<PAGE>
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
-
Post-Effective Amendment No.____ ................................ .... X
-
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
-
Amendment No. 42 ................................................. X
----- -
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, Esq. Copies to: Burton M. Leibert, Esq.
One South Street Willkie Farr & Gallagher
Baltimore, Maryland 21202 787 Seventh Ave
(Name and Address of Agent New York, New York 10019
for Service)
EXPLANATORY NOTE: This Registration Statement has been filed by BT Institutional
Funds (the "Registrant") pursuant to Section 8(b) of the Investment Company Act
of 1940, as amended. However, shares of beneficial interest of Daily Assets
Institutional (the "Fund"), a series of the Registrant, are not being registered
under the Securities Act of 1933 (the "1933 Act") since such shares will be
issued by the Registrant solely in private placement transactions which do not
involve any "public offering" within the meaning of Section 4(2) of the 1933
Act. Shares of the Fund may only be purchased by "accredited investors," as that
term is defined in Rule 501(a) of Regulation D under the Securities Act. This
Registration Statement does not constitute an offer to sell, or the solicitation
of an offer to buy, any shares of beneficial interest of the Fund.
<PAGE>
Deutsche Asset Management
DO NOT COPY OR CIRCULATE
Prospective
Investor ______________________ Copy # _______________
Confidential Private
Offering Memorandum
October 27, 2000
Daily Assets Institutional
Formerly Institutional Daily Assets Fund, a BT Mutual Fund
[The securities described in this memorandum are offered pursuant to an
exemption from the registration requirements of the Securities Act of 1933, as
amended, and have not been registered with the Securities and Exchange
Commission. 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
memorandum. Any representation to the contrary is a criminal offense.]
NO RESALE OF SHARES MAY BE MADE UNLESS THE SHARES ARE SUBSEQUENTLY REGISTERED
UNDER THE SECURITIES ACT OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
THIS CONFIDENTIAL PRIVATE OFFERING MEMORANDUM HAS BEEN PREPARED ON A
CONFIDENTIAL BASIS SOLELY FOR THE INFORMATION OF THE RECIPIENT AND MAY NOT BE
REPRODUCED, PROVIDED TO OTHERS OR USED FOR ANY OTHER PURPOSE.
NO PERSON HAS BEEN AUTHORIZED TO MAKE REPRESENTATIONS OR GIVE ANY INFORMATION
WITH RESPECT TO THE SHARES, EXCEPT THE INFORMATION CONTAINED HEREIN OR IN THE
TRUST'S REGISTRATION STATEMENT FILED UNDER THE INVESTMENT COMPANY ACT.
A Member of the
Deutsche Bank Group [GRAPHIC]
<PAGE>
Overview
--------------------------------------------------------------------------------
of Daily Assets Institutional
Goal: The Fund seeks a high level of current income consistent with liquidity
and the preservation of capital.
Core Strategy: The Fund invests in high quality money market instruments.
INVESTMENT POLICIES AND STRATEGIES
The Fund seeks its objective by investing in high quality money market
instruments, maintaining a dollar-weighted average maturity of 90 days or less.
The Fund attempts to maintain a stable share price by investing in securities
that are valued in U.S. dollars, have remaining maturities of 397 days or less
and are of the highest quality. The Fund typically invests more than 25% of its
total assets in banks and other financial institutions.
--------------------------------------------------------------------------------
Daily Assets Institutional
Overview of Daily Assets Institutional
<TABLE>
<S> <C>
Goal........................................................................ 3
Core Strategy............................................................... 3
Investment Policies and Strategies.......................................... 3
Principal Risks of Investing in the Fund.................................... 4
Who Should Consider Investing in the Fund................................... 4
Total Returns, After Fees and Expenses...................................... 5
Annual Fund Operating Expenses.............................................. 6
</TABLE>
A Detailed Look at Daily Assets Institutional
<TABLE>
<S> <C>
Objective................................................................... 7
Strategy.................................................................... 7
Principal Investments....................................................... 7
Risks....................................................................... 8
Management of the Fund...................................................... 8
Calculating the Fund's Share Price.......................................... 9
Dividends and Distributions................................................. 9
</TABLE>
<TABLE>
<S> <C>
Tax Considerations.......................................................... 10
Buying and Selling Fund Shares.............................................. 10
Financial Highlights........................................................ 11
</TABLE>
--------------------------------------------------------------------------------
3
<PAGE>
Overview of Daily Assets Institutional
PRINCIPAL RISKS OF INVESTING IN THE FUND
Although the Fund seeks to preserve the value of your investment at $1.00 a
share, there are risks associated with investing in the Fund. For example:
. A rise in interest rates could cause the bond market and individual
securities in the Fund's portfolio to decline in value.
. An issuer's creditworthiness could decline, which in turn may cause the value
of a security in the Fund's portfolio to decline.
. Changes in interest rates or economic downturns could have a negative effect
on issuers in the financial services industry.
WHO SHOULD CONSIDER INVESTING IN THE FUND
Shares of the Fund are being offered for investment only to investors who
qualify as both:
. Accredited investors as defined under Regulation D of the Securities Act of
1933, as amended, and
. institutional investors.
Shares of the Fund are not being offered to individuals or to entities
organized for the purpose of investing on behalf of individuals. Investors will
be required to represent that they meet certain financial requirements and that
they are familiar with and understand the terms, risks and merits of an
investment in the Fund.
You should consider investing in the Fund if you are looking for a cash
management vehicle that offers income approximating money market rates and
preserves the value of your capital. The Fund is only sold to investors who use
the Fund to invest cash collateral received in connection with securities
lending transactions as part of their participation in Deutsche Bank's
securities lending program.
You should not consider investing in the Fund if you seek long-term capital
growth. Although it provides a convenient means of diversifying short-term
investments, the Fund by itself does not constitute a balanced investment
program.
An investment in the Fund is not a bank deposit, and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the Fund.
--------------------------------------------------------------------------------
4
<PAGE>
Overview of Daily Assets Institutional
TOTAL RETURNS, AFTER FEES AND EXPENSES
The bar chart and table on this page can help you evaluate the potential risk
and rewards of investing in the Fund by showing changes in the Fund's
performance year to year. The bar chart shows the Fund's actual return for each
full calendar year since November 13, 1996 (its inception date). The table
shows the Fund's average annual return over the last calendar year and since
the Fund's inception.
As of December 31, 1999 the Fund's 7-day yield was 5.66%. To learn the current
7-day yield, shareholders may call the Service Center at 1-800-730-1313.
--------------------------------------------------------------------------------
The 7-day yield, which is often referred to as the "current yield," is the
income generated by the Fund over a seven-day period. This amount is then
annualized, which means that we assume the Fund generates the same income every
week for a year. The "total return" of the Fund is the change in the value of
an investment in the Fund over a given period. Average annual returns are
calculated by averaging the year-by-year returns of the Fund over a given
period.
YEAR-BY-YEAR RETURNS
(each full calendar year since inception)
[GRAPH]
1997 5.65%
1998 5.59%
1999 5.22%
Since inception, the Fund's highest return in any calendar quarter was 1.42%
(fourth quarter 1997) and its lowest quarterly return was 1.21% (second quarter
1999). The Fund's return for the period January 1, 2000 to September 30, 2000
was 4.77%. Past performance offers no indication of how the Fund will perform
in the future.
PERFORMANCE FOR PERIOD ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Average Annual Returns
Since Inception
1 Year 3 Years (Nov. 13, 1996)
<S> <C> <C> <C>
Daily Assets Institutional 5.22% 5.49% 5.50%
-----------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
5
<PAGE>
Overview of Daily Assets Institutional
ANNUAL FUND OPERATING EXPENSES
(expenses paid from Fund assets)
The Annual Fees and Expenses table to the right describes the fees and expenses
that you may pay if you buy and hold shares of Daily Assets Institutional.
Expense Example. The example below illustrates the expenses you would have
incurred on a $10,000 investment in the Fund. It assumes that the Fund earned
an annual return of 5% over the periods shown, that the Fund's operating
expenses remained the same, and that you redeem your shares at the end of the
period.
You may use this hypothetical example to compare the Fund's expense history
with other funds. Your actual costs may be higher or lower.
--------------------------------------------------------------------------------
/1/The investment adviser and administrator have contractually agreed, for the
16-month period from the Fund's fiscal year end of June 30, 2000, to waive
their fees and reimburse expenses so that total expenses will not exceed 0.12%.
/2/For the first year, the expense example takes into account fee waivers and
reimbursements.
ANNUAL FEES AND EXPENSES
<TABLE>
<CAPTION>
Percentage of Average
Daily Net Assets
<S> <C>
Management Fees 0.10%
--------------------------------------------------
Distribution and
Service (12b-1) Fees None
--------------------------------------------------
Other Fund Operating
Expenses 0.022%
--------------------------------------------------
Total Fund Operating
Expenses 0.122%
--------------------------------------------------
Less: Fee Waivers or
Expense Reimbursement (0.002)%/1/
--------------------------------------------------
Net Expenses 0.12%
--------------------------------------------------
</TABLE>
EXPENSE EXAMPLE/2/
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C>
$12 $39 $69 $156
---------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
6
<PAGE>
A detailed look
--------------------------------------------------------------------------------
at Daily Assets Institutional
OBJECTIVE
Daily Assets Institutional seeks a high level of current income consistent with
liquidity and the preservation of capital by investing in high quality short-
term money market instruments.
While we give priority to earning income and maintaining the value of the
Fund's principal at $1.00 per share, all money market instruments, including
U.S. government obligations, can change in value when interest rates change or
an issuer's creditworthiness changes.
The Fund's objective is not a fundamental policy. We must notify shareholders
before we can change it, but we do not require their approval to do so.
STRATEGY
The Fund seeks current income by investing in high quality money market
securities and maintains a dollar-weighted average maturity of 90 days or less.
The Fund follows two policies designed to maintain a stable share price.
Generally, Fund securities are valued in U.S. dollars and have remaining
maturities of 397 days (about 13 months) or less at the time of purchase. The
Fund may also invest in securities that have features that effectively reduce
their maturities to 397 days or less at the time of purchase.
The Fund buys U.S. government debt obligations, money market instruments and
other debt obligations that at the time of purchase:
. have received the highest short-term rating from two nationally recognized
statistical rating organizations;
. have received the highest short-term rating from one rating organization (if
only one organization rates the security);
. are unrated, but are determined by us to be of similar quality; or
. have no short-term rating, but are rated in one of the top three highest
long-term rating categories, or are determined by us to be of similar
quality.
