o BT INSTITUTIONAL FUNDS o
INSTITUTIONAL
LIQUID ASSETS FUND
ANNUAL REPORT
-------------
DECEMBER o 1998
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Institutional Liquid Assets Fund
TABLE OF CONTENTS
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Letter to Shareholders ....................................3
Institutional Liquid Assets Fund
Statement of Assets and Liabilities ....................5
Statement of Operations ................................5
Statements of Changes in Net Assets ................... 6
Financial Highlights ...................................7
Notes to Financial Statements ..........................8
Report of Independent Accountants ......................9
Liquid Assets Portfolio
Statement of Net Assets ................................10
Statement of Operations ................................14
Statements of Changes in Net Assets ....................14
Financial Highlights ...................................15
Notes to Financial Statements ..........................16
Report of Independent Accountants ......................17
2
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Institutional Liquid Assets Fund
LETTER TO SHAREHOLDERS
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We are pleased to present you with this annual report for the BT Institutional
Liquid Assets Fund (the "Fund"), providing a detailed review of the market, the
Portfolio, and our outlook. Included are a complete financial summary of the
Fund's operations and a listing of the Portfolio's holdings.
MARKET ACTIVITY
The money markets were dominated throughout 1998 by the global financial crisis,
which began in Southeast Asia and spread to countries around the world.
o During the first half of the year, the hangover effects of the Southeast
Asian financial crisis spread to Hong Kong and Japan. This both focused the
U.S. markets on that region and also supported a flight to quality and, in
turn, a U.S. Treasury rally.
o In the second half of 1998, Russia devalued its currency and defaulted on
its domestic debt, despite an International Monetary Fund (IMF) bailout
attempt; weak commodity prices dampened the economic outlook for Latin
America in general and Brazil in particular; and economic instability in
Asia was ongoing. All of this buoyed the U.S. Treasury rally.
Concerns over the impact of foreign turmoil on U.S. economic growth did not
surface until the second half of the year.
o Interest rates in the first six months remained relatively stable. The
combination of a strong economy--especially in the service sector--and low
inflation allowed the Federal Reserve Board to keep interest rates
unchanged at 5.5%.
o During the third quarter, investors began to focus more heavily on the
Asian contagion and on the political problems in the Clinton
administration. In addition, a major leveraged hedge fund went bankrupt,
requiring a bailout by a consortium of Wall Street firms. The announcement
of this Fed-orchestrated bailout package forced corporate credit spreads to
widen significantly and liquidity to decrease. This led, in turn, to a
further rally in U.S. Treasuries plus significant buying of high quality
domestic paper.
Status at December 31, 1998
Seven day effective yield: 5.27%
Average maturity: 38 days
Net assets: $3,374.2 million
Citing both global and U.S. developments and their prospects on the U.S.
economy, the Federal Reserve Board effectively battled investors' growing risk
aversion and escalating illiquidity with three rapid cuts of interest rates in
the second half of the year. These easing moves of 0.25% each--on September 29,
October 15, and November 17--restored the financial markets to a more peaceful
state and allowed the money markets, in particular, to finish out the year on a
relatively calm note.
Money markets also benefited from volatility in the equity markets. This
volatility buoyed a rally in the U.S. fixed income market in general and strong
cash inflows into the money markets in particular. Investors moved assets from
equity funds, both domestic and foreign, seeking both the greater liquidity and
the perceived safety of the money markets. Also fueling positive fixed income
market sentiment toward the end of the year was a plunge in oil prices and other
commodities to their lowest level in decades.
INVESTMENT REVIEW
By staying disciplined to the purchase of high quality instruments and actively
adjusting sector allocation as market conditions changed, we were able to
produce highly competitive yields in the Institutional Liquid Assets Fund.
Period ended Annualized 7 Day Annualized 7 Day
December 31, 1998 Current Yield Effective Yield
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BT Institutional
Liquid Assets Fund* 5.14% 5.27%
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IBC First Tier-Institutional
Only Money Funds Average 4.87% 4.99%
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We maintained a neutral, close-to-the benchmark weighted average maturity
position through most of the first half of the year. This strategy was based on
the uncertainty surrounding the impact of the Asian financial turmoil on the
U.S. financial markets as well as on the Federal Reserve Board's decision to
keep interest rates on hold. Also, the flat yield curve gave us few
opportunities to extend maturities to increase yield. Instead, we sought to add
value by increasing the Fund's holdings in floating rate securities, which
proved to be effective in producing competitive Fund returns. In anticipation of
Federal Reserve Board interest rate cuts, we began extending the Fund's average
maturity in the third quarter. We were careful to add exposure to high quality
counterparties, while limiting exposure to those we felt might experience
difficulties in the worsening Asian crisis.
