BT INSTITUTIONAL FUNDS, 485APOS, 1999-02-08

BT INSTITUTIONAL FUNDS
485APOS, 1999-02-08

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02/02/99

As filed with the Commission on February 5, 1999
1933 Act File No. 33-34079
1940 Act File No. 811-6071

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
---

Pre-Effective Amendment No. ..............................
--- ---
Post-Effective Amendment No. 27 .............................. X
--- ---

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
---

Amendment No. 35 ........................................... X
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BT INSTITUTIONAL FUNDS
(Exact Name of Registrant as Specified in Charter)

One South Street
Baltimore, Maryland 21202
(Address of Principal Executive Offices)

(410) 895-5000
(Registrant's Telephone Number)

Daniel O. Hirsch Copies To: Burton M. Leibert, Esq.
One South Street Willkie Farr & Gallagher
Baltimore, MD 21202 One Citicorp Center
(Name and Address of Agent for Service) 153 East 53rd Street
New York, New York 10022

It is proposed that this filing will become effective (check appropriate box)

[ ] immediately upon filing pursuant to paragraph (b)
[ ] on pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on ____ pursuant to paragraph (a)(1)
[X] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.

If appropriate, check the following box:

[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

BT Investment Portfolios has also executed this Registration Statement.

<PAGE>

Subject to Completion, Dated February 5, 1999

PROSPECTUS: April , 1999

BT MUTUAL FUNDS (LOGO)

INFORMATION ABOUT INVESTING IN THE
EUROPEAN EQUITY FUND

With the goal of achieving long-term capital appreciation through investment in
the stocks and other equity securities of companies in developed European
countries.

TRUST: BT INSTITUTIONAL FUNDS

INVESTMENT ADVISER: BANKERS TRUST COMPANY

[LIKE SHARES OF ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.]

EUROPEAN EQUITY FUND

OVERVIEW OF THE INSTITUTIONAL EUROPEAN EQUITY FUND
Goal
Core Strategy
Investment Policies and Strategies
Principal Risks of Investing in the Fund
Who Should Consider Investing in the Fund
Annual Fund Operating Expenses

A DETAILED LOOK AT THE INSTITUTIONAL EUROPEAN EQUITY FUND
Objective
Strategy
Principal Investments
Investment Process
Prior Performance of a Similar Portfolio
Risks
Management of the Fund
Board of Trustees
Investment Adviser and Sub-Adviser
Portfolio Manager
Calculating the Fund's Share Price
Dividends and Distributions
Tax Considerations
Buying and Selling Fund Shares

<PAGE>

OVERVIEW
OF THE INSTITUTIONAL EUROPEAN EQUITY FUND

GOAL: The Fund invests for long-term capital appreciation.

CORE STRATEGY: The Fund invests primarily in the stocks and other equity
securities of companies in developed European countries.

INVESTMENT POLICIES AND STRATEGIES: The Fund invests all of its assets in a
master portfolio with the same investment objective as the Fund. The Fund,
through the master portfolio, seeks to achieve that objective by investing
primarily in European companies. The Adviser looks for European investments that
may not be appropriately priced by the market. In selecting investments, the
Adviser attempts to identify investment trends or major social developments that
are likely to have a positive impact on a company's technologies, products and
services.

PRINCIPAL RISKS OF INVESTING IN THE FUND

An investment in the Fund could lose money, or the Fund's performance could
trail that of other investments. For example:

o Stocks that the Investment Adviser has selected could perform poorly in
one or more of the countries in which the Fund has invested; or

o The stock market could perform poorly in one or more of the countries
in which the Fund has invested.

Beyond the risks common to all stock investing, an investment in the Fund could
also lose money or underperform alternative investments as a result of risks in
the foreign countries in which the Fund invests:

o Adverse political, economic or social developments could undermine the
value of the Fund's investments or prevent the Fund from realizing
their full value;

o Accounting and financial reporting standards differ from those in the
U.S. and could convey incomplete information when compared to
information typically provided by U.S. companies; or

o The currency of the country in which the Fund invests may decrease in
value relative to the U.S. dollar, which could affect the value of the
investment to U.S. investors.

<PAGE>

WHO SHOULD CONSIDER INVESTING IN THE FUND

The Institutional European Equity Fund requires a minimum investment of $5
million. You should consider investing in the Fund if you are seeking long-term
capital appreciation. There is, of course, no guarantee that the Fund will
realize its goal. Moreover, you should be willing to accept greater short-term
fluctuation in the value of your investment than you would typically experience
investing in bond or money market funds.

You should NOT consider investing in the Institutional European Equity Fund if
you are pursuing a short-term financial goal, if you seek regular income or if
you cannot tolerate fluctuations in the value of your investments.

The Fund by itself does not constitute a balanced investment program. It can,
however, afford exposure to investment opportunities not available to someone
who invests in U.S. securities. The Fund provides access to European markets
which can be less accessible to individual investors. The Fund offers investors
an opportunity to invest in a region with various industries and in companies
which may be undervalued because of economic or political changes. It is
designed as a relatively low-cost means for you to diversify your investment
portfolio. Diversifying your investments may improve your long-run investment
return and lower the volatility of your overall investment portfolio.

[AN INVESTMENT IN THE INSTITUTIONAL EUROPEAN EQUITY FUND IS NOT A DEPOSIT OF
BANKERS TRUST COMPANY OR ANY OTHER BANK, AND IS NOT INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.]

<PAGE>
ANNUAL FUND OPERATING EXPENSES
(expenses paid from Fund assets)

The Annual Fees and Expenses table describes the fees and expenses that you may
pay if you buy and hold shares of the Institutional European Equity Fund.

Annual Fees and Expenses
percentage of average
daily net assets(1)
-----------------

Management Fees 0.65%

Distribution and Service (12b-1) Fees None

Other Fund Operating Expenses 0.70%

Total Fund Operating Expenses 1.35%

Less: Fee Waivers or Expense Reimbursement (0.40%)(2)

NET EXPENSES 0.95%

Expense Example. The example below illustrates the expenses you would have
incurred on a $10,000 investment in the Fund. The numbers assume that the Fund
earned an annual return of 5% over the period shown, the Fund's operating
expenses remained the same over the periods shown and you sold your shares at
the end of the period.

EXPENSE EXAMPLE(3)

1 year 3 years
$73 $401

You may use this hypothetical example to compare the Fund's estimated expenses
with other funds. The example represents an estimate of future returns or
expenses. Your actual costs may be higher or lower.

- ------------------------------------

(1) Information on the annual operating expenses reflects the expenses of
both the Fund and the European Equity Portfolio, the master fund in
which the European Equity Fund invests its assets. (A further
discussion of the relationship between the Fund and the Portfolio
appears in the "Organizational Structure" section of this prospectus.)

(2) Bankers Trust has agreed, for the period from the commencement of the
Fund's operations through the four months following the Fund's fiscal
year end of September 30, 1999, to waive its fees and reimburse
expenses so that total expenses will not exceed 0.95%.

(3) Based on expenses, after fee waivers and reimbursements for the first 9
months only.

<PAGE>

A DETAILED LOOK
AT THE INSTITUTIONAL EUROPEAN EQUITY FUND

OBJECTIVE

The Fund seeks long-term capital appreciation. Under normal circumstances, the
Fund invests at least 65% of its total assets in the stocks and other equity
securities of companies in developed European countries.

The Fund invests for capital appreciation, not income; any dividend and interest
income is incidental to the pursuit of its objective. While we give priority to
capital appreciation, we cannot offer any assurance of achieving this objective.
The Fund's objective is not a fundamental policy. We must notify shareholders
before we change it, but we do not require their approval to do so.

STRATEGY

The Fund invests for the long term. We employ a strategy of growth at a
reasonable price -- combining the best of "value" and "growth" investment
approaches. This core philosophy involves identifying both undervalued medium
and large capitalization stocks AND a catalyst that will realize the inherent
value of the company in the relative near term.

We seek to identify companies in Europe that combine strong potential for
earnings growth with reasonable investment value. Such companies typically
exhibit increasing rates of profitability and cash flow, yet their share prices
compare favorably to other stocks in a given market and to their peers. In
evaluating stocks, we consider factors such as earnings per share and
replacement value--the cost of replacing their physical assets at current
prices. We further consider the relationship between these and other
quantitative factors. Together, these indicators of growth and value may
identify companies with improving prospects before the market in general has
taken notice.

We will concentrate on various sub-markets within the region as they may benefit
from a unified Europe. Within these sub-markets, we will assess various
industries and selected companies within these industries in terms of the
benefits they will receive from the impending structural changes within the
region. We intend to use financial derivatives for efficient portfolio
management. Applicable law currently permits unlimited use of futures and
related options for bona fide hedging purposes. However, to the extent that the
Fund engages in futures and options on futures transactions for non-hedging
purposes, aggregate initial margin and premiums required to establish such
positions may not exceed 5% of the Fund's net asset value.

[SIDEBAR: Financial derivatives are financial instruments whose value is based
on another security.]

PRINCIPAL INVESTMENTS

The Fund will invest primarily in the developed countries of Europe -- United
Kingdom, Germany, France, Switzerland, Netherlands, Sweden, Italy, Norway,
Denmark, Finland and Spain -- but we have the discretion to invest in all
countries within Europe. The Fund may also invest a portion of its assets in
companies based in the emerging markets of Eastern Europe if we believe that
their return potential more than compensates for the extra risks associated with
these markets. Under normal market conditions, however, we do not consider
investment in emerging markets a central element of the Fund's strategy.

<PAGE>
INVESTMENT PROCESS

Company research lies at the heart of our investment process, as it does with
many stock mutual funds. But our process brings an added dimension to this
fundamental research. It draws on the insight of experts from a range of
financial disciplines -- regional stock market specialists, global industry
specialists, economists and quantitative analysts. They challenge, refine and
amplify each other's ideas. Their close collaboration is a critical element of
our investment process. We utilize a team approach to investing and believe
strongly in fundamental analysis as a starting point to valuing a company.

Currency management is a critical part of global investment. Our specialist
currency team will manage the Fund's currency strategy in an attempt to add
value and manage risk by insulating the Fund against adverse currency movements.

Our analysis of trends and possible breaks with traditional patterns allows for
the identification of investments which may not be appropriately priced by the
market because changes in legislation, technological developments, industry
rationalization or other structural shifts have created potential opportunities
which the market has not yet discovered. Emphasis is placed on visiting
companies and in-depth research of industries and regions. This involves
identifying investment trends or major social developments that are likely to
have a significant positive impact on certain technologies, products and
services.

In choosing stocks and other equity securities, we consider a number of factors,
including:

o stock price relative to the company's rate of earnings growth;
o valuation relative to other European companies and market averages;
o the stock's currency denomination;
o merger and acquisition trends; and
o trends related to the impact of the introduction of the new European
currency, the "euro," on the finance, marketing and distribution
strategies of European companies.

Though the Fund intends to diversify its investments across different countries,
the Fund may invest a significant part of its assets in a single country. The
Fund may invest in companies of any size, although most of its investments will
be in large and mid-capitalization companies.

[SIDEBAR: Market capitalization is determined by the market price of a company's
issued and outstanding common stock and is calculated by multiplying the number
of shares a company has outstanding by the current market price of the company's
shares. Generally, large capitalization companies have a market capitalization
greater than $5 billion and mid-capitalization companies have a market
capitalization between $1 billion and $5 billion.]

[Portfolio Turnover. The portfolio turnover rate measures the frequency that the
Portfolio sells and replaces the value of its securities within a given period.
We do not expect the Fund to have a high portfolio turnover rate.]

<PAGE>

Prior Performance of a Composite Portfolio Managed by the same Adviser or
Sub-Adviser. The information below compares the performance of a composite of
funds (the "Related Funds") managed by the same investment team that manages the
Fund. The investment objectives, policies and strategies of the Related Funds
are substantially similar to those of the Fund, but the Related Funds are only
offered to retail and institutional investors outside the United States. The
Related Funds also differ from the Fund because:

o They are not subject to certain regulatory restrictions, including
diversification and investment limitations and restrictions, to which the
Fund is subject; and
o Their performance is not adjusted by the fees and expenses the Fund pays.

These factors may affect the performance of the Fund and cause it to differ from
that of the composite of the Related Funds.

Returns of the composite of the Related Funds are compared to the Morgan Stanley
Capital International (MSCI) Europe (15) Net Accumulation Index. The Index is a
passive model of combined national stock returns. It does not measure the costs
of buying, holding and selling stock, which are reflected in the composite of
the Related Funds.

[SIDEBAR: The MSCI Europe (15) Net Accumulation Index is a widely accepted
benchmark of European stock performance. It is a model, not an actual portfolio.
It covers stock markets in 15 European countries and tracks only those stocks
within the markets that a non-resident national can buy and sell freely.]

AVERAGE ANNUAL RETURNS
(as of November 30, 1998) Annualized
------------------------------------------
1 year 3 years 5 years 10 years
------ ------- ------- --------
BT European
Equity Composite 31.35% 26.28% 21.94% 18.98%

MSCI Europe (15)
Net Accumulation Index 27.65% 23.95% 19.81% 14.80%

Performance information for the Related Funds shows the combined performance of
the Related Funds over various time periods. The funds were added to the
composite either at their inception, ranging from 1986 through 1998, or at the
time when BT Funds Management (International) Limited became the Investment
Sub-Adviser, also from 1986 through 1998.

The performance of one of the Related Funds was converted into U.S. dollars from
Australian dollars as of the last day of each month using the London Close
exchange rate. The performance of another of the Related Funds was converted
into U.S. dollars from Canadian dollars as of the last day of each month using
the London Close exchange rate. The other two Related Funds are U.S. dollar
denominated. Performance figures of the Index and the Related Funds reflect the
reinvestment of all investment income, including dividends and capital gains.

The performance data represents the prior performance of the composite of the
Related Funds, not the prior performance of the Fund, and should not be
considered an indication of future performance of the Fund.

<PAGE>

RISKS

BELOW WE SET FORTH SOME OF THE PROMINENT RISKS ASSOCIATED WITH INTERNATIONAL
INVESTING, AS WELL AS INVESTING IN GENERAL, AND WE DETAIL OUR APPROACHES TO
CONTAINING THEM. ALTHOUGH WE ATTEMPT TO ASSESS THE LIKELIHOOD THAT THESE RISKS
MAY ACTUALLY OCCUR AND TO LIMIT THEM, WE MAKE NO GUARANTEE THAT WE WILL SUCCEED.

PRIMARY RISKS

Market Risk. Although individual stocks can outperform their local markets,
deteriorating market conditions might cause an overall weakness in the stock
prices of the entire market.

Stock Selection Risk. A risk that pervades all investing is the risk that the
securities an investor has selected will not perform to expectations. To
minimize this risk, we monitor each of the stocks in the Fund according to three
basic quantitative criteria. We subject a stock to intensive review if:

o its rate of price appreciation begins to trail that of its national
stock index;
o the financial analysts who track the stock reduce their estimates of
the stock's future earnings; or
o the stock's price approaches the downside target we set when we first
bought the stock (and may since have modified to reflect changes in
market and economic conditions).

In this review, we seek to learn if the deteriorating performance accurately
reflects deteriorating prospects or if, in our view, it merely reflects investor
overreaction to temporary circumstances.

Political Risk. Some foreign governments have limited the outflow of profits to
investors abroad, extended diplomatic disputes to include trade and financial
relations, and imposed high taxes on corporate profits. While these political
risks have not occurred recently in the major countries in which the Fund
invests, we analyze countries and regions to try to anticipate these risks.

Information Risk. Financial reporting standards for companies based in foreign
markets differ from those in the United States. Since the "numbers" themselves
sometimes mean different things, the Investment Adviser devotes much of its
research effort to understanding and assessing the impact of these differences
upon a company's financial conditions and prospects.

Foreign Stock Market Risk. From time to time, foreign capital markets have
exhibited more volatility than those in the United States. Trading stocks on
some foreign exchanges is inherently more difficult than trading in the United
States for reasons including:

o Liquidity Risk. Stocks that trade less can be more difficult or more
costly to buy, or to sell, than more liquid or active stocks. This liquidity
risk is a factor of the trading volume of a particular stock, as well as the
size and liquidity of the entire local market. On the whole, foreign exchanges
are smaller and less liquid than the U.S. market. This can make buying and
selling certain shares more difficult and costly. Relatively small transactions
in some instances can have a disproportionately large effect on the price and
supply of shares. In certain situations, it may become virtually impossible to
sell a stock in an orderly fashion at a price that approaches our estimate of
its value.

o Regulatory Risk. Some foreign governments regulate their exchanges less
stringently, and the rights of shareholders may not be as firmly established.

<PAGE>
In an effort to reduce these foreign stock market risks, the Fund diversifies
its investments, just as you may spread your investments among a range of
securities so that a setback in one need not overwhelm your entire strategy. In
this way, a reversal in one market or stock need not undermine the pursuit of
long-term capital appreciation.

Currency Risk. The Fund invests in foreign securities denominated in foreign
currencies. This creates the possibility that changes in foreign exchange rates
will affect the value of foreign securities or the U.S. dollar amount of income
or gain received on these securities. The Investment Adviser's currency
management team seeks to minimize this risk by actively managing the currency
exposure of the Fund by hedging currencies that are likely to decline.

[SIDEBAR: Hedging is a strategy designed to offset investment risks. Hedging
activities include the use of forward contracts and may include the use of other
instruments. The Fund may use hedging activities to reduce risk and in no case
will it acquire securities for hedging that would increase risk above the level
associated with conventional investments.]

Euro Conversion Risk. On January 1, 1999, eleven countries of the European
Economic and Monetary Union (EMU) began implementing a plan to replace their
national currencies with a new currency, the euro. Full conversion to the euro
is slated to occur by July 1, 2002.

Although it is impossible to predict the impact of the conversion to
the euro on the Fund, the risks may include:

o changes in the relative strength and value of the U.S. dollar or other
major currencies;
o adverse effects on the business or financial condition of European
issuers that the Fund holds in its portfolio;
o that the systems used to purchase and sell euro-denominated securities
may not work;
o uncertainty about how existing financial contracts will be treated
after euro implementation; and
o unpredictable effects on trade and commerce generally.

These and other factors could increase volatility in financial markets worldwide
and could adversely affect the value of securities held by the Fund.

Exposure Risk. There is risk associated with certain investments (such as
derivatives) or practices (such as short selling) that increase the amount of
money the Fund could gain or lose on an investment. This exposure risk could
multiply losses generated by a derivative or practice used for hedging purposes.
Such losses should be substantially offset by gains on the hedged investment.
However, while hedging can reduce or eliminate losses, it can also reduce or
eliminate gains.

To the extent that a derivative or practice is not used as a hedge, the Fund is
directly exposed to its risks. Gains or losses from speculative positions in a
derivative may be much greater than the derivative's original cost. For example,
potential losses from writing uncovered call options and from speculative short
sales are unlimited.

Region Focus Risk. Focusing on a single country or region involves increased
currency, political, regulatory and other risks. Market swings in the targeted
country or region will be likely to have a greater effect on fund performance
than they would in a more geographically diversified equity fund.

<PAGE>

SECONDARY RISKS

Emerging Market Risk. To the extent that the Fund does invest in emerging
markets to enhance overall returns, it may face higher political, information,
and stock market risks. In addition, profound social changes and business
practices that depart from norms in developed countries' economies have hindered
the orderly growth of emerging economies and their stock markets in the past.
High levels of debt tend to make emerging economies heavily reliant on foreign
capital and vulnerable to capital flight. For all these reasons, the Fund
carefully limits and balances its commitment to these markets.

Small Company Risk. Although the Fund generally invests in the shares of large,
well-established companies, it may occasionally take advantage of exceptional
opportunities presented by smaller companies. Such opportunities pose unique
risks, which we take into account in considering an investment. Small company
stocks tend to experience steeper fluctuations in price -- down as well as up --
than the stocks of larger companies. A shortage of reliable information, the
same information gap that creates opportunity in small company investing, can
also pose added risk. Industrywide reversals have had a greater impact on small
companies, since they lack a large company's financial resources. Small company
managers typically have less experience coping with adversity or capitalizing on
opportunity than their counterparts at larger companies. Finally, small company
stocks are typically less liquid than large company stocks: when things are
going poorly, it is harder to find a buyer for a small company's shares.

Pricing Risk. When price quotations for securities are not readily available, we
determine their value by the method that most accurately reflects their current
worth in the judgement of the Board of Trustees. This procedure implies an
unavoidable risk, the risk that our prices are higher or lower than the prices
that the securities might actually command if we sold them. If we have valued
the securities too highly, you may end up paying too much for Fund shares when
you buy. If we underestimate their price, you may not receive the full market
value for your Fund shares when you sell.

Year 2000 Risk. As with most businesses, the Fund faces the risk that the
computer systems of its Investment Adviser and other companies on which it
relies for service or in which it invests will not accommodate the changeovers
necessary from dates in the year 1999 to dates in the year 2000. These risks
could adversely affect:

o the companies in which the Fund invests, which could impact the value
of the Fund's investments;
o our ability to service your Fund account, including our ability to meet
your requests to buy and sell Fund shares; and
o our ability to trade securities held by the Fund or to accurately price
securities held by the Fund.

We are working both internally and with our business partners and service
providers to address this problem. If we - or our business partners, service
providers, government agencies or other market participants - do not succeed, it
could materially affect shareholder services or the value of the Fund's shares.

Temporary Defensive Position. We may from time to time adopt a temporary
defensive position in response to extraordinary adverse political, economic or
stock market events. We could place up to 100% of the Fund's assets in U.S. or
foreign government money market investments, or other short-term bonds that
offer comparable safety, if the situation warranted. To the extent we might
adopt such a position and over the course of its duration, the Fund may not meet
its goal of long-term capital appreciation.

<PAGE>

MANAGEMENT OF THE FUND

Board of Trustees. The Fund's shareholders, voting in proportion to the number
of shares each owns, elect a Board of Trustees, and the Trustees supervise all
the Fund's activities on their behalf.

Investment Adviser and Sub-Adviser. Under the supervision of the Board of
Trustees, Bankers Trust Company, with headquarters at 130 Liberty Street, New
York, NY 10006, acts as the Fund's investment adviser. Bankers Trust will
receive a fee of 0.65% of the Fund's average daily net assets for its services
in the current fiscal year. As investment adviser, Bankers Trust makes the
Fund's investment decisions. It buys and sells securities for the Fund and
conducts the research that leads to the purchase and sale decisions. Bankers
Trust has, in turn, vested day-to-day investment decision-making and
implementation in a sub-adviser, the wholly owned entity BT Funds Management
(International) Limited ("BTFMIL"). Responsibilities and advisory fees can be
reallocated between the Investment Adviser and Sub-Adviser without obtaining
shareholder approval.

As of December 31, 1998, Bankers Trust was the eighth largest bank holding
company in the United States with total assets of approximately $156 billion.
Bankers Trust is a worldwide merchant bank dedicated to servicing the needs of
corporations, governments, financial institutions and private clients through a
global network of over 96 offices in more than 43 countries.

Bankers Trust's officers bring wide experience to managing both the Fund and its
Portfolio. The firm's own record dates back to its founding as a trust company
in 1903. It has invested retirement assets on behalf of the nation's largest
corporations and institutions for more than 50 years. Today, the assets under
its global management exceed $338 billion. The scope of the firm's capability is
broad: It is a leader in both the active and passive quantitative investment
disciplines and maintains a major presence in stock and bond markets worldwide.
BTFMIL, a subsidiary of Bankers Trust with headquarters at Level 15, The Chifley
Tower, 2 Chifley Square, Sydney, N.S.W. 2000 Australia, offers a decade of
research and investing experience in European equities. It has developed a team
dedicated exclusively to the European equity market discipline.

The Investment Adviser is a wholly owned subsidiary of Bankers Trust
Corporation. 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 retail and commercial banking, investment banking
and insurance. The transaction is contingent upon various regulatory approvals,
as well as the approval of the Fund's Board of Trustees and the Fund's
shareholders. If the transaction is approved and completed, Deutsche Bank AG, as
the Investment Adviser's new parent company, will control the operations of the
Investment Adviser. The Investment Adviser believes that, under this new
arrangement, the services provided to the Fund will be maintained at their
current level.

<PAGE>

Portfolio Managers. The following portfolio managers are responsible for the
day-to-day management of the master portfolio's investments:

CHRIS SELTH, Managing Director of Bankers Trust and Co-Lead Manager of the Fund.

o Joined Bankers Trust in 1987.
o Head of International Equities, Sydney, Australia.
o Previously responsible for European investments, specializing
in finance, telecommunication and electronic sectors.
o Prior experience at QBE Insurance as Assistant to Group
Treasurer.
o 14 years of investment management experience.
o Honors degree in commerce from the University of Sydney,
Australia.

CRISPIN MURRAY, Executive
Vice President of Bankers
Trust and Co-Lead Manager
of the Fund.

o Joined Bankers Trust in 1994.
o Head of European Equities; Coordinator for BTFMIL's Global
Banking Group.
o Responsible for BT European Growth Fund and BT International
Investment Series European Equity Fund.
o Joined Bankers Trust as an investment analyst, specializing in
banks, telecommunications, telecommunication equipment and
media.
o Prior experience at Equitable Life Assurance Society, United
Kingdom, as Bond and Currency Analyst.
o 9 years of investment management experience.
o Honors degree in economics and human geography from Reading
University, United Kingdom.

MICHAEL LEVY, Managing
Director of Bankers Trust
and Co-Lead Manager of
the Fund.

o Joined Bankers Trust in 1993.
o Head of International Equities, U.S.; Co-lead Portfolio
Manager of the BT International Equity Fund.
o Bankers Trust international equity strategist, overseeing the
design and implementation of the firm's proprietary stock
selection process.
o 27 years of business experience, 17 of them as an investment
professional.
o Degrees in mathematics and geophysics from the University of
Michigan.

Other Services. Bankers Trust provides administrative services--such as
portfolio accounting, legal services and others--for the Fund. In addition,
Bankers Trust--or your broker or financial advisor--performs the functions
necessary to establish and maintain your account. In addition to setting up the
account and processing your purchase and sale orders, these functions include:

o keeping accurate, up-to-date records for your individual Fund account;
o implementing any changes you wish to make in your account information;
o processing your requests for cash dividends and distributions from the
Fund;
o answering your questions on the Fund's investment performance or
administration;
o sending proxy reports and updated prospectus information to you; and
o collecting your executed proxies.

Brokers and financial advisors may charge additional fees to investors only for
those services not otherwise included in the Bankers Trust servicing agreement,
such as cash management or special trust or retirement-investment reporting.

<PAGE>

Organizational Structure. The European Equity Fund is a "feeder fund" that
invests all of its assets in a "master portfolio," the European Equity
Portfolio. The Fund and the Master Portfolio have the same investment objective.
The Master Portfolio is advised by Bankers Trust.