Because all of the investors in the Fund will issue standing orders to invest
in the Fund cash collateral received in connection with securities lending
transactions, the Fund may receive significant purchase orders late in the day,
which may impact the Fund's ability to remain fully invested. To assist the
Fund in remaining fully invested, the Fund and the investment adviser may
jointly enter into repurchase agreements and other investments with non-
affiliated banks, broker-dealers or other issuers with respect to amounts
estimated to be received on any day through the operation of the securities
lending program. Such investments will be allocated between the Fund and the
investment adviser in such a manner as to maximize the investment of cash by
the Fund.
PRINCIPAL INVESTMENTS
The Fund may invest in high-quality, short-term, dollar-denominated money
market instruments paying a fixed, variable or floating interest rate. These
include:
. Debt obligations issued by U.S. and foreign banks, financial institutions,
corporations or other entities, including certificates of deposit, euro-time
deposits, commercial paper (including asset-backed commercial paper), notes,
funding agreements and U.S. government securities. Securities that do not
satisfy the maturity restrictions for a money market fund may be specifically
structured so that they are eligible investments for money market funds. For
example, some securities have features, that have the effect of shortening
the security's maturity.
. U.S. government securities that are issued or guaranteed by the U.S.
Treasury, or by agencies or instrumentalities of the U.S. Government.
. Repurchase agreements, which are agreements to buy securities at one price
with a simultaneous agreement to sell back the securities at a future date at
an agreed-upon price.
. Asset-backed securities, which are generally participations in a pool of
assets whose payment is derived from the payments generated by the underlying
assets. Payments on the asset-backed security generally consist of interest
and/or principal.
Because many of the Fund's principal investments are issued or credit-enhanced
by banks or other financial institutions, the Fund may invest more that 25% of
its total assets in the financial services industry.
The Fund is listed on the National Association of Insurance Commissioners
("NAIC") list of Approved Mutual Funds. NAIC
--------------------------------------------------------------------------------
7
<PAGE>
A Detailed Look at Daily Assets Institutional
has designated the Fund as Class 1. Class 1 listings are to be reserved against
as if they were a Class 1 Bond. In addition, Standard & Poor's rated the Fund
AAAm.
RISKS
Below we set forth some of the prominent risks associated with money market
mutual funds. 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. If
a security no longer meets the Fund's requirements, we will attempt to sell
that security within a reasonable time, unless selling the security would not
be in the Fund's best interest.
Primary Risks
Interest Rate Risk. Money market instruments, like all debt securities, face
the risk that the securities will decline in value because of changes in
interest rates. Generally, investments subject to interest rate risk will
decrease in value when interest rates rise and increase when interest rates
decline. To minimize such price fluctuations, the Fund adheres to the following
practices:
. We limit the dollar-weighted average maturity of the securities held by the
Fund to 90 days or less. Generally, rates of short-term investments fluctuate
less than longer-term bonds.
. We primarily buy securities with remaining maturities of 13 months or less.
This reduces the risk that the issuer's creditworthiness will change, or that
the issuer will default on the principal and interest payments of the
obligation.
Credit Risk. A money market instrument's credit quality depends on the issuer's
ability to pay interest on the security and repay the debt: the lower the
credit rating, the greater the risk that the security's issuer will default, or
fail to meet its payment obligations. The credit risk of a security may also
depend on the credit quality of any bank or financial institution that provides
credit enhancement for it. The Fund only buys high quality securities with
minimal credit risk.
Market Risk. Although individual securities may outperform their market, the
entire market may decline as a result of rising interest rates, regulatory
developments or deteriorating economic conditions.
Security Selection Risk. While the Fund invests in short-term securities, which
by nature are relatively stable investments, the risk remains that the
securities we have selected will not perform as expected. This, in turn, could
cause the Fund's returns to lag behind those of similar money market funds.
Repurchase Agreement Risk. A repurchase agreement exposes the Fund to the risk
that the party that sells the securities defaults on its obligation to
repurchase them. In this circumstance, the Fund can lose money because:
. it cannot sell the securities at the agreed-upon time and price; or
. the securities lose value before they can be sold.
The Fund seeks to reduce this risk by monitoring, under the supervision of its
investment adviser, the creditworthiness of the sellers with whom it enters
into repurchase agreements. The Fund also monitors the value of the securities
to ensure that they are at least equal to the total amount of the repurchase
obligations, including interest and accrued interest.
Concentration Risk. Because the Fund may invest more than 25% of its total
assets in the financial services industry, it may be vulnerable to setbacks in
that industry. Banks and other financial service companies are highly dependent
on short-term interest rates and can be adversely affected by downturns in the
U.S. and foreign economies or changes in banking regulations.
Prepayment Risk. When a bond issuer, such as an issuer of asset-backed
securities, retains the right to pay off a high yielding bond before it comes
due, the Fund may have no choice but to reinvest the proceeds at lower interest
rates. Thus, prepayment may reduce the Fund's income. It may also create a
capital gains tax liability, because bond issuers usually pay a premium for the
right to pay off bonds early.
MANAGEMENT OF THE FUND
Deutsche Asset Management is the marketing name for the asset management
activities of Deutsche Bank AG, Deutsche Fund Management, Inc., Bankers Trust
Company, DB Alex. Brown LLC, Deutsche Asset Management, Inc. and Deutsche Asset
Management Investment Services Limited.
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
of the Fund's activities on their behalf.
Investment 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 is an indirect wholly-
owned subsidiary of Deutsche Bank A.G. 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
--------------------------------------------------------------------------------
8
<PAGE>
A Detailed Look at Daily Assets Institutional
received a fee of 0.10% of the Fund's average daily net assets for its
services in the last fiscal year.
As of June 30, 2000, Bankers Trust had total assets under management of
approximately $257 billion. Bankers Trust is dedicated to servicing the needs
of corporations, governments, financial institutions, and private clients and
has invested retirement assets on behalf of the nation's largest corporations
and institutions for more than 50 years. 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.
At a special meeting of shareholders held in 1999, shareholders of the Fund
approved a new investment advisory agreement with Deutsche Asset Management,
Inc. (formerly Morgan Grenfell, Inc.). The new investment advisory agreement
may be implemented within two years of the date of the special meeting upon
approval of a majority of the members of the Board of Trustees who are not
"interested persons," generally referred to as independent trustees.
Shareholders of the Fund also approved a new sub-investment advisory agreement
among the Trust, Deutsche Asset Management, Inc. and Bankers Trust under which
Bankers Trust may perform certain of Deutsche Asset Management, Inc.'s
responsibilities, at Deutsche Asset Management, Inc.'s expense, upon approval
of the independent trustees, within two years of the date of the special
meeting. Under the new investment advisory agreement and new sub-advisory
agreement, the compensation paid and the services provided would be the same
as those under the existing advisory agreement with Bankers Trust.
Deutsche Asset Management, Inc. is located at 885 Third Avenue, 32nd Floor,
New York, New York 10022. The firm provides a full range of investment
advisory services to institutional clients. It serves as investment adviser to
11 other investment companies and as sub-adviser to five other investment
companies.
Other Services. Bankers Trust provides administrative services such as
portfolio accounting, legal services and others for the Fund. In addition,
Bankers Trust performs the functions necessary to establish and maintain your
account. Besides setting up the account and processing your purchase and sale
orders, these functions include:
. keeping accurate, up-to-date records for your individual Fund account;
. implementing any changes you wish to make in your account information;
. processing your requests for cash dividends and distributions from the Fund;
. answering your questions on the Fund's investment performance or
administration;
. sending proxy reports and updated information about the Fund to you; and
. collecting your executed proxies.
CALCULATING THE FUND'S SHARE PRICE
We calculate the price of the Fund's shares (also known as the "Net Asset
Value" or "NAV") at 5:30 p.m. Eastern time each day that the Fund is open for
business. On the day before certain holidays are observed, the bond markets or
other primary trading markets for the Fund may close early. They may also
close early on the day after Thanksgiving and the day before Christmas Eve. If
the Bond Market Association recommends an early close of the bond markets, the
Fund also may close early. You may call the Service Center at 1-800-730-1313
for additional information about whether the Fund will close before a
particular holiday. On days the Fund closes early:
. All orders received prior to the Fund's close will be processed as of the
time the Fund's NAV is next calculated.
. Redemption orders received after the Fund's close will be processed as of
the time the Fund's NAV is next calculated.
. Purchase orders received after the Fund's close will be processed the next
business day.
The Fund uses the amortized cost method to account for any premiums or
discounts above or below the face value of any securities it buys. This method
writes down the premium or marks up the discount at a constant rate until
maturity. It does not reflect daily fluctuations in market value. All cash
receivables and current payments are valued at face value. Other assets are
valued at fair value as determined in good faith by the Fund's Board. The
Fund's Net Asset Value will normally be $1.00 a share.
DIVIDENDS AND DISTRIBUTIONS
The Fund declares dividends from its net income daily and pays the dividends
on a monthly basis.
-------------------------------------------------------------------------------
The Fund 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), Independence Day (July 4th),
Labor Day (the first Monday in September), Columbus Day (the second Monday in
October), Veterans' Day (November 11), Thanksgiving Day (the fourth Thursday
in November) and Christmas Day.
-------------------------------------------------------------------------------
9
<PAGE>
A Detailed Look at Daily Assets Institutional
The Fund reserves the right to include in the daily dividend any short-term
capital gains on securities that it sells. Also, the Fund will normally declare
and pay annually any long-term capital gains as well as any short-term capital
gains that it did not distribute during the year.
We automatically reinvest all dividends and capital gains, if any, unless you
tell us otherwise.
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 gain 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:
<TABLE>
<CAPTION>
TRANSACTION TAX STATUS
<S> <C>
Income dividends Ordinary income
--------------------------------------------
Short-term capital gain
distributions Ordinary income
--------------------------------------------
Long-term capital gain
distributions Capital gains
--------------------------------------------
</TABLE>
Every year the Fund will send you information on the distributions for the
previous year.
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.
BUYING AND SELLING FUND SHARES
Investors in the Fund will issue standing orders, effective on or before 5:30
p.m., Eastern time each day, on which the Fund is open, to invest in the Fund
cash collateral received in connection with securities lending transactions.
Three copies of a Subscription Agreement for use in subscribing to purchase
shares of the Fund accompany delivery of this Memorandum to prospective
investors. In order to purchase shares of the Fund, a prospective investor must
satisfactorily complete, execute and deliver each copy of the Subscription
Agreement to Bankers Trust Company, 130 Liberty Street, New York, New York
10006, and the purchase must be accepted by the Fund's Placement Agent, ICC
Distributors, Inc.
Important Information About Buying and Selling Shares
. After receiving your order, we buy or sell your shares at the next price
calculated on a day the Fund is open for business.
. We do not pay dividends on shares the day they are sold.
. We remit proceeds from the sale of shares in U.S. dollars (unless the
redemption is so large that it is made "in-kind").
. We do not issue share certificates.
. If your sell order exceeds $250,000, we reserve the right to redeem it "in-
kind" with a pro-rata distribution of securities actually held by a Fund,
rather than in cash.
