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. BT INSTITUTIONAL FUNDS .
Equity 500 Index Fund
PROSPECTUS
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APRIL 30, 1998
As Revised April 12, 1999
BT Institutional Funds (the "Trust") is an open-end management investment com-
pany (mutual fund) which consists of a number of separate investment funds.
The Equity 500 Index Fund ("the Fund") is a separate series of the Trust. The
Fund seeks to match the performance of the stock market as represented by the
Standard & Poor's Daily Stock Price Index of 500 Common Stocks (the "S&P 500")
before the deduction of expenses allocable to the shares of the Fund and the
Equity 500 Index Portfolio (the "Portfolio") (the "Expenses"). There is no
assurance, however, that the Fund will achieve its stated objective.
Please read this Prospectus carefully before investing and retain it for
future reference. It contains important information about the Fund that you
should know and can refer to in deciding whether the Fund's goals match your
own.
A Statement of Additional Information ("SAI") with the same date has been
filed with the Securities and Exchange Commission ("SEC"), and is incorporated
herein by reference. You may request a free copy of the SAI or a paper copy of
this prospectus, if you have received your prospectus electronically, free of
charge by calling the Trust's Service Agent at 1-800-368-4031. The SAI, mate-
rial incorporated by reference into this document, and other information
regarding the Trust is maintained electronically with the SEC at Internet Web
site (http://www.sec.gov).
Unlike other mutual funds, the Fund seeks to achieve its investment objective
by investing all of its investable assets ("Assets") in the Portfolio, a sepa-
rate investment company with an identical investment objective. The investment
performance of the Fund will correspond directly to the investment performance
of the Portfolio. See "Special Information Concerning Master-Feeder Fund
Structure" herein.
Bankers Trust Company ("Bankers Trust") is the investment adviser (the "Advis-
er") of the Portfolio. Shares of the Fund are not deposits or obligations of,
or guaranteed or endorsed by, Bankers Trust or any other banking or depository
institution. Shares are not federally guaranteed or insured by the Federal
Deposit Insurance Corporation, the U.S. government, the Federal Reserve Board
or any other agency and are subject to investment risk including the possible
loss of principal amount invested.
LIKE SHARES OF ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPEC-
TUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
ICC DISTRIBUTORS, INC.
Two Portland Square . Portland, Maine . 04101
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TABLE OF CONTENTS
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PAGE
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<S> <C>
The Fund.................................................................. 3
Who May Invest............................................................ 3
Summary of Fund Expenses.................................................. 4
Financial Highlights...................................................... 5
Investment Objective and Policies......................................... 6
Risk Factors: Matching the Fund to Your Investment Needs.................. 8
Net Asset Value........................................................... 10
Purchase and Redemption of Shares......................................... 10
Dividends, Distributions and Taxes........................................ 14
Performance Information and Reports....................................... 14
Management of the Trust and Portfolio..................................... 15
Additional Information.................................................... 18
</TABLE>
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2
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THE FUND
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The Fund seeks to replicate as closely as possible (before deduction of
Expenses) the total return of the Standard & Poor's 500 Composite Stock Price
Index (the "S&P 500"), an index emphasizing large-capitalization stocks. The
Fund will include the common stock of those companies included in the S&P 500,
other than Bankers Trust Corporation, selected on the basis of computer gener-
ated statistical data, that are deemed representative of the industry diversi-
fication of the entire S&P 500. The Equity 500 Index Fund invests all of its
Assets in the Equity 500 Index Portfolio.
The Trust seeks to achieve the investment objective of the Fund by investing
all the Assets of the Fund in the Portfolio, which has the same investment
objective as the Fund.
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WHO MAY INVEST
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Shares of the Fund are offered through this Prospectus primarily to institu-
tional investors. The shares are generally available to investors who invest
at least $5 million in the Fund.
The Fund may be appropriate for investors who are willing to ride out stock
market fluctuations in pursuit of potentially higher long-term returns. The
Portfolio invests for growth and does not pursue income. Over time, stocks,
although more volatile, have shown greater growth potential than other types
of securities. In the shorter-term, however, stock prices can fluctuate dra-
matically in response to market factors.
The Fund is not in itself a balanced investment plan. Investors should con-
sider their investment objective and tolerance for risk when making an invest-
ment decision. When investors sell their Fund shares, they may be worth more
or less than what they originally paid for them.
3
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SUMMARY OF FUND EXPENSES
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The following table provides (i) a summary of expenses relating to purchases
and sales of the shares of the Fund and the annual operating expenses of the
Fund and the expenses of the Portfolio, as a percentage of average net assets
of the Fund and (ii) an example illustrating the dollar cost of such expenses
on a $1,000 investment in the Fund. The trustees of BT Institutional Funds
believe that the aggregate per share expenses of the Fund and the Portfolio
will be less than or approximately equal to the expenses which the Fund would
incur if the Trust retained the services of an investment adviser and the
Assets of the Fund were invested directly in the type of securities being held
by the Portfolio.
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Annual Operating Expenses
(as a percentage of the average daily net assets of the Fund)
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Investment advisory fee................................................. 0.075 %
12b-1 fees.............................................................. None
Other expenses (after reimbursements or waivers)........................ 0.025 %
-----
Total operating expenses (after reimbursements or waivers).............. 0.10 %
-----
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<TABLE>
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1 year 3 years 5 years 10 years
Example: ------ ------- ------- --------
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You would pay the following expenses on a
$1,000
investment, assuming: (1) 5% annual return
and (2) redemption
at the end of each time period............... $ 1 $ 3 $ 6 $13
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The expense table and the example above show the costs and expenses that an
investor will bear directly or indirectly as a shareholder of the Fund. The
expense table and the example reflect a voluntary undertaking by Bankers Trust
to waive or reimburse expenses such that the total operating expenses will not
exceed 0.10% of the Fund's average net assets annually. In the absence of this
undertaking, for the fiscal year ended December 31, 1997, the total operating
expenses would have been equal to approximately 0.21% of the Fund's average
net assets annually. The example should not be considered a representation of
past or future expenses and actual expenses may be greater or less than those
shown. Moreover, while each example assumes a 5% annual return, actual perfor-
mance will vary and may result in a return greater or less than 5%.
The Fund is distributed by ICC Distributors, Inc. ("ICC" or the "Distributor")
to customers of Bankers Trust or to customers of another bank or a dealer or
other institution that has a sub-shareholder servicing agreement with Bankers
Trust (along with Bankers Trust, a "Service Agent"). Some Service Agents may
impose certain conditions on their customers in addition to or different from
those imposed by the Fund and may charge their customers a direct fee for
their services, including transaction fees for purchases and redemptions of
Fund shares. Each Service Agent has agreed to transmit to shareholders who are
its customers appropriate disclosures of any fees that it may charge them
directly.
For more information with respect to the expenses of the Fund and the Portfo-
lio see "Management of the Trust and Portfolio" herein.
4
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FINANCIAL HIGHLIGHTS
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The following table shows selected data for a share outstanding, total invest-
ment return, ratios to average net assets and other supplemental data for the
Fund for each period indicated and has been audited by PriceWaterhouseCoopers
LLP, the Fund's independent accountants, whose report thereon appears in
the Fund's Annual Report which is incorporated by reference.
