Under this Administration and Services
Agreement, Bankers Trust provides administrative, custody, transfer agency and
shareholder services to the Fund in return for a fee computed daily and paid
monthly at an annual rate of 0.05 of 1% of the Fund's average daily net assets.
For the six months ended June 30, 1996, this fee aggregated $420,863.
The Trust has entered into a Distribution Agreement with Signature Broker-Dealer
Services, Inc. ("Signature"). Under the Distributions Agreement with the Trust,
pursuant to Rule 12b-1 of the 1940 Act, Signature may seek reimbursement, at an
annual rate not exceeding 0.10 of 1% of the Fund's average daily net assets, for
expenses incurred in connection with any activities primarily intended to result
in the sale of the Fund's shares. For the six months ended June 30, 1996, there
were no reimbursable expenses incurred under this agreement.
Bankers Trust has voluntarily undertaken to waive and reimburse expenses of the
Fund, to the extent necessary, to limit all expenses to 0.05 of 1% of the
average daily net assets of the Fund, excluding expenses of the Portfolio and
0.16 of 1% of the average daily net assets of the Fund, including expenses of
the Portfolio. Bankers Trust voluntarily decided to waive and reimburse all the
expenses of the Fund for the six months ended June 30, 1996. Such expenses
amounted to $445,824.
The Fund is subject to such limitations as may from time to time be imposed by
the Blue Sky laws of states in which the Fund sells its shares. Currently, the
most restrictive jurisdiction imposed expense limitation of 2.5% of the first
$30,000,000 of the average daily net assets, 2.0% of the next $70,000,000, and
1.5% of any excess over $100,000,000.
Certain trustees and officers of the Fund are also directors, officers and/or
employees of Signature. None of the trustees so affiliated received compensation
for services as trustees of the Fund. Similarly, none of the Fund's officers
received compensation from the Fund.
NOTE 3 -- SHARES OF BENEFICIAL INTEREST
At June 30, 1996, there were an unlimited number of shares of beneficial
interest authorized. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE PERIOD
MONTHS ENDED DECEMBER 11, 1995
JUNE 30, 1996 (COMMENCEMENT OF OPERATIONS)
(UNAUDITED) TO DECEMBER 31, 1995
--------------- ----------------------------
<S> <C> <C>
Sold..................... $ 2,746,319,729 $1,679,671,203
Redeemed................. (2,305,888,652) (202,286,758)
--------------- ---------------
Net Increase............. $ 440,431,077 $1,477,384,445
--------------- ---------------
--------------- ---------------
</TABLE>
7
<PAGE>
- --------------------------------------------------------------------------------
LIQUID ASSETS PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DESCRIPTION VALUE
- --------------------------------------- --------------
<C> <S> <C>
CERTIFICATES OF DEPOSIT - 2.34%
$20,000,000 Bank of America, 5.45%,
9/18/96................... $ 20,000,000
25,000,000 NBD Bank, 5.42%, 8/19/96.... 25,000,674
--------------
TOTAL CETIFICATES OF DEPOSIT
(Amortized Cost $45,000,674)......... $ 45,000,674
--------------
*COMMERCIAL PAPER - 42.19%
14,565,000 ABN - Amro Bank, 5.05%,
10/11/96.................. 14,356,599
20,000,000 Asset Securitization, 5.28%,
7/31/96................... 19,912,000
6,500,000 Banc One Corporation, 5.28%,
8/21/96................... 6,451,380
15,000,000 Bank of America, 5.19%,
7/8/96.................... 14,984,862
30,000,000 Barclays U. S. Funding
Corporation, 5.28%,
8/22/96................... 29,771,200
17,799,000 Bass Finance C. I. Limited,
5.28%, 7/2/96............. 17,796,390
15,000,000 Bear Stearns, 5.30%,
7/8/96.................... 14,984,542
BHF Finance Delaware
22,000,000 5.32%, 7/5/96............... 21,986,996