The Master Portfolio may accept investments from other feeder funds. The feeders
bear the Master Portfolio's expenses in proportion to their assets. However,
each feeder can set its own transaction minimums, fund-specific expenses, and
other conditions. This arrangement allows the Fund's Trustees to withdraw the
Fund's assets from the Master Portfolio if they believe doing so is in the
shareholder's best interests. If the Trustees withdraw the Fund's assets, they
would then consider whether the Fund should hire its own investment adviser,
invest in a different master portfolio, or take other action.

CALCULATING THE FUND'S SHARE PRICE

We calculate the daily price of the Fund's shares (also known as the "Net Asset
Value" or "NAV") in accordance with the standard formula for valuing mutual fund
shares at the close of regular trading on the New York Stock Exchange every day
the Exchange is open for business.

[SIDEBAR: The Exchange is open every week Monday through Friday, except when the
following holidays are celebrated: New Year's Day, 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 fourth Thursday in November)
and Christmas Day.]

The formula calls for deducting all of the Fund's liabilities from the total
value of its assets--the market value of the securities it holds, plus its cash
reserves--and dividing the result by the number of shares outstanding. (Note
that prices for securities that trade on foreign exchanges can change
significantly on days when the New York Stock Exchange is closed and you cannot
buy or sell Fund shares. Price changes in the securities the Fund owns may
ultimately affect the price of Fund shares the next time the NAV is calculated.)

We value the securities in the Fund at their stated market value if price
quotations are available. When price quotations for a particular security are
not readily available, we determine their value by the method that most
accurately reflects their current worth in the judgment of the Board of
Trustees.

<PAGE>

DIVIDENDS AND DISTRIBUTIONS

Dividends and capital gains distributions, if any, are paid annually. We
automatically reinvest all dividends and any capital gains, unless you elect to
receive your distributions in cash.

TAX CONSIDERATIONS

The Fund does not ordinarily pay income taxes. You and other shareholders pay
taxes on the income or capital gains from the Fund's holdings. Your taxes will
vary from year to year, based on the amount of capital gains distributions and
dividends paid out by the Fund. You owe the taxes whether you receive cash or
choose to have distributions and dividends reinvested. Distributions and
dividends usually create the following tax liability:

Transaction Tax status
- ----------- ----------
Income dividends Ordinary income

Short-term capital gains distributions Ordinary income

Long-term capital gains distributions Capital gains

Every year the Fund will send you information on the distributions for the
previous year. In addition, if you sell your fund shares you may have a capital
gain or loss.

Transaction Tax status
- ------------ ----------
Your sale of shares owned more than one year Capital gains or losses

Your sale of shares owned for one year or less Gains treated as ordinary
income; losses are subject to
special rules.

The tax considerations for tax deferred accounts or non-taxable entities will be
different.

Because each investor's tax circumstances are unique and because the tax laws
are subject to change, we recommend that you consult your tax advisor about your
investment.

<PAGE>

BUYING AND SELLING FUND SHARES

CONTACTING THE BT MUTUAL FUNDS

By Phone 1-800-368-4031
(between 9:00 a.m. and 6:00 p.m., Eastern Time)

By Mail P.O. Box 419210
Kansas City, MO 64141-6210

By Overnight Mail 210 West 10th Street, 8th floor
Kansas City, MO 64105-1716

MINIMUM ACCOUNT INVESTMENTS

To open an account [$5 million]
To add to an account [$100,000]
Minimum account balance [$500,000]

HOW TO OPEN YOUR FUND
ACCOUNT

By mail Complete and sign the account
application that accompanies his
prospectus. (You may obtain additional
applications by calling the BT Service
Center.) Mail the completed application
along with a check payable to Institu-
tional European Equity Fund - [Fund #].

By wire Call the BT Service Center to set up a
wire account.

Please note that your account cannot become activated until we receive a
completed application via mail or fax.

<PAGE>

TWO WAYS TO BUY AND SELL SHARES IN YOUR ACCOUNT

MAIL:
BUYING: Send your check, payable to the BT Fund you have selected, to the
BT Service Center. The addresses are shown above under "Contacting the BT Mutual
Funds." Be sure to include the fund number and your account number (see your
account statement) on your check. Please note that we cannot accept starter
checks or third-party checks. If you are investing in more than one fund, make
your check payable to "BT Funds" and include your account number and the names
and numbers of the funds you have selected.

SELLING: Send a signed letter to the Service Center with your name, your fund
number and account number, the fund's name, and either the number of shares you
wish to sell or the dollar amount you wish to receive. You must leave at least
$500,000 worth of shares in your account to keep it open. Unless exchanging into
another BT Fund, you must submit a written authorization to sell shares in a
retirement account.

WIRE:
BUYING: You may only buy shares by wire if your account is authorized to do so.
Please note that you or your financial advisor must call the BT Service Center
at 1-800-368-4031 to notify us in advance of a wire transfer purchase. Inform
the BT Representative of the amount of your purchase and receive a trade
confirmation number. Instruct your bank to send payment by wire using the wire
instructions noted below. All wires must be received by 4:00 p.m. Eastern time
the next business day.

ROUTING NO: 021001033
ATTN: Bankers Trust/IFTC Deposit
DDA NO: 00-226-296
FBO: (Account name)
(Account number)
CREDIT: (Fund name and number)

See your account statement for the account name, number and fund number.

SELLING: You may only sell shares by wire if your account is authorized to do
so. For your protection, you may not change the wire instructions relating to
the destination bank account over the phone. To sell by wire, contact your
financial advisor or the BT Service Center at 1-800-368-4031. Inform the BT
Representative of the amount of your redemption and receive a trade confirmation
number. The minimum redemption by wire is $1,000. We must receive your order by
4:00 p.m. Eastern time to wire payment to your account the next business day.

<PAGE>

IMPORTANT INFORMATION ABOUT BUYING AND SELLING SHARES

o After receiving your order, we buy or sell your shares at the next price
calculated on a day the New York Stock Exchange is open for business.
o We accept payment for shares only in U.S. dollars by check, bank or Federal
Funds wire transfer, or by electronic bank transfer.
o We remit proceeds from the sale of shares in U.S. dollars (unless the
redemption is so large that it is made "in-kind").
o You may place orders to buy and sell over the phone by calling your
Financial Advisor or the BT Service Center at 1-800-368-4031. If you pay
for shares by check and the check fails to clear, or if you order shares by
phone and fail to pay for them by 4:00 p.m. Eastern time the next business
day, we have the right to cancel your order, hold you liable or charge you
or your account for any losses or fees a fund or its agents have incurred.
To sell shares, you must state whether you would like to receive the
proceeds by wire or check.
o You may buy and sell shares of a fund through authorized brokers and
financial advisors as well as from BT Mutual Funds directly. The same terms
and conditions apply. Specifically, once you place your order with a broker
or financial advisor, it is considered received by the BT Service Center.
It is then your broker or financial advisor's responsibility to transmit
the order to the BT Service Center by the next business day. You should
contact your broker or financial advisor if you have a dispute as to when
your order was placed with the fund.
o We do not issue share certificates.
o We process all sales orders free of charge.
o Unless otherwise instructed, we normally mail a check for the proceeds from
the sale of your shares to your account address the next business day and
no later than seven DAYS.
o We reserve the right to close your account on 30 days' notice if it fails
to meet minimum balance requirements for any reason other than a change in
market value.
o If you sell shares by mail or wire, you may be required to obtain a
signature guarantee. Please contact your financial advisor or the BT
Service Center for more information.
o Selling shares of trust accounts and business or organization accounts may
require additional documentation. Please contact your financial advisor or
the BT Service Center for more information.
o During periods of heavy market activity, you may have trouble reaching the
BT Service Center by telephone. If this occurs, you should make your
request by mail.

EXCHANGE PRIVILEGE
You can exchange all or part of your shares for shares of another BT Mutual Fund
up to four times a year without paying a fee. When you exchange shares, you are
selling shares in one fund to purchase shares in another. Before buying shares
through an exchange, you should be sure to get a copy of that fund's prospectus
and read it carefully. You may only order exchanges over the phone if your
account is authorized to do so.

Please note the following conditions:

o The accounts between which the exchange is taking place must have the same
name, address and taxpayer ID number.
o You may make the exchange by phone, letter or wire, if your account has the
exchange by phone feature.
o If you are maintaining a taxable account, you may have to pay taxes on the
exchange.
o You will receive a written confirmation of each transaction from the BT
Service Center or your investment professional.

<PAGE>

[BACK COVER]

Bankers Trust (logo)

You can find more detailed information about the Fund in the current Statement
of Additional Information, dated April , 1999, which we have filed
electronically with the Securities and Exchange Commission (SEC) and which is
incorporated by reference into this Prospectus. To receive your free copy of the
Statement of Additional Information or if you have questions about investing in
the Fund, write to us at:

BT SERVICE CENTER
P.O. BOX 419210
KANSAS CITY, MO 64141-6210
or call our toll-free number: 1-800-368-4031.

You can find reports and other information about the Fund on the SEC website
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Fund, including its Statement
of Additional Information, can be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. For information on the Public Reference Room,
call the SEC at 1-800-SEC-0330.

European Equity Fund
a BT Institutional Fund [Product Code]
811-6071

Distributed by:
ICC Distributors, Inc.
Two Portland Square
Portland, ME 04101

<PAGE>

Subject to completion, dated February 5, 1999

PROSPECTUS: April__, 1999

BT MUTUAL FUNDS (LOGO)

INFORMATION ABOUT INVESTING IN THE
GLOBAL EQUITY FUND

With the goal of achieving long-term capital appreciation through investment in
the stocks and other equity securities of companies in the world's developed
markets, including the United States.

TRUST: BT INSTITUTIONAL FUNDS

INVESTMENT ADVISER: BANKERS TRUST COMPANY

<PAGE>

GLOBAL EQUITY FUND

OVERVIEW OF THE INSTITUTIONAL GLOBAL EQUITY FUND
Goal
Core Strategy
Investment Policies and Strategies
Principal Risks of Investing in the Fund
Who Should Consider Investing in the Fund
Annual Fund Operating Expenses

A DETAILED LOOK AT THE INSTITUTIONAL GLOBAL EQUITY FUND
Objective
Strategy
Principal Investments
Investment Process
Risks
Management of the Fund
Board of Trustees
Investment Adviser and Sub-Adviser
Portfolio Manager
Calculating the Fund's Share Price
Dividends and Distributions
Tax Considerations
Buying and Selling Fund Shares

OVERVIEW

OF THE INSTITUTIONAL GLOBAL EQUITY FUND

GOAL: The Fund invests for long-term capital appreciation.

CORE STRATEGY: The Fund invests primarily in the stocks and other equity
securities of companies in the world's developed markets, including the United
States.

INVESTMENT POLICIES AND STRATEGIES: The Fund invests all of its assets in a
master portfolio with the same investment objective as the Fund. The Fund,
through the master portfolio, seeks to achieve that objective by investing
primarily in companies in the world's developed markets. The Adviser looks for
global investments that may not be appropriately priced by the market. In
selecting investments, the Adviser attempts to identify investment trends or
major social developments that are likely to have a positive impact on a
company's technologies, products and services.

PRINCIPAL RISKS OF INVESTING IN THE FUND

An investment in the Fund could lose money, or the Fund's performance could
trail that of other investments. For example:

o Stocks that the Investment Adviser has selected could perform poorly in
one or more of the countries in which the Fund has invested; or

o The stock market could perform poorly in one or more of the countries
in which the Fund has invested.

o Adverse political, economic or social developments could undermine the
value of the Fund's investments or prevent the Fund from realizing
their full value;

<PAGE>

o Accounting and financial reporting standards differ from those in the
U.S. and could convey incomplete information when compared to
information typically provided by U.S. companies; and

o The currency of the country in which the Fund invests may decrease in
value relative to the U.S. dollar, which could affect the value of the
investment to U.S. investors.

ii
<PAGE>

WHO SHOULD CONSIDER
INVESTING IN THE FUND

The Institutional Global Equity Fund requires a minimum investment of $5
million. You should consider investing in the Fund if you are seeking long-term
capital appreciation. There is, of course, no guarantee that the Fund will
realize its goal. Moreover, you should be willing to accept greater short-term
fluctuation in the value of your investment than you would typically experience
investing in bond or money market funds.

You should NOT consider investing in the Fund if you are pursuing a short-term
financial goal, if you seek regular income or if you cannot tolerate
fluctuations in the value of your investments.

The Fund by itself does not constitute a balanced investment program. It can,
however, afford exposure to investment opportunities not available to someone
who invests in U.S. securities. The Fund provides access to foreign markets
which can be less accessible to individual investors. It is designed as a
relatively low-cost means for you to diversify your investment portfolio.
Diversifying your investments may improve your long-run return and lower the
volatility of your overall investment portfolio.

[AN INVESTMENT IN THE INSTITUTIONAL GLOBAL EQUITY FUND IS NOT A DEPOSIT OF
BANKERS TRUST COMPANY OR ANY OTHER BANK, AND IS NOT INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.]

iii
<PAGE>

ANNUAL FUND OPERATING COSTS
(expenses paid from Fund assets)

the Annual Fees and Expenses table describes the fees and expenses that you may
pay if you buy and hold shares of the Institutional Global Equity Fund.

Annual Fees and Expense
percentage of average
daily net assets(1)
-------------------
Management Fees 0.75%

Distribution and Service (12b-1) Fees None

Other Fund Operating Expenses 0.70%

Total Fund Operating Expenses 1.45%

Less: Fee Waivers or Expense
Reimbursement (0.55%)(2)

NET EXPENSES 0.90%

Expense Example. The example below illustrates the expenses you would have
incurred on a $10,000 investment in the Fund. The numbers assume that the Fund
earned an annual return of 5% over the periods shown, the Fund's operating
expenses remained the same over the periods shown and you sold your shares at
the end of the period.

EXPENSE EXAMPLE(3)

1 year 3 years
$69 $418

You may use the hypothetical example to compare the Fund's estimated expenses
with other funds. The example represents an estimate of future returns or
expenses. Your actual costs may be higher or lower.

- -----------------------------------
(1) Information on the annual operating expenses reflects the expenses of
both the Fund and the Global Equity Portfolio, the master fund in which
the Institutional Global Equity Fund invests its assets. (A further
discussion of the relationship between the Fund and the Portfolio
appears in the "Organizational Structure" section of this prospectus.)

(3) Based on expenses, after fee waivers and reimbursements for the first 9
months only.

iv
<PAGE>

A DETAILED LOOK
AT THE INSTITUTIONAL GLOBAL EQUITY FUND

OBJECTIVE

STRATEGY

We seek to identify companies both within and outside the United States that
combine strong potential for earnings growth with reasonable investment value.
Such companies typically exhibit increasing rates of profitability and cash
flow, yet their share prices compare favorably to other stocks in a given market
and to their global peers. In evaluating stocks, we consider factors such as
earnings per share and replacement value--the cost of replacing their physical
assets at current prices. We further consider the relationships between these
and other quantitative factors. Together, these indicators of growth and value
may identify companies with improving prospects before the market in general has
taken notice.

We intend to use financial derivatives for efficient portfolio management.
Applicable law currently permits unlimited use of futures and related options
for bona fide hedging purposes. However, to the extent that the Fund engages in
futures and options on futures transactions for non-hedging purposes, aggregate
initial margin and premiums required to establish such positions may not exceed
5% of the Fund's net asset value.

[SIDEBAR: Financial derivatives are financial instruments whose value is based
on another security.]

PRINCIPAL INVESTMENTS

The Fund will invest primarily in the United States, Canada, the United Kingdom,
Germany, France, Switzerland, Netherlands, Sweden, Hong Kong, Italy, Norway,
Denmark, Finland and Spain, but we have the discretion to invest in any market
throughout the world. The Fund may also invest a portion of its assets in
companies based in the emerging markets of Latin America, the Middle East,
Emerging Europe, Africa and Asia if we believe that their return potential more
than compensates for the extra risks associated with these markets. Under normal
market conditions, however, we do not consider investment in emerging markets a
central element of the Fund's strategy.

v
<PAGE>

INVESTMENT PROCESS

In choosing the stocks, we consider a number of factors, including:
o stock price relative to the company's rate of earnings growth;
o valuation relative to other United States and international companies and
market averages;
o the stock's currency denomination;
o merger and acquisition trends; and
o trends related to the impact of the introduction of the new European
currency, the "euro," on the finance, marketing and distribution strategies
of European companies.

vi
<PAGE>

RISKS

PRIMARY RISKS

Market Risk. Although individual stocks can outperform their local markets,
deteriorating market conditions might cause an overall weakness in the stock
prices of the entire market.

o its rate of price appreciation begins to trail that of its national stock
index;
o the financial analysts who track the stock reduce their estimates of the
stock's future earnings; or
o the stock's price approaches the downside target we set when we first
bought the stock (and may since have modified to reflect changes in market
and economic conditions).

In this review, we seek to learn if the deteriorating performance accurately
reflects deteriorating prospects or if, in our view, it merely reflects investor
overreaction to temporary circumstances.

o Regulatory Risk. Some foreign governments regulate their exchanges less
stringently, and the rights of shareholders may not be as firmly established.

In an effort to reduce these foreign stock market risks, the Fund diversifies
its investments, just as you may spread your investments among a range of
securities so that a setback in one need not overwhelm your entire strategy. In
this way, a reversal in one market or stock need not undermine the pursuit of
long-term capital appreciation.

vii
<PAGE>

Exposure Risk. There is risk associated with investments (such as derivatives)
or practices (such as short selling) that increase the amount of money the Fund
could gain or lose on an investment. This exposure risk could multiply losses
generated by a derivative or practice used for hedging purposes. Such losses
should be substantially offset by gains on the hedged investment. However, while
hedging can reduce or eliminate losses, it can also reduce or eliminate gains.

SECONDARY RISKS

viii
<PAGE>

Although it is impossible to predict the impact of the conversion to
the euro on the Fund, the risks may include:

o changes in the relative strength and value of the U.S. dollar or other
major currencies;
o adverse effects on the business or financial condition of European issuers
that the Fund holds in its portfolio;
o that the systems used to purchase and sell euro-denominated securities may
not work;
o uncertainty about how existing financial contracts will be treated after
euro implementation; and
o unpredictable effects on trade and commerce generally.

These and other factors could increase volatility in financial markets worldwide
and could adversely affect the value of securities held by the Fund.

o the companies in which the Fund invests, which could impact the value of
the Fund's investments;
o our ability to service your Fund account, including our ability to meet
your requests to buy and sell Fund shares; and
o our ability to trade securities held by the Fund or to accurately price
securities held by the Fund.

ix
<PAGE>

MANAGEMENT OF THE FUND

Board of Trustees. The Fund's shareholders, voting in proportion to the number
of shares each owns, elect a Board of Trustees, and the Trustees supervise all
the Fund's activities on their behalf.

Investment Adviser and Sub-Adviser. Under the supervision of the Board of
Trustees, Bankers Trust Company, with headquarters at 130 Liberty Street, New
York, NY 10006, acts as the Fund's investment adviser. Bankers Trust will
receive a fee of 0.75% of the Fund's average daily net assets for its services
in the current fiscal year. As investment adviser, Bankers Trust makes the
Fund's investment decisions. It buys and sells securities for the Fund and
conducts the research that leads to the purchase and sale decisions. Bankers
Trust has, in turn, vested day-to-day investment decision-making and
implementation in a sub-adviser, the wholly owned entity BT Funds Management
(International) Limited ("BTFMIL"). Responsibilities and advisory fees can be
reallocated between the Investment Adviser and Sub-Adviser without obtaining
shareholder approval.

Bankers Trust's officers bring wide experience to managing both the Fund and its
Portfolio. The firm's own record dates back to its founding as a trust company
in 1903. It has invested retirement assets on behalf of the nation's largest
corporations and institutions for more than 50 years. Today, the assets under
its global management exceed $338 billion. The scope of the firm's capability is
broad: It is a leader in both the active and passive quantitative investment
disciplines and maintains a major presence in stock and bond markets worldwide.
BTFMIL, a subsidiary of Bankers Trust with headquarters at Level 15, The Chifley
Tower, 2 Chifley Square, Sydney, N.S.W. 2000 Australia, offers a decade of
research and investing experience in global equities. It has developed a team
dedicated exclusively to the global equity market discipline.

x
<PAGE>

Portfolio Managers. The following portfolio managers are responsible for the
day-to-day management of the master portfolio's investments:

MICHAEL LEVY, Managing Director of Bankers Trust and Co-Lead Manager of the
Fund.

ROBERT L. REINER, Managing Director of Bankers Trust and Co-Lead Manager of the
Fund.

o Joined Bankers Trust in 1994.
o Co-lead Portfolio Manager, BT International Equity Fund.
o Specializes in Japanese and European stock and market
analysis.
o Served as a Senior Financial Analyst at Scudder, Stevens &
Clark from 1993 to 1994.
o Previously served as Vice President and Senior Analyst at
Sanford C. Bernstein & Co.
o 17 years of investment research experience.
o Degrees from the University of Southern California and Harvard
University.

CHRIS SELTH, Managing Director of Bankers Trust and Co-Lead Manager of the Fund.

<PAGE>

o keeping accurate, up-to-date records for your individual Fund account;

o implementing any changes you wish to make in your account information;

o processing your requests for cash dividends and distributions from the
Fund;

o answering your questions on the Fund's investment performance or
administration;

o sending proxy reports and updated prospectus information to you; and

o collecting your executed proxies.

Organizational Structure. The Global Equity Fund is a "feeder fund" that invests
all of its assets in a "master portfolio," the Global Equity Portfolio. The Fund
and the Master Portfolio have the same investment objective.
The Master Portfolio is advised by Bankers Trust.

xii
<PAGE>

CALCULATING THE FUND'S SHARE PRICE

DIVIDENDS AND DISTRIBUTIONS

Dividends and capital gains distributions, if any, are paid annually. We
automatically reinvest all dividends and any capital gains, unless you elect to
receive your distributions in cash.

xiii
<PAGE>

TAX CONSIDERATIONS

Transaction Tax status
- ----------- ----------
Income dividends Ordinary income

Short-term capital gains distributions Ordinary income

Long-term capital gains distributions Capital gains

Every year the Fund will send you information on the distributions for the
previous year. In addition, if you sell your fund shares you may have a capital
gain or loss.

Transaction Tax status
- ------------ ----------
Your sale of shares owned more than one year Capital gains or losses

Your sale of shares owned for one year or less Gains treated as ordinary
income; losses are subject
to special rules.

The tax considerations for tax deferred accounts or non-taxable entities will be
different.

Because each investor's tax circumstances are unique and because the tax laws
are subject to change, we recommend that you consult your tax advisor about your
investment.

xiv

<PAGE>

BUYING AND SELLING FUND SHARES

CONTACTING THE BT MUTUAL FUNDS

By Phone 1-800-368-4031
(between 9:00 a.m. and 6:00 p.m., Eastern Time)

By Mail P.O. Box 419210
Kansas City, MO 64141-6210

By Overnight Mail 210 West 10th Street, 8th floor
Kansas City, MO 64105-1716

MINIMUM ACCOUNT INVESTMENTS

To open an account [$5 million]
To add to an account [$100,000]
Minimum account balance [$500,000]

HOW TO OPEN YOUR FUND ACCOUNT

By mail Complete and sign the account
application that accompanies
this prospectus. (You may
obtain additional applications
by calling the BT Service
Center.) Mail the completed
application along with a check
payable to Institutional
Global Equity Fund - [Fund #].

By wire Call the BT Service Center to
set up a wire account.

Please note that your account cannot become activated until we receive a
completed application via mail or fax.

xv
<PAGE>

TWO WAYS TO BUY AND SELL SHARES IN YOUR ACCOUNT

MAIL:
BUYING: Send your check, payable to the BT Fund you have selected, to the BT
Service Center. The addresses are shown above under "Contacting the BT Mutual
Funds." Be sure to include the fund number and your account number (see your
account statement) on your check. Please note that we cannot accept starter
checks or third-party checks. If you are investing in more than one fund, make
your check payable to "BT Funds" and include your account number and the names
and numbers of the funds you have selected.

SELLING: Send a signed letter to the BT Service Center with your name, your fund
number and account number, the fund's name, and either the number of shares you
wish to sell or the dollar amount you wish to receive. You must leave at least
$500,000 worth of shares in your account to keep it open. Unless exchanging into
another BT Fund, you must submit a written authorization to sell shares in a
retirement account.

WIRE:

BUYING: You may only buy shares by wire if your account is authorized to do so.
Please note that you or your financial advisor must call the BT Service Center
at 1-800-368-4031 to notify us in advance of a wire transfer purchase. Inform
the BT Representative of the amount of your purchase and receive a trade
confirmation number. Instruct your bank to send payment by wire using the wire
instructions noted below. All wires must be received by 4:00 p.m. Eastern time
the next business day.

ROUTING NO: 021001033
ATTN: Bankers Trust/IFTC Deposit
DDA NO: 00-226-296
FBO: (Account name)
(Account number)
CREDIT: (Fund name and number)

See your account statement for the account name, number and fund number.

xvi
<PAGE>

IMPORTANT INFORMATION ABOUT BUYING AND SELLING SHARES
o After receiving your order, we buy or sell your shares at the next price
calculated on a day the New York Stock Exchange is open for business.
o We accept payment for shares only in U.S. dollars by check, bank or Federal
Funds wire transfer, or by electronic bank transfer.
o We remit proceeds from the sale of shares in U.S. dollars (unless the
redemption is so large that it is made "in-kind").
o You may place orders to buy and sell over the phone by calling your
financial advisor or the BT Service Center at 1-800-368-4031. If you pay
for shares by check and the check fails to clear, or if you order shares by
phone and fail to pay for them by 4:00 p.m. Eastern time the next business
day, we have the right to cancel your order, hold you liable or charge you
or your account for any losses or fees a fund or its agents have incurred.
To sell shares, you must state whether you would like to receive the
proceeds by wire or check.
o You may buy and sell shares of a fund through authorized brokers and
financial advisors as well as from BT Mutual Funds directly. The same terms
and conditions apply. Specifically, once you place your order with a broker
or financial advisor, it is considered received by the BT Service Center.
It is then your broker or financial advisor's responsibility to transmit
the order to the BT Service Center by the next business day. You should
contact your broker or financial advisor if you have a dispute as to when
your order was placed with the fund.
o We do not issue share certificates.
o We process all sales orders free of charge.
o Unless otherwise instructed, we normally mail a check for the proceeds from
the sale of your shares to your account address the next business day and
no later than seven days.
o We reserve the right to close your account on 30 days' notice if it fails
to meet minimum balance requirements for any reason other than a change in
market value.
o If you sell shares by mail or wire, you may be required to obtain a
signature guarantee. Please contact your financial advisor or the BT
Service Center for more information.
o Selling shares of trust accounts and business or organization accounts may
require additional documentation. Please contact your financial advisor or
the BT Service Center for more information.
o During periods of heavy market activity, you may have trouble reaching the
BT Service Center by telephone. If this occurs, you should make your
request by mail.