MANAGER OUTLOOK
Economic and financial market performance have run on virtually parallel tracks
in 1998, and that pattern seems likely to persist into 1999. Looking ahead for
the near term, we believe the money markets should remain fairly positive,
though largely range-bound, without the dramatic rally of the year 1998.
o Strong momentum in the U.S. economy--in terms of consumer spending,
employment, housing, and business investment--should carry into early 1999,
before weakening later in the year.
o The global economic crisis continues to loom and we anticipate GDP growth
of around 2.5% in 1999--a positive backdrop for inflation to stay low and
for the safe haven status of U.S. Treasuries to continue.
o We believe Federal Reserve Board monetary policy is likely on hold, not
changing interest rates for the foreseeable future in the face of solid
economic growth, healthy financial markets, and the recent softening of the
dollar.
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* Past performance is not indicative of future results. Yields will vary. Yield
quotes 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 per share,
it is possible to lose money by investing in the Fund. "Current yield" refers to
the income generated by an investment in the Fund over a 7-day period. This
income is then "annualized." 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. 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
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Institutional Liquid Assets Fund
LETTER TO SHAREHOLDERS (CONTINUED)
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DIVERSIFICATION OF PORTFOLIO INVESTMENTS
By Asset Type as of December 31, 1998
(percentages are based on net assets)
Certificates of Deposit 2%
Eurodollar
Certificates of
Deposit 9%
Eurodollar
Time Deposits
17%
Floating Rate Notes 23%
Commercial Paper 36%
Yankee Certificates of Deposit 13%
Given this scenario and the slightly positive yield curve, we intend to stay
slightly longer than our benchmark for the near term. At the same time, we will
look to take advantage of any spike in yields or any issue-specific attractive
value opportunities when they arise.
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, 1998
4
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<TABLE>
<CAPTION>
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Institutional Liquid Assets Fund
STATEMENT OF ASSETS AND LIABILITIES December 31, 1998
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<S> <C>
Assets
Investment in Liquid Assets Portfolio, at Value ......................................... $ 3,389,709,147
Prepaid Expenses ........................................................................ 65,260
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Total Assets ............................................................................... 3,389,774,407
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Liabilities
Due to Bankers Trust .................................................................... 309,275
Dividends Payable ....................................................................... 15,263,889
Accrued Expenses ........................................................................ 41,567
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Total Liabilities .......................................................................... 15,614,731
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Net Assets ................................................................................. $ 3,374,159,676
===============
Shares Outstanding ($0.001 par value per share, unlimited number of shares of
beneficial interest authorized) ............................................................ 3,374,007,026
===============
Net Asset Value, Offering and Redemption Price Per Share (net assets divided by
shares outstanding) ........................................................................ $ 1.00
===============
Composition of Net Assets
Paid-in Capital ......................................................................... $ 3,374,007,026
Undistributed Net Investment Income ..................................................... 58,387
Accumulated Net Realized Gain from Investment Transactions .............................. 94,263
===============
Net Assets, December 31, 1998 .............................................................. $ 3,374,159,676
===============
</TABLE>
<TABLE>
<CAPTION>
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STATEMENT OF OPERATIONS For the year ended December 31, 1998
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<S> <C>
Investment Income
Income Allocated from Liquid Assets Portfolio, net ...................................... $ 181,820,656
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Expenses
Administration and Services Fees ........................................................ 1,673,817
Registration Fees ....................................................................... 410,697
Printing and Shareholder Reports ........................................................ 15,008
Professional Fees ....................................................................... 13,355
Trustees Fees ........................................................................... 8,166
Miscellaneous ........................................................................... 30,732
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Total Expenses .......................................................................... 2,151,775
Less: Expenses Absorbed by Bankers Trust ................................................ (478,084)
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Net Expenses ......................................................................... 1,673,691
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Net Investment Income ...................................................................... 180,146,965
Net Realized Gain from Investment Transactions ............................................. 105,907
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Net Increase in Net Assets from Operations ................................................. $ 180,252,872
===============
</TABLE>
See Notes to Financial Statements.
