BT PYRAMID MUTUAL FUNDS, 485BPOS, 1996-04-30

BT PYRAMID MUTUAL FUNDS
485BPOS, 1996-04-30

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 29, 1996

File Nos. 33-45973 and 811-06576

================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933

POST-EFFECTIVE AMENDMENT NO. 8

AND
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940

AMENDMENT NO. 11

BT PYRAMID MUTUAL FUNDS
(Exact Name of Registrant as Specified in Charter)

6 ST. JAMES AVENUE, BOSTON, MASSACHUSETTS 02116
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code: 617-423-0800

Philip W. Coolidge Copies to: Burton M. Leibert, Esq.
Signature Broker-Dealer Services, Inc. Willkie Farr & Gallagher
6 St. James Avenue One Citicorp Center
Boston, Massachusetts 02116 153 East 53rd Street
(Name and Address of Agent for Service) New York, New
York 10022

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

[ ] immediately upon filing pursuant to paragraph (b)
[x] on April 29, 1996
pursuant to paragraph (b)

[ ] 60 days after filing pursuant to paragraph (a)(i) [ ] on (date) pursuant to
paragraph (a)(i)

[ ] 75 days after filing pursuant to paragraph (a)(ii) [ ] on (date) pursuant to
paragraph (a)(ii) of rule 485.

If appropriate, check the following box:

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

SHORT/INTERMEDIATE U.S. GOVERNMENT SECURITIES PORTFOLIO, CASH
MANAGEMENT PORTFOLIO, EQUITY 500 INDEX PORTFOLIO, ASSET MANAGEMENT
PORTFOLIO AND CAPITAL APPRECIATION PORTFOLIO HAS ALSO EXECUTED THIS

REGISTRATION STATEMENT.

REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF ITS SHARES OF BENEFICIAL
INTEREST PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT OF 1940.
REGISTRANT FILED THE NOTICE REQUIRED BY RULE 24F-2 ON OR ABOUT FEBRUARY 28, 1996
FOR REGISTRANT'S FISCAL YEAR ENDING DECEMBER 31, 1995. REGISTRANT WILL FILE THE
NOTICE REQUIRED BY RULE 24F-2 ON OR ABOUT MAY 31, 1996 FOR REGISTRANT'S FISCAL
YEAR ENDED MARCH 31, 1996. REGISTRANT FILED THE NOTICE REQUIRED BY RULE 24F-2 ON
OR ABOUT NOVEMBER 30, 1995 FOR REGISTRANT'S FISCAL YEAR ENDED SEPTEMBER 30,
1995.

================================================================================

<PAGE>

BT0176G

BT PYRAMID MUTUAL FUNDS

FORM N-1A
CROSS REFERENCE SHEET

Part A
ITEM NO. PROSPECTUS HEADINGS

1. Cover Page . . . . . . . . . . . Cover Page

2. Synopsis . . . . . . . . . . . . The Funds -- Expense Summary

3. Condensed Financial Information . . . . .Not applicable

4. General Description of Registrant . . . . Cover Page; The Funds -- Who
May Want to Invest; The Funds
in Detail --Risk Factors and
Certain Securities and
Investment Practices

5. Management of the Fund . . . . . The Funds -- Expense Summary;
The Funds in Detail --
Management of the Trust and
the Portfolios

6. Capital Stock and Other Securities . . . .Cover Page; The Funds in
Detail --Performance; Your
Account -- Types of Accounts,
How to Buy Shares, How to Sell
Shares; Shareholder and Account
Policies -- Dividends, Capital
Gains and Taxes, Exchange
Restrictions, Sales Charge
Reductions and Waivers,
Additional Information About
the Trust and Portfolios

7. Purchase of Securities Being Offered . . Your Account -- How to Buy
Shares; Shareholder and Account
Policies --Valuation Details,
Exchange Restrictions, Sales
Charge Reductions and Waivers

8. Redemption or Repurchase . . . . Your Account -- How to Sell
Shares; Shareholder and Account
Policies --Valuation Details,
Exchange Restrictions

9. Pending Legal Proceedings . . . Not applicable

Part B Headings in Statement of
ITEM NO. ADDITIONAL INFORMATION

10. Cover Page . . . . . . . . . . . Cover Page

11. Table of Contents . . . . . . . Contents

12. General Information and History . . . . .Not applicable

13. Investment Objectives and Policies . . . .Investment Objective, Policies
and Restrictions (Investment
Objective, Policies and Risks)

14. Management of the Fund . . . Management of the Trust and
Portfolio

15. Control Persons and Principal Holders of Securities . . . .
See Prospectus -- "Organization
of the Trust"

16. Investment Advisory and Other Services . . Management of the Trust and
Portfolio

17. Brokerage Allocation and Other Practices . .Investment Objective,
Policies and Restrictions
(Investment Objective,
Policies and Risks)

18. Capital Stock and Other Securities . . . .Organization of the Trust; see
Prospectus -- "Dividends,
Distributions and Taxes" and
"Organization of the Trust"

19. Purchase, Redemption and Pricing of Securities Being Offered . .
Valuation of Securities;
Redemption in Kind (Purchase
and Redemption Information;
Net Asset Value)

20. Tax Status . . . . . . . . . . . Taxation (Taxes); see Prospectus
-- "Dividends, Distributions and
Taxes"

21. Underwriters . . . . . . . . . . See Prospectus--"Management of
the Trust and Portfolio"

22. Calculations of Yield Quotations of Money Market Funds . . .
Performance Information

23. Financial Statements . . . . . . Financial Statements

PART C

Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this registration statement.

<PAGE>

INSERT PROSPECTUSES

BT Investment Money Market(46803)
BT Investment Limited Term US Government Securities (46802)
BT Investment Equity 500 Index (46801)
BT Investment Funds Combined (46713)

BT INVESTMENT FUNDS
LIMITED TERM U.S. GOVERNMENT SECURITIES FUND
INTERMEDIATE TAX FREE FUND
GLOBAL HIGH YIELD SECURITIES FUND
CAPITAL APPRECIATION FUND
SMALL CAP FUND
INTERNATIONAL EQUITY FUND
PACIFIC BASIN EQUITY FUND
LATIN AMERICAN EQUITY FUND

PROSPECTUS: APRIL 29, 1996

BT Investment Funds (the "Trust") is an open-end, management investment company
(mutual fund) which currently consists of sixteen funds. With the exception of
the Limited Term U.S. Government Securities Fund, each of the funds listed above
(each, a "Fund") is a separate series of BT Investment Funds. Limited Term U.S.
Government Securities Fund is a separate series of BT Pyramid Mutual Funds. (BT
Investment Funds and BT Pyramid Mutual Funds are each a "Trust.")

UNLIKE OTHER OPEN-END MANAGEMENT INVESTMENT COMPANIES (MUTUAL FUNDS), EACH FUND
SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING ALL OF ITS INVESTABLE
ASSETS ("ASSETS") IN A SEPARATE INVESTMENT COMPANY (A "PORTFOLIO") WITH AN
IDENTICAL INVESTMENT OBJECTIVE. THE INVESTMENT PERFORMANCE OF EACH FUND WILL
CORRESPOND DIRECTLY TO THE INVESTMENT PERFORMANCE OF THE CORRESPONDING
PORTFOLIO. SEE "SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE" ON
PAGE 19.

Bankers Trust Company ("Bankers Trust") is the investment adviser (the
"Adviser") of each Portfolio.

Please read this Prospectus before investing, and keep it on file for future
reference. It contains important information, including how each Fund invests
and the services available to shareholders.

To learn more about a Fund and its investments, investors can obtain a copy of
that Fund's Statement of Additional Information (an "SAI"), dated April 29,
1996, or January 29, 1996, which contains the corresponding Portfolio's most
recent financial report and portfolio listing. Each SAI has been filed with the
Securities and Exchange Commission (the "SEC") and is incorporated herein by
reference. For a free copy of this document, call the Trusts' Service Agent at
1-(800)-730-1313.

MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, BANKERS
TRUST OR ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.

The Global High Yield Securities Portfolio and Latin American Equity Portfolio
may invest in lower-quality debt securities, sometimes called "junk bonds." The
Global High Yield Securities Portfolio may invest in these types of securities
without limit. Investors should consider that these securities carry greater
risks, such as the risk of default, than other debt securities. Refer to "Risk
Factors and Certain Securities and Investment Practices -- Risks of Investing in
High Yield Securities (Junk Bonds)" on page 18 for further information.

The Latin American Equity Portfolio and Global High Yield Securities Portfolio
may borrow money for investment in securities. Such leverage will exaggerate any
increase or decrease the value of shares in the Funds. Borrowing also involves
costs to the Portfolio. See "Risk Factors and Certain Securities and Investment
Practices -- Leverage" on page 23 herein. Each of the corresponding Funds may be
considered a speculative investment and is designed for aggressive investors.

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

THE FUNDS ................................................................ 3

WHO MAY WANT TO INVEST
INVESTMENT PRINCIPLES AND RISKS
Each Fund's overall approach to investing.
EXPENSE SUMMARY
Each Fund's sales charges and annual operating expenses.

FINANCIAL HIGHLIGHTS ..................................................... 6

THE FUNDS IN DETAIL ...................................................... 11
INVESTMENT OBJECTIVES AND POLICIES
RISK FACTORS AND CERTAIN SECURITIES AND INVESTMENT PRACTICES
SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE
SECURITIES AND INVESTMENT PRACTICES
PERFORMANCE
How each Fund has done over time.
MANAGEMENT OF THE TRUSTS AND THE PORTFOLIOS
NET ASSET VALUE

PURCHASE AND REDEMPTION OF SHARES ........................................ 29
PURCHASE OF SHARES
REDEMPTION OF SHARES
EXCHANGE PRIVILEGE
TAX-SAVING RETIREMENT PLANS

SHAREHOLDER AND ACCOUNT POLICIES ......................................... 31
DIVIDENDS, CAPITAL GAINS AND TAXES
ADDITIONAL INFORMATION ABOUT THE TRUSTS AND PORTFOLIOS

APPENDIX ................................................................. 34
- -------------------------------------------------------------------------------

<PAGE>
THE FUNDS

LIMITED TERM U.S. GOVERNMENT SECURITIES FUND'S investment objective is a high
level of current income consistent with preservation of capital. The Portfolio
invests 100% of its assets in short- and intermediate-term U.S. Government
securities, including repurchase agreements secured by U.S. Government
securities. See "Risk Factors and Certain Securities and Investment
Practices."

INTERMEDIATE TAX FREE FUND'S investment objective is a high level of current
income exempt from federal income tax consistent with moderate risk of capital.
The Portfolio seeks to maintain a current yield that is greater than that
generally obtainable from a portfolio of short-term tax-exempt obligations,
subject to applicable quality restrictions. See "Risk Factors and Certain
Securities and Investment Practices."

GLOBAL HIGH YIELD SECURITIES FUND'S investment objective is high current income
from investment in a non-diversified portfolio of high yield, non-investment
grade debt securities issued in many of the world's securities markets. Capital
appreciation will be considered when consistent with the primary investment
objective of high current income. See "Risk Factors and Certain Securities and
Investment Practices."

CAPITAL APPRECIATION FUND'S investment objective is long-term capital growth;
the production of any current income is secondary to this objective. The
Portfolio invests primarily in growth-oriented common stocks of medium sized
domestic corporations and, to a lesser extent, foreign corporations. See "Risk
Factors and Certain Securities and Investment Practices."

SMALL CAP FUND'S investment objective is long-term capital growth; the
production of any current income is secondary to this objective. The Portfolio
seeks to provide long-term capital growth by investing primarily in equity
securities of smaller sized growth companies. See "Risk Factors and Certain
Securities and Investment Practices."

INTERNATIONAL EQUITY FUND'S investment objective is long-term capital
appreciation from investment in foreign equity securities (or other securities
with equity characteristics); the production of any current income is incidental
to this objective. The Portfolio invests primarily in established companies
based in developed countries outside the United States, but the Portfolio may
also invest in emerging market securities. See "Risk Factors and Certain
Securities and Investment Practices."

PACIFIC BASIN EQUITY FUND'S investment objective is long-term capital
appreciation from investment primarily in the equity securities (or other
securities with equity characteristics) of companies domiciled in, or doing
business in the Pacific Basin region, other than Japan; the production of any
current income is incidental to this objective. See "Risk Factors and Certain
Securities and Investment Practices."

LATIN AMERICAN EQUITY FUND'S investment objective is long-term capital
appreciation from investment primarily in the equity securities (or other
securities with equity characteristics) of companies domiciled in, or doing
business in, Latin America; the production of any current income is incidental
to this objective. See "Risk Factors and Certain Securities and Investment
Practices."

WHO MAY WANT TO INVEST

The Trusts seek to achieve the investment objective of each Fund by investing
all the Assets of the Fund in the corresponding Portfolio. The Portfolios are
Short-Intermediate U.S. Government Securities Portfolio, Intermediate Tax Free
Portfolio, Global High Yield Securities Portfolio, Capital Appreciation
Portfolio, Small Cap Portfolio, International Equity Portfolio, Pacific Basin
Equity Portfolio and Latin American Equity Portfolio, respectively.

The Capital Appreciation Fund, Small Cap Fund, International Equity Fund,
Pacific Basin Equity Fund, and Latin American Equity Fund are designed for
investors who are willing to accept short-term domestic and/or foreign stock
market fluctuations in pursuit of potentially high long-term returns. These
Funds invest for growth and do not pursue income.

In addition, the International Equity Fund, Global High Yield Securities Fund,
Latin American Equity Fund and Pacific Basin Equity Fund may also be appropriate
for investors who want to pursue their investment goals in markets outside of
the United States. By including international investments in your portfolio, you
can achieve an extra level of diversification and also participate in
opportunities around the world.