. We process all orders free of charge.
. Because Bankers Trust is the Fund's Custodian, and ICCC, an affiliate of
Bankers Trust is the Fund's Transfer Agent, funds may be transferred directly
between the Fund and a customer account held with Bankers Trust without
incurring the additional costs or delays associated with a wire transfer.
. We reserve the right to reject purchases of Fund shares (including exchanges)
for any reason.
. We reserve the right to reject purchases of Fund shares (including exchanges)
or to suspend or postpone redemptions at times when both the New York Stock
Exchange and the Fund's custodian are closed.
--------------------------------------------------------------------------------
10
<PAGE>
A Detailed Look at Daily Assets Institutional
The table below provides a picture of the Fund's financial performance since
inception. The information selected reflects financial results for a single
Fund share. The total returns in the table represent the rates of return that
an investor would have earned on an investment in the Fund, assuming
reinvestment of all dividends and distributions. This information has been
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, is included in the Fund's annual report. The annual
report is available free of charge by calling us at 1-800-730-1313.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For the Period
For the Years Ended June 30, November 13, 1996/1/
2000 1999 1998 to June 30, 1997
<S> <C> <C> <C> <C>
Per Share Operating
Performance:
Net Asset Value,
Beginning of Period $1.00 $1.00 $1.00 $1.00
-----------------------------------------------------------------------------------
Income from Investment
Operations
Net Investment Income 0.06 0.05 0.06 0.03
-----------------------------------------------------------------------------------
Net Realized Gain from
Investment Transactions 0.00/2/ 0.00/2/ 0.00/2/ 0.00/2/
-----------------------------------------------------------------------------------
Total from Investment
Operations 0.06 0.05 0.06 0.03
-----------------------------------------------------------------------------------
Distributions to
Shareholders
Net Investment Income (0.06) (0.05) (0.06) (0.03)
-----------------------------------------------------------------------------------
Net Asset Value, End of
Period $1.00 $1.00 $1.00 $1.00
-----------------------------------------------------------------------------------
Total Investment Return 5.84% 5.25% 5.71% 3.46%
-----------------------------------------------------------------------------------
Supplemental Data and
Ratios:
Net Assets, End of
Period (000s omitted) $8,845,254 $7,804,575 $5,729,267 $2,748,056
-----------------------------------------------------------------------------------
Ratios to Average Net
Assets:
Net Investment Income 5.75% 5.11% 5.55% 5.43%/3/
-----------------------------------------------------------------------------------
Expenses After Waivers 0.12% 0.12% 0.12% 0.12%/3/
-----------------------------------------------------------------------------------
Expenses Before Waivers 0.122% 0.122% 0.122% 0.13%/3/
-----------------------------------------------------------------------------------
Decrease Reflected in
Above Expense Ratios Due
to Fee Waivers or
Expense Reimbursement 0.002% 0.002% 0.002% 0.01%/3/
-----------------------------------------------------------------------------------
</TABLE>
/1/Commencement of operations.
/2/Less than $0.01 per share.
/3/Annualized.
-------------------------------------------------------------------------------
11
<PAGE>
Additional information about the Fund's investments is available in the
Fund's annual and semi-annual reports to shareholders.
You can find more detailed information about the Fund in the current
Confidential Statement of Additional Information, dated October 27, 2000,
which we have filed electronically with the Securities and Exchange
Commission (SEC) and which is incorporated by reference. To receive your
free copy of the Confidential Statement of Additional Information, the
annual or semi-annual report, or if you have questions about investing in
the Fund, write to us at:
Service Center
P.O. Box 219210
Kansas City, MO 64121
or call us at: 1-800-730-1313
You can find reports and other information about each Fund on the EDGAR
Database on the SEC's website (http://www.sec.gov), or you can get copies
of this information, after payment of a duplicating fee, by electronic
request at [email protected] or by writing to the Public Reference Section
of the SEC, Washington, D.C. 20549-0102. Information about each 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 202.942.8090.
Daily Assets Institutional
BT Institutional Funds
Placement Agent: 811-6071
ICC Distributors, Inc. 1721PRO
(10/00)
<PAGE>
DO NOT COPY OR CIRCULATE
Investor __________________________________________ Copy #_____
CONFIDENTIAL STATEMENT OF ADDITIONAL INFORMATION
OCTOBER 27, 2000
BT Institutional Funds
Daily Assets Institutional
Formerly Institutional Daily Assets Fund, a BT Mutual Fund
BT Institutional Funds (the "Trust") is an open-end management investment
company that offers investors a selection of investment portfolios, each having
distinct investment objectives and policies. The Trust was organized on March
26, 1990, as a Massachusetts Business Trust under the laws of the Commonwealth
of Massachusetts. This Confidential Statement of Additional Information ("SAI")
relates to Institutional Daily Assets (the "Fund"), a series of the Trust.
Shares of the Fund are sold by ICC Distributors, Inc. ("ICC Distributors"), the
Trust's Distributor (and the Fund's Placement Agent), primarily to clients and
customers of Deutsche Bank ("the Bank") that participate in the Bank's
securities lending program. Bankers Trust Company serves as the Fund's
investment adviser (the "Adviser").
THE SECURITIES DESCRIBED IN THIS SAI ARE OFFERED PURSUANT TO AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND HAVE NOT BEEN REGISTERED WITH OR APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY AUTHORITY OF
ANY JURISDICTION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS SAI. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SHARES OF THE FUND ARE BEING OFFERED ONLY TO INVESTORS WHO QUALIFY AS BOTH (1)
ACCREDITED INVESTORS AS DEFINED UNDER REGULATION D
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UNDER THE SECURITIES ACT AND (2) INSTITUTIONAL INVESTORS. SHARES OF THE FUND ARE
NOT BEING OFFERED TO INDIVIDUALS OR TO ENTITIES ORGANIZED FOR THE PURPOSE OF
INVESTING ON BEHALF OF INDIVIDUALS. NO RESALE OF SHARES MAY BE MADE UNLESS THE
SHARES ARE SUBSEQUENTLY REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION FROM
SUCH REGISTRATION IS AVAILABLE.
THIS SAI HAS BEEN PREPARED ON A CONFIDENTIAL BASIS SOLELY FOR THE INFORMATION OF
THE RECIPIENT AND MAY NOT BE REPRODUCED, PROVIDED TO OTHERS OR USED FOR ANY
OTHER PURPOSE.
NO PERSON HAS BEEN AUTHORIZED TO MAKE REPRESENTATIONS ON ANY INFORMATION WITH
RESPECT TO THE SHARES, EXCEPT THE INFORMATION CONTAINED HEREIN OR IN THE TRUST'S
REGISTRATION STATEMENT.
INVESTORS WILL BE REQUIRED TO REPRESENT THAT THEY MEET CERTAIN FINANCIAL
REQUIREMENTS AND THAT THEY ARE FAMILIAR WITH AND UNDERSTAND THE TERMS, RISKS AND
MERITS OF AN INVESTMENT IN THE FUND.
The Fund's Confidential Private Offering Memorandum, which may be amended from
time to time, is dated October 27, 2000. The Confidential Private Offering
Memorandum provides the basic information investors should know before
investing, and may be obtained without charge by calling the Fund at
1-800-730-1313. This SAI, which is not a Confidential Private Offering
Memorandum, is intended to provide additional information regarding the
activities and operations of the Trust and should be read in conjunction with
the Confidential Private Offering Memorandum. Capitalized terms not otherwise
defined in this SAI have the meanings accorded to them in the Fund's
Confidential Private Offering Memorandum.
The Fund's audited Annual Report dated June 30, 2000, which either accompany
this SAI or has previously been provided to the investor to whom this SAI is
being sent, is incorporated herein by reference.
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Copies of the Annual Report, Semi-Annual Report and information regarding the
Fund's current performance may be obtained by writing or telephoning: Mutual
Fund Service Center of Deutsche Asset Management, P.O. Box 219210, Kansas City,
Missouri 64121-9210, 1-800-730-1313.
Investment Adviser and Administrator
BANKERS TRUST COMPANY
Placement Agent
ICC DISTRIBUTORS, INC.
Two Portland Square
Portland, Maine 04101
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TABLE OF CONTENTS
PAGE
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS AND RISKS......................5
INVESTMENT OBJECTIVE..................................................5
INVESTMENT POLICIES...................................................5
ADDITIONAL RISK FACTORS..............................................10
INVESTMENT RESTRICTIONS..............................................11
ADDITIONAL INVESTMENT LIMITATIONS....................................13
PORTFOLIO TURNOVER...................................................14
PORTFOLIO TRANSACTIONS...............................................14
NET ASSET VALUE...............................................................15
PURCHASE AND REDEMPTION INFORMATION...........................................16
MANAGEMENT OF THE TRUST.......................................................17
TRUSTEES OF THE TRUST................................................17
OFFICERS OF THE TRUST................................................19
INVESTMENT ADVISER ..................................................21
ADMINISTRATOR........................................................22
CUSTODIAN AND TRANSFER AGENT.........................................26
USE OF NAME..........................................................26
BANKING REGULATORY MATTERS...........................................26
COUNSEL AND INDEPENDENT ACCOUNTANTS..................................27
ORGANIZATION OF THE TRUST.....................................................27
TAXES.........................................................................29
PERFORMANCE INFORMATION.......................................................26
FINANCIAL STATEMENTS..........................................................27
APPENDIX......................................................................28
DESCRIPTION OF SECURITIES RATINGS.............................................28
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INVESTMENT OBJECTIVE, POLICIES, RESTRICTIONS AND RISKS
Investment Objective
The Fund's investment objective is a high level of current income consistent
with liquidity and the preservation of capital. There can, of course, be no
assurance that any Fund will achieve its investment objective.
Investment Policies
The following is a discussion of the various investments of and techniques
employed by the Fund.
Quality and Maturity of the Fund's Securities. The Fund will maintain a
dollar-weighted average maturity of 90 days or less. All securities in which the
Fund invests will have, or be deemed to have, remaining maturities of 397 days
or less on the date of their purchase and will be denominated in U.S. dollars.
Bankers Trust, acting under the supervision of and procedures adopted by the
Board of Trustees of the Trust, will also determine that all securities
purchased by the Fund present minimal credit risks. Bankers Trust will cause the
Fund to dispose of any security as soon as practicable if the security is no
longer of the requisite quality, unless such action would not be in the best
interest of the Fund. High-quality, short-term instruments may result in a lower
yield than instruments with a lower quality or longer term.
Obligations of Banks and Other Financial Institutions. For purposes of the
Fund's investment policies with respect to bank obligations, the assets of a
bank will be deemed to include the assets of its domestic and foreign branches.
