1933 Act File No. 33-34079
1940 Act File No. 811-06071
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. ...............
Post-Effective Amendment No. 19 ............... X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 24 .............................. X
BT INSTITUTIONAL FUNDS
(Exact Name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
Jay S. Neuman, Esq. Copies to: Burton M. Leibert, Esq.
Federated Investors Tower Willkie Farr & Gallagher
Pittsburgh, Pennsylvania 15222-3779 One Citicorp Center
(Name and Address of Agent for Service) 153 East 53rd Street
New York, New York 10022
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
X on March 19, 1997 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a) (1)
on pursuant to paragraph (a) (1).
75 days after filing pursuant to paragraph (a)(2)
on pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24e-2 under the Investment Company Act of
1940, and:
[X]filed the Notice required by that Rule on February 28, 1997; or
[ ]intends to file the Notice required by that Rule on or about ; or
----
[ ]during the most recent fiscal year did not sell any securities pursuant
to Rule 24f-2 under the Investment Company Act of 1940, and, pursuant
to Rule 24f-2(b)(2), need not file the Notice.
Equity 500 Index Portfolio, Cash Management Portfolio, Treasury Money
Portfolio and BT Investment Portfolios - Liquid Assets Portfolio have also
executed this Registration Statement.
CROSS-REFERENCE SHEET
This Amendment to the Registration Statement of BT INSTITUTIONAL
FUNDS, which is comprised of eleven funds, relates only to (1) Equity 500
Index Fund, (2) Institutional Cash Management Fund,
(3) Institutional Cash Reserves, (4) Institutional Liquid Assets Fund and
(5) Institutional Treasury Money Fund, and is compromised of the following.
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page...............(1-5) Cover Page.
Item 2. Synopsis.................(1-5) Summary of Fund Expenses.
Item 3. Condensed Financial
Information..............(1-5) Financial Highlights; (1-5)
Performance Information and Reports.
Item 4. General Description of
Registrant...............(1-5) The Fund; (1-5) Who May Want to
Invest; (1-5) Investment Objective and
Policies; (1-5) Risk Factors: Matching
the Fund to Your Investment Needs; (1)
Additional Information.
Item 5. Management of the Fund...(1-5) Management of the Trust and
Portfolio.
Item 6. Capital Stock and Other
Securities...............(1-5) Dividends, Distributions and
Taxes.
Item 7. Purchase of Securities Being
Offered..................(1-5) Net Asset Value; (1-5) Purchase
and Redemption of Shares.
Item 8. Redemption or Repurchase.(1-5) Purchase and Redemption of Shares.
Item 9. Legal Proceedings........None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page...............(1-5) Cover Page.
Item 11. Table of Contents........(1-5) Table of Contents.
Item 12. General Information and
History..................(1-5) Organization of the Trust.
Item 13. Investment Objectives and
Policies.................(1-5) Investment Objectives, Policies
and Restrictions.
Item 14. Management of the Fund...(1-5) Management of the Trust and
Portfolio.
Item 15. Control Persons and Principal
Holders of Securities....(1-5) Management of the Trust and
Portfolio.
Item 16. Investment Advisory and Other
Services.................(1-5) Investment Adviser; (1-5)
Administrator.
Item 17. Brokerage Allocation.....(1-5) Portfolio Transactions and
Brokerage Commissions.
Item 18. Capital Stock and Other
Securities...............Not Applicable.
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered..................(1-5) Valuation of Securities;
(1-5) Redemptions and Purchases in Kind.
Item 20. Tax Status...............(1-5) Taxation.
Item 21. Underwriters.............Not applicable.
Item 22. Calculation of Performance
Data.....................(1-5) Performance Information.
Item 23. Financial Statements (1-5) Incorporated by reference to the
Funds' Annual Reports dated December 31,
1996, pursuant to Rule 411 under the
Securities Act of 1933. (File Nos. 33-
34079 and 811-06071).
BT INSTITUTIONAL FUNDS{PRIVATE }
EQUITY 500 INDEX FUND MARCH 17, 1997
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 (`SAI'') relates only to the Equity
500 Index Fund (the "Fund").
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 Daily Stock Price Index of 500 Common
Stocks (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
(`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 Edgewood Services, Inc.
("Edgewood"), the Trust's Distributor, to clients and customers (including
affiliates and correspondents) of Bankers Trust Company ("Bankers Trust"),
the Portfolio's investment adviser (`Adviser''), and to clients and
customers of other organizations.
The Trust's Prospectus for the Fund is dated March 17, 1997. 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
SAI, which is not a Prospectus, is intended to provide additional
information regarding the activities and operations of the Trust and should
be read in conjunction with the Prospectus. Capitalized terms not
otherwise defined in this SAI have the meanings accorded to them in the
Fund's Prospectus.
BANKERS TRUST COMPANY
INVESTMENT ADVISER OF THE PORTFOLIO AND ADMINISTRATOR
EDGEWOOD SERVICES, INC.
DISTRIBUTOR
CLEARING OPERATIONS PITTSBURGH, PENNSYLVANIA 15230-0897(800) 368-
4031
P.O. BOX 897
TABLE OF CONTENTS
Investment Objectives, Policies and Restrictions 1
Performance Information 11
Valuation of Securities; Redemption in Kind 13
Management of the Trust and Portfolio 14
Organization of the Trust 20
Taxation 21
Financial Statements 21
Appendix A 22
Appendix B 23
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.
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.
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 Appendix A.
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 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.
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,
Edgewood 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 voting rights of 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 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
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 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.
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. 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.
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.
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 Appendix A to this SAI.
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 SAI
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 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 "Additional 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;
(3) make loans to other persons except: (a) through the lending of the
Portfolio's (Fund's) portfolio securities and provided that any such loans
not exceed 30% of the Portfolio's (Fund's) total assets (taken at market
value); (b) through the use of repurchase agreements or the purchase of
short-term obligations; or (c) by purchasing a portion of an issue of debt
securities of types distributed publicly or privately;
(4) purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests
therein), interests in oil, gas or mineral leases, commodities or commodity
contracts (except futures and option contracts) in the ordinary course of
business (except that the Portfolio (Trust) may hold and sell, for the
Portfolio's (Fund's) portfolio, real estate acquired as a result of the
Portfolio's (Fund's) ownership of securities);
(5) concentrate its investments in any particular industry (excluding
U.S. government securities), but if it is deemed appropriate for the
achievement of 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.
Additional Restrictions. In order to comply with certain 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 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; 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 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);
(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
(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.
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 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 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 fiscal years ended December 31, 1996, 1995 and 1994, the
Portfolio paid brokerage commissions in the amount of $289,791, $172,924,
and $97,069, respectively.
{PRIVATE }PERFORMANCE INFORMATION{TC \L 1 "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 (`NAV'') 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 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 SEC yield for the period ended December 31, 1996 was
2.05%.
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 total return for the year ended December 31, 1996 was
22.75%. The Fund's cumulative total return for the period from December
31, 1992 (commencement of operations) to December 31, 1996 was 88.09%. The
Fund's average annualized total return for the period from December 31,
1992 (commencement of operations) to December 31, 1996 was 17.11%.
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 NAV 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 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.
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 reserves 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 NAV, as the case may be (a
redemption in kind). If payment is made to a Fund shareholder in
securities, 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 NAV 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.
(Eastern 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 NAV 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 NAV 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 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.
{PRIVATE }MANAGEMENT OF THE TRUST AND PORTFOLIO{TC \L 1 "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, their
birthdates and their principal occupations during the past five years are
set forth below. Their titles may have varied during that period. Unless
otherwise indicated, the address of each officer is Clearing Operations,
P.O. Box 897, Pittsburgh, Pennsylvania, 15230-0897.
TRUSTEES OF THE TRUST
CHARLES P. BIGGAR (birthdate: October 13, 1930) - Trustee; Retired;
Director of Chase/NBW Bank Advisory Board; Director, Batemen, Eichler, Hill
Richards Inc.; formerly Vice President of International Business Machines
and President of the National Services and the Field Engineering Divisions
of IBM. His address is 12 Hitching Post Lane, Chappaqua, New York 10514.
PHILIP W. COOLIDGE* (birthdate: September 2, 1951) -Trustee; Chairman,
Chief Executive Officer and President, Signature Financial Group, Inc.
("SFG") (since December, 1988) and Signature (since April, 1989). His
address is 6 St. James Avenue, Boston, Massachusetts 02116.
RICHARD J. HERRING (birthdate: February 18, 1946) - 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 (birthdate: May 10, 1931) - Trustee; retired;
Director, Adela Investment Co. and University Patents, Inc.; formerly
Assistant Treasurer of IBM Corporation (until 1986). His address is 99
Jordan Lane, Stamford, Connecticut 06903.
TRUSTEES OF THE PORTFOLIO
CHARLES P. BIGGAR (birthdate: October 13, 1930) - Trustee; Retired;
Director of Chase/NBW Bank Advisory Board; Director, Batemen, Eichler, Hill
Richards Inc.; formerly Vice President of International Business Machines
and President of the National Services and the Field Engineering Divisions
of IBM. His address is 12 Hitching Post Lane, Chappaqua, New York 10514.
PHILIP W. COOLIDGE* (birthdate: September 2, 1951) - Trustee;
Chairman, Chief Executive Officer and President, SFG (since December, 1988)
and Signature (since April, 1989). His address is 6 St. James Avenue,
Boston, Massachusetts 02116.
S. LELAND DILL (birthdate: March 28, 1930) - Trustee; Retired;
Director, Coutts Group; Coutts (U.S.A.) International; Coutts Trust
Holdings, Ltd; Director, Zweig Series Trust; formerly Partner of KPMG Peat
Marwick; Director, Vinters International Company Inc.; General Partner of
Pemco (an investment company registered under the 1940 Act). His address
is 5070 North Ocean Drive, Singer Island, Florida 33404.
PHILIP SAUNDERS, JR. (birthdate: October 11, 1935) - Trustee;
Principal, Philip Saunders Associates (Consulting); former Director of
Financial Industry Consulting, Wolf & Company; President, John Hancock Home
Mortgage Corporation; and Senior Vice President of Treasury and Financial
Services, John Hancock Mutual Life Insurance Company, Inc. His address is
445 Glen Road, Weston, Massachusetts 02193.
*Indicates an `interested person'' (as defined in the 1940 Act) for the
Trust.
OFFICERS OF THE TRUST AND PORTFOLIO
Unless otherwise specified, each officer listed below holds the same
position with the Trust and the Portfolio.
RONALD M. PETNUCH (birthdate: February 27, 1960) - President and
Treasurer; Senior Vice President; Federated Services Company (`FSC'');
formerly, Director of Proprietary Client Services, Federated Administrative
Services (`FAS''), and Associate Corporate Counsel, Federated Investors
(`FI'').
CHARLES L. DAVIS, JR. (birthdate: March 23, 1960) - Vice President and
Assistant Treasurer; Vice President, FAS.
JAY S. NEUMAN (birthdate: April 22, 1950) - Secretary; Corporate
Counsel, FI.
Messrs. Coolidge, Petnuch, Davis, and Neuman also hold similar
positions for other investment companies for which Edgewood or an affiliate
serves as the principal underwriter.
No person who is an officer or director of Bankers Trust is an officer
or Trustee of the Trust or the Portfolio. No director, officer or employee
of Edgewood 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.
For the year ended December 31, 1996, the Fund incurred Trustees fees
equal to $7,277. For the same period, the Portfolio incurred Trustees fees
of $9,865.
The following table reflects fees paid to the Trustees of the Trust
and the Portfolio for the year ended December 31, 1996.
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 $12,800 $27,500
Bruce E. Langton,
Trustee of Trust $12,800 $27,500
Charles P. Biggar,
Trustee of Trust
and Portfolio $12,350 $28,750
S. Leland Dill,
Trustee of Portfolio $625 $28,750
Philip Saunders, Jr.,
Trustee of Portfolio $625 $28,750
Philip W. Coolidge
Trustee Trust
and Portfolio $140 $1,250
*Aggregated information is furnished for the BT Family of Funds which
consists of the following: BT Investment Funds, BT Institutional Funds,
BT Pyramid Funds, BT Advisor Funds, BT Investment Portfolios, Cash
Management Portfolio, Treasury Money Portfolio, Tax Free Money Portfolio,
NY Tax Free Money Portfolio, International Equity Portfolio, Utility
Portfolio, Short Intermediate US Government Securities Portfolio,
Intermediate Tax Free Portfolio, Asset Management Portfolio, Equity 500
Index Portfolio, and Capital Appreciation Portfolio.
Bankers Trust reimbursed the Fund and Portfolio for a portion of their
Trustees fees for the period above. See "Investment Adviser" and
"Administrator" below.
As of February 20, 1997, 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 February 20, 1997, the following shareholders of record owned 5%
or more of the outstanding shares of Institutional Equity 500 Index Fund:
Chase Manhattan Bank, New York, NY, acting as Trustee, owned approximately
4,962,343 (6.60%) shares; Bankers Trust Co., New York, NY, acting as
Custodian, owned approximately 6,319,412 (8.40%) shares; Bankers Trust Co.,
New York, NY, acting as Trustee, owned approximately 7,931,385 (10.54%)
shares; Northern Telecom Omnibus Account, c/o Bankers Trusts Co., Jersey
City, NJ, owned approximately 10,278,209 (13.86%) shares and Bankers Trust
Co., New York, NY, acting as Trustee, owned approximately 13,309,547
(17.69%) shares.
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 performance
of services under the Advisory Agreement. The Trust and the Portfolio each
bear certain other expenses incurred in its operation, including: taxes,
interest, brokerage fees and commissions, if any; fees of Trustees of the
Trust or the Portfolio who are not officers, directors or employees of
Bankers Trust, Edgewood or any of their affiliates; SEC fees and state Blue
Sky qualification fees; charges of custodians and transfer and dividend
disbursing agents; certain insurance premiums; outside auditing and legal
expenses; costs of maintenance of corporate existence; costs attributable
to investor services, including, without limitation, telephone and
personnel expenses; costs of preparing and printing prospectuses and
statements of additional information for regulatory purposes and for
distribution to existing shareholders; costs of shareholders' reports and
meetings of shareholders, officers and Trustees of the Trust or the
Portfolio; and any extraordinary expenses.
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 fiscal years ended December 31, 1996, 1995 and 1994,
Bankers Trust accrued $1,505,963, $770,530, and $428,346, respectively, as
compensation for investment advisory services provided to the Portfolio.
During the same periods, Bankers Trust reimbursed $870,024, $418,814, and
$249,230, respectively, to the Portfolio to cover expenses.
ADMINISTRATOR
Under administration and services agreements, Bankers Trust is
obligated on a continuous basis to provide such administrative services as
the Board of Trustees of the Trust and 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
NAVs, net income and realized capital gains or losses; and negotiate
arrangements with, and supervise and coordinate the activities of, agents
and others to supply services.
Pursuant to a Sub-Administration Agreement (the `Sub-
Administration Agreement'), FSC performs such sub-administration duties
for the Trust and the Portfolio as from time to time may be agreed upon by
Bankers Trust and FSC. The Sub-Administration Agreement provides that FSC
will receive such compensation as from time to time may be agreed upon by
FSC and Bankers Trust. All such compensation will be paid by Bankers
Trust.
For the fiscal years ended December 31, 1996, 1995 and 1994,
Bankers Trust accrued $541,924, $270,327, and $139,997, respectively, in
compensation for administrative and other services provided to the Fund.
During the same period, Bankers Trust reimbursed $658,635, $421,776, and
$194,084, respectively, to the Fund to cover expenses. For the fiscal
years ended December 31, 1996, 1995 and 1994, Bankers Trust received
$752,981, and $385,265, $214,173, 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
SAI, the most restrictive annual expense limitation applicable to the Fund
is 2.50% of the Fund's first $30 million of average annual net assets,
2.00% of the next $70 million of average annual net assets and 1.50% of the
remaining average annual net assets.
CUSTODIAN AND TRANSFER AGENT
Bankers Trust, 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 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 SAI without violation of the Glass-Steagall Act or other applicable
banking laws or regulations. However, counsel has pointed out that future
changes in either Federal or state statutes and regulations concerning the
permissible activities of banks or trust companies, as well as future
judicial or administrative decisions or interpretations of present and
future statutes and regulations, might prevent Bankers Trust from
continuing to perform those services for the Trust 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
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, acts 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 26, 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 Code.
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.
TAXATION OF THE PORTFOLIO
The Portfolio is 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.
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.
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.
Fund shareholders may be subject to state and local taxes on their
Fund distributions. Shareholders are advised to consult their own tax
advisers with respect to the particular tax consequences to them of an
investment in the Fund.
FINANCIAL STATEMENTS
The financial statements for the Fund and Portfolio for the
period ended December 31, 1996, are incorporated herein by reference to the
Annual Report to shareholders for the Fund dated December 31, 1996. A copy
of the Fund's Annual Report may be obtained without charge by contacting
the Fund.
APPENDIX A
COMMERCIAL PAPER RATINGS
Set forth below are descriptions of the ratings of Moody's
Investors Service, Inc. (`Moody's'') and Standard & Poor's Ratings Group
(`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.
APPENDIX B
The table on the following page shows the performance of the S&P 500 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.
STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS*
{PRIVATE TOTAL YEAR TOTAL
}YEAR RETURN RETURN
1996 22.96% 1960 0.47%
1995 37.49% 1959 11.96%
1994 1.32% 1958 43.36%
1993 9.99% 1957 -10.78%
1992 7.67% 1956 6.56%
1991 30.55% 1955 31.56%
1990 -3.17% 1954 52.62%
1989 31.49% 1953 -0.99%
1988 16.81% 1952 18.73%
1987 5.23% 1951 24.02%
1986 18.47% 1950 31.71%
1985 32.16% 1949 18.79%
1984 6.27% 1948 5.50%
1983 22.51% 1947 5.71%
1982 21.41% 1946 -8.07%
1981 -4.91% 1945 36.44%
1980 32.42% 1944 19.75%
1979 18.44% 1943 25.90%
1978 6.56% 1942 20.34%
1977 -7.18% 1941 -11.59%
1976 23.84% 1940 -9.78%
1975 37.20% 1939 -0.41%
1974 -26.47% 1938 31.12%
1973 -14.66% 1937 -35.03%
1972 18.98% 1936 33.92%
1971 14.31% 1935 47.67%
1970 4.01% 1934 -1.44%
1969 -8.51% 1933 53.99%
1968 11.06% 1932 -8.19%
1967 23.98% 1931 -43.34%
1966 -10.06% 1930 -24.90%
1965 12.45% 1929 -8.42%
1964 16.48% 1928 43.61%
1963 22.08% 1927 37.49%
1962 -8.73% 1926 11.62%
1961 26.89%
*Source: Ibbotson Associates
INVESTMENT ADVISER OF THE PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY
DISTRIBUTOR
EDGEWOOD SERVICES, INC.
CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY
INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.
COUNSEL
WILLKIE FARR & GALLAGHER
No person has been authorized to give any information or to make any
representations other than those contained in the Fund's Prospectus, its SAI
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 SAI constitutes an offer in any state in which, or to
any person to whom, such offer may not lawfully be made.
Cusip #055924500
BT0326C (3/97)
<PAGE>
- BT INSTITUTIONAL FUNDS -
INSTITUTIONAL CASH MANAGEMENT FUND
A money market fund that seeks high current income to the extent consistent with
liquidity and capital preservation.
PROSPECTUS
- --------------------------------------------------------------------------------
MARCH 17, 1997
BT Institutional Funds (the "Trust") is an open-end, management investment
company (mutual fund) which consists of a number of separate investment funds.
Please read this Prospectus carefully before investing and retain it for future
reference. It contains important information about the Institutional Cash
Management Fund (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 ("SAI") with the same date has been filed
with the Securities and Exchange Commission ("SEC"), and is incorporated herein
by reference. You may request a free copy of the SAI by calling the 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 ("ASSETS") IN THE CASH MANAGEMENT
PORTFOLIO (THE "PORTFOLIO"), A SEPARATE INVESTMENT COMPANY 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" HEREIN.
BANKERS TRUST COMPANY ("BANKERS TRUST") IS THE INVESTMENT ADVISER (THE
"ADVISER") OF THE PORTFOLIO. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR GUARANTEED OR ENDORSED BY, BANKERS TRUST OR ANY OTHER BANKING OR
DEPOSITORY INSTITUTION. SHARES ARE NOT FEDERALLY GUARANTEED OR INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE U.S. GOVERNMENT, THE FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. THE FUND INTENDS TO MAINTAIN A
CONSTANT $1.00 PER SHARE NET ASSET VALUE ("NAV"), ALTHOUGH THERE CAN BE NO
ASSURANCE THAT IT WILL BE ABLE TO DO SO.
LIKE SHARES OF ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
EDGEWOOD SERVICES, INC.
Clearing Operations - P.O. Box 897 - Pittsburgh, Pennsylvania - 15230-0897
<PAGE>
TABLE OF CONTENTS
PAGE
The Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Who May Want to Invest . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Summary of Fund Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Investment Objective and Policies . . . . . . . . . . . . . . . . . . . . . 7
Risk Factors: Matching the Fund to Your Investment Needs . . . . . . . . . .10
Net Asset Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Purchase and Redemption of Shares. . . . . . . . . . . . . . . . . . . . . .12
Dividends, Distributions and Taxes . . . . . . . . . . . . . . . . . . . . .14
Performance Information and Reports. . . . . . . . . . . . . . . . . . . . .14
Management of the Trust and Portfolio. . . . . . . . . . . . . . . . . . . .15
2
<PAGE>
THE FUND
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.
See "Risk Factors: Matching the Fund to Your Investment Needs" herein.
WHO MAY WANT TO INVEST
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 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 originally paid for them.
3
<PAGE>
SUMMARY OF FUND EXPENSES
The following table provides (i) a summary of expenses relating to purchases and
sales of shares of the Fund and the aggregate annual operating expenses of the
Fund and 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 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 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 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, 1996 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.
The Fund is distributed by Edgewood Services, Inc. ("Edgewood" or 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.