20,000,000 5.29%, 8/13/96.............. 19,873,628
20,000,000 BTR Dunlop, 5.42%, 9/4/96... 19,804,278
25,000,000 Caisse des Amortissement de
la Dette Sociale, 5.35%,
8/19/96................... 24,817,951
Caisse des Depots et
Consignations
15,000,000 5.35%, 7/23/96.............. 14,950,958
20,000,000 5.34%, 7/26/96.............. 19,925,833
15,000,000 5.30%, 8/2/96............... 14,929,333
6,000,000 Canadian Wheat Board, 5.38%,
8/12/96................... 5,962,340
20,000,000 Commerzbank, 5.27%,
7/1/96.................... 20,000,000
20,000,000 Corporate Asset Funding Co.,
Inc., 5.31%, 8/9/96....... 19,884,950
10,000,000 CS First Boston, 5.29%,
7/25/96................... 9,964,733
Daimler Benz North American
25,000,000 5.28%, 7/9/96............... 24,970,667
10,000,000 5.26%, 8/13/96.............. 9,937,172
25,000,000 5.47%, 11/7/96.............. 24,509,979
15,000,000 Den Danske, 5.25%,
7/31/96................... 14,934,375
2,000,000 DuPont (E. I. ) De Nemours,
5.28%, 7/30/96............ 1,991,493
Eksportfinans
2,300,000 5.25%, 8/30/96.............. 2,279,875
8,600,000 5.37%, 10/21/96............. 8,456,323
15,000,000 European Investment Bank,
5.30%, 7/29/96............ 14,938,167
General Electric Capital
Corporation
20,000,000 5.25%, 8/28/96.............. 19,830,833
26,000,000 5.11%, 9/27/96.............. 25,675,231
Goldman Sachs
20,000,000 5.33%, 7/11/96.............. 19,970,389
25,000,000 5.33%, 8/23/96.............. 24,803,827
25,000,000 Household Finance
Corporation, 5.28%,
8/21/96................... 24,813,000
<CAPTION>
PRINCIPAL
AMOUNT DESCRIPTION VALUE
- --------------------------------------- --------------
<C> <S> <C>
$12,000,000 International Lease Finance,
5.31%, 8/15/96............ $ 11,920,350
20,000,000 J. P. Morgan, 5.46%,
12/16/96.................. 19,490,400
Kingdom of Sweden
6,000,000 5.27%, 10/18/96............. 5,904,262
30,000,000 5.47%, 11/27/96 (a)......... 29,322,739
10,000,000 McKenna Triangle, 5.31%,
8/6/96.................... 9,946,900
Monte dei Paschi di Siena
10,000,000 5.32%, 7/11/96.............. 9,985,222
20,000,000 5.34%, 8/7/96............... 19,890,233
8,000,000 5.40%, 8/16/96.............. 7,944,800
Morgan Stanley
20,000,000 5.32%, 7/12/96.............. 19,967,489
25,000,000 5.30%, 7/19/96.............. 24,933,750
25,000,000 NationsBank Corporation,
5.31%, 8/5/96............. 24,870,938
Norwest Corporation
35,000,000 5.34%, 8/5/96 (a)........... 34,818,196
10,000,000 5.35%, 8/20/96.............. 9,925,695
7,000,000 Paccar Financial, 5.34%,
7/8/96.................... 6,992,732
Pacific Dunlop Holdings
5,000,000 5.35%, 7/8/96............... 4,994,799
10,000,000 5.37%, 7/17/96.............. 9,976,133
6,200,000 Phillip Morris, 5.31%,
8/19/96................... 6,155,190
U. S. L. Capital
13,000,000 5.29%, 7/2/96............... 12,998,090
15,000,000 5.35%, 7/9/96............... 14,982,167
--------------
TOTAL COMMERCIAL PAPER
(Amortized Cost $812,489,389)........ $ 812,489,389
--------------
EURODOLLAR CERTIFICATES OF
DEPOSIT - 10.07%
25,000,000 Banque National de Paris,
5.12%, 8/23/96............ 25,002,795
Bayerische Hypotheken
25,000,000 5.04%, 8/9/96............... 25,000,737
25,000,000 5.44%, 8/12/96.............. 25,000,265
Bayerische Landesbank
21,000,000 5.22%, 7/30/96.............. 21,002,772
2,000,000 5.63%, 12/27/96............. 2,000,054
Bayerische Vereinsbank
15,000,000 5.36%, 7/3/96............... 14,999,962
23,000,000 5.34%, 7/5/96............... 22,999,990
28,000,000 Monte dei Paschi di Siena,
5.38%, 7/9/96............. 28,000,062
5,000,000 Nordeutsche Landesbank,
5.49%, 11/13/96........... 5,000,441
25,000,000 Toronto Dominion Bank,
5.64%, 12/31/96........... 25,000,000
--------------
TOTAL EURODOLLAR CERTIFICATES OF
DEPOSIT
(Amortized Cost $194,007,078)........
