o BT INSTITUTIONAL FUNDS o
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INSTITUTIONAL
LIQUID ASSETS FUND
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A N N U A L R E P O R T
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D E C E M B E R o 1 9 9 7
<PAGE>
Institutional Liquid Assets Fund
Table of Contents
LETTER TO SHAREHOLDERS...................... 3
INSTITUTIONAL LIQUID ASSETS FUND
Statement of Assets and Liabilities...... 4
Statement of Operations.................. 4
Statement of Changes in Net Assets....... 5
Financial Highlights..................... 6
Notes to Financial Statements............ 7
Report of Independent Accountants........ 8
LIQUID ASSETS PORTFOLIO
Schedule of Portfolio Investments........ 9
Statement of Assets and Liabilities......14
Statement of Operations..................14
Statement of Changes in Net Assets 15
Financial Highlights.....................15
Notes to Financial Statements............16
Report of Independent Accountants........17
2
<PAGE>
Institutional Liquid Assets Fund
Letter to Shareholders
By staying disciplined to the purchase of high quality instruments and actively
adjusting duration and sector allocation as market conditions changed, the
manager of the Institutional Liquid Assets Fund (the "Fund") was able to produce
competitive yields. In fact, the Fund's annualized 7-day effective yield of
5.72% as of December 31, 1997 was higher than the 5.56% yield of the IBC First
Tier-Institutional Only Money Funds average.* The 7-day current net yield was
5.58% 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.
- --------------------------------------------------------------------------------
Objective
Seeks high level of current income to the extent consistent with liquidity and
preservation of capital.
- --------------------------------------------------------------------------------
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. Developments in the Far East overshadowed the ongoing favorable
performance of the U.S. economy during the fourth quarter. However, to date,
there has been little evidence of any meaningful impact of the turmoil abroad on
domestic activity.
- --------------------------------------------------------------------------------
Investment Instruments
Bank obligations, commercial paper, U.S. treasury obligations and repurchase
agreements.
- --------------------------------------------------------------------------------
INVESTMENT REVIEW
We held a somewhat defensive, shorter-than-benchmark average maturity position
for the Fund throughout the first quarter of 1997, in anticipation of the late
March rate hike. Once the Federal Reserve Board raised rates and economic growth
waned, we moved to a more neutral stance in the portfolio. We then maintained a
neutral to shorter-than-benchmark maturity throughout most of the rest of the
year, as the Federal Reserve Board was seemingly on hold, and we saw no benefit
in extending maturity along a flat yield curve. We did extend slightly at the
end of the year to take advantage of the higher year-end rates generated by the
financial turmoil in Asia. This duration strategy, along with a focus on adding
value through what we call "spread product," e.g. floating rate notes, proved to
be effective in producing highly competitive Fund returns.
DIVERSIFICATION OF PORTFOLIO INVESTMENTS
By Asset Type as of December 31, 1997
(percentages are based on market value)
[PIE CHART APPEARS HERE--SEE PERCENTAGES BELOW]
Medium Term Notes ................ 1%
Repurchase Agreements ............ 1%
Certificates of Deposit .......... 1%
Floating Rate Notes .............. 10%
Eurodollar Certifcates of Deposit. 14%
Yankee Certificates of Deposit ... 15%
Eurodollar Time Deposits ......... 22%
Commercial Paper ................. 36%
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 the money market yield curve to remain flat.
Seeing no reason to extend at this time, we intend to maintain a
short-to-neutral average maturity for the near term.
- --------------------------------------------------------------------------------
Status at December 31, 1997
Seven day effective yield: 5.72%
Average maturity: 43 days
Net Assets: $3,316.8 million
- --------------------------------------------------------------------------------
We will, of course, continue to closely observe economic conditions and how they
affect the financial markets, as we seek to provide high current income
consistent with liquidity and capital preservation.
As always, we appreciate your ongoing support of the BT Institutional Liquid
Assets Fund, and we look forward to continuing to serve your investment needs
for many years ahead.
/s/ Darlene M. Rasel
--------------------
Darlene M. Rasel
Portfolio Manager of the
Liquid Assets Portfolio
December 31, 1997
- ----------
* 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.