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For the year ended December 31,
----------------------------------------------------
December 31, 1992
(Commencement
1997 1996 1995 1994 1993 of Operations)
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<S> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:*
Net Asset Value,
Beginning of Year...... $ 100.08 $ 83.82 $ 62.64 $ 64.08 $ 60.00 $60.00
---------- ---------- -------- -------- -------- ------
Income from Investment
Operations
Net Investment Income.. 2.04 1.98 1.80 1.68 1.50 --
Net Realized and
Unrealized Gain (Loss)
on Investments and
Futures Transactions.. 30.88 16.92 21.54 (0.78) 4.38 --
---------- ---------- -------- -------- -------- ------
Total from Investment
Operations............. 32.92 18.90 23.34 0.90 5.88 --
---------- ---------- -------- -------- -------- ------
Distributions to
Shareholders
Net Investment Income.. (2.01) (1.98) (1.80) (1.68) (1.50) --
Net Realized Gain from
Investments and
Futures Transactions.. (5.36) (0.66) (0.36) (0.66) (0.30) --
---------- ---------- -------- -------- -------- ------
Total Distributions..... (7.37) (2.64) (2.16) (2.34) (1.80) --
---------- ---------- -------- -------- -------- ------
Net Asset Value, End of
Year................... $ 125.63 $ 100.08 $ 83.82 $ 62.64 $ 64.08 $60.00
========== ========== ======== ======== ======== ======
Total Investment
Return................. 33.23% 22.75% 37.59% 1.40% 9.84% --
Supplemental Data and
Ratios:
Net Assets, End of Year
(000s omitted)........ $1,521,647 $1,218,455 $800,551 $371,216 $170,508 $9,335
Ratios to Average Net
Assets:
Net Investment Income.. 1.74% 2.20% 2.52% 2.84% 2.6% --
Expenses, including
expenses of the Equity
500 Index Portfolio... 0.10% 0.10% 0.10% 0.10% 0.10% --
Decrease Reflected in
Above Expense Ratio
Due to Absorption of
Expenses by Bankers
Trust................. 0.11% 0.11% 0.13% 0.13% 0.25% --
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</TABLE>
* Per share amounts for all years have been restated to reflect 1:6 reverse
stock split effective September 4, 1997.
Further information about the Fund's performance is contained in the Fund's
annual report for the fiscal year ended December 31, 1997, which can be
obtained free of charge.
5
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INVESTMENT OBJECTIVE AND POLICIES
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The Fund seeks to provide investment results that, before Expenses, correspond
to the total return (i.e., the combination of capital changes and income) of
common stocks publicly traded in the United States, as represented by the S&P
500. The Fund offers investors a convenient means of diversifying their hold-
ings of common stocks while relieving those investors of the administrative
burdens typically associated with purchasing and holding these instruments.
The Trust seeks to achieve the investment objective of the Fund by investing
all the Assets of the Fund in the Portfolio, which has the same investment
objective as the Fund. There can be no assurances that the investment objec-
tive of either the Fund or the Portfolio will be achieved. The investment
objective of the Fund and the Portfolio is not a fundamental policy and may be
changed upon notice to but without the approval of the Fund's shareholders or
the Portfolio's investors, respectively. See "Special Information Concerning
Master-Feeder Fund Structure" herein.
Since the investment characteristics of the Fund will correspond directly to
those of the Portfolio, the following is a discussion of the various invest-
ments and investment policies of the Portfolio. Additional information about
the investment policies of the Portfolio appears in the SAI.
Equity 500 Index Portfolio
The Portfolio is not managed according to traditional methods of "active"
investment management, which involve the buying and selling of securities
based upon economic, financial, and market analyses and investment judgment.
Instead, the Portfolio, utilizing a "passive" or "indexing" investment
approach, attempts to replicate, before expenses, the performance of the S&P
500. There is no assurance that the Portfolio will achieve its investment
objective.
Under normal conditions when the Portfolio's assets are above $10 million, the
Portfolio will invest at least 80% of its assets in common stocks of companies
which compose the S&P 500. In seeking to duplicate the performance of the S&P
500, Bankers Trust will attempt over time to allocate the Portfolio's invest-
ments among common stocks in approximately the same weightings as the S&P 500,
beginning with the heaviest-weighted stocks that make up a larger portion of
the index's value. Over the long term, Bankers Trust seeks a correlation
between the performance of the Portfolio, before expenses, and that of the S&P
500 of 0.98 or better (0.95 or better if Portfolio asset levels are below $10
million). A figure of 1.00 would indicate perfect correlation. In the unlikely
event that the targeted correlation is not achieved, the Portfolio's Board of
Trustees will consider alternative structures.
The Adviser utilizes a two-stage sampling approach in seeking to obtain its
objective. Stage one, which encompasses large cap stocks, maintains the stock
holdings at or near their benchmark weights. Large capitalization stocks are
defined as those securities which represent 0.10% or more of the index. In
stage two, smaller stocks are analyzed and selected using risk characteristics
and industry weights in order to match the sector and risk characteristics of
the smaller companies in the S&P 500. This approach helps to maximize portfo-
lio liquidity while minimizing costs.
Bankers Trust generally will seek to match the composition of the S&P 500 but
usually will not invest the Portfolio's stock portfolio to mirror the index
exactly. Because of the difficulty and expense of executing relatively small
stock transactions, the Portfolio may not always be invested in the less heav-
ily weighted S&P 500 stocks, and may at times have its portfolio weighted dif-
ferently from the S&P 500, particularly if the Portfolio has a low level of
assets. When the Portfolio's size is greater, Bankers Trust expects to pur-
chase more of the stocks in the S&P 500 and to match the relative weighting of
the S&P 500 more closely, and anticipates that the Portfolio will be able to
mirror, before expenses, the performance of the S&P 500 with little variance
at asset levels of $10 million or more. In addition, the Portfolio may omit or
remove any S&P 500 stock from the Portfolio if, following objective criteria,
Bankers Trust judges the stock to be insufficiently liquid or believes the
merit of the investment has been substantially impaired by extraordinary
events or financial conditions. Bankers Trust will not purchase the stock of
Bankers Trust Corporation, which is included in the index, and instead will
overweight its holdings of companies engaged in similar businesses.
Under normal conditions, Bankers Trust will attempt to invest as much of the
Portfolio's assets as is practical in common stocks included in the S&P 500.
However, the Portfolio may maintain up to 20% of its assets in short-term debt
securities and money market instruments hedged with stock index futures and
options to meet redemption requests or to facilitate the investment in common
stocks. See "Additional Information" herein for further information.
6
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When the Portfolio has cash from new investments in the Portfolio or holds a
portion of its assets in money market instruments, it may enter into stock
index futures or options to attempt to increase its exposure to the stock mar-
ket. Strategies the Portfolio could use to accomplish this include purchasing
futures contracts, writing put options, and purchasing call options. When the
Portfolio wishes to sell securities, because of shareholder redemptions or
otherwise, it may use stock index futures or options thereon to hedge against
market risk until the sale can be completed. These strategies could include
selling futures contracts, writing call options, and purchasing put options.
Bankers Trust will choose among futures and options strategies based on its
judgment of how best to meet the Portfolio's goals. In selecting futures and
options, Bankers Trust will assess such factors as current and anticipated
stock prices, relative liquidity and price levels in the options and futures
markets compared to the securities markets, and the Portfolio's cash flow and
cash management needs. If Bankers Trust judges these factors incorrectly, or
if price changes in the Portfolio's futures and options positions are not well
correlated with those of its other investments, the Portfolio could be hin-
dered in the pursuit of its objective and could suffer losses. The Portfolio
could also be exposed to risks if it could not close out its futures or
options positions because of an illiquid secondary market.