5
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Institutional Liquid Assets Fund
STATEMENTS OF CHANGES IN NET ASSETS
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For the For the
year ended year ended
December 31, 1998 December 31, 1997
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<S> <C> <C>
Increase (Decrease) in Net Assets from:
Operations
Net Investment Income ............................................... $ 180,146,965 $ 131,781,988
Net Realized Gain (Loss) from Investment Transactions ............... 105,907 (11,644)
--------------- ---------------
Net Increase in Net Assets from Operations ............................. 180,252,872 131,770,344
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Distributions to Shareholders
Net Investment Income ............................................... (180,146,965) (131,781,988)
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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 ....................................... 9,993,553,949 6,124,315,086
Cost of Shares Redeemed ............................................. (9,936,314,862) (4,750,512,402)
--------------- ---------------
Net Increase from Capital Transactions in Shares of
Beneficial Interest ................................................. 57,239,087 1,373,802,684
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Total Increase in Net Assets ........................................... 57,344,994 1,373,791,040
Net Assets
Beginning of Year ...................................................... 3,316,814,682 1,943,023,642
--------------- ---------------
End of Year ............................................................ $ 3,374,159,676 $ 3,316,814,682
=============== ===============
</TABLE>
See Notes to Financial Statements.
6
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Institutional Liquid Assets Fund
FINANCIAL HIGHLIGHTS
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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
Dec. 11, 19951
For the years ended December 31, to
1998 1997 1996 Dec. 31, 1995
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value, Beginning of Period ....... $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- --------
Income fromInvestment Operations
Net Investment Income ................... 0.05 0.05 0.05 0.00(2)
Net Realized Gain (Loss) from
Investment Transactions .............. 0.00(2) (0.00)(2) 0.00(2) 0.00(2)
-------- -------- -------- --------
Total from Investment Operations ........... 0.05 0.05 0.05 0.00(2)
-------- -------- -------- --------
Distributions to Shareholders
Net Investment Income ................... (0.05) (0.05) (0.05) (0.00)(2)
-------- -------- -------- --------
Net Asset Value, End of Period ............. $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ========
Total Investment Return .................... 5.57% 5.63% 5.45% 5.88%
Supplemental Data and Ratios:
Net Assets, End of Period
(000s omitted) ....................... $3,374,160 $3,316,815 $1,943,024 $1,477,401
Ratios to Average Net Assets:
Net Investment Income ................ 5.43% 5.48% 5.32% 5.50%(3)
Expenses, Including Expenses
of the Liquid Assets Portfolio ..... 0.16% 0.16% 0.04% 0.01%(3)
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses
by Bankers Trust ................... 0.10% 0.09% 0.22% 0.97%(3)
</TABLE>
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(1) The Fund's inception date.
(2) Less than $0.01 per share.
(3) Annualized
See Notes to Financial Statements.
7
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Institutional Liquid 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 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 value of the Fund's investment in the Portfolio
reflects its proportionate interest in the net assets of the Portfolio. At June
30, 1998, the Fund's investment was approximately 100% of the Portfolio.
The financial statements of the Portfolio, including the Statement of Net
Assets, are contained elsewhere in this report and should be read in conjunction
with the Fund's Financial Statements.
B. Security Valuation
Valuation of securities by the Portfolio is discussed in Note 1B of the
Portfolio's notes to Financial Statements which are included elsewhere in this
report.
C. 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.
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. Distributions
It is the Fund's policy to declare dividends daily and pay them monthly to
shareholders from net investment income. Dividends and distributions payable to
shareholders are recorded by the Fund on the ex-dividend date. Distributions of
net realized short-term and long-term capital gains, if any, earned by the Fund
are made annually to the extent they exceed capital loss carryforwards.
F. Federal Income Taxes
It is the Fund's policy to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and
distribute its taxable income to shareholders. Therefore, no federal income tax
provision is required.
G. Other
The Trust accounts separately for the assets, liabilities, and operations of the
Fund. Expenses directly attributable to a fund are charged to that Fund, while
expenses that 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 .05% of the Fund's average daily net assets.
Bankers Trust has voluntarily undertaken to waive its fees and reimburse
expenses of the Fund, to the extent necessary, to limit all expenses to .05% of
the average daily net assets of the Fund, excluding expenses of the Portfolio
and .16 % of the average daily net assets of the Fund, including expenses of the
Portfolio.
ICC Distributors, Inc., a member of the Forum Group of companies provides
distributor services to the Fund. For the year ended December 31, 1998, there
were no reimbursable expenses incurred under this agreement.
