(bullet) BT INSTITUTIONAL FUNDS (bullet)
INSTITUTIONAL
TREASURY ASSETS FUND
ANNUAL REPORT
DECEMBER (bullet) 1997
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Institutional Treasury Assets Fund
Table of Contents
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Letter to Shareholders 3
Institutional Treasury Assets Fund
Schedule of Portfolio Investments 4
Statement of Assets and Liabilities 5
Statement of Operations 5
Statement of Changes in Net Assets 6
Financial Highlights 6
Notes to Financial Statements 7
Report of Independent Accountants 8
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Institutional Treasury Assets Fund
Letter to Shareholders
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We are pleased to present you with this first annual report for the
Institutional Treasury Assets Fund, providing a detailed review of the market
and our outlook. Included are a complete financial summary of the Fund's
operations and a listing of the Portfolio's holdings. Please note that while the
following report reviews the calendar year, the Institutional Treasury Assets
Fund's inception date is December 1, 1997, and thus it has not been in operation
for a full year.
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Objective
Seeks high level of current income consistent with liquidity and the
preservation of capital.
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The manager of the Institutional Treasury Assets Fund (the "Fund") seek to
produce competitive yields by staying disciplined to the purchase of high
quality instruments and actively adjusting duration and sector allocation as
market conditions change. The Fund's annualized 7-day effective yield of 5.58%
as of December 31, 1997 was higher than the 5.33% yield of the IBC Government
Only-Institutional Only Money Funds average.* The 7-day net current yield was
5.43% for the Fund as of December 31, 1997.
MARKET ACTIVITY
For virtually the entire year, the pace of economic growth remained above-trend
and inflation was low. Unemployment continued to fall, putting pressure on labor
costs, but productivity improvement was strong enough to more than offset the
rising costs. Against this exceptional backdrop, the money markets were rather
quiet, with yields remaining relatively stable and the money market yield curve
reasonably flat.
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Investment Instruments
U.S. Treasury obligations, U.S. government obligations and repurchase
agreements.
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The only real interruption to this stability was early in the year. A rapidly
growing economy in the first quarter, supported by strong consumer spending and
home building, prompted the Federal Reserve Board to increase the Fed Funds rate
from 5.25% to 5.50% on March 25, 1997--the first increase in over two years.
Following this, inflationary pressures did not increase, signs pointed to a
slowing economy, and the Federal Reserve Board remained on hold throughout the
rest of the year. A high level of consumer confidence, strong employment gains
and rising incomes further helped support the low price volatility within the
money markets. During the fourth quarter, developments in the Far East
overshadowed the ongoing favorable performance of the U.S. economy. However, to
date, there has been little evidence of any meaningful impact of the turmoil
abroad on domestic activity.
[Pie Chart Appears Here - See Plot Points Below]
Diversification of Portfolio Investments
By Asset Type as of December 31, 1997
(percentages are based on market value)
U.S. Treasury Notes 26%
U.S. Treasury Bills 10%
U.S. Government and Agency Discounts 21%
Repurchase Agreements 43%
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Status at December 31, 1997
Seven day effective yield: 5.58%
Average maturity: 35 days
Net Assets: $94 million
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MANAGER OUTLOOK
As we enter 1998, the underlying fundamentals impacting the consumer--a tight
labor market, low inflation, low interest rates and strong economic growth--are
similar to those of most of 1997. Current data also supports the notion that the
Federal Reserve Board is on hold. However, the Asian crisis still looms, as the
delayed effect of the retrenchment in the region may still filter into the U.S.
Given this scenario, we expect a continued flight to quality, which will allow
short-term U.S. Treasuries to remain expensive to the repurchase agreement
market for some time. Seeing no reason to extend at this time, we intend to
maintain a short-to-neutral average maturity for the near term.
We will, of course, continue to closely observe economic conditions and how they
affect the financial markets, as we seek to provide high current income
consistent with liquidity and capital preservation.
We appreciate your support of the BT Institutional Treasury Assets Fund and look
forward to continuing to serve your investment needs for many years ahead.
/s/ Darlene Rasel
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Darlene Rasel
Portfolio Manager of the
Treasury Assets Fund
December 31, 1997
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* Past performance is not indicative of future results. Yields will vary.
Yields quoted for money market funds most closely reflect the fund's current
earnings. Although money market funds seek to maintain a share value of
$1.00, there is no guarantee that they will be able to do so. Mutual funds
are not bank deposits or obligations of any bank, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal.