Short-Term Instruments. The Portfolio intends to stay invested in the securi-
ties described above to the extent practical in light of its objective and
long-term investment perspective. However, the Portfolio's assets may be
invested in short-term instruments with remaining maturities of 397 days or
less (or in money market mutual funds) to meet anticipated redemptions and
expenses or for day-to-day operating purposes. Short-term instruments consist
of (i) short-term obligations of the U.S. government, its agencies, instrumen-
talities, authorities or political subdivisions; (ii) other short-term debt
securities rated Aa or higher by Moody's Investors Service, Inc. ("Moody's")
or AA or higher by Standard & Poor's ("S&P") or, if unrated, of comparable
quality in the opinion of Bankers Trust; (iii) commercial paper; (iv) bank
obligations, including negotiable certificates of deposit, time deposits and
bankers' acceptances; and (v) repurchase agreements. At the time the Portfolio
invests in commercial paper, bank obligations or repurchase agreements, the
issuer or the issuer's parent must have outstanding debt rated Aa or higher by
Moody's or AA or higher by S&P or outstanding commercial paper or bank obliga-
tions rated Prime-1 by Moody's or A-1 by S&P; or, if no such ratings are
available, the instrument must be of comparable quality in the opinion of
Bankers Trust. For more information on these rating categories see "Appendix"
in the SAI.
Additional Investment Limitations
As a diversified fund, no more than 5% of the assets of the Portfolio may be
invested in the securities of one issuer (other than U.S. government securi-
ties), except that up to 25% of the Portfolio's assets may be invested without
regard to this limitation. The Portfolio will not invest more than 25% of its
assets in the securities of issuers in any one industry. In the unlikely event
that the S&P 500 should concentrate to an extent greater than that amount, the
Portfolio's ability to achieve its investment objective may be impaired. These
are fundamental investment policies of the Portfolio which may not be changed
without investor approval. No more than 15% of the Portfolio's net assets may
be invested in illiquid or not readily marketable securities (including repur-
chase agreements and time deposits with remaining maturities of more than
seven calendar days). Additional investment policies of the Portfolio are con-
tained in the SAI.
About the S&P 500 Index
The S&P 500 is a well-known stock market index that includes common stocks of
500 companies from several industrial sectors representing a significant por-
tion of the market value of all common stocks publicly traded in the United
States, most of which are listed on the New York Stock Exchange Inc. (the
"NYSE"). Stocks in the S&P 500 are weighted according to their market capital-
ization (i.e., the number of shares outstanding multiplied by the stock's cur-
rent price). Bankers Trust believes that the performance of the S&P 500 is
representative of the performance of publicly traded common stocks in general.
The composition of the S&P 500 is determined by Standard & Poor's Corporation
and is based on such factors as the market capitalization and trading activity
of each stock and its adequacy as a representation of stocks in a particular
industry group, and may be changed from time to time.
The Fund and the Portfolio are not sponsored, endorsed, sold or promoted by
S&P. S&P makes no representation or warranty, express or implied, to the own-
ers of the Fund or the Portfolio or any member of the public
7
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regarding the advisability of investing in securities generally or in the Fund
and the Portfolio particularly or the ability of the S&P 500 to track general
stock market performance. S&P does not guarantee the accuracy and/or the com-
pleteness of the S&P 500 or any data included therein.
S&P makes no warranty, express or implied, as to the results to be obtained by
the Fund or the Portfolio, owners of the Fund or the Portfolio, or any other
person or entity from the use of the S&P 500 or any data included therein. S&P
makes no express or implied warranties and hereby expressly disclaims all such
warranties of merchantability or fitness for a particular purpose or use with
respect to the S&P 500 or any data included therein.
For more complete information about the S&P 500, see the SAI.
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RISK FACTORS: MATCHING THE FUND TO YOUR INVESTMENT NEEDS
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By itself, the Fund does not constitute a balanced investment plan. The Fund
is designed as a relatively low-cost means for investors to diversify their
investment portfolios. As described above, the Portfolio invests in an index
of securities that is representative of the stock market as a whole. While the
performance of the S&P 500 has fluctuated considerably, the long-term perfor-
mance of the S&P 500 has been greater than inflation. Thus, the Fund may make
sense for you if you can afford to ride out changes in the stock market both
favorable and unfavorable. The Fund's share price, yield and total return will
fluctuate and your investment may be worth more or less than your original
cost when you redeem your shares.
The ability of the Fund and the Portfolio to meet their investment objective
depends to some extent on the cash flow experienced by the Fund and by the
other investors in the Portfolio, since investments and redemptions by share-
holders of the Fund will generally require the Portfolio to purchase or sell
securities. Bankers Trust will make investment changes to accommodate cash
flow in an attempt to maintain the similarity of the Portfolio to the S&P 500.
You should also be aware that the performance of the S&P 500 is a hypothetical
number which does not take into account brokerage commissions and other costs
of investing, unlike the Portfolio which must bear these costs. Finally, since
the Portfolio seeks to track the S&P 500, Bankers Trust generally will not
attempt to judge the merits of any particular stock as an investment.
Portfolio Turnover
The frequency of portfolio transactions--the Portfolio's turnover rate--will
vary from year to year depending on market conditions and the Portfolio's cash
flows. The Portfolio's annual turnover rate is not expected to exceed 100%.
The Portfolio's turnover rates for the years ended December 31, 1997 and 1996
were 19% and 15%, respectively.
Derivatives
The Portfolio may invest in stock index futures and options thereon which are
commonly known as derivatives. Generally, a derivative is a financial arrange-
ment, the value of which is based on, or "derived" from, a traditional securi-
ty, asset or market index. Some "derivatives" such as mortgage-related and
other asset-backed securities are in many respects like any other investment,
although they may be more volatile or less liquid than more traditional debt
securities. There are, in fact, many different types of derivatives and many
different ways to use them. There are a range of risks associated with those
uses. Futures and options are commonly used for traditional hedging purposes
to attempt to protect a fund from exposure to changing interest rates, securi-
ties prices or currency exchange rates and for cash management purposes as a
low cost method of gaining exposure to a particular securities market without
investing directly in those securities. The Adviser will only use derivatives
for cash management purposes. Derivatives will not be used to increase portfo-
lio risk above the level
8
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that could be achieved using only traditional investment securities or to
acquire exposure to changes in the value of assets or indices that by
themselves would not be purchased for the Portfolio.
Special Information Concerning Master-Feeder Fund Structure
Unlike other open-end management investment companies (mutual funds) which
directly acquire and manage their own portfolio securities, the Fund seeks to
achieve its investment objective by investing all of its Assets in the Portfo-
lio, a separate registered investment company with the same investment objec-
tive as the Fund. Therefore, an investor's interest in the Portfolio's securi-
ties is indirect. In addition to selling a beneficial interest to the Fund,
the Portfolio may sell beneficial interests to other mutual funds or institu-
tional investors. Such investors will invest in the Portfolio on the same
terms and conditions and will pay a proportionate share of the Portfolio's
expenses. However, the other investors investing in the Portfolio are not
required to sell their shares at the same public offering price as the Fund
due to variations in sales commissions and other operating expenses. There-
fore, investors in the Fund should be aware that these differences may result
in differences in returns experienced by investors in the different funds that
invest in the Portfolio. Such differences in returns are also present in other
mutual fund structures. Information concerning other holders of interests in
the Portfolio is available from Bankers Trust at 1-800-368-4031.