$ 194,007,078
--------------
EURODOLLAR TIME DEPOSITS - 4.15%
Bank of America
10,000,000 5.063%, 7/15/96............. 10,000,000
10,000,000 5.031%, 8/16/96............. 10,000,000
10,000,000 5.40%, 9/3/96............... 10,000,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGE 12.
8
<PAGE>
- --------------------------------------------------------------------------------
LIQUID ASSETS PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DESCRIPTION VALUE
- --------------------------------------- --------------
<C> <S> <C>
$25,000,000 Bank of Tokyo-Mitsubishi,
5.688%, 7/1/96............ $ 25,000,000
25,000,000 Dai-Ichi Kangyo Bank
Nederland, 5.47%,
7/25/96................... 25,000,000
--------------
TOTAL EURODOLLAR TIME DEPOSITS
(Amortized Cost $80,000,000)......... $ 80,000,000
--------------
FLOATING RATE NOTES - 7.45%
23,500,000 American Express Centurion
Bank, Monthly Variable
Rate
5.466%, 5/16/97........... 23,500,000
20,000,000 5.427%, 6/10/97............. 20,000,000
Bear Stearns
15,000,000 Monthly Variable Rate,
5.503%, 2/10/97........... 15,000,000
4,000,000 Quarterly Variable Rate,
5.80%, 5/5/97............. 4,003,899
12,000,000 Daily Variable Rate, 5.47%,
6/6/97.................... 12,000,000
20,000,000 Caterpillar Financial,
Quarterly Variable Rate,
5.564%, 10/24/96.......... 20,002,465
1,000,000 Dean Witter Discover,
Quarterly Variable Rate,
5.762%, 11/22/96.......... 1,000,701
15,000,000 General Electric Capital
Corporation, Quarterly
Variable Rate, 5.50%,
12/17/96.................. 15,000,000
PNC Bank
25,000,000 Monthly Variable Rate,
5.377%, 1/6/97............ 24,989,954
8,000,000 Weekly Variable Rate,
5.515%, 2/6/97............ 7,996,189
--------------
TOTAL FLOATING RATE NOTES
(Amortized Cost $143,493,208)........ $ 143,493,208
--------------
TIME DEPOSITS - 12.10%
55,000,000 Bank of Nova Scotia, 5.50%,
7/2/96.................... 55,000,000
30,000,000 Credit Commercial de France,
5.063%, 7/15/96........... 30,000,000
50,000,000 Internationale Nederlanden
Bank, 5.375%, 7/24/96..... 50,000,000
8,000,000 Nordeutsche Landesbank,
5.063%, 7/15/96........... 8,000,000
90,000,000 Northern Trust Corporation,
5.125%, 7/1/96............ 90,000,000
--------------
TOTAL TIME DEPOSITS
(Amortized Cost $233,000,000)........ $ 233,000,000
--------------
U.S. TREASURY SECURITIES -
1.80%
*U.S. TREASURY BILLS - 0.50%
10,000,000 4.59%, 2/6/97............... 9,719,500
U.S. TREASURY NOTES - 1.30%
25,000,000 6.50%, 9/30/96.............. 25,087,655
--------------
TOTAL U.S. TREASURY SECURITIES
(Amortized Cost $34,807,155)......... $ 34,807,155
--------------
<CAPTION>
PRINCIPAL
AMOUNT DESCRIPTION VALUE
- --------------------------------------- --------------
<C> <S> <C>
YANKEE CERTIFICATES OF
DEPOSIT - 13.92%
$20,000,000 Bank of Montreal, 5.438%,
9/3/96.................... $ 20,000,000
15,000,000 Banque National de Paris,
5.34%, 7/17/96............ 14,999,851
13,000,000 Canadian Imperial Bank of
Commerce, 5.45%,
7/25/96................... 13,000,000
16,000,000 Commerzbank, 5.33%,
7/8/96.................... 15,999,957
Deutsche Bank
9,500,000 5.37%, 7/11/96.............. 9,500,053
18,000,000 5.44%, 10/1/96.............. 17,997,135
25,000,000 National Westminister Bank,
5.40%, 8/21/96............ 25,000,000
20,000,000 Rabobank, 5.37%, 8/5/96..... 20,000,193
Sanwa Bank
15,000,000 5.42%, 7/8/96............... 14,999,937
25,000,000 5.46%, 7/8/96............... 25,000,048
Societe Generale
30,000,000 5.33%, 7/2/96............... 29,999,997
29,500,000 5.35%, 7/15/96.............. 29,500,166
10,000,000 5.47%, 9/5/96............... 10,000,181
Sumitomo Bank
14,000,000 5.47%, 7/12/96.............. 14,000,043
8,000,000 5.48%, 7/24/96.............. 8,000,051
--------------
TOTAL YANKEE CERTIFICATES OF DEPOSIT
(Amortized Cost $267,997,612)........ $ 267,997,612
--------------
REPURCHASE AGREEMENTS -
5.12%
98,566,632 Tri-Party Repurchase