Obligations of foreign branches of U.S. banks and foreign banks may be general
obligations of the parent bank in addition to the issuing bank or may be limited
by the terms of a specific obligation and by government regulation. If Bankers
Trust, acting under the supervision of the Board of Trustees, deems the
instruments to present minimal credit risk, the Fund may invest in U.S.
dollar-denominated obligations of foreign banks or foreign branches of U.S.
banks, which may include banks located in the United Kingdom, Grand Cayman
Island, Nassau, Japan and Canada. Investments in these obligations may entail
risks that are different from those of investments in obligations of U.S.
domestic banks because of differences in political, regulatory and economic
systems and conditions. These risks include future political and economic
developments, currency blockage, the possible
5
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imposition of withholding taxes on interest payments, differing reserve
requirements, reporting and record keeping requirements and accounting
standards, possible seizure or nationalization of foreign deposits, difficulty
or inability of pursuing legal remedies and obtaining judgments in foreign
courts, possible establishment of exchange controls or the adoption of other
foreign governmental restrictions that might affect adversely the payment of
principal and interest on bank obligations. Foreign branches of U.S. banks and
foreign banks may also be subject to less stringent reserve requirements and to
different accounting, auditing, reporting and record keeping standards than
those applicable to domestic branches of U.S. banks.
Commercial Paper. Commercial paper obligations in which the Fund may invest are
short-term, secured or unsecured negotiable promissory notes of U.S. or foreign
corporations and special vehicles that at the time of purchase meet the rating
criteria described in the Confidential Private Offering Memorandum. Investments
in foreign commercial paper generally involve risks similar to those described
above relating to obligations of foreign banks or foreign branches of U.S.
banks.
Variable Rate Master Demand Notes. Variable rate master demand notes are
unsecured instruments that permit the indebtedness thereunder to vary and
provide for periodic adjustments in the interest rate. Because variable rate
master demand notes are direct lending arrangements between the Fund and the
issuer, they are not ordinarily traded. Although no active secondary market may
exist for these notes, the Fund will purchase only those notes under which it
may demand and receive payment of principal or may resell the note to a third
party. While the notes are not typically rated by credit rating agencies,
issuers of variable rate master demand notes must satisfy Bankers Trust, acting
under the supervision of the Board of Trustees of the Fund, that the same
criteria as set forth above for issuers of commercial paper are met. In the
event an issuer of a variable rate master demand note defaulted on its payment
obligation, the Fund might be unable to dispose of the note because of the
absence of a secondary market and could, for this or other reasons, suffer a
loss to the extent of the default. The face maturities of variable rate notes
subject to a demand feature may exceed 397 days in certain circumstances. (See
"Quality and Maturity of the Fund's Securities" herein.)
U.S. Government Obligations. The Fund may invest in direct obligations issued by
the U.S. Treasury or in obligations issued or guaranteed by the U.S. Treasury or
by agencies or
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instrumentalities of the U.S. government ("U.S. Government Obligations").
Certain short-term U.S. Government Obligations, such as those issued by the
Government National Mortgage Association ("GNMA"), are supported by the "full
faith and credit" of the U.S. government; others, such as those of the
Export-Import Bank of the United States, are supported by the right of the
issuer to borrow from the U.S. Treasury; others, such as those of the Federal
National Mortgage Association are solely the obligations of the issuing entity
but are supported by the discretionary authority of the U.S. government to
purchase the agency's obligations; and still others, such as those of the
Student Loan Marketing Association, are supported by the credit of the
instrumentality. No assurance can be given that the U.S. government would
provide financial support to U.S. government-sponsored instrumentalities if it
is not obligated to do so by law.
Examples of the types of U.S. Government Obligations that the Fund may hold
include, but are not limited to, in addition to those described above and direct
U.S. Treasury obligations, the obligations of the Federal Housing Administration
("FHA"), Farmers Home Administration, Small Business Administration, General
Services Administration, Central Bank for Cooperatives, Federal Farm Credit
Banks, Federal Farm Credit Banks Funding Corp., Federal Home Loan Banks, Federal
Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, Federal Land
Banks and Maritime Administration.
Other Debt Obligations. The Fund may invest in deposits, bonds, notes and
debentures and other debt obligations that at the time of purchase have, or are
comparable in priority and security to other securities of such issuer which
have, outstanding short-term obligations meeting the above short-term rating
requirements, or if there are no such short-term ratings, are determined by
Bankers Trust, acting under the supervision of the Board of Trustees of the
Trust, to be of comparable quality and are rated in the top three highest
long-term rating categories by the NRSROs rating such security.
Asset-Backed Securities. The Fund may also invest in securities generally
referred to as asset-backed securities, which directly or indirectly represent a
participation interest in, or are secured by and payable from, a stream of
payments generated by particular assets such as motor vehicle or credit card
receivables. Asset-backed securities may provide periodic payments that consist
of interest and/or principal payments. Consequently, the life of an asset-backed
security varies with
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the prepayment and loss experience of the underlying assets.
Repurchase Agreements. The Fund may engage in repurchase agreement transactions
with banks and governmental securities dealers approved by Bankers Trust. Under
the terms of a typical repurchase agreement, the Fund would acquire U.S.
Government Obligations regardless of maturity, subject to an obligation of the
seller to repurchase, and the Fund to resell, the obligation at an agreed price
and time, thereby determining the yield during the Fund's holding period. This
arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. The value of the underlying
securities will be at least equal at all times to the total amount of the
repurchase obligations, including interest. The Fund bears a risk of loss in the
event that the other party to a repurchase agreement defaults on its obligations
and the Fund is delayed in or prevented from exercising its rights to dispose of
the collateralized securities, including the risk of a possible decline in the
value of the underlying securities during the period in which the Fund seeks to
assert these rights. Bankers Trust reviews the creditworthiness of those banks
and dealers with which the Fund enters into repurchase agreements and monitors
on an ongoing basis the value of the securities subject to repurchase agreements
to ensure that it is maintained at the required level.
Reverse Repurchase Agreements. The Fund may borrow funds for temporary or
emergency purposes, such as meeting larger than anticipated redemption requests,
and not for leverage, by among other things, agreeing to sell portfolio
securities to financial institutions such as banks and broker-dealers and to
repurchase them at a mutually agreed date and price (a "reverse repurchase
agreement"). At the time the Fund enters into a reverse repurchase agreement it
segregates cash, U.S. Government Obligations or high-grade debt obligations
having a value equal to the repurchase price, including accrued interest.
Reverse repurchase agreements involve the risk that the market value of the
securities sold by the Fund may decline below the repurchase price of those
securities. Reverse repurchase agreements are considered to be borrowings by the
Fund.
When-Issued and Delayed-Delivery Securities. To secure prices deemed
advantageous at a particular time, the Fund may purchase securities on a
when-issued or delayed-delivery basis, in which case delivery of the securities
occurs beyond the normal settlement period; payment for or delivery of the
securities would be made prior to the reciprocal delivery or payment by the
other
8
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party to the transaction. The Fund will enter into when-issued or
delayed-delivery transactions for the purpose of acquiring securities and not
for the purpose of leverage. When-issued securities purchased by the Fund may
include securities purchased on a "when, as, and if issued" basis under which
the issuance of the securities depends on the occurrence of a subsequent event.
Securities purchased on a when-issued or delayed-delivery basis may expose the
Fund to risk because the securities may experience fluctuations in value prior
to their actual delivery. The Fund does not accrue income with respect to a
when-issued or delayed-delivery security prior to its stated delivery date.
Purchasing securities on a when-issued or delayed-delivery basis can involve the
additional risk that the yield available in the market when the delivery takes
place may be higher than that obtained in the transaction itself. Upon
purchasing a security on a when-issued or delayed-delivery basis, the Fund will
segregate cash or liquid securities in an amount at least equal to the
when-issued or delayed-delivery commitment.
Investment in Other Investment Companies. In accordance with applicable law, the
Fund may invest its assets in other money market funds with comparable
investment objectives. In general, the Fund may not (1) purchase more than 3% of
any other money market fund's voting stock; (2) invest more than 5% of its
assets in any single money market fund; and (3) invest more than 10% of its
assets in other money market funds (unless permitted by an exemptive order of
the SEC). Notwithstanding the investment policies and restrictions of the Fund,
upon approval of the Board of Trustees, the Fund may invest all or part of its
investable assets in a management company with substantially the same investment
objective, policies and restrictions as the Fund.
Illiquid Securities. The Fund may not invest more than 10% of its net assets in
securities which are illiquid or otherwise not readily marketable (such
securities may include securities which are subject to legal or contractual
restrictions on resale and repurchase agreements with maturities over seven
days). If a security becomes illiquid after purchase by a Fund, the Fund will
normally sell the security as soon as is reasonably practicable unless if to do
so would not be in the best interests of shareholders.
Credit Enhancement. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance from a third
party. Any bankruptcy, receivership, default, or change in the credit quality of
the third party providing the credit enhancement could adversely affect the
quality and marketability of the underlying security and could cause losses to
9
<PAGE>
the Fund and affect the Fund's share price. Subject to the diversification
limits contained in Rule 2a-7, the Fund may have more than 25% of its total
assets invested in securities issued by or credit-enhanced by banks or other
financial institutions.
Additional Risk Factors
In addition to the risks discussed above, the Fund's investments may be subject
to the following risk factors:
It is expected that money used to purchase Fund shares will be comprised of cash
collateral which the Fund's institutional investors receive in connection with
their participation in Bankers Trust's securities lending program. The amount of
such collateral is subject to periodic fluctuation, and accordingly the Fund may
experience large purchases and redemptions over a relatively short time period
that may impact the Fund's ability to optimize cash management. To assist the
Fund in remaining fully invested, pursuant to its request, the Fund has received
an order from the SEC granting the Fund and Bankers Trust permission to jointly
enter into repurchase agreements and other investments with non-affiliated
banks, broker-dealers or other issuers with respect to amounts to be received on
any day. Such investments will be apportioned between the Fund and Bankers Trust
in such a manner as to maximize the investment of cash by the Fund.
Rating Services. The ratings of Moody's and S&P 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 the Fund, an obligation may cease to be rated or its rating
may be reduced below the minimum required for purchase by the Fund. Neither
event would require the Fund to eliminate the obligation from its portfolio, but
the Adviser will consider such an event in its determination of whether the Fund
should continue to hold the obligation. A description of the ratings categories
of Moody's and S&P is set forth in the Appendix to this SAI.
10
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Investment Restrictions
Fundamental Policies. The following investment restrictions are "fundamental
policies" of the Fund and may not be changed with respect to the Fund without
the approval of a "majority of the outstanding voting securities" of the Fund.
Under the Investment Company Act of 1940, as amended (the "1940 Act"), a
"fundamental" policy may not be changed without the "vote of a majority of the
outstanding voting securities" of the Fund, which is defined in the 1940 Act as
the lesser of (a) 67% or more of the outstanding voting securities of the Fund
present at a shareholder meeting, if the holders of more than 50% of the
outstanding voting securities of the Fund are present or represented by proxy,
or (b) more than 50% of the outstanding voting securities of the Fund.
