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- BT INSTITUTIONAL FUNDS -
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INSTITUTIONAL
DAILY ASSETS FUND
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SEMI-ANNUAL REPORT
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DECEMBER-1996
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INSTITUTIONAL DAILY ASSETS FUND
TABLE OF CONTENTS
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LETTER TO SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . . . 3
INSTITUTIONAL DAILY ASSETS FUND
Schedule of Portfolio Investments. . . . . . . . . . . . . . . 4
Statement of Assets and Liabilities. . . . . . . . . . . . . . 6
Statement of Operations. . . . . . . . . . . . . . . . . . . . 6
Statement of Changes in Net Assets . . . . . . . . . . . . . . 7
Financial Highlights . . . . . . . . . . . . . . . . . . . . . 8
Notes to Financial Statements. . . . . . . . . . . . . . . . . 9
2
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INSTITUTIONAL DAILY ASSETS FUND
LETTER TO SHAREHOLDERS
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The money markets were dominated virtually throughout the twelve months ended
December 31, 1996 by extreme volatility in short-term interest rates. By
staying disciplined to the purchase of high quality instruments and actively
adjusting maturities as market conditions changed, the manager of the
Institutional Daily Assets Fund ("the Fund") was able to produce competitive
yields. The Fund's annualized 7-day effective yield of 5.48% as of December 31,
1996 was higher than the 5.30% effective yield of the IBC First Tier-
Institutional Only Money Funds average.
MARKET ACTIVITY
The Federal Reserve Board acted only once in 1996, cutting the Federal Funds
rate from 5.50% to 5.25% in January, in response to a weaker economy. The
markets expected a near-term recession to drive interest rates even lower.
However, once February economic data indicated stronger than anticipated growth,
most notably through very strong non-farm payroll numbers, market sentiment
changed completely and quickly, and interest rates rose sharply. The economy
remained strong through July, leading market participants, in general, to fear
that the Fed would raise interest rates officially.
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INVESTMENT INSTRUMENTS
Commercial paper, certificates of deposit, floating rate notes and repurchase
agreements.
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Instead, the Federal Reserve Board held monetary policy neutral for the rest of
1996. Rates continued to fluctuate, rising on positive economic news and
dipping on the news that the Fed remained on the sidelines each time they met.
Nevertheless, in contrast to the effects of dramatic increases in interest rates
during the first half of the year, moderate economic activity in the second half
proved much more favorable for the financial markets.
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OBJECTIVE
Seeks high levels of current income consistent with liquidity and preservation
of capital.
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Growth slowed in the third quarter, and inflation data continued to display an
absence of any real pressure. Much of the slowdown appeared in the consumer
sector, even though employment gains remained strong. Total real GDP growth
tapered from an unsustainable 4.7% increase in the second quarter to 2.1% in the
third.
There was no deterioration of economic growth in the final three months of the
year. Consumer spending perked up in response to a high degree of confidence
and a still-favorable job market, and business investment continued to expand
rapidly. These conditions proved favorable for the money markets, as short-term
interest rates remained steady while longer-term rates drifted lower.
INVESTMENT REVIEW
The fund began operating during November, 1996. We started the Fund out at
neutral duration at the point of conversion. We quickly began extending the
Fund's average maturity in the latter part of November. Although we believed
that the next move in interest rates would be higher, we also anticipated that
the Federal Reserve Board would want a clearer picture of higher inflation and
increased economic activity before making an official move. Thus, as general
market expectations of higher rates led to a steeper short-term yield curve, we
were able to extend the Fund's average maturity position with very little risk.
This strategy proved to be quite effective in adding value to the Fund through
the remainder of the year. We have since reduced duration to neutral and expect
to maintain the current investment strategy until inflation pressures begin to
surface.
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STATUS AT DECEMBER 31, 1996
Seven day effective yield: 5.48%
Average maturity: 31 days
Net assets: 1,434 million
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MANAGER OUTLOOK
We expect continued slow to moderate economic growth and modest inflation in the
months to come. Given that, we believe that the Federal Reserve Board will
remain on hold for the near future, with the money markets trading in a narrow
range. Stronger-than-expected economic news may cause some volatility ahead,
however, any dips in the market may be opportunities to extend the Fund's
average maturity out along the yield curve and lock in some higher rates.