The master-feeder fund structure is relatively complex, so shareholders should
carefully consider this investment approach.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large
fund withdraws from the Portfolio, the remaining funds may experience higher
pro rata operating expenses, thereby producing lower returns (however, this
possibility exists as well for traditionally structured funds which have large
institutional investors). Additionally, the Portfolio may become less diverse,
resulting in increased portfolio risk. Also, funds with a greater pro rata
ownership in the Portfolio could have effective voting control of the opera-
tions of the Portfolio. Except as permitted by the SEC, whenever the Trust is
requested to vote on matters pertaining to the Portfolio, the Trust will hold
a meeting of shareholders of the Fund and will cast all of its votes in the
same proportion as the votes of the Fund's shareholders. Fund shareholders who
do not vote will not affect the Trust's votes at the Portfolio meeting. The
percentage of the Trust's votes representing the Fund's shareholders not vot-
ing will be voted by the Trustees or officers of the Trust in the same propor-
tion as the Fund shareholders who do, in fact, vote.
Certain changes in the Portfolio's investment objective, policies or restric-
tions may require the Fund to withdraw its interest in the Portfolio. Any such
withdrawal could result in a distribution "in kind" of portfolio securities
(as opposed to a cash distribution from the Portfolio). If securities are dis-
tributed, the Fund could incur brokerage, tax or other charges in converting
the securities to cash. In addition, the distribution in kind may result in a
less diversified portfolio of investments or adversely affect the liquidity of
the Fund. Notwithstanding the above, there are other means for meeting redemp-
tion requests, such as borrowing.
The Fund may withdraw its investment from the Portfolio at any time, if the
Board of Trustees of the Trust determines that it is in the best interests of
the shareholders of the Fund to do so. Upon any such withdrawal, the Board of
Trustees of the Trust would consider what action might be taken, including the
investment of all the Assets of the Fund in another pooled investment entity
having the same investment objective as the Fund or the retaining of an
investment adviser to manage the Fund's assets in accordance with the invest-
ment policies described below with respect to the Portfolio.
The Fund's investment objective is not a fundamental policy and may be changed
upon notice to but without the approval of the Fund's shareholders. If there
is a change in the Fund's investment objective, the Fund's shareholders should
consider whether the Fund remains an appropriate investment in light of their
then-current needs. The investment objective of the Portfolio is also not a
fundamental policy. Shareholders of the Fund will receive 30 days prior writ-
ten notice with respect to any change in the investment objective of the Fund
or the Portfolio. See "Investment Objective and Policies" herein for a
description of the fundamental policies of the Portfolio that cannot be
changed without approval by the holders of "a majority of the outstanding vot-
ing securities" (as defined in the 1940 Act) of the Portfolio.
For descriptions of the investment objective, policies and restrictions of the
Portfolio, see "Investment Objective, Policies and Restrictions" in the SAI.
For descriptions of the management and expenses of the Portfolio, see "Manage-
ment of the Trust and Portfolio" herein and in the SAI.
9
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NET ASSET VALUE
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The net asset value ("NAV") per share of the Fund is calculated on each day on
which the NYSE is open (each such day being a "Valuation Day"). The NYSE is
currently open on each day, Monday through Friday, except (a) January 1st,
Martin Luther King Jr. Day (the third Monday in January), Presidents' Day (the
third Monday in February), Good Friday, Memorial Day (the last Monday in May),
July 4th, Labor Day (the first Monday in September), Thanksgiving Day (the
last Thursday in November) and December 25th; and (b) the preceding Friday or
the subsequent Monday when one of the calendar determined holidays falls on a
Saturday or Sunday, respectively.
The NAV per share of the Fund is calculated once on each Valuation Day as of
the close of regular trading on the NYSE, which is currently 4:00 p.m., East-
ern time or in the event that the NYSE closes early, at the time of such early
closing (the "Valuation Time"). The NAV per share of the Fund is computed by
dividing the value of the Fund's Assets (i.e., the value of its investment in
the Portfolio and other assets), less all liabilities, by the total number of
its shares outstanding. The Portfolio's securities and other assets are valued
primarily on the basis of market quotations or, if quotations are not readily
available, by a method which the Portfolio's Board of Trustees believes accu-
rately reflects fair value.
Under procedures adopted by the Board, a NAV for a Fund later determined to
have been inaccurate for any reason will be recalculated. Purchases and
redemptions made at a NAV determined to have been inaccurate will be adjusted,
although in certain circumstances, such as where the difference between the
original NAV and the recalculated NAV divided by the recalculated NAV is 0.005
(1/2 of 1%) or less or shareholder transactions are otherwise insubstantially
affected, further action is not required.
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PURCHASE AND REDEMPTION OF SHARES
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How to buy shares
The Trust accepts purchase orders for shares of the Fund at the NAV per share
next determined after the order is received on each Valuation Day. See "Net
Asset Value" herein. Shares of the Fund may be available through Investment
Professionals, such as broker/dealers and investment advisors (including Serv-
ice Agents).
Purchase orders for shares of the Fund (including those purchased through a
Service Agent) that are transmitted to the Trust's Transfer Agent (the "Trans-
fer Agent"), prior to the Valuation Time on any Valuation Day will be effec-
tive at that day's Valuation Time. The Trust and Transfer Agent reserve the
right to reject any purchase order.
Shares must be purchased in accordance with procedures established by the
Transfer Agent and each Service Agent. It is the responsibility of each Serv-
ice Agent to transmit to the Transfer Agent purchase and redemption orders and
to transmit to Bankers Trust as the Trust's custodian (the "Custodian") pur-
chase payments by the following business day (trade date +1) after an order
for shares is placed. A shareholder must settle with the Service Agent for his
or her entitlement to an effective purchase or redemption order as of a par-
ticular time. Because Bankers Trust is the Custodian and Transfer Agent of the
Trust, funds may be transferred directly from or to a customer's account held
with Bankers Trust to settle transactions with the Fund without incurring the
additional costs or delays associated with the wiring of federal funds.
Certificates for shares will not be issued. Each shareholder's account will be
maintained by a Service Agent or Transfer Agent.
10
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If orders are placed through an Investment Professional, it is the responsi-
bility of the Investment Professional to transmit the order to buy shares to
the Transfer Agent before 4:00 p.m. Eastern time.
The Transfer Agent must receive payment within one business day after an order
for shares is placed; otherwise, the purchase order may be canceled and the
investor could be held liable for resulting fees and/or losses.
Minimum investments
<TABLE>
<S> <C>
To Open An Account $5 Million
To Add To An Account $100,000
Minimum Account Balance $1 Million
</TABLE>
The Fund and its service providers reserve the right to, from time to time, at
their discretion, waive or reduce the investment minimums. Shares of the Fund
may be offered to employees of Bankers Trust and their spouses and minor chil-
dren without regard to the minimum initial investment requirements.
If you are new to BT Institutional Funds, complete and sign an account appli-
cation and mail it along with your check to the address listed below. If there
is no account application accompanying this Prospectus, call the BT Service
Center at 1-800-368-4031.
BT Service Center
P.O. Box 419210
Kansas City, MO 64141-6210
Overnight mailings:
BT Service Center
210 West 10th Street, 8th Floor
Kansas City, MO 64105-1716
If you already have money invested in a Fund in the BT Family of Funds, you
can:
. Mail an account application with a check,
. Wire money into your account,
. Open an account by exchanging from another fund in the BT Family of Funds,
or
. Contact your Service Agent or Investment Professional.