Agreement with Goldman
Sachs, dated 6/28/96,
5.00%, due 7/1/96,
principal and interest in
the amount of $98,597,697,
(Collateralized by U.S.
Treasury Note, par value
$11,570,576, 6.125%, due
9/30/00, value of
$11,442,130, U.S. Treasury
Note, par value of
$12,357,000, 6.00%, due
5/31/98, value of
$12,330,534, Federal
National Mortgage Assoc.
Discount Note, par value
$70,000,000, due 12/12/96,
value of $68,257,000,
Federal National Mortgage
Assoc. Global Bond, par
value of $20,360,000,
7.40%, due 7/1/04, value
of $21,022,719 (Amortized
Cost $98,566,632)......... $ 98,566,632
--------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS -
(Amortized Cost
$1,909,361,748)............ 99.14% $1,909,361,748
Other Assets less
Liabilities................ 0.86% 16,492,151
------- --------------
NET ASSETS................... 100.00% $1,925,853,899
------- --------------
------- --------------
</TABLE>
- ------------------
(a) Weighted Average Coupon
* Discount Rate
SEE NOTES TO FINANCIAL STATEMENTS ON PAGE 12.
9
<PAGE>
- --------------------------------------------------------------------------------
LIQUID ASSETS PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES JUNE, 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at Value............................................................... $1,909,361,748
Cash................................................................................ 41,480,580
Interest Receivable................................................................. 6,325,168
Prepaid Expenses.................................................................... 3,126
Due from Bankers Trust.............................................................. 20,976
--------------
Total Assets............................................................................ 1,957,191,598
--------------
LIABILITIES
Payable for Securities Purchased.................................................... 31,324,357
Accrued Expenses and Other.......................................................... 13,342
--------------
Total Liabilities....................................................................... 31,337,699
--------------
NET ASSETS.............................................................................. $1,925,853,899
--------------
--------------
COMPOSITION OF NET ASSETS
Paid-in Capital..................................................................... $1,925,853,899
--------------
NET ASSETS, JUNE 30, 1996............................................................... $1,925,853,899
--------------
--------------
</TABLE>
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest........................................................................... $ 44,534,709
Expenses
Advisory........................................................................... 1,265,448
Administration and Services........................................................ 421,816
Professional....................................................................... 17,463
Trustees........................................................................... 1,348
Miscellaneous...................................................................... 2,307
-------------
Total Expenses..................................................................... 1,708,382
Less: Expenses Absorbed by Bankers Trust........................................... (1,708,382)
-------------
Net Expenses................................................................... --
-------------
NET INVESTMENT INCOME.................................................................. 44,534,709
-------------
NET REALIZED LOSS FROM INVESTMENT TRANSACTIONS......................................... (17,880)
-------------
NET INCREASE IN NET ASSETS FROM OPERATIONS............................................. $ 44,516,829
-------------
-------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGE 12.