Overall, we will remain opportunistic, buying when valuations are attractive,
and waiting for the market to take a more definite direction.
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DIVERSIFICATION OF PORTFOLIO INVESTMENTS
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By Asset Type as of December 31, 1996
(PERCENTAGES ARE BASED ON MARKET VALUE)
[Piechart]
[EDGAR REPRESENTATION OF GRAPHIC MATERIAL]
Other 1%
Floating Rate Notes 20%
Eurodollar Time Deposits 11%
European Certificates of Deposit 14%
Repurchase Agreements 7%
Yankee Certificates of Deposit 6%
Commercial Paper 41%
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.
As always, we appreciate your ongoing support of the Institutional Daily Assets
Fund, and we look forward to continuing to serve your investment needs for many
years ahead.
/s/David Fishman
David Fishman
Portfolio Manager of the
Institutional Daily Assets Fund
December 31, 1996
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* Past performance is not indicative of future results. Yields will vary.
Although money market funds seek to maintain a share value of $1.00, there
is no guarantee that they will be able to do so. An investment in the Fund
is neither insured nor guaranteed by the U.S. government.
3
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INSTITUTIONAL DAILY ASSETS FUND
SCHEDULE OF PORTFOLIO INVESTMENTS DECEMBER 31, 1996
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PRINCIPAL
AMOUNT DESCRIPTION VALUE
--------- ----------- -----
COMMERCIAL PAPER - 40.76%
$ 20,000,000 ABN Amro Bank,
5.26%, 2/20/97 (United States). . . . . . . . $ 19,853,056
28,000,000 ANZ Corp.,
5.29%, 2/21/97 (United States). . . . . . . . 27,790,163
25,000,000 Asset Securitization Cooperative Corp.,
5.30%, 2/20/97 (United States). . . . . . . . 24,815,972
12,000,000 Bank of New York,
5.30%, 2/13/97 (United States). . . . . . . . 11,924,033
12,000,000 BBL North America, Inc.,
5.42%, 2/21/97 (United States). . . . . . . . 11,860,887
50,000,000 Caisse des Depots,
5.30%, 2/14/97 (United States). . . . . . . . 49,676,110
50,000,000 Canadian Imperial Bank of Commerce,
5.30%, 2/13/97 (Canada) . . . . . . . . . . . 49,683,472
15,000,000 Ciesco, LP,
5.30%, 2/13/97 (United States). . . . . . . . 14,905,042
Daimler Benz North America Corp.:
20,000,000 5.40%, 3/18/97 (Germany). . . . . . . . . . . 19,772,000
10,000,000 5.34%, 4/21/97 (Germany). . . . . . . . . . . 9,836,833
25,167,000 Delaware Funding Corp.,
5.30%, 2/14/97 (United States). . . . . . . . 25,003,974
General Electric Co.:
10,000,000 5.46%, 1/15/97 (United States). . . . . . . . 9,978,767
19,000,000 5.38%, 3/17/97 (United States). . . . . . . . 18,787,042
General Electric Capital Corp.:
30,000,000 5.30%, 2/11/97 (United States). . . . . . . . 29,818,917
10,000,000 5.33%, 4/21/97 (United States). . . . . . . . 9,837,139
31,000,000 International Lease Finance Corp.,
5.33%, 1/16/97 (United States). . . . . . . . 30,931,219
25,000,000 Kingdom of Sweden,
5.29%, 2/20/97 (Sweden) . . . . . . . . . . . 24,816,319
12,000,000 McKenna Triangle,
5.30%, 2/21/97 (United States). . . . . . . . 11,909,985
Merrill Lynch & Co.:
15,000,000 5.37%, 1/13/97 (United States). . . . . . . . 14,973,150
44,000,000 5.33%, 1/24/97 (United States). . . . . . . . 43,850,168
25,000,000 Morgan Stanley Group, Inc.,
5.32%, 1/21/97 (United States). . . . . . . . 24,926,110
5,044,000 Receivables Capital Corp.,
5.35%, 1/15/97 (United States). . . . . . . . 5,033,506
50,000,000 Riverwoods Funding Corp.,
5.31%, 1/31/97 (United States). . . . . . . . 49,778,750
20,000,000 Royal Bank of Canada,
5.32%, 1/31/97 (Canada) . . . . . . . . . . . 19,911,333
25,000,000 Sheffield Receivables Corp.,
5.33%, 1/14/97 (United States). . . . . . . . 24,951,882
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TOTAL COMMERICAL PAPER
(Amortized Cost - $584,625,829). . . . . . . . . . . . . . . . $ 584,625,829