The Portfolio, in which the Fund invests in, is a participant with other
affiliated entities in a revolving credit facility and a discretionary demand
line of credit facility (collectively the "credit facilities") in the amounts of
$50,000,000 and $100,000,000, respectively, which expire March 15, 1999. A
commitment fee of .07% per annum on the average daily amount of the available
commitment is payable on a quarterly basis and apportioned equally among all
participants. Amounts borrowed under the credit facilities will bear interest at
a rate per annum equal to the Federal Funds Rate plus .45%. No amounts were
drawn down or outstanding under the credit facilities as of and for the year
ended December 31, 1998.
8
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Institutional Liquid Assets Fund
REPORT OF INDEPENDENT ACCOUNTANTS
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To the Trustees of BT Institutional Funds and Shareholders of
Institutional Liquid Assets Fund:
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
the Institutional Liquid Assets Fund (one of the funds comprising BT
Institutional Funds, hereafter referred to as the "Fund") at December 31, 1998,
and the results of its operations, the changes in its net assets and the
financial highlights for each of the fiscal periods presented, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1998 by
correspondence with the transfer agent, provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
February 5, 1999
9
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Liquid Assets Portfolio
STATEMENT OF NET ASSETS December 31, 1998
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Principal
Amount Description Value
- ------ ----------- -----
COMMERCIAL PAPER - 36.37%
ABB Treasury Center,
$25,000,000 5.20%, 2/18/99............$ 24,826,667
Abbott Laboratories,
49,000,000 5.15%, 1/6/99................48,964,951
Asset Securitization Cooperative
Corp.:
13,000,000 5.40%, 1/29/99...............12,945,400
25,000,000 5.27%, 2/19/99...............24,820,674
Associates Corp.:
25,000,000 5.04%, 2/3/99...............24,884,500
13,000,000 5.25%, 2/5/99...............12,933,645
Bank of Scotland,
10,000,000 4.89%, 6/4/99...............9,790,816
BankAmerica Corp.,
7,000,000 4.93%, 6/2/99...............6,854,291
BBL North America:
12,000,000 5.80%, 1/12/99.............11,978,733
12,000,000 5.50%, 1/26/99.............11,954,167
British Gas Capital Corp.,
23,000,000 5.25%,(0) 2/11/99...........22,875,574
CAFCO:
30,000,000 5.40%, 1/20/99...............29,914,500
10,000,000 5.32%, 1/29/99............... 9,958,622
35,000,000 5.30%, 2/3/99................34,829,958
15,000,000 5.32%, 2/25/99...............14,878,083
Chase Manhattan Bank,
40,000,000 4.80%, 3/23/99...............39,568,000
Corporate Receivables, Inc.:
20,000,000 5.40%, 1/19/99...............19,946,000
10,000,000 5.20%, 2/12/99............... 9,939,333
10,000,000 5.375%, 2/18/99.............. 9,928,333
Credit Suisse First Boston:
20,000,000 5.29%, 1/7/99................19,982,366
11,000,000 5.27%, 1/15/99...............10,977,456
10,000,000 5.15%, 1/22/99................9,969,958
17,000,000 5.18%, 1/26/99...............16,938,847
Cregem,
30,000,000 4.99%, 4/1/99................29,625,750
Daimler Benz North America:
25,000,000 5.03%, 1/29/99...............24,902,194
20,000,000 5.22%, 2/23/99...............19,846,300
12,000,000 5.03%, 4/15/99...............11,825,626
Principal
Amount Description Value
------ ----------- -----
Delaware Funding Corp.:
$ 5,036,000 5.50%, 1/6/99............$ 5,032,153
18,118,000 5.35%, 1/20/99...............18,066,841
20,000,000 5.35%, 1/22/99...............19,937,583
5,086,000 5.40%, 1/26/99................5,066,927
10,000,000 5.19%, 2/18/99................9,930,800
Diageo Capital:
27,000,000 5.35%, 1/4/99................26,987,962
15,000,000 5.23%, 2/12/99...............14,908,475
12,000,000 5.10%, 3/5/99................11,892,900
Ford Motor Credit Corp.,
40,000,000 5.10%, 1/28/99...............39,847,000
General Electric Capital Corp.:
42,000,000 4.95%, 2/19/99...............41,717,025
5,000,000 5.37%, 2/26/99............... 4,958,233
20,000,000 4.93%, 3/15/99...............19,800,061
20,000,000 5.01%, 3/26/99...............19,766,200
General Electric Company:
20,000,000 5.05%, 1/15/99...............19,960,722
13,000,000 5.04%, 2/8/99................12,930,840
General Motors Acceptance Corp.:
20,000,000 5.10%, 1/22/99...............19,940,500
10,000,000 5.49%, 1/26/99............... 9,961,875
40,000,000 5.06%, 1/29/99...............39,842,577
10,000,000 5.08%, 2/10/99............... 9,943,555
Glaxo Wellcome,
6,000,000 4.75%, 4/26/99................5,908,958
KFW International Finance,
30,000,000 4.87%, 2/19/99...............29,801,141
Merrill Lynch & Co.:
10,000,000 5.50%, 1/13/99............... 9,981,666
15,000,000 5.50%, 1/15/99..............14,967,916
National Rural Utility Corp.,
20,000,000 4.97%, 4/26/99...............19,682,472
Norwest Corp.,
10,000,000 5.14%, 1/22/99................9,970,016
Oesterreichische Bank,
20,000,000 5.16%, 1/25/99...............19,931,200
Province of British Columbia,
5,000,000 4.80%, 3/8/99.................4,955,954
Province of Quebec:
8,200,000 5.51%, 1/15/99................8,182,429
30,000,000 5.14%, 2/8/99...............29,837,233
5,000,000 4.95%, 2/16/99................4,968,375
See Notes to Financial Statements.