EXCHANGE PRIVILEGE

You can exchange all or part of your shares for shares of another BT Mutual Fund
up to four times a year without paying a fee. When you exchange shares, you are
selling shares in one fund to purchase shares in another. Before buying shares
through an exchange, you should be sure to get a copy of that fund's prospectus
and read it carefully. You may only order exchanges over the phone if your
account is authorized to do so.

Please note the following conditions:

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[BACK COVER]
Bankers Trust (logo)

You can find more detailed information about the Fund in the current Statement
of Additional Information, dated [DATE], which we have filed electronically with
the Securities and Exchange Commission (SEC) and which is incorporated by
reference into this Prospectus. To receive your free copy of the Statement of
Additional Information or if you have questions about investing in the Fund,
write to us at:

BT SERVICE CENTER
P.O. BOX 419210
KANSAS CITY, MO 64141-6210
or call our toll-free number: 1-800-368-4031

Global Equity Fund
BT Institutional Fund [Product Code]
811-6071

Distributed by:
ICC Distributors, Inc.
Two Portland Square
Portland, ME 04101

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SUBJECT TO COMPLETION, DATED FEBRUARY 5, 1999

STATEMENT OF ADDITIONAL INFORMATION

APRIL __, 1999

BT INSTITUTIONAL FUNDS

o EUROPEAN EQUITY FUND
o GLOBAL EQUITY FUND

BT Institutional Funds (the "Trust") is an open-end management investment
company (mutual fund) comprised of several funds. The shares of European Equity
Fund and Global Equity Fund (each, a "Fund" and together the "Funds") are
described herein. Each of the Funds is a separate series of the Trust.

Unlike other mutual funds, the Trust seeks to achieve the investment objective
of each Fund by investing all the investable assets ("Assets") of the Fund in a
diversified open-end management investment company having the same investment
objectives as the Fund. These investment companies (or a series thereof) are,
respectively, European Equity Portfolio and Global Equity Portfolio (each, a
"Portfolio" and collectively, the "Portfolios"). Each Portfolio is a subtrust of
BT Investment Portfolios.

Shares of each Fund are sold by ICC Distributors, Inc. ("ICC Distributors"), the
Trust's Distributor, to clients and customers (including affiliates and
correspondents) of Bankers Trust Company ("Bankers Trust"), the Portfolios'
Adviser ("Adviser"), and to clients and customers of other organizations. As
appropriate, references to the Adviser herein apply to any sub-investment
adviser that may have day-to-day investment management responsibility of a
Portfolio.

The Trust's Prospectuses for each Fund dated April , 1999, provide the basic
information investors should know before investing. This Statement of Additional
Information ("SAI"), which is not a Prospectus, is intended to provide
additional information regarding the activities and operations of the Trust and
should be read in conjunction with that Fund's Prospectus. You may request a
copy of a Prospectus or a paper copy of this SAI, if you have received it
electronically, free of charge by calling the Trust at the telephone number
listed below or by contacting any Bankers Trust service agent ("Service Agent").
Capitalized terms not otherwise defined in this SAI have the meanings accorded
to them in the Trust's Prospectuses.

BANKERS TRUST COMPANY

INVESTMENT ADVISER OF THE PORTFOLIOS AND ADMINISTRATOR

ICC DISTRIBUTORS, INC.
DISTRIBUTOR
TWO PORTLAND SQUARE
PORTLAND, MAINE 04101
(800) 730-1313

xix
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<TABLE>
<CAPTION>
TABLE OF CONTENTS

PAGE
----
<S> <C> <C>
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS...................................................................

Investment Objectives.....................................................................................

Investment Policies.......................................................................................

Additional Risk Factors...................................................................................

Investment Restrictions...................................................................................

Portfolio Transactions and Brokerage Commissions..........................................................

PERFORMANCE INFORMATION............................................................................................

Standard Performance Information..........................................................................

Comparison of Fund Performance............................................................................

[Prior Performance of Similar Funds.......................................................................

Economic and Market Information...........................................................................

VALUATION OF SECURITIES; REDEMPTIONS AND PURCHASES IN KIND.........................................................

Valuation of Securities...................................................................................

Purchases of Shares.......................................................................................

MINIMUM INVESTMENTS..............................................................................

ADDITIONAL INFORMATION ABOUT BUYING SHARES.......................................................

Redemption of Shares......................................................................................

ADDITIONAL INFORMATION ABOUT SELLING SHARES......................................................

INVESTOR SERVICES................................................................................

INFORMATION SERVICES.............................................................................

EXCHANGE PRIVILEGE...............................................................................

SYSTEMATIC PROGRAMS..............................................................................

TAX-SAVING RETIREMENT PLANS......................................................................

Redemptions and Purchases in Kind.........................................................................

Trading in Foreign Securities.............................................................................
</TABLE>

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<TABLE>
<CAPTION>
<S> <C> <C>
MANAGEMENT OF THE TRUST AND THE PORTFOLIOS.........................................................................>

Trustees of the Trust.....................................................................................

Trustees of the Portfolios................................................................................

Officers of the Trust and Portfolios......................................................................

Investment Adviser........................................................................................

Sub-Investment Adviser....................................................................................

Administrator.............................................................................................

Distributor...............................................................................................

Service Agent.............................................................................................

Custodian and Transfer Agent..............................................................................

Use of Name...............................................................................................

Banking Regulatory Matters................................................................................

Counsel and Independent Accountants.......................................................................

ORGANIZATION OF THE TRUST..........................................................................................

TAXATION...........................................................................................................

Dividends and Distributions...............................................................................

Taxation of the Funds.....................................................................................

Taxation of the Portfolios................................................................................

Sale of Shares............................................................................................

Backup Withholding........................................................................................

Foreign Shareholders......................................................................................

Other Taxation............................................................................................

FINANCIAL STATEMENTS...............................................................................................

APPENDIX...........................................................................................................
</TABLE>

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INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS

INVESTMENT OBJECTIVES

The following is a description of each Fund's investment objective. There can,
of course, be no assurance that any Fund will achieve its investment objective.

EUROPEAN EQUITY FUND'S investment objective is long-term capital appreciation.
Under normal circumstances, the Fund invests at least 65% of its total assets in
the stocks and other equity securities of companies in developed European
countries.

GLOBAL EQUITY FUND'S investment objective is long-term capital appreciation.
Under normal circumstances, the Fund invests at least 65% of its total assets in
the stocks and other equity securities of companies in the world's developed
markets, including the United States.

INVESTMENT POLICIES

Each Fund seeks to achieve its investment objective by investing all of its
assets in the corresponding Portfolio. The Trust may withdraw a Fund's
investment from the corresponding Portfolio at any time if the Board of Trustees
of the Trust determines that it is in the best interests of the Fund to do so.

Since the investment characteristics of each Fund will correspond directly to
those of the corresponding Portfolio, the following is a discussion of the
various investments of and techniques employed by each Portfolio.

EQUITY SECURITIES. As used herein, "equity securities" are defined as common
stock, preferred stock, trust or limited partnership interests, rights and
warrants, sponsored or unsponsored American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs"), and European Depositary Receipts ("EDRs"), and
convertible securities(consisting of debt securities or preferred stock that may
be converted into common stock or that carry the right to purchase common
stock). Common stocks, the most familiar type, represent an equity (ownership)
interest in a corporation. Although equity securities have a history of
long-term growth in value, their prices fluctuate based on changes in a
company's financial condition and on overall market and economic conditions.
Smaller companies are especially sensitive to these factors.

WARRANTS. Warrants are instruments which entitle the holder to buy underlying
equity securities at a specific price for a specific period of time. A warrant
tends to be more volatile than its underlying securities and ceases to have
value if it is not exercised prior to its expiration date. In addition, changes
in the value of a warrant do not necessarily correspond to changes in the value
of its underlying securities.

ADRS, GDRS AND EDRS. ADRs, GDRs, and EDRs are certificates evidencing ownership
of shares of a foreign-based issuer held in trust by a bank or similar financial
institution. Designed for use in U.S., international and European securities
markets, respectively, ADRs, GDRs and EDRs are alternatives to the purchase of
the underlying securities in their national markets and currencies. ADRs, GDRs
and EDRs are subject to the same risks as the foreign securities to which they
relate.

DERIVATIVES. Each Portfolio may invest in various instruments that are commonly
known as "derivatives." Generally, a derivative is a financial arrangement, the
value of which is based on, or "derived" from, a traditional security, 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 is also 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, securities prices, or currency
exchange rates and as a low cost method of gaining exposure to a particular
securities market without investing directly in those securities. However, some
derivatives are used for leverage, which tends to magnify the effects of an
instrument's price changes as market conditions change. Leverage involves the
use of a small amount of money to control a large amount of financial assets,
and can in some circumstances, lead to significant losses. The Adviser will use
derivatives only in circumstances where they offer the most economic means of
improving the risk/reward profile of the Portfolio. Derivatives will not be used
to increase portfolio risk above the level 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
Portfolios. The use of derivatives for non-hedging purposes may be considered
speculative.

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ILLIQUID SECURITIES. Historically, illiquid securities have included securities
subject to contractual or legal restrictions on resale because they have not
been registered under the Securities Act of 1933, as amended (the "1933 Act"),
securities which are otherwise not readily marketable and repurchase agreements
having a remaining maturity of longer than seven days. Securities which have not
been registered under the 1933 Act are referred to as private placements or
restricted securities and are purchased directly from the issuer or in the
secondary market. Mutual funds do not typically hold a significant amount of
these restricted or other illiquid securities because of the potential for
delays on resale and uncertainty in valuation. Limitations on resale may have an
adverse effect on the marketability of portfolio securities and a mutual fund
might be unable to dispose of restricted or other illiquid securities promptly
or at reasonable prices and might thereby experience difficulty satisfying
redemptions within seven days. A mutual fund might also have to register such
restricted securities in order to dispose of them resulting in additional
expense and delay. Adverse market conditions could impede such a public offering
of securities.

A large institutional market has developed for certain securities that are not
registered under the 1933 Act, including repurchase agreements, commercial
paper, foreign securities, municipal securities and corporate bonds and notes.
Institutional investors depend on an efficient institutional market in which the
unregistered security can be readily resold or on an issuer's ability to honor a
demand for repayment. The fact that there are contractual or legal restrictions
on resale of such investments to the general public or to certain institutions
may not be indicative of their liquidity.

The Securities and Exchange Commission the (the "SEC") has adopted Rule 144A,
which allows a broader institutional trading market for securities otherwise
subject to restriction on their resale to the general public. Rule 144A
establishes a "safe harbor" from the registration requirements of the 1933 Act
of resales of certain securities to qualified institutional buyers. The Adviser
anticipates that the market for certain restricted securities such as
institutional commercial paper will expand further as a result of this
regulation and the development of automated systems for the trading, clearance
and settlement of unregistered securities of domestic and foreign issuers, such
as the PORTAL System sponsored by the National Association of Securities
Dealers, Inc.

The Portfolios may purchase securities in the United States that are not
registered for sale under federal securities laws but which can be resold to
institutions under SEC Rule 144A. Provided that a dealer or institutional
trading market in such securities exists, these restricted securities are
treated as exempt from the 15% limit on illiquid securities. Under the
supervision of the Board of Trustees of the Portfolios, the Adviser determines
the liquidity of restricted securities and, through reports from the Adviser,
the Board will monitor trading activity in restricted securities.

The Adviser will monitor the liquidity of Rule 144A securities in the Porfolios'
under the supervision of the Portfolios' Board of Trustees. In reaching
liquidity decisions, the Adviser will consider, among other things, the
following factors: (1) the frequency of trades and quotes for the security; (2)
the number of dealers and other potential purchasers or sellers of the security;
(3) dealer undertakings to make a market in the security and (4) the nature of
the security and of the marketplace trades (E.G., the time needed to dispose of
the security, the method of soliciting offers and the mechanics of the
transfer). If institutional trading in restricted securities were to decline,
the liquidity of the Portfolios could be adversely affected.

DEBT SECURITIES. Although not a principal investment, each Portfolio may invest
in debt securities. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or variable
rate of interest, and must repay the amount borrowed at maturity. Some debt
securities, such as zero coupon bonds, do not pay current interest, but are
purchased at a discount from their face values. Debt securities, loans, and
other direct debt have varying degrees of quality and varying levels of
sensitivity to changes in interest rates. Longer-term bonds are generally more
sensitive to interest rate changes than short-term bonds.

The Portfolios expect to invest in debt securities in one of the top four rating
categories by Standard & Poor's Ratings Service ("S&P") or Moody's Investors
Service, Inc. ("Moody's"), or comparably rated by another nationally recognized
statistical rating organization ("NRSRO"), or, if not rated by a NRSRO, of
comparable quality as determined by the Adviser at its sole discretion.

CONVERTIBLE SECURITIES. A convertible security is a bond or preferred stock
which may be converted at a stated price within a specific period of time into a
specified number of shares of common stock of the same or different issuer.
Convertible securities are senior to common stock in a corporation's capital
structure, but usually are subordinated to non-convertible debt securities.
While providing a fixed income stream--generally higher in yield than in the
income derived from a common stock but lower than that afforded by a
non-convertible debt security--a convertible security also affords an investor
the opportunity, through its conversion feature, to participate in the capital
appreciation of common stock into which it is convertible.

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<PAGE>

In general, the market value of a convertible security is the higher of its
investment value (its value as a fixed income security) or its conversion value
(the value of the underlying shares of common stock if the security is
converted). As a fixed income security, the market value of a convertible
security generally increases when interest rates decline and generally decreases
when interest rates rise; however, the price of a convertible security generally
increases as the market value of the underlying stock increases, and generally
decreases as the market value of the underlying stock declines. Investments in
convertible securities generally entail less risk than investments in the common
stock of the same issuer.

PREFERRED STOCK. Preferred stock has a preference in liquidation (and, generally
dividends) over common stock but is subordinated in liquidation to debt. As a
general rule the market value of preferred stocks with fixed dividend rates and
no conversion rights varies inversely with interest rates and perceived credit
risk, with the price determined by the dividend rate. Some preferred stocks are
convertible into other securities, for example common stock, at a fixed price
and ratio or upon the occurrence of certain events. The market price of
convertible preferred stocks generally reflects an element of conversion value.
Because many preferred stocks lack a fixed maturity date, these securities
generally fluctuate substantially in value when interest rates change; such
fluctuations often exceed those of long-term bonds of the same issuer. Some
preferred stocks pay an adjustable dividend that may be based on an index,
formula, auction procedure or other dividend rate reset mechanism. In the
absence of credit deterioration, adjustable rate preferred stocks tend to have
more stable market values than fixed rate preferred stocks.

All preferred stocks are also subject to the same types of credit risks of the
issuer as corporate bonds. In addition, because preferred stock is junior to
debt securities and other obligations of an issuer, deterioration in the credit
rating of the issuer will cause greater changes in the value of a preferred
stock than in a more senior debt security with similar yield characteristics.
Preferred stocks may be rated by S&P and Moody's although there is no minimum
rating which a preferred stock must have (and a preferred stock may not be
rated) to be an eligible investment for a Portfolio. The Adviser expects,
however, that generally the preferred stocks in which a Portfolio invests will
be rated at least CCC by S&P or Caa by Moody's or, if unrated, of comparable
quality in the opinion of the Adviser. Preferred stocks rated CCC by S&P are
regarded as predominantly speculative with respect to the issuer's capacity to
pay preferred stock obligations and represent the highest degree of speculation
among securities rated between BB and CCC; preferred stocks rated Caa by Moody's
are likely to be in arrears on dividend payments. Moody's rating with respect to
preferred stocks does not purport to indicate the future status of payments of
dividends.

U.S. GOVERNMENT SECURITIES. U.S. government securities are high-quality debt
securities issued or guaranteed by the U.S. Treasury or by an agency or
instrumentality of the U.S. government. Not all U.S. government securities are
backed by the full faith and credit of the United States. For example,
securities issued by the Farm Credit Banks or by the Federal National Mortgage
Association are supported by the instrumentality's right to borrow money from
the U.S. Treasury under certain circumstances. However, securities issued by
other agencies or instrumentalities are supported only by the credit of the
entity that issued them.

SHORT-TERM INSTRUMENTS. Each Portfolio intends to stay invested in the
securities described herein to the extent practical in light of its objective
and long-term investment perspective. However, each Portfolio may invest up to
35% of its total assets in high quality short-term investments with remaining
maturities of 397 days or less, or in money market mutual funds, to meet
anticipated redemptions and expenses for day-to-day operating purposes and up to
100% of its total assets when, in the Adviser's opinion, it is advisable to
adopt a temporary defensive position because of unusual and adverse conditions
affecting the respective markets. When a Portfolio experiences large cash
inflows through the sale of securities and desirable equity securities, that are
consistent with the Portfolio's investment objective, which are unavailable in
sufficient quantities or at attractive prices, each Portfolio may invest in
short-term instruments for a limited time pending availability of such portfolio
securities. Short-term instruments consist of U.S. and non-U.S.: (i) short-term
obligations of sovereign governments, their agencies, instrumentalities,
authorities or political subdivisions; (ii) other short-term debt securities
rated AA or higher by S&P or Aa or higher by Moody's 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 banker's acceptances; and (v) repurchase agreements. At the time a 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
S&P or Aa or higher by Moody's or outstanding commercial paper or bank
obligations rated A-1 by S&P or Prime-1 by Moody's; or, if no such ratings are
available, the instrument must be of comparable quality in the opinion of
Bankers Trust. These instruments may be denominated in U.S. dollars or in
foreign currencies.

CERTIFICATES OF DEPOSIT AND BANKERS' ACCEPTANCES. Certificates of deposit are
receipts issued by a depository institution in exchange for the deposit of
funds. The issuer agrees to pay the amount deposited plus interest to the bearer
of the receipt on the
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<PAGE>

date specified on the certificate. The certificate usually can be traded in the
secondary market prior to maturity. Bankers' acceptances typically arise from
short-term credit arrangements designed to enable businesses to obtain funds to
finance commercial transactions. Generally, an acceptance is a time draft drawn
on a bank by an exporter or an importer to obtain a stated amount of funds to
pay for specific merchandise. The draft is then "accepted" by a bank that, in
effect, unconditionally guarantees to pay the face value of the instrument on
its maturity date. The acceptance may then be held by the accepting bank as an
earning asset or it may be sold in the secondary market at the going rate of
discount for a specific maturity. Although maturities for acceptances can be as
long as 270 days, most acceptances have maturities of six months or less.

COMMERCIAL PAPER. Commercial paper consists of short-term (usually from 1 to 270
days) unsecured promissory notes issued by corporations in order to finance
their current operations. A variable amount master demand note (which is a type
of commercial paper) represents a direct borrowing arrangement involving
periodically fluctuating rates of interest under a letter agreement between a
commercial paper issuer and an institutional lender pursuant to which the lender
may determine to invest varying amounts.

SOVEREIGN AND SUPRANATIONAL DEBT OBLIGATIONS. Debt instruments issued or
guaranteed by foreign governments, agencies, and supranational organizations
("sovereign debt obligations"), especially sovereign debt obligations of
developing countries, may involve a high degree of risk, and may be in default
or present the risk of default. The issuer of the obligation or the governmental
authorities that control the repayment of the debt may be unable or unwilling to
repay principal and interest when due, and may require renegotiation or
rescheduling of debt payments. In addition, prospects for repayment of principal
and interest may depend on political as well as economic factors.

Lower-quality foreign government debt securities are often considered to be
speculative and involve greater risk of default or price changes, or they may
already be in default. These risks are in addition to the general risks
associated with foreign securities.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. Each Portfolio may purchase
securities 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
fluctuations during this period and no income accrues to the Portfolio until
settlement takes place. Each Portfolio identifies, as part of a segregated
account, cash or liquid securities in an amount at least equal to these
commitments. When entering into a when-issued or delayed delivery transaction,
the Portfolios will rely on the other party to consummate the transaction; if
the other party fails to do so, the Portfolios may be disadvantaged.

LENDING OF PORTFOLIO SECURITIES. Each Portfolio has the authority to lend up to
30% of the total value of its portfolio securities to brokers, dealers and other
financial organizations. These loans must be secured continuously by 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. The Portfolios will not lend
securities to Bankers Trust, ICC Distributors or their affiliates. By lending
its securities, a Portfolio can increase its income by continuing to receive
interest on the loaned securities as well as by either investing the cash
collateral in short-term securities or obtaining yield in the form of interest
paid by the borrower when U.S. government obligations are used as collateral.
There may be risks of delay in receiving additional collateral or risks of delay
in recovery of the securities or even loss of rights in the collateral should
the borrower of the securities fail financially. Each Portfolio will adhere to
the following conditions whenever its securities are loaned: (i) the Portfolio
must receive at least 100 percent cash collateral or equivalent securities from
the borrower; (ii) the borrower must increase this collateral whenever the
market value of the securities including accrued interest rises above the level
of the collateral; (iii) the Portfolio must be able to terminate the loan at any
time; (iv) the Portfolio must receive reasonable interest on the loan, as well
as any dividends, interest or other distributions on the loaned securities, and
any increase in market value; (v) the Portfolio may pay only reasonable
custodian fees in connection with the loan; and (vi) voting rights on the loaned
securities may pass to the borrower; provided, however, that if a material event
adversely affecting the investment occurs, the Board of Trustees must terminate
the loan and regain the right to vote the securities. Cash collateral may be
invested in a money market fund managed by Bankers Trust (or its affiliates) and
Bankers Trust may serve as a Portfolio's lending agent and may share in revenue
received from securities lending transactions as compensation for this service.

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.
Delays or losses could result if the other party to the agreement defaults or
becomes insolvent. A
4
<PAGE>

repurchase agreement is considered a collateralized loan under the Investment
Company Act of 1940, as amended ("1940 Act").

REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a Portfolio
temporarily transfers possession of a portfolio instrument to another party in
return for cash. This could increase the risk of fluctuation in the Fund's yield
or in the market value of its assets. A reverse repurchase agreement is a form
of borrowing and will be counted toward a Portfolio's borrowing restrictions.

INVESTMENT COMPANIES. With respect to certain countries in which capital markets
are either less developed or not easily accessed, investments by a Portfolio may
be made through investment in other registered investment companies that in turn
are authorized to invest in the securities of such countries. Investments in
other investment companies may also be made for other purposes, such as noted
above under "Short-Term Instruments," are limited in amount by the 1940 Act
(except each Portfolio may exceed the applicable percentage limits to the extent
permitted by an exemptive order of the SEC), and will involve the indirect
payment of a portion of the expenses, including advisory fees, of such other
investment companies and may result in a duplication of fees and expenses.

OPTIONS ON SECURITIES. A Portfolio may write (sell) covered call and put options
to a limited extent on its portfolio securities ("covered options") in an
attempt to increase income. However, the Portfolio may forgo the benefits of
appreciation on securities sold or may pay more than the market price on
securities acquired pursuant to call and put options written by the Portfolio.

When a Portfolio writes a covered call option, it gives the purchaser of the
option the right to buy the underlying security at the price specified in the
option (the "exercise price") by exercising the option at any time during the
option period. If the option expires unexercised, the Portfolio will realize
income in an amount equal to the premium received for writing the option. If the
option is exercised, a decision over which the Portfolio has no control, the
Portfolio must sell the underlying security to the option holder at the exercise
price. By writing a covered call option, the Portfolio forgoes, in exchange for
the premium less the commission ("net premium"), the opportunity to profit
during the option period from an increase in the market value of the underlying
security above the exercise price.

When a Portfolio writes a covered put option, it gives the purchaser of the
option the right to sell the underlying security to the Portfolio at the
specified exercise price at any time during the option period. If the option
expires unexercised, the Portfolio will realize income in the amount of the
premium received for writing the option. If the put option is exercised, a
decision over which the Portfolio has no control, the Portfolio must purchase
the underlying security from the option holder at the exercise price. By writing
a covered put option, the Portfolio, in exchange for the net premium received,
accepts the risk of a decline in the market value of the underlying security
below the exercise price. The Portfolio will only write put options involving
securities for which a determination is made at the time the option is written
that the Portfolio wishes to acquire the securities at the exercise price.

A Portfolio may terminate its obligation as the writer of a call or put option
by purchasing an option with the same exercise price and expiration date as the
option previously written. This transaction is called a "closing purchase
transaction." The Portfolio will realize a profit or loss for a closing purchase
transaction if the amount paid to purchase an option is less or more, as the
case may be, than the amount received from the sale thereof. To close out a
position as a purchaser of an option, the Portfolio, may make a "closing sale
transaction" which involves liquidating the Portfolio's position by selling the
option previously purchased. Where the Portfolio cannot effect a closing
purchase transaction, it may be forced to incur brokerage commissions or dealer
spreads in selling securities it receives or it may be forced to hold underlying
securities until an option is exercised or expires.

When a Portfolio writes an option, an amount equal to the net premium received
by the Portfolio is included in the liability section of the Portfolio's
Statement of Assets and Liabilities as a deferred credit. The amount of the
deferred credit will be subsequently marked to market to reflect the current
market value of the option written. The current market value of a traded option
is the last sale price or, in the absence of a sale, the mean between the
closing bid and asked price. If an option expires on its stipulated expiration
date or if the Portfolio enters into a closing purchase transaction, the
Portfolio will realize a gain (or loss if the cost of a closing purchase
transaction exceeds the premium received when the option was sold), and the
deferred credit related to such option will be eliminated. If a call option is
exercised, the Portfolio will realize a gain or loss from the sale of the
underlying security and the proceeds of the sale will be increased by the
premium originally received. The writing of covered call options may be deemed
to involve the pledge of the securities against which the option is being
written. Securities against which call options are written will be segregated on
the books of the custodian for the Portfolio.

A Portfolio may purchase call and put options on any securities in which it may
invest. The Portfolio would normally purchase a call option in anticipation of
an increase in the market value of such securities. The purchase of a call
option would entitle the Portfolio, in exchange for the premium paid, to
purchase a security at a specified price during the option period. The Portfolio
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<PAGE>

would ordinarily have a gain if the value of the securities increased above the
exercise price sufficiently to cover the premium and would have a loss if the
value of the securities remained at or below the exercise price during the
option period.

A Portfolio would normally purchase put options in anticipation of a decline in
the market value of securities in its portfolio ("protective puts") or
securities of the type in which it is permitted to invest. The purchase of a put
option would entitle the Portfolio, in exchange for the premium paid, to sell a
security, which may or may not be held in the Portfolio's holdings, at a
specified price during the option period. The purchase of protective puts is
designed merely to offset or hedge against a decline in the market value of the
Portfolio's holdings. Put options also may be purchased by the Portfolio for the
purpose of affirmatively benefiting from a decline in the price of securities
which the Portfolio does not own. The Portfolio would ordinarily recognize a
gain if the value of the securities decreased below the exercise price
sufficiently to cover the premium and would recognize a loss if the value of the
securities remained at or above the exercise price. Gains and losses on the
purchase of protective put options would tend to be offset by countervailing
changes in the value of underlying portfolio securities.