The Limited Term U.S. Government Securities Fund is designed for conservative
investors looking for a relatively stable, high quality investment. The
Intermediate Tax Free Fund is designed for conservative investors looking for a
relatively stable, high-grade investment free from federal income tax. Because
each Fund's corresponding Portfolio invests in high quality instruments or
high-grade tax-exempt instruments, respectively, with short to intermediate
maturities, its share price should be more stable than that of a long-term bond
fund, although it may be less stable than that of a short-term bond fund.

Each Fund is not in itself a balanced investment plan. Investors should consider
their investment objective and tolerance for risk when making an investment
decision. When investors sell their Fund Shares, they may be worth more or less
than what they originally paid for them.

INVESTMENT PRINCIPLES AND RISKS

The value of each Portfolio's investments varies based on many factors. The
value of bonds fluctuates based on changes in domestic or foreign interest
rates, the credit quality of the issuer, market conditions, and other economic
and political news. In general, bond prices rise when interest rates fall, and
vice versa. This effect is usually more pronounced for longer-term securities.
Lower-quality securities offer higher yields, but also carry more risk.

Stock values fluctuate, sometimes dramatically, in response to the activities of
individual companies and general market and economic conditions. Over time,
however, stocks have shown greater long-term growth potential than other types
of securities.

Because many foreign investments are denominated in foreign currencies, changes
in the value of these currencies can significantly affect a Fund's share price.
General economic factors in the various world markets can also impact the value
of an investor's investment, especially for securities in emerging markets. Many
investments in emerging markets can be considered speculative, and therefore may
offer higher income (for debt funds) and total return potential, but
significantly greater risk.

Each of the Global High Yield Securities Fund and Portfolio is classified as a
"non-diversified" investment company under the Investment Company Act of 1940,
as amended (the "1940 Act"), and may invest a greater portion of its assets in a
single issuer than a diversified fund. As a result, this Portfolio may be more
susceptible to any single economic, political or regulatory occurrence than a
diversified fund. See "Risk Factors and Certain Securities and Investment
Practices -- Non-Diversified Fund" for more information. Each other Fund and
Portfolio is classified as "diversified."

Bankers Trust may use various investment techniques to hedge a Portfolio's
risks, but there is no guarantee that these strategies will work as intended.
When an investor sells their Fund shares ("Shares"), they may be worth more or
less than what they originally paid for them. See "Risk Factors and Certain
Securities and Investment Practices" for more information.

EXPENSE SUMMARY

ANNUAL OPERATING EXPENSES are paid out of the assets of each Portfolio and Fund.
Each Portfolio pays an investment advisory fee and an administrative services
fee to Bankers Trust. Each Fund incurs expenses such as maintaining shareholder
records and furnishing shareholder statements. Each Fund must provide financial
reports.

The following table provides: (i) for the last fiscal year of that Fund and the
corresponding Portfolio, the annual operating expenses of the Fund and expenses
of the corresponding Portfolio, in the aggregate, as a percentage of average
daily net assets of each Fund; and (ii) an example illustrating the dollar cost
of such expenses on a $1,000 investment in each Fund. THE TRUSTEES OF THE TRUST
BELIEVE THAT THE AGGREGATE PER SHARE EXPENSES OF EACH FUND AND THE CORRESPONDING
PORTFOLIO WILL BE LESS THAN OR APPROXIMATELY EQUAL TO THE EXPENSES WHICH THE
FUND WOULD INCUR IF THE TRUST RETAINED THE SERVICES OF AN INVESTMENT ADVISER AND
THE ASSETS OF EACH FUND WERE INVESTED DIRECTLY IN THE TYPE OF SECURITIES BEING
HELD BY THE CORRESPONDING PORTFOLIO.

<PAGE>
- ------------------------------------------------------------------------------

ANNUAL OPERATING EXPENSES (as a percentage of the average net assets of each
Fund)

LIMITED TERM U.S. GOVERNMENT SECURITIES FUND
..............................................................................
Investment advisory fee (after reimbursement or waiver) 0.25%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.35
..............................................................................
Total operating expenses (after reimbursements or waivers) 0.60%
..............................................................................

INTERMEDIATE TAX FREE FUND
..............................................................................
Investment advisory fee (after reimbursement or waiver) 0.37%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.48
..............................................................................
Total operating expenses (after reimbursements or waivers) 0.85%
..............................................................................

GLOBAL HIGH YIELD SECURITIES FUND
..............................................................................
Investment advisory fee (after reimbursement or waiver) 0.41%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 1.09
..............................................................................
Total operating expenses (after reimbursements or waivers) 1.50%
..............................................................................

CAPITAL APPRECIATION FUND
..............................................................................
Investment advisory fee (after reimbursement or waiver) 0.52%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.73
..............................................................................
Total operating expenses (after reimbursements or waivers) 1.25%
..............................................................................

SMALL CAP FUND
..............................................................................
Investment advisory fee (after reimbursement or waiver) 0.37%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.88
..............................................................................
Total operating expenses (after reimbursements or waivers) 1.25%
..............................................................................

INTERNATIONAL EQUITY FUND
..............................................................................
Investment advisory fee (after reimbursement or waiver) 0.56%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.94
..............................................................................
Total operating expenses (after reimbursements or waivers) 1.50%
..............................................................................

PACIFIC BASIN EQUITY FUND
..............................................................................
Investment advisory fee (after reimbursement or waiver) 0.74%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 1.01
..............................................................................
Total operating expenses (after reimbursements or waivers) 1.75%
..............................................................................

LATIN AMERICAN EQUITY FUND
..............................................................................
Investment advisory fee (after reimbursement or waiver) 0.41%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 1.59
..............................................................................
Total operating expenses (after reimbursements or waivers) 2.00%
..............................................................................

EXPENSE TABLE EXAMPLE:
An investor would pay the following expenses assuming (1) 5% annual return and
(2) redemption at the end of each time period:

<TABLE>
<CAPTION>
EXAMPLES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
........................................................................................................
<S> <C> <C> <C> <C>
Limited Term U.S. Government Securities Fund $ 6 $19 $ 33 $ 75
Intermediate Tax Free Fund $ 9 $27 $ 47 $105
Global High Yield Securities Fund $15 $47 $ 82 $179
Capital Appreciation Fund $13 $40 $ 69 $151
Small Cap Fund $13 $40 $ 69 $151
International Equity Fund $15 $47 $ 82 $179
Pacific Basin Equity Fund $18 $55 $ 95 $206
Latin American Equity Fund $20 $63 $108 $233
- --------------------------------------------------------------------------------------------------------
</TABLE>

The expense table and the example above show the costs and expenses that an
investor will bear directly or indirectly as a shareholder of a Fund. Bankers
Trust has voluntarily agreed to waive a portion of its investment advisory fee
with respect to each Portfolio. Without such waiver, each Portfolio's investment
advisory fee would be equal to the following: Global High Yield Securities
Portfolio -- 0.80% Capital Appreciation Portfolio -- 0.65%; Small Cap Portfolio
- -- 0.65%; International Equity Portfolio -- 0.65%; Pacific Basin Equity
Portfolio -- 0.75%; Latin American Equity Portfolio -- 1.00%; Limited Term U.S.
Government Securities Portfolio -- 0.25%; and Intermediate Tax Free Portfolio --
0.40%. The expense table and the example reflect a voluntary undertaking by
Bankers Trust or Signature Broker-Dealer Services, Inc. ("SBDS"), as the
distributor (the "Distributor") of the Shares of each Fund, to waive or
reimburse expenses such that the total aggregate operating expenses of each Fund
and the corresponding Portfolio, for the fiscal year of that Fund and the
corresponding Portfolio (as a percentage of the Fund's average daily net assets)
will not exceed the following: Limited Term U.S. Government Securities Fund --
0.60%; Intermediate Tax Free Fund -- 0.85%, Global High Yield Securities Fund --
1.50%; Capital Appreciation Fund -- 1.25%; Small Cap Fund -- 1.25%;
International Equity Fund -- 1.50%; Pacific Basin Equity Fund -- 1.75% and Latin
American Equity Fund -- 2.00%. In the absence of this undertaking, "Total
Operating Expenses" would have been as follows: Limited Term U.S. Government
Securities Fund -- 0.84%; Intermediate Tax Free Fund -- 1.13%; Global High Yield
Securities Fund -- 2.61%; Capital Appreciation Fund -- 1.57%; Small Cap Fund --
1.59%; International Equity Fund -- 1.83%; Pacific Basin Equity Fund -- 2.27%;
and Latin American Equity Fund -- 3.17%. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN. Moreover, while each example assumes a 5% annual return,
actual performance will vary and may result in a return greater or less than 5%.

While reimbursement of distribution expenses in amounts up to 0.20% of average
net assets are authorized to be made pursuant to the Plan of Distribution under
Rule 12b-1 of the 1940 Act it is not expected that any payments will actually be
made under that plan in the foreseeable future.

In addition to the customers of Bankers Trust or other institutions described
above, the Funds are available for (a) accounts where an investment adviser or a
financial planner has discretion over such account and the account holder pays
such person as compensation for its advice and other services an annual fee of
at least 0.50% on the assets in the account; (b) accounts established under a
"wrap fee" program or formal asset allocation program where the account holder
pays the program sponsor an annual fee of at least 0.50% on the assets in the
account; and (c) accounts established through an automated clearing or similar
system established for the use of investment professionals and through which
purchases and redemptions are transmitted to the Funds on an omnibus basis.

For more information about each Fund's and each Portfolio's expenses see
"Management of the Trusts and the Portfolios" and "Valuation Details" herein.

FUND FINANCIAL HIGHLIGHTS

The following tables show selected data for a share outstanding, total
investment return ratios to average net assets and other supplemental data for
each Fund for each of the periods indicated and has been audited by Coopers &
Lybrand L.L.P., the Funds' independent accountants, whose report thereon appears
in each Fund's Annual Report which is incorporated by reference in that Fund's
SAI.

LIMITED TERM U.S. GOVERNMENT SECURITIES FUND
- ----------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
AUGUST 24, 1992
FOR THE YEAR ENDED DECEMBER 31, (COMMENCEMENT
-------------------------------------- OF OPERATIONS) TO
1995 1994 1993 DECEMBER 31, 1992
..................................................................................................................................
SELECTED PER SHARE DATA
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.61 $ 10.06 $ 9.93 $ 10.00
..................................................................................................................................
Income from Investment Operations
Net Investment Income 0.57 0.44 0.41 0.14
Net Realized and Unrealized Gain (Loss) on Securities 0.35 (0.45) 0.20 (0.07)
..................................................................................................................................
Total from Investment Operations 0.92 (0.01) 0.61 0.07
..................................................................................................................................
Distributions from
Net Investment Income (0.57) (0.44) (0.41) (0.14)
Net Realized Gain from Security Transactions -- -- (0.07) --
..................................................................................................................................
Total Distributions (0.57) (0.44) (0.48) (0.14)
..................................................................................................................................
Net Asset Value, End of Period $ 9.96 $ 9.61 $ 10.06 $ 9.93
..................................................................................................................................
TOTAL INVESTMENT RETURN 9.81% (0.08%) 6.21% 2.02%*
RATIOS AND SUPPLMENTAL DATA
Ratio of Net Investment Income to Average Net Assets 5.81% 4.69% 4.35% 4.08%*
Ratio of Expenses to Average Net Assets, Including Expenses of the
Short/Intermediate U.S. Government Securities Portfolio 0.60% 0.60% 0.60% 0.60%*
Decrease Reflected in Above Expense Ratio Due to Absorption of
Expenses by Bankers Trust 0.24% 0.34% 1.43% 5.60%*
Net Assets, End of Period (000's omitted) $29,870 $31,302 $ 3,462 $ 3,188
- ----------------------------------------------------------------------------------------------------------------------------------
*Annualized
</TABLE>

INTERMEDIATE TAX FREE FUND
- ----------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
JULY 20, 1992
FOR THE YEAR ENDED DECEMBER 31, (COMMENCEMENT
-------------------------------------- OF OPERATIONS) TO
1995 1994 1993 DECEMBER 31, 1992
..................................................................................................................................
SELECTED PER SHARE DATA
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.72 $ 10.54 $ 9.99 $ 10.00
..................................................................................................................................
Income from Investment Operations
Net Investment Income 0.47 0.42 0.41 0.16
Net Realized and Unrealized Gain (Loss) on Securities 0.84 (0.82) 0.57 (0.01)
..................................................................................................................................
Total from Investment Operations 1.31 (0.40) 0.98 0.15
..................................................................................................................................
Distributions from
Net Investment Income (0.47) (0.42) (0.41) (0.16)
Net Realized Gain from Security Transactions -- -- (0.02) --
..................................................................................................................................
Total Distributions (0.47) (0.42) (0.43) (0.16)
..................................................................................................................................
Net Asset Value, End of Period $ 10.56 $ 9.72 $ 10.54 $ 9.99
..................................................................................................................................
TOTAL INVESTMENT RETURN 13.71% (3.81%) 9.94% 3.42%*
RATIOS AND SUPPLMENTAL DATA
Ratio of Net Investment Income to Average Net Assets 4.58% 4.20% 3.88% 3.72%*
Ratio of Expenses to Average Net Assets, Including Expenses of the
Intermediate Tax Free Portfolio 0.85% 0.85% 0.85% 0.85%*
Decrease Reflected in Above Expense Ratio Due to Absorption of
Expenses by Bankers Trust 0.28% 0.36% 0.35% 0.80%*
Net Assets, End of Period (000's omitted) $22,213 $25,303 $31,709 $ 9,992
- ----------------------------------------------------------------------------------------------------------------------------------
*Annualized
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GLOBAL HIGH YIELD SECURITIES FUND
- ----------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
DECEMBER 14, 1993
FOR THE (COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
..................................................................................................................................
SELECTED PER SHARE DATA
<S> <C> <C>
Net Asset Value, Beginning of Period $ 10.29 $ 10.00
..................................................................................................................................
Income from Investment Operations
Net Investment Income 0.77 0.31
Net Realized and Unrealized (Loss) on Securities and Foreign Currency (0.41) (0.02)
..................................................................................................................................
Total from Investment Operations 0.36 0.29
..................................................................................................................................
Dividends from Net Investment Income (0.87) --
..................................................................................................................................
Net Asset Value, End of Period $ 9.78 $ 10.29
..................................................................................................................................
TOTAL INVESTMENT RETURN 4.28% 3.66%*
RATIOS AND SUPPLEMENTAL DATA
Ratio of Net Investment Income to Average Net Assets 8.68% 5.44%*
Ratio of Expenses to Average Net Assets, Including Expenses of the Global
High Yield Securities Portfolio 1.74% 1.75%*
Decrease Reflected in Above Expense Ratio Due to Absorption of Expenses
by Bankers Trust 0.87% 1.08%*
Net Assets, End of Period (000's omitted) $22,913 $14,738
- ----------------------------------------------------------------------------------------------------------------------------------
*Annualized
</TABLE>