10
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Liquid Assets Portfolio
STATEMENT OF NET ASSETS December 31, 1998
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Principal
Amount Description Value
------ ----------- -----
Quincy Capital Corp.:
$ 10,000,000 5.48%, 1/27/99...............$ 9,960,422
15,000,000 5.41%, 1/28/99................14,939,138
8,244,000 5.40%, 2/5/99..................8,200,719
Receivables Capital Corp.:
3,806,000 5.27%,1/25/99..................3,792,628
10,000,000 5.35%, 1/26/99.................9,962,847
40,000,000 5.35%, 1/27/99................39,845,444
Union Bank of Switzerland:
40,000,000 5.26%, 1/5/99.................39,976,622
25,000,000 5.21%, 1/15/99................24,949,260
Wells Fargo Bank,
10,000,000 5.25%, 1/29/99................9,959,167
Westpac Capital Corp.,
10,000,000 5.05%, 3/2/99.................9,896,705
Xerox Credit Corp.:
17,000,000 5.10%, 1/4/99.................16,992,775
10,000,000 5.10%, 3/25/99.................9,882,417
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Total Commercial Paper
(Amortized Cost $1,232,898,477) 1,232,898,477
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EURODOLLAR TIME DEPOSIT - 17.38%
Abbey National Treasury,
45,000,000 5.48%, 2/10/99................45,000,000
Bank of America,
25,000,000 5.45%, 2/11/99................25,000,000
Bank of Austria,
30,000,000 5.15%, 1/20/99................30,000,000
Bank of Montreal,
35,000,000 5.35%, 2/9/99.................35,000,000
Canadian Imperial Bank of
Commerce,
100,000,000 5.25%, 1/4/99................100,000,000
Generale Bank,
25,000,000 5.31%, 2/3/99.................25,000,000
International Nederlander Bank:
40,000,000 5.60%, 2/26/99................40,000,000
10,000,000 5.13%, 3/5/99................10,000,514
10,000,000 5.09%, 6/3/99................10,000,000
KBC Bank,
12,000,000 5.19%, 5/12/99...............12,000,000
Nordeutsche Landesbank,
30,000,000 5.25%, 3/29/99...............30,000,000
Principal
Amount Description Value
- -------- ----------- -----
Suntrust Bank,
$129,586,048 4.00%, 1/4/99...............$129,586,048
Svenska Handelsbanken,
20,000,000 5.37%, 2/25/99................20,000,000
West Deutsche Landesbank,
77,425,983 5.25%, 1/4/99 ................77,425,983
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Total Eurodollar Time Deposits
(Amortized Cost $589,012,545)..............589,012,545
--------------
CERTIFICATES OF DEPOSIT - 1.48%
Chase Manhattan Bank,
15,000,000 4.87%, 4/21/99................15,000,000
--------------
Mellon Bank:
20,000,000 4.87%, 4/29/99................20,000,000
15,000,000 5.05%, 5/3/99.................15,000,000
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Total Certificate of Deposit
(Amortized Cost $50,000,000)................50,000,000
--------------
EURODOLLAR CERTIFICATES
OF DEPOSIT - 9.00%
Abbey National Treasury,
10,000,000 5.20%, 2/9/99................10,000,000
Barclays Bank,
30,000,000 4.88%, 4/27/99................29,998,113
Bayerische Hypotheka Vereinbank:
30,000,000 5.62%, 1/12/99................29,998,329
20,000,000 5.36%, 2/22/99................20,004,907
30,000,000 5.60%, 2/25/99................30,000,814
35,000,000 5.17%, 2/26/99................35,000,537
Halifax PLC:
10,000,000 5.16%, 2/5/99.................10,000,074
30,000,000 5.60%, 2/22/99................30,000,000
30,000,000 5.12%, 3/2/99.................30,000,731
International Nederlander Bank,
25,000,000 5.08%, 5/27/99................25,002,967
KBC Bank,
25,000,000 5.53%, 1/15/99................25,000,097
Morgan Guaranty,
5,000,000 4.95%, 3/16/99.................5,000,000
Rabobank,
25,000,000 5.53%, 1/4/99................25,000,000
--------------
Total Eurodollar Certificates of Deposit
(Amortized Cost $305,606,569)..............305,606,569
--------------
See Notes to Financial Statements.