The hours of trading for options on securities may not conform to the hours
during which the underlying securities are traded. To the extent that the option
markets close before the markets for the underlying securities, significant
price and rate movements can take place in the underlying securities markets
that cannot be reflected in the option markets. It is impossible to predict the
volume of trading that may exist in such options, and there can be no assurance
that viable exchange markets will develop or continue.

A Portfolio may engage in over-the-counter options transactions with
broker-dealers who make markets in these options. The ability to terminate
over-the-counter option positions is more limited than with exchange-traded
option positions because the predominant market is the issuing broker rather
than an exchange, and may involve the risk that broker-dealers participating in
such transactions will not fulfill their obligations. To reduce this risk, the
Portfolio will purchase such options only from broker-dealers who are primary
government securities dealers recognized by the Federal Reserve Bank of New York
and who agree to (and are expected to be capable of) entering into closing
transactions, although there can be no guarantee that any such option will be
liquidated at a favorable price prior to expiration. The Adviser will monitor
the creditworthiness of dealers with which the Portfolio enters into such
options transactions under the general supervision of the Portfolios' Trustees.
Unless the Trustees conclude otherwise, each Portfolio intends to treat OTC
options as not readily marketable and therefore subject to each Portfolio's 15%
limitation on investment in illiquid securities.

OPTIONS ON SECURITIES INDICES. In addition to options on securities, each
Portfolio may also purchase and write (sell) call and put options on securities
indices. Such options give the holder the right to receive a cash settlement
during the term of the option based upon the difference between the exercise
price and the value of the index. Such options will be used for the purposes
described above under "Options on Securities."

Options on securities indices entail risks in addition to the risks of options
on securities. The absence of a liquid secondary market to close out options
positions on securities indices is more likely to occur, although the Portfolio
generally will only purchase or write such an option if the Adviser believes the
option can be closed out.

Use of options on securities indices also entails the risk that trading in such
options may be interrupted if trading in certain securities included in the
index is interrupted. A Portfolio will not purchase such options unless the
Adviser believes the market is sufficiently developed such that the risk of
trading in such options is no greater than the risk of trading in options on
securities.

Price movements in a Portfolio's holdings may not correlate precisely with
movements in the level of an index and, therefore, the use of options on indices
cannot serve as a complete hedge. Because options on securities indices require
settlement in cash, the Adviser may be forced to liquidate portfolio securities
to meet settlement obligations.

OPTIONS ON FOREIGN SECURITIES INDICES. Each Portfolio may purchase and write put
and call options on foreign stock indices listed on domestic and foreign stock
exchanges. The Portfolios may also purchase and write OTC options on foreign
stock indices. These OTC options would be subject to the same liquidity and
credit risks noted below with respect to OTC options on foreign currencies. A
stock index fluctuates with changes in the market values of the stocks included
in the index.

OTC options are purchased from or sold to securities dealers, financial
institutions or other parties (collectively referred to as "Counterparties" and
individually referred to as a "Counterparty") through direct bilateral agreement
with the Counterparty. In contrast to exchange listed options, which generally
have standardized terms and performance mechanics, all of the terms of an OTC
option, including such terms as method of settlement, term, exercise price,
premium, guaranties and security, are set by negotiation of the parties.
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Unless the parties provide for it, no central clearing or guaranty function is
involved in an OTC option. As a result, if a Counterparty fails to make or take
delivery of the security, currency or other instrument underlying an OTC option
it has entered into with a Portfolio or fails to make a cash settlement payment
due in accordance with the terms of that option, the Portfolio will lose any
premium it paid for the option as well as any anticipated benefit of the
transaction. Thus, the Adviser must assess the creditworthiness of each such
Counterparty or any guarantor or credit enhancement of the Counterparty's credit
to determine the likelihood that the terms of the OTC option will be met.

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 or
a foreign currency, as the case may be, 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 entering into a closing transaction on an exchange or the
option may expire unexercised.

To the extent permitted by U.S. federal or state securities laws, either
Portfolio may invest in options on foreign stock indices in lieu of direct
investment in foreign securities. The Portfolios may also use foreign stock
index options for hedging purposes.

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 Portfolios of options on stock indices will be subject to
the Adviser's ability to predict correctly movements in the direction of the
stock market generally or of a particular industry. This requires different
skills and techniques than predicting changes in the price of individual stocks.

CURRENCY EXCHANGE TRANSACTIONS. Because each Portfolio may buy and sell
securities denominated in currencies other than the U.S. dollar and receives
interest, dividends and sale proceeds in currencies other than the U.S. dollar,
a Portfolio from time to time may enter into currency exchange transactions to
convert to and from different foreign currencies and to convert foreign
currencies to and from the U.S. dollar. A Portfolio either enters into these
transactions on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign currency exchange market or uses forward contracts to purchase or sell
foreign currencies.

FORWARD CURRENCY EXCHANGE CONTRACTS. A forward currency exchange contract is an
obligation by a Portfolio to purchase or sell a specific currency at a future
date, which may be any fixed number of days from the date of the contract.
Forward currency exchange contracts establish an exchange rate at a future date.
These contracts are transferable in the interbank market conducted directly
between currency traders (usually large commercial banks and brokerages) and
their customers. A forward currency exchange contract may not have a deposit
requirement and may be traded at a net price without commission. Each Portfolio
maintains with its custodian a segregated account of cash or liquid securities
in an amount at least equal to its obligations under each forward currency
exchange contract. Neither spot transactions nor forward currency exchange
contracts eliminate fluctuations in the prices of a Portfolio's securities or in
foreign exchange rates, or prevent loss if the prices of these securities should
decline.

Each Portfolio may enter into currency hedging transactions in an attempt to
protect against changes in currency exchange rates between the trade and
settlement dates of specific securities transactions or changes in currency
exchange rates that would adversely affect a portfolio position or an
anticipated investment position. Since consideration of the prospect for
currency parities will be incorporated into the Adviser's long-term investment
decisions, a Portfolio will not routinely enter into currency hedging
transactions with respect to security transactions; however, the Adviser
believes that it is important to have the flexibility to enter into currency
hedging transactions when it determines that the transactions would be in a
Portfolio's best interest. Although these transactions tend to minimize the risk
of loss due to a decline in the value of the hedged currency, at the same time

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they tend to limit any potential gain that might be realized should the value of
the hedged currency increase. The precise matching of the forward contract
amounts and the value of the securities involved will not generally be possible
because the future value of such securities in foreign currencies will change as
a consequence of market movements in the value of such securities between the
date the forward contract is entered into and the date it matures. The
projection of currency market movements is extremely difficult, and the
successful execution of a hedging strategy is highly uncertain.

While these contracts are not presently regulated by the Commodity Futures
Trading Commission ("CFTC"), the CFTC may in the future assert authority to
regulate forward contracts. In such event a Portfolio's ability to utilize
forward contracts may be restricted. Forward contracts may reduce the potential
gain from a positive change in the relationship between the U.S. dollar and
foreign currencies. Unanticipated changes in currency prices may result in
poorer overall performance for a Portfolio than if it had not entered into such
contracts. The use of currency forward contracts may not eliminate fluctuations
in the underlying U.S. dollar equivalent value of the prices of or rates of
return on a Portfolio's foreign currency denominated portfolio securities and
the use of such techniques will subject a Portfolio to certain risks.

The matching of the increase in value of a forward contract and the decline in
the U.S. dollar equivalent value of the foreign currency denominated asset that
is the subject of the hedge generally will not be precise. In addition, a
Portfolio may not always be able to enter into currency forward contracts at
attractive prices and this will limit the Portfolio's ability to use such
contract to hedge or cross-hedge its assets. Also, with regard to a Portfolio's
use of cross-hedges, there can be no assurance that historical correlations
between the movement of certain foreign currencies relative to the U.S. dollar
will continue. Thus, at any time poor correlation may exist between movements in
the exchange rates of the foreign currencies underlying a Portfolio's
cross-hedges and the movements in the exchange rates of the foreign currencies
in which the Portfolio's assets that are the subject of such cross-hedges are
denominated.

OPTIONS ON FOREIGN CURRENCIES. Each Portfolio may purchase and write options on
foreign currencies for hedging purposes in a manner similar to that in which
futures contracts on foreign currencies, or forward contracts, will be utilized.
For example, a decline in the dollar value of a foreign currency in which
portfolio securities are denominated will reduce the dollar value of such
securities, even if their value in the foreign currency remains constant. In
order to protect against such diminutions in the value of portfolio securities,
a Portfolio may purchase put options on the foreign currency. If the value of
the currency does decline, a Portfolio will have the right to sell such currency
for a fixed amount in dollars and will thereby offset, in whole or in part, the
adverse effect on its portfolio which otherwise would have resulted.

Conversely, where a rise in the dollar value of a currency in which securities
to be acquired are denominated is projected, thereby increasing the cost of such
securities, the Portfolio may purchase call options thereon. The purchase of
such options could offset, at least partially, the effects of the adverse
movements in exchange rates. As in the case of other types of options, however,
the benefit to the Portfolio deriving from purchases of foreign currency options
will be reduced by the amount of the premium and related transaction costs. In
addition, where currency exchange rates do not move in the direction or to the
extent anticipated, the Portfolio could sustain losses on transactions in
foreign currency options which would require it to forego a portion or all of
the benefits of advantageous changes in such rates.

The purchase of an option on foreign currency may be used to hedge against
fluctuations in exchange rates, although in the event of exchange rate movements
adverse to a Portfolio's position, it may forfeit the entire amount of the
premium plus related transaction costs. In addition, the Portfolio may purchase
a call option on a foreign currency when the Adviser anticipates that the
currency will appreciate in value.

Each Portfolio may write options on foreign currencies for the same types of
hedging purposes. For example, where a Portfolio anticipates a decline in the
dollar value of foreign currency denominated securities due to adverse
fluctuations in exchange rates it could, instead of purchasing a put option,
write a call option on the relevant currency. If the expected decline occurs,
the options will most likely not be exercised, and the diminution in value of
portfolio securities will be offset by the amount of the premium received.

Similarly, instead of purchasing a call option to hedge against an anticipated
increase in the dollar cost of securities to be acquired, a Portfolio could
write a put option on the relevant currency which, if rates move in the manner
projected, will expire unexercised and allow the Portfolio to hedge such
increased cost up to the amount of the premium. As in the case of other types of
options, however, the writing of a foreign currency option will constitute only
a partial hedge up to the amount of the premium, and only if rates move in the
expected direction. If this does not occur, the option may be exercised and the
Portfolio would be required to purchase or sell the underlying currency at a
loss which may not be offset by the amount of the premium. Through the

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writing of options on foreign currencies, a Portfolio also may be required to
forego all or a portion of the benefits which might otherwise have been obtained
from favorable movements in exchange rates.

Each Portfolio may write covered call options on foreign currencies. A call
option written on a foreign currency by a Portfolio is "covered" if the
Portfolio owns the underlying foreign currency covered by the call or has an
absolute and immediate right to acquire that foreign currency without additional
cash consideration (or for additional cash consideration held in a segregated
account by its Custodian) upon conversion or exchange of other foreign currency
held in its portfolio. A call option is also covered if the Portfolio has a call
on the same foreign currency and in the same principal amount as the call
written where the exercise price of the call held (a) is equal to or less than
the exercise price of the call written or (b) is greater than the exercise price
of the call written if the difference is maintained by the Portfolio in cash or
securities acceptable to the broker in a segregated account with its custodian.

Each Portfolio also may write call options on foreign currencies that are not
covered for cross-hedging purposes. A call option on a foreign currency is for
cross-hedging purposes if it is not covered, but is designed to provide a hedge
against a decline in the U.S. dollar value of a security which the Portfolio
owns or has the right to acquire and which is denominated in the currency
underlying the option due to an adverse change in the exchange rate. In such
circumstances, the Portfolio collateralizes the option by maintaining in a
segregated account with its Custodian, cash or liquid securities in an amount
not less than the value of the underlying foreign currency in U.S. dollars
marked to market daily.

There is no assurance that a liquid secondary market will exist for any
particular option, or at any particular time. If a Portfolio is unable to effect
a closing purchase transaction with respect to covered options it has written,
the Portfolio will not be able to sell the underlying currency or dispose of
assets held in a segregated account until the options expire or are exercised.
Similarly, if the Portfolio is unable to effect a closing sale transaction with
respect to options it has purchased, it would have to exercise the options in
order to realize any profit and will incur transaction costs upon the purchase
or sale of underlying currency. Each Portfolio pays brokerage commissions or
spreads in connection with its options transactions.

As in the case of forward contracts, certain options on foreign currencies are
traded over-the-counter and involve liquidity and credit risks which may not be
present in the case of exchange-traded currency options. In some circumstances,
the Portfolio's ability to terminate OTC options may be more limited than with
exchange-traded options. It is also possible that broker-dealers participating
in OTC options transactions will not fulfill their obligations. Each Portfolio
intends to treat OTC options as not readily marketable and therefore subject to
each Portfolio's 15% limit on investment in illiquid securities.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS.

GENERAL. The successful use of futures contracts and options thereon draws upon
the Adviser's skill and experience with respect to such instruments and usually
depends on the Adviser's ability to forecast interest rate and currency exchange
rate movements correctly. Should interest or exchange rates move in an
unexpected manner, a Portfolio may not achieve the anticipated benefits of
futures contracts or options on futures contracts or may realize losses and thus
will be in a worse position than if such strategies had not been used. In
addition, the correlation between movements in the price of futures contracts or
options on futures contracts and movements in the price of the securities and
currencies hedged or used for cover will not be perfect and could produce
unanticipated losses.

FUTURES CONTRACTS. Futures contracts are contracts to purchase or sell a fixed
amount of an underlying instrument, commodity or index at a fixed time and place
in the future. U.S. futures contracts have been designed by exchanges which have
been designated "contracts markets" by the CFTC, and must be executed through a
futures commission merchant, or brokerage firm, which is a member of the
relevant contract market. Futures contracts trade on a number of exchanges and
clear through their clearing corporations. A Portfolio may enter into contracts
for the purchase or sale for future delivery of fixed-income securities, foreign
currencies, or financial indices including any index of U.S. government
securities, foreign government securities or corporate debt securities. A
Portfolio may enter into futures contracts which are based on debt securities
that are backed by the full faith and credit of the U.S. Government, such as
long-term U.S. Treasury Bonds, Treasury Notes, Government National Mortgage
Association ("GNMA") modified pass-through mortgage-backed securities and
three-month U.S. Treasury Bills. A Portfolio may also enter into futures
contracts which are based on bonds issued by governments other than the U.S.
government. Futures contracts on foreign currencies may be used to hedge against
securities that are denominated in foreign currencies.

At the same time a futures contract is entered into, a Portfolio must allocate
cash or securities as a deposit payment ("initial margin"). Initial margin
deposits are set by exchanges and may range between 1% and 10% of a contract's
face value. Daily thereafter, the futures contract is valued and the payment of
"variation margin" may be required, since each day the Portfolio would provide
or receive cash that reflects any decline or increase in the contract's value.

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Although futures contracts (other than those that settle in cash, such as index
futures) by their terms call for the actual delivery or acquisition of the
instrument underlying the contract, in most cases the contractual obligation is
fulfilled by offset before the date of the contract without having to make or
take delivery of the instrument underlying the contract. The offsetting of a
contractual obligation is accomplished by entering into an opposite position in
the identical futures contract on the commodities exchange on which the futures
contract was entered into (or a linked exchange). Such a transaction, which is
effected through a member of an exchange, cancels the obligation to make or take
delivery of the instrument underlying the contract. Since all transactions in
the futures market are made, offset or fulfilled through a clearinghouse
associated with the exchange on which the contracts are traded, the Portfolio
will incur brokerage fees when it enters into futures contracts.

The purpose of entering into a futures contract, if the Portfolio holds or
intends to acquire fixed-income securities, is to attempt to protect the
Portfolio from fluctuations in interest rates without actually buying or selling
fixed-income securities. For example, if interest rates were expected to
increase, the Portfolio might enter into futures contracts for the sale of debt
securities. Such a sale would have much the same effect as selling an equivalent
value of the debt securities owned by the Portfolio. If interest rates did
increase, the value of the debt security in the Portfolio would decline, but the
value of the futures contracts to the Portfolio would increase at approximately
the same rate, thereby keeping the net asset value of the Portfolio from
declining as much as it otherwise would have. The Portfolio could accomplish
similar results by selling debt securities and investing in bonds with short
maturities when interest rates are expected to increase. However, since the
futures market is more liquid than the cash market, the use of futures contracts
as an investment technique allows the Portfolio to maintain a defensive position
without having to sell its portfolio securities.

The assets in the segregated asset account maintained to cover the Portfolio's
obligations with respect to such futures contracts will consist of cash or
securities acceptable to the broker from its portfolio in an amount equal to the
difference between the fluctuating market value of such futures contracts and
the aggregate value of the initial and variation margin payments made by the
Portfolio with respect to such futures contracts.

The ordinary spreads between prices in the cash and futures market, due to
differences in the nature of those markets, are subject to distortions. First,
all participants in the futures market are subject to initial and variation
margin requirements. Rather than meeting additional variation margin
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on most
participants entering into offsetting transactions rather than making or taking
delivery. To the extent that many participants decide to make or take delivery,
liquidity in the futures market could be reduced, thus producing distortion.
Third, from the point of view of speculators, the margin deposit requirements in
the futures market are less onerous than margin lending requirements in the
securities market. Therefore, increased participation by speculators in the
futures market may cause temporary price distortions. Due to the possibility of
distortion, a correct forecast of general interest rate or currency exchange
rate trends by the Adviser may still not result in a successful transaction.

OPTIONS ON FUTURES CONTRACTS. Each Portfolio may purchase and write options on
futures contracts for hedging purposes. The purchase of a call option on a
futures contract is similar in some respects to the purchase of a call option on
an individual security. For example, when a Portfolio is not fully invested it
may purchase a call option on an interest rate sensitive futures contract to
hedge against a potential price increase in debt securities due to declining
interest rates. The purchase of a put option on a futures contract is similar in
some respects to the purchase of protective put options on portfolio securities.
For example, a Portfolio may purchase a put option on an interest rate sensitive
futures contract to hedge its portfolio against the risk of a decline in the
price of debt securities due to rising interest rates.

The writing of a call option on a futures contract may constitute a partial
hedge against declining prices of portfolio securities which are the same as or
correlate with the security or currency which is deliverable upon exercise of
the futures contract. If the futures price at expiration of the option is below
the exercise price, a Portfolio will retain the full amount of the option
premium which provides a partial hedge against any decline that may have
occurred in the Portfolio's portfolio holdings. The writing of a put option on a
futures contract may constitute a partial hedge against increasing prices of
intended portfolio securities which are the same or correlate with the security
or foreign currency which is deliverable upon exercise of the futures contract.
If the futures price at expiration of the option is higher than the exercise
price, the Portfolio will retain the full amount of the option premium which
provides a partial hedge against any increase in the price of securities which
the Portfolio intends to purchase. If a put or call option a Portfolio has
written is exercised, the Portfolio will incur a loss which will be reduced by
the amount of the premium it receives. Depending on the degree of correlation
between changes in the value of its portfolio securities and changes in the

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value of its futures positions, the Portfolio's losses from existing options on
futures may to some extent be reduced or increased by changes in the value of
portfolio securities.

The amount of risk a Portfolio assumes when it purchases an option on a futures
contract is the premium paid for the option plus related transaction costs. In
addition to the correlation risks discussed above, the purchase of an option
also entails the risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the option purchased.

FUTURES CONTRACTS ON DOMESTIC AND FOREIGN SECURITIES INDICES. Each Portfolio may
enter into futures contracts providing for cash settlement based upon changes in
the value of an index of domestic or foreign securities. This investment
technique may be used as a low-cost method of gaining exposure to a particular
securities market without investing directly in those securities or 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 Portfolio.

When used for hedging purposes, each transaction in futures contracts on a
securities index involves the establishment of a position which the Adviser
believes will move in a direction opposite to that of the investment 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 the futures contract may not be achieved or a loss
may be realized.

Although futures contracts on securities indices would be entered into for
hedging purposes only, such transactions do involve certain risks. These risks
include a lack of correlation between the futures contract and the securities
market being hedged, and incorrect assessments of market trends which may result
in poorer overall performance than if a futures contract had not been entered
into.

ASSET COVERAGE. To assure that a Portfolio's use of futures and related options,
as well as when-issued and delayed-delivery securities and foreign currency
exchange transactions, are not used to achieve investment leverage, a Portfolio
will cover such transactions, as required under applicable interpretations of
the SEC, either by owning the underlying securities or by segregating with the
Portfolio's Custodian or futures commission merchant liquid securities in an
amount at all times equal to or exceeding the Portfolio's commitment with
respect to these instruments or contracts.

INVESTMENT RESTRICTION ON FUTURES TRANSACTIONS. In compliance with current CFTC
regulations, a Portfolio will not enter into any futures contracts or options on
futures contracts if immediately thereafter the amount of margin deposits on all
the futures contracts of the Portfolio and premiums paid on outstanding options
on futures contracts owned by the Portfolio (other than those entered into for
bona fide hedging purposes) would exceed 5% of the Portfolio's net asset value,
after taking into account unrealized profits and unrealized losses on any such
contracts.

ADDITIONAL RISK FACTORS

In addition to the risks discussed above, each Portfolio's investments may be
subject to the following risk factors:

FOREIGN SECURITIES. Each Portfolio will under normal market conditions invest a
significant portion of its assets in foreign securities. Investors should
realize that investing in securities of foreign issuers involves considerations
not typically associated with investing in securities of companies organized and
operated in the United States. Investors should realize that the value of a
Portfolio's foreign investments may be adversely affected by changes in
political or social conditions, diplomatic relations, confiscatory taxation,
expropriation, nationalization, limitation on the removal of funds or assets, or
imposition or (or change in) exchange control or tax regulations in foreign
countries. In addition, changes in government administrations or economic or
monetary policies in the United States or abroad could result in appreciation or
depreciation of portfolio securities and could favorably or unfavorably affect a
Portfolio's operations, Furthermore, the economies of individual foreign nations
may differ from the U.S. economy, whether favorably or unfavorably, in areas
such as growth or gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency or balance of payments position; it may
also be more difficult to obtain and enforce a judgment against a foreign
issuer. In general, less information is publicly available with respect to
foreign issuers than is available with respect to U.S. companies. Most foreign
companies are also not subject to the uniform accounting and financial reporting
requirements applicable to issuers in the Untied States. Any foreign investments
made by a Portfolio must be made in compliance with U.S. and foreign currency
restrictions and tax laws restricting the amounts and types of foreign
investments.

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Because foreign securities generally are denominated and pay dividends or
interest in foreign currencies, the value of the net assets of a Portfolio as
measured in U.S. dollars will be affected favorably or unfavorably by changes in
exchange rates. In order to protect against uncertainty in the level of future
foreign currency exchange rates, a Portfolio is also authorized to enter into
certain foreign exchange transactions. Furthermore, a Portfolio's foreign
investments may be less liquid and their prices may be more volatile than
comparable investments in securities of U.S. companies. The settlement periods
for foreign securities, which are often longer than those for securities of U.S.
issuers, may affect portfolio liquidity. Finally, there may be less government
supervision and regulation of securities exchanges, brokers and issuers in
foreign countries than in the United States.

In addition, while the volume of transactions effected on foreign stock
exchanges has increased in recent years, in most cases it remains appreciably
below that of the New York Stock Exchange, Inc. (the "NYSE"). Accordingly, a
Portfolio's foreign investments may be less liquid and their prices may be more
volatile than comparable investments in securities of U.S. companies. Moreover,
the settlement periods for foreign securities, which are often longer than those
for securities of U.S. issuers, may affect portfolio liquidity. In buying and
selling securities on foreign exchanges, the Portfolio normally pays fixed
commissions that are generally higher than the negotiated commissions charged in
the United States. In addition, there is generally less government supervision
and regulation of securities exchanges, brokers and issuers in foreign countries
than in the United States.

EMERGING MARKETS. Each Portfolio may invest up to 35% of its total assets in
securities of companies located in emerging markets. The risks involved when
investing in emerging markets are of a nature generally not encountered when
investing in securities traded on major international markets.

The world's industrialized markets generally include but are not limited to the
following: Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Hong Kong, Ireland, Italy, Japan, Luxembourg, the Netherlands, New
Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United
Kingdom, and the United States; the world's emerging markets generally include
but are not limited to the following: Argentina, Bolivia, Brazil, Bulgaria,
Chile, China, Colombia, Costa Rica, the Czech Republic, Ecuador, Egypt, Greece,
Hungary, India, Indonesia, Israel, the Ivory Coast, Jordan, Malaysia, Mexico,
Morocco, Nicaragua, Nigeria, Pakistan, Peru, the Philippines, Poland, Romania,
Russia, Slovakia, Slovenia, South Africa, South Korea, Sri Lanka, Taiwan,
Thailand, Turkey, Uruguay, Venezuela, Vietnam and Zimbabwe.

Investment in securities of issuers based in underdeveloped emerging markets
entails all of the risks of investing in securities of foreign issuers outlined
in the above section to a heightened degree. These heightened risks include: (i)
greater risks of expropriation, confiscatory taxation, nationalization, and less
social, political and economic stability; (ii) the smaller size of the market
for such securities and a low or nonexistent volume of trading, resulting in
lack of liquidity and in price volatility; (iii) certain national policies which
may restrict a Portfolio's investment opportunities including restrictions on
investing in issuers or industries deemed sensitive to relevant national
interests; (iv) accounting, auditing and financial reporting standards
applicable can be less demanding than the levels acceptable in the United States
which can result in incomplete company information; and (v) in the case of
Eastern Europe, the absence of developed capital markets and legal structures
governing private or foreign investment and private property and the possibility
that recent favorable economic and political developments could be slowed or
reversed by unanticipated events.

Although external debt in most emerging markets is generally falling, it remains
at high levels. This acts as a depressant on economic growth and limits access
to global savings. As a result, many emerging markets are reliant on foreign
capital inflows for fund development. During periods of uncertainty, foreign
capital may be withdrawn from these economies, causing financial market
weakness.

Investments in certain countries may require government approval which may
restrict the size and nature of investments. These restrictions may limit a
Portfolio's access to certain emerging markets. Additionally, the Adviser may be
required to obtain government consent to redeem a Portfolio's capital and
profits. Therefore, a Portfolio could encounter delays or refusals to grant
permission for money to be removed from the country. This could impact the
amount of cash available to meet shareholder redemptions.