<TABLE>
<CAPTION>
CAPITAL APPRECIATION FUND
- ----------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
MARCH 9, 1993
FOR THE PERIOD (COMMENCEMENT
JANUARY 1, 1995 TO FOR THE YEAR ENDED OF OPERATIONS) TO
SEPTEMBER 30, 1995 DECEMBER 31, 1994 DECEMBER 31, 1993
..................................................................................................................................
SELECTED PER SHARE DATA
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 12.10 $ 11.72 $ 10.00
..................................................................................................................................
Income from Investment Operations
Net Investment (Loss) (0.07) (0.04) (0.01)
Net Realized and Unrealized Gain on Securities 4.80 0.42 1.73
..................................................................................................................................
Total from Investment Operations 4.73 0.38 1.72
..................................................................................................................................
Net Asset Value, End of Period $ 16.83 $ 12.10 $ 11.72
..................................................................................................................................
TOTAL INVESTMENT RETURN 39.09% 3.24% 21.54%*
RATIOS AND SUPPLMENTAL DATA
Ratio of Net Investment (Loss) to Average Net Assets (0.65)%* (0.57)% (0.23)%*
Ratio of Expenses to Average Net Assets, Including
Expenses of the Capital Appreciation Portfolio 1.25%* 1.25% 1.25%*
Decrease Reflected in Above Expense Ratio Due to
Absorption of Expenses by Bankers Trust 0.32%* 0.54% 0.74%*
Net Assets, End of Period (000's omitted) $57,380 $42,737 $17,573
- ----------------------------------------------------------------------------------------------------------------------------------
*Annualized

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SMALL CAP FUND
- ----------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
OCTOBER 21, 1993
FOR THE (COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
..................................................................................................................................
Selected Per Share Data
<S> <C> <C>
Net Asset Value, Beginning of Period $ 11.60 $ 10.00
..................................................................................................................................
Income from Investment Operations
Net Investment (Loss) (0.04) (0.03)
Net Realized and Unrealized Gain on Securities 6.94 1.63
..................................................................................................................................
Total from Investment Operations 6.90 1.60
..................................................................................................................................
Net Asset Value, End of Period $ 18.50 $ 11.60
..................................................................................................................................
TOTAL INVESTMENT RETURN 59.48% 17.06%*
RATIOS AND SUPPLEMENTAL DATA
Ratio of Net Investment (Loss) to Average Net Assets (0.46%) (0.58%)*
Ratio of Expenses to Average Net Assets, Including Expenses of the Small Cap
Portfolio 1.25% 1.25%*
Decrease Reflected in Above Expense Ratio Due to Absorption of Expenses by
Bankers Trust 0.34% 0.86%*
Net Assets, End of Period (000's omitted) $122,935 $21,332
- -----------------------------------------------------------------------------------------------------------------------------------
*Annualized
</TABLE>

INTERNATIONAL EQUITY FUND
- -----------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
FOR THE YEAR ENDED AUGUST 4, 1992
FOR THE PERIOD DECEMBER 31, (COMMENCEMENT
JANUARY 1, 1995 TO ----------------- OF OPERATIONS) TO
SEPTEMBER 30, 1995 1994 1993 DECEMBER 31, 1992
...................................................................................................................................
Selected Per Share Data
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 13.37 $ 13.18 $ 9.75 $10.00
...................................................................................................................................
Income from Investment Operations
Net Investment Income 0.14 0.10 0.05 0.03
Net Realized and Unrealized Gain (Loss) on Securities and
Foreign Currency 1.97 0.44 3.60 (0.28)
...................................................................................................................................
Total from Investment Operations 2.11 0.54 3.65 (0.25)
...................................................................................................................................
Distributions from
Net Investment Income (0.00)+ (0.09) (0.15) --
Net Realized Gain from Securities
Transactions (0.01) (0.26) (0.07) --
...................................................................................................................................
Total Distributions (0.01) (0.35) (0.22) --
...................................................................................................................................
Net Asset Value, End of Period $ 15.47 $ 13.37 $ 13.18 $ 9.75
...................................................................................................................................
TOTAL INVESTMENT RETURN 15.82% 4.12% 37.38% (6.01%)*
RATIOS AND SUPPLEMENTAL DATA
Ratio of Net Investment Income to Average Net Assets 1.55%* 0.84% 0.79% 0.97%*
Ratio of Expenses to Average Net Assets, Including Expenses of the
International Equity Portfolio 1.50%* 1.50% 1.50% 1.50%*
Decrease Reflected in Above Expense Ratio Due to
Absorption of Expenses by Bankers Trust 0.33%* 0.37% 0.62% 1.36%*
Net Assets, End of Period (000's omitted) $82,807 $56,020 $33,869 $8,218
- -----------------------------------------------------------------------------------------------------------------------------------
*Annualized
+Less Than $0.01 Per Share
</TABLE>

<PAGE>

PACIFIC BASIN EQUITY FUND
- -----------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
NOVEMBER 1, 1993
FOR THE (COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
...................................................................................................................................
Selected Per Share Data
<S> <C> <C>
Net Asset Value, Beginning of Period $ 11.82 $ 10.00
...................................................................................................................................
Income from Investment Operations
Net Investment Income (Loss) 0.01 (0.04)
Net Realized and Unrealized Gain (Loss) on Securities and Foreign Currency (0.49) 1.86
...................................................................................................................................
Total from Investment Operations (0.48) 1.82
...................................................................................................................................
Distributions from Net Realized Gain from Securities Transactions (0.38) --
...................................................................................................................................
Net Asset Value, End of Period $ 10.96 $ 11.82
...................................................................................................................................
TOTAL INVESTMENT RETURN (3.87%) 20.11%*
RATIOS AND SUPPLEMENTAL DATA

Ratio of Net Investment Income (Loss) to Average Net Assets 0.12% (0.59%)*
Ratio of Expenses to Average Net Assets, Including Expenses of the
Pacific Basin Equity Portfolio 1.75% 1.75%*
Decrease Reflected in Above Expense Ratio Due to Absorption of
Expenses by Bankers Trust 0.52% 0.60%*
Net Assets, End of Period (000's omitted) $24,504 $25,362
- -----------------------------------------------------------------------------------------------------------------------------------
*Annualized
</TABLE>

LATIN AMERICAN EQUITY FUND
- -----------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
OCTOBER 25, 1993
FOR THE (COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
...................................................................................................................................
Selected Per Share Data
<S> <C> <C>
Net Asset Value, Beginning of Period $ 14.59 $ 10.00
...................................................................................................................................
Income from Investment Operations
Net Investment Income 0.03 0.00#
Net Realized and Unrealized Gain (Loss) on Securities and Foreign Currency (5.92) 4.59
...................................................................................................................................
Total from Investment Operations (5.89) 4.59
...................................................................................................................................
Distributions from Net Realized Gain from Securities Transactions (0.20) --
...................................................................................................................................
Net Asset Value, End of Period $ 8.50 $ 14.59
...................................................................................................................................
TOTAL INVESTMENT RETURN (40.68%) 50.01%*
RATIOS AND SUPPLEMENTAL DATA
Ratio of Net Investment Income to Average Net Assets 0.29% 0.03%*
Ratio of Expenses to Average Net Assets, Including Expenses of
the Latin American Equity Portfolio 2.00% 2.00%*
Decrease Reflected in Above Expense Ratio Due to Absorption of
Expenses by Bankers Trust 1.17% 1.27%*
Net Assets, End of Period (000's omitted) $13,624 $27,489
- -----------------------------------------------------------------------------------------------------------------------------------
*Annualized
#Less than $0.01 per share

</TABLE>
<PAGE>
THE FUNDS IN DETAIL

INVESTMENT OBJECTIVES AND POLICIES

The Trusts seek to achieve the investment objective of each Fund by investing
all of its Assets in the corresponding Portfolio, which has the same investment
objective as the Fund. Since the investment characteristics of each Fund will
correspond directly to those of the corresponding Portfolio, the following is a
discussion of the various investments of and techniques employed by each
Portfolio. Additional information about the investment policies of each
Portfolio appears in "Risk Factors and Certain Securities and Investment
Practices" in this Prospectus and in the Funds' SAI. There can be no assurance
that the investment objective of either a Fund or the corresponding Portfolio
will be achieved.

The SHORT/INTERMEDIATE U.S. GOVERNMENT SECURITIES PORTFOLIO (LIMITED TERM U.S.
GOVERNMENT SECURITIES FUND), investment objective is a high level of current
income consistent with preservation of capital. The Portfolio invests 100%
of its assets in short- and intermediate-term U.S. Government securities,
including repurchase agreements secured by U.S. Government securities.

In selecting securities for the Portfolio, Bankers Trust attempts to maintain
the Portfolio's overall sensitivity to interest rates in a range similar to that
of short-term to intermediate-term government bonds and notes with weighted
average maturities of two to five years. Because the Portfolio may invest in
mortgage securities whose prices are less sensitive to interest rates than their
relatively long maturities would suggest, the Portfolio's dollar-weighted
average maturity may be longer than five years from time to time, but will not
exceed seven years under normal conditions. The Portfolio may hold individual
securities with remaining maturities of more than seven years as long as the
Portfolio's dollar-weighted average maturity remains within the above limit. The
remaining maturities of individual securities, excluding mortgage securities,
will normally not exceed ten years.

"U.S. Government securities" as used in this Prospectus means securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities. U.S. Government securities have varying degrees of
government backing. They may be backed by the credit of the government as a
whole or only by the issuing agency. Securities issued by certain agencies are
supported only by the credit of the agency that issued them, and not by the
U.S. Government. Securities issued by the Federal Home Loan Mortgage
Corporation and the Federal National Mortgage Association are supported by the
agency's right to borrow money from the U.S. Treasury under certain
circumstances. There is no assurance that the U.S. government will support the
obligations of its agencies or instrumentalities if it is not required to do
so by law. U.S. Treasury bonds, notes and bills, and some agency securities,
such as those issued by the Government National Mortgage Association, are
backed by the full faith and credit of the U.S. Government as to payment of
principal and interest and are the highest quality government securities. The
Fund itself, and its share price and yield, are not guaranteed by the U.S.
Government. For additional information on U.S. Government securities, see
"Risk Factors and Certain Securities and Investment Practices."

The Portfolio may invest a portion of its assets in short-term U.S. Government
securities with remaining maturities of one year or less and repurchase
agreements relating thereto. When Bankers Trust believes market conditions
warrant a temporary defensive position, the Portfolio may invest up to 100% of
its assets in these instruments.

Other Investments and Investment Techniques. The Portfolio may also utilize the
following investments and investment techniques and practices: repurchase
agreements, when-issued and delayed delivery securities, Rule 144A securities,
securities lending, mortgage-backed securities, collateralized mortgage
obligations, zero coupon securities, and options and futures. See "Risk Factors
and Certain Securities and Investment Practices" in this Prospectus and in the
SAI for more information.

The INTERMEDIATE TAX FREE PORTFOLIO investment objective is a high level of
current income exempt from federal income tax consistent with moderate risk of
capital. The Portfolio intends to manage its holdings actively. Portfolio
transactions are undertaken principally to accomplish the Portfolio's investment
objective in relation to expected movements in the general level of interest
rates, but the Portfolio may also engage in short-term trading consistent with
its objective.

The Portfolio seeks to maintain a current yield that is greater than that
generally obtainable from a portfolio of short-term tax-exempt obligations,
subject to applicable quality restrictions. The Portfolio seeks to increase
yields by adjusting the average maturity of its portfolio in light of prevailing
market conditions and credit considerations. The Portfolio will normally consist
of a portfolio of securities with a weighted average maturity of three to ten
years. The remaining maturity of securities generally will not exceed 20 years
at the time of investment. The Portfolio adjusts its holdings of long-term and
short-term debt securities to reflect its assessment of prospective changes in
interest rates, which may adversely affect current income. The success of this
strategy depends upon the ability of Bankers Trust, as the investment adviser
(the "Adviser"), to forecast changes in interest rates.

The value of securities held by the Portfolio will generally fluctuate inversely
with changes in prevailing interest rates and will also be affected by changes
in the creditworthiness of issuers and other market factors. The quality
criteria applied in the selection of Portfolio securities are intended to
minimize adverse price changes due to credit considerations. The value of
municipal securities in the Portfolio can also be affected by market reaction to
legislative consideration of various tax reform proposals. Although the value of
the assets of the Portfolio and the net asset value of the Fund will fluctuate,
the Portfolio attempts to conserve the value of its assets to the extent
consistent with its objective.

The Portfolio attempts to invest 100% of its assets in tax-exempt municipal
securities; however the Portfolio is permitted to invest up to 20% (or greater
while maintaining a temporary defensive position) of the value of its total
assets in securities, the interest income on which is subject to federal income
or alternative minimum tax. The Portfolio may make taxable investments pending
investment of proceeds of tax-exempt securities, pending settlement of purchases
of portfolio securities, to maintain liquidity to meet redemptions or when it is
advisable in Bankers Trust's opinion because of adverse market conditions. The
taxable investments permitted for the Portfolio include obligations of the U.S.
and its agencies and instrumentalities, bank obligations, commercial paper and
repurchase agreements and other debt securities which meet the Portfolio's
quality requirements.