10
<PAGE>
- --------------------------------------------------------------------------------
LIQUID ASSETS PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31,
(UNAUDITED) 1995+
--------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net Investment Income.................................................. $ 44,534,709 $ 4,721,474
Net Realized Gain (Loss) from Investment Transactions.................. (17,880) 18,254
--------------- ----------------
Net Increase in Net Assets from Operations................................. 44,516,829 4,739,728
--------------- ----------------
CAPITAL TRANSACTIONS
Proceeds from Capital Invested......................................... 2,746,319,729 1,701,831,076
Value of Capital Withdrawn............................................. (2,346,571,687) (238,385,924)
--------------- ----------------
Net Increase in Net Assets from Capital Transactions....................... 399,748,042 1,463,445,152
--------------- ----------------
TOTAL INCREASE IN NET ASSETS............................................... 444,264,871 1,468,184,880
NET ASSETS
Beginning of Period........................................................ 1,481,589,028 13,404,148
--------------- ----------------
End of Period.............................................................. $ 1,925,853,899 $1,481,589,028
--------------- ----------------
--------------- ----------------
</TABLE>
FINANCIAL HIGHLIGHTS
- ----------------------------------------------------------------------
Contained below are selected ratios and supplemental data for each of the
periods indicated for the Liquid Assets Portfolio.
<TABLE>
<CAPTION>
FOR THE SIX FOR THE PERIOD
MONTHS ENDED FOR THE JUNE 7, 1993
JUNE 30, PERIOD ENDED FOR THE YEAR (COMMENCEMENT OF
1996 DECEMBER 31, ENDED DECEMBER OPERATIONS) TO
(UNAUDITED) 1995+ 31, 1994 DECEMBER 31, 1993
------------ ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
SUPPLEMENTAL DATA AND RATIOS:
Net Assets, End of Period (000's
omitted)............................ $1,925,854 $ 1,481,589 $ 13,404 $ 8,137
Ratios to Average Net Assets
Net Investment Income............... 5.29%* 7.28%* 4.28% 3.12%*
Expenses............................ 0.00%* 0.01%* 0.10% 0.10%*
Decrease Reflected in Above Expense
Ratio Due to Absorption of
Expenses by Bankers Trust......... 0.20%* 0.28%* 0.30% 0.57%*
</TABLE>
- ----------------
* Annualized
+ For the periods January 1, 1995 to September 14, 1995 and December 11, 1995 to
December 31, 1995 (see Note 1A)
SEE NOTES TO FINANCIAL STATEMENTS ON PAGE 12.
11
<PAGE>
- --------------------------------------------------------------------------------
LIQUID ASSETS PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION
The Liquid Assets Portfolio (the "Portfolio") is registered under the Investment
Company Act of 1940 ("the Act"), as amended, as an open-end management
investment company. The Portfolio commenced operations on June 7, 1993, as an
unincorporated trust under the laws of New York. The Declaration of Trust
permits the Board of Trustees (the "Trustees") to issue beneficial interests in
the Portfolio.