4
<PAGE>
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.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
---------------------------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . . . $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income. . . . . . . . . . . . . . . . . 0.05 0.06 0.04 0.03 0.04
Net Realized Gain (Loss) from Investment Transactions. 0.00+ 0.00+ (0.01) 0.00+ 0.00+
--------- --------- --------- --------- ---------
Total from Investment Operations . . . . . . . . . . . . 0.05 0.06 0.03 0.03 0.04
--------- --------- --------- --------- ---------
CONTRIBUTIONS OF CAPITAL . . . . . . . . . . . . . . . . 0.00+ -- 0.01 -- --
--------- --------- --------- --------- ---------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income. . . . . . . . . . . . . . . . . (0.05) (0.06) (0.04) (0.03) (0.04)
Net Realized Gain from Investment Transactions . . . . -- -- -- (0.00)+ (0.00)+
--------- --------- --------- --------- ---------
Total Distributions. . . . . . . . . . . . . . . . . . . (0.05) (0.06) (0.04) (0.03) (0.04)
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . . . $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . . . . 5.36%++ 5.89% 4.18%++ 3.05% 3.58%
SUPPLEMENTAL DATA AND RATIOS:
Net Assets, End of Year (000s omitted) . . . . . . . . $1,438,546 $1,010,874 $ 664,149 $1,850,222 $1,334,517
Ratios to Average Net Assets:
Net Investment Income . . . . . . . . . . . . . . . 5.24% 5.72% 3.98% 3.01% 3.48%
Expenses, including expenses of the
Cash Management Portfolio. . . . . . . . . . . . . 0.23% 0.23% 0.23% 0.25% 0.25%
Decrease Reflected in Above Expense Ratio Due
to Absorption of Expenses by Bankers Trust . . . . 0.04% 0.04% 0.03% 0.02% 0.04%
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
FOR THE PERIOD JULY 25, 1990
FOR THE YEAR ENDED (COMMENCEMENT OF OPERATIONS)
DECEMBER 31, 1991 TO DECEMBER 31, 1990
----------------- ----------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . . $ 1.00 $ 1.00
-------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income. . . . . . . . . . . . . . . . 0.06 0.03
Net Realized Gain (Loss) from Investment Transactions 0.00+ --
-------- --------
Total from Investment Operations . . . . . . . . . . . 0.06 0.03
-------- --------
CONTRIBUTIONS OF CAPITAL . . . . . . . . . . . . . . . -- --
-------- --------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income. . . . . . . . . . . . . . . . (0.06) (0.03)
Net Realized Gain from Investment Transactions . . . (0.00)+ --
-------- --------
Total Distributions. . . . . . . . . . . . . . . . . . (0.06) (0.03)
-------- --------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . . $ 1.00 $ 1.00
-------- --------
-------- --------
TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . . . 6.20% 8.29%*
SUPPLEMENTAL DATA AND RATIOS:
Net Assets, End of Year (000s omitted) . . . . . . . $ 806,690 $ 301,546
Ratios to Average Net Assets:
Net Investment Income. . . . . . . . . . . . . . . 5.82% 7.90%
Expenses, including expenses of the
Cash Management Portfolio . . . . . . . . . . . . 0.25% 0.25%*
Decrease Reflected in Above Expense Ratio Due
to Absorption of Expenses by Bankers Trust. . . . 0.09% 0.21%
</TABLE>
- ----------
* Annualized
+ Less than $0.01 per share
++ Increased by approximately 0.01% and 0.91% due to Contributions of Capital
for the years ended December 31, 1996 and 1994, respectively.
6
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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 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" herein.
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 SAI.
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 Ratings Group
("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 SAI.
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
7
<PAGE>
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 DEBT OBLIGATIONS. The Portfolio may invest in bonds, notes and debentures
issued that at the time of purchase have outstanding short-term ratings 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 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 counterparties 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 counterparties 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 the
value 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. During the
term of the loan, the Portfolio continues to bear the risk of fluctuations in
the price of loaned securities. 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 securities lent 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 SAI for a more detailed description of reverse
repurchase agreements.
CREDIT ENHANCEMENT. Certain of the Portfolio's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. Any bankruptcy,
receiver-
8
<PAGE>
ship, default, or change in the credit quality of the party providing the credit
enhancement will adversely affect the quality and marketability of the
underlying security and could cause losses to the Portfolio and affect the
Fund's share price. The Portfolio may have more than 25% of its total assets
invested in securities credit-enhanced by banks.
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 SAI.
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 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 SAI 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 SAI
contains further information on the Fund's and the Portfolio's investment
restrictions.
9
<PAGE>
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
1-800-368-4031.
The master-feeder structure is relatively complex, 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.
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" herein and in the SAI.
For descriptions of the management and expenses of the Portfolio, see
"Management of the Trust and Portfolio" herein and in the SAI.
10
<PAGE>
NET ASSET VALUE
The NAV 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 NAV 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., Eastern time or in the event that the NYSE closes early,
at the time of such early closing. The NAV 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 NAV 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 NAV. 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.
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<PAGE>
PURCHASE AND REDEMPTION OF SHARES
PURCHASE OF SHARES
The Trust accepts purchase orders for shares of the Fund at the NAV 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
NAV 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. (Eastern 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
Transfer Agent 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.
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, shareholder should contact
their Service Agent.
REDEMPTION OF SHARES
Shareholders may redeem shares at the NAV 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., Eastern time or earlier should the NYSE close
earlier) on each Valuation Day will be redeemed at the NAV per share as of the
close of the NYSE 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. Payments for redemptions will in any event be
made within seven calendar days following receipt of the request.
Service Agents may allow redemptions or exchanges by telephone and may disclaim
liability for following instructions communicated by telephone that the Service
Agent reasonably believes to be genuine. The Service Agent must provide the
investor with an opportunity to choose whether or not to utilize the telephone
redemption or exchange privilege. The 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 $100,000 (excluding retirement
plans).
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<PAGE>
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).
- - 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
this 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.
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<PAGE>
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 daily and pays dividends
monthly. The Fund reserves the right to include realized short-term gains, if
any, in such daily dividends. Distributions of the Fund's pro rata share of the
Portfolio's net realized long-term capital gains, if any, and any undistributed
net realized short-term capital gains are normally declared and paid annually at
the end of the fiscal year in which they were earned to the extent they are not
offset by any capital loss carryforwards. Unless a shareholder instructs the
Fund to pay dividends or capital gains distributions in cash, dividends and
distributions will automatically be reinvested at NAV in additional shares of
the Fund.
The Fund intends to qualify as a regulated investment company, as defined in the
Internal Revenue Code of 1986, as amended (the "Code".) Provided the Fund meets
the requirements imposed by the Code, 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 Fund's dividends and
distributions will not qualify for the dividends-received deduction for
corporations.
Statements as to the tax status of each shareholder's dividends and
distributions, if any, are mailed annually. Each shareholder will also receive,
if appropriate, various written notices after the end of the Fund's prior
taxable year as to the Federal income tax status of his or her dividends and
distributions which were received from the Fund during that year. Shareholders
should consult their tax advisers to assess the consequences of investing in the
Fund under state and local laws and to determine whether dividends paid by the
Fund that represent interest derived from U.S. Government Obligations are exempt
from any applicable state or local income taxes.
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
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<PAGE>
be compared with, for example, the IBC First Tier Institutions Only All Taxable
Money Fund Average which is an average compiled by IBC Money Fund Report, a
widely recognized, independent publication that monitors the performance of
money market mutual funds. Similarly, the yield of the Fund might be compared
with rankings prepared by Micropal Limited and/or Lipper Analytical Services,
Inc., which are widely recognized, independent services that monitor the
investment performance of mutual funds. The yield of the Fund might also be
compared 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.
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 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 SAI.
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, 1996,
Bankers Trust New York Corporation was the seventh largest bank holding company
in the United States with total assets of approximately $120 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 $227 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 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
15
<PAGE>
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 SAI without violation of the Glass-Steagall
Act or other applicable banking laws or regulations.
ADMINISTRATOR
Under its Administration and Services Agreement with the Trust, Bankers Trust
calculates the NAV 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 affiliates of Edgewood, at
Bankers Trust's expense. For more information, see the SAI.
DISTRIBUTOR
Edgewood Services, Inc. is the principal distributor for shares of the Fund. In
addition, Edgewood and its affiliates provide the Trust with office facilities
and currently provide administration and distribution services for other
registered investment companies. The principal business address of Edgewood and
its affiliates is Clearing Operations, P.O. Box 897, Pittsburgh, Pennsylvania
15230-0897.
Pursuant to the terms of the Trust's Plan of Distribution pursuant to Rule 12b-1
under the 1940 Act (the "Plan"), Edgewood 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 Edgewood 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 Edgewood or its affiliates in formulating sales literature; and
typesetting, printing and distribution of sales literature. All costs and
expenses in connection with implementing and operating the Plan will be paid by
the Fund, subject to the 0.10% of net assets limitation. All costs and expenses
associated with preparing the Prospectus and SAI and in connection with printing
them for and distributing them to existing shareholders and regulatory
authorities, which costs and expenses would not be considered distribution
expenses for purposes of the Plan, will also be paid by the Fund. To the extent
expenses of Edgewood under the Plan in any fiscal year of the Trust exceed
amounts payable under the Plan during that year, those expenses will not be
reimbursed in any succeeding fiscal year. Expenses incurred in connection with
distribution activities will be identified to the Fund or other series of the
Trust involved, although it is anticipated that some activities may be conducted
on a Trust-wide basis,
16
<PAGE>
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.
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 exist-
17
<PAGE>
ed 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 Edgewood,
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 has agreed
to reimburse the Fund to the extent required by applicable state law for certain
expenses that are described in the SAI. The Portfolio bears its own expenses.
Operating expenses for the Portfolio generally consist of all costs not
specifically borne by Bankers Trust or Edgewood, including investment advisory
and administration and services fees, fees for necessary professional services,
amortization of organizational expenses, the costs associated with regulatory
compliance and maintaining legal existence and investor relations.
18
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
19
<PAGE>
BT INSTITUTIONAL FUNDS
INSTITUTIONAL CASH MANAGEMENT FUND
INVESTMENT ADVISER OF THE PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY
280 Park Avenue
New York, NY 10017
DISTRIBUTOR
EDGEWOOD SERVICES, INC.
Clearing Operations
P.O. Box 897
Pittsburgh, PA 15230-0897
CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY
280 Park Avenue
New York, NY 10017
INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.
1100 Main Street, Suite 900
Kansas City, MO 64105
COUNSEL
WILLKIE FARR & GALLAGHER
153 East 53rd Street
New York, NY 10022
No person has been authorized to give any information or to make any
representations other than those contained in the Trust's Prospectuses, its
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.
Cusip #055924104
STA479300 (3/97) 20
<PAGE>
- BT INSTITUTIONAL FUNDS -
INSTITUTIONAL CASH RESERVES
A money market fund that seeks high current income to the extent consistent with
liquidity and capital preservation.
PROSPECTUS
- --------------------------------------------------------------------------------
MARCH 17, 1997
BT Institutional Funds (the "Trust") is an open-end, management investment
company (mutual fund) which consists of a number of separate investment funds.
Please read this Prospectus carefully before investing and retain it for future
reference. It contains important information about Institutional Cash Reserves
(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 ("SAI") with the same date has been filed
with the Securities and Exchange Commission ("SEC"), and is incorporated herein
by reference. You may request a free copy of the SAI by calling the 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 ("ASSETS") IN THE CASH MANAGEMENT
PORTFOLIO (THE "PORTFOLIO"), A SEPARATE INVESTMENT COMPANY 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" HEREIN.
BANKERS TRUST COMPANY ("BANKERS TRUST") IS THE INVESTMENT ADVISER (THE
"ADVISER") OF THE PORTFOLIO. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR GUARANTEED OR ENDORSED BY, BANKERS TRUST OR ANY OTHER BANKING OR
DEPOSITORY INSTITUTION. SHARES ARE NOT GUARANTEED OR FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE U.S. GOVERNMENT, THE FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. THE FUND INTENDS TO MAINTAIN A
CONSTANT $1.00 PER SHARE NET ASSET VALUE ("NAV"), ALTHOUGH THERE CAN BE NO
ASSURANCE THAT IT WILL BE ABLE TO DO SO.
LIKE SHARES OF ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
EDGEWOOD SERVICES, INC.
Clearing Operations - P.O. Box 897 - Pittsburgh, Pennsylvania - 15230-0897
<PAGE>
TABLE OF CONTENTS
PAGE
The Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Who May Want to Invest . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Summary of Fund Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Investment Objective and Policies . . . . . . . . . . . . . . . . . . . . . .5
Risk Factors: Matching the Fund to Your Investment Needs . . . . . . . . . . .8
Net Asset Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Purchase and Redemption of Shares. . . . . . . . . . . . . . . . . . . . . . 10
Dividends, Distributions and Taxes . . . . . . . . . . . . . . . . . . . . . 12
Performance Information and Reports. . . . . . . . . . . . . . . . . . . . . 12
Management of the Trust and Portfolio. . . . . . . . . . . . . . . . . . . . 13
2
<PAGE>
THE FUND
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. See "Risk Factors: Matching the Fund to Your Investment Needs"
herein.
WHO MAY WANT TO INVEST
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 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 originally paid for them.
3
<PAGE>
SUMMARY OF FUND EXPENSES
The following table provides (i) a summary of expenses relating to purchases and
sales of shares of the Fund and the aggregate annual operating expenses of the
Fund and the expenses of 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
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 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 $6 $10 $23
- --------------------------------------------------------------------------------
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 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, 1996 the total operating expenses would have been equal to 0.26% 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.
The Fund is distributed by Edgewood Services, Inc. ("Edgewood" or 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.
4
<PAGE>
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.
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 25, 1994
FOR THE YEAR ENDED DECEMBER 31, (COMMENCEMENT OF
------------------------------- OPERATIONS) TO
1996 1995 DECEMBER 31, 1994
---- ---- -----------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . $1.00 $1.00 $1.00
----- ----- -----
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income. . . . . . . . . . . . . . . . . . . . . 0.05 0.06 0.04
Net Realized Gain (Loss) from Investment Transactions. . . . . 0.00+ 0.00+ (0.01)
----- ----- -----
Total from Investment Operations . . . . . . . . . . . . . . . . 0.05 0.06 0.03
----- ----- -----
CONTRIBUTIONS OF CAPITAL . . . . . . . . . . . . . . . . . . . . 0.00+ -- 0.01
----- ----- -----
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income. . . . . . . . . . . . . . . . . . . . . (0.05) (0.06) (0.04)
----- ----- -----
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . $1.00 $1.00 $1.00
----- ----- -----
----- ----- -----
TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . . . . . . . . 5.42%++ 5.94% 4.32%*++
SUPPLEMENTAL DATA AND RATIOS:
Net Assets, End of Period (000s omitted) . . . . . . . . . . . $1,286,737 $820,973 $920,722
Ratios to Average Net Assets:
Net Investment Income. . . . . . . . . . . . . . . . . . . . 5.28% 5.80% 4.32%*
Expenses, including expenses of the
Cash Management Portfolio . . . . . . . . . . . . . . . . . 0.18% 0.18% 0.18%*
Decrease Reflected in Above Expense Ratio Due
to Absorption of Expenses by Bankers Trust. . . . . . . . . 0.08% 0.07% 0.08%*
</TABLE>
- ---------------
* Annualized
+ Less than $0.01 per share.
++ Increased by approxmiately 0.03% and 0.81% due to Contributions of Capital
for the years ended December 31, 1996 and 1994, respectively.
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 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" herein.
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 SAI.
5
<PAGE>
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 Ratings Group
("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 SAI.
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 DEBT OBLIGATIONS. The Portfolio may invest in bonds, notes and debentures
that at the time of purchase have outstanding short-term ratings 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. gov-
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ernment, such as 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 counterparties 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 counterparties 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 the
value 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. During the
term of the loan, the Portfolio continues to bear the risk of fluctuations in
the price of loaned securities. 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 securities lent should the borrower of the securities fail
financially.
ADDITIONAL INVESTMENT TECHNIQUES
The Portfolio may enter into reverse repurchase agreements. See "Investment
Objective and Policies" in the SAI for a more detailed description of reverse
repurchase agreements.
CREDIT ENHANCEMENT. Certain of the Portfolio's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. Any bankruptcy,
receivership, default, or change in the credit quality of the party providing
the credit enhancement will adversely affect the quality and marketability of
the underlying security and could cause losses to the Portfolio and affect the
Fund's share price. The Portfolio may have more than 25% of its total assets
invested in securities credit-enhanced by banks.
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 SAI.
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.
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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
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 SAI 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 SAI
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 1-800-368-4031.
The master-feeder structure is relatively complex, 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
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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" herein and in the SAI. For
descriptions of the management and expenses of the Portfolio, see "Management of
the Trust and Portfolio" herein and in the SAI.
NET ASSET VALUE
The NAV 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 NAV 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., Eastern time or in the event that the NYSE closes early, at
the time of such early closing. The NAV 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 NAV 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 NAV. 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.
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PURCHASE AND REDEMPTION OF SHARES
PURCHASE OF SHARES
The Trust accepts purchase orders for shares of the Fund at the NAV 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
NAV 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. (Eastern 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
Transfer Agent 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.
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.
REDEMPTION OF SHARES
Shareholders may redeem shares at the NAV 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., Eastern time or earlier should the NYSE close
earlier) on each Valuation Day will be redeemed at the NAV per share as of 4:00
p.m. (Eastern time) or after the close of the NYSE 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. Payments for
redemptions will in any event be made within seven calendar days following
receipt of the request.
Service Agents may allow redemptions or exchanges by telephone and may disclaim
liability for following instructions communicated by telephone that the Service
Agent reasonably believes to be genuine. The Service Agent must provide the
investor with an opportunity to choose whether or not to utilize the telephone
redemption or exchange privilege. The 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).
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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).
- - 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
this 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.
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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 daily and pays dividends
monthly. The Fund reserves the right to include realized short-term gains, if
any, in such daily dividends. Distributions of the Fund's pro rata share of the
Portfolio's net realized long-term capital gains, if any, and any undistributed
net realized short-term capital gains are normally declared and paid annually at
the end of the fiscal year in which they were earned to the extent they are not
offset by any capital loss carryforwards. Unless a shareholder instructs the
Fund to pay dividends or capital gains distributions in cash, dividends and
distributions will automatically be reinvested at NAV in additional shares of
the Fund.
The Fund intends to qualify as a regulated investment company, as defined in the
Internal Revenue Code of 1986, as amended (the "Code"). Provided the Fund meets
the requirements imposed by the Code, 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 Fund's dividends and
distributions will not qualify for the dividends-received deduction for
corporations.
Statements as to the tax status of each shareholder's dividends and
distributions, if any, are mailed annually. Each shareholder will also receive,
if appropriate, various written notices after the end of the Fund's prior
taxable year as to the Federal income tax status of his or her dividends and
distributions which were received from the Fund during that year. Shareholders
should consult their tax advisers to assess the consequences of investing in the
Fund under state and local laws and to determine whether dividends paid by the
Fund that represent interest derived from U.S. Government Obligations are exempt
from any applicable state or local income taxes.
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
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<PAGE>
be compared with, for example, the IBC First Tier Institutions Only All Taxable
Money Fund Average, which is an average compiled by IBC Money Fund Report, a
widely recognized, independent publication that monitors the performance of
money market mutual funds. Similarly, the yield of the Fund might be compared
with rankings prepared by Micropal Limited and/or Lipper Analytical Services,
Inc., which are widely recognized, independent services that monitor the
investment performance of mutual funds. The yield of the Fund might also be
compared 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.
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 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 SAI.
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, 1996,
Bankers Trust New York Corporation was the seventh largest bank holding company
in the United States with total assets of approximately $120 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 $227 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 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
13
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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 SAI without violation of the Glass-Steagall
Act or other applicable banking laws or regulations.
ADMINISTRATOR
Under its Administration and Services Agreement with the Trust, Bankers Trust
calculates the NAV 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 affiliates of Edgewood, at
Bankers Trust's expense. For more information, see the SAI.
DISTRIBUTOR
Edgewood Services, Inc. is the principal distributor for shares of the Fund. In
addition, Edgewood and its affiliates provide the Trust with office facilities
and currently provide administration and distribution services for other
registered investment companies. The principal business address of Edgewood and
its affiliates is Clearing Operations, P.O. Box 897, Pittsburgh, Pennsylvania
15230-0897.
Pursuant to the terms of the Trust's Plan of Distribution pursuant to Rule 12b-1
under the 1940 Act (the "Plan"), Edgewood 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 Edgewood 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 Edgewood or its affiliates in formulating sales literature; and
typesetting, printing and distribution of sales literature. All costs and
expenses in connection with implementing and operating the Plan will be paid by
the Fund, subject to the 0.10% of net assets limitation. All costs and expenses
associated with preparing the Prospectuses and SAI and in connection with
printing them for and distributing them to existing shareholders and regulatory
authorities, which costs and expenses would not be considered distribution
expenses for purposes of the Plan, will also be paid by the Fund. To the extent
expenses of Edgewood under the Plan in any fiscal year of the Trust exceed
amounts payable under the Plan during that year, those expenses will not be
reimbursed in any succeeding fiscal year. Expenses incurred in connection with
distribution activities will be identified to the Fund or 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
identifi-
14
<PAGE>
able 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 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.
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 commin-
15
<PAGE>
gled 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 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 Edgewood,
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 has agreed to reimburse the Fund to the extent required
by applicable state law for certain expenses that are described in the SAI. The
Portfolio bears its own expenses. Operating expenses for the Portfolio generally
consist of all costs not specifically borne by Bankers Trust or Edgewood,
including investment advisory and administration and services fees, fees for
necessary professional services, the costs associated with regulatory compliance
and maintaining legal existence and investor relations.
16
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17
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18
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<PAGE>
BT INSTITUTIONAL FUNDS
INSTITUTIONAL CASH RESERVES
INVESTMENT ADVISER OF THE PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY
280 Park Avenue
New York, NY 10017
DISTRIBUTOR
EDGEWOOD SERVICES, INC.