Municipal Securities. The Intermediate Tax Free Portfolio may invest in notes
and bonds issued by or on behalf of states, territories and possessions of the
United States and the District of Columbia and their political subdivisions,
agencies, authorities and instrumentalities. These obligations may be general
obligation instruments secured by the issuer's pledge of its full faith, credit
and taxing power for the payment of principal and interest, or they may be
revenue instruments payable from specific revenue sources, but not generally
backed by the issuer's taxing power. These include industrial development bonds
where payment is the responsibility of the private industrial user of the
facility financed by the instruments.

Short-Term Municipal Investments. For temporary defensive purposes or for
purposes of liquidity, the assets of the Intermediate Tax Free Portfolio may be
invested in short-term municipal obligations. These short-term obligations
include municipal notes of various types, including notes issued in anticipation
of receipt of taxes, the proceeds of the sale of bonds, other revenues or grant
proceeds and project notes, as well as municipal commercial paper and municipal
demand obligations such as variable rate demand notes and master demand
obligations. The interest rate on variable rate demand notes is adjustable at
periodic intervals as specified in the notes. Master demand obligations permit
the investment of fluctuating amounts at periodically adjusted interest rates.
Although master demand obligations are not marketable to third parties, the
Portfolio considers them to be liquid because they are payable on demand. There
is no specific percentage limitation on these investments. The credit quality of
variable rate demand notes and other municipal obligations is frequently
enhanced by various arrangements with domestic or foreign financial
institutions, such as letters of credit, guarantees and insurance, and these
arrangements are considered when investment quality is evaluated. These
obligations will be of comparable quality to municipal bonds and will be
purchased in anticipation of a declining market and rising interest rates,
pending purchase of longer term investments or to maintain liquidity to meet
redemptions. The amortized cost method is used by the Portfolio to value
municipal securities with maturities of less than 60 days; when these securities
are subject to puts separate from the underlying securities, no value is
assigned to the puts. The cost of any such put is carried as an unrealized loss
from the time of purchase until it is exercised or expires.

Other Investments and Investment Techniques. The Portfolio may also utilize the
following investments and investment techniques and practices: puts, zero coupon
municipal securities, repurchase agreements, Rule 144A securities, when-issued
and delayed delivery securities, and options and futures contracts. See "Risk
Factors and Certain Securities and Investment Practices" in this Prospectus and
in the SAI for more information.

The GLOBAL HIGH YIELD SECURITIES PORTFOLIO'S investment objective is high
current income from investment in a non-diversified portfolio of high yield
non-investment grade debt securities issued in many of the world's securities
markets. Capital appreciation will be considered when consistent with the
primary investment objective of high current income. The Portfolio intends to
invest in Brady bonds and other sovereign debt and in high risk, lower quality
debt securities commonly referred to as "junk bonds" and regarded as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation as well as in
the debt securities of issuers located in emerging markets, Brady bonds and
other sovereign debt.

Under normal circumstances, at least 65% of the Portfolio's assets will be
invested in high yield, non-investment grade debt securities of both
governmental and corporate issuers in both the major industrialized markets and
the so-called "emerging markets." See "Risk Factors and Certain Securities and
Investment Practices -- Risks of Investing in Foreign Securities" and "-- Risk
of Investing in Emerging Markets."

Although Bankers Trust considers both industrialized and emerging countries
eligible for investment pursuant to the Portfolio's objective, the Portfolio
will not be invested in all such markets at all times. Furthermore, investing in
some emerging markets may be neither feasible nor desirable from time to time,
due to the lack of adequate custodial arrangements for the Portfolio's assets,
exchange controls and overly burdensome repatriation rules, the lack of
organized and liquid securities markets, and unacceptable political risks. Under
normal circumstances, the Portfolio will invest in at least three emerging
markets countries. See "Risk Factors and Certain Securities and Investment
Practices -- Risks of Investing in Foreign Securities" and " -- Risk of
Investing in Emerging Markets."

The Portfolio generally invests in securities which are rated BBB or lower by
Standard & Poor's Corporation ("S&P") or Baa or lower by Moody's Investors
Service, Inc. ("Moody's") or, if unrated, of comparable quality in the opinion
of Bankers Trust. Securities which are rated BBB by S&P or Baa by Moody's
possess some speculative characteristics. A description of the rating categories
is attached to this Prospectus. THERE IS NO LOWER LIMIT WITH RESPECT TO THE
RATING CATEGORIES FOR SECURITIES IN WHICH THE PORTFOLIO MAY INVEST. See "Risk
Factors and Certain Securities and Investment Practices -- Risks of Investing In
High Yield Securities (Junk Bonds)."

The Portfolio is not required to dispose of debt securities whose credit quality
declines at some point after the security is purchased; however, no more than
25% of the Portfolio's assets will be invested at any time in securities rated
less than CCC by S&P or Caa by Moody's or, if unrated, of comparable quality in
the opinion of Bankers Trust. S&P's lowest rating for bonds is CI, which is
reserved for income bonds on which no interest is being paid and D, which is
reserved for debt in default and in respect of which payment of interest or
repayment of principal is in arrears. Moody's lowest rating is C, which is
applied to bonds which have extremely poor prospects for ever attaining any real
investment standing. The Portfolio may, from time to time, purchase defaulted
debt securities if, in the opinion of Bankers Trust, the issuer may resume
interest payments in the near future. The Portfolio will not invest more than
10% of its total assets (at the time of purchase) in defaulted debt securities,
which may be illiquid. Other than as set forth above, there is no restriction on
the percentage of the Portfolio's assets which may be invested in bonds of a
particular rating.

The Portfolio invests in debt obligations allocated among diverse markets and
denominated in various currencies, including multi-currency units such as
European Currency Units ("ECUs"). The Portfolio may purchase securities that are
issued by the government or a company or financial institution of one country
but denominated in the currency (or multi-currency unit) of another country.

The Portfolio is classified as a "non-diversified" fund under the 1940 Act,
which means the Portfolio is not limited by the 1940 Act in the proportion of
its assets that may be invested in a single issuer. The Portfolio may,
therefore, invest in the securities of individual issuers to a greater degree
than a diversified fund and may be more susceptible to any single economic,
political or regulatory occurrence affecting those issuers. However, in order to
enable the Fund (and other registered investment companies which may in the
future invest all their assets in the Portfolio) to qualify as a regulated
investment company (a "RIC") the Portfolio must comply with the diversification
requirement of Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), for U.S. federal income tax purposes. See "Risk Factors and
certain Securities and Investment Practices -- Non-Diversified Fund" herein.

Other Investments and Investment Techniques. The Portfolio may also utilize the
following investments and investment techniques and practices: short-term
investments, floating rate bonds, zero coupon bonds, sovereign and supranational
debt obligations, Brady bonds, loan participations and assignments, convertible
bonds, preferred stock, foreign currency exchange transactions, options on
foreign currencies, options on foreign bond indices, futures contracts on
foreign bond indices, options on futures contracts, Rule 144A securities,
when-issued or delayed delivery securities, securities lending, repurchase
agreements and reverse repurchase agreements. See "Risk Factors and Certain
Securities and Investment Practices" in this Prospectus and in the SAI for
further information.

The Portfolio may borrow money for investment purposes. See "Risk Factors and
Certain Securities and Investment Practices -- Leverage."

The CAPITAL APPRECIATION PORTFOLIO'S investment objective is long-term capital
growth; the production of any current income is secondary to this objective. The
Portfolio invests primarily in growth-oriented common stocks of medium-sized
domestic corporations and, to a lesser extent, foreign corporations.

Bankers Trust employs a flexible investment program in pursuit of the
Portfolio's investment objective. The Portfolio is not restricted to investments
in specific market sectors. The Portfolio may invest in any market sectors and
in companies of any size and may take advantage of any investment opportunity
with attractive long-term prospects. The Adviser takes advantage of its market
access and the research available to it to select investments in promising
growth companies that are involved in new technologies, new products, foreign
markets and special developments, such as research discoveries, acquisitions,
recapitalizations, liquidations or management changes, and companies whose stock
may be undervalued by the market. These situations are only illustrative of the
types of investment the Portfolio may make. The Portfolio is free to invest in
any common stock which in the Adviser's judgment provides above average
potential for long-term growth of capital and income.

The Portfolio will generally invest a majority of its assets in equity
securities of medium-sized companies (companies with a market capitalization of
between $500 million and $2 billion), but may invest in securities of companies
having various levels of market capitalization, including smaller companies
whose securities may be more volatile and less liquid than securities issued by
larger companies with higher levels of net worth. Investments will be in
companies in various industries. Industry and company fundamentals along with
key investment themes and various quantitative screens will be used in the
investment process. Criteria for selection of individual securities include the
issuer's competitive environment and position, prospects for growth, managerial
strength, earnings momentum and quality, underlying asset value, relative market
value and overall marketability. The Portfolio will follow a disciplined selling
process to lessen market risks.

The Portfolio may also invest up to 25% of its assets in similar securities of
foreign issuers. For further information on foreign investments see "Risk
Factors and Certain Securities and Investment Practices -- Risks of Investing in
Foreign Securities."

Other Investments and Investment Techniques. The Portfolio may also utilize the
following investments and investment techniques and practices: short-term
investments, options on stocks, options on stock indices, futures contracts on
stock indices, options on futures contracts, foreign currency exchange
transactions, options on foreign currencies, Rule 144A securities, when-issued
and delayed delivery securities, securities lending, and repurchase agreements.
See "Risk Factors and Certain Securities and Investment Practices" in this
Prospectus and in the SAI for further information.

The SMALL CAP PORTFOLIO'S investment objective is long-term capital growth; the
production of any current income is secondary to this objective.

The Portfolio seeks to provide long term capital growth by investing primarily
in equity securities of smaller U.S. companies. The Portfolio's policy is to
invest in equity securities of smaller companies that Bankers Trust believes are
in an early stage or transitional point in their development and have
demonstrated or have the potential for above average capital growth. The Adviser
will select companies which have the potential to gain market share in their
industry, achieve and maintain high consistent profitability or produce
increases in earnings. The Adviser also seeks companies with strong company
management and superior fundamental strength.

The Adviser employs a flexible investment program in pursuit of the Portfolio's
investment objective. The Portfolio is free to invest in any common stock which
in the Adviser's judgement provides above average potential for long-term growth
of capital and income.

Under normal market conditions, the Portfolio will invest at least 65% of its
assets in smaller companies (with market capitalizations less than $750 million
at time of purchase) that offer strong potential for capital growth. Small
capitalization companies have the potential to show earnings growth over time
that is well above the growth rate of the overall economy. The Portfolio may
also invest in larger, more established companies that the Adviser believes may
offer the potential for strong capital growth due to their relative market
position, anticipated earnings growth, changes in management or other similar
opportunities. The Portfolio will follow a disciplined selling process to lessen
market risks.

For temporary defensive purposes, when in the opinion of the Adviser that market
conditions so warrant, the Portfolio may invest all or a portion of its Assets
in common stocks of larger, more established companies or in fixed-income
securities or short-term money market securities. To the extent the Portfolio is
engaged in temporary defensive investments, the Portfolio will not be pursuing
its investment objective.

Other Investments and Techniques. The Portfolio may also utilize the following
investments and investment techniques and practices: short-term investments,
options on stocks, options on stock indices, futures contracts on stock indices,
options on future contracts, foreign currency exchange transactions, options on
foreign currencies, Rule 144A securities, when-issued and delayed delivery
securities, securities lending and repurchase agreements. See "Risk Factors and
Certain Securities and Investment Practices" in this Prospectus and in the SAI
for further information.

The INTERNATIONAL EQUITY PORTFOLIO'S investment objective is long-term capital
appreciation from investment in foreign equity securities (or other securities
with equity characteristics); the production of any current income is incidental
to this objective. The Portfolio invests primarily in established companies
based in developed countries outside the United States, but the Portfolio also
invests in securities of issuers in emerging markets. See "Risk Factors and
Certain Securities and Investment Practices -- Risks of Investing in Foreign
Securities" and "-- Risk of Investing in Emerging Markets." Under normal
circumstances, the Portfolio will invest at least 65% of the value of its total
assets in the equity securities of issuers based in at least three countries
other than the United States. The Portfolio's investments will generally be
diversified among several geographic regions and countries.

In countries and regions with well-developed capital markets where more
information is available, Bankers Trust will seek to select individual
investments for the Portfolio. Criteria for selection of individual securities
include the issuer's competitive position, prospects for growth, managerial
strength, earnings quality, underlying asset value, relative market value and
overall marketability. The Portfolio may invest in securities of companies
having various levels of net worth, including smaller companies whose securities
may be more volatile than securities offered by larger companies with higher
levels of net worth.

In other countries and regions where capital markets are underdeveloped or not
easily accessed and information is difficult to obtain, the Portfolio may choose
to invest only at the market level. Here, to the extent available and consistent
with applicable regulations, the Portfolio may seek to achieve country exposure
through use of options or futures based on an established local index or through
investment in other registered investment companies rather than investing
directly in individual securities. Investment in other investment companies is
limited in amount by the 1940 Act, will involve the indirect payment of a
portion of the expenses, including advisory fees, of such other investment
companies and may result in a duplication of fees and expenses.

The Portfolio invests in securities listed on foreign or domestic securities
exchanges and securities traded in foreign or domestic over-the-counter markets
and may invest in restricted or unlisted securities.

Other Investments and Investment Techniques. The Portfolio may also utilize the
following investments and investment techniques and practices: short-term
investments, foreign currency exchange transactions, options on foreign
currencies, American Depositary Receipts ("ADRs"), Global Depositary Receipts
("GDRs") and European Depositary Receipts ("EDRs"), options on stocks, options
on foreign stock indices, futures contracts on foreign stock indices, options on
futures contracts, Rule 144A securities, when-issued and delayed delivery
securities, securities lending and repurchase agreements. See "Risk Factors and
Certain Securities and Investment Practices" in this Prospectus and in the SAI
for further information.