The percentage limitations contained in the restrictions listed below apply at
the time of the purchase of the securities. Notwithstanding the investment
policies and restrictions of the Fund, upon approval of the Board of Trustees,
the Fund may invest all or part of its investable assets in a management company
with substantially the same investment objective, policies and restrictions as
the Fund. As a matter of fundamental policy, the Fund may not:
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1. Borrow money or mortgage or hypothecate assets of the Fund, except
that in an amount not to exceed 10% of the current value of the Fund's
net assets, it may borrow money as a temporary measure for
extraordinary or emergency purposes and enter into reverse repurchase
agreements or dollar roll transactions, and except that it may pledge,
mortgage or hypothecate not more than 10% of such assets to secure
such borrowings (it is intended that money would be borrowed only from
banks or through reverse repurchase agreements and only either to
accommodate redemption requests while effecting an orderly liquidation
of portfolio securities or to maintain liquidity in the event of an
unanticipated failure to complete a portfolio security transaction or
other similar situations), 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. (As an operating policy, the Fund may not engage in dollar
roll transactions or options and futures);
2. Underwrite securities issued by other persons except insofar as the
Trust or the Fund may technically be deemed an underwriter under the
Securities Act of 1933, as amended (the "1933 Act"), in selling a
portfolio security;
3. Make loans to other persons except (a) through the use of repurchase
agreements or the purchase of short-term obligations or (b) 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 Fund may hold and sell, for the
Fund's portfolio, real estate acquired as a result of the Fund's
ownership of securities);
5. Concentrate its investments in any particular industry (excluding U.S.
Government Obligations), except that the Fund will invest more than
25% of its total assets in the
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obligations of banks and other financial institutions, and if it is
deemed appropriate for the achievement of the Fund's investment
objective, up to 25% of its total assets may be invested in any other
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 the 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 investment companies) or own more than 10% of the voting
securities of any issuer.
Notwithstanding the foregoing policies, the Fund has no present intention of
engaging in transactions involving dollar rolls, futures and options contracts
or loans of portfolio securities. The Fund will only engage in such transactions
upon approval of the Board of Trustees and appropriate disclosure to investors.
Additional Investment Limitations
The Fund may not invest more than 25% of its total assets in the securities of
issuers in any single industry (excluding U.S. Government Obligations and
repurchase agreements collateralized by U.S. Government Obligations), except
that, under normal market conditions, more than 25% of the total assets of the
Fund will be invested in obligations of banks and other financial institutions.
As an operating policy, the Fund may not invest more than 5% of its total assets
in the obligations of any one issuer except: (1) as may be permitted by Rule
2a-7 and (2) for U.S. Government Obligations and repurchase agreements
collateralized fully thereby, which may be purchased without limitation. The
Fund is also authorized to borrow for temporary purposes to meet redemptions,
including entering into reverse repurchase transactions, in an amount up to 10%
of its total assets and to pledge its assets to the same extent in connection
with these borrowings. At the time of an investment, the Fund's aggregate
holdings of repurchase agreements having a remaining maturity of more than seven
calendar days (or which may not be
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terminated within seven calendar days upon notice by the Fund), time deposits
having remaining maturities of more than seven calendar days and other illiquid
securities will not exceed 10% of the Fund's net assets. If changes in the
liquidity of certain securities cause the Fund to exceed such 10% limit, the
Fund will take steps to bring the aggregate amount of its illiquid securities
back below 10% of its net assets as soon as practicable, unless such action
would not be in the best interest of the Fund. The Fund's limitations on
investment in a single industry and on borrowing may not be changed without the
approval of the shareholders of the Fund.
Portfolio Turnover
The Fund may attempt to increase yield by trading to take advantage of
short-term market variations, which results in higher portfolio turnover.
However, this policy does not result in higher brokerage commissions to the Fund
as the purchases and sales of portfolio securities are usually effected as
principal transactions. The Fund's turnover rate is not expected to have a
material effect on their income and has been and is expected to be zero for
regulatory reporting purposes.
Portfolio Transactions
Decisions to buy and sell securities and other financial instruments for the
Fund are made by Bankers Trust, which also is responsible for placing these
transactions, subject to the overall review of the Trust's Board of Trustees.
Although investment requirements for the Fund are reviewed independently from
those of the other accounts managed by Bankers Trust, investments of the type
the Fund may make may also be made by these other accounts. When the Fund and
one or more other accounts managed by Bankers Trust are prepared to invest in,
or desire to dispose of the same security or other financial instrument,
available investments or opportunities for sales will be allocated in a manner
believed by Bankers Trust to be equitable to each. In some cases, this procedure
may affect adversely the price paid or received by the Fund or the size of the
position obtained or disposed of by the Fund.
Purchases and sales of securities on behalf of the Fund will be principal
transactions. These securities are normally purchased directly from the issuer
or from an underwriter or market maker for the securities. The cost of
securities purchased from underwriters includes an
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underwriting commission or concession and the prices at which securities are
purchased from and sold to dealers include a dealer's mark-up or mark-down. U.S.
Government Obligations are generally purchased from underwriters or dealers,
although certain newly issued U.S. Government Obligations may be purchased
directly from the U.S. Treasury or from the issuing agency or instrumentality.
Over-the-counter purchases and sales are transacted directly with principal
market makers except in those cases in which better prices and executions may be
obtained elsewhere. Principal transactions are not entered into with persons
affiliated with the Fund except pursuant to exemptive rules or orders adopted by
the SEC. Under rules adopted by the SEC, broker-dealers may not execute
transactions on the floor of any national securities exchange for the accounts
of affiliated persons, but may effect transactions by transmitting orders for
execution.
In selecting dealers to execute portfolio transactions on behalf of the Fund,
Bankers Trust seeks the best overall terms available. In assessing the best
overall terms available for any transaction, Bankers Trust will consider the
factors it deems relevant, including the breadth of the market in the
investment, the price of the investment and the financial condition and
execution capability of the dealer for the specific transaction and on a
continuing basis. In addition, Bankers Trust is authorized, in selecting parties
to execute a particular transaction and in evaluating the best overall terms
available, to consider the "brokerage services," but not "research services" (as
those terms are defined in Section 28(e) of the Securities Exchange Act of 1934)
provided to the Fund.
NET ASSET VALUE
The Confidential Private Offering Memorandum discusses the time at which the NAV
per share of the Fund is determined for purposes of sales and redemptions.
The valuation of the Fund's securities is based on their amortized cost, which
does not take into account unrealized capital gains or losses. Amortized cost
valuation involves initially valuing an instrument at its cost and thereafter
assuming a constant amortization to maturity of any discount or premium,
generally without regard to the impact of fluctuating interest rates on the
market value of the instrument. Although this method provides certainty in
valuation, it may result in
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periods during which value, as determined by amortized cost, is higher or lower
than the price the Fund would receive if it sold the instrument.
The Fund's use of the amortized cost method of valuing its securities is
permitted by a rule adopted by the SEC. Under this rule, the Fund must maintain
a dollar-weighted average portfolio maturity of 90 days or less, purchase only
instruments having remaining maturities of 397 days or less (as determined under
the rule), and invest only in securities determined by or under the supervision
of the Trust's Board of Trustees to present minimal credit risks.
Pursuant to the rule, the Trust's Board of Trustees also has established
procedures designed to allow investors in the Fund to establish, to the extent
reasonably possible, the investors' price per share as computed for the purpose
of sales and redemptions at $1.00. These procedures include review of the Fund's
holdings by the Trust's Board of Trustees, at such intervals as it deems
appropriate, to determine whether the value of the Fund's assets calculated by
using available market quotations or market equivalents deviates from such
valuation based on amortized cost.
The rule also provides that the extent of any deviation between the value of the
Fund's assets based on available market quotations or market equivalents and
such valuation based on amortized cost must be examined by the Trust's Board of
Trustees. In the event the Trust's Board of Trustees determines that a deviation
exists that may result in material dilution or other unfair results to investors
or existing shareholders, pursuant to the rule, the Trust's Board of Trustees
must cause the Fund to take such corrective action as the Board of Trustees
regards as necessary and appropriate, including: selling portfolio instruments
prior to maturity to realize capital gains or losses or to shorten average
portfolio maturity; withholding dividends or paying distributions from capital
or capital gains; redeeming shares in kind; or valuing the Fund's assets by
using available market quotations.
PURCHASE AND REDEMPTION INFORMATION
The Trust may suspend the right of redemption or postpone the date of payment
for shares of the Fund during any period when: (a) trading in the Fund's primary
markets is restricted by applicable rules and regulations of the SEC; (b) the
Fund's primary markets are closed for other
16
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than customary weekend and holiday closings; (c) the SEC has by order permitted
such suspension; or (d) an emergency exists as determined by the SEC.
Under the terms of a Placement Agent Agreement, ICC Distributors, Inc. ("ICC
Distributors") acts as Placement Agent on a `"best efforts" basis with respect
to the sale of shares of the Fund. In addition to ICC Distributors' duties as
Placement Agent, ICC Distributors may, in its discretion, perform additional
functions in connection with transactions in the shares of the Fund.
The Fund reserves the right to redeem all of its shares, if the Board of
Trustees votes to liquidate the Fund.
MANAGEMENT OF THE TRUST
The Trust's Board of Trustees is composed of persons experienced in financial
matters who meet throughout the year to oversee the activities of the Trust. In
addition, the Trustees review contractual arrangements with companies that
provide services to the Fund/ Trust and review the Fund's performance.
The Trustees and officers of the Trust, their birthdates, and their principal
occupations during the past five years are set forth below. Their titles may
have varied during that period.
TRUSTEES OF THE TRUST
CHARLES P. BIGGAR (birth date: October 13, 1930) -- Trustee of the Trust;
Trustee of each of the other investment companies in the Deutsche Asset
Management Fund Complex1; Retired; formerly Vice President, International
Business Machines ("IBM") and President, National Services and the Field
Engineering Divisions of IBM. His address is 12 Hitching Post Lane, Chappaqua,
New York 10514.
S. LELAND DILL (birth date: March 28, 1930) -- Trustee of the Trust; Trustee of
each of the other investment companies in the Deutsche Asset Management Fund
Complex; Retired;
-----------------------
1 The "Deutsche Asset Management Fund Complex" consists of BT Investment Funds,
BT Institutional Funds, BT Pyramid Mutual Funds, BT Adviser Funds, Cash
Management Portfolio, Intermediate Tax Free Portfolio, Tax Free Money Portfolio,
NY Tax Free Money Portfolio, Treasury Money Portfolio, International Equity
Portfolio, Equity 500 Index Portfolio, Capital Appreciation Portfolio, Asset
Management Portfolio and BT Investment Portfolios.