In addition to brokerage commissions, custodial services and other costs
relating to investment in emerging markets are generally more expensive than in
the United States. Such markets have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions. The
inability of a Portfolio to make intended security purchases due to settlement
problems could cause the Portfolio to miss attractive investment opportunities.
Inability to
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dispose of a security due to settlement problems could result either in losses
to the Portfolio due to subsequent declines in the value of the security or, if
the Portfolio has entered into a contract to sell the security, could result in
possible liability to the purchaser.

It should be noted that developments affecting emerging market investments
cannot always be foreseen. Therefore, a shareholder may find it difficult to
protect their investments against risk.

FOREIGN SECURITIES: SPECIAL CONSIDERATIONS CONCERNING CENTRAL AND EASTERN
EUROPE. The Portfolios may invest in foreign securities issued by Central and
Eastern European countries. Investments in companies domiciled in Eastern
European countries may be subject to potentially greater risks than those of
other foreign issuers. These risks include: (i) potentially less social,
political and economic stability; (ii) the small current size of the markets for
such securities and the low volume of trading, which result in less liquidity
and in greater price volatility; (iii) certain national policies which may
restrict a Portfolio's investment opportunities, including restrictions on
investment in issuers or industries deemed sensitive to national interests; (iv)
foreign taxation; (v) the absence of developed legal structures governing
private or foreign investment or allowing for judicial redress for injury to
private property; (vi) the absence, until recently in certain Eastern European
countries, of a capital market structure or market-oriented economy; and (vii)
the possibility that recent favorable economic developments in Eastern Europe
may be slowed or reversed by unanticipated political or social events in such
countries, or in the Commonwealth of Independent States (consisting of the
Republics of the former Union of Soviet Socialist Republics).

The economic situation remains difficult for Eastern European countries in
transition from central planning, following what has already been a sizable
decline in output. The contraction now appears to be bottoming out in parts of
Eastern Europe. Following three successive years of output declines, there are
preliminary indications of a turnaround in the former Czech and Slovak Federal
Republic, Hungary and Poland; growth in private sector activity and strong
exports now appear to have contained the fall in output. A number of their
governments, including those of Hungary and Poland, are currently implementing
or considering reforms directed at political and economic liberalization,
including efforts to foster multi-party political systems, decentralize economic
planning, and a move toward free-market economies. But key aspects of the reform
and stabilization efforts have not yet been fully implemented, and there remain
risks of policy slippage. At present, no Eastern European country has a
developed stock market, but Poland, Hungary and the Czech Republic have small
securities markets in operation.

In many other countries of the region, output losses have been even larger.
These declines reflect the adjustment difficulties during the early stages of
the transition, high rates of inflation, the compression of imports, disruption
in trade among the countries of the former Soviet Union, and uncertainties about
the reform process itself. Large-scale subsidies are delaying industrial
restructuring and are exacerbating the fiscal situation. A reversal of these
adverse factors is not anticipated in the near term, and output is expected to
decline further in most of these countries. In the Russian Federation and most
other countries of the former Soviet Union, economic conditions are of
particular concern because of economic instability due to political unrest and
armed conflicts in many regions. Further, no accounting standards exist in
Eastern European countries. Although certain Eastern European currencies may be
convertible into U.S. dollars, the conversion rates may be artificial to the
actual market values and may be adverse to each Fund's shareholders.

OPTIONS ON FUTURES CONTRACTS, FORWARD CONTRACTS AND OPTIONS ON FOREIGN
CURRENCIES. Unlike transactions entered into by a Portfolio in futures
contracts, options on foreign currencies and forward contracts are not traded on
contract markets regulated by the CFTC or (with the exception of certain foreign
currency options) by the SEC. To the contrary, such instruments are traded
through financial institutions acting as principals, although foreign currency
options are also traded on certain national securities exchanges such as the
Philadelphia Stock Exchange and the Chicago Board Options Exchange, subject to
SEC regulation. In an over-the-counter trading environment, many of the
protections afforded to exchange participants will not be available. For
example, there are no daily price fluctuation limits, and adverse market
movements could therefore continue to an unlimited extent over a period of time.
Although the purchaser of an option cannot lose more than the amount of the
premium plus related transaction costs, this entire amount could be lost.
Moreover, the option writer and a trader of forward contracts could lose amounts
substantially in excess of their initial investments.

Forward contracts and options on foreign currencies traded over-the-counter
involve liquidity and credit risks which may not be present in the case of
exchange-traded currency options. A Portfolio's ability to terminate
over-the-counter options will be more limited than with exchange-traded options.
It is also possible that broker-dealers participating in over-the-counter
options transactions will not fulfill their obligations. Until such time as the
staff of the SEC changes its position, each Portfolio will treat purchased
over-the-counter options and assets used to cover written over-the-counter
options as illiquid securities.

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Options on foreign currencies traded on national securities exchanges are within
the jurisdiction of the SEC, as are other securities traded on such exchanges.
As a result, many of the protections provided to traders on organized exchanges
will be available with respect to such transactions. In particular, all foreign
currency option positions entered into on a national securities exchange are
cleared and guaranteed by the Options Clearing Corporation ("OCC"), thereby
reducing the risk of counterparty default. Further, a liquid secondary market in
options traded on a national securities exchange may be more readily available
than in the over-the-counter market, potentially permitting a Portfolio to
liquidate open positions at a profit prior to exercise or expiration, or to
limit losses in the event of adverse market movements.

The purchase and sale of exchange-traded foreign currency options, however, is
subject to the risks of the availability of a liquid secondary market described
above, as well as the risks regarding adverse market movements, margining of
options written, the nature of the foreign currency market, possible
intervention by governmental authorities and the effects of other political and
economic events. In addition, exchange-traded options on foreign currencies
involve certain risks not presented by the over-the-counter market. For example,
exercise and settlement of such options must be made exclusively through the
OCC, which has established banking relationships in applicable foreign countries
for this purpose. As a result, the OCC may, if it determines that foreign
governmental restrictions or taxes would prevent the orderly settlement of
foreign currency option exercises, or would result in undue burdens on the OCC
or its clearing member, impose special procedures on exercise and settlement,
such as technical changes in the mechanics of delivery of currency, the fixing
of dollar settlement prices or prohibitions on exercise.

In addition, futures contracts, options on futures contracts, forward contracts
and options on foreign currencies may be traded on foreign exchanges. Such
transactions are subject to the risk of governmental actions affecting trading
in or the prices of foreign currencies or securities. The value of such
positions also could be adversely affected by: (i) other complex foreign
political and economic factors; (ii) lesser availability than in the United
States of data on which to make trading decisions; (iii) delays in the
Portfolio's ability to act upon economic events occurring in foreign markets
during nonbusiness hours in the United States; (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States; and (v) lesser trading volume.

RISKS OF INVESTING IN MEDIUM- AND SMALL-CAPITALIZATION STOCKS. Historically,
medium- and small-capitalization stocks have been more volatile in price than
larger-capitalization stocks. Among the reasons for the greater price volatility
of these securities are the less certain growth prospects of smaller firms, the
lower degree of liquidity in the markets for such stocks, and the greater
sensitivity of medium- and small-size companies to changing economic conditions.
In addition to exhibiting greater volatility, medium- and small-size company
stocks may fluctuate independently of larger company stocks. Medium- and
small-size company stocks may decline in price as large company stocks rise, or
rise in prices as large company stocks decline.

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, each Fund seeks to achieve its
investment objective by investing all of its Assets in the corresponding
Portfolio, a separate registered investment company with the same investment
objective as the corresponding Fund. Therefore, an investor's interest in the
corresponding Portfolio's securities is indirect. In addition to selling a
beneficial interest to the corresponding Fund, each Portfolio may sell
beneficial interests to other mutual funds, investment vehicles or institutional
investors. Such investors will invest in a Portfolio on the same terms and
conditions and will pay a proportionate share of a Portfolio's expenses.
However, the other investors investing in a Portfolio are not required to sell
their shares at the same public offering price as the Fund due to variations in
sales commissions and other operating expenses. Therefore, investors in a Fund
should be aware that these differences may result in differences in returns
experienced by investors in the different funds that invest in each Portfolio.
Such differences in returns are also present in other mutual fund structures.
Information concerning other holders of interests in each Portfolio is available
from Bankers Trust at 1-800-368-4031.

Smaller funds investing in a Portfolio may be materially affected by the actions
of larger funds investing in the Portfolio. For example, if a large fund
withdraws from a 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, a Portfolio may become less diverse, resulting in
increased portfolio risk. Also, funds with a greater pro rata ownership in a
Portfolio could have effective voting control of the operations of the
Portfolio. Except as permitted by the SEC, whenever the Trust is requested to
vote on matters pertaining to a Portfolio, the Trust will hold a meeting of
shareholders of the Fund and will cast all of its votes in the same proportion
as the votes of the Fund's shareholders. Fund shareholders who do not vote will
not affect the Trust's votes at the Portfolio meeting. The percentage of the
Trust's votes representing the Fund's shareholders not voting will be voted by
the Trustees or officers of the Trust in the same proportion as the Fund
shareholders who do, in fact, vote.

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Certain changes in a Portfolio's investment objectives, policies or restrictions
may require the Fund to withdraw its interest in the Portfolio. Any such
withdrawal could result in a distribution "in kind" of portfolio securities (as
opposed to a cash distribution from the Portfolio). If securities are
distributed, the Fund could incur brokerage, tax or other charges in converting
the securities to cash. In addition, the distribution in kind may result in a
less diversified portfolio of investments or adversely affect the liquidity of
the Fund. Notwithstanding the above, there are other means for meeting
redemption requests, such as borrowing.

The Fund may withdraw its investment from a Portfolio at any time, if the Board
of Trustees of the Trust determines that it is in the best interests of the
shareholders of the Fund to do so. Upon any such withdrawal, the Board of
Trustees of the Trust would consider what action might be taken, including the
investment of all the Assets of the Fund in another pooled investment entity
having the same investment objective as the Fund or the retaining of an
investment adviser to manage the Fund's assets in accordance with the investment
policies described herein with respect to the corresponding Portfolio.

Each 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 each Portfolio is also not a
fundamental policy. Shareholders of the Funds will receive 30 days prior written
notice with respect to any change in the investment objective of the Fund or the
corresponding Portfolio.

RATING SERVICES. The ratings of rating services represent their opinions as to
the quality of the securities that they undertake to rate. It should be
emphasized, however, that ratings are relative and subjective and are not
absolute standards of quality. Although these ratings are an initial criterion
for selection of portfolio investments, the Adviser also makes its own
evaluation of these securities, subject to review by the Board of Trustees.
After purchase by a Portfolio, an obligation may cease to be rated or its rating
may be reduced below the minimum required for purchase by the Portfolio. Neither
event would require a Portfolio to eliminate the obligation from its portfolio,
but the Adviser will consider such an event in its determination of whether a
Portfolio should continue to hold the obligation. A description of the ratings
is included in the Appendix herein.

INVESTMENT RESTRICTIONS

FUNDAMENTAL POLICIES. The following investment restrictions are "fundamental
policies" of each Fund and each Portfolio and may not be changed with respect to
each Fund or Portfolio without the approval of a "majority of the outstanding
voting securities" of the Fund or the Portfolio, as the case may be. "Majority
of the outstanding voting securities" under the 1940 Act, and as used in this
SAI, means, with respect to each Fund (or Portfolio), the lesser of (i) 67% or
more of the outstanding voting securities of the Fund (or of the total
beneficial interests of the corresponding Portfolio) present at a meeting, if
the holders of more than 50% of the outstanding voting securities of the Fund
(or of the total beneficial interests of the Portfolio) are present or
represented by proxy or (ii) more than 50% of the outstanding voting securities
of the Fund (or of the total beneficial interests of the Portfolio). Whenever
the Trust is requested to vote on a fundamental policy of a Portfolio, the Trust
will hold a meeting of the corresponding Fund's shareholders and will cast its
vote as instructed by that Fund's shareholders. Fund shareholders who do not
vote will not affect the Trust's votes at the Portfolio meeting. The percentage
of the Trust's votes representing Fund shareholders not voting will be voted by
the Trustees of the Trust in the same proportion as the Fund shareholders who
do, in fact, vote.

As a matter of fundamental policy, no Portfolio (or Fund) may (except that no
investment restriction of a Fund shall prevent a Fund from investing all of its
Assets in an open-end investment company with substantially the same investment
objectives):

(1) borrow money or mortgage or hypothecate assets of the Portfolio
(Fund), except that it may borrow money for temporary or emergency
purposes in an amount up to 1/3 of its total assets, and enter
into reverse repurchase agreements or dollar roll transactions,
and except that it may pledge, mortgage or hypothecate not more
than 1/3 of such assets to secure such borrowings, provided that
collateral arrangements with respect to options and futures,
including deposits of initial deposit and variation margin, are
not considered a pledge of assets for purposes of this restriction
and except that assets may be pledged to secure letters of credit
solely for the purpose of participating in a captive insurance
company sponsored by the Investment Company Institute;

(2) underwrite securities issued by other persons except insofar as
the Portfolios (the Funds) may technically be deemed an
underwriter under the 1933 Act in selling a portfolio security;

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<PAGE>

(3) make loans to other persons except: (a) through the lending of the
Portfolio's (Fund's) portfolio securities and provided that any
such loans not exceed 30% of the Portfolio's (Fund's) total assets
(taken at market value); (b) through the use of repurchase
agreements or the purchase of short-term obligations; or (c) by
purchasing a portion of an issue of debt securities of types
distributed publicly or privately;

(4) purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or
interests therein), interests in oil, gas or mineral leases,
commodities or commodity contracts (except futures and option
contracts) in the ordinary course of business (except that the
Portfolio (Fund) may hold and sell, for the Portfolio's (Fund's)
portfolio, real estate acquired as a result of the Portfolio's
(Fund's) ownership of securities);

(5) concentrate its investments in any particular industry (excluding
U.S. government securities), but if it is deemed appropriate for
the achievement of a Portfolio's (Fund's) investment objective(s),
up to 25% of its total assets may be invested in any one industry;
and

(6) issue any senior security (as that term is defined in the 1940
Act) if such issuance is specifically prohibited by the 1940 Act
or the rules and regulations promulgated thereunder, provided that
collateral arrangements with respect to options and futures,
including deposits of initial deposit and variation margin, are
not considered to be the issuance of a senior security for
purposes of this restriction.

(7) with respect to 75% of each Portfolio's (Fund's) total assets,
invest more than 5% of its total assets in the securities of any
one issuer (excluding cash and cash-equivalents, U.S. government
securities and the securities of other investments companies) or
own more than 10% of the voting securities of any issuer.

ADDITIONAL RESTRICTIONS. In order to comply with certain statutes and policies,
each Portfolio (or the Trust, on behalf of each Fund) will not as a matter of
operating policy (except that no operating policy shall prevent a Fund from
investing all of its Assets in an open-end investment company with substantially
the same investment objectives):

(i) purchase any security or evidence of interest therein on
margin, except that such short-term credit as may be necessary
for the clearance of purchases and sales of securities may be
obtained and except that deposits of initial deposit and
variation margin may be made in connection with the purchase,
ownership, holding or sale of futures;
(ii) invest for the purpose of exercising control or management of
another company;

(iii) purchase securities issued by any investment company
except by purchase in the open market where no commission or
profit to a sponsor or dealer results from such purchase other
than the customary broker's commission, or except when such
purchase, though not made in the open market, is part of a
plan of merger or consolidation; provided, however, that
securities of any investment company will not be purchased for
the Portfolio (Fund) if such purchase at the time thereof
would cause: (a) more than 10% of the Portfolio's (Fund's)
total assets (taken at the greater of cost or market value) to
be invested in the securities of such issuers; (b) more than
5% of the Portfolio's (Fund's) total assets (taken at the
greater of cost or market value) to be invested in any one
investment company; or (c) more than 3% of the outstanding
voting securities of any such issuer to be held for the
Portfolio (Fund) unless permitted to exceed these limitations
by an exemptive order of the SEC; provided further that,
except in the case of a merger or consolidation, the Portfolio
(Fund) shall not purchase any securities of any open-end
investment company unless (1) the Portfolio's investment
adviser waives the investment advisory fee with respect to
assets invested in other open-end investment companies and (2)
the Portfolio incurs no sales charge in connection with the
investment;

(iv) invest more than 15% of the Portfolio's (Fund's) net
assets (taken at the greater of cost or market value) in
securities that are illiquid or that have no readily
ascertainable market value;

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(v) write puts and calls on securities unless each of the
following conditions are met: (a) the security underlying the
put or call is within the investment practices of the
Portfolio (Fund) and the option is issued by the OCC, except
for put and call options issued by non-U.S. entities or listed
on non-U.S. securities or commodities exchanges; (b) the
aggregate value of the obligations underlying the puts
determined as of the date the options are sold shall not
exceed 5% of the Portfolio's (Fund's) net assets; (c) the
securities subject to the exercise of the call written by the
Portfolio (Fund) must be owned by the Portfolio (Fund) at the
time the call is sold and must continue to be owned by the
Portfolio (Fund) until the call has been exercised, has
lapsed, or the Portfolio (Fund) has purchased a closing call,
and such purchase has been confirmed, thereby extinguishing
the Portfolio's (Fund's) obligation to deliver securities
pursuant to the call it has sold; and (d) at the time a put is
written, the Portfolio (Fund) designates as segregated assets
cash or liquid securities equal in value to the amount the
Portfolio (Fund) will be obligated to pay upon exercise of the
put (until the put is exercised, has expired, or the Portfolio
(Fund) has purchased a closing put, which is a put of the same
series as the one previously written); and

(vi) buy and sell puts and calls on securities, stock index
futures or options on stock index futures, or financial
futures or options on financial futures unless such options
are written by other persons and: (a) the options or futures
are offered through the facilities of a national securities
association or are listed on a national securities or
commodities exchange, except for put and call options issued
by non-U.S. entities or listed on non-U.S. securities or
commodities exchanges; (b) the aggregate premiums paid on all
such options which are held at any time do not exceed 20% of
the Portfolio's (Fund's) total net assets; and (c) the
aggregate margin deposits required on all such futures or
options thereon held at any time do not exceed 5% of the
Portfolio's (Fund's) total assets.

There will be no violation of any investment restriction (except with respect to
fundamental investment restriction (1) above) if that restriction is complied
with at the time the relevant action is taken, notwithstanding a later change in
the market value of an investment, in net or total assets or in the change of
securities rating of the investment, or any other later change.

PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS

The Adviser is responsible for decisions to buy and sell securities, futures
contracts and options on such securities and futures for each Portfolio, the
selection of brokers, dealers and futures commission merchants to effect
transactions and the negotiation of brokerage commissions, if any.
Broker-dealers may receive brokerage commissions on portfolio transactions,
including options, futures and options on futures transactions and the purchase
and sale of underlying securities upon the exercise of options. Orders may be
directed to any broker-dealer or futures commission merchant, including to the
extent and in the manner permitted by applicable law, Bankers Trust or its
subsidiaries or affiliates. Purchases and sales of certain portfolio securities
on behalf of a Portfolio are frequently placed by the Adviser with the issuer or
a primary or secondary market-maker for these securities on a net basis, without
any brokerage commission being paid by the Portfolio. Trading does, however,
involve transaction costs. Transactions with dealers serving as market-makers
reflect the spread between the bid and asked prices. Transaction costs may also
include fees paid to third parties for information as to potential purchasers or
sellers of securities. Purchases of underwritten issues may be made which will
include an underwriting fee paid to the underwriter.

The Adviser seeks to evaluate the overall reasonableness of the brokerage
commissions paid (to the extent applicable) in placing orders for the purchase
and sale of securities for a Portfolio taking into account such factors as
price, commission (negotiable in the case of national securities exchange
transactions), if any, size of order, difficulty of execution and skill required
of the executing broker-dealer through familiarity with commissions charged on
comparable transactions, as well as by comparing commissions paid by the
Portfolio to reported commissions paid by others. The Adviser reviews on a
routine basis commission rates, execution and settlement services performed,
making internal and external comparisons.

The Adviser is authorized, consistent with Section 28(e) of the Securities
Exchange Act of 1934, when placing portfolio transactions for a Portfolio with a
broker to pay a brokerage commission (to the extent applicable) in excess of
that which another broker might have charged for effecting the same transaction
on account of the receipt of research, market or statistical information. The
term "research, market or statistical information" includes advice as to the
value of securities; the advisability of investing in, purchasing or selling
securities; the availability of securities or purchasers or sellers of
securities; and furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts.

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Consistent with the policy stated above, the Conduct Rules of the National
Association of Securities Dealers, Inc. and such other policies as the Trustees
of the Portfolio may determine, the Adviser may consider sales of shares of the
Trust and of other investment company clients of Bankers Trust as a factor in
the selection of broker-dealers to execute portfolio transactions. Bankers Trust
will make such allocations if commissions are comparable to those charged by
nonaffiliated, qualified broker-dealers for similar services.

Higher commissions may be paid to firms that provide research services to the
extent permitted by law. Bankers Trust may use this research information in
managing each Portfolio's assets, as well as the assets of other clients.

Except for implementing the policies stated above, there is no intention to
place portfolio transactions with particular brokers or dealers or groups
thereof. In effecting transactions in over-the-counter securities, orders are
placed with the principal market-makers for the security being traded unless,
after exercising care, it appears that more favorable results are available
otherwise.

Although certain research, market and statistical information from brokers and
dealers can be useful to a Portfolio and to the Adviser, it is the opinion of
the management of the Portfolios that such information is only supplementary to
the Adviser's own research effort, since the information must still be analyzed,
weighed and reviewed by the Adviser's staff. Such information may be useful to
the Adviser in providing services to clients other than the Portfolios, and not
all such information is used by the Adviser in connection with the Portfolios.
Conversely, such information provided to the Adviser by brokers and dealers
through whom other clients of the Adviser effect securities transactions may be
useful to the Adviser in providing services to the Portfolios.

In certain instances there may be securities which are suitable for a Portfolio
as well as for one or more of the Adviser's other clients. Investment decisions
for a Portfolio and for the Adviser's other clients are made with a view to
achieving their respective investment objectives. It may develop that a
particular security is bought or sold for only one client even though it might
be held by, or bought or sold for, other clients. Likewise, a particular
security may be bought for one or more clients when one or more clients are
selling that same security. Some simultaneous transactions are inevitable when
several clients receive investment advice from the same investment adviser,
particularly when the same security is suitable for the investment objectives of
more than one client. When two or more clients are simultaneously engaged in the
purchase or sale of the same security, the securities are allocated among
clients in a manner believed to be equitable to each. It is recognized that in
some cases this system could have a detrimental effect on the price or volume of
the security as far as a Portfolio is concerned. However, it is believed that
the ability of a Portfolio to participate in volume transactions will produce
better executions for the Portfolio.

PERFORMANCE INFORMATION

STANDARD PERFORMANCE INFORMATION

From time to time, quotations of a Fund's performance may be included in
advertisements, sales literature or shareholder reports. For mutual funds, much
as the Portfolios and the Funds, performance is commonly measured as total
return. Each Fund's performance is affected by its expenses. These performance
figures are calculated in the following manner:

TOTAL RETURN: Total return is the change in value of an investment in a
Fund over a given period, assuming reinvestment of any dividends and
capital gains. A cumulative total return reflects actual performance
over a stated period of time. An average annual total return is a
hypothetical rate of return that, if achieved annually, would have
produced the same cumulative total return if performance had been
constant over the entire period. Average annual total return
calculations smooth out variations in performance; they are not the
same as actual year-by-year results. Average annual total returns
covering periods of less than one year assume that performance will
remain constant for the rest of the year. A Fund's average annual total
return is calculated for certain periods by determining the average
annual compounded rates of return over those periods that would cause
an investment of $1,000 (made at the maximum public offering price with
all distributions reinvested) to reach the value of that investment at
the end of the periods. A Fund may also calculate total return figures
which represent aggregate performance over a period or year-by-year
performance.

PERFORMANCE RESULTS: Total returns are based on past results and are
not an indication of future performance. Any total return quotation
provided for a Fund should not be considered as representative of the
performance of the Fund in the future since the net asset value and
public offering price of shares of the Fund will vary based not only on
the type, quality and maturities of the securities held in the
corresponding Portfolio, but also on changes in the current value of
such securities and on changes in the expenses of the Fund and the

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corresponding Portfolio. These factors and possible differences in the
methods used to calculate total return should be considered when
comparing the total return of a Fund to total returns published for
other investment companies or other investment vehicles. Total return
reflects the performance of both principal and income.

COMPARISON OF FUND PERFORMANCE

Comparison of the quoted nonstandardized performance of various investments is
valid only if performance is calculated in the same manner. Since there are
different methods of calculating performance, investors should consider the
effect of the methods used to calculate performance when comparing performance
of a Fund with performance quoted with respect to other investment companies or
types of investments.

In connection with communicating its performance to current or prospective
shareholders, a Fund also may compare these figures to the performance of other
mutual funds tracked by mutual fund rating services or to unmanaged indices
which may assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs. Evaluations of a Fund's
performance made by independent sources may also be used in advertisements
concerning the Fund. Sources for a Fund's performance information could include
the following:

Asian Wall Street Journal, a weekly Asian newspaper that often reviews U.S.
mutual funds investing internationally.

Barron's, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance data.

Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds investing abroad.

Changing Times, The Kiplinger Magazine, a monthly investment advisory
publication that periodically features the performance of a variety of
securities.

Consumer Digest, a monthly business/financial magazine that includes a "Money
Watch" section featuring financial news.

Financial Times, Europe's business newspaper, which features from time to time
articles on international or country-specific funds.

Financial World, a general business/financial magazine that includes a "Market
Watch" department reporting on activities in the mutual fund industry.

Forbes, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.

Fortune, a national business publication that periodically rates the performance
of a variety of mutual funds.

Global Investor, a European publication that periodically reviews the
performance of U.S. mutual funds investing internationally.

Investor's Daily, a daily newspaper that features financial, economic and
business news.

Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis, a weekly
publication of industry-wide mutual fund averages by type of fund.

Money, a monthly magazine that from time to time features both specific funds
and the mutual fund industry as a whole.

Morningstar Inc., a publisher of financial information and mutual fund research.

New York Times, a nationally distributed newspaper which regularly covers
financial news.

Personal Investing News, a monthly news publication that often reports on
investment opportunities and market conditions.

Personal Investor, a monthly investment advisory publication that includes a
"Mutual Funds Outlook" section reporting on mutual fund performance measures,
yields, indices and portfolio holdings.

Success, a monthly magazine targeted to the world of entrepreneurs and growing
business, often featuring mutual fund performance data.

U.S. News and World Report, a national business weekly that periodically reports
mutual fund performance data.

ValueLine, a biweekly publication that reports on the largest 15,000 mutual
funds.

19
<PAGE>

Wall Street Journal, a Dow Jones and Company, Inc. newspaper which regularly
covers financial news.

Weisenberger Investment Companies Services, an annual compendium of information
about mutual funds and other investment companies, including comparative data on
funds' backgrounds, management policies, salient features, management results,
income and dividend records, and price ranges.