On September 15, 1995, the Portfolio temporarily suspended its operations due to
a withdrawal of investments by BT Investment Liquid Assets Fund. On December 11,
1995, the Portfolio resumed its operations as a result of an investment made by
the Institutional Liquid Assets Fund.
B. SECURITY VALUATION
Investments are valued at amortized cost, which has been determined by the
Trustees to represent fair value of the Portfolio's investments.
C. SECURITY TRANSACTIONS AND INTEREST INCOME
Security transactions are accounted for on a trade date basis (date the order to
buy or sell is executed). Interest income is recorded on the accrual basis and
includes amortization of premium and discount on investments. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
The Portfolio may enter into repurchase agreements with financial institutions
deemed to be creditworthy by the Portfolio's Investment Adviser, subject to the
seller's agreement to repurchase and the Portfolio's agreement to resell such
securities at a mutually agreed upon price. Securities purchased subject to
repurchase agreements are deposited with the Portfolio's custodian, and pursuant
to the terms of the repurchase agreements must have an aggregate market value
greater than or equal to the repurchase price plus accrued interest at all
times. If the value of the underlying securities falls below the value of the
repurchase price plus accrued interest, the Portfolio will require the seller to
deposit additional collateral by the next business day. If the request for
additional collateral is not met, or the seller defaults on its repurchase
obligation, the Portfolio maintains the right to sell the underlying securities
at market value and may claim any resulting loss against the seller.
All of the net investment income and realized and unrealized gains and losses
from the security transactions of the Portfolio are allocated pro rata among the
investors in the Portfolio at the time of such determination.
D. FEDERAL INCOME TAXES
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code. Therefore, no federal income tax provision is required.
E. OTHER
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements.
NOTE 2 -- FEES AND TRANSACTIONS WITH AFFILIATES
The Portfolio has entered into an Administration and Services Agreement with
Bankers Trust Company ("Bankers Trust"). Under this Administration and Services
Agreement, Bankers Trust provides administrative, custody, transfer agency and
shareholder services to the Portfolio in return for a fee computed daily and
paid monthly at an annual rate of 0.05 of 1% of the Portfolio's average daily
net assets. For the six months ended June 30, 1996, this fee aggregated
$421,816.
The Portfolio has entered into an Advisory Agreement with Bankers Trust. Under
this Advisory Agreement, the Portfolio pays Bankers Trust an advisory fee
computed daily and paid monthly at an annual rate of 0.15 of 1% of the
Portfolio's average daily net assets. For the six months ended June 30, 1996,
this fee aggregated $1,265,448.
Bankers Trust has voluntarily undertaken to waive and reimburse expenses of the
Portfolio, to the extent necessary, to limit all expenses to 0.11 of 1% of the
average daily net assets of the Portfolio. Bankers Trust voluntarily decided to
waive and reimburse all the expenses of the Portfolio for the six months ended
June 30, 1996. Such expenses amounted to $1,708,382.
Certain trustees and officers of the Portfolio are also directors, officers
and/or employees of Signature. None of the trustees so affiliated received
compensation for services as trustee of the Portfolio. Similarly, none of the
Portfolio's officers received compensation from the Portfolio.
12
<PAGE>
BT INSTITUTIONAL FUNDS
INSTITUTIONAL LIQUID ASSETS FUND
For shareholder account information
and current price and yield
quotations, shareholders may call
their relationship manager or
servicing agent. Prospectuses
containing more extensive information
regarding the Institutional Liquid
Assets Fund may be obtained by calling
or writing to Investors Fiduciary
Trust Company or Signature
Broker-Dealer Services, Inc., the
primary Servicing Agent and
Distributor, respectively, of BT
Institutional Funds:
BT INSTITUTIONAL FUNDS
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, MO 64105
(800) 368-4031
BT INSTITUTIONAL FUNDS
Signature Broker-Dealer Services, Inc.
6 St. James Avenue
Boston, MA 02116
(800) 545-1074
You may write to the Institutional
Liquid Assets Fund
at the following address:
BT INSTITUTIONAL FUNDS
6 St. James Avenue
Boston, MA 02116