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Institutional Treasury Assets Fund
Schedule of Portfolio Investments December 31, 1997
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Principal
Amount Description Value
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UNITED STATES TREASURY NOTES - 25.49%
$ 13,000,000 7.875%, 1/15/98 $13,010,954
8,000,000 5.875%, 4/30/98 8,009,150
3,000,000 8.25%, 7/15/98 3,040,758
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Total United States Treasury Notes
(Amortized Cost $24,060,862) 24,060,862
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UNITED STATES TREASURY BILLS - 10.57%
10,000,000 5.17%, 1/22/98
(Amortized Cost $9,971,278) 9,971,278
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UNITED STATES GOVERNMENT AND
AGENCY OBLIGATIONS - 20.52%
3,000,000 Federal Farm Credit
5.90%, 6/02/98 3,001,397
8,000,000 Federal Home Loan Mortgage Co.
5.58%, 2/25/98 7,933,040
3,485,000 Federal National Mortage Association
Discounted Note
5.689%, 1/07/98 3,482,246
5,000,000 Federal National Mortgage Association
Discounted Note
5.57%, 3/03/98 4,953,583
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Total United States Government and Agency
Discounts
(Amortized Cost $19,370,266) 19,370,266
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REPURCHASE AGREEMENTS - 43.18%
15,000,000 Repurchase Agreement
with Canadian Imperial Bank
of Commerce, dated 12/31/97,
6.50%, Principal & Interest
in the amount of $15,005,417,
due 1/02/98 (Collaterized by
U.S. Treasury Bonds, Par
Value of $12,109,000, Coupon
rate of 8.125%, due 5/15/21,
Value of $15,390,286) 15,000,000
15,000,000 Repurchase Agreement
with J.P. Morgan, dated
12/31/97, 6.25%, Principal
& Interest in the amount of
$15,005,208, due 1/02/98,
(Collaterized by Federal
National Mortgage Association
Global Bond, Par Value of
$14,590,000, Coupon rate of
6.55%, due 9/12/05, Value of
$15,330,350) 15,000,000
Principal
Amount Description Value
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$ 3,000,000 Repurchase Agreement
with Greenwich Capital, dated
12/31/97, 6.60%, Principal &
Interest in the amount of
$3,001,100, due 1/02/98,
(Collaterized by U.S.
Treasury Bills, Par Value
of $3,101,000, Coupon rate
of 6.60%, due 3/26/98,
Value of $3,063,263) $ 3,000,000
3,483,602 Repurchase Agreement
with West Deutsche Bank, dated
12/31/97, 6.625%, Principal &
Interest in the amount of
$3,484,884, due 1/02/98,
(Collaterized by U.S.
Treasury Notes/Bonds, Par
Value of $2,213,112, Coupon
rate of 11.25%, due 2/15/15,
Value of $3,561,550) 3,483,602
4,274,593 Tri-Party Repurchase Agreement
with Goldman Sachs, dated
12/31/97, 5.20%, Principal &
Interest in the amount of
$4,275,828, due 1/02/98,
(Collaterized by U.S.