Working Women, a monthly publication that features a "Financial Workshop"
section reporting on the mutual fund/financial industry.

PRIOR PERFORMANCE OF SIMILAR EUROPEAN EQUITY FUNDS

Set forth below is certain composite information regarding the performance for
certain periods through November 30, 1998, of four funds each of which is
advised or sub-advised by either BT Funds Management (International) Limited,
formerly BT Fund Managers (International) Limited, ("BTFMIL") or BT Funds
Management Limited ("BT Funds Management"). Although the investment objectives,
policies and strategies of these funds are substantially the same as those of
the Fund, it should be noted that these funds are not registered as investment
companies under the 1940 Act or subject to the provisions of the Code governing
"regulated investment companies," nor are any of them subject to investment
restrictions that are identical to those that apply to the European Equity Fund.
The funds are not subject to certain investment limitations, diversification
requirements, and other restrictions imposed by the 1940 Act and the Internal
Revenue Code, which, if applicable, may have adversely affected the performance
results of the composite funds set forth herein. Therefore, the performance of
the funds set forth herein may be better or worse than it would have been had
all of the funds been subject to such requirements.

The composite table below reflects the performance of the following types of
funds: two funds which are available to non-U.S. investors ("BT International
Investment Series - European Equity Retail Fund" and "BT International
Investment Series - European Equity Institutional Fund"); one fund which is
available to Australian investors ("BT Select Markets - European Growth Fund");
and a separate account established for an advisory clients of BTFMIL. The same
investment personnel that will manage the European Equity Fund manage all four
funds in the composite, and they will have the same degree of discretion in
managing the European Equity Fund as they did with the composite funds (subject
to limitations imposed by applicable U.S. regulations, including the 1940 Act).

Performance information for the four funds described above is provided below on
a composite basis, showing the combined performance of the funds over various
periods of time up to five years (the first full calendar year of operations for
the oldest of the funds included in the composite was 1987). Of the funds that
comprise the composite, only one fund has not been operational for the
three-year period indicated. The funds were added to the composite at their
inception or at the time when BTFMIL began management of the Fund. BT
International Investment Series - European Equity Retail Fund was entered into
the composite on its inception date, October 31, 1992. Its performance is
included in the composite as of November 30, 1992. BT International Investment
Series - European Equity Institutional Fund was entered into the composite on
its inception date, April 1, 1998. Its performance is included in the composite
as of April 30, 1998. BT Select Markets - European Growth Fund was entered into
the composite on its inception date, July 1, 1986. Its performance is included
in the composite as of July 31, 1986. Although the inception date of the
separate account was October 1, 1990, BTFMIL did not begin to manage the account
until August, 1995. The account was entered into the composite on August 31,
1995 and its performance is included in the composite as of September 30, 1995.

The prior performance information below is presented net of (or after payment
of) fees and expenses by the relevant funds. These fees and expenses averaged
approximately 1.97% per year of the average assets under management. It is
anticipated that the European Equity Fund, during its initial period of
operation, will incur expenses at an annualized rate of 1.85% of its average
daily net assets (which the Adviser has undertaken to reduce to 1.50% through
fee waivers and/or expense reimbursements). Had the funds reflected in the table
below been subject to fees and expenses at the lower level expected to be
incurred by the European Equity Fund, the performance shown below would be
increased by an amount approximately equal to the difference between the
European Equity Fund's anticipated expenses and the approximate expenses
incurred by the funds included in the composite.

The performance below is compared to the Morgan Stanley Capital International
("MSCI") Europe (15) Net Accumulation Index which is an index of securities of
companies domiciled in European countries as determined by MSCI. Since the index
reflects the performance of an unmanaged portfolio of securities, the
performance of the index is not subject to any fees or

20
<PAGE>

expenses, nor is it subject to any brokerage fees or other transaction costs.

THE PRIOR PERFORMANCE SHOWN BELOW SHOULD NOT BE CONSIDERED A REPRESENTATION OF
FUTURE PERFORMANCE OF THE FUND.

Performance (net of fees and expenses) through November 30, 1998 (% in U.S.
dollars)

Annualized
----------
1 year 3 years 5 years 10 years
------ ------ ------- --------
BT European Equity Composite 31.35% 26.28% 21.94% 18.98%
MSCI Europe (15) Net
Accumulation Index 27.65% 23.95% 19.81% 14.80%

Performance figures above represent the asset-weighted composite of four
European equity portfolios with investment objectives substantially similar to
those of the Fund. The performance presented herein for one of the portfolios
has been converted into U.S. dollars from Australian dollars as of the last day
of each month using the London Close exchange rate. The performance presented
herein for another of the portfolios has been converted into U.S. dollars from
Canadian dollars as of the last day of each month using the London Close
exchange rate. The other two portfolios are U.S. dollar denominated. Performance
figures are net of fees and reflect the reinvestment of all investment income,
including dividends and capital gains.

ECONOMIC AND MARKET INFORMATION

Advertising and sales literature of a Fund may include discussions of economic,
financial and political developments and their effect on the securities market.
Such discussions may take the form of commentary on these developments by Fund
portfolio managers and their views and analysis on how such developments could
affect the Funds. In addition, advertising and sales literature may quote
statistics and give general information about the mutual fund industry,
including the growth of the industry, from sources such as the Investment
Company Institute ("ICI"). For example, according to the ICI, thirty-seven
percent of American households are pursuing their financial goals through mutual
funds. These investors, as well as businesses and institutions, have entrusted
over $3.5 trillion to the more than 6,000 funds available.

VALUATION OF SECURITIES; REDEMPTIONS AND PURCHASES IN KIND

VALUATION OF SECURITIES

The net asset value ("NAV") per Share is calculated once on each Valuation Day
as of the close of regular trading on the NYSE (the "Valuation Time"), which is
currently 4:00 p.m., Eastern time. The NAV per Share is computed by dividing the
value of each Fund's assets (I.E., the value of its investment in the
corresponding Portfolio and other assets), less all liabilities attributable to
the Shares, by the total number of Shares outstanding as of the Valuation Time.
Each 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 accurately 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 is 0.005 (1/2 of 1%) or less or
shareholder transactions are otherwise insubstantially affected, further action
is not required.

Equity and debt securities (other than short-term debt obligations maturing in
60 days or less), including listed securities and securities for which price
quotations are available, will normally be valued on the basis of market
valuations furnished by a pricing service. Such market valuations may represent
the last quoted price on the securities major trading exchange or may

21
<PAGE>
be determined through use of matrix pricing. In matrix pricing, pricing services
may use various pricing models, involving comparable securities, historic
relative price movements, economic factors and dealer quotations.
Over-the-counter securities will normally be valued at the bid price. Short-term
debt obligations and money market securities maturing in 60 days or less are
valued at amortized cost, which approximates market.

Securities for which market quotations are not readily available are valued by
Bankers Trust pursuant to procedures adopted by each Portfolio's Board of
Trustees. It is generally agreed that securities for which market quotations are
not readily available should not be valued at the same value as that carried by
an equivalent security which is readily marketable.

The problems inherent in making a good faith determination of value are
recognized in the codification effected by SEC Financial Reporting Release No. 1
("FRR 1" (formerly Accounting Series Release No. 113)) which concludes that
there is "no automatic formula" for calculating the value of restricted
securities. It recommends that the best method simply is to consider all
relevant factors before making any calculation. According to FRR 1 such factors
would include consideration of the:

type of security involved, financial statements, cost at date
of purchase, size of holding, discount from market value of
unrestricted securities of the same class at the time of
purchase, special reports prepared by analysts, information as
to any transactions or offers with respect to the security,
existence of merger proposals or tender offers affecting the
security, price and extent of public trading in similar
securities of the issuer or comparable companies, and other
relevant matters.

To the extent that a Portfolio purchases securities which are
restricted as to resale or for which current market quotations are not
readily available, the Adviser of the Portfolio will value such
securities based upon all relevant factors as outlined in FRR 1.

PURCHASES OF 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. Shares may be
available through Investment Professionals, such as broker/dealers and
investment advisers (including Service Agents).

Purchase orders for Shares (including those purchased through a Service Agent)
that are transmitted to the Trust's Transfer Agent (the "Transfer Agent"), prior
to the Valuation Time on any Valuation Day will be effective 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 Service
Agent to transmit to the Transfer Agent purchase and redemption orders and to
transmit to Bankers Trust as the Trust's custodian (the "Custodian") purchase
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 particular
time. Because Bankers Trust is the Custodian and Transfer Agent of the Trust,
funds may be transferred directly from or to a customer's account held with
Bankers Trust to settle transactions with the Fund without incurring the
additional costs or delays associated with the wiring of federal funds.

The Trust and Bankers Trust have authorized one or more brokers to accept on the
Trust's behalf purchase and redemption orders. Such brokers are authorized to
designate other intermediaries to accept purchase and redemption orders on the
Trust's behalf. The Transfer Agent will be deemed to have received a purchase or
redemption order when an authorized broker or, if applicable, a broker's
authorized designee, accepts the order. Customer orders will be priced at the
Fund's NAV next computed after they are accepted by an authorized broker or the
broker's authorized designee.

Certificates for Shares will not be issued. Each shareholder's account will be
maintained by a Service Agent or Transfer Agent.

If orders are placed through an Investment Professional, it is the
responsibility of the Investment Professional to transmit the order to buy
Shares to the Transfer Agent before 4:00 p.m. Eastern time.

22
<PAGE>

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

To open an account $250,000

To add to an account $25,000

Minimum Account Balance $100,000

The Fund and its service providers reserve the right to, from time to time in
their discretion, waive or reduce the investment minimums.

If you are new to BT Institutional Funds, complete and sign an account
application and mail it along with your check to the address listed below. For
an account application, 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 have money invested in a fund in the BT Family of Funds, you can:

o Mail an account application with a check,

o Wire money into your account,

o Open an account by exchanging from another fund in the BT Family of
Funds, or

o Contact your Service Agent or Investment Professional.

23
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Additional Information About Buying Shares

TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
By Wire Call the BT Service Center at Call your Investment Professional
1-800-368-4031 to receive wire or wire additional investment to:
instructions for account Routing No.: 021001033
establishment. Attn: Bankers Trust/IFTC Deposit
DDA No.: 00-226-296
FBO: (Account name)
(Account Number)
Credit: (Fund name and number)
Institutional European Equity
Fund -
Institutional Global Equity
Fund -
<CAPTION>
<S> <C> <C>

PLEASE NOTE THAT YOU MUST
CALL THE BT SERVICE CENTER
TO PLACE YOUR TRADE THE
DAY YOU WISH TO BUY SHARES
TO NOTIFY US OF THE WIRE
TRANSFER AND TO INDICATE
THE FUND IN WHICH YOU
INTEND TO INVEST TO
RECEIVE THAT DAY'S PRICE.

By Phone Contact your Service Agent, Contact your Service Agent,
Investment Professional, or call Investment Professional, or call
BT's Service Center at BT's Service Center at
1-800-368-4031. If you are an 1-800-368-4031. If you are an
existing Shareholder, you may existing Shareholder, you may
exchange from another BT account exchange from another BT account
with the same registration, with the same registration,
including name, address, and including name, address, and
taxpayer ID number. You may taxpayer ID number.
only order exchanges over the
phone if your account is
authorized to do so.

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 the choice. Indicate your Fund account
Fund of your choice. Mail to the number on your check and mail to
appropriate address indicated on the the address printed on your account
application. statement.

</TABLE>
24
<PAGE>

Redemption of 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.
Redemption requests for Shares received by the Service Agent and transmitted 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 disclaim
liability for following instructions communicated by telephone that the Service
Agent reasonably believes to be genuine. The Service Agent must provide the
investor with an opportunity to choose whether or not to utilize the telephone
redemption or exchange privilege. The Transfer Agent and the Service Agent must
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. If the Service Agent does not do so, it may be liable for
any losses due to unauthorized or fraudulent instructions. Such procedures may
include, among others, requiring some form of personal identification prior to
acting upon instructions received by telephone, providing written confirmation
of such transactions and/or tape recording of telephone instructions.

Redemption orders are processed without charge by the Trust. The Trust reserves
the right to close investor accounts via 30 day notice in writing if the Fund
account balance falls below $100,000.

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
distributions, 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:

o Your account registration has changed within the last 30 days,

o The check is being mailed to a different address than the one on your
account (record address),

o The check is being made payable to someone other than the account
owner,

o The redemption proceeds are being transferred to a BT account with a
different registration, or

o 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, dealer,
credit union (if authorized under state law), securities exchange or
association, clearing agency, or savings association. A notary public cannot
provide a signature guarantee.

ADDITIONAL INFORMATION ABOUT SELLING SHARES

25
<PAGE>

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.

For a Business or Organization account, at least one person authorized
by corporate 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.

EXCHANGE PRIVILEGE

Shareholders may exchange their Shares for shares of certain other funds
in the BT Family of Funds registered in their state. To make an
exchange, follow the procedures indicated in "Purchase of Shares" and
"Redemption of Shares" herein. Before making an exchange, please note
the following:

o Call your Service Agent for information and a prospectus. Read
the prospectus before exchanging into a Fund.

o Complete and sign an application, taking care to register your
new account in the same name, address and taxpayer
identification number as your existing account(s).

o 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 transaction.

o Exchanges out of the Fund may be limited to four per calendar
year and any exchange may have tax consequences for you.

o The Fund reserves the right to terminate or modify the exchange
privilege in the future.

Redemptions and Purchases in Kind
26
<PAGE>

The Trust, on behalf of the Fund, and the Portfolio reserve the right, if
conditions exist which make cash payments undesirable, to honor any request for
redemption or withdrawal by making payment in whole or in part in readily
marketable securities chosen by the Trust, or the Portfolio, as the case may be,
and valued as they are for purposes of computing the Fund's or the Portfolio's
net asset value, as the case may be (a redemption in kind). If payment is made
to a Fund shareholder in securities, an investor, including the Fund, may incur
transaction expenses in converting these securities into cash. The Trust, on
behalf of the Fund, and the Portfolio have elected, however, to be governed by
Rule 18f-1 under the 1940 Act as a result of which the Fund and the Portfolio
are obligated to redeem shares or beneficial interests, as the case may be, with
respect to any one investor during any 90-day period, solely in cash up to the
lesser of $250,000 or 1% of the net asset value of the Fund or the Portfolio, as
the case may be, at the beginning of the period.
The Portfolio has agreed to make a redemption in kind to the Fund whenever the
Fund wishes to make a redemption in kind and therefore shareholders of the Fund
that receive redemptions in kind will receive portfolio securities of the
Portfolio and in no case will they receive a security issued by the Portfolio.
The Portfolio has advised the Trust that the Portfolio will not redeem in kind
except in circumstances in which the Fund is permitted to redeem in kind or
unless requested by the Fund.

The Fund may, at its own option, accept securities in payment for shares. The
securities delivered in payment for shares are valued by the method described
under "Net Asset Value" as of the day the Fund receives the securities. This may
be a taxable transaction to the shareholder. (Consult your tax adviser for
further tax guidance.) Securities may be accepted in payment for shares only if
they are, in the judgment of Bankers Trust, appropriate investments for the
Portfolio. In addition, securities accepted in payment for shares must: (i) meet
the investment objective and policies of the Portfolio; (ii) be acquired by the
Fund for investment and not for resale (other than for resale to the Portfolio);
(iii) be liquid securities which are not restricted as to transfer either by law
or liquidity of the market; and (iv) if stock, have a value which is readily
ascertainable as evidenced by a listing on a stock exchange, over-the-counter
market or by readily available market quotations from a dealer in such
securities. The Fund reserves the right to accept or reject at its own option
any and all securities offered in payment for its shares.

Trading in Foreign Securities

Trading in foreign cities may be completed at times which vary from the closing
of the New York Stock Exchange ("NYSE"). In computing the net asset values, the
Funds value foreign securities at the latest closing price on the exchange on
which they are traded immediately prior to the closing of the NYSE. Similarly,
foreign securities quoted in foreign currencies are translated into U.S. dollars
at the foreign exchanges.

Occasionally, events that affect values and exchange rates may occur between the
times at which they are determined and the closing of the NYSE. If such events
materially affect the value of portfolio securities, these securities may be
valued at their fair value as determined in good faith by the Trustees, although
the actual calculation may be done by others.

MANAGEMENT OF THE TRUST AND THE PORTFOLIOS

The Trust and each Portfolio are governed by a Board of Trustees which is
responsible for protecting the interests of investors. A majority of the
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Trust or the Portfolio, as the case may be, have adopted written procedures
reasonably appropriate to deal with potential conflicts of interest arising from
the fact that some of the same individuals are Trustees of the Trust and the
Portfolios, up to and including creating separate boards of trustees.

Each Board of Trustees is composed of persons experienced in financial matters
who meet throughout the year to oversee the activities of the Funds or
Portfolios they represent. In addition, the Trustees review contractual
arrangements with companies that provide services to the Funds/Portfolios and
review the Funds' performance.

The Trustees and officers of the Trust and Portfolios, their birthdate and their
principal occupations during the past five years are set forth below. Their
titles may have varied during that period. Unless otherwise indicated, the
address of each officer is BT Alex. Brown, Inc., One South Street, Baltimore,
Maryland 21202.
27
<PAGE>

TRUSTEES OF THE TRUST

CHARLES P. BIGGAR (birthdate: October 13, 1930) -- Trustee; Retired; formerly
Vice President of International Business Machines ("IBM") and President of the
National Services and the Field Engineering Divisions of IBM. His address is 12
Hitching Post Lane, Chappaqua, New York 10514.

RICHARD J. HERRING (birthdate: February 18, 1946) -- Trustee; Professor, Finance
Department, The Wharton School, University of Pennsylvania. His address is The
Wharton School, University of Pennsylvania Finance Department, 3303 Steinberg
Hall /Dietrich Hall, Philadelphia, Pennsylvania 19104.

BRUCE E. LANGTON (birthdate: May 10, 1931) -- Trustee; Retired; Director, Adela
Investment Co. and University Patents, Inc.; formerly Assistant Treasurer of IBM
Corporation (until 1986). His address is 99 Jordan Lane, Stamford, Connecticut
06903.

TRUSTEES OF THE PORTFOLIOS

CHARLES P. BIGGAR (birthdate: October 14, 1930) -- Trustee; Retired; Director of
Chase/NBW Bank Advisory Board; Director, Batemen, Eichler, Hill Richards Inc.;
formerly Vice President of International Business Machines and President of the
National Services and the Field Engineering Divisions of IBM. His address is 12
Hitching Post Lane, Chappaqua, New York 10514.

S. LELAND DILL (birthdate: March 28, 1930) -- Trustee; Retired; Director, Coutts
Group; Coutts (U.S.A.) International; Coutts Trust Holdings Ltd; Director, Zweig
Series Trust; formerly Partner of KPMG Peat Marwick; Director, Vinters
International Company Inc.; General Partner of Pemco (an investment company
registered under the 1940 Act). His address is 5070 North Ocean Drive, Singer
Island, Florida 33404.

PHILIP SAUNDERS, JR. (birthdate: October 11, 1935) -- Trustee; Principal, Philip
Saunders Associates (Consulting); former Director of Financial Industry
Consulting, Wolf & Company; President, John Hancock Home Mortgage Corporation;
and Senior Vice President of Treasury and Financial Services, John Hancock
Mutual Life Insurance Company, Inc. His address is 445 Glen Road, Weston,
Massachusetts 02193.

OFFICERS OF THE TRUST AND PORTFOLIOS

Unless otherwise specified, each officer listed below holds the same position
with the Trust and each Portfolio.

JOHN Y. KEFFER (birthdate: July 15, 1942) -- President and Chief Executive
Officer; President, Forum Financial Group.

JOSEPH A. FINELLI (birthdate: January 24, 1957) -- Treasurer; Vice President, BT
Alex. Brown Incorporated and Vice President, Investment Company Capital Corp.
(registered investment advisor), September 1995-Present; Formerly, Vice
President and Treasurer, The Delaware Group of Funds (registered investment
companies) and Vice President, Delaware Management Company Inc. (investments),
1980-August 1995.

DANIEL O. HIRSCH (birthdate: March 27, 1954) -- Secretary; Principal, BT Alex.
Brown since July 1998; Assistant General Counsel in the Office of the General
Councel at the United States Securities and Exchange Commission from 1993 to
1998. His address is 2901 Dorset Avenue, Chevy Chase, Maryland 20815.

No person who is an officer or director of Bankers Trust is an officer or
Trustee of the Trust or the Portfolios. No director, officer or employee of ICC
Distributors or any of its affiliates will receive any compensation from the
Trust or the Portfolios for serving as an officer or Trustee of the Trust or a
Portfolio.
28
<PAGE>
<TABLE>
<CAPTION>

TRUSTEE COMPENSATION TABLE

AGGREGATE AGGREGATE TOTAL COMPENSATION
NAME OF PERSON, COMPENSATION COMPENSATION FROM FROM FUND COMPLEX**
POSITION FROM TRUST* PORTFOLIO+ PAID TO TRUSTEES***
-------- ------------ ---------- -------------------
<S> <C> <C> <C> <C>
Richard J. Herring,
Trustee of Trust $23,625 $0 $35,000

Bruce B. Langton,
Trustee of Trust $23,625 $0 $35,000

Charles P. Biggar,
Trustee of Trust and
Portfolio $10,732 $1,106 $35,000

S. Leland Dill,
Trustee of Portfolio $0 $935 $35,000

Philip Saunders, Jr.,
Trustee of Portfolio $0 $942 $35,000
</TABLE>

* The information provided is for the BT Institutional Funds, which is comprised
of 10 funds, for the year ended September 30, 1998.

+ Information provided is for the Portfolio's most recent fiscal year ended
September 30, 1998.

** Aggregated information is furnished for the BT Family of Funds which consists
of the following: BT Investment Funds, BT Institutional Funds, BT Pyramid Funds,
BT Advisor Funds, BT Investment Portfolios, Cash Management Portfolio, Treasury
Money Portfolio, Tax Free Money Portfolio, NY Tax Free Money Portfolio,
International Equity Portfolio, Intermediate Tax Free Portfolio, Asset
Management Portfolio, Equity 500 Index Portfolio, and Capital Appreciation
Portfolio for the year ended September 30, 1998.

Bankers Trust reimbursed the Fund and Portfolio for a portion of their Trustees
fees for the period above. See "Investment Adviser" and "Administrator" below.

+ The compensation is provided for the calendar year ended December 31, 1998.
As of March __, 1999, the Trustees and Officers of the Trust and the Portfolios
owned in the aggregate less than 1% of the shares of any Fund or the Trust (all
series taken together).

Neither Fund has commenced operations as of the date of this SAI and therefore
neither Fund has any shareholders of record.

The Trust has not retained the services of an investment adviser since the Trust
seeks to achieve the investment objective of each of its Funds by investing all
the Assets of the Fund in the corresponding Portfolio. Each Portfolio has
retained the services of Bankers Trust as Adviser.

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 New York Corporation. Bankers Trust
conducts a variety of general banking and trust activities and is a major
wholesale supplier of financial services to the international and domestic
institutional market. As of December 31, 1998, Bankers Trust was the seventh
largest bank holding company in the United States with total assets of over $156
billion. The scope of Bankers Trust's investment management capability is broad
due to its leadership positions in both active and passive quantitative
management and its presence in major equity and fixed income markets around the
world. Bankers Trust is one of the nation's largest and most experienced
investment managers with over $338 billion in assets under management globally.

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Under the terms of each Portfolio's investment advisory agreement with Bankers
Trust (the "Advisory Agreement"), Bankers Trust manages the Portfolio subject to
the supervision and direction of the Board of Trustees of the Portfolio. Bankers
Trust will: (i) act in strict conformity with each Portfolio's Declaration of
Trust, the 1940 Act and the Investment Advisers Act of 1940, as the same may
from time to time be amended; (ii) manage each Portfolio in accordance with the
Portfolio's investment objectives, restrictions and policies; (iii) make
investment decisions for each Portfolio; and (iv) place purchase and sale orders
for securities and other financial instruments on behalf of each Portfolio.

Bankers Trust bears all expenses in connection with the performance of services
under each Advisory Agreement. The Trust and each Portfolio bears certain other
expenses incurred in its operation, including: taxes, interest, brokerage fees
and commissions, if any; fees of Trustees of the Trust or the Portfolio who are
not officers, directors or employees of Bankers Trust, ICC Distributors or any
of their affiliates; SEC fees and state Blue Sky qualification fees; charges of
custodians and transfer and dividend disbursing agents; certain insurance
premiums; outside auditing and legal expenses; costs of maintenance of corporate
existence; costs attributable to investor services, including, without
limitation, telephone and personnel expenses; costs of preparing and printing
prospectuses and statements of additional information for regulatory purposes
and for distribution to existing shareholders; costs of shareholders' reports
and meetings of shareholders, officers and Trustees of the Trust or the
Portfolio; and any extraordinary expenses.

The Investment Advisory Agreement provides for each Portfolio to pay Bankers
Trust a fee, accrued daily and paid monthly, equal on an annual basis to the
following percentages of the average daily net assets of each Portfolio for its
then-current fiscal year: European Equity Portfolio, 0.65%; Global Equity
Portfolio, 0.75%. Under certain circumstances Bankers Trust has agreed to pay
fees to certain securities brokers, dealers and other entities that facilitate
the sale of Fund shares, and in connection therewith provide administrative,
shareholder, or distribution related services to the Fund or its shareholders.
Fees paid to entities that administer mutual fund "supermarkets" may be higher
than fees paid for other types of services.

Bankers Trust, subject to the supervision and direction of the Board of Trustees
of each Portfolio, manages each Portfolio in accordance with the Portfolio's
investment objective and stated investment policies, makes investment decisions
for the Portfolio, places orders to purchase and sell securities and other
financial instruments on behalf of the Portfolio and employs professional
investment managers and securities analysts who provide research services to the
Portfolio. Bankers Trust may utilize the expertise of any of its world wide
subsidiaries and affiliates to assist it in its role as investment adviser. All
orders for investment transactions on behalf of a Portfolio are placed by the
Adviser 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. A Portfolio will not invest in
obligations for which Bankers Trust or any of its affiliates is the ultimate
obligor or accepting bank. Each Portfolio may, however, invest in the
obligations of correspondents and customers of Bankers Trust. Bankers Trust may
perform the above duties or it may delegate such responsibilities to the
Sub-Investment Adviser as defined herein.
Bankers Trust may have deposit, loan and other commercial banking relationships
with the issuers of securities which may be purchased on behalf of the
Portfolio, including outstanding loans to such issuers which could be repaid in
whole or in part with the proceeds of securities so purchased. Such persons
issue, deal, trade and invest in securities for their own accounts and are among
the leading market participants with respect to various types of such
securities. Bankers Trust has informed the Portfolio that, in making its
investment decisions, it does not obtain or use material inside information in
its possession or in the possession of any of its affiliates. In making
investment recommendations for the Portfolio, Bankers Trust will not inquire or
take into consideration whether an issuer of securities proposed for purchase or
sale by the Portfolio is a customer of Bankers Trust, its parent or its
subsidiaries or affiliates and, in dealing with its customers, Bankers Trust,
its parent, subsidiaries and affiliates will not inquire or take into
consideration whether securities of such customers are held by any fund managed
by Bankers Trust or any such affiliate.