Clearing Operations, P.O. Box 897
Pittsburgh, PA 15230-0897
CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY
280 Park Avenue
New York, NY 10017
INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.
1100 Main Street, Suite 900
Kansas City, MO 64105
COUNSEL
WILLKIE FARR & GALLAGHER
153 East 53rd Street
New York, NY 10022
No person has been authorized to give any information or to make any
representations other than those contained in the Trust's Prospectuses, its
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.
Cusip #055924872
STA487300 (3/97)
<PAGE>
BT INSTITUTIONAL FUNDS
Institutional Liquid Assets Fund
A money market fund that seeks a high level of current income to the extent
consistent with liquidity and the preservation of capital.
PROSPECTUS
- --------------------------------------------------------------------------------
MARCH 17, 1997
BT Institutional Funds (the "Trust") is an open-end management investment
company (mutual fund) which consists of a number of separate investment funds.
Please read this Prospectus carefully before investing and retain it for future
reference. It contains important information about the Liquid Assets Fund (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 ("SAI") with the same date has been filed
with the Securities and Exchange Commission ("SEC"), and is incorporated herein
by reference. You may request a free copy of the SAI by calling the Fund's
Service Agent at 1-800-368-4031.
UNLIKE MOST OTHER MUTUAL FUNDS, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT
OBJECTIVE BY INVESTING ALL OF ITS INVESTABLE ASSETS ("ASSETS") IN THE LIQUID
ASSETS PORTFOLIO (THE "PORTFOLIO"), A SEPARATE INVESTMENT COMPANY 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" HEREIN.
BANKERS TRUST COMPANY ("BANKERS TRUST") IS THE INVESTMENT ADVISER (THE
"ADVISER") OF THE PORTFOLIO. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR GUARANTEED OR ENDORSED BY, BANKERS TRUST OR ANY OTHER BANKING OR
DEPOSITORY INSTITUTION. SHARES ARE NOT FEDERALLY GUARANTEED OR INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE U.S. GOVERNMENT, THE FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. THE FUND INTENDS TO MAINTAIN A
CONSTANT $1.00 PER SHARE NET ASSET VALUE, ("NAV") ALTHOUGH THERE CAN BE NO
ASSURANCE THAT IT WILL BE ABLE TO DO SO.
LIKE SHARES OF ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Edgewood Services, Inc.
Clearing Operations, P.O. Box 897, Pittsburgh, Pennsylvania 15230-0897.
<PAGE>
TABLE OF CONTENTS
PAGE
The Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Who May Want to Invest . . . . . . . . . . . . . . . . . . . . . . . 3
Summary of Fund Expenses . . . . . . . . . . . . . . . . . . . . . . 4
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . 5
Investment Objective and Policies. . . . . . . . . . . . . . . . . . 5
Risk Factors: Matching the Fund to Your Investment Needs . . . . . . 9
Net Asset Value. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Purchase and Redemption of Shares. . . . . . . . . . . . . . . . . . 11
Dividends, Distributions and Taxes . . . . . . . . . . . . . . . . . 12
Performance Information and Reports. . . . . . . . . . . . . . . . . 12
Management of the Trust and Portfolio. . . . . . . . . . . . . . . . 13
2
<PAGE>
THE FUND
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. See "Risk Factors: Matching the Fund to Your Investment Needs"
herein.
WHO MAY WANT TO INVEST
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 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 originally paid for them.
3
<PAGE>
SUMMARY OF FUND EXPENSES
The following table provides (i) a summary of expenses relating to purchases and
sales of shares of the Fund and the aggregate annual operating expenses of the
Fund and the expenses of 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 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
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 0.03%
reimbursements or waivers)
12b-1 fees 0.00
Other expenses (after reimbursements or 0.13
waivers)
- -------------------------------------------------------------------------------
Total operating expenses (after 0.16%
reimbursements or waivers)
- -------------------------------------------------------------------------------
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. 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 0.15%. The expense table and the example reflect
a voluntary undertaking by Bankers Trust to waive or reimburse expenses such
that the total operating expenses will not exceed 0.16% of the Fund's average
net assets annually. In the absence of these undertakings, for the fiscal year
ended December 31, 1996 the total operating expenses would have been equal to
approximately 0.26% 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.
The Fund is distributed by Edgewood Services, Inc. ("Edgewood" or 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.
4
<PAGE>
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 the 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.
<TABLE>
<CAPTION>
FOR THE PERIOD
DECEMBER 11, 1995
FOR THE (COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
DECEMBER 31, 1996 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. . . . . . . . . . . . . . . 0.05 0.00+
Net Realized Gain from Investment Transactions . . 0.00+ 0.00+
----------- -----------
Total from Investment Operations . . . . . . . . . . 0.05 0.00+
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income. . . . . . . . . . . . . . . (0.05) (0.00)+
----------- -----------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . $ 1.00 $ 1.00
----------- -----------
----------- -----------
TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . . 5.45% 5.88%*
SUPPLEMENTAL DATA AND RATIOS:
Net Assets, End of Period (000s omitted) . . . . . $1,943,024 $1,477,401
Ratios to Average Net Assets:
Net Investment Income. . . . . . . . . . . . . . 5.32% 5.50%*
Expenses, Including Expenses of the
Liquid Assets Portfolio . . . . . . . . . . . . 0.04% 0.01%*
Decrease Reflected in Above Expense Ratio
Due to Absorption of Expenses by Bankers Trust. 0.22% 0.97%*
* Annualized
+ Less than $0.01 per share
</TABLE>
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 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"
herein.
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 SAI.
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
5
<PAGE>
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,
6
<PAGE>
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. During the
term of the loan, the Portfolio continues to bear the risk of fluctuations in
the price of loaned securities. 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 securities lent 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
below and in "Additional Investment Limitations" below and in the SAI.
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-deliv-
7
<PAGE>
ery security prior to its stated delivery date. Purchasing securities on a when-
issued or delayed-delivery basis can involve the additional risk that the yield
available in the market when the delivery takes place may be higher than that
obtained in the transaction itself. Upon purchasing a security on a when-issued
or delayed- delivery basis, the Portfolio will segregate at the Portfolio's
custodian 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.
CREDIT ENHANCEMENT. Certain of the Portfolio's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. Any bankruptcy,
receivership, default, or change in the credit quality of the party providing
the credit enhancement will adversely affect the quality and marketability of
the underlying security and could cause losses to the Portfolio and affect the
Fund's share price. The Portfolio may have more than 25% of its total assets
invested in securities credit-enhanced by banks.
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 Ratings Group, 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 SAI. 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 SAI
contains further information on the Fund's and the Portfolio's investment
restrictions.
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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. The Fund's receipt of significant
purchase orders late in a Valuation Day may impact the Portfolio's ability to
optimize cash management. To assist the Portfolio in remaining fully invested,
pursuant to its request, the Portfolio has received an order from the SEC
granting the Portfolio and Bankers Trust permission to jointly 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.
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 1-800-368-4031.
The master-feeder structure is relatively complex, 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
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(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 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.
For descriptions of the investment objective, policies and restrictions of the
Portfolio, see "Investment Objective and Policies" herein and in the SAI. For
descriptions of the management and expenses of the Portfolio, see "Management of
the Trust and Portfolio" herein and in the SAI.
NET ASSET VALUE
The NAV 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), Good Friday, Memorial Day (the last Monday in May), July 4th, Labor
Day (the first Monday in September), Columbus Day (the second Monday in
October), Veteran's Day (November 11th), Thanksgiving Day (the last Thursday in
November) and December 25th; and (b) the preceding Friday or the subsequent
Monday when one of the calendar determined holidays falls on a Saturday or
Sunday, respectively.
The NAV per share of the Fund is calculated 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., Eastern time or in the event that the NYSE closes
early, at the time of such early closing. The NAV 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 NAV 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 NAV. 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.
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PURCHASE AND REDEMPTION OF SHARES
PURCHASE OF SHARES
The Trust accepts purchase orders for shares of the Fund at the NAV 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
NAV 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. (Eastern 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. (Eastern 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 Transfer Agent 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.
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.
REDEMPTION OF SHARES
Shareholders may redeem shares at the NAV 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., Eastern New York time or earlier should the
NYSE close earlier) on each Valuation Day will be redeemed at the NAV 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. (Eastern time) or after
the close of the NYSE on each Valuation Day will be redeemed at the NAV 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.
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 $100,000.
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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 daily and pays dividends
monthly. The Fund reserves the right to include realized short-term gains, if
any, in such daily dividends. Distributions of the Fund's pro rata share of the
Portfolio's net realized long-term capital gains, if any, and any undistributed
net realized short-term capital gains are normally declared and paid annually at
the end of the fiscal year in which they were earned to the extent they are not
offset by any capital loss carryforwards. Unless a shareholder instructs the
Fund to pay dividends or capital gains distributions in cash, dividends and
distributions will automatically be reinvested at NAV in additional shares of
the Fund.
The Fund intends to qualify as a regulated investment company, as defined in
the Internal Revenue Code of 1986, as amended (the "Code"). Provided the Fund
meets the requirements imposed by the Code, 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 Fund's dividends and
distributions will not qualify for the dividends-received deduction for
corporations.
Statements as to the tax status of each shareholder's dividends and
distributions, if any, are mailed annually. Each shareholder will also receive,
if appropriate, various written notices after the end of the Fund's prior
taxable year as to the Federal income tax status of his or her dividends and
distributions which were received from the Fund during that year. Shareholders
should consult their tax advisers to assess the consequences of investing in the
Fund under state and local laws and to determine whether dividends paid by the
Fund that represent interest derived from U.S. Government Obligations are exempt
from any applicable state or local income taxes.
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 First Tier Institutions Only All Taxable
Money Fund Average,
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which is an average compiled by IBC Money Fund Report, a widely recognized,
independent publication that monitors the performance of money market mutual
funds. Similarly, the yield of the Fund might be compared with rankings prepared
by Micropal Limited and/or Lipper Analytical Services, Inc., which are widely
recognized, independent services that monitor the investment performance of
mutual funds. The yield of the Fund might also be compared 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.
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 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 SAI.
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, 1996,
Bankers Trust New York Corporation was the seventh largest bank holding company
in the United States with total assets of approximately $120 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 $227 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 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 BT Investment Portfolios, manages the Portfolio in accordance with the
Portfolio's
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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
Portfolios described in this Prospectus and the SAI without violation of the
Glass-Steagall Act or other applicable banking laws or regulations.
ADMINISTRATOR
Under its Administration and Services Agreement with the Trust, Bankers Trust
calculates the NAV 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 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. The Administration and
Services Agreement provides for the Portfolio 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 Portfolio. Under each Administration and Services
Agreement, Bankers Trust may delegate one or more of its responsibilities to
others, including affiliates of Edgewood, at Bankers Trust's expense. For more
information, see the SAI.
DISTRIBUTOR
Edgewood Services, Inc. is the principal distributor for shares of the Fund. In
addition, Edgewood and its affiliates provide the Trust with office facilities
and currently provide administration and distribution services for other
registered investment companies. The principal business address of Edgewood and
its affiliates is Clearing Operations, P.O. Box 897, Pittsburgh, Pennsylvania
15230-0897.
Pursuant to the terms of the Trust's Plan of Distribution pursuant to Rule 12b-1
under the 1940 Act (the "Plan"), Edgewood 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 Edgewood 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 Edgewood or its affiliates in formulating sales literature;
and typesetting, printing and distribution of sales literature. All costs and
expenses in connection with implementing and operating the Plan will be paid by
the Fund, subject to the 0.10% of net assets limitation. All costs and expenses
associated with preparing the Prospectus and SAIs 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 Edgewood under the Plan in any fiscal year of the Trust exceed
amounts payable under the Plan during that year, those expenses will not be
reimbursed in any succeeding fiscal year. Expenses incurred in connection with
distribution activities will be identified to the Fund or other series of the
Trust involved, although it is anticipated that
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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
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.
15
<PAGE>
The 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.
As of February 20, 1997, Bankers Trust Funds Valuation Group, New York, New
York, owned 100% of the voting securities of the Fund, and therefore, may, for
certain purposes, be deemed to control the Fund and be able to affect the
outcome of certain matters presented for a vote of its shareholders.
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 Edgewood,
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 agreed to reimburse the Fund to the extent required by
applicable state law for certain expenses that are described in the SAI. The
Portfolio bears its own expenses. Operating expenses for the Portfolio generally
consist of all costs not specifically borne by Bankers Trust or Edgewood,
including investment advisory and administration and services fees, fees for
necessary professional services, amortization of organizational expenses,
amortization of organizational expenses, the costs associated with regulatory
compliance and maintaining legal existence and investor relations.
16
<PAGE>
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17
<PAGE>
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18
<PAGE>
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19
<PAGE>
BT INSTITUTIONAL FUNDS
Institutional Liquid Assets Fund
INVESTMENT ADVISER OF THE PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY
280 Park Avenue
New York, NY 10017
DISTRIBUTOR
EDGEWOOD SERVICES, INC.
Clearing Operations
P.O. Box 897
Pittsburgh, Pennsylvania 15230-0897
CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY
280 Park Avenue
New York, NY 10017
INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.
1100 Main Street, Suite 900
Kansas City, MO 64105
COUNSEL
WILLKIE FARR & GALLAGHER
153 East 53rd Street
New York, NY 10022
No person has been authorized to give any information or to make any
representations other than those contained in the 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.
Cusip #055924864
STA492300 (3/97)
<PAGE>
- BT INSTITUTIONAL FUNDS -
INSTITUTIONAL TREASURY MONEY FUND
A money market fund, that seeks high current income to the extent consistent
with liquidity and capital preservation.
PROSPECTUS
- --------------------------------------------------------------------------------
MARCH 17, 1997
BT Institutional Funds (the "Trust") is an open-end, management investment
company (mutual fund) which consists of a number of separate investment funds.
Please read this Prospectus carefully before investing and retain it for future
reference. It contains important information about the Institutional Treasury
Money Fund (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 ("SAI") with the same date has been filed
with the Securities and Exchange Commission ("SEC"), and is incorporated herein
by reference. You may request a free copy of the SAI by calling the 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 ("ASSETS") IN THE TREASURY MONEY
PORTFOLIO (THE "PORTFOLIO"), A SEPARATE INVESTMENT COMPANY WITH AN IDENTICAL
INVESTMENT OBJECTIVE. THE INVESTMENT PERFORMANCE OF THE FUND WILL CORRESPOND
DIRECTLY TO THE INVESTMENT PERFORMANCE OF THE CORRESPONDING PORTFOLIO. SEE
"SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE" HEREIN.
BANKERS TRUST COMPANY ("BANKERS TRUST") IS THE INVESTMENT ADVISER (THE
"ADVISER") OF THE PORTFOLIO. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR GUARANTEED OR ENDORSED BY, BANKERS TRUST OR ANY OTHER BANKING OR
DEPOSITORY INSTITUTION. SHARES ARE NOT FEDERALLY GUARANTEED OR INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE U.S. GOVERNMENT, THE FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. THE FUND INTENDS TO MAINTAIN A
CONSTANT $1.00 PER SHARE NET ASSET VALUE ("NAV"), ALTHOUGH THERE CAN BE NO
ASSURANCE THAT IT WILL BE ABLE TO DO SO.
LIKE SHARES OF ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
EDGEWOOD SERVICES, INC.
Clearing Operations - P.O. Box 897 - Pittsburgh, Pennsylvania - 15230-0897
<PAGE>
TABLE OF CONTENTS
PAGE
The Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Who May Want to Invest . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Summary of Fund Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Investment Objective and Policies . . . . . . . . . . . . . . . . . . . . . .7
Risk Factors: Matching the Fund to Your Investment Needs . . . . . . . . . . .8
Net Asset Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Purchase and Redemption of Shares. . . . . . . . . . . . . . . . . . . . . . 10
Dividends, Distributions and Taxes . . . . . . . . . . . . . . . . . . . . . 12
Performance Information and Reports. . . . . . . . . . . . . . . . . . . . . 12
Management of the Trust and Portfolio. . . . . . . . . . . . . . . . . . . . 13
2
<PAGE>
THE FUND
The Fund seeks a high level of current income consistent with liquidity and the
preservation of capital through investment in direct obligations of the U.S.
Treasury and repurchase agreements collateralized by such obligations. See "Risk
Factors: Matching the Fund to Your Investment Needs" herein.
WHO MAY WANT TO INVEST
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 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 originally paid for them.
3
<PAGE>
SUMMARY OF FUND EXPENSES
The following table provides (i) a summary of expenses relating to purchases and
sales of shares the Fund and the aggregate annual operating expenses of the
Fund and the expenses of 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
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 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) 0.10
Total operating expenses (after reimbursements
or waivers) 0.25%
- --------------------------------------------------------------------------------
EXAMPLE 1 year 3 years 5 years 10 years
You would pay the following expenses for each
Fund on a $1,000 investment, assuming:
(1) 5% annual return and (2) redemption
at the end of each time period $3 $8 $14 $32
- --------------------------------------------------------------------------------
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 to waive or reimburse expenses such that the total
operating expenses will not exceed 0.25% of the Fund's average net assets
annually. In the absence of these undertakings, for the fiscal year ended
December 31, 1996 the total operating expenses would have been equal to
approximately 0.26% 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.
The Fund is distributed by Edgewood Services, Inc. ("Edgewood" or 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.
4
<PAGE>
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.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
---------------------------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . . . $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income. . . . . . . . . . . . . . . . . 0.05 0.06 0.04 0.03 0.04
Net Realized Gain (Loss) from Investment Transactions. 0.00+ 0.00+ (0.00)+ 0.00+ 0.00+
--------- --------- --------- --------- ---------
Total from Investment Operations . . . . . . . . . . . . 0.05 0.06 0.04 0.03 0.04
--------- --------- --------- --------- ---------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income. . . . . . . . . . . . . . . . . (0.05) (0.06) (0.04) (0.03) (0.04)
Net Realized Gain from Investment Transactions . . . . -- (0.00)+ -- (0.00)+ (0.00)+
--------- --------- --------- --------- ---------
Total Distributions. . . . . . . . . . . . . . . . . . (0.05) (0.06) (0.04) (0.03) (0.04)
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . . . $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . . . . 5.22% 5.71% 3.92% 2.94% 3.56%
SUPPLEMENTAL DATA AND RATIOS:
Net Assets, End of Year (000s omitted) . . . . . . . . $1,424,305 $1,325,069 $ 182,101 $ 143,966 $ 102,182
Ratios to Average Net Assets:
Net Investment Income . . . . . . . . . . . . . . . 5.10% 5.53% 3.97% 2.88% 3.47%
Expenses, including expenses of the
Treasury Money Portfolio . . . . . . . . . . . . . 0.25% 0.25% 0.25% 0.25% 0.25%
Decrease Reflected in Above Expense Ratio Due
to Absorption of Expenses by Bankers Trust . . . . 0.01% 0.07% 0.04% 0.03% 0.04%
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
FOR THE PERIOD JULY 25, 1990
FOR THE YEAR ENDED (COMMENCEMENT OF OPERATIONS)
DECEMBER 31, 1991 TO DECEMBER 31, 1990
----------------- ----------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . . $ 1.00 $ 1.00
-------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income. . . . . . . . . . . . . . . . 0.06 0.03
Net Realized Gain (Loss) from Investment Transactions 0.00+ 0.00+
-------- --------
Total from Investment Operations . . . . . . . . . . . 0.06 0.03
-------- --------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income. . . . . . . . . . . . . . . . (0.06) (0.03)
Net Realized Gain from Investment Transactions . . . (0.00)+ (0.00)+
-------- --------
Total Distributions. . . . . . . . . . . . . . . . . . (0.06) (0.03)
-------- --------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . . $ 1.00 $ 1.00
-------- --------
-------- --------
TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . . . 5.84% 7.90%*
SUPPLEMENTAL DATA AND RATIOS:
Net Assets, End of Year (000s omitted) . . . . . . . $ 131,406 $ 57,184
Ratios to Average Net Assets:
Net Investment Income. . . . . . . . . . . . . . . 5.54% 7.36%*
Expenses, including expenses of the
Cash Management Portfolio . . . . . . . . . . . . 0.25% 0.25%*
Decrease Reflected in Above Expense Ratio Due
to Absorption of Expenses by Bankers Trust. . . . 0.12% 0.39%*
</TABLE>
- ----------
* Annualized
+ Less than $0.01 per share
6
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The Fund seeks a high level of current income consistent with liquidity and the
preservation of capital through investment in direct obligations of the U.S.
Treasury and repurchase agreements collateralized by such obligations. 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.
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 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" herein.
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 SAI.
TREASURY MONEY PORTFOLIO
The 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 collateralized by such
obligations. 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 the Fund and the interests in the
Portfolio are not guaranteed or insured by the U.S. government.
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement
transactions with counterparties 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
counterparties 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 the value is maintained at the required
level.
ADDITIONAL INVESTMENT TECHNIQUES
The Portfolio may enter into reverse repurchase agreements and lend
securities held by it to brokers, dealers and other financial organizations.
Loans of securities by the 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. See "Investment Objectives and Policies" in the SAI 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
7
<PAGE>
quality. A description of such ratings is provided in the Appendix to the SAI.
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 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 objectives, as the Portfolio. The Portfolio may not invest
more than 25% of its total assets in the securities of issuers in any single
industry. 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 SAI for additional
information with respect to reverse repurchase transactions. At the time of an
investment, the 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), 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 SAI
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
objectives 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 1-800-368-4031.
The master-feeder structure is relatively complex, so shareholders should
carefully consider this investment approach.
8
<PAGE>
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may experience higher pro rata
operating expenses, thereby producing lower returns (however, this possibility
exists as well for traditionally structured funds which have large institutional
investors). Additionally, the Portfolio may become less diverse, resulting in
increased portfolio risk. Also, funds with a greater pro rata ownership in the
Portfolio could have effective voting control of the operations of the
Portfolio. Except as permitted by the SEC, whenever the Trust is requested to
vote on matters pertaining to the Portfolio, the Trust will hold a meeting of
shareholders of the Fund and will cast all of its votes in the same proportion
as the votes of the Fund's shareholders. Fund shareholders who do not vote will
not affect the Trust's votes at the Portfolio meeting. The percentage of the
Trust's votes representing the Fund's shareholders not voting will be voted by
the Trustees or officers of the Trust in the same proportion as the Fund
shareholders who do, in fact, vote.