Treasury Bond, Par Value
of $4,239,000, Coupon rate
of 8.125%, due 11/15/27,
Value of $4,360,317) 4,274,593
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Total Repurchase Agreements
(Amortized Cost $40,758,195) 40,758,195
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Total Investments
(Amortized Cost $94,160,601) 99.76% $94,160,601
Other Assets Less Liabilities 0.24% 225,492
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Net Assets 100.00% $94,386,093
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See Notes to Financial Statements on Page 7
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Institutional Treasury Assets Fund
Statement of Assets and Liabilities December 31, 1997
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Assets
Investments, at Value (including repurchase
agreements amounting to $40,758,195)* $ 94,160,601
Interest Receivable 674,125
Deferred Organization Expenses 3,000
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Total Assets 94,837,726
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Liabilities
Dividends Payable 435,798
Accrued Expenses and Other 15,835
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Total Liabilities 451,633
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Net Assets $ 94,386,093
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Shares Outstanding ($0.001 par value per share, unlimited
number of shares of beneficial interest authorized) 94,385,809
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Net Asset Value, Offering and Redemption Price Per Share
(net assets divided by shares outstanding) $ 1.00
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Composition of Net Assets
Paid-in Capital $ 94,385,809
Accumulated Net Realized Gain From Investment Transactions 284
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Net Assets $ 94,386,093
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* Value represents amortized cost
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Statement of Operations
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For the period
December 1, 1997
(Commencement of
Operations) to
December 31, 1997
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Investment Income
Interest Income $ 448,632
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Expenses
Advisory Fees 12,032
Administration and Services Fees 8,021
Printing and Shareholder Reports 4,500
Professional Fees 12,250
Trustees Fees 410
Registration Fees 27,844
Miscellaneous 54
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Total Expenses 65,111
Less: Expenses Waived and Reimbursed by Bankers Trust (52,277)
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Net Expenses 12,834
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Net Investment Income 435,798
Realized Gain from Investment Transactions 284
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Net Increase in Net Assets from Operations $ 436,082
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See Notes to Financial Statements on Page 7
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Institutional Treasury Assets Fund
Statement of Changes in Net Assets
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For the period
December 1, 1997
(Commencement of
Operations) to
December 31, 1997
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Increase (Decrease) in Net Assets from:
Operations
Net Investment Income $ 435,798
Net Realized Gain from Investment Transactions 284
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Net Increase in Net Assets from Operations 436,082
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Distributions to Shareholders
Net Investment Income (435,798)
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Capital Transactions in Shares of Beneficial Interest
(at net asset value of $1.00 per share)*
Proceeds from Sales of Shares 246,463,863
Cost of Shares Redeemed (152,078,054)
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Net Increase from Capital Transactions in Shares of
Beneficial Interest 94,385,809
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Total Increase in Net Assets 94,386,093
Net Assets
Beginning of Period 0
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End of Period $ 94,386,093
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* As of December 31, 1997, one shareholder held more than 5% of the Fund's
outstanding shares.
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Financial Highlights
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Contained below are selected data for a share of beneficial interest
outstanding, total investment return, ratios to average net assets and other
supplemental data for the period indicated for the Institutional Treasury Assets
Fund.
For the period
December 1, 1997
(Commencement of
Operations) to
December 31, 1997
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Per Share Operating Performance:
Net Asset Value, Beginning of Period $ 1.0000
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Income from Investment Operations
Net Investment Income 0.0046
Net Realized Gain from Investment Transactions 0.0000+
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Total from Investment Operations 0.0046
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Distributions to Shareholders
Net Investment Income (0.0046)
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Net Asset Value, End of Period $ 1.0000
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Total Investment Return for Period 0.46%
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) $ 94,386
Ratios to Average Net Assets:
Net Investment Income 5.43%*
Expenses 0.16%*
Decrease Reflected in Above Expense Ratio Due
to Absorption of Expenses by Bankers Trust 0.81%*
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* Annualized.
+ Less than $0.0001.
See Notes to Financial Statements on Page 7
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Institutional Treasury Assets Fund
Notes to Financial Statements
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Note 1--Organization and Significant Accounting Policies
A. Organization
BT Institutional Funds (the "Trust") is registered under the Investment Company
Act of 1940 (the "Act"), as amended, as an open-end management investment
company. The Trust was organized on March 26, 1990, as an unincorporated
business trust under the laws of the Commonwealth of Massachusetts. The
Institutional Treasury Assets Fund (the "Fund") is one of the institutional
funds offered to "accredited investors" as defined under the Securities Act of
1933 and institutional investors by the Trust. The Fund commenced operations and
began offering shares of beneficial interest on December 1, 1997. The
Declaration of Trust permits the Board of Trustees (the "Trustees") to issue
beneficial interests in the Fund. The following summarizes the significant
accounting policies of the Fund:
B. Security Valuation
Investments are valued at amortized cost, which has been determined by the
Trustees to represent fair value of the Fund's investments.
C. Security Transactions and Interest Income
Security transactions are accounted for on a trade date basis. Interest income
is recorded on the accrual basis and includes amortization of premium and
discount on investments. Realized gains and losses from securities transactions
are recorded on the specific identification basis.
D. Organization Expenses
Costs incurred by the Fund in connection with its organization and initial
registration are being amortized evenly over a five year period.
E. Dividends
It is the Fund's policy to declare dividends daily and pay monthly to
shareholders from net investment income. Dividends payable to shareholders are
recorded by the Fund on the ex-dividend date. Distributions of net capital
gains, if any, earned by the Fund will be made annually.