The PACIFIC BASIN EQUITY PORTFOLIO'S investment objective is long-term capital
appreciation from investment primarily in the equity securities (or other
securities with equity characteristics) of companies domiciled in, or doing
business in the Pacific Basin region, other than Japan; the production of any
current income is incidental to this objective. Investment in such securities
involves certain considerations which are not normally involved in investment in
securities of U.S. issuers, and an investment in the Fund may be considered
speculative.

For purposes of this Prospectus, "issuers domiciled in, or doing business in,
the Pacific Basin region (other than Japan)" shall include securities of
issuers: (1) which are organized under the laws of Pacific Basin countries (see
below); (2) for which the principal securities trading market is in a Pacific
Basin country; or (3) which derive a significant proportion (at least 50
percent) of their revenues or profits from goods produced or sold, investments
made, or services performed in the countries of the Pacific Basin or which have
at least 50 percent of their assets situated in the countries of the Pacific
Basin. It is expected under normal conditions that at least 65% of the
Portfolio's assets will be invested in the equity securities of issuers located
in at least three countries in the Pacific Basin.

For the purpose of this Prospectus, the "Pacific Basin" includes, but is not
limited to, the following countries: Hong Kong, India, Indonesia, Malaysia, New
Zealand, Pakistan, the Philippines, the People's Republic of China ("China"),
Singapore, Sri Lanka, South Korea, Thailand, Taiwan and Vietnam. See "Risk
Factors and Certain Securities and Investment Practices -- Risks of Investing in
Foreign Securities" and "-- Risks of Investing in Emerging Markets" in this
Prospectus and "Risk Factors and Certain Securities and Investment Practices --
Risks of Investing in China and China Region" in the SAI.

The Portfolio will be managed using a disciplined, value-oriented investment
philosophy that stresses the inherent value of, and the medium term outlook for,
the companies under examination. Experience has proven that often the real basis
of a business is quite different from that perceived by the market: a
misconception that usually results in its shares trading below its true business
or replacement value. The exploitation of this "perception/reality" gap is a
hallmark of the investment style that has been adopted for the Portfolio, and a
potential source of value for its investors.

"Value" investing means trying to find companies which are mispriced by the
market for reasons of neglect, fashion or misconception. These opportunities
arise out of legislative changes, industrial restructuring and technology
advancements, for example. As a result, Bankers Trust and the sub-investment
adviser attach great importance to analyzing trends and accessing possible
breaks with traditional price patterns. At the company level, the emphasis is
placed on assessing the inherent "business" value of the firm. While this often
varies from the stock market's valuation, the Adviser and the sub- investment
adviser believe a company's stock price tends to gravitate to their "business"
value over time.

The Portfolio's investments will generally be diversified among several
geographic regions and countries in the Pacific Basin. Criteria for determining
the appropriate distribution of investment among various countries and regions
include the prospects for relative growth among foreign countries, expected
levels of inflation, government policies influencing business conditions, the
outlook for currency relationships and the range of alternative opportunities
available to international investors.

The Portfolio will not invest more than 20% of the value of its total assets in
issuers domiciled in China.

In countries and regions where capital markets are underdeveloped or not easily
accessed and information is difficult to obtain, the Portfolio may choose to
invest only at the market level. Here, to the extent available and consistent
with applicable regulations, the Portfolio may seek to achieve country exposure
through the use of options on futures based on an established local index or
through investment in other registered investment companies. Investment in other
investment companies is limited in amount by the 1940 Act, will involve the
indirect payment of a portion of the expenses, including advisory fees, of such
other investment companies and may result in a duplication of fees and expenses.

Other Investments and Investment Techniques. The Portfolio may also utilize the
following investments and investment techniques and practices: short-term
investments, foreign currency exchange transactions, options on foreign
currencies, ADRs, GDRs and EDRs, options on stocks, options on foreign stock
indices, futures contracts on foreign stock indices, options on futures
contracts, 144A securities, when-issued and delayed delivery securities,
securities lending and repurchase agreements. See "Risk Factors and Certain
Securities and Investment Practices" in this Prospectus and in the SAI for
further information.

The LATIN AMERICAN EQUITY PORTFOLIO'S investment objective is long-term capital
appreciation from investment primarily in the equity securities (or other
securities with equity characteristics) of companies domiciled in, or doing
business in, Latin America; the production of any current income is incidental
to this objective. Investment in such securities involves certain considerations
which are not normally involved in investment in securities of U.S. issuers, and
an investment in the Fund may be considered speculative. See "Risk Factors and
Certain Securities and Investment Practices -- Risks of Investing in Foreign
Securities" and "-- Risk of Investing in Emerging Markets" herein and "Foreign
Securities: Special Consideration Concerning Latin America" in the SAI. It is
expected under normal conditions that at least 65% of the Portfolio's total
assets will be invested in the equity securities of Latin American issuers.

The Fund may borrow money for investment purposes. See "Risk Factors and
Certain Securities and Investment Practices -- Leverage."

For purposes of this Prospectus, "Latin America" is defined as Mexico, and all
countries in Central America and South America, including Argentina, Brazil,
Chile, Colombia, Peru and Venezuela.

As used in this Prospectus, "securities of Latin American issuers" is defined
as: (i) securities of companies the principal securities trading market for
which is in Latin America; (ii) securities, traded in any market, of companies
that derive 50% or more of their total revenue from either goods or services
produced in Latin America or sales made in Latin America; (iii) securities of
companies organized under the laws of, and with a principal office in, Latin
America; or (iv) securities issued or guaranteed by the government of a country
in Latin America, its agencies or instrumentalities, political subdivisions or
the central bank of such a country. Determinations as to eligibility will be
made by Bankers Trust, under the supervision of the Board of Trustees of BT
Investment Portfolios, based on publicly available information and inquiries
made to the issuers.

Bankers Trust intends to consider investment only in those countries in Latin
America in which it believes investing is feasible and does not involve undue
political risks. As of the date of this Prospectus, this list included
Argentina, Brazil, Chile, Colombia, Mexico, Peru and Venezuela. Under normal
circumstances, the Portfolio's investments will be diversified among at least
three Latin American countries.

The Portfolio may invest in securities of companies having various levels of net
worth, including small companies whose securities may be more volatile than
securities offered by larger companies with higher levels of net worth.

In other countries and regions where capital markets are underdeveloped or not
easily accessed and information is difficult to obtain, the Portfolio may choose
to invest only at the market level. Here, to the extent available and consistent
with applicable regulations, the Portfolio may seek to achieve country exposure
through the use of options or futures based on an established local index or
through investment in other registered investment companies. Investment in other
investment companies is limited in amount by the 1940 Act, will involve the
indirect payment of a portion of the expenses, including advisory fees, of such
other investment companies and may result in a duplication of fees and expenses.

Fixed Income Investments. For purposes of seeking capital appreciation, the
Portfolio may invest up to 35% of its total assets in debt securities of Latin
American issuers which are rated at least C by S&P or Moody's or, if unrated, of
comparable quality in the opinion of Bankers Trust. As an operating policy,
which may be changed by the Board of Trustees of BT Investment Portfolios, the
Portfolio will not invest more than 10% of its total assets in debt securities
rated BBB or lower by S&P or Baa or lower by Moody's. Securities which are rated
BBB by S&P or Baa by Moody's possess speculative characteristics. Bonds rated C
by S&P are of the lowest quality and may be used when the issuer has filed a
bankruptcy petition, but debt payments are still being paid. Moody's lowest
rating is C, which is applied to bonds which have extremely poor prospects of
ever attaining any real investment standing. See "Risk Factors and Certain
Securities and Investment Practices -- Risks of Investing in High Yield
Securities (Junk Bonds)." Certain debt securities can provide the potential for
capital appreciation based on various factors such as changes in interest rates,
economic and market conditions, improvement in an issuer's ability to repay
principal and pay interest and ratings upgrades. Additionally, convertible bonds
offer the potential for capital appreciation through the conversion feature,
which enables the holder of the bond to benefit from increases in the market
price of the securities into which they are convertible.

Other Investments and Investment Techniques. The Portfolio may also utilize the
following investments and investment techniques and practices: Brady bonds,
foreign currency exchange transactions, options on foreign currencies, ADRs,
GDRs and EDRs, options on stocks, options on foreign stock indices, futures
contracts on foreign stock indices, options on futures contracts, when-issued
and delayed delivery securities, Rule 144A securities, short-term investments,
repurchase agreements, reverse repurchase agreements and securities lending. See
"Risk Factors and Certain Securities and Investment Practices" in this
Prospectus and in the SAI for further information.

RISK FACTORS AND CERTAIN SECURITIES AND INVESTMENT PRACTICES

The following pages contain more detailed information about types of instruments
in which a Portfolio may invest and strategies Bankers Trust may employ in
pursuit of a Portfolio's investment objective. A summary of risks and
restrictions associated with these instrument types and investment practices is
included as well.

Bankers Trust may not buy all of these instruments or use all of these
techniques to the full extent permitted unless it believes that doing so will
help a Portfolio achieve its goal. Holdings and recent investment strategies are
described in the financial reports of a Fund and the corresponding Portfolio,
which are sent to Fund shareholders twice a year. For a free SAI or financial
report, call an Investment Professional.

RISKS OF INVESTING IN FOREIGN SECURITIES

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

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

RISK OF INVESTING IN EMERGING MARKETS

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

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

So long as the Communist Party continues to exercise a significant or, in some
countries, dominant role in Eastern European countries or in China and other
Asian countries, investments in such countries will involve risks of
nationalization, expropriation and confiscatory taxation. The Communist
governments of a number of Eastern European countries expropriated large amounts
of private property in the past, in many cases without adequate compensation,
and there may be no assurance that such expropriation will not occur in the
future. In the event of such expropriation, a Portfolio could lose a substantial
portion of any investments it has made in the affected countries. Further, no
accounting standards exist in Eastern European countries. Finally, even though
certain Eastern European currencies may be convertible into U.S. dollars, the
conversion rates may be artificial to the actual market values and may be
adverse to Fund shareholders.

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

RISKS OF INVESTING IN HIGH YIELD SECURITIES (JUNK BONDS)
Lower-rated securities, including securities rated from BB to D by S&P or Ba to
C by Moody's or, if unrated, of comparable quality in the opinion of Bankers
Trust, will usually offer higher yields than higher-rated securities. However,
there is more risk associated with these investments. This is because of the
reduced creditworthiness and increased risk of default that these securities
carry. Lower-rated securities generally tend to reflect short-term corporate and
market developments to a greater extent than higher-rated securities which react
primarily to fluctuations in the general level of interest rates. Lower rated
securities also involve greater sensitivity to significant increases in interest
rates. Short-term corporate and market developments affecting the prices and
liquidity of lower-rated securities could include adverse news impacting major
issues or underwriters or dealers in lower-rated or unrated securities. In
addition, since there are fewer investors in lower-rated securities, it may be
harder to sell securities at an optimum time.

An economic downturn may adversely affect the value of some lower-rated bonds.
Such a downturn may especially affect highly leveraged companies or companies in
cyclically sensitive industries, where deterioration in a company's cash flow
may impair its ability to meet its obligation to pay principal and interest to
bondholders in a timely fashion. From time to time, as a result of changing
conditions, issuers of lower-rated bonds may seek or may be required to
restructure the terms and conditions of the securities they have issued. As a
result of these restructurings, holders of lower-rated securities may receive
less principal and interest than originally expected at the time such bonds were
purchased. In the event of a restructuring, the Portfolio may bear additional
legal or administrative expenses in order to maximize recovery from an issuer.
The secondary trading market for lower-rated bonds is generally less liquid than
the secondary trading market for higher-rated bonds.

The risk of loss due to default by the issuer is significantly greater for the
holders of high yield securities because such securities are generally unsecured
and are often subordinated to other obligations of the issuer. During an
economic downturn or a sustained period of rising interest rates, highly
leveraged issuers of high yield securities may experience financial stress and
may not have sufficient revenues to meet their interest payment obligations. An
issuer's ability to service its debt obligations may also be adversely affected
by specific corporate developments, its inability to meet specific projected
business forecasts, or the unavailability of additional financing.

Factors adversely affecting the market value of high yield and other Portfolio
securities will adversely affect the corresponding Fund's net asset value. In
addition, a Portfolio may incur additional expenses to the extent it is required
to seek recovery upon a default in the payment of principal or interest on its
portfolio holdings.

RISKS OF INVESTING IN MEDIUM- AND SMALL-CAPITALIZATION STOCKS
The Small Cap Portfolio and Capital Appreciation Portfolio invest primarily in
smaller-sized and medium-sized, respectively, growth-oriented common stocks of
domestic corporations and, to a limited extent, foreign corporations.
Historically, medium- and small-capitalization stocks have been more volatile in
price that the larger-capitalization stocks included in the S&P 500. Among the
reasons for the greater price volatility of these securities are the less
certain growth prospects of smaller firms, the lower degree of liquidity in the
markets for such stocks, and the greater sensitivity of medium- and small- size
companies to changing economic conditions. In addition to exhibiting greater
volatility, medium- and small-size company stocks may fluctuate independently of
larger company stocks. Medium- and small-size company stocks may decline in
price as large company stocks rise, or rise in prices as large company stocks
decline.

NON-DIVERSIFIED FUND

The Global High Yield Securities Portfolio and Fund are each classified as a
"non-diversified" investment company so that with respect to 50% of the
Portfolio's assets, it will be able to invest more than 5% of its assets in
obligations of one or more issuers, while being limited with respect to the
other half of its assets to investments not exceeding 5% of the Portfolio's
total assets. (A "diversified" investment company would be required under the
1940 Act, to maintain at least 75% of its assets in cash (including foreign
currency), cash items, U.S. Government securities, and other securities limited
per issuer to not more than 5% of the investment company's total assets.) In
order to enable the Fund to qualify as a regulated investment company under the
Code, the Portfolio, among other things, may not invest more than 25% of its
assets in obligations of any one issuer (other than U.S. Government securities).
As a "non-diversified" investment company, the Portfolio may invest a greater
proportion of its assets in the securities of a smaller number of issuers and
therefore may be subject to greater market and credit risk than a more broadly
diversified fund.