11
<PAGE>
- --------------------------------------------------------------------------------
Liquid Assets Portfolio
STATEMENT OF NET ASSETS December 31, 1998
- --------------------------------------------------------------------------------
Principal
Amount Description Value
------ ----------- -----
YANKEE CERTIFICATES OF DEPOSIT - 12.63%
Bank of Montreal:
$ 17,000,000 5.25%, 1/25/99...............$ 17,000,000
25,000,000 5.32%, 1/29/99................ 25,000,000
25,000,000 5.57%, 2/26/99................ 25,000,000
Banque Nationale de Paris:
50,000,000 5.54%, 1/4/99..................50,000,000
10,000,000 5.65%, 2/26/99................. 9,997,230
25,000,000 4.93%, 4/28/99.................25,000,000
Bayerische Hypotheka:
10,000,000 5.55%, 1/4/99..................10,000,008
25,000,000 5.25%, 1/25/99 ............... 25,000,000
Canadian Imperial Bank,
10,000,000 4.87%, 4/21/99..................9,998,389
CommerzBank:
25,000,000 5.52%, 2/2/99..................24,998,665
20,000,000 5.37%, 2/24/99 ................20,006,372
Hessen Thuringer,
18,000,000 5.26%, 1/29/99.................18,000,609
National Westminster Bank,
50,000,000 5.53%, 1/4/99.................50,000,000
Nordeutsche Landesbank,
7,000,000 5.66%, 7/27/99.................7,022,157
Rabobank:
13,000,000 5.60%, 3/17/99.................12,999,209
10,000,000 5.65%, 6/19/99.................10,023,694
5,000,000 5.64%, 7/30/99................. 5,013,424
Royal Bank of Canada,
10,000,000 5.56%, 2/26/99.................9,999,264
Svenska Handelsbanken,
22,000,000 5.52%, 1/19/99................22,001,337
Union Bank of Switzerland:
30,000,000 5.10%, 2/19/99................30,000,000
6,000,000 5.74%, 6/11/99.................6,015,960
Westdeutsche Landesbank,
15,000,000 5.54%, 1/13/99 ...............15,000,000
--------------
Total Yankee Certificates of Deposit
(Amortized Cost $428,076,318)................428,076,318
--------------
Principal
Amount Description Value
------ ----------- -----
FLOATING RATE NOTES - 22.56%
Associates Corp.:
Daily Variable Rate,
$ 20,000,000 5.65%, 1/4/99..............$ 19,999,920
Bank of Austria:
Quarterly Variable Rate,
25,000,000 5.54%, 7/27/99.................24,991,652
Bayerische Hypotheka Vereinbank:
Monthly Variable Rate,
20,000,000 5.50%, 5/28/99 ................19,993,652
Bayerishce Landesbank:
Monthly Variable Rate,
20,000,000 5.49%, 2/25/99.................19,998,255
Bear Stearns Companies, Inc.:
Monthly Variable Rate,
25,000,000 5.62%, 6/4/99..................25,000,000
14,000,000 5.62%, 6/11/99................14,000,576
Colgate-Palmolive:
Monthly Variable Rate,
20,000,000 5.52%,(0) 8/25/99 .............19,989,849
Comerica Bank:
Monthly Variable Rate,
25,000,000 5.55%, 6/10/99.................24,991,935
Deutsche Bank:
Quarterly Variable Rate,
30,000,000 5.52%, 6/1/99..................29,990,257
15,000,000 5.53%, 8/16/99.................14,993,594
First Union Corp.:
Quarterly Variable Rate,
10,000,000 5.68%, 8/18/99.................10,004,554
10,000,000 5.20%, 10/20/99................10,000,000
20,000,000 5.42%, 11/16/99 ...............20,000,000
General Electric Capital Corp.:
Quarterly Variable Rate,
15,000,000 5.60%, 1/15/99................ 15,000,000
10,000,000 5.55%, 9/8/99................ 10,000,000
International Business Machines:
Quarterly Variable Rate,
5,000,000 5.54%, 3/1/99.................. 4,999,684
25,000,000 5.48%, 6/1/99..................24,987,899
13,000,000 5.21%, 11/2/99.................12,997,827
J. P. Morgan Co.:
Monthly Variable Rate,
50,000,000 5.50%, 2/24/99.................49,994,881
See Notes to Financial Statements.