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EUROPEAN CERTIFICATES OF
DEPOSIT - 13.88%
$ 50,000,000 Abbey National PLC,
5.38%, 2/14/97 (United Kingdom) . . . . . . . $ 50,000,410
50,000,000 Barclays Bank PLC,
5.63%, 1/03/97 (United Kingdom) . . . . . . . 50,000,047
35,000,000 Bayerische Hypotheken,
5.38%, 2/24/97 (Germany). . . . . . . . . . . 35,000,518
35,000,000 Deutsche Bank,
5.37%, 2/27/97 (Germany). . . . . . . . . . . 35,000,000
29,000,000 Sumitomo Bank,
5.69%, 1/13/97 (Japan). . . . . . . . . . . . 29,000,192
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TOTAL EUROPEAN CERTIFICATES OF DEPOSIT
(Amortized Cost - $199,001,167). . . . . . . . . . . . . . . . $ 199,001,167
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EURODOLLAR TIME DEPOSITS - 10.72%
Bank of Tokyo-Mitsubishi,
$ 60,000,000 5.46%, 2/18/97 (Japan). . . . . . . . . . . . $ 55,000,000
25,000,000 Canadian Imperial Bank of Commerce,
6.00%, 1/02/97 (Canada) . . . . . . . . . . . 25,000,000
25,000,000 Sanwa Bank,
5.53%, 1/27/97 (Japan). . . . . . . . . . . . 25,000,000
30,000,000 Sumitomo Bank,
5.70%, 1/09/97 (Japan). . . . . . . . . . . . 30,000,000
18,755,270 Suntrust Bank,
6.25%, 1/02/97 (United States). . . . . . . . 18,755,270
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TOTAL EURODOLLAR TIME DEPOSITS
(Amortized Cost - $153,755,270). . . . . . . . . . . . . . . . $ 153,755,270
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See Notes to Financial Statements on Page 9
4
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INSTITUTIONAL DAILY ASSETS FUND
SCHEDULE OF PORTFOLIO INVESTMENTS DECEMBER 31, 1996
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PRINCIPAL
AMOUNT DESCRIPTION VALUE
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FLOATING RATE NOTES - 20.31%
$ 20,000,000 Bank One Milwaukee,
5.46%, 1/02/97 (United States). . . . . . . . $ 19,994,350
Bayerische Landesbank:
15,000,000 5.23%, 1/03/97 (Germany). . . . . . . . . . . . 14,997,854
5,000,000 5.25%, 1/15/97 (Germany). . . . . . . . . . . . 4,999,077
5,000,000 Bear Stearns Companies, Inc.,
5.43%, 1/21/97 (United States). . . . . . . . 5,000,517
10,000,000 Beneficial Corp.,
5.72%, 1/02/97 (United States). . . . . . . . 10,000,000
5,000,000 Caterpillar Financial Services Corp.,
5.36%, 1/22/97 (United States). . . . . . . . 5,000,375
50,000,000 CoreStates MTN,
5.53%, 1/31/97 (United States). . . . . . . . 50,000,000
15,000,000 Dean Witter Discover,
5.47%, 1/07/97 (United States). . . . . . . . 14,998,309
10,000,000 General Electric Capital Corp.,
5.48%, 2/02/97 (United States). . . . . . . . 10,000,000
15,000,000 Merrill Lynch & Co.,
5.46%, 1/31/97 (United States). . . . . . . . 14,995,081
20,000,000 Morgan Stanley Group, Inc.,
5.75%, 1/20/97 (United States). . . . . . . . 20,000,000
PNC Bank N.A.,
50,000,000 5.28%, 1/27/97 (United States). . . . . . . . 49,970,230
40,000,000 Royal Bank of Canada,
5.47%, 1/02/97 (Canada) . . . . . . . . . . . 39,965,578
16,375,000 Student Loan Marketing Association,
5.56%, 1/01/97 (United States). . . . . . . . 16,375,000
Wachovia Bank of North Carolina,
15,000,000 5.25%, 1/28/97 (United States). . . . . . . . 14,993,820
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TOTAL FLOATING RATE NOTES
(Amortized Cost - $291,290,191). . . . . . . . . . . . . . . . $ 291,290,191
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OTHER - 1.20%
$ 7,000,000 Merrill Lynch & Co.,
5.12%, 2/27/97 (United States). . . . . . . . $ 6,999,673
$ 10,250,535 Ford Motor Credit Co.,
5.67%, 1/15/97 (United States). . . . . . . . $ 10,254,431
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TOTAL OTHER
(Amortized Cost - $17,254,104) . . . . . . . . . . . . . . . . $ 17,254,104
--------------
REPURCHASE AGREEMENTS - 6.97%
100,000,000 Repurchase agreement with NationsBank,
dated 12/31/96, 7.38%, principal &
interest in the amount of $100,164,000,
due 1/02/97, (Collateralized by U.S.