The Portfolio will not have more than 25% of the current value of its total
assets invested in any single industry, provided that this restriction shall not
apply to debt securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities.

SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE
Unlike other open-end management investment companies (mutual funds) which
directly acquire and manage their own portfolio securities, each Fund seeks to
achieve its investment objective by investing all of its Assets in the
corresponding Portfolio, a separate registered investment company with the same
investment objectives as the Fund. Therefore, an investor's interest in the
Portfolio's securities is indirect. In addition to selling a beneficial interest
to the corresponding Fund, each Portfolio may sell beneficial interests to other
mutual funds or institutional investors. Such investors will invest in a
Portfolio on the same terms and conditions and will pay a proportionate share of
the Portfolio's expenses. However, the other investors investing in a Portfolio
are not required to sell their shares at the same public offering price as the
Fund due to variations in sales commissions and other operating expenses.
Therefore, investors in a Fund should be aware that these differences may result
in differences in returns experienced by investors in the different funds that
invest in the Portfolio. Such differences in returns are also present in other
mutual fund structures. Information concerning other holders of interests in the
Portfolio is available from Bankers Trust, as the Administrator, at (800)
730-1313.

The master-feeder structure has been developed relatively recently, so
shareholders should carefully consider this investment approach.

Smaller funds investing in a Portfolio may be materially affected by the actions
of larger funds investing in the Portfolio. For example, if a large fund
withdraws from a Portfolio, the remaining funds may experience higher pro rata
operating expenses, thereby producing lower returns (however, this possibility
exists as well for traditionally structured funds which have large institutional
investors). Additionally, a Portfolio may become less diverse, resulting in
increased portfolio risk. Also, funds with a greater pro rata ownership in a
Portfolio could have effective voting control of the operations of the
Portfolio. Except as permitted by the SEC, whenever the Trust is requested to
vote on matters pertaining to a Portfolio, the Trust will hold a meeting of
shareholders of the Fund and will cast all of its votes in the same proportion
as the votes of the Fund's shareholders. Fund shareholders who do not vote will
not affect the Trust's votes at the Portfolio meeting. The percentage of the
Trust's votes representing Fund shareholders not voting will be voted by the
Trustees or officers of the Trust in the same proportion as the Fund
shareholders who do, in fact, vote. Certain changes in the Portfolio's
investment objectives, policies or restrictions may require the Fund to withdraw
its interest in the Portfolio. Any such withdrawal could result in a
distribution "in kind" of portfolio securities (as opposed to a cash
distribution from the Portfolio). If securities are distributed, the Fund could
incur brokerage, tax or other charges in converting the securities to cash. In
addition, the distribution in kind may result in a less diversified portfolio of
investments or adversely affect the liquidity of the Fund. Notwithstanding the
above, there are other means for meeting redemption requests, such as borrowing.

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

Each Fund's investment objective is not a fundamental policy and may be changed
upon notice to but without the approval of the Fund's shareholders. If there is
a change in a Fund's investment objective, the Fund's shareholders should
consider whether the Fund remains an appropriate investment in light of their
then-current needs. The investment objective of each Portfolio is also not a
fundamental policy. Shareholders of the Funds will receive 30 days prior written
notice with respect to any change in the investment objective of a Fund or the
corresponding Portfolio. See "Risk Factors and Certain Securities and Investment
Practices" in the SAI for a description of the fundamental policies of each
Portfolio that cannot be changed without approval by "the vote of a majority of
the outstanding voting securities" (as defined in the 1940 Act) of the
Portfolio.

For descriptions of the investment objective, policies and restrictions of each
Portfolio, see "The Funds in Detail" herein and "Risk Factors and Certain
Securities and Investment Practices" in this Prospectus and in the SAI. For
descriptions of the management of the Trusts and the Portfolios, see "Management
of the Trusts and the Portfolios" herein and in the SAI. For descriptions of the
expenses of the Portfolio, see "The Funds -- Expense Summary" herein and
"Management of the Trust and the Portfolios" herein and in the SAI.

SECURITIES AND INVESTMENT PRACTICES

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

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

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

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

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

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

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

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

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

MORTGAGE-BACKED SECURITIES. The Short/Intermediate Term U.S. Government
Securities Portfolio may purchase mortgage-backed securities issued by the U.S.
Government and its agencies and instrumentalities. Mortgage-backed securities
include mortgage pass-through securities, mortgage-backed bonds and mortgage
pay-through securities. A mortgage pass-through security is a pro rata interest
in a pool of mortgages where the cash flow generated from the mortgage
collateral is passed through to the security holder. Mortgage-backed bonds are
general obligations of their issuers, payable out of the issuers' general funds
and additionally secured by a first lien on a pool of mortgages. Mortgage
pay-through securities exhibit characteristics of both pass-throughs and
mortgage-backed bonds. Mortgage-backed securities also include other debt
obligations secured by mortgages on commercial real estate or residential
properties. Other types of mortgage-backed securities will likely be developed
in the future, and the Portfolio may invest in them if Bankers Trust determines
they are consistent with the Portfolio's investment objective and policies.

COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"). The Short/Intermediate Term U.S.
Government Securities Portfolio may purchase CMOs issued by the U.S. Government
and its agencies and instrumentalities. CMOs are pay-through securities
collateralized by mortgages or mortgage-backed securities. CMOs are issued in
classes and series that have different maturities and often are retired in
sequence.

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

PUTS. The Intermediate Tax Free Portfolio may purchase municipal bonds or notes
together with the right to resell them at an agreed price or yield within a
specified period prior to maturity. This right to resell is known as a put. The
aggregate price paid for securities with puts may be higher than the price which
otherwise would be paid. Consistent with the investment objectives of the
Portfolio and subject to the supervision of the Trustees of the Portfolio, the
purpose of this practice is to permit the Portfolio to be fully invested in
tax-exempt securities while maintaining the necessary liquidity to purchase
securities on a when-issued basis, to meet unusually large redemptions, to
purchase at a later date securities other than those subject to the put and to
facilitate Bankers Trust's ability to manage the Portfolio actively. The
principal risk of puts is that the put writer may default on its obligation to
repurchase. Bankers Trust will monitor each writer's ability to meet its
obligations under puts.

The amortized cost method is used by the Portfolio to value municipal securities
with maturities of less than 60 days; when these securities are subject to puts
separate from the underlying securities, no value is assigned to the puts. The
cost of any such put is carried as an unrealized loss from the time of purchase
until it is exercised or expires.

ZERO COUPON SECURITIES are the separate income or principal components of a debt
instrument. These involve risks that are similar to those of other debt
securities, although they may be more volatile, and certain zero coupon
securities move in the same direction as interest rates.

ZERO COUPON MUNICIPAL SECURITIES. The Intermediate Tax Free Portfolio may invest
in zero coupon municipal securities which are debt securities issued or sold at
a discount from their face value which do not entitle the holder to any periodic
payment of interest prior to maturity or a specified redemption date (or cash
payment date). The amount of the discount varies depending on the time remaining
until maturity or cash payment date, prevailing interest rates, liquidity of the
security and perceived credit quality of the issuer. Zero coupon securities also
may take the form of debt securities that have been stripped of their unmatured
interest coupons, the coupons themselves and receipts or certificates
representing interests in such stripped debt obligations and coupons. The market
prices of zero coupon securities generally are more volatile than the market
prices of interest-bearing securities and are likely to respond to a greater
degree to changes in interest rates than interest-bearing securities having
similar maturities and credit qualities.

FLOATING RATE BONDS may have interest rates that move in tandem with a
benchmark, helping to stabilize their prices.

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

BRADY BONDS. "Brady bonds" are bonds issued as a result of a restructuring of a
country's debt obligations to commercial banks under the "Brady plan." Brady
bonds have been issued by the governments of Argentina, Costa Rica, Mexico,
Nigeria, Uruguay and Venezuela, Brazil and the Philippines, as well as other
emerging market countries. Most Brady bonds are currently rated below BBB by S&P
or Baa by Moody's. While Bankers Trust is not aware of the occurrence of any
payment defaults on Brady bonds, investors should recognize that these debt
securities have been issued only recently and, accordingly, do not have a long
payment history. Brady bonds may be collateralized or uncollateralized, are
issued in various currencies (primarily the U.S. dollar) and are actively traded
in the secondary market for Latin American debt.

RULE 144A SECURITIES are securities in the United States that are not registered
for sale under Federal securities laws but which can be resold to institutions
under the SEC's Rule 144A. Provided that a dealer or institutional trading
market in such securities exists, these restricted securities are treated as
exempt from the 15% limit on illiquid securities. Under the supervision of the
Board of Trustees of the Portfolio, Bankers Trust determines the liquidity of
restricted securities and, through reports from Bankers Trust, the Board will
monitor trading activity in restricted securities. Because Rule 144A is
relatively new, it is not possible to predict how these markets will develop. If
institutional trading in restricted securities were to decline, the liquidity of
the Portfolio could be adversely affected. No more than 10% of the Portfolio's
assets may be invested in securities restricted as to transfer or re-sale,
including Rule 144A securities.

WHEN ISSUED AND DELAYED DELIVERY SECURITIES. Each Portfolio may purchase
securities on a when-issued or delayed delivery basis. Delivery of and payment
for these securities may take place as long as a month or more after the date of
the purchase commitment. The value of these securities is subject to market
fluctuation during this period and no income accrues to the Portfolio until
settlement takes place. The Portfolio maintains with the Custodian a segregated
account containing high grade liquid securities in an amount at least equal to
these commitments.

REPURCHASE AGREEMENTS. In a repurchase agreement, a Portfolio buys a security at
one price and simultaneously agrees to sell it back at a higher price. Delays or
losses could result if the other party to the agreement defaults or becomes
insolvent.

REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a Portfolio
temporarily transfers possession of a portfolio instrument to another party in
return for cash. This could increase the risk of fluctuation in the fund's yield
or in the market value of its assets. A reverse repurchase agreement is a form
of borrowing and will be counted towards each Portfolio's borrowing
restrictions. See "Risk Factors and Certain Securities and Investment Practices
- -- Leverage" and in the SAI.

INVESTMENT COMPANIES. With respect to certain countries in which capital markets
are either less developed or not easily accessed, investments by the Portfolio
may be made through investment in other registered investment companies that in
turn are authorized to invest in the securities of such countries. Investment in
other investment companies is limited in amount by the 1940 Act, will involve
the indirect payment of a portion of the expenses, including advisory fees, of
such other investment companies and may result in a duplication of fees and
expenses.

SHORT-TERM INVESTMENTS. Each Portfolio intends to stay invested in the
securities described above to the extent practical in light of its objective and
long-term investment perspective. However, a Portfolio's assets may be invested
in high quality short-term investments with remaining maturities of 397 days or
less to meet anticipated redemptions and expenses for day-to-day operating
purposes and when, in Bankers Trust's opinion, it is advisable to adopt a
temporary defensive position because of unusual and adverse conditions affecting
the respective markets.

SECURITIES LENDING. Each Portfolio (other than the Intermediate Tax Free
Portfolio) is permitted to lend up to 30% of the total value of its securities.
These loans must be secured continuously by cash or equivalent collateral or by
a letter of credit at least equal to the market value of the securities loaned
plus accrued income. By lending its securities, the Portfolio can increase its
income by continuing to receive income on the loaned securities as well as by
the opportunity to receive interest on the collateral. Any gain or loss in the
market price of the borrowed securities which occurs during the term of the loan
inures to the Portfolio and its investors. In lending securities to brokers,
dealers and other financial organizations, a Portfolio is subject to risks,
which like those associated with other extensions of credit, include delays in
recovery and possible loss of rights in the collateral should the borrower fail
financially.

LEVERAGE. The Global High Yield Securities Portfolio and Latin American Equity
Portfolio may each borrow up to one-third of the value of its total assets, from
banks or through the use of reverse repurchase agreements, to increase its
holdings of portfolio securities. Under the 1940 Act, each Portfolio is required
to maintain continuous asset coverage of 300% with respect to such borrowings
and to sell (within three days) sufficient portfolio holdings to restore such
coverage if it should decline to less than 300% due to market fluctuations or
otherwise, even if such liquidations of a Portfolio's holdings may be
disadvantageous from an investment standpoint.

Leveraging by means of borrowing may exaggerate the effect of any increase or
decrease in the value of each Portfolio's securities and the corresponding
Fund's net asset value and money borrowed by a Portfolio will be subject to
interest and other costs (which may include commitment fees and/or the cost of
maintaining minimum average balances) which may or may not exceed the income
received from the securities purchased with borrowed funds.

LOAN PARTICIPATIONS AND ASSIGNMENTS. The Global High Yield Securities Portfolio
may invest in fixed and floating rate loans ("loans") arranged through private
negotiations between a borrower and one or more institutions ("lenders"). The
majority of the Portfolio's investments in loans in emerging markets is expected
to be in the form of participations in loans ("participations") and assignments
of portions of loans from third parties ("assignments"). The Portfolio may also
invest in loans, participations or assignments of loans to borrowers located in
the industrialized world. Participations typically will result in the
Portfolio's having a contractual relationship only with the lender, not the
borrower. The Portfolio will have the right to receive payments of principal,
interest and any fees to which it is entitled only from the lender selling the
participation and only upon receipt by the lender of the payments from the
borrower. In connection with purchasing participations, the Portfolio generally
will have no right to enforce compliance by the borrower with the terms of the
loan agreement relating to the loan ("loan agreement"), nor any rights of
set-off against the borrower, and the Portfolio may not directly benefit from
any collateral supporting the loan in which it has purchased the participation.
As a result, the Portfolio will assume the credit risk of both the borrower and
the lender that is selling the participation. In the event of the insolvency of
the lender selling the participation, the Portfolio may be treated as a general
creditor of the lender and may not benefit from any set-off between the lender
and the borrower. The Portfolio will acquire participations only if the lender
interpositioned between the Portfolio and the borrower is determined by Bankers
Trust to be creditworthy. When the Portfolio purchases assignments from lenders,
the Portfolio will acquire direct rights against the borrower on the loan;
however, since assignments are arranged through private negotiations between the
potential assignees and assignors, the rights and obligations acquired by the
Portfolio as the purchaser of an assignment may differ from, and be more limited
than, those held by the assigning lender.