3
<PAGE>
Institutional Liquid Assets Fund
Statement of Assets and Liabilities December 31, 1997
<TABLE>
<S> <C>
ASSETS
Investment in Liquid Assets Portfolio, at Value ..................................... $3,331,359,518
Deferred Organizational Expenses .................................................... 5,880
Prepaid Expenses .................................................................... 1,141
--------------
Total Assets ........................................................................... 3,331,366,539
--------------
LIABILITIES
Due to Bankers Trust ................................................................ 128,925
Dividends Payable ................................................................... 14,385,791
Accrued Expenses .................................................................... 37,141
--------------
Total Liabilities ...................................................................... 14,551,857
--------------
NET ASSETS ............................................................................. $3,316,814,682
==============
SHARES OUTSTANDING ($0.001 par value per share, unlimited number of shares of beneficial
interest authorized) ................................................................. 3,316,767,939
==============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE (net assets divided by shares
outstanding) ......................................................................... $ 1.00
==============
COMPOSITION OF NET ASSETS
Paid-in Capital ..................................................................... $3,316,767,939
Undistributed Net Realized Gain from Investment Transactions ........................ 46,743
--------------
NET ASSETS, DECEMBER 31, 1997 .......................................................... $3,316,814,682
==============
</TABLE>
Statement of Operations For the year ended December 31, 1997
INVESTMENT INCOME
Income Allocated from Liquid Assets Portfolio, net $ 132,984,263
-------------
EXPENSES
Administration and Services Fees ................. 1,202,275
Registration Fees ................................ 13,719
Miscellaneous .................................... 12,932
Printing and Shareholder Reports ................. 12,500
Professional Fees ................................ 9,495
Insurance ........................................ 9,149
Trustees Fees .................................... 8,140
Amortization of Organizational Expenses .......... 1,997
-------------
Total Expenses ................................... 1,270,207
Less: Expenses Absorbed by Bankers Trust ........ (67,932)
-------------
Net Expenses .................................. 1,202,275
-------------
NET INVESTMENT INCOME ............................... 131,781,988
-------------
NET REALIZED LOSS FROM INVESTMENT TRANSACTIONS ...... (11,644)
-------------
NET INCREASE IN NET ASSETS FROM OPERATIONS .......... $ 131,770,344
=============
See Notes to Financial Statements on Page 7
4
<PAGE>
Institutional Liquid Assets Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the For the
year ended year ended
December 31, 1997 December 31, 1996
----------------- -----------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net Investment Income ................................................... $ 131,781,988 $ 98,808,817
Net Realized Gain (Loss) from Investment Transactions ................... (11,644) 41,704
--------------- ---------------
Net Increase in Net Assets from Operations ................................. 131,770,344 98,850,521
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income ................................................... (131,781,988) (98,808,817)
--------------- ---------------
CAPITAL TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST (at Net Asset Value of
$1.00 per share)
Proceeds from Sales of Shares ........................................... 6,124,315,086 4,756,221,475
Cost of Shares Redeemed ................................................. (4,750,512,402) (4,290,640,665)
--------------- ---------------
Net Increase from Capital Transactions in Shares of Beneficial Interest .... 1,373,802,684 465,580,810
--------------- ---------------
TOTAL INCREASE IN NET ASSETS ............................................... 1,373,791,040 465,622,514
NET ASSETS
Beginning of Year .......................................................... 1,943,023,642 1,477,401,128
--------------- ---------------
End of Year ................................................................ $ 3,316,814,682 $ 1,943,023,642
=============== ===============
</TABLE>
See Notes to Financial Statements on Page 7
5
<PAGE>
Institutional Liquid Assets Fund
Financial Highlights
Contained below are selected data for a share outstanding, total investment
return, ratios to average net assets and other supplemental data for each of the
periods indicated for the Institutional Liquid Assets Fund.
<TABLE>
<CAPTION>
For the period
December 11, 1995
For the For the (Commencement of
year ended year ended Operations) to
December 31, 1997 December 31, 1996 December 31, 1995
----------------- ----------------- -----------------
<S> <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 0.05 0.00+
Net Realized Gain (Loss) from Investment Transactions (0.00)+ 0.00+ 0.00+
------------- ------------- -------------
Total from Investment Operations ....................... 0.05 0.05 0.00+
------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income ............................... (0.05) (0.05) (0.00)+
------------- ------------- -------------
NET ASSET VALUE, END OF PERIOD ......................... $ 1.00 $ 1.00 $ 1.00
============= ============= =============
TOTAL INVESTMENT RETURN ................................ 5.63% 5.45% 5.88%*
SUPPLEMENTAL DATA AND RATIOS:
Net Assets, End of Period (000s omitted) ............ $ 3,316,815 $ 1,943,024 $ 1,477,401
Ratios to Average Net Assets:
Net Investment Income ............................ 5.48% 5.32% 5.50%*
Expenses, Including Expenses of the Liquid
Assets Portfolio ............................... 0.16% 0.04% 0.01%*
Decrease Reflected in Above Expense Ratio
Due to Absorption of Expenses by Bankers Trust . 0.09% 0.22% 0.97%*
</TABLE>
- ----------
* Annualized.
+ Less than $0.01 per share.
See Notes to Financial Statements on Page 7
6
<PAGE>
Institutional Liquid Assets Fund
Notes to Financial Statements
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 Liquid Assets Fund (the "Fund") is one of the institutional funds
offered to investors by the Trust. The Fund commenced operations and began
offering shares of beneficial interest on December 11, 1995. The Fund invests
substantially all of its assets in the Liquid Assets Portfolio (the
"Portfolio"). The Portfolio is an open-end management investment company
registered under the Act. The Fund seeks to achieve its investment objective by
investing all of its investable assets in the Portfolio. The value of such
investment in the Portfolio reflects the Fund's proportionate interest in the
net assets of the Portfolio. At December 31, 1997, the Fund's investment was
approximately 100% of the Portfolio.