Treasury Notes, par value of $12,657,000,
6.625% to 7.75%, due 1/31/00 to 7/31/01,
value of $13,437,013; Federal National
Mortgage Association, par value of
$44,216,298, 5.50% to 9.50%, due 3/17/97
to 1/01/27, value of $52,467,018; Federal
Home Loan Bank, par value of $5,600,000,
due 2/27/97, value of $5,551,358; and
Federal Mortgage Association Corp., par
value of $38,692,185, 5.50% to 9.50%, due
11/01/98 to 12/01/28, value of
$30,545,371). . . . . . . . . . . . . . . . . $ 100,000,000
--------------
YANKEE CERTIFICATES OF
DEPOSIT - 6.00%
Bank of Nova Scotia:
$ 6,000,000 5.56%, 1/17/97 (Canada) . . . . . . . . . . . $ 6,000,000
25,000,000 5.37%, 2/14/97 (Canada) . . . . . . . . . . . 25,000,000
10,000,000 Bayerische Hypotheken,
5.62%,1/15/97 (Germany) . . . . . . . . . . . 10,000,183
20,000,000 Sanwa Bank,
5.50%, 1/22/97 (Japan). . . . . . . . . . . . 20,000,116
25,000,000 Societe Generale,
5.38%, 2/14/97 (United States). . . . . . . . 25,000,078
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TOTAL YANKEE CERTIFICATES OF DEPOSIT
(Amortized Cost - $86,000,337) . . . . . . . . . . . . . . . . $ 86,000,377
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TOTAL INVESTMENTS
(Amortized Cost - $1,431,926,938). . . . . . . . . 99.84% $1,431,926,938
Other Assets Less Liabilities. . . . . . . . . . . . 0.16% 2,351,192
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NET ASSETS . . . . . . . . . . . . . . . . . . . . .100.00% $1,434,278,130
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* Interest rates for Commercial Paper represent discount rates at the time of
purchase.