The Portfolio may have difficulty disposing of assignments and participations.
The liquidity of such securities is limited and the Portfolio anticipates that
such securities could only be sold to a limited number of institutional
investors. The lack of a liquid secondary market could have an adverse impact on
the value of such securities and on the Portfolio's ability to dispose of
particular assignments or participations when necessary to meet the Portfolio's
liquidity needs or in response to a specific economic event, such as a
deterioration in the creditworthiness of the borrower. The lack of a liquid
secondary market for assignments and participations also may make it more
difficult in valuing the Portfolio and, therefore, calculating the net asset
value per share of the Fund. All assignments and participations shall be
considered to be illiquid securities by the Portfolio. The investment by the
Portfolio in illiquid securities, including assignments and participations, is
limited to a total of 15% of net assets.

DERIVATIVES

Each Portfolio may invest in various instruments that are commonly known as
derivatives. Generally, a derivative is a financial arrangement, the value of
which is based on, or "derived" from, a traditional security, asset, or market
index. Some "derivatives" such as mortgage-related and other asset-backed
securities are in many respects like any other investment, although they may be
more volatile or less liquid than more traditional debt securities. There are,
in fact, many different types of derivatives and many different ways to use
them. There are a range of risks associated with those uses. Futures and options
are commonly used for traditional hedging purposes to attempt to protect a fund
from exposure to changing interest rates, securities prices, or currency
exchange rates and as a low cost method of gaining exposure to a particular
securities market without investing directly in those securities. However, some
derivatives are used for leverage, which tends to magnify the effects of an
instrument's price changes as market conditions change. Leverage involves the
use of a small amount of money to control a large amount of financial assets,
and can in some circumstances, lead to significant losses. Bankers Trust will
use derivatives only in circumstances where they offer the most efficient means
of improving the risk/reward profile of a Portfolio. The use of derivatives for
non-hedging purposes may be considered speculative.

Foreign Currency Exchange Transactions. Each Portfolio (other than the Short/
Intermediate U.S. Government Securities Portfolio and the Intermediate Tax Free
Portfolio) may enter into foreign currency exchange transactions to convert to
and from different foreign currencies and to convert foreign currencies to and
from the U.S. dollar. A Portfolio either enters into these transactions on a
spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market or uses forward contracts to purchase or sell foreign
currencies.

A forward foreign currency exchange contract is an obligation by a Portfolio to
purchase or to sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract. Forward foreign currency exchange
contracts establish an exchange rate at a future date. These contracts are
transferable in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. A forward foreign currency
exchange contract generally has no deposit requirement and is traded at a net
price without commission. Neither spot transactions nor forward foreign currency
exchange contracts eliminate fluctuations in the prices of a Portfolio's
securities or in foreign exchange rates, or prevent loss if the prices of these
securities should decline.

A Portfolio may enter into foreign currency hedging transactions in an attempt
to protect against changes in foreign currency exchange rates between the trade
and settlement dates of specific securities transactions or changes in foreign
currency exchange rates that would adversely affect a portfolio position or an
anticipated investment position. Although these transactions tend to minimize
the risk of loss due to a decline in the value of the hedged currency, at the
same time they tend to limit any potential gain that might be realized should
the value of the hedged currency increase. The precise matching of the forward
contract amounts and the value of the securities involved will not generally be
possible because the future value of such securities in foreign currencies will
change as a consequence of market movements in the value of such securities
between the date the forward contract is entered into and the date it matures.
The projection of currency market movements is extremely difficult, and the
successful execution of a hedging strategy is highly uncertain.

Options on Foreign Currencies. Each Portfolio (other than the Short/
Intermediate U.S. Government Securities Portfolio and the Intermediate Tax Free
Portfolio) may write covered put and call options and purchase put and call
options on foreign currencies for the purpose of protecting against declines in
the U.S. dollar value of portfolio securities and against increases in the U.S.
dollar cost of securities to be acquired. A Portfolio may use options on
currency to cross-hedge, which involves writing or purchasing options on one
currency to hedge against changes in exchange rates for a different, but related
currency. As with other types of options, however, the writing of an option on
foreign currency will constitute only a partial hedge up to the amount of the
premium received, and the Portfolio could be required to purchase or sell
foreign currencies at disadvantageous exchange rates, thereby incurring losses.
The purchase of an option on foreign currency may be used to hedge against
fluctuations in exchange rates although, in the event of exchange rate movements
adverse to a Portfolio's position, it may forfeit the entire amount of the
premium plus related transaction costs. In addition, a Portfolio may purchase
call options on a currency when the investment adviser anticipates that the
currency will appreciate in value.

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

Options on Stocks. Each Portfolio (except the Global High Yield Securities
Portfolio, the Short/Intermediate U.S. Government Securities Portfolio and the
Intermediate Tax Free Portfolio) may write and purchase options on stocks. A
call option gives the purchaser of the option the right to buy, and obligates
the writer to sell, the underlying stock at the exercise price at any time
during the option period. Similarly, a put option gives the purchaser of the
option the right to sell, and obligates the writer to buy the underlying stock
at the exercise price at any time during the option period. A covered call
option with respect to which a Portfolio owns the underlying stock sold by the
Portfolio exposes the Portfolio during the term of the option to possible loss
of opportunity to realize appreciation in the market price of the underlying
stock or to possible continued holding of a stock which might otherwise have
been sold to protect against depreciation in the market price of the stock. A
covered put option sold by a Portfolio exposes the Portfolio during the term of
the option to a decline in price of the underlying stock.

Options on Securities Indices. Each Portfolio may purchase and write put and
call options on stock or bond indices listed on domestic and foreign stock
exchanges, in lieu of direct investment in the underlying securities or for
hedging purposes. A stock or bond index fluctuates with changes in the market
values of the securities included in the index.

Options on securities indices are generally similar to options on stocks except
that the delivery requirements are different. Instead of giving the right to
take or make delivery of securities at a specified price, an option on a stock
or bond index gives the holders the right to receive a cash "exercise settlement
amount" equal to (a) the amount, if any, by which the fixed exercise price of
the option exceeds (in the case of a put) or is less than (in the case of a
call) the closing value of the underlying index on the date of the exercise,
multiplied by (b) a fixed "index multiplier."

Successful use by a Portfolio of options on security indices will be subject to
Bankers Trust's ability to predict correctly movement in the direction of the
security market generally or of a particular industry. This requires different
skills and techniques than predicting changes in the price of individual
securities.

Futures Contracts on Securities Indices. Each Portfolio may enter into contracts
providing for the making and acceptance of a cash settlement based upon changes
in the value of an index of domestic or foreign securities ("Futures
Contracts"). This investment technique may be used as a low-cost method of
gaining exposure to a particular securities market without investing directly in
those securities or to hedge against anticipated future changes in general
market prices which otherwise might either adversely affect the value of
securities held by the Portfolio or adversely affect the prices of securities
which are intended to be purchased at a later date for the Portfolio. A Futures
Contract may also be entered into to close out or offset an existing futures
position.

When used for hedging purposes, each transaction in Futures Contracts involves
the establishment of a position which will move in a direction opposite to that
of the investment being hedged. If these hedging transactions are successful,
the futures position taken for the Portfolio will rise in value by an amount
which approximately offsets the decline in value of the portion of the
Portfolio's investments that is being hedged. Should general market prices move
in an unexpected manner, the full anticipated benefits of Futures Contracts may
not be achieved or a loss may be realized.

The risks of Futures Contracts also include a potential lack of liquidity in the
secondary market and incorrect assessments of market.

Brokerage costs will be incurred and "margin" will be required to be posted and
maintained as a good faith deposit against performance of obligations under
Futures Contracts written for a Portfolio. A Portfolio may not purchase or sell
a Futures Contract if immediately thereafter its margin deposits on its
outstanding Futures Contracts, other than Futures Contracts used for hedging
purposes, would exceed 5% of the market value of the Portfolio's total assets.

Options on Futures Contracts. Each Portfolio may invest in options on futures
contracts for similar purposes.

There can be no assurance that the use of these portfolio strategies will be
successful.

Asset Coverage. To assure that a Portfolio's use of futures and related options,
as well as when-issued and delayed-delivery securities and foreign currency
exchange transactions, are not used to achieve investment leverage, a Portfolio
will cover such transactions, as required under applicable interpretations, of
the SEC, either by owning the underlying securities, entering into an
off-setting transaction, or by establishing a segregated account with the
Portfolio's custodian containing high grade liquid debt securities in an amount
at all times equal to or exceeding the Portfolio's commitment with respect to
these instruments or contracts.

PORTFOLIO TURNOVER

The portfolio turnover rate for each Portfolio for the periods indicated were as
follows: Short/Intermediate Term U.S. Government Securities Portfolio -- 246%,
202%, 267% and 75% for the fiscal years ended December 31, 1995, 1994 and 1993
and for the period from August 24, 1992 (commencement of operations) to December
31, 1992, respectively; Intermediate Tax Free Portfolio -- 95%, 118%, 40% and
132% for the fiscal years ended December 31, 1995, 1994, 1993 and for the period
from July 20, 1992 (commencement of operations) to December 31, 1992,
respectively; Global High Yield Securities Portfolio -- 169% and 347% for the
fiscal year ended September 30, 1995 and for the period from December 14, 1993
(commencement of operations) to September 30, 1994, respectively; Capital
Appreciation Portfolio -- 125%, 157% and 137% for the period from January 1,
1995 to September 30, 1995, the fiscal year ended December 31, 1994 and the
period from March 9, 1993 (commencement of operations) to December 31, 1993,
respectively; Small Cap Portfolio -- 161% and 154% for the fiscal year ended
September 30, 1995 and for the period from October 21, 1993 (commencement of
operations) to September 30, 1994, respectively; International Equity Portfolio
- -- 21%, 15%, 17% and 7% for the period from January 1, 1995 to September 30,
1995, the fiscal years ended December 31, 1994, 1993 and the period from August
4, 1992 (commencement of operations) to December 31, 1992, respectively; Pacific
Basin Equity Portfolio -- 104% and 40% for the fiscal year ended September 30,
1995 and for the period from November 1, 1993 (commencement of operations) to
September 30, 1994, respectively; Latin American Equity Portfolio -- 161% and
124% for the fiscal year ended September 30, 1995 and for the period from
October 25, 1993 (commencement of operations) to September 30, 1994,
respectively. These rates will vary from year to year. High turnover rates
increase transaction costs and may increase investable capital gains. Bankers
Trust considers these effects when evaluating the anticipated benefits of
short-term investing.

PERFORMANCE

Each Portfolio's recent strategies and holdings, and the corresponding Fund's
performance, is detailed twice a year in the Funds' financial reports, which are
sent to all Fund shareholders.

For current Fund performance or a free copy of the Funds' financial report,
please contact a Service Agent.

Mutual fund performance is commonly measured as total return and/or yield. Each
Fund's performance is affected by the expenses of that Fund. The exclusion of
any applicable sales charge from a performance calculation produces a higher
return.

EXPLANATION OF TERMS

TOTAL RETURN is the change in value of an investment in a Fund over a given
period, assuming reinvestment of any dividends and capital gains. A cumulative
total return reflects actual performance over a stated period of time. An
average annual total return is a hypothetical rate of return that, if achieved
annually, would have produced the same cumulative total return if performance
had been constant over the entire period. Average annual total return
calculations smooth out variations in performance; they are not the same as
actual year-by-year results. Average annual total returns covering periods of
less than one year assume that performance will remain constant for the rest of
the year.

YIELD refers to the income generated by an investment in a Fund over a given
period of time, expressed as an annual percentage rate. Yields are calculated
according to a standard that is required for all stock and bond funds. Because
this differs from other accounting methods, the quoted yield may not equal the
income actually paid to shareholders. This difference may be significant for a
Fund investing in a Portfolio whose investments are denominated in foreign
currencies.

Performance information may include comparisons of a Fund's investment results
to various unmanaged indices or results of other mutual funds or investment or
savings vehicles. From time to time, Fund rankings may be quoted from various
sources, such as Lipper Analytical Services, Inc., Value Line and Morningstar,
Inc.

Unlike some bank deposits or other investments which pay a fixed yield for a
stated period of time, the total return of a Fund will vary depending upon
interest rates, the current market value of the securities held by the
corresponding Portfolio and changes in the expenses of the Fund or Portfolio. In
addition, during certain periods for which total return may be provided, Bankers
Trust or SBDS may have voluntarily agreed to waive portions of their fees, or
reimburse certain operating expenses of a Fund or Portfolio, on a month-to-month
basis. Such waivers will have the effect of increasing the Fund's net income
(and therefore its yield and total return) during the period such waivers are in
effect.

TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN INDICATION OF
FUTURE PERFORMANCE.

MANAGEMENT OF THE TRUSTS AND THE PORTFOLIOS

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

INVESTMENT ADVISER
Neither Trust has retained the services of an investment adviser since each
Trust seeks to achieve the investment objective of each of its Funds by
investing all the Assets of the Fund in the corresponding Portfolio. Each
Portfolio has retained the services of Bankers Trust as investment adviser (the
"Adviser").