The financial statements of the Portfolio, including the Schedule of Portfolio
Investments, are contained elsewhere in this report.
B. Investment Income
The Fund earns income, net of expenses, daily on its investment in the
Portfolio. All of the net investment income and realized and unrealized gains
and losses from the security transactions of the Portfolio are allocated pro
rata among the investors in the Portfolio at the time of such determination.
C. Organizational Expenses
Costs incurred by the Fund in connection with its organization and initial
registration are being amortized evenly over a five year period.
D. Dividends
It is the Fund's policy to declare dividends daily and pay monthly to
shareholders from net investment income. Dividends payable to shareholders are
recorded by the Fund on the ex-dividend date, which is the same as the
declaration date. Distributions of net realized short-term and long-term capital
gains, if any, earned by the Fund will be made annually to the extent they are
not offset by any capital loss carryforwards.
E. Federal Income Taxes
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code and distribute its income to shareholders. Therefore, no federal income tax
provision is required.
F. Other
The Trust accounts separately for the assets, liabilities, and operations of the
Fund. Expenses directly attributable to the Fund are charged to that Fund, while
expenses which are attributable to all of the Trust's funds are allocated among
them.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements. 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 0.05 of 1% of the Fund's average daily net assets.
For the year ended December 31, 1997, this fee aggregated $1,202,275.
On September 30, 1996, the Trust entered into a Distribution Agreement with
Edgewood Services, Inc. ("Edgewood"). Prior to September 30, Signature
Broker-Dealer Services, Inc. ("Signature") was the Trust's distributor. Under
the Distribution Agreement with the Trust, pursuant to Rule 12b-1 of the 1940
Act, Edgewood, and previously Signature, may seek reimbursement at an annual
rate not exceeding 0.10 of 1% of the Fund's average daily net assets, for
expenses incurred in connection with any activities primarily intended to result
in the sale of the Fund's shares. For the year ended December 31, 1997, there
were no reimbursable expenses incurred under this agreement. The Fund does not
intend to charge 12b-1 fees in the future.
From January 1, 1996 to September 26, 1996, Bankers Trust had voluntarily
undertaken to waive and reimburse expenses of the Fund, to the extent necessary,
to limit all expenses to 0.00 of 1% of the daily net assets of the Fund,
excluding expenses of the Portfolio and 0.00 of 1% of the average daily net
assets of the Fund, including expenses of the Portfolio.
Bankers Trust has voluntarily undertaken to waive its fees and reimburse
expenses of the Fund, to the extent necessary, to limit all expenses to 0.05 of
1% of the average daily net assets of the Fund, excluding expenses of the
Portfolio and 0.16 of 1% of the average daily net assets of the Fund, including
expenses of the Portfolio. For the year ended December 31, 1997, expenses of the
Fund have been reduced by $67,932.
Certain officers of the Fund are also directors, officers and/or employees of
Edgewood. None of the officers so affiliated received compensation for services
as officers of the Fund.
Note 3--Capital Loss Carryforward
At December 31, 1997, accumulated net realized capital loss carryforward
available as a reduction against future net realized capital gains aggregated
$11,644, which will expire in 2005.
7
<PAGE>
Institutional Liquid Assets Fund
Report of Independent Accountants
To the Trustees of BT Institutional Funds and Shareholders
of the Institutional Liquid Assets Fund:
We have audited the accompanying statement of assets and liabilities of the
Institutional Liquid Assets Fund (one of the Funds comprising BT Institutional
Funds) as of December 31, 1997, and the related statement of operations for the
year then ended, the statement of changes in net assets for each of the two
years in the period then ended and the financial highlights for each of the two
years in the period then ended December 31, 1997 and for the period December 11,
1995 (commencement of operations) to December 31, 1995. 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 securities owned as of
December 31, 1997, by correspondence with the custodian. 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 Liquid Assets Fund as of December 31, 1997, the results of its
operations, the changes in its net assets and the financial highlights for the
periods referred to above, in conformity with generally accepted accounting
principles.
Coopers & Lybrand L.L.P.