See Notes to Financial Statements on Page 9
5
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INSTITUTIONAL DAILY ASSETS FUND
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1996
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ASSETS
Investments, at Value . . . . . . . . . . . . . . . . . . $ 1,436,924,696
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . 117,013
Interest Receivable . . . . . . . . . . . . . . . . . . . 4,748,687
Deferred Organizational Expenses. . . . . . . . . . . . . 128,530
Prepaid Expenses and Other. . . . . . . . . . . . . . . . 18,885
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Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . 1,441,937,811
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LIABILITIES
Due to Bankers Trust. . . . . . . . . . . . . . . . . . . 153,664
Dividends Payable . . . . . . . . . . . . . . . . . . . . 7,359,417
Accrued Expenses and Other. . . . . . . . . . . . . . . . 146,600
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TOTAL LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . 7,659,681
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NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,434,278,130
---------------
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SHARES OUTSTANDING ($0.001 par value per share,
unlimited number of shares of beneficial
interest authorized) . . . . . . . . . . . . . . . . . . . . 1,434,280,952
---------------
---------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(net assets divided by shares outstanding) . . . . . . . . . $ 1.00
---------------
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COMPOSITION OF NET ASSETS
Paid-in Capital . . . . . . . . . . . . . . . . . . . . . $ 1,434,280,952
Accumulated Net Realized Loss from Investment
Transactions. . . . . . . . . . . . . . . . . . . . . . (2,822)
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NET ASSETS, DECEMBER 31, 1996. . . . . . . . . . . . . . . . . $ 1,434,278,130
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STATEMENT OF OPERATIONS FOR THE PERIOD ENDED DECEMBER 31, 1996
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INVESTMENT INCOME
Interest Income . . . . . . . . . . . . . . . . . . . . . $ 12,041,437
---------------
EXPENSES
Advisory Fees . . . . . . . . . . . . . . . . . . . . . . 219,939
Administration and Services Fees. . . . . . . . . . . . . 43,988
Printing and Shareholder Reports. . . . . . . . . . . . . 3,906
Professional Fees . . . . . . . . . . . . . . . . . . . . 8,383
Trustees Fees . . . . . . . . . . . . . . . . . . . . . . 6,470
Amortization of Organizational Expenses . . . . . . . . . 3,470
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 2,029
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Total Expenses. . . . . . . . . . . . . . . . . . . . . . 288,185
Less: Expenses Absorbed by Bankers Trust . . . . . . . . (24,258)
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Net Expenses. . . . . . . . . . . . . . . . . . . . . . 263,927
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NET INVESTMENT INCOME. . . . . . . . . . . . . . . . . . . . . 11,777,510
REALIZED LOSS FROM INVESTMENT TRANSACTIONS . . . . . . . . . . (2,822)
---------------
NET INCREASE IN NET ASSETS FROM OPERATIONS . . . . . . . . . . $ 11,774,688
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See Notes to Financial Statements on Page 9
6
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INSTITUTIONAL DAILY ASSETS FUND
STATEMENT OF CHANGES IN NET ASSETS
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FOR THE PERIOD
NOVEMBER 13, 1996
(COMMENCEMENT OF
OPERATIONS) TO
DECEMBER 31, 1996
-----------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net Investment Income . . . . . . . . . . . . . . . . . . $ 11,777,510
Net Realized Gain from Investment Transactions. . . . . . (2,822)
---------------
Net Increase in Net Assets from Operations . . . . . . . . . . 11,774,688
---------------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income . . . . . . . . . . . . . . . . . . (11,777,510)
---------------
CAPITAL TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
(at Net Asset Value of $1.00 per share)
Proceeds from Sales of Shares . . . . . . . . . . . . . . 2,304,701,811
Cost of Shares Redeemed . . . . . . . . . . . . . . . . . (870,420,869)
---------------
Net Increase from Capital Transactions in Shares of
Beneficial Interest. . . . . . . . . . . . . . . . . . . . . 1,434,280,942
---------------
TOTAL INCREASE IN NET ASSETS . . . . . . . . . . . . . . . . . 1,434,278,120
NET ASSETS
Beginning of Period. . . . . . . . . . . . . . . . . . . . . . 10
---------------
End of Period. . . . . . . . . . . . . . . . . . . . . . . . . $ 1,434,278,130
---------------
---------------
See Notes to Financial Statements on Page 9
7
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INSTITUTIONAL DAILY ASSETS FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below are selected data for a share of beneficial interest
outstanding, total investment return, ratios to average net assets and other
supplemental data for the period indicated for the Institutional Daily Assets
Fund.
FOR THE PERIOD
NOVEMBER 13, 1996
(COMMENCEMENT OF
OPERATIONS) TO
DECEMBER 31, 1996
-----------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . $ 1.00
------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income . . . . . . . . . . . . . . . . . 0.01
Net Realized Gain from Investment Transactions. . . . . 0.00+
------------
Total from Investment Operations . . . . . . . . . . . . . . 0.01
------------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income . . . . . . . . . . . . . . . . . (0.01)
------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . $ 1.00
------------
------------
TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . . . . . . 0.72%
SUPPLEMENTAL DATA AND RATIOS:
Net Assets, End of Period (000s omitted). . . . . . . . $ 1,434,278
Ratios to Average Net Assets:
Net Investment Income . . . . . . . . . . . . . . . . 1.43%
Expenses. . . . . . . . . . . . . . . . . . . . . . . 0.03%
Decrease Reflected in Above Expense Ratio Due
to Absorption of Expenses by Bankers Trust. . . . . 0.00%++
- ------------
+ Less than $0.01 per share.