Additional Information About Buying Shares
<TABLE>
<CAPTION>
To Open an Account To Add to an Account
<S> <C> <C>
By Wire Call the BT Service Center at Call your Investment Professional
1-800-368-4031 to receive or wire additional investment to:
wire instructions for account
establishment.
Routing No.: 021001033
Attn: Bankers Trust/IFTC Deposit
DDA No.: 00-226-296
FBO: (Account name)
(Account number)
Credit: BT Institutional Equity
500 Index Fund--481
By Phone Contact your Service Agent, Contact your Service Agent,
Investment Professional, or call Investment Professional, or call
BT's Service Center at 1-800-368- BT's Service Center at 1-800-368-
4031. If you are an existing 4031. If you are an existing
shareholder, you may exchange from shareholder, you may exchange from
another BT account with the same another BT account with the same
registration, including, name, registration, including, name,
address, and taxpayer ID number. address, and taxpayer ID number.
By Mail Complete and sign the account Make your check payable to the
application. Make your check complete name of the Fund of your
payable to the complete name of choice. Indicate your Fund account
the Fund of your choice. Mail to number on your check and mail to
appropriate address indicated on the address printed on your the
the application. account statement.
</TABLE>
11
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How to Sell Shares
You can arrange to take money out of your fund account at any time by selling
(redeeming) some or all of your shares. Your shares shall be sold at the next
NAV calculated after an order is received by the Transfer Agent. Redemption
requests should be transmitted by customers in accordance with procedures
established by the Transfer Agent and the Shareholder's Service Agent. Redemp-
tion requests for shares of the Fund received by the Service Agent and trans-
mitted to the Transfer Agent prior to the Valuation Time on each Valuation Day
will be effective at that day's Valuation Time and the redemption proceeds
normally will be delivered to the shareholder's account the next day, but in
any event within seven calendar days following receipt of the request.
Service Agents may allow redemptions or exchanges by telephone and may dis-
claim liability for following instructions communicated by telephone that the
Service Agent reasonably believes to be genuine. The Service Agent must pro-
vide the investor with an opportunity to choose whether or not to utilize the
telephone redemption or exchange privilege. The Transfer Agent and the Service
Agent must employ reasonable procedures to confirm that instructions communi-
cated by telephone are genuine. If the Shareholder Servicing Agent does not do
so, it may be liable for any losses due to unauthorized or fraudulent instruc-
tions. Such procedures may include, among others, requiring some form of per-
sonal identification prior to acting upon instructions received by telephone,
providing written confirmation of such transactions and/or tape recording of
telephone instructions.
Redemption orders are processed without charge by the Trust. A Service Agent
may on at least 30 days' notice involuntarily redeem a shareholder's account
with the Fund having a balance below the minimum, but not if an account is
below the minimum due to a change in market value. See "Minimum Investments"
above for minimum balance amounts.
To sell shares in a retirement account, your request must be made in writing,
except for exchanges to other eligible funds in the BT Family of Funds, which
can be requested by phone or in writing. For information on retirement distri-
butions, contact your Service Agent or call the BT Service Center at 1-800-
368-4031.
To sell shares by bank wire you will need to sign up for these services in
advance when completing your account application.
Certain requests must include a signature guarantee to protect you and Bankers
Trust from fraud. Redemption requests in writing must include a signature
guarantee if any of the following situations apply:
. Your account registration has changed within the last 30 days,
. The check is being mailed to a different address than the one on your
account (record address),
. The check is being made payable to someone other than the account owner,
. The redemption proceeds are being transferred to a BT account with a differ-
ent registration, or
. You wish to have redemption proceeds wired to a non-predesignated bank
account.
A signature guarantee is also required if you change the pre-designated bank
information for receiving redemption proceeds on your account.
You should be able to obtain a signature guarantee from a bank, broker, deal-
er, credit union (if authorized under state law), securities exchange or asso-
ciation, clearing agency, or savings association. A notary public cannot pro-
vide a signature guarantee.
Additional Information About Selling Shares
By Wire - You must sign up for the wire feature before using it. To verify
that it is in place, call 1-800-368-4031. Minimum wire: $1,000. Your wire
redemption request must be received by the Transfer Agent before 4:00 p.m.
Eastern time for money to be wired on the next business day.
In Writing - Write a signed "letter of instruction" with your name, the Fund's
name and Fund's number, your Fund account number, the dollar amount or number
of shares to be redeemed, and mail to one of the following addresses:
BT Service Center
P.O. Box 419210
Kansas City, MO 64141-6210
Overnight mailings:
BT Service Center
210 West 10th Street, 8th Floor
Kansas City, MO 64105-1716
For Trust accounts, the trustee must sign the letter indicating capacity as
trustee. If the trustee's name is not on the account registration, provide a
copy of the trust document certified within the last 60 days.
12
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For a Business or Organization account, at least one person authorized by cor-
porate resolution to act on the account must sign the letter.
Unless otherwise instructed, the Transfer Agent will send a check to the
account address of record. The Trust reserves the right to close investor
accounts via 30 day notice in writing if the Fund account balance falls below
$1 million.
Exchange Privilege
Shareholders may exchange their shares for shares of certain other funds in
the BT Family of Funds registered in their state. The Fund reserves the right
to terminate or modify the exchange privilege in the future. To make an
exchange, follow the procedures indicated in "Purchase of Shares" and "Redemp-
tion of Shares" herein. Before making an exchange, please note the following:
. Call your Service Agent for information and a prospectus. Read the prospec-
tus for relevant information.
. Complete and sign an application, taking care to register your new account
in the same name, address and taxpayer identification number as your exist-
ing account(s).
. Each exchange represents the sale of shares of one fund and the purchase of
shares of another, which may produce a gain or loss for tax purposes. Your
Service Agent will receive a written confirmation of each exchange transac-
tion.
13
<PAGE>
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DIVIDENDS, DISTRIBUTIONS AND TAXES
- -------------------------------------------------------------------------------
Distributions. The Fund distributes substantially all of its net investment
income and capital gains to shareholders each year. Income dividends are dis-
tributed quarterly. In addition, the Fund will distribute net capital gains,
if any, at least annually and potentially semi-annually, if required, to
remain in compliance with the applicable tax regulations. Unless a shareholder
instructs the Trust to pay such dividends and distributions in cash, they will
be automatically reinvested in additional shares of the Fund.
Federal Taxes. The Fund intends to qualify as a regulated investment company,
as defined in the Internal Revenue Code of 1986, as amended (the "Code"). Pro-
vided the Fund meets the requirements imposed by the Code and distributes all
of its income and gains, the Fund will not pay any Federal income or excise
taxes. The Portfolio will also not be required to pay any Federal income or
excise taxes.
Distributions from the Fund's income and short-term capital gains are taxed as
dividends, and long-term capital gain distributions are taxed as long-term
capital gains. The Fund's distributions are taxable when they are paid,
whether you take them in cash or reinvest them in additional shares. Distribu-
tions declared to shareholders of record in November and December and paid in
January are taxable as if paid on December 31. The Fund will send each share-
holder a tax statement by January 31 showing the tax status of the distribu-
tions received in the past year.
Capital Gains. You may realize a capital gain or loss when you redeem (sell)
or exchange shares. Because the tax treatment also depends on your purchase
price and your personal tax position, you should keep your regular account
statements to use in determining your tax.