Kansas City, Missouri
February 18, 1998
8
<PAGE>
Liquid Assets Portfolio
Schedule of Portfolio Investments December 31, 1997
Principal
Amount Description Value
------ ----------- -----
CERTIFICATE OF DEPOSIT - 0.90%
$ 30,000,000 J.P. Morgan, 5.80%, 6/22/98
(Amortized Cost $30,000,000) $ 30,000,000
-------------
COMMERCIAL PAPER - 35.00%*
Asset Securitization Cooperative Corp.:
18,000,000 5.62%, 1/15/98 17,960,660
10,000,000 5.72%, 1/28/98 9,957,100
25,000,000 5.61%, 1/29/98 24,890,917
8,000,000 5.88%, 1/29/98 7,963,413
20,000,000 5.74%, 2/13/98 19,862,878
18,000,000 5.705%, 2/25/98 17,843,113
10,000,000 5.69%, 2/26/98 9,911,489
10,000,000 Alcatel Alsthom,
6.10%, 1/06/98 9,991,528
Abbey National Bank:
20,000,000 5.495%, 3/31/98 19,728,303
10,000,000 5.55%, 4/27/98 9,821,167
20,000,000 Australian Wheat Board,
5.72%, 3/04/98 19,802,978
13,000,000 BBL North America,
5.75%, 3/10/98 12,858,806
BTR Dunlop:
23,000,000 5.71%, 1/30/98 22,894,206
5,000,000 5.52%, 2/03/98 4,974,700
5,000,000 5.69%, 2/17/98 4,962,857
20,000,000 5.68%, 2/26/98 19,823,289
10,000,000 Bank of Austria,
5.72%, 3/17/98 9,880,833
Bank of Nova Scotia:
10,000,000 5.667%, 2/17/98 9,926,014
15,000,000 5.727%, 3/02/98 14,856,825
11,381,000 Bayer Corp.,
5.78%, 2/18/98 11,293,290
13,000,000 Cafco,
5.75%, 2/13/98 12,910,715
17,000,000 Caisse Des Depot,
5.71%, 1/16/98 16,959,554
<PAGE>
Principal
Amount Description Value
------ ----------- -----
Caterpillar Financial:
$ 8,000,000 5.52%, 1/21/98 $ 7,975,467
15,000,000 5.52%, 4/29/98 14,728,600
18,000,000 Commonwealth Bank of Australia,
5.54%, 4/30/98 17,670,370
10,000,000 Credit Suisse,
5.72%, 3/12/98 9,888,778
Daimler Benz North American:
20,425,000 5.51%, 1/20/98 20,365,603
15,000,000 5.72%, 3/24/98 14,804,567
Delaware Funding Corp.:
10,575,000 5.88%, 1/07/98 10,564,636
20,000,000 5.52%, 1/12/98 19,966,267
8,000,000 5.95%, 1/16/98 7,980,167
5,264,000 5.72%, 1/28/98 5,241,417
Ford Motor Credit:
40,000,000 5.52%, 1/09/98 39,950,933
25,000,000 5.60%, 1/16/98 24,941,667
22,500,000 Generale Bank,
5.65%, 4/01/98 22,182,187
General Electric Capital Corporation:
10,000,000 5.57%, 1/23/98 9,965,961
8,000,000 5.54%, 1/30/98 7,964,298
20,000,000 5.70%, 2/18/98 19,848,000
10,000,000 5.73%, 2/27/98 9,909,275
23,000,000 5.71%, 4/17/98 22,613,306
Goldman Sachs:
38,000,000 5.85%, 1/30/98 37,820,925
17,000,000 5.72%, 3/16/98 16,800,118
10,000,000 Grand Metropolitan,
5.60%, 1/20/98 9,970,444
2,671,000 H.J. Heinz,
5.64%, 6/22/98 2,599,025
Hitachi America Ltd.:
1,500,000 5.56%, 1/16/98 1,496,525
10,000,000 5.57%, 4/10/98 9,846,825
9,000,000 Kreditbank,
5.53%, 1/22/98 8,970,967
See Notes to Financial Statements on Page 16
9
<PAGE>
Liquid Assets Portfolio
Schedule of Portfolio Investments December 31, 1997
Principal
Amount Description Value
------ ----------- -----
MCI Communications Corp.:
$ 6,000,000 5.55%, 1/15/98 $ 5,987,050
5,000,000 5.54%, 1/23/98 4,983,072
Morgan Stanley Group, Inc.:
8,500,000 5.90%, 1/28/98 8,462,387
23,000,000 5.75%, 2/18/98 22,823,667
25,000,000 5.70%, 2/23/98 24,790,208
12,000,000 Manitoba Hydro Electric,
5.68%, 4/16/98 11,801,200
Merrill Lynch & Co.:
8,000,000 5.52%, 1/15/98 7,982,827
20,000,000 5.57%, 1/16/98 19,953,583
15,000,000 5.62%, 2/06/98 14,915,700
12,000,000 5.71%, 2/25/98 11,895,317
23,000,000 5.75%, 3/13/98 22,739,174
10,000,000 5.57%, 5/05/98 9,808,144
48,000,000 Motorola Co.,
5.65%, 2/04/98 47,743,867
10,000,000 National Australia,
5.71%, 1/21/98 9,968,278
9,000,000 National Rural Utility,
5.692%, 4/21/98 8,843,470
18,000,000 Norwest,
5.72%, 2/27/98 17,836,980
4,000,000 Pacific Dunlop,
6.15%, 1/07/98 3,995,900
24,000,000 Province of Quebec,
5.57%, 3/05/98 23,766,060
Rabobank:
10,000,000 5.56%, 1/29/98 9,956,756
9,000,000 5.54%, 4/30/98 8,835,185
Receivables Capital Corporation:
10,000,000 5.92%, 1/05/98 9,993,422
10,000,000 5.98%, 1/23/98 9,963,456
10,000,000 5.795%, 2/06/98 9,942,050