F. Repurchase Agreements
The Fund may enter into repurchase agreements with financial institutions deemed
to be creditworthy by the Fund's Investment Adviser, subject to the seller's
agreement to repurchase such securities at a mutually agreed upon price.
Securities received as collateral subject to repurchase agreements are deposited
with the Fund's custodian, and pursuant to the terms of the repurchase agreement
must have an aggregate market value greater than or equal to the repurchase
price plus all accrued interest at all times. If the value of the underlying
securities falls below the value of the repurchase price plus accrued interest,
the Fund will require the seller to deposit additional collateral by the next
business day. If the request for additional collateral is not met, or the seller
defaults on its repurchase obligation, the Fund maintains the right to sell the
underlying securities at market value and may claim any resulting loss against
the seller. However, in the event of default or bankruptcy by the seller,
realization and/or retention of the collateral may be subject to legal
proceedings.
G. Federal Income Taxes
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code and distribute substantially all of its income to shareholders. Therefore,
no federal income tax provision is required.
H. Other
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements. Actual results could
differ from those estimates.
Note 2--Fees and Transactions with Affiliates
The Fund has entered into an Administration and Services Agreement with Bankers
Trust Company ("Bankers Trust"). Under this Administration and Services
Agreement, Bankers Trust provides administrative, custody, transfer agency and
shareholder services to the Fund in return for a fee computed daily and paid
monthly at an annual rate of 0.10 of 1% of the Fund's average daily net assets.
For the period ended December 31, 1997, this fee aggregated $6,574.
The Fund has entered into an Advisory Agreement with Bankers Trust. Under this
Advisory Agreement, the Fund pays Bankers Trust an advisory fee computed daily
and paid monthly at an annual rate of 0.15 of 1% of average daily net assets.
For the period ended December 31, 1997, this fee aggregated $8,826.
The Trust has entered into a Distribution Agreement with Edgewood Services, Inc.
("Edgewood"). Under the Distribution Agreement with the Trust, pursuant to Rule
12b-1 of the Act, Edgewood may seek reimbursement at an annual rate not
exceeding 0.10 of 1% of the Fund's average daily net assets, for expenses
incurred in connection with any activities primarily intended to result in the
sale of the Fund's shares. For the period ended December 31, 1997, there were no
reimbursable expenses incurred under this agreement.
Bankers Trust has voluntarily undertaken to waive and reimburse expenses of the
Fund, to the extent necessary, to limit all expenses to 0.16 of 1% of the
average daily net assets of the Fund. For the period ended December 31, 1997,
expenses of the Fund have been reduced by $52,227.
Certain officers of the Fund are also directors, officers and employees of
Edgewood. None of the officers so affiliated received compensation for services
as officers of the Fund.
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Institutional Treasury Assets Fund
Report of Independent Accountants
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To the Board of Trustees and Shareholders of Institutional Treasury Assets Fund:
We have audited the accompanying statement of assets and liabilities, including
the schedule of portfolio investments, of the Institutional Treasury Assets Fund
(one of the Funds comprising BT Institutional Funds), as of December 31, 1997,
and the related statement of operations, changes in net assets and financial
highlights for the period December 1, 1997 (commencement of operations) to
December 31, 1997. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
December 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Institutional Treasury Assets Fund as of December 31, 1997, the results of its
operations, the changes in its net assets and the financial highlights for the
period December 1, 1997, (commencement of operations) to December 31, 1997, in
conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Philadelphia, Pennsylvania
February 18, 1998
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BT INSTITUTIONAL FUNDS
INSTITUTIONAL TREASURY ASSETS FUND
Investment Advisor and Administrator of the Fund
BANKERS TRUST COMPANY
130 Liberty Street
New York, NY 10006
Distributor
EDGEWOOD SERVICES, INC.
Clearing Operations
P.O. Box 897
Pittsburgh, PA 15230-0897
Custodian and Transfer Agent
BANKERS TRUST COMPANY
130 Liberty Street
New York, NY 10006
Independent Accountants
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, PA 19103
Counsel
WILLKIE FARR & GALLAGHER
153 East 53rd Street
New York, NY 10022
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For information on how to invest, shareholder account information and current
price and yield information, please contact your relationship manager or the BT
Mutual Fund Service Center at (800) 368-4031. This report must be preceded or
accompanied by a current prospectus for the Fund.
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