Certain changes in the Portfolio's investment objectives, policies or
restrictions may require the Fund to withdraw its interest in the Portfolio. Any
such withdrawal could result in a distribution "in kind" of portfolio securities
(as opposed to a cash distribution from the Portfolio). If securities are
distributed, the Fund could incur brokerage, tax or other charges in converting
the securities to cash. In addition, the distribution in kind may result in a
less 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 objectives, policies and restrictions of the
Portfolio, see "Investment Objectives and Policies" herein and in the SAI. For
descriptions of the management and expenses of the Portfolio, see "Management of
the Trust and Portfolio" herein and in the SAI.
NET ASSET VALUE
The NAV 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 NAV of the Fund is calculated as of the close of regular trading on the New
York Stock Exchange ("NYSE") which is currently 4:00 p.m., Eastern time or
earlier, should the NYSE close earlier. The NAV 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 NAV 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 NAV. 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 assets of the Portfolio are valued fairly and in
good faith.
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PURCHASE AND REDEMPTION OF SHARES
PURCHASE OF SHARES
The Trust accepts purchase orders for shares of the Fund at the NAV 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
NAV 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 and transmitted prior to 2:00 p.m.
(Eastern time) 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 2:00
p.m. (Eastern time) the shareholder will receive the dividend declared on the
following day even if the Custodian receives federal funds on that day. The
Trust and Transfer Agent reserve the right to reject any purchase order.
Shares must be purchased in accordance with procedures established by the
Transfer Agent and 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.
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.
REDEMPTION OF SHARES
Shareholders may redeem shares at the NAV 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 2:00 p.m.
(Eastern time) on each Valuation Day will be redeemed at the NAV per share next
determined for the 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 2:00 p.m. Eastern time
will be redeemed at the NAV per share next determined for the 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.
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 a
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Fund having a current value of less than $100,000 (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).
- - 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
this 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.
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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 daily and pays dividends
monthly. The Fund reserves the right to include realized short-term gains, if
any, in such daily dividends. Distributions of the Fund's pro rata share of the
Portfolio's net realized long-term capital gains, if any, and any undistributed
net realized short-term capital gains are normally declared and paid annually at
the end of the fiscal year in which they were earned to the extent they are not
offset by any capital loss carryforwards. Unless a shareholder instructs the
Trust to pay dividends or capital gains distributions in cash, dividends and
distributions will automatically be reinvested at NAV in additional shares of
the Fund.
The Fund intends to qualify as a regulated investment company, as defined in 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 (whether from tax-exempt or taxable
obligations) are taxable to shareholders as ordinary income, whether received in
cash or reinvested in additional shares of the Fund. Exempt-interest dividends
may be excluded by shareholders of the Fund from its 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 certain types of private
activity bonds issued after August 7, 1986 and (ii) all exempt- interest
dividends will be a component of the "current 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. The Fund's dividends and
distributions will not qualify for the dividends-received deduction for
corporations.
Statements as to the tax status of each shareholder's dividends and
distributions, if any, are mailed annually. Each shareholder will also receive,
if appropriate, various written notices after the end of the Fund's prior
taxable year as to the Federal income tax status of his or her dividends and
distributions which were received from the Fund during that year. Shareholders
should consult their tax advisers to assess the consequences of investing in the
Fund under state and local laws and to determine whether dividends paid by the
Fund that represent interest derived from U.S. government obligations are exempt
from any applicable state or local income taxes.
PERFORMANCE INFORMATION AND REPORTS
From time to time, the Trust may advertise "current yield," "effective yield"
and/or "tax equivalent 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 "tax equivalent yield"
demonstrates the yield on a taxable investment necessary to produce an after-tax
yield equal to the 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 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
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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 IBC Government Only Institutions Only All Taxable Money Fund
Average, which is an average compiled by IBC Money Fund Report, a widely
recognized, independent publication that monitors the performance of money
market mutual funds. Similarly, the yield of the Fund might be compared with
rankings prepared by Micropal Limited and/or Lipper Analytical Services, Inc.,
which are widely recognized, independent services that monitor the investment
performance of mutual funds. The yield of the Fund might also be compared 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.
Shareholders will receive financial reports semi-annually that include listings
of investment securities held by the Fund's 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 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 the Portfolio, neither the
Trust nor the Portfolio require employees other than its executive officers.
None of the executive officers of the Trust or the Portfolio devote 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 SAI.
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, 1996,
Bankers Trust New York Corporation was the seventh largest bank holding company
in the United States with total assets of approximately $120 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
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approximately $227 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 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 objectives 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 SAI without violation of the Glass-Steagall
Act or other applicable banking laws or regulations.
ADMINISTRATOR
Under its Administration and Services Agreement with the Trust, Bankers Trust
calculates the NAV 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 the Administration and Services Agreement, Bankers Trust may delegate one
or more of its responsibilities to others, including affiliates of Edgewood, at
Bankers Trust's expense. For more information, see the SAI.
DISTRIBUTOR
Edgewood Services, Inc. is the principal distributor for shares of the Fund. In
addition, Edgewood and its affiliates provide the Trust with office facilities
and currently provide administration and distribution services for other
registered investment companies. The principal business address of Edgewood and
its affiliates is Clearing Operations, P.O. Box 897, Pittsburgh, Pennsylvania
15230-0897.
Pursuant to the terms of the Trust's Plan of Distribution pursuant to Rule 12b-1
under the 1940 Act (the "Plan"), Edgewood 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 Edgewood 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 Edgewood or its affiliates in formulating sales literature;
and typesetting, printing and distribution of sales litera-
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ture. 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 Prospectus and SAI and in
connection with printing them for and distributing them to existing shareholders
and regulatory authorities, which costs and expenses would not be considered
distribution expenses for purposes of the Plan, will also be paid by the Fund.
To the extent expenses of Edgewood under the Plan in any fiscal year of the
Trust exceed amounts payable under the Plan during that year, those expenses
will not be reimbursed in any succeeding fiscal year. Expenses incurred in
connection with distribution activities will be identified to the Fund or 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 to the Fund on the basis of its 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 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 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.
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 a matter that does 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
15
<PAGE>
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 the
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 Edgewood,
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 has agreed
to reimburse the Fund to the extent required by applicable state law for certain
expenses that are described in the SAI. The Portfolio bears its own expenses.
Operating expenses for the Portfolio generally consist of all costs not
specifically borne by Bankers Trust or Edgewood, including investment advisory
and administration and services fees, fees for necessary professional services,
the costs associated with regulatory compliance and maintaining legal existence
and investor relations.
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BT INSTITUTIONAL FUNDS
INSTITUTIONAL TREASURY MONEY FUND
INVESTMENT ADVISER OF EACH PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY
280 Park Avenue
New York, NY 10017
DISTRIBUTOR
EDGEWOOD SERVICES, INC.
Clearing Operations
P.O. Box 897
Pittsburgh, PA 15230-0897
CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY
280 Park Avenue
New York, NY 10017
INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.
1100 Main Street, Suite 900
Kansas City, MO 64105
COUNSEL
WILLKIE FARR & GALLAGHER
153 East 53rd Street
New York, NY 10022
No person has been authorized to give any information or to make any
representations other than those contained in the Trust's Prospectuses, its
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.
Cusip #055924203
STA480300 (3/97)
BT INSTITUTIONAL FUNDS
{PRIVATE }INSTITUTIONAL CASH MANAGEMENT FUND MARCH 17, 1997
INSTITUTIONAL CASH RESERVES
INSTITUTIONAL LIQUID ASSETS FUND
INSTITUTIONAL TREASURY MONEY FUND
BT PYRAMID MUTUAL FUNDS
BT INVESTMENT MONEY MARKET FUND
STATEMENT OF ADDITIONAL INFORMATION
BT Institutional Funds and BT Pyramid Mutual Funds (each a
`Trust'' and, collectively, the ``Trusts''), are open-end management
investment companies that offer investors a selection of investment
portfolios, each having distinct investment objectives and policies. This
Statement of Additional Information (`SAI'') 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.
BT INVESTMENT MONEY MARKET FUND-a diversified investment portfolio
that seeks a high level of current income through investment in a
portfolio of high quality money market instruments.
As described in the prospectuses, the Trusts seek to achieve the
investment objectives of each Fund by investing all the investable assets
of the Fund in a diversified 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''), and Treasury 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 Edgewood Services, Inc.
(`Edgewood''), the Trusts' distributor (``Distributor''), to clients and
customers (including affiliates and correspondents) of Bankers Trust
Company (`Bankers Trust''), the Portfolios' investment adviser
(`Adviser''), and to clients and customers of other organizations.
The Trusts' prospectuses, which may be amended from time to time
(each, a `Prospectus''), with respect to Institutional Cash Management
Fund, Institutional Cash Reserves, Institutional Liquid Assets Fund,
Institutional Treasury Fund and BT Investment Money Market Fund, are dated
March 17, 1997. The Prospectuses provide the basic information investors
should know before investing and may be obtained without charge by calling
the Trusts at the telephone number listed below or by contacting any
Service Agent. This SAI, which is not a Prospectus, is intended to provide
additional information regarding the activities and operations of the
Trusts and should be read in conjunction with the Prospectuses.
Capitalized terms not otherwise defined in this SAI have the meanings
accorded to them in the Trusts' Prospectuses.
BANKERS TRUST COMPANY
INVESTMENT ADVISER OF EACH PORTFOLIO AND ADMINISTRATOR
EDGEWOOD SERVICES, INC.
DISTRIBUTOR
CLEARING OPERATIONSPITTSBURGH, PENNSYLVANIA 15230-0897(800) 368-4031
P.O. BOX 897
TABLE OF CONTENTS
Investment Objectives and Policies 1
Net Asset Value 7
Purchase and Redemption Information 9
Management of the Trusts and Portfolios 9
Organization of the Trusts 16
Taxes 17
Performance Information 17
Financial Statements 18
Appendix 19
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
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, are supported
by the `full faith and credit'' of the U.S. government; others, such as
those of the Export-Import Bank of the United States, are supported by the
right of the issuer to borrow from the U.S. Treasury; others, such as those
of the Federal National Mortgage Association are solely the obligations of
the issuing entity but are supported by the discretionary authority of the
U.S. government to purchase the agency's obligations; and still others,
such as those of the Student Loan Marketing Association, are supported by
the credit of the instrumentality. No assurance can be given that the U.S.
government would provide financial support to U.S. government-sponsored
instrumentalities if it is not obligated to do so by law.
Examples of the types of U.S. Government Obligations that the
Portfolios may hold include, but are not limited to, in addition to those
described above and direct U.S. Treasury obligations, the obligations of
the Federal Housing Administration, Farmers Home Administration, Small
Business Administration, General Services Administration, Central Bank for
Cooperatives, Farm Credit Banks, 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 have the authority to lend portfolio securities to
brokers, dealers and other financial organizations. The Portfolios will
not lend securities to Bankers Trust, Edgewood or their affiliates. By
lending its securities, a Portfolio can increase its income by continuing
to receive interest on the loaned securities as well as by either investing
the cash collateral in short-term securities or obtaining yield in the form
of interest paid by the borrower when U.S. Government Obligations are used
as collateral. There may be risks of delay in receiving additional
collateral or risks of delay in recovery of the securities or even loss of
rights in the collateral should the borrower of the securities fail
financially. Each Portfolio will adhere to the following conditions
whenever its securities are loaned: (i) the Portfolio must receive at
least 100% 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.
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.
RATING SERVICES
The ratings of Moody's Investors Service, Inc. (`Moody's'') and
Standard & Poor's Ratings Group (`S&P'') represent their opinions as to
the quality of the securities that they undertake to rate. It should be
emphasized, however, that ratings are relative and subjective and are not
absolute standards of quality. Although these ratings are an initial
criterion for selection of portfolio investments, 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 SAI.
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. UNLESS AN
INVESTMENT INSTRUMENT OR TECHNIQUE IS DESCRIBED IN THE RESPECTIVE
PROSPECTUS OR 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 Trusts
with respect to each of the Funds and by the Portfolios as fundamental
policies. Under the Investment Company Act of 1940, as amended (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, a 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 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 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 Trusts, on behalf of each
Fund, and by the Portfolios, each Fund and each Portfolio may not:
1. Borrow money, except for temporary or emergency (not leveraging)
purposes in an amount not exceeding 5% of the value of the Fund's or
the Portfolio's total assets (including the amount borrowed), as the
case may be, calculated in each case at the lower of cost or market.
2. Pledge, hypothecate, mortgage or otherwise encumber more than 5% of
the total assets of the Fund or the Portfolio, as the case may be, and
only to secure borrowings for temporary or emergency purposes.
3. Invest more than 5% of the total assets of the Fund or the
Portfolio, as the case may be, in any one issuer (other than U.S.
Government Obligations) or purchase more than 10% of any class of
securities of any one issuer; provided, however, that (i) up to 25% of
the assets of the Fund and the Portfolio may be invested without
regard to this restriction; provided, however, that nothing in this
investment restriction shall prevent a 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, Institutional Cash Reserves and BT Investment Money
Market Fund (and Cash Management Portfolio) will be invested in
obligations of foreign and U.S. Banks provided, however, that nothing
in this investment restriction shall prevent a 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,
provided, however, that nothing in this investment restriction shall
prevent a Trust from investing all 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, Institutional Treasury Money Fund and BT Investment Money
Market Fund (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 a 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 a 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 a 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 may be deemed
to have issued a senior security by reason of (i) entering into a
reverse repurchase agreement or (ii) borrowing in accordance with
terms described in the Prospectus and this SAI.
13. Purchase or retain the securities of any issuer if any of the officers
or trustees of the Fund or the Portfolio or its 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.
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 an orderly liquidation of portfolio securities
or to maintain liquidity in the event of an unanticipated failure to
complete a portfolio security transaction or other similar situations)
or reverse repurchase agreements, provided that collateral
arrangements with respect to options and futures, including deposits
of initial deposit and variation margin, are not considered a pledge
of assets for purposes of this restriction and except that assets may
be pledged to secure letters of credit solely for the purpose of
participating in a captive insurance company sponsored by the
Investment Company Institute; for additional related restrictions, see
clause (i) under the caption `Additional Restrictions'' below. (As
an operating policy, the 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 restriction.
Additional Restrictions. In order to comply with certain statutes
and policies, each Portfolio (or Trust, on behalf of the Fund) will not as
a matter of operating policy (except that no operating policy shall prevent
a Fund from investing all of its Assets in an open-end investment company
with substantially the same investment objectives):
(i) borrow money (including through dollar roll transactions) for any
purpose in excess of 10% of the Portfolio's (Fund's) total assets
(taken at cost), except that the Portfolio (Fund) may borrow for
temporary or emergency purposes up to 1/3 of its total assets;
(ii) pledge, mortgage or hypothecate for any purpose in excess of 10% of
the Portfolio's (Fund's) total assets (taken at market value),
provided that collateral arrangements with respect to options and
futures, including deposits of initial deposit and variation margin,
are not considered a pledge of assets for purposes of this
restriction;
(iii) purchase any security or evidence of interest therein on margin,
except that such short-term credit as may be necessary for the
clearance of purchases and sales of securities may be obtained and
except that deposits of initial deposit and variation margin may be
made in connection with the purchase, ownership, holding or sale of
futures;
(iv) sell any security which it does not own unless by virtue of its
ownership of other securities it has at the time of sale a right to
obtain securities, without payment of further consideration,
equivalent in kind and amount to the securities sold and provided that
if such right is conditional the sale is made upon the same
conditions;
(v) invest for the purpose of exercising control or management;
(vi) purchase securities issued by any investment company except by
purchase in the open market where no commission or profit to a sponsor
or dealer results from such purchase other than the customary broker's
commission, or except when such purchase, though not made in the open
market, is part of a plan of merger or consolidation; provided,
however, that securities of any investment company will not be
purchased for the Portfolio (Fund) if such purchase at the time
thereof would cause (a) more than 10% of the Portfolio's (Fund's)
total assets (taken at the greater of cost or market value) to be
invested in the securities of such issuers; (b) more than 5% of the
Portfolio's (Fund's) total assets (taken at the greater of cost or
market value) to be invested in any one investment company; or (c)
more than 3% of the outstanding voting securities of any such issuer
to be held for the Portfolio (Fund); and, provided further, that the
Portfolio shall not invest in any other open-end investment company
unless the Portfolio (Fund) (1) waives the investment advisory fee
with respect to assets invested in other open-end investment companies
and (2) incurs no sales charge in connection with the investment (as
an operating policy, each Portfolio will not invest in another open-
end registered investment company);
(vii) invest more than 15% of the Portfolio's (Fund's) total net (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;
(viii) 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;
(ix) 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);
(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 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 American Stock Exchange or the New York Stock Exchange, Inc.
(`NYSE'');
(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).
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.
PORTFOLIO TURNOVER
Each Portfolio may attempt to increase yields by trading to take
advantage of short-term market variations, which results in 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 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
(`NAV'') of the Funds are determined for purposes of sales and
redemptions. The NAV 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 (397 days or less with respect to Cash Management Portfolio
(BT Investment Money Market Fund)) 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 Trusts, to stabilize, to the extent reasonably possible, the
investors' price per share as computed for the purpose of sales and
redemptions at $1.00. These procedures include review of each Portfolio's
holdings by the Portfolio's Board of Trustees, at such intervals as it
deems appropriate, to determine whether the value of the Portfolio's assets
calculated by using available market quotations or market equivalents
deviates from such valuation based on amortized cost.
The rule also provides that the extent of any deviation between the
value of each Portfolio's assets based on available market quotations or
market equivalents and such valuation based on amortized cost must be
examined by the Portfolio's Board of Trustees. In the event the
Portfolio's Board of Trustees determines that a deviation exists that may
result in material dilution or other unfair results to investors or
existing shareholders, pursuant to the rule, the respective Portfolio's
Board of Trustees must cause the Portfolio to take such corrective action
as such Board of Trustees regards as necessary and appropriate, including:
selling portfolio instruments prior to maturity to realize capital gains or
losses or to shorten average portfolio maturity; withholding dividends or
paying distributions from capital or capital gains; redeeming shares in
kind; or valuing the Portfolio's assets by using available market
quotations.
Each investor in a Portfolio, including the corresponding Fund, may
add to or reduce its investment in the Portfolio on each day the Portfolio
determines its NAV. 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 NAV 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 NAV 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 Trusts may suspend the right of redemption or postpone the date
of payment for shares of the Funds during any period when: (a) trading on
the NYSE is restricted by applicable rules and regulations of the SEC;
(b) the NYSE is closed for other than customary weekend and holiday
closings; (c) the SEC has by order permitted such suspension; or (d) an
emergency exists as determined by the SEC.
Edgewood is the principal Distributor of shares of the Funds. In
addition to Edgewood's duties as Distributor, Edgewood and its affiliates
may, in their discretion, perform additional functions in connection with
transactions in the shares of the Funds. Pursuant to the terms of each
Trust's Distribution Plan (the `Plan''), pursuant to Rule 12b-1 under the
1940 Act, Edgewood may seek reimbursement in an amount not exceeding 0.10%
of each Institutional Fund's, and 0.20% in the case of BT Investment Money
Market Fund'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.
Each Plan provides that it will continue in effect from year to year
only if its continuance is approved annually by each Trust's Board of
Trustees, including a majority of the Trustees who are not `interested
persons,''as defined by the 1940 Act, of each 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 Plans may not
be amended to increase materially the amount to be spent for the services
provided by Edgewood without shareholder approval and all material
amendments of the Plans must also be approved by the Trustees in the manner
described above. The Plans 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 Plans, Edgewood will provide to
the Board of Trustees periodic reports of any amounts expended under the
Plans and the purpose for which expenditures were made.
On September 30, 1996, the Trust entered into a Distribution Agreement
with Edgewood. Prior to September 30, Signature Broker-Dealer Services,
Inc. (`Signature'') was the Trust's distributor. For the year ended
December 31, 1996, there were no reimbursable expenses incurred under this
agreement.
MANAGEMENT OF THE TRUSTS AND PORTFOLIOS
Each Board of Trustees is composed of persons experienced in financial
matters who meet throughout the year to oversee the activities of the Funds
or Portfolios they represent. In addition, the Trustees review contractual
arrangements with companies that provide services to the Funds/Portfolios
and review the Funds' performance.
The Trustees and officers of the Trusts and the Portfolios, their
birthdates and their principal occupations during the past five years are
set forth below. Their titles may have varied during that period. Unless
otherwise indicated, the address of each officer is Clearing Operations,
P.O. Box 897, Pittsburgh, Pennsylvania 15230-0897.
TRUSTEES OF BT INSTITUTIONAL FUNDS
CHARLES P. BIGGAR (birthdate: October 13, 1930) - Trustee; Retired;
Director of Chase/NBW Bank Advisory Board; Director, Batemen, Eichler, Hill
Richards Inc.; formerly Vice President of International Business Machines
and President of the National Services and the Field Engineering Divisions
of IBM. His address is 12 Hitching Post Lane, Chappaqua, New York 10514.
RICHARD J. HERRING (birthdate: February 18, 1946) - 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 (birthdate: May 10, 1931) - Trustee; Retired;
Director, Adela Investment Co. and University Patents, Inc.; formerly
Assistant Treasurer of IBM Corporation (until 1986). His address is 99
Jordan Lane, Stamford, Connecticut 06903.
PHILIP W. COOLIDGE* (birthdate: September 2, 1951) -Trustee;
Chairman, Chief Executive Officer and President, Signature Financial Group,
Inc. (`SFG'') (since December, 1988) and Signature (since April, 1989).
His address is 6 St. James Avenue, Boston, Massachusetts 02116.