10,000,000 5.79%, 2/10/98 9,935,667
5,000,000 5.74%, 2/18/98 4,961,733
20,000,000 5.76%, 2/20/98 19,840,000
35,000,000 5.77%, 2/20/98 34,719,514
10,000,000 5.813%, 2/25/98 9,911,190
12,000,000 Riverwoods Funding,
5.55%, 1/14/98 11,975,950
Principal
Amount Description Value
------ ----------- -----
$ 10,000,000 Schering Plough Corp.,
5.70%, 4/21/98 $ 9,825,833
Sony Capital Corp.:
10,000,000 5.88%, 1/30/98 9,952,633
10,000,000 5.85%, 2/04/98 9,944,750
15,000,000 5.90%, 2/12/98 14,896,750
5,000,000 5.93%, 2/23/98 4,956,349
15,000,000 Westpac Capital Corp.,
5.73%, 3/09/98 14,840,038
-------------
Total Commercial Paper
(Amortized Cost $1,165,889,123) 1,165,889,123
-------------
COMMERCIAL PAPER (INTEREST
BEARING) - 1.05%
35,000,000 General Electric Co.,
6.002%, 1/02/98
(Amortized Cost $35,000,000) 35,000,000
-------------
EURODOLLAR CERTIFICATES
OF DEPOSIT - 14.56%
22,000,000 ABN Amro Bank,
5.88%, 1/09/98 21,999,898
Abbey National:
10,000,000 5.76%, 2/17/98 10,000,000
32,000,000 5.77%, 2/27/98 31,996,924
20,000,000 Australia and New Zealand Bank,
5.75%, 2/17/98 20,000,392
Banco Bilbao Vizcaya:
10,000,000 5.80%, 1/14/98 10,000,094
7,000,000 5.65%, 1/20/98 7,000,036
35,000,000 5.80%, 2/17/98 35,001,351
20,000,000 5.77%, 2/18/98 20,000,526
10,000,000 5.81%, 3/16/98 10,000,203
25,000,000 Bank of Austria,
5.781%, 8/27/98 25,000,000
15,000,000 Bank of Tokyo-Mitsubishi,
5.80%, 1/26/98 15,000,027
29,000,000 Banque National Paris,
5.82%, 3/05/98 29,000,500
See Notes to Financial Statements on Page 16
10
<PAGE>
Liquid Assets Portfolio
Schedule of Portfolio Investments December 31, 1997
Principal
Amount Description Value
------ ----------- -----
Bayerische Hypotheka:
$ 3,000,000 5.76%, 2/09/98 $ 3,000,137
13,000,000 5.75%, 3/16/98 13,001,228
10,000,000 Bayerische Landesbank,
5.66%, 1/29/98 9,998,251
Creditanstalt Bankverein:
25,000,000 5.67%, 1/05/98 25,000,028
11,000,000 5.64%, 1/07/98 11,000,072
50,000,000 5.66%, 1/07/98 50,000,362
International Nederlander Funding:
8,000,000 5.64%, 1/14/98 7,999,972
25,000,000 5.65%, 1/16/98 25,000,051
20,000,000 5.78%, 1/20/98 20,000,104
29,000,000 J.P. Morgan,
5.80%, 6/17/98 29,010,567
10,000,000 National Australia Bank,
5.75%, 1/07/98 10,000,043
20,000,000 Rabobank,
5.675%, 2/12/98 19,997,812
Svenska Handelsbanke:
16,000,000 5.73%, 3/02/98 15,999,668
10,000,000 5.82%, 3/17/98 9,999,903
------------
Total Eurodollar Certificates of Deposit
(Amortized Cost $485,008,149) 485,008,149
------------
EURODOLLAR TIME DEPOSITS - 21.77%
25,000,000 ABN Amro,
5.70%, 1/29/98 25,000,000
50,000,000 Bank of Nova Scotia,
7.00%, 1/02/98 50,000,000
100,000,000 Bank of Montreal,
5.25%, 1/02/98 100,000,000
Bank of Tokyo-Mitsubishi:
15,000,000 5.75%, 1/05/98 15,000,000
10,000,000 5.75%, 1/16/98 10,000,000
25,000,000 Banque Nationale de Paris,
5.70%, 1/02/98 25,000,000
40,000,000 Canadian Imperial,
6.75%, 1/02/98 40,000,000
Principal
Amount Description Value
------ ----------- -----
$30,000,000 Credit Anstaldt,
5.84%, 3/04/98 $ 30,000,000
25,000,000 Den Danske,
5.73%, 1/27/98 25,000,000
25,000,000 Generale Bank,
5.781%, 3/27/98 25,000,000
25,000,000 International Nederlander Funding,
5.71%, 1/30/98 25,000,000
70,000,000 National City Cleveland,
4.50%, 1/02/98 70,000,000
100,000,000 Mellon Bank,
6.125%, 1/02/98 100,000,000
160,273,578 Suntrust Bank,
4.50%, 1/02/98 160,273,578
25,000,000 Svenska Handelsbanke,
5.687%, 1/30/98 25,000,000
-----------
Total Eurodollar Time Deposits
(Amortized Cost $725,273,578) 725,273,578
-----------
FLOATING RATE NOTES - 9.75%
American Express Centurion Bank:
Monthly Variable Rate,
20,000,000 5.97%, 3/06/98 20,000,000
10,000,000 5.97%, 5/12/98 10,000,000
20,000,000 5.928%, 9/25/98 20,000,000
Associates Corp.:
20,000,000 Daily Variable Rate,
5.55%, 1/04/99 19,990,237
Bear Stearns Co.:
1,000,000 Quarterly Variable Rate,
6.045%, 2/17/98 1,000,106