17
<PAGE>
formerly Partner, KPMG Peat Marwick; Director, Vintners International Company
Inc., Coutts (U.S.A.) International, Coutts Trust Holdings Ltd., Coutts Group
(registered investment companies); Trustee, Phoenix Zweig Series Trust, Phoenix
Euclid Market Neutral Fund (registered investment companies); General Partner,
Pemco (a registered investment company). His address is 5070 North Ocean Drive,
Singer Island, Florida 33404.
MARTIN J. GRUBER (birth date: July 15, 1937)-- Trustee of the Trust; Trustee of
each of the other investment companies in the Deutsche Asset Management Fund
Complex; Nomura Professor of Finance, Leonard N. Stern School of Business, New
York University (since 1964); Trustee, TIAA (registered investment company);
Director, S.G. Cowen Mutual Funds, Japan Equity Fund, Inc., Taiwan Equity Fund,
Inc. (registered investment companies). His address is 229 South Irving Street,
Ridgewood, New Jersey 07450.
RICHARD HALE* (birth date: July 17, 1945) -- Trustee of the Trust; Trustee of
each of the other investment companies in the Deutsche Asset Management Fund
Complex; Managing Director, Deutsche Asset Management; Director, Flag Investors
Funds and ISI Family of Funds (registered investment companies); President,
Morgan Grenfell Investment Trust (registered investment company); Managing
Director, DB Alex. Brown LLC; Director and President, Investment Company Capital
Corp. (registered investment adviser); Chartered Financial Analyst. His address
is One South Street, Baltimore, Maryland 21202.
RICHARD J. HERRING (birth date: February 18, 1946) -- Trustee of the Trust;
Trustee of each of the other investment companies in the Deutsche Asset
Management Fund Complex; Jacob Safra Professor of International Banking and
Professor, Finance Department, The Wharton School, University of Pennsylvania
(since 1972). His address is 325 South Roberts Road, Bryn Mawr, Pennsylvania
19010.
BRUCE E. LANGTON (birth date: May 10, 1931) -- Trustee of the Trust; Trustee of
each of the other investment companies in the Deutsche Asset Management Fund
Complex; Retired; formerly Assistant Treasurer of IBM Corporation (until 1986);
Trustee and Member, Investment Operations Committee, Allmerica Financial Mutual
Funds (1992-present); Member, Investment
18
<PAGE>
Committee, Unilever U.S. Pension and Thrift Plans (1989 to present) (a
registered investment company); Director, TWA Pilots Directed Account Plan and
401(k) Plan (1988 to present) (a registered investment company). His address is
99 Jordan Lane, Stamford, Connecticut 06903.
PHILIP SAUNDERS, JR. (birth date: October 11, 1935) -- Trustee of the Trust;
Trustee of each of the other investment companies in the Deutsche Asset
Management Fund Complex; Principal, Philip Saunders Associates (Economic and
Financial Consulting); former Director, Financial Industry Consulting, Wolf &
Company; President, John Hancock Home Mortgage Corporation; Senior Vice
President of Treasury and Financial Services, John Hancock Mutual Life Insurance
Company, Inc. His address is Philip Saunders Associates, 445 Glen Road, Weston,
Massachusetts 02493.
HARRY VAN BENSCHOTEN (birth date: February 18, 1928) -- Trustee of the Trust;
Trustee of each of the other investment companies in the Deutsche Asset
Management Fund Complex; Retired; Corporate Vice President, Newmont Mining
Corporation (prior to 1987); Director, Canada Life Insurance Corporation of New
York (since 1987). His address is 6581 Ridgewood Drive, Naples, Florida 34108.
* "Interested Person" within the meaning of Section 2(a)(19) of the Act.
The Board has an Audit Committee that meets with the Trust's independent
auditors to review the financial statements of the Trust, the adequacy of
internal controls and the accounting procedures and policies of the Trust. Each
member of the Board except Mr. Hale also is a member of the Audit Committee.
-----------------------
/2/ The "Fund Complex" consists of BT Investment Funds, BT Institutional Funds,
BT Pyramid Mutual Funds, BT Advisor Funds, Cash Management Portfolio,
Intermediate Tax Free Portfolio, Tax Free Money Portfolio, NY Tax Free Money
Portfolio, Treasury Money Portfolio, International Equity Portfolio, Equity 500
Index Portfolio, Capital Appreciation Portfolio, Asset Management Portfolio and
BT Investment Portfolios.
/3/ An investment company registered under the 1940 Act.
/4/ A publicly held company with securities registered pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended.
19
<PAGE>
OFFICERS OF THE TRUST
RICHARD T. HALE (birth date: July 17, 1945) - President and Chief Executive
Officer of the Trust; Trustee of each of the other investment companies in the
Deutsche Asset Management Fund Complex; Managing Director, Deutsche Asset
Management; Director, Flag Investors Funds and ISI Family of Funds (registered
investment companies); President, Morgan Grenfell Investment Trust (registered
investment company); Managing Director, DB Alex. Brown LLC; Director and
President, Investment Company Capital Corp. (registered investment adviser);
Chartered Financial Analyst. His address is One South Street, Baltimore,
Maryland 21202.
DANIEL O. HIRSCH (birth date: March 27, 1954)-- Secretary of the Trust;
Director, Deutsche Asset Management Americas since 1999; Director, DB Alex.
Brown LLC and Investment Company Capital Corp. since July 1998; Assistant
General Counsel, Office of the General Counsel, United States Securities and
Exchange Commission from 1993 to 1998. His address is One South Street,
Baltimore, Maryland 21202.
CHARLES A. RIZZO (birth date: August 5, 1957) Treasurer of the Trust; Director,
Deutsche Asset Management, and Vice President and Department Head, DB Alex.
Brown LLC from 1998 to 1999; Formerly, Senior Manager, PricewaterhouseCoopers
LLP from 1993 to 1998. His address is One South Street, Baltimore, MD 21202.
Messrs. Hirsch and Rizzo also hold similar positions for other investment
companies for which ICCD, or an affiliate serves as the principal underwriter.
No person who is an officer or Trustee of Bankers Trust is an officer or Trustee
of the Trust. No Trustee, officer or employee of ICCD or any of its affiliates
will receive any compensation from the Trust for serving as an officer or
Trustee of the Trust.
20
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Trustee Compensation Table
================================================================================
Aggregate Total Compensation
Compensation from
Trustee from Trust* Fund Complex**
--------------------------------------------------------------------------------
Charles P. Biggar $7,729 $43,750
--------------------------------------------------------------------------------
S. Leland Dill $5,063 $43,750
--------------------------------------------------------------------------------
Martin Gruber $5,063 $45,000
--------------------------------------------------------------------------------
Richard J. Herring $11,541 $43,750
--------------------------------------------------------------------------------
Kelvin Lancaster - 0 - $18,750
--------------------------------------------------------------------------------
Bruce E. Langton $11,729 $43,750
--------------------------------------------------------------------------------
Philip Saunders, Jr. $5,063 $45,000
--------------------------------------------------------------------------------
HarryVan Benschoten $4,855 $45,000
================================================================================
* The information provided is for the BT Institutional Funds, which is comprised
of nine funds, for the year ended June 30, 2000.
** Aggregated information is furnished for the Fund Complex 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 December 31, 1999.
As of October 1, 2000, the Trustees and officers of the Trust owned in the
aggregate less than 1% of the shares of the Fund or the Trust (all series taken
together).
As of October 1, 2000, the following shareholders of record owned 5% or more of
the outstanding shares of the Fund: Los Angeles Fire and Police Pension Systems,
360 East Second Street, Suite 600, Department of Pensions, Los Angeles, CA
90012, was the owner of record of approximately 9% of the Fund's outstanding
shares; Employees Retirement System of the State of Hawaii, 201 Merchant Street,
Suite 1400, Honolulu, HI 96813-2980, was the owner of record of approximately 8%
of the Fund's outstanding shares; Fidelity Concord Street Trust: Spartan U.S.
Equity Index (500) Fund, 82 Devonshire Street, Boston, Massachusetts 02109, was
the owner of record of approximately 7% of the Fund's outstanding shares;
Lockheed Martin Corporation Master Retirement Trust, 6075 Rockledge Drive, Suite
550, Bethesda, MD 20817, was the owner of record of approximately 7%; GE Capital
Assurance, Two Union Square, Suite 1500, Seattle, WA 98101, was the owner of
record of approximately 5% of the Fund's shares; Washington University, 7425
Forsyth Boulevard, Campus Box 1047, St. Louis, MO 63105, was the owner of record
of approximately 5% of the Fund's outstanding shares.
21
<PAGE>
Code of Ethics
The Board of Trustees of the Fund has adopted a Code of Ethics pursuant to Rule
17j-1 under the 1940 Act. The Fund's Code of Ethics permits Fund personnel to
invest in securities for their own accounts, but requires compliance with the
Code's pre-clearance requirements (with certain exceptions). In addition, the
Fund's Code of Ethics provides for trading "blackout periods" that prohibit
trading by personnel within periods of trading by the Fund in the same security.
The Fund's Code of Ethics also prohibits short term trading profits and personal
investment in initial public offerings. The Code requires prior approval with
respect to purchases of securities in private placements.
The Fund's adviser, Bankers Trust, has also adopted a Code of Ethics. The Code
of Ethics allows personnel to invest in securities for their own accounts, but
requires compliance with the Code's pre-clearance requirements and other
restrictions including "blackout periods" and minimum holding periods, subject
to limited exceptions. The Code prohibits purchases of securities in initial
public offerings (the prohibition is limited to U.S. public offerings) and
requires prior approval for purchases of securities in private placements.
The Fund's principal underwriter, ICC Distributors, has adopted a Code of Ethics
applicable to ICC Distributors' distribution services to registered investment
companies such as the Fund. The ICC Distributors Code of Ethics prohibits
directors and officers of ICC Distributors from executing trades on a day during
which the individual knows or should have known that a Fund in the individual's
complex has a pending "buy" or "sell" order in the same security, subject to
certain exceptions. The ICC Distributors Code of Ethics also requires
pre-clearance for purchases of securities in an initial public offering or
private placement.
22
<PAGE>
Investment Adviser
On June 4, 1999, Bankers Trust Corporation merged with a subsidiary of Deutsche
Bank AG ("Deutsche Bank"). Deutsche Bank is a major global banking institution
that is engaged in a wide range of financial services, including investment
management, mutual funds, retail and commercial banking, investment banking and
insurance. A Special Meeting of Shareholders ("Special Meeting") was held for
this purpose.
Shareholders voted at the Special Meeting to approve a new investment advisory
agreement (the "Advisory Agreement") with Bankers Trust. Approval of the
Advisory Agreement was sought because Deutsche Bank became Bankers Trust's
parent company and, therefore, controls its operations as investment adviser.