TRUSTEES OF BT PYRAMID MUTUAL FUNDS
KELVIN J. LANCASTER (birthdate: December 10, 1924) - Trustee;
Professor, Department of Economics, Columbia University. His address is
35 Claremont Avenue, New York, New York 10027
HARRY VAN BENSCHOTEN (birthdate: February 18, 1928) - 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.
MARTIN J. GRUBER (birthdate: July 15, 1937) - Trustee; Chairman of the
Finance Department and Nomura Professor of Finance, Leonard N. Stern School
of Business, New York University (since 1964). His address is 229 S. Irving
Street, Ridgewood, New Jersey 07450.
PHILIP W. COOLIDGE* (birthdate: September 2, 1951) -Trustee; Chairman,
Chief Executive Officer and President, SFG (since December, 1988) and
Signature (since April, 1989). His address is 6 St. James Avenue, Boston,
Massachusetts 02116.
TRUSTEES OF THE PORTFOLIOS
PHILIP SAUNDERS, JR. (birthdate: October 11, 1935) - Trustee;
Principal, Philip Saunders Associates (Consulting); former Director of
Financial Industry Consulting, Wolf & Company; President, John Hancock Home
Mortgage Corporation; and Senior Vice President of Treasury and Financial
Services, John Hancock Mutual Life Insurance Company, Inc. His address is
445 Glen Road, Weston, Massachusetts 02193.
CHARLES P. BIGGAR (birthdate: October 13, 1930) - Trustee; Retired;
Director of Chase/NBW Bank Advisory Board; Director, Batemen, Eichler, Hill
Richards Inc.; formerly Vice President of International Business Machines
and President of the National Services and the Field Engineering Divisions
of IBM. His address is 12 Hitching Post Lane, Chappaqua, New York 10514.
S. LELAND DILL (birthdate: March 28, 1930) - Trustee; Retired;
Director, Coutts Group; Coutts (U.S.A.) International; Coutts Trust
Holdings Ltd; Director, Zweig Series Trust; formerly Partner of KPMG Peat
Marwick; Director, Vinters International Company Inc.; General Partner of
Pemco (an investment company registered under the 1940 Act). His address
is 5070 North Ocean Drive, Singer Island, Florida 33404.
PHILIP W. COOLIDGE* (birthdate: September 2, 1951) - Trustee;
Chairman, Chief Executive Officer and President, SFG (since December, 1988)
and Signature (since April, 1989). His address is 6 St. James Avenue,
Boston, Massachusetts 02116.
*Indicates an `interested person'' (as defined in the 1940 Act) for the
Trust.
OFFICERS OF THE TRUST AND PORTFOLIOS
Unless otherwise specified, each officer listed below holds the same
position with each Trust and Portfolio.
RONALD M. PETNUCH (birthdate: February 27, 1960) - President and
Treasurer; Senior Vice President; Federated Services Company (`FSC'');
formerly, Director of Proprietary Client Services, Federated Administrative
Services (`FAS''), and Associate Corporate Counsel, Federated Investors
(`FI'').
CHARLES L. DAVIS, JR. (birthdate: March 23, 1960) - Vice President and
Assistant Treasurer; Vice President, FAS.
JAY S. NEUMAN (birthdate: April 22, 1950) - Secretary; Corporate
Counsel, FI.
Messrs. Coolidge, Petnuch, Davis, and Neuman also hold similar
positions for other investment companies for which Signature, Edgewood 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 Trusts or the Portfolios. No director, officer or
employee of Edgewood or any of its affiliates will receive any compensation
from the Trusts or any Portfolio for serving as an officer or Trustee of
the Trusts or the Portfolios.
For the fiscal year ended December 31, 1996, Institutional Cash
Management Fund, Institutional Cash Reserves, Institutional Liquid Assets
Fund, Institutional Treasury Money Fund and BT Investment Money Market Fund
incurred Trustees fees equal to $7,351, $7,352, $6,904, $7,402, and $7,085,
respectively. For the same period, Cash Management Portfolio, Liquid
Assets Portfolio and Treasury Money Portfolio incurred Trustees fees equal
to $2,365, $2,372, and $2,365, respectively.
TRUSTEE COMPENSATION TABLE
The following table reflects fees paid to the Trustees of the
Trusts and the Portfolios for the year ended December 31, 1996.
AGGREGATE AGGREGATE
COMPENSATION COMPENSATION TOTAL COMPENSATION
NAME OF PERSON, FROM BT FROM BT PYRAMID FROM FUND COMPLEX
POSITION INSTITUTIONAL FUNDS MUTUAL FUNDS PAID
TO TRUSTEES*
Philip W. Coolidge
Trustee of BT Institutional
Funds, BT Pyramid Mutual $140 $115 $1,250
Funds and Portfolios
Martin J. Gruber,
Trustee of BT Pyramid $625 $12,130 $27,500
Mutual Funds
Kelvin J. Lancaster,
Trustee of BT Pyramid none $11,850 $26,250
Mutual Funds
Harry Van Benschoten,
Trustee of BT Pyramid $625 $12,130 $27,500
Mutual Funds
Bruce E. Langton,
Trustee of BT Institutional $12,800 none $27,500
Funds
Richard J. Herring,
Trustee of BT Institutional $12,800 none $27,500
Funds
Charles P. Biggar,
Trustee of BT Institutional $12,350 none $28,750
Funds and Portfolios
S. Leland Dill,
Trustee of Portfolios $625 none $28,750
Philip Saunder, Jr.,
Trustee of Portfolios $625 none $28,750
*Aggregated information is furnished for the BT Family of Funds which
consists of the following: BT Investment Funds, BT Institutional Funds,
BT Pyramid Funds, BT Advisor Funds, BT Investment Portfolios, Cash
Management Portfolio, Treasury Money Portfolio, Tax Free Money Portfolio,
NY Tax Free Money Portfolio, International Equity Portfolio, Utility
Portfolio, Short Intermediate US Government Securities Portfolio,
Intermediate Tax Free Portfolio, Asset Management Portfolio, Equity 500
Index Portfolio, and Capital Appreciation Portfolio.
Bankers Trust reimbursed the Funds and Portfolios for a portion of
their Trustees fees for the period above. See `Investment Adviser'' and
`Administrator'' below.
As of February 20, 1997, the Trustees and Officers of the Trusts
and the Trustees of each Portfolio, owned in the aggregate less than 1% of
the shares of any Fund or of the Trusts (all series taken together).
As of February 20, 1997, the following shareholders of record owned 5%
or more of the outstanding shares of Institutional Cash Management Fund:
First Deposit Master Trust, San Francisco, CA, owned approximately
102,214,588 (5.65%) shares; Individual Small Group Demographic Pool c/o
Alicare, Inc., New York, NY, owned approximately 104,147,787 (5.75%) shares
and John Hancock Mutual Life Insurance Co., Boston, MA, owned approximately
177,697,862 (9.81%) shares.
As of February 20, 1997, the following shareholders of record owned 5%
or more of the outstanding shares of Institutional Cash Reserves: Thrifty
Rent-A-Car, New York, NY, owned approximately 94,458,580 (5.59%) shares;
AT&T Universal Card Master Trust Spread Account, New York, NY, owned
approximately 96,046,407 (5.68%); General Electric Capital Corp., Stamford,
CT, owned approximately 100,434,637 (5.94%) shares and Banc One Collection,
New York, NY, owned approximately 223,240,733 (13.20%) shares.
As of February 20, 1997, the following shareholder of record owned 5%
or more of the outstanding shares of Institutional Liquid Assets Fund:
Bankers Trust Funds Valuation Group, Jersey City, NJ, owned 2,432,152,595
(100%) shares.
As of February 20, 1997, no shareholder of record owned 5% or more of
the outstanding shares of Institutional Treasury Money Fund.
As of February 20, 1997, the following shareholders or record owned 5%
or more of the outstanding shares of BT Investment Money Market Fund: Duff
& Phelps Investment Management, Chicago, IL, owned approximately 28,363,100
(6.34%) shares and Bankers Trust Co., Jersey City, NJ, acting as Custodian,
owned approximately 111,888,210 (25.00%) shares.
INVESTMENT ADVISER
Under the terms of an investment advisory agreement (the `Advisory
Agreement') between each Portfolio and Bankers Trust, the adviser 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 Trusts and each Portfolio bear
certain other expenses incurred in their operation, including: taxes,
interest, brokerage fees and commissions, if any; fees of Trustees of each
Trust or Portfolio who are not officers, directors or employees of Bankers
Trust, Edgewood or any of their affiliates; SEC fees and state Blue Sky
qualification fees, 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 Trusts or the Portfolios; and any extraordinary expenses.
For the fiscal years ended December 31, 1996, 1995 and 1994,
Bankers Trust earned $4,935,288, $3,847,729, and $3,807,085, respectively,
in compensation for investment advisory services provided to Cash
Management Portfolio. During the same periods, Bankers Trust reimbursed
$761,230, $578,251, and $537,651, respectively, to Cash Management
Portfolio to cover expenses.
For the fiscal year ended December 31, 1996, the period ended
December 31, 1995 and the fiscal year ended December 31, 1994, Bankers
Trust earned $2,794,472, $127,704, and $22,347, respectively, in
compensation for investment advisory services provided to Liquid Assets
Portfolio. During the same periods, Bankers Trust reimbursed $3,187,013,
$178,381, and $44,908, respectively, to Liquid Assets Portfolio to cover
expenses.
For the fiscal years ended December 31, 1996, 1995 and 1994, Bankers
Trust earned $2,787,544, $1,764,890, and $1,176,759, respectively, in
compensation for investment advisory services provided to Treasury Money
Portfolio. During the same periods, Bankers Trust reimbursed $60,530,
$69,965, and $65,359, respectively, to Treasury Money Portfolio to cover
expenses.
Bankers Trust may have deposit, loan and other commercial banking
relationships with the issuers of obligations which may be purchased on
behalf of the Portfolios, including outstanding loans to such issuers which
could be repaid in whole or in part with the proceeds of securities so
purchased. Such affiliates deal, trade and invest for their own accounts
in such obligations and are among the leading dealers of various types of
such obligations. Bankers Trust has informed the Portfolios that, in
making its investment decisions, it does not obtain or use material inside
information in its possession or in the possession of any of its
affiliates. In making investment recommendations for the Portfolios,
Bankers Trust will not inquire or take into consideration whether an issuer
of securities proposed for purchase or sale by a Portfolio is a customer of
Bankers Trust, its parent or its subsidiaries or affiliates and, in dealing
with its customers, Bankers Trust, its parent, subsidiaries, and affiliates
will not inquire or take into consideration whether securities of such
customers are held by any fund managed by Bankers Trust or any such
affiliate.
ADMINISTRATOR
Under 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 each Trust and each Portfolio
reasonably deems necessary for the proper administration of each 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 Trusts 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 each 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
NAV, net income and realized capital gains or losses of a 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') FSC performs such sub-administration duties for
the Trusts and each Portfolio as from time to time may be agreed upon by
Bankers Trust and FSC. The Sub-Administration Agreement provides that FSC
will receive such compensation as from time to time may be agreed upon by
FSC and Bankers Trust. All such compensation will be paid by Bankers
Trust.
Bankers Trust has agreed that if in any fiscal year the aggregate
expenses of any Fund and its respective Portfolio (including fees pursuant
to the Advisory Agreement, but excluding interest, taxes, brokerage and, if
permitted by the relevant state securities commissions, extraordinary
expenses) exceed the expense limitation of any state having jurisdiction
over the Fund, Bankers Trust will reimburse the Fund for the excess expense
to the extent required by state law. As of the date of this SAI, the most
restrictive annual expense limitation applicable to any Fund is 2.50% of
the Fund's first $30 million of average annual net assets, 2.00% of the
next $70 million of average annual net assets and 1.50% of the remaining
average annual net assets.
For the fiscal years ended December 31, 1996, 1995 and 1994,
Bankers Trust earned $622,176, $327,340, and $429,664, respectively, in
compensation for administrative and other services provided to
Institutional Cash Management Fund. During the same periods, Bankers Trust
reimbursed $280,146, $129,230, and $59,280, respectively, to the
Institutional Cash Management Fund to cover expenses.
For the fiscal years ended December 31, 1996, 1995 and for the period
from January 25, 1994 (commencement of operations) to December 31, 1994,
Bankers Trust earned $674,983, $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 $805,636, $508,395 and $452,281, respectively to the
Institutional Cash Reserves to cover expenses.
For the fiscal year ended December 31, 1996, and for the period from
December 11, 1995 (commencement of operations) to December 31, 1995,
Bankers Trust earned $929,288 and $38,038 in compensation for
administrative and other services provided to the Institutional Liquid
Assets Fund. During the same periods, Bankers Trust reimbursed $879,347,
and $526,169, respectively to the Institutional Liquid Assets Fund to cover
expenses.
For the fiscal years ended December 31, 1996, 1995 and 1994, Bankers
Trust earned $640,788, $274,216, and $74,378, respectively, in compensation
for administrative and other services provided to Institutional Treasury
Money Fund. During the same periods, Bankers Trust reimbursed $48,531,
$340,378, and $46,491, respectively, to Institutional Treasury Money Fund
to cover expenses.
For the fiscal years ended December 31, 1996, 1995, and 1994, Bankers
Trust earned $1,648,203, $2,418,113, and $2,104,780, respectively for
administrative and other services provided to the BT Investment Money
Market Fund. During the same periods, Bankers Trust reimbursed $782,979,
$1,110,205, and $1,309,180, respectively, to the BT Investment Money Market
Fund to cover expenses.
For the fiscal years ended December 31, 1996, 1995 and 1994, Bankers
Trust earned compensation of $1,645,096, $1,282,576, and $1,269,028,
respectively, for administrative and other services provided to the Cash
Management Portfolio.
For the fiscal year ended December 31, 1996, the period ended December
31, 1995 and the fiscal year ended December 31, 1994, Bankers Trust earned
compensation of $931,490, $42,568, and $7,449, respectively, for
administrative and other services provided to the Liquid Assets Portfolio.
For the fiscal years ended December 31, 1996, 1995 and 1994, Bankers
Trust earned compensation of $929,181, $588,297, and $392,252,
respectively, for administrative and other services provided to the
Treasury Money Portfolio.
CUSTODIAN AND TRANSFER AGENT
Bankers Trust, 280 Park Avenue, New York, New York 10017, serves as
custodian and transfer agent for the Trusts 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 each Trust, Bankers Trust maintains
the shareholder account records for each Fund, handles certain
communications between shareholders and each Trust and causes to be
distributed any dividends and distributions payable by each 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 Trusts and Bankers Trust have agreed that the Trusts may use
`BT'' as part of their name for so long as Bankers Trust serves as
Adviser. 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.
The Trusts may be required, on 60 days' notice from Bankers Trust at
any time, to abandon use of the acronym `BT'' as part of their name. If
this were to occur, the Trustees would select an appropriate new name for
the Trusts, 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 Trusts and the
Portfolios described in the Prospectuses and this SAI without violation of
the Glass-Steagall Act or other applicable banking laws or regulations.
However, counsel has pointed out that future changes in either Federal or
state statutes and regulations concerning the permissible activities of
banks or trust companies, as well as future judicial or administrative
decisions or interpretations of present and future statutes and
regulations, might prevent Bankers Trust from continuing to perform those
services for the Trusts or the Portfolios. If the circumstances described
above should change, the Boards of Trustees would review each Trust's
relationship 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, serve as Counsel to the Trusts 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 Trusts.
ORGANIZATION OF THE TRUSTS
BT Institutional Funds was organized on March 26, 1990 as a series
Trust. BT Pyramid Mutual Funds was organized on February 28, 1992. The
shares of each series participate equally in the earnings, dividends and
assets of the particular series. The Trusts may create and issue
additional series of shares. Each Trust's Declaration of Trust permits the
Trustees to divide or combine the shares into a greater or lesser number of
shares without thereby changing the proportionate beneficial interest in a
series. Each share represents an equal proportionate interest in a series
with each other share. Shares when issued are fully paid and non-
assessable, except as set forth below. Shareholders are entitled to one
vote for each share held.
Shares of the Trusts do not have cumulative voting rights, which means
that holders of more than 50% of the shares voting for the election of
Trustees can elect all Trustees. Shares are transferable but have no
preemptive, conversion or subscription rights. Shareholders generally vote
by Fund, except with respect to the election of Trustees and the
ratification of the selection of independent accountants.
The Trusts are not required to hold annual meetings of shareholders
but will hold special meetings of shareholders when in the judgment of the
Trustees it is necessary or desirable to submit matters for a shareholder
vote. Shareholders have under certain circumstances the right to
communicate with other shareholders in connection with requesting a meeting
of shareholders for the purpose of removing one or more Trustees without a
meeting. 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 obligations of the Trusts.
However, the Declarations of Trust disclaim shareholder liability for acts
or obligations of the Trusts and require that notice of this disclaimer be
given in each agreement, obligation or instrument entered into or executed
by a Trust or a Trustee. The Declarations of Trust provide for
indemnification from each 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 Trusts
believe is remote. Upon payment of any liability incurred by a Trust, the
shareholder paying the liability will be entitled to reimbursement from the
general assets of the Trust. The Trustees intend to conduct the operations
of each Trust in a manner so as to avoid, as far as possible, ultimate
liability of the shareholders for liabilities of the Trust.
Whenever a Trust is requested to vote on a matter pertaining to a
Portfolio, the Trust will vote its shares without a meeting of shareholders
of the 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, a 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' Prospectuses, each Fund is
designed to provide investors with current income. 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.
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 each 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' Prospectuses. 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.
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 yields are then calculated as follows:
Base Period Return = Net Change in Account Value
Beginning Account Value
Current Yield = Base Period Return x 365/7
Effective Yield = [(1 + Base Period Return)365/7] - 1
Tax Equivalent Yield = Current Yield
(1 - Tax Rate)
The following table sets forth various measures of the performance
for the indicated Funds for the seven days ended December 31, 1996.
Institutional Institutional Institutional
Institutional BT Investment
Cash Management Cash Reserves Liquid Assets
Treasury Money Money Market
Fund Fund Fund Fund
Current Yield 5.26% 5.31% 5.35% 5.02% 4.74%
Effective Yield 5.45% 5.51% 5.52% 5.17%
5.32%
FINANCIAL STATEMENTS
The financial statements for each Fund and Portfolio for the period
ended December 31, 1996, are incorporated herein by reference to the Annual
Report to shareholders for each Fund dated December 31, 1996. A copy of a
Fund's Annual Report may be obtained without charge by contacting the
respective Fund.
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 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:
AAA-Highest credit quality. The risk factors are negligible, being
only slightly more than for risk-free U.S. Treasury Funds.
AA+, AA, AA-High credit quality. Protection factors are strong. Risk
is modest but may vary slightly from time to time because of economic
conditions.
Description of S&P's municipal bond ratings:
AAA-Prime-These are obligations of the highest quality. They have the
strongest capacity for timely payment of debt service.
General Obligation Bonds-In a period of economic stress, the issuers
will suffer the smallest declines in income and will be least susceptible
to autonomous decline. Debt burden is moderate. A strong revenue
structure appears more than adequate to meet future expenditure
requirements. Quality of management appears superior.
Revenue Bonds-Debt service coverage has been, and is expected to
remain, substantial; stability of the pledged revenues is also
exceptionally strong due to the competitive position of the municipal
enterprise or to the nature of the revenues. Basic security provisions
(including rate covenant, earnings test for issuance of additional bonds
and debt service reserve requirements) are rigorous. There is evidence of
superior management.
AA-High Grade-The investment characteristics of bonds in this group
are only slightly less marked than those of the prime quality issues.
Bonds rated AA have the second strongest capacity for payment of debt
service.
S&P's letter ratings may be modified by the addition of a plus or a
minus sign, which is used to show relative standing within the major rating
categories, except in the AAA rating category.
Description of Moody's municipal bond ratings:
Aaa-Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as `gilt edge.'' Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of
such issues.
Aa-Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities, or
fluctuation of protective elements may be of greater amplitude, or there
may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
Moody's may apply the numerical modifier 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 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 interest is dependent on
favorable 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 (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 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.
INVESTMENT ADVISER OF EACH PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY
DISTRIBUTOR
EDGEWOOD SERVICES, INC.
CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY
INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.
COUNSEL
WILLKIE FARR & GALLAGHER
No person has been authorized to give any information or to make any
representations other than those contained in the Fund's Prospectus, its
SAI 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.
Cusip #055924104
Cusip #055924872
Cusip #055924864
Cusip #055924203
Cusip #055847206
BT0440A (3/97)
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements: Incorporated by reference to the
Funds' Annual Reports dated December 31, 1996, pursuant to
Rule 411 under the Securities Act of 1933. (File Nos. 33-
34079 and 811-06071).
(b) Exhibits:
(1) (i) Conformed copy of Amended and Restated Declaration of Trust
of the Trust; (5)
(ii) Fifth Amended and Restated Establishment and Designation of
Series of the Trust; (5)
(iii) Sixth Amended and Restated Establishment and Designation of
Series of the Trust; (5)
(iv) Seventh Amended and Restated Establishment and Designation
of Series of the Trust; (5)
(v) Eighth Amended and Restated Establishment and Designation of
Series of the Trust; (5)
(vi) Ninth Amended and Restated Establishment and Designation of
Series of the Trust; (5)
(vii) Tenth Amended and Restated Establishment and Designation of
Series of the Trust; (5)
(viii)Eleventh Amended and Restated Establishment and Designation
of Series of the Trust; (7)
(2) Copy of By-Laws of the Trust; (5)
(3) Not Applicable.
(4) Copy of Specimen stock certificates for shares of beneficial
interest of the Trust; (1)
(5) Conformed copy of Investment Advisory Agreement; (7)
(6) Conformed copy of Distributor's Contract; +
(7) Not applicable.
(8) See Item (9).
(9) (i) Administration and Services Agreement; (5)
(ii) Schedule of Fees under Administration and Service
Agreement; (7)
(10) Not applicable.
(11) Conformed copy of Consents of Independent Accountants; +
(12) Not Applicable.
(13) (i) Conformed copy of investment representation letter of
initial shareholder of the Equity 500 Index Fund; (3)
(ii) Conformed copy of investment representation letter of
initial shareholder of the Institutional Liquid Assets
Fund; (5)
+ All exhibits have been filed electroncally.