++ Less than 0.01% per share.
See Notes to Financial Statements on Page 9
8
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INSTITUTIONAL DAILY ASSETS FUND
NOTES TO FINANCIAL STATEMENTS
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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 an unincorporated
business trust under the laws of the Commonwealth of Massachusetts. The
Institutional Daily Assets Fund (the "Fund") is one of the institutional funds
offered to "accredited investors" as defined under the Securities Act of 1933
and institutional investors by the Trust. The Fund commenced operations and
began offering shares of beneficial interest on November 13, 1996. The
Declaration of Trust permits the Board of Trustees (the "Trustees") to issue
beneficial interests in the Fund. The following summarizes the significant
accounting policies of the Fund:
B. SECURITY VALUATION
Investments are valued at amortized cost, which has been determined by the
Trustees to represent fair value of the Fund's investments.
C. SECURITY TRANSACTIONS AND INTEREST INCOME
Security transactions are accounted for on a trade date basis. 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 indentified cost basis.
D. ORGANIZATIONAL EXPENSES
Costs incurred by the Fund in connection with its organization and initial
registration are being amortized evenly over a five year period.
E. 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. Distributions of net realized
short-term and long-term capital gains, if any, earned by the Fund will be made
annually.
F. REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with financial institutions deemed
to be creditworthy by the Fund's Investment Adviser, subject to the seller's
agreement to repurchase such securities at a mutually agreed upon price.
Securities purchased subject to repurchase agreements are deposited with the
Fund's custodian, and pursuant to the terms of the repurchase agreement must
have an aggregate market value greater than or equal to the repurchase price
plus all accrued interest at all times. If the value of the underlying
securities falls below the value of the repurchase price plus accrued interest,
the Fund 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 Fund maintains the right to sell the
underlying securities at market value and may claim any resulting loss against
the seller. However, in the event of default or bankruptcy by the seller,
realization and/or retention of the collateral may be subject to legal
proceedings.
G. FEDERAL INCOME TAXES
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code and distribute its income to shareholders. Therefore, no federal income tax
provision is required.
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 0.02 of 1% of the Fund's average daily net assets.
For the period ended December 31, 1996, this fee aggregated $43,988.
The Fund has entered into an Advisory Agreement with Bankers Trust. Under this
Advisory Agreement, the Fund pays Bankers Trust an advisory fee computed daily
and paid monthly at an annual rate of 0.10 of 1% of average daily net assets.
For the period ended December 31, 1996, this fee aggregated $219,939.
The Trust has entered into a Distribution Agreement with Edgewood Services, Inc.
("Edgewood"). Under the Distribution Agreement with the Trust, pursuant to Rule
12b-1 of the 1940 Act, Edgewood 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 year ended December 31, 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 0.12 of 1% of the
average daily net assets of the Fund. For the year ended December 31, 1996,
expenses of the Fund have been reduced by $24,258.
Certain trustees and officers of the Fund are also directors, officers and
employees of Edgewood. 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.
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BT INSTITUTIONAL FUNDS
INSTITUTIONAL DAILY 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 BT
Institutional Funds may be obtained by calling or writing to DST Systems, Inc.
or Edgewood Services, Inc., the primary Servicing Agent and Distributor,
respectively, of BT Institutional Funds:
BT INSTITUTIONAL FUNDS
DST Systems, Inc.
210 West 10th St.
Kansas City, MO 64105
BT INSTITUTIONAL FUNDS
Edgewood Services, Inc.
Clearing Operations
P.O. Box 897
Pittsburgh, PA 15230-0897
You may write to the Institutional Daily Assets Fund
at the following address:
BT INSTITUTIONAL FUNDS
Clearing Operations
P.O. Box 897
Pittsburgh, PA 15230-0897