At the Special Meeting, shareholders of the Fund also approved a new investment
advisory agreement with Deutsche Asset Management, Inc. ("DeAM, Inc.") (formerly
Morgan Grenfell, Inc.). The new investment advisory agreement with DeAM, Inc.
may be implemented within two years of the date of the Special Meeting upon
approval of a majority of the members of the Board of Trustees who are not
"interested persons" ("Independent Trustees"). Shareholders of the Fund also
approved a new sub-investment advisory agreement among the Fund, DeAM, Inc. and
Bankers Trust under which Bankers Trust may perform certain of DeAM, Inc.'s
responsibilities, at DeAM, Inc.'s expense, upon approval of the Independent
Trustees, within two years of the date of the Special Meeting.
The new investment advisory agreement with DeAM, Inc. and the new sub-investment
advisory agreement with Bankers Trust will permit Deutsche Bank to simplify the
organizational structure of its U.S. mutual fund operations, enhance the
efficiency of their administration and promote consistency of internal controls,
compliance and regulatory oversight. The deferral in implementing the new
investment advisory and sub-investment advisory agreements is needed to permit
Deutsche Bank a sufficient amount of time to plan, prepare and institute the
necessary arrangements for DeAM, Inc. to consolidate Deutsche Bank's U.S. mutual
fund operations.
Under the new investment advisory agreements and new sub-investment advisory
agreements, the compensation paid and the services provided would be the same as
those under the Advisory Agreement with Bankers Trust.
23
<PAGE>
About Bankers Trust. Bankers Trust is an indirect wholly owned subsidiary of
Deutsche Bank. Deutsche Bank is a banking company with limited liability
organized under the laws of the Federal Republic of Germany. Deutsche Bank is
the parent company of a group consisting of banks, capital markets companies,
fund management companies, mortgage banks, a property finance company,
installment financing and leasing companies, insurance companies, research and
consultancy companies and other domestic and foreign companies.
About DeAM, Inc. DeAM, Inc. is a subsidiary of Deutsche Asset Management Group
Limited, a wholly owned subsidiary of Deutsche Morgan Grenfell Group PLC, an
investment holding company which is, in turn, a wholly owned subsidiary of
Deutsche Bank.
Bankers Trust may have deposit, loan and other commercial banking relationships
with the issuers of obligations which may be purchased on behalf of the Fund,
including outstanding loans to such issuers which could be repaid in whole or in
part with the proceeds of securities so purchased. Such affiliates deal, trade
and invest for their own accounts in such obligations and are among the leading
dealers of various types of such obligations. Bankers Trust has informed the
Fund 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 Fund, Bankers Trust
will not inquire or take into consideration whether an issuer of securities
proposed for purchase or sale by the Fund is a customer of Bankers Trust, its
parent or its subsidiaries or affiliates. Also, 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.
24
<PAGE>
Under the Advisory Agreement, Bankers Trust receives a fee from the Fund,
computed daily and paid monthly, at the annual rate of 0.10% the average daily
net assets of the Fund. Prior to April __, 2000, Bankers Trust served as
investment adviser to the Fund. For the fiscal years ending June 30, 2000, 1999
and 1998, Bankers Trust earned $7,719,290, $6,368,995 and $4,260,363,
respectively, as compensation for investment advisory services provided to the
Fund. During the same periods, Bankers Trust reimbursed $140,260, $115,594 and
$75,882, respectively, to the Fund to cover expenses.
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 reasonably deems necessary for the proper administration
of the Trust. Bankers Trust will generally assist in all aspects of the Fund's
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 record keeping 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 of the
Trust), internal auditing, 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, if
applicable; supply supporting documentation for meetings of the Board of
Trustees; provide monitoring reports and assistance regarding compliance with
the Trust's Declaration of Trust, by-laws, investment objectives and policies
and with applicable federal and state securities laws; arrange for appropriate
insurance coverage; calculate the NAV, net income and realized capital gains or
losses; and negotiate arrangements with, and supervise and coordinate the
activities of, agents and others retained to supply services.
For the fiscal years ending June 30, 2000, 1999 and 1998, Bankers Trust earned
$1,543,858, $1,273,799 and $852,019, respectively, in compensation for
administrative and other services provided to the Fund.
25
<PAGE>
Custodian and Transfer Agent
Bankers Trust, 130 Liberty Street, New York, New York 10006, serves as Custodian
for the Trust pursuant to an administration and services agreement. As
Custodian, it holds the Fund's assets. Bankers Trust will comply with the
self-custodian provisions of Rule 17f-2 under the 1940 Act.
Investment Company Capital Corp. ("ICCC"), One South Street, Baltimore,
Maryland, 21202, serves as transfer agent of the Trust pursuant to a transfer
agency agreement. Under its transfer agency agreement with the Trust, ICCC
maintains the shareholder account records for the Fund, handles certain
communications between shareholders and the Trust and causes to be distributed
any dividends and distributions payable by the Trust. ICCC may be reimbursed by
the Fund for its out-of-pocket expenses.
Use of Name
The Trust and Bankers Trust have agreed that the Trust and may use "BT" as part
of its name for so long as Bankers Trust serves as investment adviser. 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 Fund contemplated by the Advisory Agreement and
other activities for the Trust described in the Confidential Private Offering
Memorandum 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
26
<PAGE>
decisions or interpretations of present and future statutes and regulations,
might prevent Bankers Trust from continuing to perform those services for the
Trust. If the circumstances described above should change, the Trust's Board of
Trustees would review the Trust's relationship with Bankers Trust and consider
taking all actions necessary in the circumstances.
Counsel and Independent Accountants
Willkie Farr & Gallagher LLP, 787 Seventh Avenue, New York, New York 10019-6099,
serves as Counsel to the Trust and from time to time provides certain legal
services to Bankers Trust. PricewaterhouseCoopers LLP, 250 W. Pratt Street,
Baltimore, Maryland 21201 has been selected as Independent Accountants for the
Trust.
ORGANIZATION OF THE TRUST
BT Institutional Funds was organized on March 26, 1990 under the laws of the
Commonwealth of Massachusetts. The Fund is a separate series of the Trust. The
Trust offers shares of beneficial interest of separate series, par value $0.001
per share. The shares of the other series of the Trust are offered through
separate prospectuses and statements of additional information. The shares of
each series participate equally in the earnings, dividends and assets of the
particular 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 a 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. No series of shares has any preference
over any other series.
The Trust is an entity commonly known as a "Massachusetts business trust."
Massachusetts law provides that shareholders could under certain circumstances
be held personally liable for the obligations of the Trust. However, the
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 shareholders 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, a possibility that the Trust believes is remote. Upon
payment of any liability
27
<PAGE>
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.
The Trust is not required to hold annual meetings of shareholders but will hold
special meetings of shareholders when in the judgment of the Trustees it is
necessary or desirable to submit matters for a shareholder vote. Shareholders
have under certain circumstances the right to communicate with other
shareholders in connection with requesting a meeting of shareholders for the
purpose of removing one or more Trustees without a meeting. 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 generally vote by Fund,
except with respect to the election of Trustees. 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.
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. Upon liquidation of the Fund, shareholders of that Fund
would be entitled to share pro rata in the net assets of the Fund available for
distribution to shareholders.
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TAXES
The following is only a summary of certain tax considerations generally
affecting the Fund and its shareholders, and is not intended as a substitute for
careful tax planning. Shareholders are urged to consult their tax advisers with
specific reference to their own tax situations.
Taxation of the Fund
The Trust intends that the Fund qualify as a separate regulated investment
company under the Internal Revenue Code of 1986, as amended (the "Code").
Provided that the Fund is a regulated investment company, the Fund will not be
liable for Federal income taxes to the extent all of its taxable net investment
income and net realized long and short-term capital gains, if any, are
distributed to its shareholders. Although the Trust expects the Fund to be
relieved of all or substantially all Federal income taxes, depending upon the
extent of its activities in states and localities in which its offices are
maintained, in which its agents or independent contractors are located or in
which they are otherwise deemed to be conducting business, that portion of the
Fund's income which is treated as earned in any such state or locality could be
subject to state and local tax. Any such taxes paid by the Fund would reduce the
amount of income and gains available for distribution to its shareholders.
While the Fund does not expect to realize net long-term capital gains, any such
gains realized will be distributed annually. Such distributions ("capital gain
dividends"), if any, will be taxable to non tax-exempt shareholders as long-term
capital gains, regardless of how long a shareholder has held Fund shares.
If for any taxable year the 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.
29
<PAGE>
The Fund is designed to provide investors with liquidity and current income. The
Fund is not intended to constitute a balanced investment program and is not
designed for investors seeking capital gains, maximum income or maximum
tax-exempt income irrespective of fluctuations in principal.
PERFORMANCE INFORMATION
The "effective yield" of the Fund is an annualized "yield" based on a
compounding of the unannualized base period return. These yields are each
computed in accordance with a standard method prescribed by the rules of the
SEC, by first determining the "net change in account value" for a hypothetical
account having a share balance of one share at the beginning of a seven-day
period (the "beginning account value"). The net change in account value equals
the value of additional shares purchased with dividends from the original share
and dividends declared on both the original share and any such additional
shares. The unannualized "base period return" equals the net change in account
value divided by the beginning account value. Realized gains or losses or
changes in unrealized appreciation or depreciation are not taken into account in
determining the net change in account value.
The yields are then calculated as follows:
Base Period Return = Net Change in Account Value
---------------------------
Beginning Account Value
Current Yield = Base Period Return x 365/7
Effective Yield = [(1 + Base Period Return)/365/7/] - 1
The Fund's current yield for the seven days ended June 30, 2000 was 6.56% and
the effective yield was 6.77%.
30
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FINANCIAL STATEMENTS
The financial statements for the Fund for the year ended June 30, 2000 are
incorporated herein by reference to the Annual Report dated June 30, 2000. A
copy of the Fund's Annual Report may be obtained without charge by contacting
the Fund.
31
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APPENDIX
Description of Securities Ratings
STANDARD & POOR'S COMMERCIAL PAPER RATINGS:
A-1: An obligor rated A-1 has strong capacity to meet its financial commitments.
It is rated in the highest category by Standard & Poor's. Those issues
determined to possess overwhelming safety characteristics are denoted A-1+.
Moody's COMMERCIAL PAPER RATINGS:
Prime-1: Issuers rated Prime-1 (or related supporting institutions) have
superior capacities for repayment of senior short-term promissory obligations.
FITCH INVESTORS SERVICE'S COMMERCIAL PAPER RATINGS:
F1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F1: Very Strong Credit Quality. Issues assigned this rating reflect an assurance
of timely payment only slightly less in degree than the strongest issue.