(1) Incorporated by reference to Pre-Effective Amendment No. 1 to the
Registrant's registration statement on Form N-1A (`Registration
Statement') as filed with the Securities and Exchange Commission
(`Commission'') on July 20, 1990.
(3) Incorporated by reference to Post-Effective Amendment No. 4 to the
Registration Statement as filed with the Commission on April 30,
1992.
(5) Incorporated by reference to Post-Effective Amendment No. 15 to the
Registration Statement as filed with the Commission on July 5, 1995.
(7) Incorporated by reference to Post-Effective Amendment No. 21 to the
Registration Statement as filed with the Commission on September 24,
1996.
(iii) Conformed copy of investment representation letter of
initial shareholder of the Institutional Daily Assets
Fund; (7)
(14) Not Applicable.
(15) (i) Conformed copy of Plan of Distribution; +
(ii) Conformed copy of Exclusive Placement Agent Agreement -
Institutional Daily Assets Fund; +
(16) (i) Copy of method of computation of performance information
for money market funds; (2)
(ii) Copy of method of computation of performance information
for non-money market funds; (3)
(17) Copy of Financial Data Schedules; +
(18) Not Applicable.
(19) Conformed copy of Power of Attorney of Registrant, Equity 500 Index
Portfolio, Cash Management Portfolio, Treasury Money Portfolio and BT
Investment Portfolios - Liquid Assets
Portfolio. +
Item 25. Persons Controlled by or under Common Control with Registrant:
None
Item 26. Number of Holders of Securities:
Title of Class Number of Record Holders
as of December 31, 1996
Institutional Cash Management Fund: 848
Institutional Treasury Money Fund: 478
Institutional Tax Free Money Fund: 0
Institutional NY Tax Free Money Fund: 0
Institutional Equity 500 Index Fund: 83
BT Institutional Capital Appreciation Fund: 0
Institutional Liquid Assets Fund: 3
Institutional Cash Reserves: 232
Institutional Daily Assets Fund: 0
International Equity Fund 0
Item 27. Indemnification; (8)
+ All exhibits have been filed electronically.
(2) Incorporated by reference to Post-Effective Amendment No. 1 to the
Registration Statement as filed with the Commission on February 29,
1991.
(3) Incorporated by reference to Post-Effective Amendment No. 4 to the
Registration Statement as filed with the Commission on April 30,
1992.
(7) Incorporated by reference to Post-Effective Amendment No. 21 to the
Registration Statement as filed with the Commission on September 24,
1996.
(8) Incorporated by reference to Post-Effective Amendment No. 17 to the
Registration Statement as filed with the Commission on April 30, 1996.
Item 28. Business and Other Connections of Investment Adviser:
Bankers Trust serves as investment adviser to the Trust. Bankers Trust, a
New York banking corporation, is a wholly owned subsidiary of Bankers Trust
New York Corporation. Bankers Trust conducts a variety of commercial
banking and trust activities and is a major wholesale supplier of financial
services to the international institutional market. To the knowledge of
the Trust, none of the directors or officers of Bankers Trust, except those
set forth below, is engaged in any other business, profession, vocation or
employment of a substantial nature, except that certain directors and
officers also hold various positions with and engage in business for
Bankers Trust New York Corporation. Set forth below are the names and
principal businesses of the directors and officers of Bankers Trust who are
engaged in any other business, profession, vocation or employment of a
substantial nature. These persons may be contacted c/o Bankers Trust
Company, 280 Park Avenue, New York, New York, 10017.
George B. Beitzel, 29 King Street, Chappaqua, NY 10514-3432. Retired
Senior Vice President and Director of International Business Machines
Corporation. Director of Bankers Trust and Bankers Trust New York
Corporation. Director of Computer Task Group, FlightSafety International,
Inc., Phillips Gas Company, Phillips Petroleum Company, Caliber Systems,
Inc. (formerly, Roadway Services, Inc.), Rohm and Haas Company and TIG
Holdings, Chairman Emeritus of Amherst College, and Chairman of the
Colonial Williamsburg Foundation.
William R. Howell, J.C. Penney Company, Inc., P.O. Box 10001, Dallas, TX
75301-0001. Chairman of the Board and Chief Executive Officer, J.C. Penney
Company, Inc. Director of Bankers Trust and Bankers Trust New York
Corporation. Also a Director of Exxon Corporation, Halliburton Company and
Warner-Lambert Corporation, National Urban League, Inc. and the National
Retail Federation.
Jon M. Huntsman, Huntsman Corporation, 500 Huntsman Way, Salt Lake City, UT
84108. Chairman and Chief Executive Officer, Huntsman Corporation and other
affiliated companies. Director of Bankers Trust and Bankers Trust New York
Corporation. Chairman, Chief Executive Officer and Director of Sunstar
Corporation and JK Corp. Chairman and Director of Co-Ex Plastics Inc. and
Global Polymers Corporation. Chairman of Constar Corporation and Petrostar
Corporation. President of Autostar Corporation and Restar Corporation.
Director of Airstar Corporation, Consolidated Press International
(Australia), Razzleberry Foods Corporation and Thiokol Corporation.
General Partner of Huntsman Group Ltd., McLeod Creek Partnership and
Trustar Ltd. Chairman of Primary Children's Medical Center Foundation, an
overseer, The Wharton School, University of Pennsylvania, an advisor,
University of Utah, Eccles Business School, founder of Huntsman Cancer
Institute, University of Utah, chairman and director of the Huntsman Cancer
Foundation, and a trustee and president of the Jon and Karen Huntsman
Foundation.
Vernon E. Jordan, Jr., Akin, Gump, Strauss, Hauer & Feld, LLP, 1333 New
Hampshire Ave., N.W., Suite 400, Washington, DC 20036. Senior Partner,
Akin, Gump, Strauss, Hauer & Feld, LLP. Director of Bankers Trust and
Bankers Trust New York Corporation. Also a Director of American Express
Company, Corning Incorporated, Dow Jones, Inc., J.C. Penney Company, Inc.,
Revlon Group Incorporated, Ryder System, Inc., Sara Lee Corporation, Union
Carbide Corporation and Xerox Corporation, a trustee of Brookings
Institution, The Ford Foundation and Howard University, and governor of the
Joint Center for Political and Economic Studies.
Hamish Maxwell, Philip Morris Companies Inc., 100 Park Avenue, 10th Floor,
New York, NY 10017. Retired Chairman and Chief Executive Officer, Philip
Morris Companies Inc. Director of Bankers Trust and Bankers Trust New York
Corporation. Director of The New Corporation Limited and Sola
International Inc..
Donald F. McCullough, Collins & Aikman Corporation, 210 Madison Avenue, New
York, NY 10016. Chairman Emeritus, Collins & Aikman Corporation. Director
of Bankers Trust and Bankers Trust New York Corporation. Director of
Massachusetts Mutual Life Insurance Co. and Melville Corporation.
N.J. Nicholas Jr., 15 West 53rd Street, New York, NY 10019. Former
President, Co-Chief Executive Officer and Director of Time Warner Inc.
Director of Bankers Trust and Bankers Trust New York Corporation. Also a
Director of Boston Scientific Corporation and Xerox Corporation.
Russell E. Palmer, The Palmer Group, 3600 Market Street, Suite 530,
Philadelphia, PA 19104. Chairman and Chief Executive Officer of The Palmer
Group. Director of Bankers Trust and Bankers Trust New York Corporation.
Former Dean of The Wharton School, University of Pennsylvania and former
Chief Executive Officer of Touche Ross & Co. (now Deloitte and Touche).
Also Director of Allied-Signal Inc., Contel Cellular, Inc., Federal Home
Loan Mortgage Corporation, GTE Corporation, Goodyear Tire & Rubber Company,
Imasco Limited, The May Department Stores Company and Safeguard
Scientifics, Inc. Member, Radnor Venture Partners Advisory Board, advisory
board of the Controller General of the United States, and a Trustee, the
Universtiy of Pennsylvania.
Didier Pineau-Valencienne, Schneider S.A., 4 Rue de Longchamp, 75116 Paris,
France. Chairman and Chief Executive Officer, Schneider S.A. Director and
member of the European Advisory Board of Bankers Trust and Director of
Bankers Trust New York Corporation. Director of AXA (France) and Equitable
Life Assurance Society of America, Arbed (Luxembourg), Banque Paribas
(France), Ciments Francais (France), Cofibel (Belgique), Compagnie
Industrielle de Paris (France), SIAPAP, Schneider USA, Sema Group PLC
(Great Britain), Spie- Batignolles, Tractebel (Belgique) and Whirlpool.
Chairman and Chief Executive Officer of Societe Parisienne d'Entreprises et
de Participations.
Charles S. Sanford, Jr., Bankers Trust Company, 280 Park Avenue, New York,
NY 10017. Chairman of the Board of Bankers Trust and Bankers Trust New
York Corporation. Also a Director of Mobil Corporation and J.C. Penney
Company, Inc.
Eugene B. Shanks, Jr., Bankers Trust Company, 280 Park Avenue, New York, NY
10017. President of Bankers Trust and Bankers Trust New York Corporation.
Patricia Carry Stewart, c/o Office of the Secretary, 280 Park Avenue - 17W,
New York, NY 10017. Former Vice President, The Edna McConnell Clark
Foundation. Director of Bankers Trust and Bankers Trust New York
Corporation. Director, Borden Inc., Continental Corp. and Melville
Corporation, Director and Vice Chair of Community Foundation for Palm Beach
and Martin Counties, and a Trustee Emerita of Cornell University.
George J. Vojta, Bankers Trust Company, 280 Park Avenue, New York, NY
10017. Vice Chairman of the Board of Bankers Trust and Bankers Trust New
York Corporation. Director of Northwest Airlines and Private Export
Funding UST Corp., the New York State Banking Board and St. Lukes-Roosevelt
Hospital Center, a partner of New York City Partnership and Chairman,
Wharton Financial Services Center.
Item 29. Principal Underwriters:
(a) Edgewood Services, Inc., (``Edgewood'') the Distributor for shares
of the Registrant, also acts as principal underwriter for the following
open-end investment companies: FTI Funds, Excelsior Institutional Trust
(formerly, UST Master Funds, Inc.), Excelsior Tax-Exempt Funds, Inc.
(formerly, UST Master Tax-Exempt Funds, Inc.), Excelsior Institutional
Trust, Marketvest Funds, Marketvest Funds, Inc., BT Advisor Funds, BT
Investment Funds, and BT Pyramid Mutual Funds.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
Lawrence Caracciolo Trustee, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Arthur L. Cherry Trustee, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
J. Christopher Donahue Trustee, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Lawrence Caracciolo President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Newton Heston, III Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Ronald M. Petnuch Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Thomas P. Schmitt Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
S. Elliott Cohan Secretary, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Thomas J. Ward Assistant Secretary, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Kenneth W. Pegher, Jr. Treasurer, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
(c) Not Applicable.
ITEM 30. Location of Accounts and Records:
BT INSTITUTIONAL FUNDS: Federated Investor Tower
(`Registrant'') Pittsburgh, PA 15222-3779
BANKERS TRUST COMPANY: 280 Park Avenue
(`Adviser, Custodian and New York, NY 10017
Administrator')
INVESTORS FIDUCIARY TRUST COMPANY: 127 West 10th Street
(`Transfer Agent and Dividend Kansas City, MO 64105
Disbursing Agent')
EDGEWOOD SERVICES, INC.: Clearing Operations
(`Distributor'') P.O. Box 897
Pittsburgh, PA 15230-0897
Item 31. Management Services:
Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to file a post-effective amendment,
using financial statements on behalf of International Equity Fund
which need not be certified, within four to six months from the
effective date of Post-Effective Amendment No.18.
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, the Registrant, BT
INSTITUTIONAL FUNDS, certifies that it meets all of the requirements for
effectiveness of this Amendment to its Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933, and has duly caused this
Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of Pittsburgh and the
Commonwealth of Pennsylvania on the 17th of March, 1997.
BT INSTITUTIONAL FUNDS
By: /s/ Jay S. Neuman
Jay S. Neuman, Secretary
March 17, 1997
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the
following person in the capacity and on the date indicated:
NAME TITLE DATE
By: /s/ Jay S. Neuman Attorney in Fact March 17, 1997
Jay S. Neuman For the Persons
SECRETARY Listed Below
/s/RONALD M. PETNUCH* President and Treasurer
Ronald M. Petnuch (Chief Executive Officer,
Principal Financial and
Accounting Officer)
/s/PHILIP W. COOLIDGE* Trustee
Philip W. Coolidge
/s/CHARLES P. BIGGAR* Trustee
Charles P. Biggar
/s/RICHARD J. HERRING* Trustee
Richard J. Herring
/s/BRUCE E. LANGTON* Trustee
Bruce E. Langton
* By Power of Attorney
SIGNATURES
BT INVESTMENT PORTFOLIOS has duly caused this Post-Effective amendment
No. 19 to the Registration Statement on Form N-1A of BT Institutional Funds
to be signed on its behalf by the undersigned, thereto authorized in the
City of Pittsburgh and the Commonwealth of Pennsylvania on the 17th of
March, 1997.
BT INVESTMENT PORTFOLIOS
By: /s/ Jay S. Neuman
Jay S. Neuman, Secretary
March 17,1997
This Post-Effective amendment No. 19 to the Registration Statement has
been signed below by the following persons in the capacity and on the date
indicated:
NAME TITLE DATE
By: /s/ Jay S. Neuman Attorney in Fact March 17,1997
Jay S. Neuman For the Persons
SECRETARY Listed Below
/s/RONALD M. PETNUCH* President and Treasurer
Ronald M. Petnuch (Chief Executive Officer,
Principal Financial and
Accounting Officer)
/s/PHILIP W. COOLIDGE* Trustee
Philip W. Coolidge
/s/S. LELAND DILL* Trustee
S. Leland Dill
/s/PHILIP SAUNDERS, JR.* Trustee
Philip Saunders, Jr.
/s/KELVIN J. LANCASTER* Trustee
Kelvin J. Lancaster
* By Power of Attorney
SIGNATURES
CASH MANAGEMENT PORTFOLIO has duly caused this Post-Effective
amendment No. 19 to the Registration Statement on Form N-1A of BT
Institutional Funds to be signed on its behalf by the undersigned, thereto
authorized in the City of Pittsburgh and the Commonwealth of Pennsylvania
on the 17th of March, 1997.
CASH MANAGEMENT PORTFOLIO
By: /s/ Jay S. Neuman
Jay S. Neuman, Secretary
March 17,1997
This Post-Effective amendment No. 19 to the Registration Statement has
been signed below by the following persons in the capacity and on the date
indicated:
NAME TITLE DATE
By: /s/ Jay S. Neuman Attorney in Fact March 17,1997
Jay S. Neuman For the Persons
SECRETARY Listed Below
/s/RONALD M. PETNUCH* President and Treasurer
Ronald M. Petnuch (Chief Executive Officer,
Principal Financial and
Accounting Officer)
/s/PHILIP W. COOLIDGE* Trustee
Philip W. Coolidge
/s/CHARLES P. BIGGAR* Trustee
Charles P. Biggar
/s/S. LELAND DILL* Trustee
S. Leland Dill
/s/PHILIP SAUNDERS, JR.* Trustee
Philip Saunders, Jr.
* By Power of Attorney
SIGNATURES
TREASURY MONEY PORTFOLIO has duly caused this Post-Effective amendment
No. 19 to the Registration Statement on Form N-1A of BT Institutional Funds
to be signed on its behalf by the undersigned, thereto authorized in the
City of Pittsburgh and the Commonwealth of Pennsylvania on the 17th of
March, 1997.
TREASURY MONEY PORTFOLIO
By: /s/ Jay S. Neuman
Jay S. Neuman, Secretary
March 17,1997
This Post-Effective amendment No. 19 to the Registration Statement has
been signed below by the following persons in the capacity and on the date
indicated:
NAME TITLE DATE
By: /s/ Jay S. Neuman Attorney in Fact March 17,1997
Jay S. Neuman For the Persons
SECRETARY Listed Below
/s/RONALD M. PETNUCH* President and Treasurer
Ronald M. Petnuch (Chief Executive Officer,
Principal Financial and
Accounting Officer)
/s/PHILIP W. COOLIDGE* Trustee
Philip W. Coolidge
/s/CHARLES P. BIGGAR* Trustee
Charles P. Biggar
/s/S. LELAND DILL* Trustee
S. Leland Dill
/s/PHILIP SAUNDERS, JR.* Trustee
Philip Saunders, Jr.
* By Power of Attorney
SIGNATURES
EQUITY 500 INDEX PORTFOLIO has duly caused this Post-Effective
amendment No. 19 to the Registration Statement on Form N-1A of BT
Institutional Funds to be signed on its behalf by the undersigned, thereto
authorized in the City of Pittsburgh and the Commonwealth of Pennsylvania
on the 17th of March, 1997.
EQUITY 500 INDEX PORTFOLIO
By: /s/ Jay S. Neuman
Jay S. Neuman, Secretary
March 17,1997
This Post-Effective amendment No. 19 to the Registration Statement has
been signed below by the following persons in the capacity and on the date
indicated:
NAME TITLE DATE
By: /s/ Jay S. Neuman Attorney in Fact March 17,1997
Jay S. Neuman For the Persons
SECRETARY Listed Below
/s/RONALD M. PETNUCH* President and Treasurer
Ronald M. Petnuch (Chief Executive Officer,
Principal Financial and
Accounting Officer)
/s/PHILIP W. COOLIDGE* Trustee
Philip W. Coolidge
/s/CHARLES P. BIGGAR* Trustee
Charles P. Biggar
/s/S. LELAND DILL* Trustee
S. Leland Dill
/s/PHILIP SAUNDERS, JR.* Trustee
Philip Saunders, Jr.
* By Power of Attorney
Exhibit 6 under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
BT INSTITUTIONAL FUNDS
DISTRIBUTOR'S CONTRACT
AGREEMENT made as of this 30th day of September, 1996, by and between
BT INSTITUTIONAL FUNDS (the "Trust"), a Massachusetts business trust, and
Edgewood Services, Inc. ("EDGEWOOD"), a New York corporation.
In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. The Trust hereby appoints EDGEWOOD as its principal underwriter, to
act as agent in selling and distributing shares of the Trust which may be
offered in one or more series (the "Funds") consisting of one or more
classes (the "Classes") of shares (the "Shares"), as described and set
forth on one or more exhibits to this Agreement, at the current offering
price thereof as described and set forth in the current Prospectuses of the
Trust. EDGEWOOD hereby accepts such appointment and agrees to provide such
other services for the Trust, if any, and accept such compensation from the
Trust, if any, as set forth in the applicable exhibits to this Agreement.
2. The sale of any Shares may be suspended without prior notice
whenever in the judgment of the Trust it is in its best interest to do so.
In addition, the Trust and EDGEWOOD reserve the right to reject any
purchase order.
3. Neither EDGEWOOD nor any other person is authorized by the Trust to
give any information or to make any representation relative to any Shares
other than those contained in the Registration Statement, Prospectuses, or
Statements of Additional Information ("SAIs") filed with the Securities and
Exchange Commission, as the same may be amended from time to time, or in
any supplemental information to said Prospectuses or SAIs approved by the
Trust. EDGEWOOD agrees that any other information or representations other
than those specified above which it or any dealer or other person who
purchases Shares through EDGEWOOD may make in connection with the offer or
sale of Shares, shall be made entirely without liability on the part of the
Trust. With respect to the duties and services provided for in this
Agreement, no person or dealer, other than EDGEWOOD, is authorized to act
as agent for the Trust for any purpose. EDGEWOOD agrees that in offering
or selling Shares as agent of the Trust, it will, in all respects, duly
conform to all applicable state and federal laws and the rules and
regulations of the National Association of Securities Dealers, Inc.,
including its Rules of Fair Practice. EDGEWOOD will submit to the Trust
copies of all sales literature before using the same and will not use such
sales literature if disapproved by the Trust.
4. This Agreement is effective with respect to each Class as of the
date of execution of the applicable exhibit and shall continue in effect
with respect to each Class presently set forth on an exhibit and any
subsequent Classes added pursuant to an exhibit during the initial term of
this Agreement for one year from the date set forth above, and thereafter
for successive periods of one year if such continuance is approved at least
annually by the Trustees of the Trust including a majority of the members
of the Board of Trustees of the Trust who are not interested persons of the
Trust and have no direct or indirect financial interest in the operation of
any Distribution Plan relating to the Trust or in any related documents to
such Plan ("Disinterested Trustees") cast in person at a meeting called for
that purpose. If a Class is added after the first annual approval by the
Trustees as described above, this Agreement will be effective as to that
Class upon execution of the applicable exhibit and will continue in effect
until the next annual approval of this Agreement by the Trustees and
thereafter for successive periods of one year, subject to approval as
described above.
2
5. This Agreement may be terminated with regard to a particular Fund or
Class at any time, without the payment of any penalty, by the vote of a
majority of the Disinterested Trustees or by a majority of the outstanding
voting securities of the particular Fund or Class on not more than sixty
(60) days' written notice to any other party to this Agreement. This
Agreement may be terminated with regard to a particular Fund or Class by
EDGEWOOD on sixty (60) days' written notice to the Trust.
6. This Agreement may not be assigned by EDGEWOOD and shall
automatically terminate in the event of an assignment by EDGEWOOD as
defined in the Investment Company Act of 1940, as amended, provided,
however, that EDGEWOOD may employ such other person, persons, corporation
or corporations as it shall determine in order to assist it in carrying out
its duties under this Agreement.
7. EDGEWOOD shall not be liable to the Trust for anything done or
omitted by it, except acts or omissions involving willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties imposed by
this Agreement.
8. This Agreement may be amended at any time by mutual agreement in
writing of all the parties hereto, provided that such amendment is approved
by the Trustees of the Trust including a majority of the Disinterested
Trustees of the Trust cast in person at a meeting called for that purpose.
9. This Agreement shall be construed in accordance with and governed by
the laws of the State of New York.