"Buying a Dividend." On the ex-date for a distribution from income and/or cap-
ital gains, the Fund's share value is reduced by the amount of the distribu-
tion. If you buy shares just before the ex-date ("buying a dividend"), you
will pay the full price for the shares and then receive a portion of the price
back as a taxable distribution.
Other Tax Information. In addition to Federal taxes, you may be subject to
state or local taxes on your investment, depending on the laws in your area.
You should consult with your own tax adviser concerning the application of
Federal, state and local taxes to your distributions from the Fund.
- -------------------------------------------------------------------------------
PERFORMANCE INFORMATION AND REPORTS
- -------------------------------------------------------------------------------
The Fund's performance may be used from time to time in advertisements, share-
holder reports or other communications to shareholders or prospective share-
holders. Performance information may include the Fund's investment results
and/or comparisons to the Lipper S&P Funds' Average, or other various unman-
aged indices, such as the S&P 500, or results of other mutual funds or invest-
ment or savings vehicles. In addition, the Fund may compare various Portfolio
characteristics such as beta, price earnings ratio and sector diversification
to those of various unmanaged indices or other mutual funds or investment or
savings vehicles. The Fund's investment results as used in such communications
will be calculated on a yield or total rate of return basis in the manner set
forth below. From time to time, Fund rankings may be quoted from various
sources, such as Lipper Analytical Services, Inc., Value Line and Morningstar,
Inc.
The Trust may provide period and average annualized "total return" quotations
for the Fund. The Fund's "total return" refers to the change in the value of
an investment in the Fund over a stated period based on any change in NAV per
share and including the value of any shares purchasable with any dividends or
capital gains distributed during such period. Period total return may be
annualized. An annualized total return is a compounded total return which
assumes that the period total return is generated over a one-year period, and
that all dividends and capital gain distributions are reinvested. An
annualized total return will be higher than a period total return if the
period is shorter than one year, because of the compounding effect.
The Trust may provide annualized "yield" quotations for the Fund. The "yield"
of the Fund refers to the income generated by an investment in the Fund over a
30-day or one-month period (which period shall be stated in any such adver-
tisement or communications). This income is then annualized; that is, the
amount generated by the investment over the period is assumed to be generated
over a one-year period and is shown as a percentage of investment.
14
<PAGE>
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Unlike some bank deposits or other investments which pay a fixed yield for a
stated period of time, the total return of the Fund will vary depending upon
interest rates, the current market value of the securities held by the Portfo-
lio and changes in the Fund's expenses. In addition, during certain periods
for which total return or yields may be provided, Bankers Trust, as Adviser,
Service Agent or Administrator, may have voluntarily agreed to waive portions
of its fees on a month-to-month basis. Such waivers will have the effect of
increasing the Fund's net income (and therefore its total return or yield)
during the period such waivers are in effect.
Shareholders will receive financial reports semi- annually that include the
Portfolio's financial statements, including a listing of investment securities
held by the Portfolio at those dates. Annual reports are audited by indepen-
dent accountants.
- -------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST AND PORTFOLIO
- -------------------------------------------------------------------------------
Board of Trustees
The affairs of the Trust and the Portfolio are managed under the supervision
of their respective Boards of Trustees. By virtue of the responsibilities
assumed by Bankers Trust, the administrator of the Trust and Portfolio, nei-
ther the Trust nor the Portfolio requires employees other than its executive
officers. None of the executive officers of the Trust or Portfolio devotes
full time to the affairs of the Trust or the Portfolio.
The Trustees of the Trust who are not "interested persons" (as defined in the
1940 Act) (the "Independent Trustees") of the Trust or of the Portfolio, as
the case may be, have adopted written procedures reasonably appropriate to
deal with potential conflicts of interest, up to and including creating sepa-
rate boards of trustees, arising from the fact that several of the same indi-
viduals are Trustees of the Trust and the Portfolio. For more information with
respect to the Trustees of both the Trust and the Portfolio, see "Management
of the Trust and the Portfolio" in the SAI.
Investment Adviser
The Trust has not retained the services of an investment adviser since the
Trust seeks to achieve the investment objective of the Fund by investing all
the Assets of the Fund in the Portfolio. The Portfolio has retained the serv-
ices of Bankers Trust, as investment adviser.
Bankers Trust Company and its Affiliates
Bankers Trust Company, a New York banking corporation with principal offices
at 130 Liberty Street (One Bankers Trust Plaza), New York, New York 10006, is
a wholly owned subsidiary of Bankers Trust Corporation. Bankers Trust conducts
a variety of general banking and trust activities and is a major wholesale
supplier of financial services to the international and domestic institutional
market. As of December 31, 1997, Bankers Trust Corporation was the seventh
largest bank holding company in the United States with total assets of over
$100 billion. Bankers Trust is dedicated to servicing the needs of corpora-
tions, governments, financial institutions and private clients through a
global network of over 90 offices in more than 50 countries. Investment man-
agement is a core business of Bankers Trust, built on a tradition of excel-
lence from its roots as a trust bank founded in 1903. The scope of Bankers
Trust's investment management capability is unique due to its leadership posi-
tions in both active and passive quantitative management and its presence in
major equity and fixed income markets around the world. Bankers Trust is one
of the nation's largest and most experienced investment managers, with over
$300 billion in assets under management globally. Of that total, approximately
$148 billion are in U.S. equity index assets alone.
On March 11, 1999, Bankers Trust announced that it had reached an agreement
with the United States Attorney's Office in the Southern District of New York
to resolve an investigation concerning inappropriate transfers of unclaimed
funds and related record-keeping problems that occurred between 1994 and early
1996. Pursuant to its agreement with the U.S. Attorney's Office, Bankers Trust
pleaded guilty to misstating entries in the bank's books and records and
agreed to pay a $60 million fine to federal authorities. Separately, Bankers
Trust agreed to pay a $3.5 million fine to the State of New York. The events
leading up to the guilty pleas did not arise out of the investment advisory or
mutual fund management activities of Bankers Trust or its affiliates.
As a result of the plea, absent an order from the SEC, Bankers Trust would not
be able to continue to provide investment advisory services to the Fund. The
SEC has granted a temporary order to permit Bankers Trust and its affiliates
to continue to provide investment advisory services to registered investment
companies. There is no assurance that the SEC will grant a permanent order.
15
<PAGE>
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Bankers Trust has more than 50 years of experience managing retirement assets
for the nation's largest corporations and institutions. In the past, these
clients have been serviced through separate account and commingled fund struc-
tures. Bankers Trust's officers have had extensive experience in managing
investment portfolios having objectives similar to those of the Portfolio.
On November 30, 1998, Bankers Trust Corporation entered into an Agreement and
Plan of Merger with Deutsche Bank AG under which Bankers Trust Corporation
would merge with and into a subsidiary of Deutsche Bank AG. Deutsche Bank AG
is a major global banking institution that is engaged in a wide range of
financial services, including investment management, mutual funds, retail and
commercial banking, investment banking and insurance. The transaction is con-
tingent upon various regulatory approvals, and continuation of the Fund's
advisory relationship with Bankers Trust thereafter is subject to the approval
of Fund shareholders. If the transaction is approved and completed, Deutsche
Bank AG, as Bankers Trust's new parent company, will control its operations as
investment adviser. Bankers Trust believes that, under this new arrangement,
the services provided to the Fund will be maintained at their current level.