8,000,000 Monthly Variable Rate,
6.118%, 4/28/98 8,004,019
Chase Manhattan:
5,000,000 Quarterly Variable Rate,
5.877%, 11/10/98 5,007,561
Corestates Bank:
20,000,000 Monthly Variable Rate,
5.96%, 2/02/98 20,000,000
See Notes to Financial Statements on Page 16
11
<PAGE>
Liquid Assets Portfolio
Schedule of Portfolio Investments December 31, 1997
Principal
Amount Description Value
------ ----------- -----
General Electric Capital Corporation:
Quarterly Variable Rate,
$10,000,000 5.648%, 1/05/98 $ 10,000,000
15,000,000 5.82%, 1/23/98 15,000,000
20,000,000 5.673%, 4/13/98 20,000,000
Mellon Bank:
Quarterly Variable Rate,
40,000,000 5.846%, 6/16/98 40,003,863
10,000,000 5.795%, 11/17/98 10,000,000
Merrill Lynch & Co.:
25,000,000 Quarterly Variable Rate,
5.68%, 2/06/98 24,999,520
Morgan Stanley:
20,000,000 Monthly Variable Rate,
5.96%, 1/30/98 20,000,000
20,000,000 Quarterly Variable Rate,
5.825%, 5/18/98 20,000,000
National City Cleveland:
10,000,000 Monthly Variable Rate,
5.85%, 2/18/98 9,999,047
PNC Bank Corp.:
Monthly Variable Rate,
15,000,000 5.868%, 5/27/98 14,996,498
20,000,000 5.854%, 6/16/98 19,993,823
Sallie Mae:
1,000,000 Weekly Variable Rate,
5.619%, 8/20/98 999,672
Societe Generale:
15,000,000 Daily Variable Rate,
6.17%, 6/11/98 14,997,902
-----------
Total Floating Rate Notes
(Amortized Cost $324,992,248) 324,992,248
-----------
MEDIUM TERM NOTES - 0.60%
15,000,000 Bank of Scotland, 144A
5.618%, 9/22/98 14,995,798
5,000,000 MCI Communications Corp.,
6.17%, 2/23/98 5,002,137
------------
Principal
Amount Description Value
------ ----------- -----
Total Medium Term Notes
(Amortized Cost $19,997,935) $ 19,997,935
------------
REPURCHASE AGREEMENTS - 0.75%
$25,000,000 Tri-Party Repurchase
Agreement with
Goldman Sachs,
Dated 12/31/97, 6.80%,
Principal & Interest in the
amount of $25,009,444
Due 1/02/98 (Collateralized
by FGLMC, Par
Value of $26,034,790,
Coupon rate of 7.00%,
Due from 11/01/26
to 12/01/27, Value of
$25,500,000)
(Amortized Cost $25,000,000) 25,000,000
-----------
YANKEE CERTIFICATES OF DEPOSIT - 15.10%
3,000,000 ABN Amro Bank,
5.68%, 2/02/98 3,000,043
25,000,000 Bank of Scotland,
5.77%, 2/23/98 25,000,000
35,000,000 Bank of Tokyo - Mitsubishi,
6.23%, 4/02/98 35,000,000
Banque National de Paris:
9,000,000 5.65%, 1/16/98 9,000,083
10,000,000 5.84%, 6/04/98 10,001,234
10,000,000 5.82%, 6/15/98 10,001,336
20,000,000 Banque Paribas,
5.95%, 12/07/98 20,000,000
35,000,000 Bayerische Hypotheka,
5.77%, 2/20/98 35,000,000
Commerz Bank:
30,000,000 5.59%, 1/07/98 30,000,000
11,000,000 5.63%, 1/14/98 11,000,000
National Westminster:
18,000,000 5.68%, 3/02/98 17,997,733
25,000,000 5.69%, 1/23/98 25,000,000
Rabobank:
15,000,000 5.97%, 3/20/98 14,995,873
3,000,000 6.07%, 3/26/98 3,001,334
See Notes to Financial Statements on Page 16
12
<PAGE>
Liquid Assets Portfolio
Schedule of Portfolio Investments December 31, 1997
Principal
Amount Description Value
------ ----------- -----
Sanwa Bank:
$13,000,000 5.755%, 1/22/98 $ 13,000,037
10,000,000 5.76%, 1/22/98 10,000,058
Societe Generale:
21,000,000 5.73%, 1/07/98 21,000,009
15,000,000 5.78%, 2/27/98 15,000,000
35,000,000 5.80%, 3/09/98 35,000,000
10,000,000 5.97%, 3/18/98 10,002,866
20,000,000 6.10%, 3/26/98 20,001,398
25,000,000 5.81%, 6/16/98 25,001,120
Swiss Bank Corp.:
50,000,000 5.64%, 1/14/98 50,000,000
30,000,000 5.76%, 2/25/98 30,000,000
5,000,000 5.98%, 3/19/98 5,001,395
Principal
Amount Description Value
------ ----------- -----
$20,000,000 West Deutsche Landesbank,
5.67%, 2/06/98 $ 20,000,000
Total Yankee Certificates of Deposit
(Amortized Cost $503,004,519) 503,004,519
-------------
Total Investments
(Amortized Cost $3,314,165,552) 99.48% $3,314,165,552
Other Assets Less Liabilities 0.52% 17,194,130
------- --------------
Net Assets 100.00% $3,331,359,682
======= ==============
- ----------
* Interest rates represent discount rates at the time of purchase.