Each Fund's prospectus contains disclosure as to the amount of Bankers Trust's
investment advisory and administration and services fees, including waivers
thereof. Bankers Trust may not recoup any of its waived investment advisory or
administration and services fees.

SUB-INVESTMENT ADVISER

Bankers Trust has entered into sub-investment advisory agreements (the
"Sub-Advisory Agreements") with respect to each Portfolio with BT Funds
Management (International) Limited ("BTFMIL") a wholly owned subsidiary of
Bankers Trust Australia Limited ("BTAL") in Sydney. BTAL is a wholly owned
subsidiary of Bankers Trust New York Corporation. Under the Sub-

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Advisory Agreements, Bankers Trust may receive investment advice and research
services and/or may grant BT Funds Management International investment
management authority as well as the authority to buy and sell securities. For
the services provided and the expenses assumed pursuant to this Agreement,
Bankers Trust will pay BTFMIL and BTFMIL will accept as full compensation
therefor a fee, such amount as is agreed to from time to time by Bankers Trust
and BTFMIL provided, however, that such fee will not exceed 100% of the fee
being paid at any such time to Bankers Trust by the Portfolios.

BTAL, which was granted a banking license in 1986, is the parent of Bankers
Trust Australia Group which has offices is Sydney, Melbourne, Perth, Brisbane,
Adelaide, London and Hong Kong. A representative office of Bankers Trust Company
was opened in Australia in 1966 and Australian merchant banking operations
commences in 1969. A related organization, Bankers Trust New Zealand Limited,
was established in 1986. Although BTAL has not previously served as investment
adviser for a registered investment company, BTAL provides investment services
for a range of clients.

ADMINISTRATOR

Under the administration and services agreements, Bankers Trust is obligated on
a continuous basis to provide such administrative services as the Board of
Trustees of the Trust and each Portfolio reasonably deem necessary for the
proper administration of the Trust or a Portfolio. Bankers Trust will generally
assist in all aspects of the Funds' and Portfolios' operations; supply and
maintain office facilities (which may be in Bankers Trust's own offices),
statistical and research data, data processing services, clerical, accounting,
bookkeeping and recordkeeping services (including without limitation the
maintenance of such books and records as are required under the 1940 Act and the
rules thereunder, except as maintained by other agents), executive and
administrative services, and stationery and office supplies; prepare reports to
shareholders or investors; prepare and file tax returns; supply financial
information and supporting data for reports to and filings with the SEC and
various state Blue Sky authorities; supply supporting documentation for meetings
of the Board of Trustees; provide monitoring reports and assistance regarding
compliance with Declarations of Trust, by-laws, investment objectives and
policies and with Federal and state securities laws; arrange for appropriate
insurance coverage; calculate net asset values, net income and realized capital
gains or losses; and negotiate arrangements with, and supervise and coordinate
the activities of, agents and others to supply services.

Pursuant to a sub-administration agreement (the "Sub-Administration Agreement"),
Forum Financial ("Forum") performs such sub-administration duties for the Trust
and the Portfolios as from time to time may be agreed upon by Bankers Trust and
Forum Financial. The Sub-Administration Agreement provides that Forum will
receive such compensation as from time to time may be agreed upon by Forum and
Bankers Trust. All such compensation will be paid by Bankers Trust.

DISTRIBUTOR

ICC Distributors is the principal distributor for shares of the Funds. ICC
Distributors is a registered broker/dealer and is unaffiliated with Bankers
Trust. The principal business address of ICC Distributors is Two Portland
Square, Portland, Maine 04101.

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 Funds for such
shareholder services. The service fees of any other Service Agents, including
broker-dealers, will be paid by Bankers Trust from its fees. The services
provided by a Service Agent may include establishing and maintaining shareholder
accounts, processing purchase and redemption transactions, arranging for bank
wires, performing shareholder sub-accounting, answering client inquiries
regarding the Trust, assisting clients in changing dividend options, account
designations and addresses, providing periodic statements showing the client's
account balance, transmitting proxy statements, periodic reports, updated
prospectuses and other communications to shareholders and, with respect to
meetings of shareholders, collecting, tabulating and forwarding to the Trust
executed proxies and obtaining such other information and performing such other
services as the Administrator or the Service Agent's clients may reasonably
request and agree upon with the Service Agent. Service Agents may separately
charge their clients additional fees only to cover provision of additional or
more comprehensive services not already provided under the Administration and
Services Agreement with Bankers Trust, or of the type or scope not generally
offered by a mutual fund, such as cash management services or enhanced
retirement or trust reporting. In addition, investors may be charged a
transaction fee if they effect transactions in Fund shares through a broker

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or agent. Each Service Agent has agreed to transmit to shareholders, who are its
customers, appropriate disclosures of any fees that it may charge them directly.

CUSTODIAN AND TRANSFER AGENT

Bankers Trust, 130 Liberty Street (One Bankers Trust Plaza) , New York, New
York, 10006, serves as Custodian for the Trust and for each Portfolio pursuant
to the administration and services agreements. As Custodian, it holds the Funds'
and each Portfolio's assets. Bankers Trust also serves as transfer agent of the
Trust and of each Portfolio pursuant to the respective administration and
services agreement. Under its transfer agency agreement with the Trust, Bankers
Trust maintains the shareholder account records for each Fund, handles certain
communications between shareholders and the Trust and causes to be distributed
any dividends and distributions payable by the Trust. Bankers Trust may be
reimbursed by the Funds or the Portfolios for its out-of-pocket expenses.
Bankers Trust will comply with the self-custodian provisions of Rule 17f-2 under
the 1940 Act.

USE OF NAME

The Trust and Bankers Trust have agreed that the Trust may use "BT" as part of
its name for so long as Bankers Trust serves as investment adviser to the
Portfolios. The Trust has acknowledged that the term "BT" is used by and is a
property right of certain subsidiaries of Bankers Trust and that those
subsidiaries and/or Bankers Trust may at any time permit others to use that
term.

The Trust may be required, on 60 days' notice from Bankers Trust at any time, to
abandon use of the acronym "BT" as part of its name. If this were to occur, the
Trustees would select an appropriate new name for the Trust, but there would be
no other material effect on the Trust, its shareholders or activities.

BANKING REGULATORY MATTERS

Bankers Trust has been advised by its counsel that in its opinion Bankers Trust
may perform the services for the Portfolios contemplated by the Advisory
Agreements and other activities for the Funds and the Portfolios described in
the Prospectuses and this SAI without violation of the Glass-Steagall Act or
other applicable banking laws or regulations. However, counsel has pointed out
that future changes in either Federal or state statutes and regulations
concerning the permissible activities of banks or trust companies, as well as
future judicial or administrative decisions or interpretations of present and
future statutes and regulations, might prevent Bankers Trust from continuing to
perform those services for the Trust and the Portfolios. State laws on this
issue may differ from the interpretations of relevant Federal law and banks and
financial institutions may be required to register as dealers pursuant to state
securities law. If the circumstances described above should change, the Boards
of Trustees would review the relationships with Bankers Trust and consider
taking all actions necessary in the circumstances.

COUNSEL AND INDEPENDENT ACCOUNTANTS

Willkie Farr & Gallagher, 787 Seventh Avenue, New York, New York 10019, serves
as Counsel to the Trust and each Portfolio. PricewaterhouseCoopers LLP, 1100
Main Street, Suite 900, Kansas City, Missouri 64105 acts as Independent
Accountants of the Trust and each Portfolio.

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ORGANIZATION OF THE TRUST

The Trust was organized on March 26, 1990. The Fund is a separate series of the
Trust. The Trust offers shares of a beneficial interest of separate series, par
value $0.001 per share. The Trust currently consists of 10 separate series,
including the Funds, and BT Investment Portfolios currently consist of 16
separate subtrusts, including the Portfolios. The shares of the other series of
the Trust are offered through separate prospectuses and SAIs. No series of
shares has any preference over any other series.

The Trust may create and issue additional series of shares. The Trust's
Declaration of Trust permits the Trustees to divide or combine the shares into a
greater or lesser number of shares without thereby changing the proportionate
beneficial interest in series. Each share represents an equal proportionate
interest in a series with each other share. Shares when issued are fully paid
and non-assessable, except as set forth below. Shareholders are entitled to one
vote for each share held.

Shares of the Trust do not have cumulative voting rights, which means that
holders of more than 50% of the shares voting for the election of Trustees can
elect all Trustees. Shares are transferable but have no preemptive, conversion
or subscription rights. Shareholders generally vote by Fund, except with respect
to the election of Trustees and the ratification of the selection of independent
accountants.

The Trust is an entity commonly known as a "Massachusetts business trust." Under
Massachusetts law, shareholders of such a business trust may, under certain
circumstances, be held personally liable as partners for its obligations.
However, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Trust itself was unable to meet its obligations.

The Trust's Declaration of Trust disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of this disclaimer be given in
each agreement, obligation or instrument entered into or executed by the Trust
or a Trustee. The Declaration of Trust provides for indemnification from the
Trust's property for all losses and expenses of any shareholder held personally
liable for the obligations of the Trust. Thus, the risk of a shareholder's
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Trust itself would be unable to meet its obligations,
a possibility that the Trust believes is remote. Upon payment of any liability
incurred by the Trust, the shareholder paying the liability will be entitled to
reimbursement from the general assets of the Trust. The Trustees intend to
conduct the operations of the Trust in a manner so as to avoid, as far as
possible, ultimate liability of the shareholders for liabilities of the Trust.

When matters are submitted for shareholder vote, shareholders of the Fund will
have one vote for each full share held and proportionate, fractional votes for
fractional shares held. A separate vote of the Fund is required on any matter
affecting the Fund on which shareholders are entitled to vote. Shareholders of
the Fund are not entitled to vote on Trust matters that do not affect the Fund.
There normally will be no meetings of shareholders for the purpose of electing
Trustees unless and until such time as less than a majority of Trustees holding
office have been elected by shareholders, at which time the Trustees then in
office will call a shareholders' meeting for the election of Trustees. Any
Trustee may be removed from office upon the vote of shareholders holding at
least two-thirds of the Trust's outstanding shares at a meeting called for that
purpose. The Trustees are required to call such a meeting upon the written
request of shareholders holding at least 10% of the Trust's outstanding shares.

Whenever a Trust is requested to vote on matters pertaining to a Portfolio, the
Trust will vote its shares without a meeting of shareholders of the respective
Fund if the proposal is one, which if made with respect to the Fund, would not
require the vote of shareholders of the Fund as long as such action is
permissible under applicable statutory and regulatory requirements. For all
other matters requiring a vote, a Trust will hold a meeting of shareholders of
its respective Fund and, at the meeting of the investors in the Portfolio, the
Trust will cast all of its votes in the same proportion as votes in all its
shares at the Portfolio meeting, other investors with a greater pro rata
ownership of the Portfolio could have effective voting control of the operations
of the Portfolio.

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The Portfolio is a subtrust (or "series") of the BT Investment Portfolios, an
open-end management investment company. BT Investment Portfolios was organized
as a master trust fund under the laws of the State of New York. BT Investment
Portfolios' Declaration of Trust provides that the Fund and other entities
investing in the Portfolio (e.g., other investment companies, insurance company
separate accounts and common and commingled trust funds) will each be liable for
all obligations of the Portfolio. However, the risk of the Fund incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance existed and the Portfolio itself was unable to meet
its obligations. Accordingly, the Trustees of the Trust believe that neither the
Fund nor its shareholders will be adversely affected by reason of the Fund's
investing in the Portfolio. The interests in BT Investment Portfolios are
divided into separate series, such as the Portfolio. No series of BT Investment
Portfolios has any preference over any other series.

Each series in the Trust will not be involved in any vote involving a Portfolio
in which it does not invest its Assets. Shareholders of all the series of the
Trust will, however, vote together to elect trustees of the Trust and for
certain other matters. Under certain circumstances, the shareholders of one or
more series could control the outcome of these votes.

The series of the BT Investment Portfolios will vote separately or together in
the same manner as the series of the Trust. Under certain circumstances, the
investors in one or more series of BT Investment Portfolios could control the
outcome of these votes.

The Trust and BT Investment Portfolios reserve the right to add additional
series in the future. The Trust also reserves the right to issue more than one
class of Shares in the Fund.

TAXATION

DIVIDENDS AND DISTRIBUTIONS

Each Fund distributes substantially all of its net income and capital gains to
shareholders each year. Each Fund distributes capital gains annually. 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.

Each Fund intends to qualify as a regulated investment company, as defined in
the Code. Provided each Fund meets the requirements imposed by the Code and
distributes all of its income and gains, a Fund will not pay any federal income
or excise taxes.

Distributions from each 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. Each Fund's capital gain distributions are taxable when they are
paid, whether you take them in cash or reinvest them in additional Shares.
Distributions declared to shareholders of record in October, November or
December and paid in January are taxable on December 31. Each Fund will send
each shareholder a tax statement by January 31 showing the tax status of the
distributions received during the past year.

On the ex-date for a distribution from capital gains, each Fund's Share value is
reduced by the amount of the distribution. 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.

TAXATION OF THE FUNDS

As a regulated investment company, each Fund will not be subject to U.S. Federal
income tax on its investment company taxable income and net capital gains (the
excess of net long-term capital gains over net short-term capital losses), if
any, that it distributes to shareholders. The Funds intend to distribute to
their shareholders, at least annually, substantially all of their investment
company taxable income and net capital gains, and therefore do not anticipate
incurring Federal income tax liability.

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If for any taxable year a Fund does not qualify for the special federal income
tax treatment afforded regulated investment companies, all of its taxable income
will be subject to federal income tax at regular corporate rates (without any
deduction for distributions to its shareholders). In such event, dividend
distributions would be taxable to shareholders to the extent of current
accumulated earnings and profits, and would be eligible for the dividends
received deduction for corporations in the case of corporate shareholders.

A Fund's investment in Section 1256 contracts, such as regulated futures
contracts, most forward currency forward contracts traded in the interbank
market and options on most stock indices, are subject to special tax rules. All
section 1256 contracts held by a Fund at the end of its taxable year are
required to be marked to their market value, and any unrealized gain or loss on
those positions will be included in the Fund's income as if each position had
been sold for its fair market value at the end of the taxable year. The
resulting gain or loss will be combined with any gain or loss realized by the
Fund from positions in section 1256 contracts closed during the taxable year.
Provided such positions were held as capital assets and were not part of a
"hedging transaction" nor part of a "straddle," 60% of the resulting net gain or
loss will be treated as long-term capital gain or loss, and 40% of such net gain
or loss will be treated as short-term capital gain or loss, regardless of the
period of time the positions were actually held by the Fund.

Each Fund shareholder will also receive, if appropriate, various written notices
after the close of the Fund's prior taxable year as to the Federal income status
of his dividends and distributions which were received from the Fund during the
Fund's prior taxable year. Shareholders should consult their tax advisers as to
any state and local taxes that may apply to these dividends and distributions.

FOREIGN SECURITIES. Income received by a Portfolio from sources within foreign
countries may be subject to withholding and other taxes imposed by such
countries. Tax conventions between certain countries and the United States may
reduce or eliminate foreign taxes. It is impossible to determine the effective
rate of foreign tax in advance since the amount of each Portfolio's assets to be
invested in various countries will vary.

If a Portfolio is liable for foreign taxes, and if more than 50% of the value of
the Portfolio's total assets at the close of its taxable year consists of stocks
or securities of foreign corporations (including foreign governments), the
corresponding Fund may make an election pursuant to which certain foreign taxes
paid by the Portfolio would be treated as having been paid directly by
shareholders of the corresponding Fund. Pursuant to such election, the amount of
foreign taxes paid will be included in the income of the corresponding Fund's
shareholders, and such Fund shareholders (except tax-exempt shareholders) may,
subject to certain limitations, claim either a credit or deduction for the
taxes. Each such Fund shareholder will be notified after the close of the
Portfolio's taxable year whether the foreign taxes paid will "pass through" for
that year and, if so, such notification will designate (a) the shareholder's
portion of the foreign taxes paid to each such country and (b) the amount which
represents income derived from sources within each such country.

The amount of foreign taxes for which a shareholder may claim a credit in any
year will generally be subject to a separate limitation for "passive income,"
which includes, among other items of income, dividends, interest and certain
foreign currency gains. Because capital gains realized by a Portfolio on the
sale of foreign securities will be treated as U.S. source income, the available
credit of foreign taxes paid with respect to such gains may be restricted by
this limitation.

TAXATION OF THE PORTFOLIOS

The Portfolios are not subject to Federal income taxation. Instead, the Fund and
other investors investing in a Portfolio must take into account, in computing
their Federal income tax liability, their share of the Portfolio's income,
gains, losses, deductions, credits and tax preference items, without regard to
whether they have received any cash distributions from the Portfolio.

Distributions received by a Fund from the corresponding Portfolio generally will
not result in the Fund recognizing any gain or loss for Federal income tax
purposes, except that: (1) gain will be recognized to the extent that any cash
distributed exceeds the Fund's basis in its interest in the Portfolio prior to
the distribution; (2) income or gain may be realized if the distribution is made
in liquidation of the Fund's entire interest in the Portfolio and includes a
disproportionate share of any unrealized receivables held by the Portfolio; and
(3) loss may be recognized if the distribution is made in liquidation of the
Fund's entire interest in the Portfolio and consists solely of cash and/or
unrealized receivables. A Fund's basis in its interest in the corresponding
Portfolio generally will equal the amount of cash and the basis of any property
which the Fund invests in the Portfolio, increased by the Fund's share of income
from the Portfolio, and decreased by the amount of any cash distributions and
the basis of any property distributed from the Portfolio.

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SALE OF SHARES

Any gain or loss realized by a shareholder upon the sale or other disposition of
Shares of a Fund, or upon receipt of a distribution in complete liquidation of a
Fund, generally will be a capital gain or loss which will be long-term or
short-term, generally depending upon the shareholder's holding period for the
Shares. Any loss realized on a sale or exchange will be disallowed to the extent
the Shares disposed of are replaced (including Shares acquired pursuant to a
dividend reinvestment plan) within a period of 61 days beginning 30 days before
and ending 30 days after disposition of the Shares. In such a case, the basis of
the Shares acquired will be adjusted to reflect the disallowed loss. Any loss
realized by a shareholder on a disposition of Fund Shares held by the
shareholder for six months or less will be treated as a long-term capital loss
to the extent of any distributions of net capital gains received by the
shareholder with respect to such Shares.

BACKUP WITHHOLDING

Each Fund may be required to withhold U.S. Federal income tax at the rate of 31%
of all taxable distributions payable to shareholders who fail to provide the
Fund with their correct taxpayer identification number or to make required
certifications, or who have been notified by the Internal Revenue Service that
they are subject to backup withholding. Corporate shareholders and certain other
shareholders specified in the Code generally are exempt from such backup
withholding. Backup withholding is not an additional tax. Any amounts withheld
may be credited against the shareholder's U.S. Federal income tax liability.

FOREIGN SHAREHOLDERS

The tax consequences to a foreign shareholder of an investment in a Fund may be
different from those described herein. Foreign shareholders are advised to
consult their own tax advisers with respect to the particular tax consequences
to them of an investment in a Fund.

OTHER TAXATION

The Trust is organized as a Massachusetts business trust and, under current law,
neither the Trust nor any Fund is liable for any income or franchise tax in the
Commonwealth of Massachusetts, provided that the Fund continues to qualify as a
regulated investment company under Subchapter M of the Code. The investment by
each Fund in the corresponding Portfolio does not cause the Fund to be liable
for any income or franchise tax in the State of New York.

Each Portfolio is a subtrust of BT Investment Portfolios, which is organized as
a New York master trust fund. Each Portfolio is not subject to any income or
franchise tax in the State of New York or the Commonwealth of Massachusetts.

Fund shareholders may be subject to state and local taxes on their Fund
distributions. Shareholders are advised to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in a Fund.

FINANCIAL STATEMENTS

Neither the Funds nor the Portfolios have commenced operations as of the date of
this SAI and therefore no financial statements are currently available.

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APPENDIX

Description of Moody's Corporate Bond Ratings:

Aaa - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Aa - Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.

A - Bonds rated A possess many favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

Baa - Bonds rated Baa are considered as medium-grade obligations, i.e. they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such, bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.

Ba - Bonds rated Ba are judged to have speculative elements. Their future cannot
be considered as well assured. Often the protection of interest and principal
payments may be very moderate and thereby not well safeguarded during both (good
and bad times over the future). Uncertainty of position characterizes bonds in
this class.

B - Bonds rated B generally lack characteristics of a desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.

Caa - Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.

Ca - Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked short-comings.

C - Bonds rated C are the lowest-rated class of bonds and issued so rated can be
regarded as having extremely poor prospects of ever attaining any real
investment standing.

Moody's applies numerical modifiers, 1, 2, and 3, in each generic rating
classification from Aa through B in its corporate bond system. The modifier 1
indicates that the security ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end of its generic rating category.

Description of S&P Corporate Bond Ratings:

AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's to a
debt obligation. Capacity to pay interest and repay principal is extremely
strong.

AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher-rated issues only in small degree.

A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.

BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to weakened capacity to pay interest and repay principal for debt
in this category than in higher-rated categories.

BB - Debt rate BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments.

37
<PAGE>

B - Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB- rating.

CCC - Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal.

CC - Debt rated CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.

C - The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed but debt service
payments are continued.

CI - The rating CI is reserved for income bonds on which no interest is being
paid.

D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating will also be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.

Description of S&P commercial paper ratings:

Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted A-1+.

Description of Moody's commercial paper ratings:

The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered to
have a superior capacity for repayment of short-term promissory obligations.

Description of S&P Municipal Bond Ratings:

AAA - Prime - These are obligations of the highest quality. They have the
strongest capacity for timely payment of debt service.

General Obligations Bonds - In a period of economic stress, the issuers will
suffer the smallest declines in income and will be least susceptible to
autonomous decline. Debt burden is moderate. A strong revenue structure appears
more than adequate to meet future expenditure requirements. Quality of
management appears superior.

Revenue Bonds - Debt service coverage has been, and is expected to remain,
substantial, stability of the pledged revenues is also exceptionally strong due
to the competitive position of the municipal enterprise or to the nature of the
revenues. Basic security provisions (including rate covenant, earnings test for
issuance of additional bonds and debt service reserve requirements) are
rigorous. There is evidence of superior management.

AA - High Grade - The investment characteristics of bonds in this group are only
slightly less marked than those of the prime quality issues. Bonds rated AA have
the second strongest capacity for payment of debt service.

38
<PAGE>

A - Good Grade - Principal and interest payments on bonds in this category are
regarded as safe although the bonds are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds in higher
rated categories. This rating describes the third strongest capacity for payment
of debt service. Regarding municipal bonds, the rating differs from the two
higher ratings because:

General Obligation Bonds - There is some weakness, either in the local economic
base, in debt burden, in the balance between revenues and expenditures, or in
quality of management. Under certain adverse circumstances, any one such
weakness might impair the ability of the issuer to meet debt obligations at some
future date.

Revenue Bonds - Debt service coverage is good, but not exceptional. Stability of
the pledged revenues could show some variations because of increased competition
or economic influences on revenues. Basic security provisions, while
satisfactory, are less stringent. Management performance appearance appears
adequate.

S&P's letter ratings may be modified by the addition of a plus or a minus sign,
which is used to show relative standing within the major rating categories,
except in the AAA rating category.

Description of Moody's Municipal Bond Ratings:

Aaa - Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge". Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Aa - Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities, or fluctuation of protective elements
may be of greater amplitude, or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.

A - Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.

Moody's may apply the numerical modifier in each generic rating classification
from Aa through B. The modifier 1 indicates that the security within its generic
rating classification possesses the strongest investment attributes.

Description of S&P Municipal Note Ratings:

Municipal notes with maturities of three years or less are usually given note
ratings (designated SP-1, or -2) to distinguish more clearly the credit quality
of notes as compared to bonds. Notes rated SP-1 have a very strong or strong
capacity to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics are given the designation of SP-1. Notes
rates SP-2 have a satisfactory capacity to pay principal and interest.

Description of Moody's Municipal Note Ratings:

Moody's ratings for state and municipal notes and other short-term loans are
designated Moody's Investment Grade (MIG) and for variable rate demand
obligations are designated Variable Moody's Investment Grade (VMIG). This
distinction recognizes the differences between short-term credit risk and
long-term risk. Loans bearing the designation MIG 1/VMIG 1 are of the best
quality, enjoying strong protection from established cash flows of funds for
their servicing or from established cash flows of funds for their servicing or
from established and broad-based access to the market for refinancing, or both.
Loans bearing the designation MIG2/VMIG2 are of high quality, with ample margins
of protection, although not as large as the preceding group.

39
<PAGE>

S&P's Commercial Paper Ratings:

A is the highest commercial paper rating category utilized by S&P, which uses
the numbers 1, 1, 2 and 3 to denote relative strength within its A
classification. Commercial paper issues rated A by S&P have the following
characteristics: Liquidity ratios are better than industry average. Long-term
debt ratings is A or better. The issuer has access to at least two additional
channels of borrowing. Basic earnings and cash flow are in an upward tread.
Typically, the issuer is a strong company in a well-established industry and has
superior management.

Moody's Commercial Paper Ratings:

Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics: leasing
market positions in well-established industries; high rates of return on funds
employed; conservative capitalization structures with moderate reliance on debt
and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; well-established access to
a range of financial markets and assured sources of alternate liquidity.

Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Issuers rates Prime-3 (or related supporting institutions) have an acceptable
capacity for repayment of short-term promissory obligations. The effect of
industry characteristics and market composition may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained.

40
<PAGE>

INVESTMENT ADVISER AND ADMINISTRATOR OF EACH PORTFOLIO
BANKERS TRUST COMPANY

DISTRIBUTOR
ICC DISTRIBUTORS, INC.

CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY

INDEPENDENT ACCOUNTANTS
PRICEWATERHOUSECOOPERS LLP

COUNSEL
WILLKIE FARR & GALLAGHER

--------------------

No person has been authorized to give any information or to make any
representations other than those contained in the Trust's Prospectuses, its
Statements of Additional Information or the Trust's official sales literature in
connection with the offering of the Trust's shares and, if given or made, such
other information or representations must not be relied on as having been
authorized by the Trust. Neither the Prospectuses nor this Statement of
Additional Information constitutes an offer in any state in which, or to any
person to whom, such offer may not lawfully be made.