Bankers Trust, subject to the supervision and direction of the Board of Trust-
ees of the Portfolio, manages the Portfolio in accordance with the Portfolio's
investment objective and stated investment policies, makes investment deci-
sions for the Portfolio, places orders to purchase and sell securities and
other financial instruments on behalf of the Portfolio and employs profes-
sional investment managers and securities analysts who provide research serv-
ices to the Portfolio. Bankers Trust may utilize the expertise of any of its
worldwide subsidiaries and affiliates to assist in its role as Adviser.
All orders for investment transactions on behalf of the Portfolio are placed
by Bankers Trust with broker- dealers and other financial intermediaries that
it selects, including those affiliated with Bankers Trust. A Bankers Trust
affiliate will be used in connection with a purchase or sale of an investment
for the Portfolio only if Bankers Trust believes that the affiliate's charge
for the transaction does not exceed usual and customary levels. The Portfolio
will not invest in obligations for which Bankers Trust or any of its affili-
ates is the ultimate obligor or accepting bank. The Portfolio may, however,
invest in the obligations of correspondents and customers of Bankers Trust.
Bankers Trust receives an investment advisory fee from the Portfolio, computed
daily and paid monthly, at the annual rate of 0.075% of the average daily net
assets of the Portfolio.
Bankers Trust has been advised by its counsel that, in counsel's opinion,
Bankers Trust currently may perform the services for the Trust and the Portfo-
lio described in this Prospectus and the SAI without violation of the Glass-
Steagall Act or other applicable banking laws or regulations.
Portfolio Manager
Mr. Frank Salerno, Managing Director of Bankers Trust is responsible for the
day-to-day management of the Portfolio. Mr. Salerno has been employed by Bank-
ers Trust since 1981 and has managed the Portfolio's assets since the Portfo-
lio commenced operations.
Administrator
Under its Administration and Services Agreement with the Trust, Bankers Trust
calculates the NAV of the Fund and generally assists the Board of Trustees of
the Trust in all aspects of the administration and operation of the Trust. The
Administration and Services Agreement provides for the Trust to pay Bankers
Trust a fee, computed daily and paid monthly, at the annual rate of 0.05% of
the average daily net assets of the Fund.
Under an Administration and Services Agreement with the Portfolio, Bankers
Trust calculates the value of the assets of the Portfolio and generally
assists the Board of Trustees of the Portfolio in all aspects of the adminis-
tration and operation of the Portfolio. For these services, the Portfolio pays
to Bankers Trust a fee, computed daily and paid monthly, equal to the lesser
of 0.05% of the average daily net assets of the Portfolio or an amount that
brings the total operating expenses of the Portfolio to 0.08% of the average
daily net assets of the Portfolio. Under each Administration and Services
Agreement, Bankers Trust may delegate one or more of its responsibilities to
others at Bankers Trust's expense. For more information, see the SAI.
Distributor
ICC Distributors, Inc. is the principal distributor for shares of the Fund. In
addition, ICC provides distribution services for other registered investment
companies. The principal business address of ICC and its affiliates is Two
Portland Square, Portland, Maine 04101.
16
<PAGE>
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Service Agent
All shareholders must be represented by a Service Agent. Bankers Trust acts as
a Service Agent pursuant to its Administration and Services Agreement with the
Trust and receives no additional compensation from the Fund for such share-
holder services. The service fees of any other Service Agents, including bro-
ker-dealers, will be paid by Bankers Trust from its fees. The services pro-
vided by a Service Agent may include establishing and maintaining shareholder
accounts, processing purchase and redemption transactions, arranging for bank
wires, performing shareholder sub-accounting, answering client inquiries
regarding the Trust, assisting clients in changing dividend options, account
designations and
addresses, providing periodic statements showing the client's account balance,
transmitting proxy statements, periodic reports, updated prospectuses and
other communications to shareholders and, with respect to meetings of share-
holders, collecting, tabulating and forwarding to the Trust executed proxies
and obtaining such other information and performing such other services as the
Administrator or the Service Agent's clients may reasonably request and agree
upon with the Service Agent. Service Agents may separately charge their cli-
ents additional fees only to cover provision of additional or more comprehen-
sive services not already provided under the Administration and Services
Agreement with Bankers Trust, or of the type or scope not generally offered by
a mutual fund, such as cash management services or enhanced retirement or
trust reporting. In addition, investors may be charged a transaction fee if
they effect transactions in Fund shares through a broker or agent. Each Serv-
ice Agent has agreed to transmit to shareholders, who are its customers,
appropriate disclosures of any fees that it may charge them directly.
Custodian and Transfer Agent
Bankers Trust acts as Custodian of the Assets of the Trust and the Portfolio
and serves as the Transfer Agent for the Trust and the Portfolio under the
Administration and Services Agreement with the Trust and the Portfolio.
Organization of the Trust
The Trust was organized on March 26, 1990 under the laws of the Commonwealth
of Massachusetts. The Fund is a separate series of the Trust. The Trust offers
shares of beneficial interest of separate series, par value $0.001 per share.
The shares of the other series of the Trust are offered through separate pro-
spectuses. No series of shares has any preference over any other series.
The Trust is an entity commonly known as a "Massachusetts business trust."
Under Massachusetts law, shareholders of such a business trust may, under cer-
tain circumstances, be held personally liable as partners for its obligations.
However, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Trust itself was unable to meet its obligations.
When matters are submitted for shareholder vote, shareholders of the Fund will
have one vote for each full share held and proportionate, fractional votes for
fractional shares held. A separate vote of the Fund is required on any matter
affecting the Fund on which shareholders are entitled to vote. Shareholders of
the Fund are not entitled to vote on Trust matters that do not affect the
Fund. There normally will be no meetings of shareholders for the purpose of
electing Trustees unless and until such time as less than a majority of Trust-
ees holding office have been elected by shareholders, at which time the Trust-
ees then in office will call a shareholders' meeting for the election of
Trustees. Any Trustee may be removed from office upon the vote of shareholders
holding at least two-thirds of the Trust's outstanding shares at a meeting
called for that purpose. The Trustees are required to call such a meeting upon
the written request of shareholders holding at least 10% of the Trust's out-
standing shares.
The Portfolio, in which all the Assets of the Fund will be invested, is orga-
nized as a trust under the laws of the State of New York. The Portfolio's Dec-
laration of Trust provides that the Fund and other entities investing in the
Portfolio (e.g., other investment companies, insurance company separate
accounts and common and commingled trust funds) will each be liable for all
obligations of the Portfolio. However, the risk of the Fund incurring finan-
cial loss on account of such liability is limited to circumstances in which
both inadequate insurance existed and the Portfolio itself was unable to meet
its obligations. Accordingly, the Trustees of the Trust believe that neither
the Fund nor its shareholders will be adversely affected by reason of the
Fund's investing in the Portfolio.
Each series in the Trust will not be involved in any vote involving a Portfo-
lio in which it does not invest its Assets. Shareholders of all of the series
of the Trust will, however, vote together to elect Trustees of the Trust and
for certain other matters. Under certain circumstances, the shareholders of
one or more series could control the outcome of these votes.
17
<PAGE>
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Expenses of the Fund and Portfolio
The Fund bears its own expenses. Operating expenses for the Fund generally
consist of all costs not specifically borne by Bankers Trust or ICC, including
administration and services fees, fees for necessary professional services,
amortization of organizational expenses, and costs associated with regulatory
compliance and maintaining legal existence and shareholder relations. Bankers
Trust has agreed to reimburse the Fund to the extent required
by applicable state law for certain expenses that are described in the SAI.