12
<PAGE>
- --------------------------------------------------------------------------------
Liquid Assets Portfolio
STATEMENT OF NET ASSETS December 31, 1998
- --------------------------------------------------------------------------------
Principal
Amount Description Value
------ ----------- -----
Kreditbank:
Quarterly Variable Rate,
$ 25,000,000 5.53%, 6/1/99................$ 24,992,896
Merrill Lynch & Co., Inc.:
Monthly Variable Rate,
30,000,000 5.57%, 2/16/99...................30,000,000
5,000,000 5.60%, 4/13/99....................4,999,860
Morgan Guaranty:
Monthly Variable Rate,
40,000,000 5.21%, 11/29/99.................39,982,934
National City Bank of Cleveland:
Monthly Variable Rate,
15,000,000 5.57%, 3/5/99 ...................14,998,987
National Rural Utility Corp.:
Monthly Variable Rate,
15,000,000 5.21%, 11/23/99 .................15,000,000
Nordeutsche Landesbank:
Monthly Variable Rate,
13,000,000 5.52%, 2/2/99.....................12,999,450
20,000,000 5.50%, 2/25/99....................19,998,526
Norwest Bank:
Monthly Variable Rate,
20,000,000 5.45%, 9/20/99....................19,999,332
Norwest Corp.:
Quarterly Rate Change,
20,000,000 5.24%, 10/28/99..................19,998,347
Principal
Amount Description Value
------ ----------- -----
Royal Bank of Canada:
Monthly Variable Rate,
$ 10,000,000 5.52%, 7/14/99................$ 9,996,279
Societe Generale:
Monthly Variable Rate,
$45,000,000 5.56%, 5/7/99....................44,990,045
10,000,000 5.55%, 6/1/99.................... 9,996,789
Svenska Handelsbanken:
Monthly Variable Rate,
25,000,000 5.54%, 6/1/99.....................24,992,896
Toronto Dominion Bank:
Quarterly Variable Rate,
25,000,000 5.54%, 7/30/99....................25,000,401
U.S. Bank:
Monthly Variable Rate,
25,000,000 5.56%, 8/18/99....................24,997,072
Walt Disney Co.:
Quarterly Variable Rate,
15,000,000 5.45%, 2/26/99 ...................14,998,044
Westpac Capital:
Quarterly Variable Rate,
15,000,000 5.54%, 4/9/99 ....................14,998,027
----------------
Total Floating Rate Notes
(Amortized Cost $764,861,112)..................764,861,112
----------------
Total Investments
(Amortized Cost $3,369,855,021) 99.4%....$3,369,855,021
Other Assets Less Liabilities 0.6%........19,854,126
------ ----------------
Net Assets 100.0% $3,389,709,147
====== ================
- ------------
*Interest rates for commercial paper represent discount rates at the time of
purchase.
See Notes to Financial Statements.