--------------------

CUSIP # ____________
CUSIP # ____________

1
<PAGE>

PART C OTHER INFORMATION
<TABLE>
<CAPTION>
Item 23.
<S> <C> <C>
(a) (i) Conformed copy of Amended and Restated Declaration of Trust of the Trust; 1
(ii) Fifth Amended and Restated Establishment and Designation of Series of the Trust; 1
(iii) Sixth Amended and Restated Establishment and Designation of Series of the Trust; 1
(iv) Seventh Amended and Restated Establishment and Designation of Series of the Trust; 1
(v) Eighth Amended and Restated Establishment and Designation of Series of the Trust; 1
(vi) Ninth Amended and Restated Establishment and Designation of Series of the Trust; 1
(vii) Tenth Amended and Restated Establishment and Designation of Series of the Trust; 1
(viii) Eleventh Amended and Restated Establishment and Designation of Series of the Trust; 2
(b) Copy of By-Laws of the Trust; 1
(c) Copy of Specimen stock certificates for shares of beneficial interest of the Trust; 3
(d) Conformed copy of Investment Advisory Agreement; 2
(e) (i) Conformed copy of Distribution Agreement; 4
(ii) Appendix A to Distribution Agreement; filed herewith
(f) Not applicable;
(g) (i) Conformed Copy of Custodian Agreement of Registrant; 5
(ii) Amendment #1 to Exhibit A of Custodian Agreement; 5
(iii) Amendment #2 to Exhibit A of Custodian Agreement; 6
(iv) Amendment #3 to Exhibit A of Custodian Agreement; 6
(v) Amendment #4 to Exhibit A of Custodian Agreement; filed herewith
(v) Conformed Copy of Cash Services Addendum to Custodian
Agreement; 7
(h) (i) Administration and Services Agreement; 1
(ii) Schedule of Fees under Administration and Service Agreement; 2
(iii) Exhibit D to the Administration and Services Agreement; filed herewith
(iv) Conformed copy of Expense Limitation Agreement; to be filed by amendment
(i) Not Applicable;
(j) Not Applicable;
(k) Not Applicable;
(l) (v) Conformed copy of investment representation letter of initial shareholder of the Equity 500
Index Fund; 8
(vi) Conformed copy of investment representation letter of initial
shareholder of the Institutional Liquid Assets Fund; 1
(vii) Conformed copy of investment representation letter of initial
shareholder of the Institutional Daily Assets Fund; 2
(m) Not Applicable;
(n) Not Applicable;
(o) Copy of Multiple Class Expense Allocation Plan Adopted Pursuant to Rule 18f-3; 5
- --------------------
</TABLE>

+ All exhibits have been filed electronically.

<PAGE>

1. Incorporated by reference to Post-Effective Amendment No. 15 to the
Registration Statement as filed with the Commission on July 5, 1995.

2. Incorporated by reference to Amendment No. 21 to the Registration
Statement as filed with the Commission on September 24, 1996.

3. Incorporated by reference to Pre-Effective Amendment No. 1 to the
Registrant's registration statement on Form N-1A ("Registration
Statement") as filed with the Securities and Exchange Commission on
July 20, 1990.

4. Incorporated by reference to Post-Effective Amendment No. 24 to the
Registration Statement as filed with the Commission on November 24,
1998.

5. Incorporated by reference to Post-Effective Amendment No. 20 to the
Registration Statement as filed with the Commission on September 10,
1997.

6. Incorporated by reference to Post-Effective Amendment No. 21 to the
Registration Statement as filed with the Commission on January 28,
1998.

7. Incorporated by reference to Amendment No. 31 to the Registration
Statement as filed with the Commission on October 27, 1998.

8. Incorporated by reference to Post-Effective Amendment No. 4 to the
Registration Statement as filed with the Commission on April 30, 1992.

9. Incorporated by reference to Post-Effective Amendment No. 26 to the
Registration Statement as filed with the Commission on January 28,
1999.

Item 24. Persons Controlled by or under Common Control with Registrant:

None

Item 25. Indemnification:

Incorporated by reference to Post-Effective Amendment No. 17 to the Registration
Statement as filed with the Commission on April 30, 1996.

<PAGE>

Item 26. Business and Other Connections of Investment Adviser:

Bankers Trust serves as investment adviser to the Fund's Portfolio. Bankers
Trust, a New York banking corporation, is a wholly owned subsidiary of Bankers
Trust Corporation. Bankers Trust conducts a variety of commercial banking and
trust activities and is a major wholesale supplier of financial services to the
international institutional market. To the knowledge of the Trust, none of the
directors or officers of Bankers Trust, except those set forth below, is or has
been at anytime during the past two fiscal years engaged in any other business,
profession, vocation or employment of a substantial nature, except that certain
directors and officers also hold various positions with and engage in business
for Bankers Trust Corporation. Set forth below are the names and principal
businesses of the directors and officers of Bankers Trust who are or during the
past two fiscal years have been engaged in any other business, profession,
vocation or employment of a substantial nature. These persons may be contacted
c/o Bankers Trust Company, 130 Liberty Street, New York, New York 10006.

George B. Beitzel, International Business Machines Corporation, Old Orchard
Road, Armonk, NY 10504. Director, Bankers Trust Company; Retired Senior Vice
President and Director, International Business Machines Corporation; Director,
Computer Task Group; Director, Phillips Petroleum Company; Director, Caliber
Systems, Inc. (formerly, Roadway Services Inc.); Director, Rohm and Haas
Company; Director, TIG Holdings; Chairman Emeritus of Amherst College; and
Chairman of the Colonial Williamsburg Foundation.

Richard H. Daniel, Bankers Trust Company, 130 Liberty Street, New York, New York
10006. Vice Chairman and Chief Financial Officer, Bankers Trust Company and
Bankers Trust Corporation; Beneficial owner, General Partner, Daniel Brothers,
Daniel Lingo & Assoc., Daniel Pelt & Assoc.; Beneficial owner, Rhea C. Daniel
Trust.

Philip A. Griffiths, Bankers Trust Company, 130 Liberty Street, New York, New
York 10006. Director, Institute for Advanced Study; Director, Bankers Trust
Company; Chairman, Committee on Science, Engineering and Public Policy of the
National Academies of Sciences and Engineering & the Institute of Medicine;
Chairman and member, Nominations Committee and Committee on Science and
Engineering Indicators, National Science Board; and Trustee, North Carolina
School of Science and Mathematics and the Woodward Academy.

William R. Howell, J.C. Penney Company, Inc., P.O. Box 10001, Plano, TX
75301-0001. Chairman Emeritus, J.C. Penney Company, Inc.; Director, Bankers
Trust Company; Director, Exxon Corporation; Director, Halliburton Company;
Director, Warner-Lambert Corporation; Director, The Williams Companies, Inc.;
and Director, National Retail Federation.

Vernon E. Jordan, Jr., Akin, Gump, Strauss, Hauer & Feld, LLP, 1333 New
Hampshire Ave., N.W., Washington, DC 20036. Senior Partner, Akin, Gump, Strauss,
Hauer & Feld, LLP; Director, Bankers Trust Company; Director, American Express
Company; Director, Dow-Jones, Inc.; Director, J.C. Penney Company, Inc.;
Director, Revlon Group Incorporated; Director, Ryder System, Inc.; Director,
Sara Lee Corporation; Director, Union Carbide Corporation; Director, Xerox
Corporation; Trustee, Brookings Institution; Trustee, The Ford Foundation; and
Trustee, Howard University.

David Marshall, 130 Liberty Street, New York, New York 10006. Chief Information
Officer and Executive Vice President, Bankers Trust Corporation; Senior Managing
Director, Bankers Trust Company.

Hamish Maxwell, Philip Morris Companies Inc., 120 Park Avenue, New York, NY
10006. Retired Chairman and Chief Executive Officer, Philip Morris Companies
Inc.; Director, Bankers Trust Company; Director, The News Corporation Limited;
Director, Sola International Inc.; and Chairman, WWP Group plc.

Frank N. Newman, Bankers Trust Company, 130 Liberty Street, New York, New York
10006. Chairman of the Board, Chief Executive Officer and President, Bankers
Trust Corporation and Bankers Trust Company; Director, Bankers Trust Company;
Director, Dow-Jones, Inc.; and Director, Carnegie Hall.

N.J. Nicholas Jr., 745 Fifth Avenue, New York, NY 10020. Director, Bankers Trust
Company; Director, Boston Scientific Corporation; and Director, Xerox
Corporation.
<PAGE>

Russell E. Palmer, The Palmer Group, 3600 Market Street, Suite 530,
Philadelphia, PA 19104. Chairman and Chief Executive Officer of The Palmer
Group; Director, Bankers Trust Company; Director, Allied-Signal Inc.; Director,
Federal Home Loan Mortgage Corporation; Director, GTE Corporation; Director, The
May Department Stores Company; Director, Safeguard Scientifics, Inc.; and
Trustee, University of Pennsylvania.

Donald L. Staheli, Bankers Trust Company, 130 Liberty Street, New York, New York
10006. Chairman of the Board and Chief Executive Officer, Continental Grain
Company; Director, Bankers Trust Company; Director, ContiFinancial Corporation;
Director, Prudential Life Insurance Company of America; Director, Fresenius
Medical Care, A.g.; Director, America-China Society; Director, National
Committee on United States-China Relations; Director, New York City Partnership;
Chairman, U.S.-China Business Council; Chairman, Council on Foreign Relations;
Chairman, National Advisor Council of Brigham Young University's Marriott School
of Management; Vice Chairman, The Points of Light Foundation; and Trustee,
American Graduate School of International Management.

Patricia Carry Stewart, c/o Office of the Secretary, 130 Liberty Street, New
York, NY 10006. Director, Bankers Trust Company; Director, CVS Corporation;
Director, Community Foundation for Palm Beach and Martin Counties; Trustee
Emeritus, Cornell University.

George J. Vojta, Bankers Trust Company, 130 Liberty Street, New York, NY 10006.
Vice Chairman, Bankers Trust Corporation and Bankers Trust Company; Director,
Bankers Trust Company; Director; Alicorp S.A.; Director; Northwest Airlines;
Director, Private Export Funding Corp.; Director, New York State Banking Board;
Director, St. Lukes-Roosevelt Hospital Center; Partner, New York City
Partnership; and Chairman, Wharton Financial Services Center.

Paul A. Volcker, Bankers Trust Company, 130 Liberty Street, New York, New York
10006. Director, Bankers Trust Company; Director, American Stock Exchange;
Director, Nestle S.A.; Director, Prudential Insurance Company; Director, UAL
Corporation; Chairman, Group of 30; North American Chairman, Trilateral
Commission; Co-Chairman, Bretton Woods Committee; Co-Chairman, U.S./Hong Kong
Economic Cooperation Committee; Director, American Council on Germany; Director,
Aspen Institute; Director, Council on Foreign Relations; Director, The Japan
Society; and Trustee, The American Assembly.

Melvin A. Yellin, Bankers Trust Company, 130 Liberty Street, New York, New York
10006. Senior Managing Director and General Counsel of Bankers Trust Corporation
and Bankers Trust Company; Director, 1136 Tenants Corporation; and Director, ABA
Securities Association.

Item 27. Principal Underwriters:

(a) ICC Distributors, Inc., the Distributor for shares of the Registrant, also
acts as principal underwriter for the following open-end investment companies:
BT Advisor Funds, BT Institutional Funds, and BT Investment Funds.
<PAGE>

(b)

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
---------------- --------------- ---------------
John Y. Keffer President None
Two Portland Square
Portland, ME 04101

Sara M. Morris Treasurer None
Two Portland Square
Portland, ME 04101

David I. Goldstein Secretary None
Two Portland Square
Portland, ME 04101

Benjamin L. Niles Vice President None
Two Portland Square
Portland, ME 04101

Margaret J. Fenderson Assistant Treasurer None
Two Portland Square
Portland, ME 04101

Dana L. Lukens Assistant Secretary None
Two Portland Square
Portland, ME 04101

Nanette K. Chern Chief Compliance Officer None
Two Portland Square
Portland, ME 04101

ITEM 28. Location of Accounts and Records:

BT Institutional Funds: One South Street
("Registrant") Baltimore, MD 21202

Bankers Trust Company: 130 Liberty Street
("Adviser, Custodian and New York, NY 10006
Administrator")

Investors Fiduciary Trust Company: 127 West 10th Street
("Transfer Agent and Dividend Kansas City, MO 64105
Disbursing Agent")

ICC Distributors, Inc.: Two Portland Square
("Distributor") Portland, ME 04101

<PAGE>

Item 29. Management Services:

Not applicable.

Item 30. Undertakings:

The Registrant undertakes to comply with Section 16(c) of the 1940 Act as though
such provisions of the Act were applicable to the Registrant except that the
request referred to in the third full paragraph thereof may only be made by
shareholders who hold in the aggregate at least 10% of the outstanding shares of
the Registrant, regardless of the net asset value or values of shares held by
such requesting shareholders.

Registrant hereby undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant, BT INSTITUTIONAL FUNDS, has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Baltimore and the State of Maryland on this 5th
day of February, 1999.

BT INSTITUTIONAL FUNDS

By: /s/ Daniel O. Hirsch
Daniel O. Hirsch, Secretary
February 5, 1999

Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the following
persons in the capacity and on the date indicated:

NAME TITLE DATE
- ---- ----- ------
By: /s/ Daniel O. Hirsch Secretary February 5, 1999
Daniel O. Hirsch (Attorney in Fact
For the Persons
Listed Below)

/s/ John Y. Keffer* President and
John Y Keffer Chief Executive Officer

/s/ Joseph A. Finelli* Treasurer (Principal
Joseph A. Finelli Financial and
Accounting Officer)

/s/ RICHARD J. HERRING** Trustee
Richard J. Herring

/s/ BRUCE E. LANGTON** Trustee
Bruce E. Langton

/s/ CHARLES P. BIGGAR** Trustee
Charles P. Biggar

* By Power of Attorney - filed herewith.
** By Power of Attorney -- Incorporated by reference to Post-Effective
Amendment No. 20 to the Registration Statement as filed with the
Commission on September 10, 1997.

<PAGE>

SIGNATURES

BT INVESTMENT PORTFOLIOS has duly caused this Post Effective Amendment
No. 27 to the Registration Statement on Form N-1A of BT Institutional Funds to
be signed on their behalf by the undersigned, thereto duly authorized, in the
City of Baltimore and the State of Maryland on the 5th day of February, 1999.

BT INVESTMENT PORTFOLIOS

By: /s/ Daniel O. Hirsch
Daniel O. Hirsch, Secretary
February 5, 1999

This Post Effective Amendment No. 27 to the Registration Statement of
BT Institutional Funds has been signed below by the following persons in the
capacities indicated with respect to European Equity Portfolio and Global Equity
Portfolio, each a series of BT INVESTMENT PORTFOLIOS.

NAME TITLE DATE

By: /s/ Daniel O. Hirsch Secretary February 5, 1999
Daniel O. Hirsch (Attorney in Fact
For the Persons
Listed Below)

/s/ John Y. Keffer* President and
John Y Keffer Chief Executive Officer

/s/ Joseph A. Finelli* Treasurer (Principal
Joseph A. Finelli Financial and Accounting
Officer)

/s/ CHARLES P. BIGGAR* Trustee
Charles P. Biggar

/s/ S. LELAND DILL* Trustee
S. Leland Dill

/s/ PHILIP SAUNDERS, JR.* Trustee
Philip Saunders, Jr.

* By Power of Attorney - filed herewith.

** By Power of Attorney -- Incorporated by reference to Post-Effective
Amendment No. 20 to the Registration Statement as filed with the Commission on
September 10, 1997.

<PAGE>

Power of Attorney

The undersigned Trustees and officers, as indicated respectively below,
of BT Investment Funds, BT Institutional Funds, BT Pyramid Mutual Funds, and BT
Advisor Funds (each, a "Trust") and, Cash Management Portfolio, Treasury Money
Portfolio, Tax Free Money Portfolio, NY Tax Free Money Portfolio, International
Equity Portfolio, Utility Portfolio, Short/Intermediate U.S. Government
Securities Portfolio, Equity 500 Index Portfolio, Asset Management Portfolio,
Capital Appreciation Portfolio, Intermediate Tax Free Portfolio, and BT
Investment Portfolios (each, a "Portfolio Trust") each hereby constitutes and
appoints the Secretary, each Assistant Secretary and each authorized signatory
of each Trust and each Portfolio Trust, each of them with full powers of
substitution, as his true and lawful attorney-in-fact and agent to execute in
his name and on his behalf in any and all capacities the Registration Statements
on Form N-1A, and any and all amendments thereto, and all other documents, filed
by a Trust or a Portfolio Trust with the Securities and Exchange Commission (the
"SEC") under the Investment Company Act of 1940, as amended, and (as applicable)
the Securities Act of 1933, as amended, and any and all instruments which such
attorneys and agents, or any of them, deem necessary or advisable to enable the
Trust or Portfolio Trust to comply with such Acts, the rules, regulations and
requirements of the SEC, and the securities or Blue Sky laws of any state or
other jurisdiction and to file the same, with all exhibits thereto and other
documents in connection therewith, with the SEC and such other jurisdictions,
and the undersigned each hereby ratifies and confirms as his own act and deed
any and all acts that such attorneys and agents, or any of them, shall do or
cause to be done by virtue hereof. Any one of such attorneys and agents has, and
may exercise, all of the powers hereby conferred. The undersigned each hereby
revokes any Powers of Attorney previously granted with respect to any Trust or
Portfolio Trust concerning the filings and actions described herein.

IN WITNESS WHEREOF, each of the undersigned has hereunto set his hand
as of the 31st day of December, 1998.

SIGNATURES TITLE

President and Chief Executive Officer of each Trust
/s/ JOHN Y. KEFFER and Portfolio Trust
John Y. Keffer

/s/ JOSEPH A. FINELLI Treasurer (Principal Financial and Accounting
Joseph A. Finelli Officer) of each Trust and Portfolio Trust

<PAGE>
Appendix I

BT INSTITUTIONAL FUNDS

Fifteenth Amended and Restated Establishment and
Designation of Series of Shares of
beneficial Interest (par value $0.001 per share)
Dated as of December 9, 1998

Pursuant to Sections 6.9 and 9.3 of the Amended and Restated
Declaration of Trust, dated as of March 29, 1990 (the "Declaration of Trust"),
of BT Institutional Funds (the "Trust"), the Trustees of the Trust hereby amend
and restate the Establishment and Designation of Series appended to the
Declaration of Trust to establish and designate one additional series,
Institutional Treasury Assets Fund, such series of Shares together with nine
existing series of Shares totaling ten series of Shares (each a "Fund" and
collectively the "Funds").

1. The Funds shall be designated, as follows:

Institutional Liquid Assets Fund
Institutional Cash Management Fund
Institutional Treasury Money Fund
Institutional Cash Reserves
Equity 500 Index Fund
Institutional Daily Assets Fund
International Equity Fund
Class I
Class II
International Small Company Equity Fund
Global Emerging Markets Equity Fund
Institutional Treasury Assets Fund
BT European Equity Fund
BT Global Equity Fund

and shall have the following special and relative rights:

2. Each Fund shall be authorized to hold cash, invest in securities,
instruments and other properties and use investment techniques as from time to
time described in the Trust's then currently effective registration statement
under the Securities Act of 1933, and/or the Investment company Act of 1940,
each as amended, to the extent pertaining to the offering of Shares of such Fund
(or Class thereof). Each Share of a Fund (or Class thereof) shall be redeemable,
shall be entitled to one vote (or fraction thereof in respect of a fractional
share) on matters on which Shares of the Fund (or Class thereof) shall be
entitled to vote, shall represent a pro rata beneficial interest in the assets
allocated or belonging to the Fund (or allocated or belonging to the Class
thereof), and shall be entitled to receive its pro rata share of the net assets
of the Fund (or Class thereof) upon liquidation of the Fund (or Class thereof),
all as provided in Section 6.9 of the Declaration of Trust. The proceeds of
sales of Shares of a Fund (or Class thereof), together with any income and gain
thereon, less an diminution or expenses thereof, shall irrevocably belong to
that Fund (or allocated to the Class thereof), unless otherwise required by law.

<PAGE>

3. Shareholders of each Fund (or Class thereof) shall vote separately
as a class on any matter to the extent required by, and any matter shall be
deemed to have been effectively acted upon with respect to the Fund (or Class
thereof) as provided in, Rule 18f-2, as from time to time in effect, under the
Investment Company Act of 1940, as amended, or any successor rule, and by the
Declaration of Trust.

4. The assets and liabilities of the Trust shall be allocable among the
Funds (or Class thereof) as set forth in Section 6.9 of the Declaration of
Trust.

5. Subject to the provisions of Section 6.9 and Article IX of the
Declaration of Trust, the Trustees (including any successor Trustees) shall have
the right at any time and from time to time to reallocate assets and expenses,
to change the designation of any Fund (or Class thereof) created previously or
now or hereafter created, or otherwise to change the special and relative rights
of any Fund (or Class thereof).

IN WITNESS WHEREOF, the undersigned have signed this instrument as of
December 9, 1998. This instrument may be executed by the Trustees on separate
counterparts but shall be effective only when signed by a majority of the
Trustees.

/s/ Charles P. Biggar
----------------------------------------------
Charles P. Biggar
As Trustee and not individually

/s/ Richard J. Herring
----------------------------------------------
Richard J. Herring
As Trustee and not individually

/s/ Bruce E. Langton
----------------------------------------------
Bruce E. Langton
As Trustee and not individually

<PAGE>

BT INSTITUTIONAL FUNDS
DISTRIBUTION AGREEMENT

APPENDIX A
AS OF AUGUST 11, 1998
AS REVISED: DECEMBER 9, 1998
<TABLE>
<CAPTION>

- -------------------------------------------------- -------------- ------------------------------------ ---------------
DISTRIBUTION SERVICE
SERIES CLASS FEE FEE
- -------------------------------------------------- -------------- ------------------------------------ ---------------
<S> <C> <C> <C>
International Equity Fund Class I None
Class II None
- -------------------------------------------------- -------------- ------------------------------------ ---------------
Institutional Cash Management Fund None
None
- -------------------------------------------------- -------------- ------------------------------------ ---------------
Institutional Liquid Assets Fund None None

- -------------------------------------------------- -------------- ------------------------------------ ---------------
Institutional Cash Reserves None
None
- -------------------------------------------------- -------------- ------------------------------------ ---------------
Institutional Treasury Money Fund None
None
- -------------------------------------------------- -------------- ------------------------------------ ---------------
Equity 500 Index Fund None
None
- -------------------------------------------------- -------------- ------------------------------------ ---------------
International Small Company Equity Fund None None

- -------------------------------------------------- -------------- ------------------------------------ ---------------
Global Emerging Markets Equity Fund None None

- -------------------------------------------------- -------------- ------------------------------------ ---------------
European Equity Fund None None

- -------------------------------------------------- -------------- ------------------------------------ ---------------
Global Equity Fund None None

- -------------------------------------------------- -------------- ------------------------------------ ---------------
</TABLE>

<PAGE>

BT INSTITUTIONAL FUNDS

EXHIBIT D
---------
TO THE
ADMINISTRATION AND SERVICES AGREEMENT
MADE AS OF OCTOBER 28, 1992
BETWEEN
BT INSTITUTIONAL FUNDS AND BANKERS TRUST COMPANY
AS REVISED:

<PAGE>

December 9, 1998

Institutional Cash Management Fund........................................0.05%
Institutional Treasury Money Fund.........................................0.05%
Institutional Liquid Assets Fund..........................................0.05%
Equity 500 Index Fund.....................................................0.05%
Institutional Cash Reserves...............................................0.05%
Institutional Daily Assets Fund...........................................0.02%
International Equity Fund
Class I..........................................................0.40%
Class II.........................................................0.15%
Global Emerging Markets Equity Fund.......................................0.35%
International Small Company Equity Fund...................................0.10%
Institutional Treasury Assets Fund........................................0.10%
European Equity Fund......................................................0.35%
Global Equity Fund........................................................0.35%

<PAGE>

Amendment #4 to Exhibit A

Exhibit A to Custodian Agreement dated as of July 1, 1996 between Bankers Trust
Company and BT Institutional Funds is hereby amended by adding the following to
the List of Portfolios:

THE FOLLOWING IS A LIST OF PORTFOLIOS THE FOLLOWING IS A LIST OF INVESTMENT
REFERRED TO IN THE FIRST WHEREAS PORTFOLIOS REFERRED TO IN SECTION 28
CLAUSE OF THE AGREEMENT. OF THE AGREEMENT.

BT European Equity Fund BT European Equity Portfolio
BT Global Equity Fund BT Global Equity Portfolio

Dated as of December 9, 1998 BT INSTITUTIONAL FUNDS

By: /s/ Daniel O. Hirsch
---------------------------------
Name: Daniel O. Hirsch.
--------------------------------
Title: Secretary
---------------------------------

BANKERS TRUST COMPANY

By: /s/ Brian W. Wixted
---------------------------------
Name: Brian W. Wixted
---------------------------------
Title: Principal
---------------------------------

<PAGE>

BT INSTITUTIONAL FUNDS
One South Street
Baltimore, Maryland 21202

February 5, 1999

EDGAR Operations Branch
Securities and Exchange Commission
Division of Investment Management
450 Fifth Street, Northwest
Washington, DC 20549

Re: BT INSTITUTIONAL FUNDS (the "Trust")
1933 Act File No. 33-34079
1940 Act File No. 811-6071
-------------------------------------
Dear Sir or Madam:

Post-Effective No. 27 under the Securities Act of 1933, as amended (the
"1933 Act") and Amendment No. 35 under the Investment Company Act of 1940 to the
Registration Statement of the above-referenced Trust is hereby electronically
transmitted. This filing is being made pursuant to paragraph (a) of Rule 485
under the 1933 Act, to reflect the addition of two new series to the Trust.

Pursuant to Securities Act release No. 6510 and Investment Company Release
No. 13768 (February 15, 1984), we request selective review of the above
referenced Post-Effective Amendment.

The disclosure, design and format contained in this Post-Effective
Amendment is substantially similar to disclosure provided pursuant to new Form
N-1A for BT Institutional International Equity Fund in the BT Mutual Funds
family previously reviewed by the Staff (BT Investment Funds (File no. 33-34079)
filed on November 24, 1998).

The following sections of the Fund's prospectuses and statement of
additional information differ from those of the Institutional International
Equity Fund only so far as necessary to include Fund-specific disclosure:

The Prospectuses:
1. Cover page
2. Overview
3. Who Should Consider Investing in the Fund
4. Annual Fund Operating Expenses
5. Objective
6. Strategy
7. Principal Investments
8. Investment Process
9. Prior Performance (European Equity Fund only)
10. Portfolio Managers

The Statement of Additional Information:
1. Prior Performance of Similar European Equity Funds
2. Additional Information About Buying Shares

If you have any questions regarding this filing, please call me at
(410) 895-3776.

Very truly yours,

/s/ Daniel O. Hirsch

Daniel O. Hirsch
Secretary

Enclosures