10. (a) Subject to the conditions set forth below, the Trust agrees to
indemnify and hold harmless EDGEWOOD and each person, if any, who
controls EDGEWOOD within the meaning of Section 15 of the Securities
Act of 1933 and Section 20 of the Securities Exchange Act of 1934, as
3
amended, against any and all loss, liability, claim, damage and
expense whatsoever (including but not limited to any and all expenses
whatsoever reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any
claim whatsoever) arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement, any Prospectuses or SAIs (as from time to time
amended and supplemented) or the omission or alleged omission
therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading, unless such
statement or omission was made in reliance upon and in conformity with
written information furnished to the Trust about EDGEWOOD by or on
behalf of EDGEWOOD expressly for use in the Registration Statement,
any Prospectuses and SAIs or any amendment or supplement thereof.
If any action is brought against EDGEWOOD or any controlling
person thereof with respect to which indemnity may be sought against
the Trust pursuant to the foregoing paragraph, EDGEWOOD shall promptly
notify the Trust in writing of the institution of such action and the
Trust shall assume the defense of such action, including the
employment of counsel selected by the Trust and payment of expenses.
EDGEWOOD or any such controlling person thereof shall have the right
to employ separate counsel in any such case, but the fees and expenses
of such counsel shall be at the expense of EDGEWOOD or such
controlling person unless the employment of such counsel shall have
been authorized in writing by the Trust in connection with the defense
of such action or the Trust shall not have employed counsel to have
charge of the defense of such action, in any of which events such fees
4
and expenses shall be borne by the Trust. Anything in this paragraph
to the contrary notwithstanding, the Trust shall not be liable for any
settlement of any such claim of action effected without its written
consent. The Trust agrees promptly to notify EDGEWOOD of the
commencement of any litigation or proceedings against the Trust or any
of its officers or Trustees or controlling persons in connection with
the issue and sale of Shares or in connection with the Registration
Statement, Prospectuses, or SAIs.
(b) EDGEWOOD agrees to indemnify and hold harmless the Trust, each
of its Trustees, each of its officers who have signed the Registration
Statement and each other person, if any, who controls the Trust within
the meaning of Section 15 of the Securities Act of 1933, against any
and all loss, liability, claims, damage and expense whatsoever
(including but not limited to any and all expenses whatsoever
reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever)
arising out of or based upon any untrue statement or any alleged
untrue statement of material fact contained in the Registration
Statement, any Prospectuses or SAIs (as from time to time amended or
supplemented) or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the
statements therein not misleading, but only with respect to alleged
statements or alleged omissions or statements or omissions, if any,
made in the Registration Statement or any Prospectus, SAI, or any
amendment or supplement thereof in reliance upon, and in conformity
with, information furnished to the Trust about EDGEWOOD by or on
behalf of EDGEWOOD expressly for use in the Registration Statement or
5
any Prospectus, SAI, or any amendment or supplement thereof. In case
any action shall be brought against the Trust or any other person so
indemnified based on the Registration Statement or any Prospectus,
SAI, or any amendment or supplement thereof, and with respect to which
indemnity may be sought against EDGEWOOD, EDGEWOOD shall have the
rights and duties given to the Trust, and the Trust and each other
person so indemnified shall have the rights and duties given to
EDGEWOOD by the provisions of subsection (a) above.
(c) Nothing herein contained shall be deemed to protect any person
against liability to the Trust or its shareholders to which such
person would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of the duties of such
person or by reason of the reckless disregard by such person of the
obligations and duties of such person under this Agreement.
(d) Insofar as indemnification for liabilities may be permitted
pursuant to Section 17 of the Investment Company Act of 1940, as
amended, for Trustees, officers, EDGEWOOD, and controlling persons of
the Trust by the Trust pursuant to this Agreement, the Trust is aware
of the position of the Securities and Exchange Commission as set forth
in the Investment Company Act Release No. IC-11330. Therefore, the
Trust undertakes that in addition to complying with the applicable
provisions of this Agreement, in the absence of a final decision on
the merits by a court or other body before which the proceeding was
brought, that an indemnification payment will not be made unless in
the absence of such a decision, a reasonable determination based upon
factual review has been made (i) by a majority vote of a quorum of
non-party Disinterested Trustees, or (ii) by independent legal counsel
6
in a written opinion that the indemnitee was not liable for an act of
willful misfeasance, bad faith, gross negligence or reckless disregard
of duties. The Trust further undertakes that advancement of expenses
incurred in the defense of a proceeding (upon undertaking for
repayment unless it is ultimately determined that indemnification is
appropriate) against an officer, Trustee, EDGEWOOD or controlling
person of the Trust will not be made absent the fulfillment of at
least one of the following conditions: (i) the indemnitee provides
security for his undertaking; (ii) the Trust is insured against losses
arising by reason of any lawful advances; or (iii) a majority of a
quorum of non-party Disinterested Trustees or independent legal
counsel in a written opinion makes a factual determination that there
is reason to believe the indemnitee will be entitled to
indemnification.
11. EDGEWOOD is hereby expressly put on notice of the limitation of
liability as set forth in the Declaration of Trust and agrees that the
obligations assumed by the Trust pursuant to this Agreement shall be
limited in any case to the Trust and its assets and EDGEWOOD shall not seek
satisfaction of any such obligation from the shareholders of the Trust, the
Trustees, officers, employees or agents of the Trust, or any of them.
12. This Agreement will become binding on the parties hereto upon the
execution of the attached exhibits to the Agreement.
13. EDGEWOOD shall be responsible for reviewing and making any filings
of advertisements and sales literature relating to the Funds that have been
furnished to EDGEWOOD.
14. EDGEWOOD agrees on behalf of itself and its employees to treat
confidentially and as proprietary information of the Trust all records and
7
other information not otherwise publicly available relative to the Trust
and its prior, present or potential shareholders and not to use such
records and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior notification to
and approval in writing by the Trust, which approval shall not be
unreasonably withheld and may not be withheld where EDGEWOOD may be exposed
to civil or criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted authorities, or
when so requested by the Trust.
15. EDGEWOOD and the Trust each hereby represents and warrants to the
other that it has all the requisite authority to enter into, execute,
deliver and perform its obligations under this Agreement and that, with
respect to it, this Agreement is legal, valid and binding, and enforceable
in accordance with its terms.
* * * * *
8
Exhibit A
to the
Distributor's Contract
BT INSTITUTIONAL FUNDS
The following provisions are hereby incorporated and made part of the
Distributor's Contract dated as of September 30, 1996, between BT
Institutional Funds and Edgewood Services, Inc. with respect to the Funds
and Classes of shares set forth in Schedule A to this Exhibit, attached
hereto (collectively, `Funds'').
1. The Trust hereby appoints EDGEWOOD to engage in activities
principally intended to result in the sale of shares of the Funds
("Shares"). Pursuant to this appointment, EDGEWOOD is authorized to select
a group of financial institutions ("Financial Institutions") to sell Shares
at the current offering price thereof as described and set forth in the
respective prospectuses of the Trust.
2. During the term of this Agreement, the Trust will pay EDGEWOOD for
services pursuant to this Agreement, a monthly fee computed at the annual
rate indicated on Schedule A on the average aggregate net asset value of
the Shares held during the month. For the month in which this Agreement
becomes effective or terminates, there shall be an appropriate proration of
any fee payable on the basis of the number of days that the Agreement is in
effect during the month.
3. EDGEWOOD may from time-to-time and for such periods as it deems
appropriate reduce its compensation to the extent any Fund's expenses
exceed such lower expense limitation as EDGEWOOD may, by notice to the
Trust, voluntarily declare to be effective.
4. EDGEWOOD will enter into separate written agreements with various
firms to provide certain of the services set forth in Paragraph 1 herein.
EDGEWOOD, in its sole discretion, may pay Financial Institutions a periodic
fee in respect of Shares owned from time to time by their clients or
customers. The schedules of such fees and the basis upon which such fees
will be paid shall be determined from time to time by EDGEWOOD in its sole
discretion.
5. EDGEWOOD will prepare reports to the Board of Trustees of the Trust
on a quarterly basis showing amounts expended hereunder including amounts
paid to Financial Institutions and the purpose for such expenditures.
In consideration of the mutual covenants set forth in the
Distributor's Contract dated as of September 30, 1996 between BT
Institutional Funds and EDGEWOOD, BT Institutional Funds executes and
delivers this Exhibit on behalf of the Funds, and with respect to the
Classes set forth in Schedule A to this Exhibit.
2
Witness the due execution hereof this 30th day of September, 1996.
ATTEST: BT INSTITUTIONAL FUNDS
/s/ Jay S. Neuman By:/s/ Charles L. Davis, Jr.
[Secretary] [Vice President]
(SEAL)
ATTEST: EDGEWOOD SERVICES, INC.
/s/ S. Elliott Cohan By:/s/ R. Jeffrey Niss
[Secretary] [Senior Vice President]
(SEAL)
SCHEDULE A
OF
EXHIBIT A
TO THE
DISTRIBUTOR'S CONTRACT
The provisions of the Distributor's Contract between BT Institutional
Funds and Edgewood Services, Inc. shall be effective with respect to each
Fund and Class as of the date set forth below.
3
Name of Fund Effective Date Fee
Institutional Cash Management Fund September 30, 1996 0.10%
Institutional Treasury Money Fund September 30, 1996 0.10%
Institutional Tax Free Money Fund September 30, 1996 0.10%
Institutional NY Tax Free Money Fund September 30, 1996 0.10%
Institutional Liquid Assets Fund September 30, 1996 0.10%
Equity 500 Index Fund September 30, 1996 0.10%
100% Treasury Fund September 30, 1996 0.10%
Institutional Cash Reserves September 30, 1996 0.10%
BT Institutional Capital Appreciation Fund September 30,
1996 0.10%
Exhibit B
to the
Distributor's Contract
BT INSTITUTIONAL FUNDS
In consideration of the mutual covenants set forth in the
Distributor's Contract dated September 30, 1996 between BT INSTITUTIONAL
FUNDS and EDGEWOOD, BT INSTITUTIONAL FUNDS executes and delivers this
Exhibit on behalf of the Funds and Classes of shares first set forth in
Schedule A to this Exhibit, attached hereto.
4
Witness the due execution hereof this 30th day of September, 1996.
ATTEST: BT INSTITUTIONAL FUNDS
/s/ Jay S. Neuman By:/s/ Charles L. Davis, Jr.
[Secretary] [Vice President]
(SEAL)
ATTEST: EDGEWOOD SERVICES, INC.
/s/ S. Elliott Cohan By:/s/ R. Jeffrey Niss
[Secretary] [Senior Vice President]
(SEAL)
SCHEDULE A
OF
EXHIBIT B
TO THE
DISTRIBUTOR'S CONTRACT
5
The provisions of the Distributor's Contract between BT Institutional Funds
and Edgewood Services, Inc. shall be effective with respect to each Fund
and Class as of the date set forth below.
Exhibit 15(i) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
BT INSTITUTIONAL FUNDS
PLAN OF DISTRIBUTION
This Plan, when effective in accordance with its terms, shall be the
written plan of BT Institutional Funds (the `Trust''), contemplated by
Rule 12b-1 under the Investment Company Act of 1940, as amended (the
`Act'').
W H E R E A S :
The Trust has been organized to operate as an open-end management
investment company and is registered as such under the Act;
The Trust intends to distribute the shares of its series (each, a
`Fund'') as listed on Schedule A hereto, and desires to adopt a
distribution plan pursuant to Rule 12b-1 under the Act with respect to such
Funds, and the Trustees of the Trust have determined, in the exercise of
their reasonable business judgment and in light of their fiduciary duty,
that there is a reasonable likelihood that adoption of this Plan will
benefit each Fund and its shareholders; and
The Trust desires to engage Edgewood Services, Inc. (`ESI'') to
provide (or cause to be provided) certain distribution services for each
Fund.
NOW, THEREFORE, in consideration of the foregoing, the Trust hereby
adopts this Plan in accordance with Rule 12b-1 under the Act on the
following terms and conditions:
1. The Trust may reimburse ESI, as the distributor, for expenses
incurred in connection with the distribution of the shares of the Funds at
an annual rate not exceeding the percentage of the average daily net assets
of the Fund as set forth on Schedule A hereto. Such expenses shall be
calculated and accrued daily and reimbursed monthly or at such other
intervals as the Board of Trustees shall determine.
2. ESI may seek reimbursement under paragraph 1 of this Plan for
expenses incurred in connection with any activities primarily intended to
result in the sale of the Funds' shares, including, but not limited to:
compensation to and expenses (including overhead and telephone expenses) of
account executives or other employees of ESI 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 ESI or its
affiliates in formulating sales literature; and typesetting, printing and
distribution of sales literature.
3. The Trust shall pay all costs and expenses in connection with
implementing and operating this Plan, subject to the limitation specified
in paragraph 1 hereof. The Trust shall pay all costs and expenses
associated with preparing the Fund's prospectuses and statements of
additional information and in connection with printing them for an
distributing them to existing shareholders and regulatory authorities,
which costs and expenses shall not be considered distribution expenses for
purposes of this Plan.
4. This Plan together with any related agreements shall not take
effect with respect to a Fund until it has been approved by a vote of at
2
least a majority (as defined in the Act) of the outstanding voting
securities of the Fund, if so required by Rule 12b-1 under the Act.
5. This Plan together with any related agreements shall become
effective with respect to a Fund upon approval by a majority vote of both
(i) the Board of Trustees and (ii) those Trustees who are not interested
persons of the Trust (as defined in the Act) and have no direct or indirect
financial interest in the operation of this Plan or any agreements related
to it (the ``ualified Trustees''), cast in person at a meeting called for
the purpose of voting on this Plan and such related agreements.
6. This Plan shall continue in effect for so long as such
continuance is specifically approved at least annually in the manner
provided in paragraph 5 hereof.
7. In each year that the Plan remains in effect, any person
authorized to direct the disposition of monies paid or payable by the Trust
pursuant to this Plan or any related agreement shall prepare and furnish to
the Board and the Board shall review, at least quarterly, written reports
complying with the requirements of Rule
12b-1 under the Act of the amounts expended under the Plan and purposes for
which such expenditures were made.
8. This Plan may be terminated at any time with respect to a Fund by
a majority vote of the Qualified Trustees or by vote of a majority of the
outstanding voting securities of the Fund.
9. This Plan may not be amended in order to increase materially the
amount of distribution expenses provided for in paragraph 1 hereof unless
such amendment is approved in the manner provided for initial approval in
paragraph 4 hereof and no material amendment to the Plan shall be made
3
unless approved in the manner provided for approval and annual renewal in
paragraph 5 hereof.
10. While this Plan shall be in effect, the selection and nomination
of Trustees who are not interested persons of the Trust (as defined in the
Act) shall be committed to the discretion of the Qualified Trustees then in
office.
11. ESI hereby acknowledges that (i) payments to be made by the Trust
to ESI pursuant to this Plan shall be for actual expenses of ESI as
contemplated hereunder, (ii) upon termination of this Plan with respect to
a Fund, the benefits inuring to ESI hereunder with respect to that Fund
shall immediately cease and (iii) to the extent expenses of ESI under this
Plan in any fiscal year of a Fund exceed amounts payable under this Plan
during such Fund's fiscal year, such expenses shall not be payable to ESI
in any succeeding fiscal year of the Fund.
12. The Trust shall preserve copies of this Plan and any related
agreements and all reports made pursuant to paragraph 7 hereof for a period
of not less than six years from the date of (a) this Plan or (b) the
agreements or such report, as the case may be, the first two years in an
easily accessible place.
Dated: May 22, 1990
Revised: September 30, 1996
SCHEDULE A
4
BT INSTITUTIONAL FUNDS
SCHEDULE OF FEES UNDER THE PLAN OF DISTRIBUTION
Institutional Cash Management Fund 0.10%
Institutional Treasury Money Fund 0.10%
Institutional Tax Free Money Fund 0.10%
Institutional NY Tax Free Money Fund 0.10%
Institutional Liquid Assets Fund 0.10%
Equity 500 Index Fund 0.10%
100% Treasury Fund 0.10%
Institutional Cash Reserves 0.10%
BT Institutional Capital Appreciation Fund 0.10%
Exhibit 15(ii) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
Institutional Daily Assets Fund,
(a portfolio of BT Institutional Funds)
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
September 30, 1996
Edgewood Services, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Ladies and Gentlemen:
Re: EXCLUSIVE PLACEMENT AGENT AGREEMENT
This is to confirm that, in consideration of the agreements
hereinafter contained, the undersigned, INSTITUTIONAL DAILY ASSETS FUND, a
portfolio of BT Institutional Funds (the `Trust''), an open-end management
investment company registered under the Investment Company Act of 1940, as
amended (the `1940 Act''), organized as a business trust under the laws of
the Commonwealth of Massachusetts, has agreed that Edgewood Services, Inc.,
a New York corporation (`ESI''), shall be the exclusive placement agent
(the `Exclusive Placement Agent'') of beneficial interests (``Trust
Interests') of Institutional Daily Assets Fund.
1. Services as Exclusive Placement Agent.
1.1 ESI will act as Exclusive Placement Agent of the Trust
Interests. In acting as Exclusive Placement Agent under this Exclusive
Placement Agent Agreement, neither ESI nor its employees or any agents
thereof shall make any offer or sale of Trust Interests in a manner which
would require the Trust Interests to be registered under the Securities Act
of 1933, as amended (the ``933 Act'').
1.2 All activities by ESI and its agents and employees as
Exclusive Placement Agent of Trust Interests shall comply with all
applicable laws, rules and regulations, including, without limitation, all
rules and regulations adopted pursuant to the 1940 Act by the Securities
and Exchange Commission (the `Commission'').
1.3 Nothing herein shall be construed to require the Trust to
accept any offer to purchase any Trust Interests, all of which shall be
subject to approval by the Trust's Board of Trustees.
1.4 The Trust shall furnish from time to time for use in
connection with the sale of Trust Interests such information with respect
to the Trust and Trust Interests as ESI may reasonably request. The Trust
shall also furnish ESI upon request with: (a) unaudited semiannual
statements of the Trust's books and accounts prepared by the Trust, and (b)
from time to time such additional information regarding the Trust's
financial or regulatory condition as ESI may reasonably request.
1.5 The Trust represents to ESI that all registration statements
filed by the Trust with the Commission under the 1940 Act with respect to
Trust Interests have been prepared in conformity with the requirements of
2
such statute and the rules and regulations of the Commission thereunder.
As used in this Agreement the term `registration statement'' shall mean
any registration statement filed with the Commission, as modified by any
amendments thereto that at any time shall have been filed with the
Commission by or on behalf of the Trust. The Trust represents and warrants
to ESI that any registration statement will contain all statements required
to be stated therein in conformity with both such statute and the rules and
regulations of the Commission; that all statements of fact contained in any
registration statement will be true and correct in all material respects at
the time of filing of such registration statement or amendment thereto; and
that no registration statement will include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading to a
purchaser of Trust Interests. The Trust may but shall not be obligated to
propose from time to time such amendment to any registration statement as
in the light of future developments may, in the opinion of the Trust's
counsel, be necessary or advisable. If the Trust shall not propose such
amendment and/or supplement within fifteen days after receipt by the Trust
of a written request from ESI to do so, ESI may, at its option, terminate
this Agreement. The Trust shall not file any amendment to any registration
statement without giving ESI reasonable notice thereof in advance;
provided, however, that nothing contained in this Agreement shall in any
way limit the Trust's right to file at any time such amendment to any
registration statement as the Trust may deem advisable, such right being in
all respects absolute and unconditional.
1.6 The Trust agrees to indemnify, defend and hold ESI, its several
officers and directors, and any person who controls ESI within the meaning
of Section 15 of the 1933 Act or Section 20 of the Securities Exchange Act
3
of 1934 (the `1934 Act'') (for purposes of this paragraph 1.6,
collectively, the `Covered Persons'') free and harmless from and against
any and all claims, demands, liabilities and expenses (including the cost
of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which any Covered Person may
incur under the 1933 Act, the 1934 Act, common law, or otherwise, but only
to the extent that such liability or expense incurred by a Covered Person
resulting from such claims or demands shall arise out of or be based on (i)
any untrue statement of a material fact contained in any registration
statement, private placement memorandum or other offering material
(`Offering Material'') or (ii) any omission to state a material fact
required to be stated in any Offering Material or necessary to make the
statements in any Offering Material not misleading; provided, however, that
the Trust's agreement to indemnify Covered Persons shall not be deemed to
cover any claims, demands, liabilities or expenses arising out of any
financial and other statements as are furnished in writing to the Trust by
ESI in its capacity as Exclusive Placement Agent for use in the answers to
any items of any registration statement or in any statements made in any
Offering Material, or arising out of or based on any omission or alleged
omission to state a material fact in connection with the giving of such
information required to be stated in such answers or necessary to make the
answers not misleading; and further provided that the Trust's agreement to
indemnify ESI and the Trust's representations and warranties hereinbefore
set forth in paragraph 1.5 shall not be deemed to cover any liability to
the Trust or its investors to which a Covered Person would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties, or by reason of a Covered Person's reckless
disregard of its obligations and duties under this Agreement. The Trust
shall be notified of any action brought against a Covered Person, such
4
notification to be given by letter or by telegram addressed to the Trust,
Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779,
Attention: Secretary, with a copy to Burton M. Leibert, Esq., Willkie Farr
& Gallagher, One Citicorp Center, 153 East 53rd Street, New York, NY 10022,
promptly after the summons or other first legal process shall have been
duly and completely served upon such Covered Person. The failure to so
notify the Trust of any such action shall not relieve the Trust (i) from
any liability except to the extent the Trust shall have been prejudiced by
such failure, or (ii) from any liability that the Trust may have to the
Covered Person against whom such action is brought by reason of any such
untrue or alleged untrue statement, or omission or alleged omission,
otherwise than on account of the Trust's indemnity agreement contained in
this paragraph. The Trust will be entitled to assume the defense of any
suit brought to enforce any such claim, demand or liability, but in such
case such defense shall be conducted by counsel of good standing chosen by
the Trust and approved by ESI, which approval shall not be unreasonably
withheld. In the event the Trust elects to assume the defense in any such
suit and retain counsel of good standing approved by ESI, the defendant or
defendants in such suit shall bear the fees and expenses of any additional
counsel retained by any of them; but in case the Trust does not elect to
assume the defense of any such suit, or in case ESI reasonably does not
approve of counsel chosen by the Trust, the Trust will reimburse the
Covered Person named as defendant in such suit, for the fees and expenses
of any counsel retained by ESI or the Covered Persons. The Trust's
indemnification agreement contained in this paragraph and the Trust's
representations and warranties in this Agreement shall remain operative and
in full force and effect regardless of any investigation made by or on
behalf of Covered Persons, and shall survive the delivery of any Trust
Interests. This agreement of indemnity will inure exclusively to Covered
5
Persons and their successors. The Trust agrees to notify ESI promptly of
the commencement of any litigation or proceedings against the Trust or any
of its officers or Trustees in connection with the issue and sale of any
Trust Interests.