The Portfolio bears its own expenses. Operating expenses for the Portfolio
generally consist of all costs not specifically borne by Bankers Trust or ICC,
including investment advisory and administration and services fees, fees for
necessary professional services, amortization of organizational expenses, the
costs associated with regulatory compliance and maintaining legal existence
and investor relations.
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ADDITIONAL INFORMATION
- -------------------------------------------------------------------------------
Repurchase Agreements. In a repurchase agreement the Portfolio buys a security
and simultaneously agrees to sell it back at a higher price at a future date.
In the event of the bankruptcy of the other party to a repurchase agreement,
the Portfolio could experience delays in recovering either its cash or selling
the securities subject to the repurchase agreement. To the extent that, in the
meantime, the value of the securities repurchased had decreased or the value
of the securities had increased, the Portfolio could experience a loss. In all
cases, Bankers Trust must find the creditworthiness of the other party to the
transaction satisfactory.
Securities Lending. The Portfolio is permitted to lend up to 30% of the total
value of its securities. These loans must be secured continuously be cash or
securities issued or guaranteed by the United States government, its agencies
or instrumentalities or by a letter of credit at least equal to the market
value of the securities loaned plus accrued income. By lending its securities,
the Portfolio may increase its income by continuing to receive income on the
loaned securities as well as by the opportunity to receive interest on the
collateral. During the term of the loan, a Portfolio continues to bear the
risk of fluctuations in the price of the loaned securities. In lending securi-
ties to brokers, dealers and other organizations, the Portfolio is subject to
risks which, like those associated with other extensions of credit, include
delays in receiving additional collateral, in recovery should the borrower
fail financially and possible loss of the collateral. Upon receipt of appro-
priate regulatory approval,
cash collateral may be invested in a money market fund managed by Bankers
Trust (or its affiliate) and Bankers Trust may serve as the Portfolio's lend-
ing agent and may share in revenue received from securities lending transac-
tions as compensation for this service.
When-issued and Delayed Delivery Securities. The Portfolio may purchase secu-
rities on a when-issued or delayed delivery basis. Delivery of and payment for
these securities may take place as long as a month or more after the date of
the purchase commitment. The value of these securities is subject to market
fluctuation during this period and no income accrues to the Portfolio until
settlement takes place. The Portfolio segregates with the Custodian liquid
securities in an amount at least equal to these commitments. When entering
into a when-issued or delayed delivery transaction, the Portfolio will rely on
the other party to consummate the transaction; if the other party fails to do
so, the Portfolio may be disadvantaged.
Options on Stock Indices. The Portfolio may purchase and write put and call
options on stock indices listed on stock exchanges. A stock index fluctuates
with changes in the market values of the stocks included in the index.
Options on stock indices are generally similar to options on stock except that
the delivery requirements are different. Instead of giving the right to take
or make delivery of stock at a specified price, an option on a stock index
gives the holder the right to receive a cash "exercise settlement amount"
equal to (a) the amount, if any, by which the fixed exercise price of the
option exceeds (in the case of a put) or is less than (in the case of a call)
the closing value of the underlying index on the date of exercise, multiplied
by (b) a fixed "index multiplier." Receipt of this cash amount will depend
upon the closing level of the stock index upon which the option is based being
greater than, in the case of a call, or less than, in the case of a put, the
exercise price of the option. The amount of cash received will be equal to
such difference between the closing price of the index and the exercise price
of the option expressed in dollars times a specified multiple. The writer of
the option is obligated, in return for the premium received, to make delivery
of this amount. The writer may offset its position in stock index options
prior to expiration by enter-
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ing into a closing transaction on an exchange or the option may expire unexer-
cised.
Because the value of an index option depends upon movements in the level of
the index rather than the price
of a particular stock, whether the Portfolio will realize a gain or loss from
the purchase or writing of options on an index depends upon movements in the
level of stock prices in the stock market generally or, in the case of certain
indices, in an industry or market segment, rather than movements in the price
of a particular stock. Accordingly, successful use by the Portfolio of options
on stock indices will be subject to Bankers Trust's ability to predict cor-
rectly movements in the direction of the stock market generally or of a par-
ticular industry. This requires different skills and techniques than predict-
ing changes in the price of individual stocks.
Futures Contracts On Stock Indices. The Portfolio may enter into contracts
providing for the making and acceptance of a cash settlement based upon
changes in the value of an index of securities ("Futures Contracts"). This
investment technique is designed only to hedge against anticipated future
change in general market prices which otherwise might either adversely affect
the value of securities held by the Portfolio or adversely affect the prices
of securities which are intended to be purchased at a later date for the Port-
folio. A Futures Contract may also be entered into to close out or offset an
existing futures position.
In general, each transaction in Futures Contracts involves the establishment
of a position which will move in a direction opposite to that of the invest-
ment being hedged. If these hedging transactions are successful, the futures
positions taken for the Portfolio will rise in value by an amount which
approximately offsets the decline in value of the portion of the Portfolio's
investments that are being hedged. Should general market prices move in an
unexpected manner, the full anticipated benefits of Futures Contracts may not
be achieved or a loss may be realized.
Although Futures Contracts would be entered into for cash management purposes
only, such transactions do involve certain risks. These risks could include a
lack of correlation between the Futures Contract and the equity market, a
potential lack of liquidity in the secondary market and incorrect assessments
of market trends which may result in poorer overall performance than if a
Futures Contract had not been entered into.
Brokerage costs will be incurred and "margin" will be required to be posted
and maintained as a good-faith deposit against performance of obligations
under Futures Contracts written for the Portfolio. The Portfolio may not pur-
chase or sell a Futures Contract (or options thereon) if immediately thereaf-
ter its margin deposits on its outstanding Futures Contracts (and its premium
paid on outstanding options thereon) would exceed 5% of the market value of
the Portfolio's total assets.
Options on Futures Contracts. The Portfolio may invest in options on such
Futures Contracts for similar purposes.
Asset Coverage. The Portfolio will cover the Portfolio's transactions in
futures and related options, as well as in when-issued and delayed delivery,
as required under applicable interpretations of the SEC, either by owning the
underlying securities or by segregating liquid assets with the Portfolio's
Custodian in an amount at all times equal to or exceeding the Portfolio's com-
mitment with respect to these instruments or contracts.
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BT INSTITUTIONAL FUNDS
Equity 500 Index Fund
Investment Adviser of the Portfolio and Administrator
BANKERS TRUST COMPANY
130 Liberty Street
(One Bankers Trust Plaza)
New York, NY 10006
Distributor
ICC DISTRIBUTORS, INC.
Two Portland Square
Portland, Maine 04101
Custodian and Transfer Agent
BANKERS TRUST COMPANY
130 Liberty Street
(One Bankers Trust Plaza)
New York, NY 10006
Independent Accountants
PRICEWATERHOUSECOOPERS LLP
250 West Pratt Street
Baltimore, Maryland 21201
Counsel
WILLKIE FARR & GALLAGHER
787 7th Avenue
New York, NY 10019
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No person has been authorized to give any information or to make any represen-
tations other than those contained in the Trust's Prospectuses, its Statements
of Additional Information or the Trust's official sales literature in connec-
tion with the offering of the Trust's shares and, if given or made, such other
information or representations must not be relied on as having been authorized
by the Trust. This Prospectus does not constitute an offer in any state in
which, or to any person to whom, such offer may not lawfully be made.
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Cusip #055924500
STA481300 (4/99)