See Notes to Financial Statements on Page 16
13
<PAGE>
Liquid Assets Portfolio
Statement of Assets and Liabilities December 31, 1997
ASSETS
Investments, at Value ............................... $3,314,165,552
Cash ................................................ 65,134,421
Interest Receivable ................................. 16,453,356
--------------
Total Assets ........................................... 3,395,753,329
--------------
LIABILITIES
Payable for Securities Purchased .................... 64,099,339
Due to Bankers Trust ................................ 278,701
Accrued Expenses and Other .......................... 15,607
--------------
Total Liabilities ...................................... 64,393,647
--------------
NET ASSETS ............................................. $3,331,359,682
==============
COMPOSITION OF NET ASSETS
Paid-in Capital ..................................... $3,331,359,682
--------------
NET ASSETS, DECEMBER 31, 1997 .......................... $3,331,359,682
==============
Statement of Operations For the year ended December 31, 1997
INVESTMENT INCOME
Interest ............................................... $ 135,636,393
-------------
EXPENSES
Advisory Fees .......................................... 3,616,531
Administration and Services Fees ....................... 1,205,510
Professional Fees ...................................... 24,965
Insurance .............................................. 9,177
Miscellaneous .......................................... 2,050
Trustees Fees .......................................... 2,036
-------------
Total Expenses ......................................... 4,860,269
Less: Expenses Absorbed by Bankers Trust .............. (2,208,146)
-------------
Net Expenses ........................................ 2,652,123
-------------
NET INVESTMENT INCOME ..................................... 132,984,270
NET REALIZED LOSS FROM INVESTMENT TRANSACTIOns ............ (11,644)
-------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ................ $ 132,972,626
=============
See Notes to Financial Statements on Page 16
14
<PAGE>
Liquid Assets Portfolio
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the For the
year ended year ended
December 31, 1997 December 31, 1996
----------------- -----------------
<S> <C>
Increase (Decrease) in Net Assets from:
Operations
Net Investment Income ............................... $ 132,984,270 $ 99,083,413
Net Realized Gain (Loss) from Investment Transactions (11,644) 41,704
--------------- ---------------
Net Increase in Net Assets from Operations ............. 132,972,626 99,125,117
--------------- ---------------
Capital Transactions
Proceeds from Capital Invested ...................... 5,800,519,569 4,756,221,475
Value of Capital Withdrawn .......................... (4,554,217,994) (4,384,850,139)
--------------- ---------------
Net Increase in Net Assets from Capital Transactions ... 1,246,301,575 371,371,336
--------------- ---------------
Total Increase in Net Assets ........................... 1,379,274,201 470,496,453
Net Assets
Beginning of Year ...................................... 1,952,085,481 1,481,589,028
--------------- ---------------
End of Year ............................................ $ 3,331,359,682 $ 1,952,085,481
=============== ===============
</TABLE>
Financial Highlights
Contained below are selected ratios and supplemental data for each of the
periods indicated for the Liquid Assets Portfolio.
<TABLE>
<CAPTION>
For the period
June 7, 1993
(Commencement of
For the years ended Operations to
December 31, December 31, 1993)
----------------------------------------------- ------------------
1997 1996 1995+ 1994 1993
---- ---- ----- ---- ----
<S> <C>
SUPPLEMENTAL DATA AND RATIOS:
Net Assets, End of Period (000s omitted) $ 3,331,360 $ 1,952,085 $ 1,481,589 $ 13,404 $ 8,137
Ratios to Average Net Assets:
Net Investment Income 5.52% 5.32% 7.28%* 4.28% 3.12%*
Expenses 0.11% 0.03% 0.01%* 0.10% 0.10%*
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses by
Bankers Trust 0.09% 0.17% 0.28%* 0.30% 0.57%*
</TABLE>
- ----------
* Annualized.