1.7 ESI agrees to indemnify, defend and hold the Trust, its
several officers and trustees, and any person who controls the Trust within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
(for purposes of this paragraph 1.7, collectively, the ``overed Persons'')
free and harmless from and against any and all claims, demands, liabilities
and expenses (including the costs of investigating or defending such
claims, demands, liabilities and any counsel fees incurred in connection
therewith) that Covered Persons may incur under the 1933 Act, the 1934 Act,
common law, or otherwise, but only to the extent that such liability or
expense incurred by a Covered Person resulting from such claims or demands
shall arise out of or be based on (i) any untrue statement of a material
fact contained in information furnished in writing by ESI in its capacity
as Exclusive Placement Agent to the Trust for use in the answers to any of
the items of any registration statement or in any statements in any other
Offering Material, or (ii) any omission to state a material fact in
connection with such information furnished in writing by ESI to the Trust
required to be stated in such answers or necessary to make such information
not misleading. ESI shall be notified of any action brought against a
Covered Person, such notification to be given by letter or telegram
addressed to ESI at Federated Investors Tower, 1001 Liberty Avenue,
Pittsburgh, PA 15222-3779, Attention: Secretary, promptly after the
summons or other first legal process shall have been duly and completely
served upon such Covered Person. The failure to so notify ESI of any such
action shall not relieve ESI (i) from any liability except to the extent
6
the Trust shall have been prejudiced by such failure, or (ii) from any
liability that ESI may have to the Covered Person against whom such action
is brought by reason of any such untrue or alleged untrue statement, or
omission or alleged omission, otherwise than on account of ESI's indemnity
agreement contained in this paragraph. ESI will be entitled to assume the
defense of any suit brought to enforce any such claim, demand or liability,
but in such case such defense shall be conducted by counsel of good
standing chosen by ESI and approved by the Trust, which approval shall not
be unreasonably withheld. In the event the ESI elects to assume the
defense in any such suit and retain counsel of good standing approved by
the Trust, the defendant or defendants in such suit shall bear the fees and
expenses of any additional counsel retained by any of them; but in case ESI
does not elect to assume the defense of any such suit, or in case the Trust
reasonably does not approve of counsel chosen by ESI, ESI will reimburse
the Covered Person named as defendant in such suit, for the fees and
expenses of any counsel retained by the Trust or the Covered Persons.
ESI's indemnification agreement contained in this paragraph and ESI's
representations and warranties in this Agreement shall remain operative and
in full force and effect regardless of any investigation made by or on
behalf of Covered Persons, and shall survive the delivery of any Trust
Interests. This agreement of indemnity will inure exclusively to Covered
Persons and their successors. ESI agrees to notify the Trust promptly of
the commencement of any litigation or proceedings against ESI or any of its
officers or directors in connection with the issue and sale of any Trust
Interests.
1.8 No Trust Interests shall be offered by either ESI or the
Trust under any of the provisions of this Agreement and no orders for the
purchase or sale of Trust Interests hereunder shall be accepted by the
7
Trust if and so long as the effectiveness of the registration statement or
any necessary amendments thereto shall be suspended under any of the
provisions of the 1940 Act; provided, however, that nothing contained in
this paragraph shall in any way restrict or have an application to or
bearing on the Trust's obligation to redeem Trust Interests from any
investor in accordance with the provisions of the Trust's registration
statement or Declaration of Trust, as amended from time to time. The Trust
shall notify ESI promptly of the suspension of the registration statement
or any necessary amendments thereto, such notification to be given by
letter or telegram addressed to ESI at Federated Investors Tower, 1001
Liberty Avenue, Pittsburgh, PA 15222-3779, Attention: Secretary.
1.9 The Trust agrees to advise ESI as soon as reasonably
practical by a notice in writing delivered to ESI or its counsel:
(a) of any request by the Commission for amendments to the
registration statement then in effect or for additional information;
(b) in the event of the issuance by the Commission of any stop
order suspending the effectiveness of the registration statement then in
effect or the initiation by service of process on the Trust of any
proceeding for that purpose;
(c) of the happening of any event that makes untrue any
statements of a material fact made in the registration statement then in
effect or that requires the making of a change in such registration
statement in order to make the statements therein not misleading; and
8
(d) of all action of the Commission with respect to any
amendment to any registration statement that may from time to time be filed
with the Commission.
For purposes of this paragraph 1.9, informal requests by or acts
of the Staff of the Commission shall not be deemed actions of or requests
by the Commission.
1.10 ESI agrees on behalf of itself and its employees to treat
confidentially and as proprietary information of the Trust all records and
other information not otherwise publicly available relative to the Trust
and its prior, present or potential investors and not to use such records
and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior notification to
and approval in writing by the Trust, which approval shall not be
unreasonably withheld and may not be withheld where ESI may be exposed to
civil or criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted authorities, or
when so requested by the Trust.
1.11 In addition to ESI's duties as Exclusive Placement Agent,
the Trust understands that ESI may, in its discretion, perform additional
functions in connection with transactions in Trust Interests.
The processing of Trust Interest transactions may include, but is
not limited to, compilation of all transactions from ESI's various offices;
creation of a transaction tape and timely delivery of it to the Trust's
transfer agent for processing; reconciliation of all transactions delivered
to the Trust's transfer agent; and the recording and reporting of these
9
transactions executed by the Trust's transfer agent in customer statements;
rendering of periodic customer statements; and the reporting of IRS Form
1099 information at year end if required.
ESI may also provide other investor services, such as
communicating with Trust investors and other functions in administering
customer accounts for Trust investors.
ESI understands that these services may result in cost savings to
the Trust or to the Trust's investment manager and neither the Trust nor
the Trust's investment manager will compensate ESI for all or a portion of
the costs incurred in performing functions in connection with transactions
in Trust Interests. Nothing herein is intended, nor shall be construed, as
requiring ESI to perform any of the foregoing functions.
1.12 Except as set forth in paragraph 1.6 of this Agreement, the
Trust shall not be liable to ESI or any Covered Persons as defined in
paragraph 1.6 for any error of judgment or mistake of law or for any loss
suffered by ESI in connection with the matters to which this Agreement
relates, except a loss resulting from the willful misfeasance, bad faith or
gross negligence on the part of the Trust in the performance of its duties
or from reckless disregard by the Trust of its obligations and duties under
this Agreement.
1.13 Except as set forth in paragraph 1.7 of this Agreement, ESI
shall not be liable to the Trust or any Covered Persons as defined in
paragraph 1.7 for any error of judgment or mistake of law or for any loss
suffered by the Trust in connection with the matters to which this
Agreement relates, except a loss resulting from the willful misfeasance,
10
bad faith or gross negligence on the part of ESI in the performance of its
duties or from reckless disregard by ESI of its obligations and duties
under this Agreement.
2. Term.
This Agreement shall become effective on the date first written
above and, unless sooner terminated as provided herein, shall continue
until one year from the date first written above, and thereafter shall
continue automatically for successive annual periods, provided such
continuance is specifically approved at least annually by (i) the Trust's
Board of Trustees or (ii) by a vote of a majority (as defined in the 1940
Act) of the Trust's outstanding voting securities, provided that in either
event the continuance is also approved by the majority of the Trust's
Trustees who are not interested persons (as defined in the 1940 Act) of the
Trust and who have no direct or indirect financial interest in this
Agreement, by vote cast in person at a meeting called for the purpose of
voting on such approval. This Agreement is terminable without penalty, on
not less than 60 days' notice, by the Board, by a vote of a majority (as
defined in the 1940 Act) of the Trust's outstanding voting securities, or
by ESI. This Agreement will also terminate automatically in the event of
its assignment (as defined in the 1940 Act and the rules thereunder).
3. Representations and Warranties.
ESI and the Trust each hereby represents and warrants to the
other that it has all requisite authority to enter into, execute, deliver
11
and perform its obligations under this Agreement and that, with respect to
it, this Agreement is legal, valid and binding, and enforceable in
accordance with its terms.
4. Concerning Applicable Provisions of Law, etc.
This Agreement shall be subject to all applicable provisions of
law, including the applicable provisions of the 1940 Act and to the extent
that any provisions herein contained conflict with any such applicable
provisions of law, the latter shall control.
The laws of the State of New York shall, except to the extent
that any applicable provisions of Federal law shall be controlling, govern
the construction, validity and effect of this Agreement, without reference
to principles of conflicts of law.
The undersigned officer of the Trust has executed this Agreement
not individually, but as President under the Trust's Declaration of Trust,
as amended. Pursuant to the Declaration of Trust the obligations of this
Agreement are not binding upon any of the Trustees or investors of the
Trust individually, but bind only the trust estate.
If the contract set forth herein is acceptable to you, please so
indicate by executing the enclosed copy of this Agreement and returning the
same to the undersigned, whereupon this Agreement shall constitute a
binding contract between the parties hereto effective at the closing of
business on the date hereof.
12
Very truly yours,
BT INSTITUTIONAL FUNDS, on behalf of its
Institutional Daily Assets Fund
By:/s/ Charles L. Davis, Jr.
Charles L. Davis, Jr.
Vice President
Accepted:
EDGEWOOD SERVICES, INC.
By:/s/ R. Jeffrey Niss
Exhibit 19 under Form N-1A
Exhibit 24 under Item 601/Reg. S-K
POWER OF ATTORNEY
The undersigned Trustees and officers, as indicated respectively
below, of BT Investment Funds, BT Institutional Funds, BT Pyramid Mutual
Funds, The Leadership Trust, and BT Advisor Funds (each, a `Trust'') and,
Cash Management Portfolio, Treasury Money Portfolio, Tax Free Money
Portfolio, NY Tax Free Money Portfolio, International Equity Portfolio,
Utility Portfolio, Short/Intermediate U.S. Government Securities Portfolio,
Equity 500 Index Portfolio, Asset Management Portfolio, Capital
Appreciation Portfolio, Intermediate Tax Free Portfolio, and BT Investment
Portfolios (each, a `Portfolio Trust'') each hereby constitutes and
appoints the Secretary and each Assistant Secretary of each Trust and each
Portfolio Trust and the Deputy General Counsel of Federated Investors, each
of them with full powers of substitution, as his true and lawful attorney-
in-fact and agent to execute in his name and on his behalf in any and all
capacities the Registration Statements on Form N-1A, and any and all
amendments thereto, and all other documents, filed by a Trust or a
Portfolio Trust with the Securities and Exchange Commission (the `SEC'')
under the Investment Company Act of 1940, as amended, and (as applicable)
the Securities Act of 1933, as amended, and any and all instruments which
such attorneys and agents, or any of them, deem necessary or advisable to
enable the Trust or Portfolio Trust to comply with such Acts, the rules,
regulations and requirements of the SEC, and the securities or Blue Sky
laws of any state or other jurisdiction, and to file the same, with all
exhibits thereto and other documents in connection therewith, with the SEC
and such other jurisdictions, and the undersigned each hereby ratifies and
confirms as his own act and deed any and all acts that such attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof. Any
one of such attorneys and agents has, and may exercise, all of the powers
hereby conferred. The undersigned each hereby revokes any Powers of
Attorney previously granted with respect to any Trust or Portfolio Trust
concerning the filings and actions described herein.
IN WITNESS WHEREOF, each of the undersigned has hereunto set his hand
as of the 30th day of September, 1996.
SIGNATURES TITLE
/s/Ronald M. Petnuch President and Treasurer (Chief Executive
Officer,
Ronald M. Petnuch Principal Financial and Accounting Officer)
of each Trust and Portfolio Trust
/s/Philip W. Coolidge Trustee of each Trust and
Philip W. Coolidge Portfolio Trust
/s/Charles P. Biggar Trustee of each Portfolio Trust
Charles P. Biggar and BT Institutional Funds
SIGNATURES TITLE
/s/S. Leland Dill Trustee of each Portfolio Trust
S. Leland Dill and BT Investment Funds
/s/Philip Saunders, Jr. Trustee of each Portfolio Trust
2
Philip Saunders, Jr. and BT Investment Funds
/s/Richard J. Herring Trustee of BT Institutional Funds
Richard J. Herring and BT Advisor Funds
/s/Bruce E. Langton Trustee of BT Institutional Funds
Bruce E. Langton and BT Advisor Funds
Exhibit 11 under Form N-1A
Exhibit 23 under Item 601/Reg. S-K
COOPERS & LYBRAND
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Post-Effective Amendment
No. 19 to the Registration Statement of the Equity 500 Index Fund (one of
the Funds comprising BT Institutional Funds) on Form N-1A of our report
dated January 27, 1997 on our audits of the financial statements and
financial highlights of the BT Institutional Funds, which report is
included in the Annual Report to Shareholders for the year ended December
31, 1996 which is incorporated by reference in the Post-Effective Amendment
to the Registration Statement. We also consent to the reference in the
Statement of Additional Information to our Firm under the caption `Counsel
and Independent Accountants.''
By: COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Kansas City, Missouri
March 11, 1997
Exhibit 11 under Form N-1A
Exhibit 23 under Item 601/Reg. S-K
COOPERS & LYBRAND
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Post-Effective Amendment
No. 19 to the Registration Statement of the Equity 500 Index Fund (one of
the Funds comprising BT Institutional Funds) on Form N-1A of our report
dated January 27, 1997 on our audits of the financial statements and
financial highlights of the Equity 500 Index Portfolio, which report is
included in the Annual Report to Shareholders for the year ended December
31, 1996 which is incorporated by reference in the Post-Effective Amendment
to the Registration Statement. We also consent to the reference in the
Statement of Additional Information to our Firm under the caption `Counsel
and Independent Accountants.''
By: COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Kansas City, Missouri
March 11, 1997
Exhibit 11 under Form N-1A
Exhibit 23 under Item 601/Reg. S-K
COOPERS & LYBRAND
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Post-Effective Amendment
No. 19 to the Registration Statement of the Institutional Cash Management
Fund (one of the Funds comprising BT Institutional Funds) on Form N-1A of
our report dated February 12, 1997 on our audits of the financial
statements and financial highlights of the BT Institutional Funds, which
report is included in the Annual Report to Shareholders for the year ended
December 31, 1996 which is incorporated by reference in the Post-Effective
Amendment to the Registration Statement. We also consent to the reference
in the Statement of Additional Information to our Firm under the caption
`Counsel and Independent Accountants.''
By: COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Kansas City, Missouri
March 11, 1997
Exhibit 11 under Form N-1A
Exhibit 23 under Item 601/Reg. S-K
COOPERS & LYBRAND
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Post-Effective Amendment
No. 19 to the Registration Statement of the Institutional Cash Management
Fund (one of the Funds comprising BT Institutional Funds) on Form N-1A of
our report dated February 12, 1997 on our audits of the financial
statements and financial highlights of the Cash Management Portfolio, which
report is included in the Annual Report to Shareholders for the year ended
December 31, 1996 which is incorporated by reference in the Post-Effective
Amendment to the Registration Statement. We also consent to the reference
in the Statement of Additional Information to our Firm under the caption
`Counsel and Independent Accountants.''
By: COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Kansas City, Missouri
March 11, 1997
Exhibit 11 under Form N-1A
Exhibit 23 under Item 601/Reg. S-K
COOPERS & LYBRAND
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Post-Effective Amendment
No. 19 to the Registration Statement of the Institutional Cash Reserves
Fund (one of the Funds comprising BT Institutional Funds) on Form N-1A of
our report dated February 12, 1997 on our audits of the financial
statements and financial highlights of the Cash Management Portfolio, which
report is included in the Annual Report to Shareholders for the year ended
December 31, 1996 which is incorporated by reference in the Post-Effective
Amendment to the Registration Statement. We also consent to the reference
in the Statement of Additional Information to our Firm under the caption
`Counsel and Independent Accountants.''
By: COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Kansas City, Missouri
March 11, 1997
Exhibit 11 under Form N-1A
Exhibit 23 under Item 601/Reg. S-K
COOPERS & LYBRAND
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Post-Effective Amendment
No. 19 to the Registration Statement of the Institutional Cash Reserves
Fund (one of the Funds comprising BT Institutional Funds) on Form N-1A of
our report dated February 12, 1997 on our audits of the financial
statements and financial highlights of the BT Institutional Funds, which
report is included in the Annual Report to Shareholders for the year ended
December 31, 1996 which is incorporated by reference in the Post-Effective
Amendment to the Registration Statement. We also consent to the reference
in the Statement of Additional Information to our Firm under the caption
`Counsel and Independent Accountants.''
By: COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Kansas City, Missouri
March 11, 1997
Exhibit 11 under Form N-1A
Exhibit 23 under Item 601/Reg. S-K
COOPERS & LYBRAND
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Post-Effective Amendment
No. 19 to the Registration Statement of the Institutional Liquid Assets
Fund (one of the Funds comprising BT Institutional Funds) on Form N-1A of
our report dated February 20, 1997 on our audits of the financial
statements and financial highlights of the BT Institutional Funds, which
report is included in the Annual Report to Shareholders for the year ended
December 31, 1996 which is incorporated by reference in the Post-Effective
Amendment to the Registration Statement. We also consent to the reference
in the Statement of Additional Information to our Firm under the caption
`Counsel and Independent Accountants.''
By: COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Kansas City, Missouri
March 11, 1997
Exhibit 11 under Form N-1A
Exhibit 23 under Item 601/Reg. S-K
COOPERS & LYBRAND
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Post-Effective Amendment
No. 19 to the Registration Statement of the Institutional Liquid Assets
Fund (one of the Funds comprising BT Institutional Funds) on Form N-1A of
our report dated February 20, 1997 on our audits of the financial
statements and financial highlights of the Liquid Assets Portfolio (one of
the Portfolios comprimising BT Investment Portfolios), which report is
included in the Annual Report to Shareholders for the year ended December
31, 1996 which is incorporated by reference in the Post-Effective Amendment
to the Registration Statement. We also consent to the reference in the
Statement of Additional Information to our Firm under the caption `Counsel
and Independent Accountants.''
By: COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Kansas City, Missouri
March 11, 1997
Exhibit 11 under Form N-1A
Exhibit 23 under Item 601/Reg. S-K
COOPERS & LYBRAND
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Post-Effective Amendment
No. 19 to the Registration Statement of the Institutional Treasury Money
Fund (one of the Funds comprising BT Institutional Funds) on Form N-1A of
our report dated February 12, 1997 on our audits of the financial
statements and financial highlights of the BT Institutional Funds, which
report is included in the Annual Report to Shareholders for the year ended
December 31, 1996 which is incorporated by reference in the Post-Effective
Amendment to the Registration Statement. We also consent to the reference
in the Statement of Additional Information to our Firm under the caption
`Counsel and Independent Accountants.''
By: COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Kansas City, Missouri
March 11, 1997
Exhibit 11 under Form N-1A
Exhibit 23 under Item 601/Reg. S-K
COOPERS & LYBRAND
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Post-Effective Amendment
No. 19 to the Registration Statement of the Institutional Treasury Money
Fund (one of the Funds comprising BT Institutional Funds) on Form N-1A of
our report dated February 12, 1997 on our audits of the financial
statements and financial highlights of the Treasury Money Portfolio, which
report is included in the Annual Report to Shareholders for the year ended
December 31, 1996 which is incorporated by reference in the Post-Effective
Amendment to the Registration Statement. We also consent to the reference
in the Statement of Additional Information to our Firm under the caption
`Counsel and Independent Accountants.''
By: COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Kansas City, Missouri
March 11, 1997
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the BT
Institutional Funds Annual Report dated December 31, 1996, and is qualified
in its entirety by reference to such Annual Report.
</LEGEND>
<CIK> 0081106071
<NAME> BT INSTITUTIONAL FUNDS
<SERIES>
<NUMBER> 3
<NAME> EQUITY 500 INDEX FUND
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<ARTICLE> 6
<LEGEND>
This schedule contains Summary Information extracted from the BT
Institutional Funds Annual Report dated December 31, 1996, and is qualified
in its entirety by reference to such Annual Report.
</LEGEND>
<CIK> 0081106071
<NAME> BT INSTITUTIONAL FUNDS
<SERIES>
<NUMBER> 1
<NAME> CASH MANAGEMENT FUND
<S> <C>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the BT
Institutional Funds Annual Report dated December 31, 1996, and is qualified
in its entirety by reference to such Annual Report.
</LEGEND>
<CIK> 0081106071
<NAME> BT INSTITUTIONAL FUNDS
<SERIES>
<NUMBER> 7
<NAME> CASH RESERVE FUND
<S> <C>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the BT
Institutional Funds Annual Report dated December 31, 1996, and is qualified
in its entirety by reference to such Annual Report.
</LEGEND>
<CIK> 0081106071
<NAME> BT INSTITUTIONAL FUNDS
<SERIES>
<NUMBER> 8
<NAME> LIQUID ASSET FUND
<S> <C>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the BT
Institutional Funds Annual Report dated December 31, 1996, and is qualified
in its entirety by reference to such Annual Report.
</LEGEND>
<CIK> 0081106071
<NAME> BT INSTITUTIONAL FUNDS
<SERIES>
<NUMBER> 2
<NAME> TREASURY FUND
<S> <C>
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</TABLE>