13
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Liquid Assets Portfolio
STATEMENT OF OPERATIONS For the year ended December 31, 1998
- -----------------------------------------------------------------------------------------------------------------
<S> <C>
Investment Income
Interest ............................................................................. $ 185,501,537
---------------
Expenses
Advisory Fees ........................................................................... 5,018,284
Administration and Service Fees ...................................................... 1,672,823
Professional Fees .................................................................... 51,921
Trustees Fees ........................................................................ 8,281
Miscellaneous ........................................................................ 3,085
---------------
Total Expenses ....................................................................... 6,754,394
Less: Expenses Absorbed by Bankers Trust ............................................. (3,073,520)
---------------
Net Expenses ....................................................................... 3,680,874
---------------
Net Investment Income ................................................................... 181,820,663
Net Realized Gain from Investment Transactions .......................................... 105,907
---------------
Net Increase in Net Assets from Operations .............................................. $ 181,926,570
===============
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the For the
year ended year ended
December 31, 1998 December 31, 1997
------------------ ------------------
<S> <C> <C>
Increase (Decrease) in Net Assets from:
Operations
Net Investment Income ............................................... $ 181,820,663 $ 132,984,270
Net Realized Gain (Loss) from Investment Transactions ............... 105,907 (11,644)
--------------- ---------------
Net Increase in Net Assets from Operations ............................. 181,926,570 132,972,626
--------------- ---------------
Capital Transactions
Proceeds from Capital Invested ...................................... 9,957,865,381 5,800,519,569
Value of Capital Withdrawn .......................................... (10,081,442,865) (4,554,217,994)
--------------- ---------------
Net Increase(Decrease) in Net Assets from Capital Transactions ......... (123,577,105) 1,246,301,575
--------------- ---------------
Total Increase in Net Assets ........................................... 58,349,465 1,379,274,201
Net Assets
Beginning of Year ...................................................... 3,331,359,682 1,952,085,481
--------------- ---------------
End of Year ............................................................ $ 3,389,709,147 $ 3,331,359,682
=============== ===============
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
- --------------------------------------------------------------------------------
Liquid Assets Portfolio
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 years ended December 31,
---------- ---------- ---------- ---------- ---------
1998 1997 1996 1995(2) 1994
---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) $3,389,709 $3,331,360 $1,952,085 $1,481,589 $ 13,404
Ratios to Average Net Assets:
Net Investment Income ............... 5.47% 5.52% 5.32% 7.28%(1) 4.28%
Expenses ............................ 0.11% 0.11% 0.03% 0.01%(1) 0.10%
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses
by Bankers Trust .................. 0.09% 0.09% 0.17% 0.28%(1) 0.30%
</TABLE>
- -----------------
(1) Annualized
(2) For the periods January 1, 1995 to September 14, 1995 and December 11, 1995
to December 31, 1995.
See Notes to Financial Statements.
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 with Rule 2a-7
of the Act 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
accretion of 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 accrued interest at all
times. 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
The Portfolio is considered a Partnership under 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 .05% of the Portfolio's average daily net
assets. For the year ended December 31, 1998, administrative and service fees
amounted to $1,672,823, of which $164,314 was payable at the end of the period.
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 .15% of the Portfolio's
average daily net assets. For the year ended December 31, 1998, advisory fees
amounted to $5,018,284, of which $448,419 was payable at the end of the period.
Bankers Trust has voluntarily undertaken to waive its fees and reimburse
expenses of the Portfolio, to the extent necessary, to limit all expenses to
.11% of the average daily net assets.
The Liquid Assets Portfolio is a participant with other affiliated entities in a
revolving credit facility and a discretionary demand line of credit facility
(collectively the "credit facilities") in the amounts of $50,000,000 and
$100,000,000, respectively, which expire March 15, 1999. A commitment fee of
.07% per annum on the average daily amount of the available commitment is
payable on a quarterly basis and apportioned equally among all participants.
Amounts borrowed under the credit facilities will bear interest at a rate per
annum equal to the Federal Funds Rate plus .45%. No amounts were drawn down or
outstanding under the credit facilities as of and for the year ended December
31, 1998.
Note 3--Net Assets
At December 31, 1998 net assets consisted of:
Paid-in-Capital ..................... $3,389,709,147
==============
16
<PAGE>
- --------------------------------------------------------------------------------
Liquid Assets Portfolio
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees and Holders of Beneficial Interest of Liquid Assets Portfolio:
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
the Liquid Assets Portfolio (the "Portfolio") at December 31, 1998, and the
results of its operations, the changes in its net assets and the financial
highlights for each of the fiscal periods presented, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolio's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1998 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
February 5, 1999
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
ICC DISTRIBUTORS, INC.
P.O. Box 7558
Portland, ME 04112-9892
Custodian and Transfer Agent
BANKERS TRUST COMPANY 130
Liberty Street New York, NY 10006
Independent Accountants
PRICEWATERHOUSECOOPERS LLP
250 West Pratt Street
Baltimore, MD 21201
Counsel
WILLKIE FARR & GALLAGHER
787 7th Avenue
New York, NY 10019
----------------
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 the Fund's current prospectus.
----------------
Cusip # 055924864
STA 492200(12/98)