+ For the periods January 1, 1995 to September 14, 1995 and December 11, 1995
to December 31, 1995 (see Note 1A).
See Notes to Financial Statements on Page 16
15
<PAGE>
Liquid Assets Portfolio
Notes to Financial Statements
Note 1--Organization and Significant Accounting Policies
A. Organization
The Liquid Assets Portfolio (the "Portfolio") is registered under the Investment
Company Act of 1940 (the "Act"), as amended, as an open-end management
investment company. The Portfolio commenced operations on June 7, 1993, as an
unincorporated trust under the laws of New York. The Declaration of Trust
permits the Board of Trustees (the "Trustees") to issue beneficial interests in
the Portfolio.
On September 15, 1995, the Portfolio temporarily suspended its operations due to
a withdrawal of investments by BT Investment Liquid Assets Fund. On December 11,
1995, the Portfolio resumed its operations as a result of an investment made by
the Institutional Liquid Assets Fund.
B. Security Valuation
Investments are valued at amortized cost, which is in accordance to Rule 2a-7 of
the Investment Company Act of 1940 and represents fair value of the Portfolio'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 identified cost basis.
All of the net investment income and realized and unrealized gains and losses
from the security transactions of the Portfolio are allocated pro rata among the
investors in the Portfolio at the time of such determination.
D. Repurchase Agreements
The Portfolio may enter into repurchase agreements with financial institutions
deemed to be creditworthy by the Portfolio's Investment Advisor, subject to the
seller's agreement to repurchase and the Portfolio's agreement to resell such
securities at a mutually agreed upon price. Securities purchased subject to
repurchase agreements are deposited with the Portfolio's custodian, and pursuant
to the terms of the repurchase 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 Portfolio will require the seller to
deposit additional collateral by the next business day. If the request for
additional collateral is not met, or the seller defaults on its repurchase
obligation, the Portfolio maintains the right to sell the underlying securities
at market value and may claim any resulting loss against the seller. However, in
the event of default or bankruptcy by the seller, realization and/or retention
of the collateral may be subject to legal proceedings.
E. Federal Income Taxes
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code. Therefore, no federal income tax provision is required.
F. 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 Portfolio has entered into an Administration and Services Agreement with
Bankers Trust Company ("Bankers Trust"). Under this Administration and Services
Agreement, Bankers Trust provides administrative, custody, transfer agency and
shareholder services to the Portfolio in return for a fee computed daily and
paid monthly at an annual rate of 0.05 of 1% of the Portfolio's average daily
net assets. For the year ended December 31, 1997, this fee aggregated
$1,205,510.
The Portfolio has entered into an Advisory Agreement with Bankers Trust. Under
this Advisory Agreement, the Portfolio pays Bankers Trust an advisory fee
computed daily and paid monthly at an annual rate of 0.15 of 1% of the
Portfolio's average daily net assets. For the year ended December 31,1997, this
fee aggregated $3,616,531.
From January 1, 1996 to September 26, 1996, Bankers Trust had voluntarily
undertaken to waive its fees and reimburse expenses of the Fund, to the extent
necessary, to limit all expenses to 0.00 of 1% of the daily net assets of the
Fund, excluding expenses of the Portfolio and 0.00 of 1% of the average daily
net assets of the Fund, including expenses of the Portfolio.
Bankers Trust has voluntarily undertaken to waive its fees and reimburse
expenses of the Portfolio, to the extent necessary, to limit all expenses to
0.11 of 1% of the average daily net assets of the Portfolio. For the year ended
December 31, 1997, expenses of the Portfolio have been reduced by $2,208,146.
Certain officers of the Portfolio are also directors, officers and/or employees
of Edgewood Services, Inc., distributor of BT Institutional Funds. None of the
officers so affiliated received compensation for services as officers of the
Portfolio.
16
<PAGE>
Liquid Assets Portfolio
Report of Independent Accountants
To the Trustees and Holders of Beneficial Interest of BT
Institutional Portfolios:
We have audited the accompanying statement of assets and liabilities, including
the schedule of portfolio investments, of the Liquid Assets Portfolio (one of
the Portfolios comprising BT Institutional Portfolios) as of December 31, 1997,
and the related statement of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then ended and
the financial highlights for each of the four years in the period then ended and
for the period June 7, 1993 (commencement of operations) to December 31, 1993.
These financial statements and financial highlights are the responsibility of
the Portfolio'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 securities 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
Liquid Assets Portfolio as of December 31, 1997, the results of its operations,
the changes in its net assets and the financial highlights for the periods
referred to above, in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Kansas City, Missouri
February 18, 1998
17
<PAGE>
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<PAGE>
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<PAGE>
BT INSTITUTIONAL FUNDS
INSTITUTIONAL LIQUID ASSETS FUND
Investment Advisor and Administrator of the Portfolio
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.
1100 Main Street, Suite 900
Kansas City, MO 64105
Counsel
WILLKIE FARR & GALLAGHER
153 East 53rd Street
New York, NY 10022
--------------------
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.
--------------------
Cusip #055924864
STA492200 (2/98)