DUFF & PHELPS' COMMERCIAL PAPER RATINGS:
Duff 1+: Highest certainty of timely payment. Short term liquidity, including
internal operating factors and/or access to alternative sources of funds, is
outstanding, and safety is just below risk free U.S. Treasury short term
obligations.
Duff 1: Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are minor.
THOMSON BANK WATCH SHORT-TERM RATINGS:
T-1: The highest category; indicates a very high likelihood that principal and
interest will be paid on a timely basis.
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T-2: The second-highest category; while the degree of safety regarding timely
repayment of principal and interest is strong, the relative degree of safety is
not as high as for issues rated "TBW-1".
T-3: The lowest investment-grade category; indicates that while the obligation
is more susceptible to adverse developments (both internal and external) than
those with higher ratings, the capacity to service principal and interest in a
timely fashion is considered adequate.
T-4: The lowest rating category; this rating is regarded as non-investment grade
and therefore speculative.
33
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Investment Adviser and Administrator
BANKERS TRUST COMPANY
130 Liberty Street
(One Bankers Trust Plaza)
New York, NY 10006
Distributor and Placement Agent
ICC DISTRIBUTORS, INC.
Two Portland Square
Portland, ME 04101
Custodian
BANKERS TRUST COMPANY
130 Liberty Street
(One Bankers Trust Plaza)
New York, NY 10006
Transfer Agent
Investment Company Capital Corp.
One South Street
Baltimore, MD 21202
Independent Accountants
PRICEWATERHOUSECOOPERS LLP
250 West Pratt Street
Baltimore, MD 21201
Counsel
WILLKIE FARR & GALLAGHER
787 Seventh Avenue
New York, NY 10019
--------------------
No person has been authorized to give any information or to make any
representations other than those contained in the Fund's Confidential Private
Offering Memorandum or its Confidential Statement of Additional Information in
connection with the offering of the Fund'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 Fund's Confidential Private Offering
Memorandum nor its Confidential 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.
34
<PAGE>
PART C OTHER INFORMATION
Item 23. Exhibits.
---------
(a) Amended and Restated Declaration of Trust dated March 29, 1990; 1
(i) Fifteenth Amended and Restated Establishment and Designation of
Series dated December 9, 1998; 9
(ii) Sixteenth Amended and Restated Establishment and Designation of
Series dated December 8, 1999; 12
(iii) Seventeenth Amended and Restated Establishment and Designation of
Series dated March 7, 2000; 12
(b) By-Laws; 1
(c) Incorporated by reference to (b) above;
(d) Investment Advisory Agreement dated August 6, 1996; 2
(i) Exhibit A to Investment Advisory Agreement dated August 6, 1996, as
revised October 31, 1997; 3
(ii) Investment Advisory Agreement dated June 4, 1999; 13
(e) Distribution Agreement dated August 11, 1998; 3
(i) Appendix A to Distribution Agreement dated August 11, 1998, as
revised December 9, 1998; 9
(ii) Exclusive Placement Agent Agreement dated September 30, 1996 on
behalf of Institutional Daily Assets Fund; 10
(iii) Exclusive Placement Agent Agreement dated October 31, 1997 on behalf
of Institutional Treasury Assets Fund; 5
(f) Bonus or Profit Sharing Contracts -- Not applicable;
(g) Custodian Agreement dated July 1, 1996; 4
(i) Amendment #1 to Exhibit A dated March 26, 1997 of the Custodian
Agreement; 4
(ii) Amendment #2 to Exhibit A dated October 8, 1997 of Custodian
Agreement; 5
(iii) Amendment #3 to Exhibit A dated October 31, 1997 of Custodian
Agreement; 5
(iv) Cash Services Addendum dated December 18, 1998 to Custodian
Agreement; 6
(v) Amendment #4 to Exhibit A dated December 9, 1998 of Custodian
Agreement; 9
(vi) Custodian Agreement dated September 10, 1996 on behalf of
Institutional Daily Assets Fund; 4
(h) Administration and Services Agreement dated October 28, 1992; 1
(i) Exhibit D dated December 9, 1998 to the Administration and Services
Agreement; 9
<PAGE>
(ii) Expense Limitation Agreement dated September 30, 1998 on behalf of
International Equity Fund, International Small Company Equity Fund
and Global Emerging Markets Equity Fund; 8
(iii) Expense Limitation Agreement dated December 31, 1998, on behalf of
Institutional Cash Management, Institutional Cash Reserves,
Institutional Treasury Money, Equity 500 Index, Institutional Liquid
Assets, and Institutional Treasury Assets Funds; 11
(iv) Expense Limitation Agreement dated June 30, 2000, on behalf of
Institutional Daily Assets; - filed herewith
(v) Expense Limitation Agreement dated December 31, 1999, on behalf of
Institutional Cash Management, Institutional Cash Reserves,
Institutional Treasury Money, Equity 500 Index, Institutional Liquid
Assets, and Institutional Treasury Assets Funds; 12
(i) Legal Opinion - Not Applicable;
(j) Consent of Independent Accountants - filed herewith
(k) Omitted Financial Statements - Not Applicable;
(l) (i) Investment representation letter of initial shareholder of Equity
500 Index Fund; 7
(ii) Investment representation letter of initial shareholder of
Institutional Liquid Assets Fund; 1
(iii) Investment representation letter of initial shareholder of
Institutional Daily Assets Fund; 2
(m) Rule 12b-1 Plans - Not Applicable;
(n) Financial Data Schedules - Not Applicable;
(o) Multiple Class Expense Allocation Plan Adopted Pursuant to Rule 18f-3 dated
March 26, 1997; 4
(p) Fund, Adviser, and Distributor Codes of Ethics; 12
--------------------
1. Incorporated by reference to Post-Effective Amendment No. 14 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 Post-Effective Amendment No. 24 to the
Registration Statement as filed with the Commission on November 24, 1998.
4. Incorporated by reference to Post-Effective Amendment No. 20 to the
Registration Statement as filed with the Commission on September 10, 1997.
<PAGE>
5. Incorporated by reference to Post-Effective Amendment No. 21 to the
Registration Statement as filed with the Commission on January 28, 1998.
6. Incorporated by reference to Amendment No. 31 to the Registration Statement
as filed with the Commission on October 27, 1998.
7. Incorporated by reference to Post-Effective Amendment No. 4 to the
Registration Statement as filed with the Commission on April 30, 1992.
8. Incorporated by reference to Post-Effective Amendment No. 26 to the
Registration Statement as filed with the Commission on January 28, 1999.
9. Incorporated by reference to Post-Effective Amendment No. 27 to the
Registration Statement as filed with the Commission on February 8, 1999.
10. Incorporated by reference to Post-Effective Amendment No. 19 to the
Registration Statement as filed with the Commission on March 17, 1997.
11. Incorporated by reference to Post-Effective Amendment No. 29 to the
Registration Statement as filed with the Commission on April 30, 1999.
12. Incorporated by reference to Amendment No. 31 to the Registration Statement
as filed with the Commission on April 28, 2000.
13. Incorporated by reference to Amendment No. 39 to the Registration Statement
as filed with the Commission on January 28, 2000.
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. Bankers Trust, a New
York banking corporation, is a wholly owned subsidiary of Deutsche Bank AG.
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 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 to our knowledge
as of July 28, 1999, are engaged in any other business, profession, vocation or
employment of a substantial nature.
Josef Ackermann
Chairman of the Board, Chief Executive Officer and President, Bankers Trust;
Member, Board of Managing Directors, Deutsche Bank AG. Address: Deutsche Bank
AG, Taunusanlage 12, D-60262 Frankfurt am Main, Federal Republic of Germany.
Hans Angermueller
Director, Bankers Trust; Director of various corporations; Shearman and
Sterling, of counsel. Address: Shearman & Sterling, 599 Lexington Avenue, New
York, New York 10022
George B. Beitzel
Director, Bankers Trust and Bankers Trust Corporation since 1977; Director of
various corporations. Address: 29 King Street, Chappaqua, New York 10514-3432.
William R. Howell
Director, Bankers Trust; Chairman Emeritus, J.C. Penney Company, Inc.; Director
of various corporations. Address: J.C. Penney Company, Inc., P.O. Box 10001,
Dallas, Texas 74301-1109.
Hermann-Josef Lamberti
Director, Bankers Trust; Member, Board of Managing Directors, Deutsche Bank AG.
Address: Deutsche Bank AG, Taunusanlage 12, D-60262 Frankfurt am Main, Federal
Republic of Germany.
<PAGE>
John A. Ross
Director, Bankers Trust; Regional Chief Executive Officer, Deutsche Bank
Americas Holding Corp. Address: Deutsche Bank, 31 West 52nd Street, New York,
New York 10019.
Ronaldo H. Schmitz
Director, Bankers Trust; Member, Board of Managing Directors, Deutsche Bank AG.
Address: Deutsche Bank AG, Taunusanlage 12, D-60262 Frankfurt am Main, Federal
Republic of Germany.
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 Pyramid Mutual Funds, BT Investment Funds,
Cash Management Portfolio, Intermediate Tax Free Portfolio, NY Tax Free
Money Portfolio, Treasury Money Portfolio, International Equity Portfolio,
Equity 500 Index Portfolio, Capital Appreciation Portfolio, Asset
Management Portfolio and BT Investment Portfolio.
(b) Unless otherwise stated, the principal business address for the following
persons is Two Portland Square, Portland, Maine 04101.
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
----------------- ---------------- --------------
John Y. Keefer President None
Sara M. Morris Treasurer None
David I. Goldstein Secretary None
Benjamin L. Niles Vice President None
Margaret J. Fenderson Assistant Treasurer None
Dana L. Lukens Assistant Secretary None
Nanette K. Chern Chief Compliance Officer None
(c) None
ITEM 28. Location of Accounts and Records.
---------------------------------
BT Institutional Funds: Deutsche Asset Management Inc.
(Registrant) One South Street
Baltimore, MD 21202
<PAGE>
Bankers Trust Company: 130 Liberty Street
(Custodian, Investment Adviser New York, NY 10006
and Administrator)
Investors Fiduciary 127 West 10th Street,
Trust Company: Kansas City, MO 64105.
ICC Distributors, Inc.: Two Portland Square
(Distributor) Portland, ME 04101
ITEM 29. Management Services.
--------------------
Not Applicable
ITEM 30. Undertakings.
-------------
Not Applicable
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant, BT INSTITUTIONAL FUNDS on behalf of one of its series, Institutional
Daily Asset, has duly caused this Amendment to its Registration Statement to be
signed on its behalf by the undersigned, duly authorized, in the City of
Baltimore and the State of Maryland on this 27th day of October, 2000.
BT INSTITUTIONAL FUNDS
By: /s/ Daniel O. Hirsch
Daniel O. Hirsch, Secretary
October 27, 2000