BANKERS TRUST COMPANY AND ITS AFFILIATES
Bankers Trust Company, a New York banking corporation with principal offices at
280 Park Avenue, New York, New York 10017, is a wholly owned subsidiary of
Bankers Trust New York Corporation. Bankers Trust conducts a variety of general
banking and trust activities and is a major wholesale supplier of financial
services to the international and domestic institutional market.

As of December 31, 1995, Bankers Trust New York Corporation was the ninth
largest bank holding company in the United States with total assets of
approximately $104 billion. Bankers Trust is a worldwide merchant bank dedicated
to servicing the needs of corporations, governments, financial institutions and
private clients through a global network of over 120 offices in more than 40
countries. Investment management is a core business of Bankers Trust, built on a
tradition of excellence from its roots as a trust bank founded in 1903. The
scope of Bankers Trust's investment management capability is unique due to its
leadership positions in both active and passive quantitative management and its
presence in major equity and fixed income markets around the world. Bankers
Trust is one of the nation's largest and most experienced investment managers
with approximately $200 billion in assets under management globally.

Bankers Trust has more than 50 years of experience managing retirement assets
for the nation's largest corporations and institutions. In the past, these
clients have been serviced through separate account and commingled fund
structures. Now, the BT Family of Funds brings Bankers Trust's extensive
investment management expertise - once available to only the largest
institutions in the U.S. - to individual investors. Bankers Trust's officers
have had extensive experience in managing investment portfolios having
objectives similar to those of each Portfolio.

Bankers Trust, subject to the supervision and direction of the Board of Trustees
of each Portfolio, manages each Portfolio in accordance with the Portfolio's
investment objective and stated investment policies, makes investment decisions
for the Portfolio, places orders to purchase and sell securities and other
financial instruments on behalf of the Portfolio and employs professional
investment managers and securities analysts who provide research services to the
Portfolio. Bankers Trust may utilize the expertise of any of its world wide
subsidiaries and affiliates to assist it in its role as investment adviser. All
orders for investment transactions on behalf of a Portfolio are placed by
Bankers Trust with broker-dealers and other financial intermediaries that it
selects, including those affiliated with Bankers Trust. A Bankers Trust
affiliate will be used in connection with a purchase or sale of an investment
for the Portfolio only if Bankers Trust believes that the affiliate's charge for
the transaction does not exceed usual and customary levels. The Portfolio will
not invest in obligations for which Bankers Trust or any of its affiliates is
the ultimate obligor or accepting bank. The Portfolio may, however, invest in
the obligations of correspondents and customers of Bankers Trust.

The Investment Advisory Agreement provides for each Portfolio to pay Bankers
Trust a fee, accrued daily and paid monthly, equal on an annual basis to the
following percentages of the average daily net assets of the Portfolio for its
then-current fiscal year: Short/Intermediate U.S. Government Securities
Portfolio, 0.25%; Intermediate Tax Free Portfolio, 0.40%; Global High Yield
Securities Portfolio, 0.80%; Capital Appreciation Portfolio, 0.65%; Small Cap
Portfolio, 0.65%; International Equity Portfolio, 0.65%; Pacific Basin Equity
Portfolio, 0.75%; and Latin American Equity Portfolio, 1.00%. With respect to
Global High Yield Securities Portfolio, Pacific Basin Equity Portfolio, and
Latin American Equity Portfolio, the investment advisory fee is higher than that
of most funds, but not necessarily higher than that of a typical international
fund, due to the greater complexity, expense and commitment of resources
involved in international investing.

Bankers Trust has been advised by its counsel that, in counsel's opinion,
Bankers Trust currently may perform the services for the Trust and the
Portfolios described in this Prospectus and the SAI without violation of the
Glass-Steagall Act or other applicable banking laws or regulations. State laws
on this issue may differ from the interpretations of relevant Federal law, and
banks and financial institutions may be required to register as dealers pursuant
to state securities law.

SUB-INVESTMENT ADVISER -- PACIFIC BASIN EQUITY PORTFOLIO
Bankers Trust has entered into a sub-investment advisory agreement (the "Sub-
Advisory Agreement") with BT Fund Managers International Limited ("BT Fund
Managers International"), a wholly owned registered investment advisory
subsidiary of Bankers Trust Australia Limited ("BTAL"). BTAL is a wholly owned
subsidiary of Bankers Trust New York Corporation. Under the Sub-Advisory
Agreement, Bankers Trust may receive investment advice and research services
with respect to companies based in the Pacific Basin and may grant BT Fund
Managers International investment management authority as well as the authority
to buy and sell securities if Bankers Trust believes it would be beneficial to
the Pacific Basin Equity Portfolio. Under the Sub-Advisory Agreement, BT Fund
Managers International receives a fee from Bankers Trust for providing
investment advice and research services, accrued daily and paid monthly, at the
annual rate of 0.60% of the average daily assets of the Portfolio.

PORTFOLIO MANAGERS

Louis M. Hudson, Vice President, is responsible for the day to day management
of the Short/Intermediate Term U.S. Government Securities Portfolio. Mr.
Hudson has been employed by Bankers Trust since 1961 and has managed the
Portfolio's assets since February, 1994.

Gary Pollack is responsible for the day-to-day management of the Intermediate
Tax Free Portfolio. Mr. Pollack has been employed by Bankers Trust since prior
to 1989 and has managed the Portfolio's assets since the Portfolio's
commencement of operations.

David A. Reiss, Vice President of Bankers Trust and Stephen C. Freidheim,
Managing Director of Bankers Trust are responsible for the day-to-day
management of the Global High Yield Securities Portfolio. Mr. Reiss has been
employed by Bankers Trust since March, 1994 and has managed the Portfolio's
assets since March, 1994. From September, 1989 to March, 1994, Mr. Reiss was a
Portfolio Manager at Kidder Peabody Asset Management. Prior to September,
1989, he was an associate in Mortgage Research at Goldman, Sachs & Co. Mr.
Freidheim has been employed by Bankers Trust since August, 1993 and has
managed the Portfolio's assets since December, 1993. From July, 1990 to July,
1993 he was a Senior Vice President and Director of Research and Trading at
Nomura Securities International. Mr. Freidheim was also on the Board of
Directors of Nomura Corporate Research and Asset Management. Prior to July,
1990, he was Director of Research at Kidder, Peabody High Yield Asset
Management.

Mary Lisanti, Managing Director of Bankers Trust, is responsible for the
day-to-day management of the Capital Appreciation Portfolio and Small Cap
Portfolio. Ms. Lisanti has been employed by Bankers Trust since February, 1993
and has managed each Portfolio's assets since each Portfolio commenced
operations. Prior to 1993, she was a Vice President and Portfolio Manager with
Lieber & Company/The Evergreen Funds (since 1990).

Michael Levy has been the primary portfolio manager for the International Equity
Portfolio since August 1995. He also heads the international active equity team,
which is responsible for the day to day management of the Portfolio. Mr. Levy
has been the head of this team since joining Bankers Trust in March, 1993, and
is a Managing Director and International Equity Strategist of Bankers Trust. The
international active equity team has provided input into the management of the
Portfolio since the Portfolio's commencement of operations. Prior to joining
Bankers Trust, Mr. Levy was an investment banker and an equity analyst with
Oppenheimer & Company. He has twenty-four years of business experience, of which
fourteen years have been in the investment industry.

Robert Reiner has been the co-manager of the International Equity Portfolio
since joining Bankers Trust in 1994. Mr. Reiner is responsible for managing
global portfolios and developing analytical and investment tools for the group's
global equity team. As a member of the international active equity team, he
focuses on Japanese and European markets. Prior to joining Bankers Trust, he was
an equity analyst and also provided macroeconomic coverage for Scudder, Stevens
and Clark. He previously served as Senior Analyst at Sanford C. Bernstein & Co.
and was instrumental in the development of Bernstein's International Value Fund.
For more than nine years, Mr. Reiner was employed by S&P in its ratings group.
His tenure included managing the day to day operations of S&P's Tokyo office for
three years.

Paul Durham, Vice President of BTAL, is responsible for the day-to-day
management of the Pacific Basin Equity Portfolio. Mr. Durham has been employed
by Bankers Trust since January, 1988 and has managed the Portfolio's assets
since November, 1993.

Maria-Elena Carrion (CFA), Vice President of Bankers Trust, is primarily
responsible for the day-to-day management of the Latin American Equity
Portfolio. Ms. Carrion has been employed by Bankers Trust since April, 1993 and
has managed the Portfolio's assets since the Portfolio commenced operations.
Prior to April, 1993, Ms. Carrion was employed by Latin American Securities
(London) (from June, 1991 to April, 1993). Prior to June, 1991, Ms. Carrion was
employed by US Trust Company (from September, 1986 to June, 1991).

Bankers Trust investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for personal
investing and restricts certain transactions.

ADMINISTRATOR

Under an Administration and Services Agreement with each Portfolio, Bankers
Trust calculates the value of the assets of the Portfolio and generally assists
the respective Board of Trustees in all aspects of the administration and
operation of the Portfolios. The Administration and Services Agreement provides
for each Portfolio to pay Bankers Trust a fee, accrued daily and paid monthly,
equal on an annual basis to the following percentages of the Portfolio's average
daily net assets for its then-current fiscal year: Short/ Intermediate U.S.
Government Securities Portfolio, 0.05%; and Intermediate Tax Free Portfolio,
0.05%; Global High Yield Securities Portfolio, 0.20%; Capital Appreciation
Portfolio, 0.10%; Small Cap Portfolio, 0.10%; International Equity Portfolio,
0.15%; Pacific Basin Equity Portfolio, 0.25%; and Latin American Equity
Portfolio, 0.20%. Under each Administration and Services Agreement, Bankers
Trust may delegate one or more of its responsibilities to others, including
SBDS, at Bankers Trust's expense.

DISTRIBUTOR

Under its Distribution Agreement with each Trust, SBDS, as Distributor, serves
as the Trust's principal underwriter on a best efforts basis. In addition, SBDS
provides the Trust with office facilities. SBDS is a wholly owned subsidiary of
Signature Financial Group, Inc. ("SFG"). SFG and its affiliates currently
provide administration and distribution services for other registered investment
companies. The principal business address of SFG and SBDS is 6 St. James Avenue,
Boston, Massachusetts 02116.

DISTRIBUTION AND SERVICE PLAN

Pursuant to the terms of each Trust's Plan of Distribution pursuant to Rule
12b-1 under the 1940 Act (the "Plan"), Signature may seek reimbursement in an
amount not exceeding 0.20% of each Fund's average daily net assets annually for
expenses incurred in connection with any activities primarily intended to result
in the sale of the Fund's shares, including, but not limited to: compensation to
and expenses (including overhead and telephone expenses) of account executives
or other employees of Signature who, as their primary activity, engage in or
support the distribution of shares; printing of prospectuses, statements of
additional information and reports for other than existing Fund shareholders in
amounts in excess of that typically used in connection with the distribution of
shares of the Fund; costs of placing advertising in various media; services of
parties other than Signature or its affiliates in formulating sales literature;
and typesetting, printing and distribution of sales literature. All costs and
expenses in connection with implementing and operating the Plan will be paid by
the Fund, subject to the 0.20% of net assets limitation. All costs and expenses
associated with preparing the Prospectus and SAI and in connection with printing
them for and distributing them to existing shareholders and regulatory
authorities, which costs and expenses would not be considered distribution
expenses for purposes of the Plan, will also be paid by the Funds. To the extent
expenses of SBDS under the Plan in any fiscal year of the Trust exceed amounts
payable under the Plan during that year, those expenses may be reimbursed in a
succeeding fiscal year; however, no carrying charge or interest will be added to
the amount of the expense. Expenses incurred in connection with distribution
activities will be identified to each Fund or the other series of the Trust
involved, although it is anticipated that some activities may be conducted on a
Trust-wide basis, with the result that those activities will not be identifiable
to any particular series. In the latter case, expenses will be allocated among
the series of the Trust on the basis of their relative net assets.

SERVICE AGENT

All shareholders must be represented by a Service Agent. Bankers Trust acts as a
Service Agent pursuant to its Administration and Services Agreement with each
Trust and receives no additional compensation from the Funds for such
shareholder services. The service fees of any other Service Agents, including
broker-dealers, will be paid by Bankers Trust from its fees. The services
provided by a Service Agent may include establishing and maintaining shareholder
accounts, processing purchase and redemption transactions, arranging for bank
wires, performing shareholder sub-accounting, answering client inquiries
regarding the Trust, assisting clients in changing dividend options, account
designations and addresses, providing periodic statements showing the client's
account balance, transmitting proxy statements, periodic reports, updated
prospectuses and other communications to shareholders and, with respect to
meetings of shareholders, collecting, tabulating and forwarding to the Trust
executed proxies and obtaining such other information and performing such other
services as the Administrator or the Service Agent's clients may reasonably
request and agree upon with the Service Agent. Service Agents may separately
charge their clients additional fees only to cover provision of additional or
more comprehensive services not already provided under the Administration and
Services Agreement with Bankers Trust, or of the type or scope not generally
offered by a mutual fund, such as cash management services or enhanced
retirement or trust reporting. Each Service Agent has agreed to transmit to
shareholders, who are its customers, appropriate disclosures of any fees that it
may charge them directly.

CUSTODIAN AND TRANSFER AGENT

Bankers Trust acts as custodian of the assets of the Trusts and each Portfolio
and serves as the transfer agent (the "Transfer Agent") for the Trust and each
Portfolio under the Administration and Services Agreement with the Trust and
each Portfolio.

NET ASSET VALUE

The net asset value per share of each Fund is calculated on each day on which
the New York Stock Exchange Inc. (the "NYSE") is open (each such day being a
"Valuation Day"). The NYSE is currently open on each day, Monday through Friday,
except: (a) January 1st, Presidents' Day (the third Monday in February), Good
Friday, Memorial Day (the last Monday in May), July 4th, Labor Day (the first
Monday in September), Thanksgiving Day (the last Thursday in November) and
December 25th; and (b) the preceding Friday or the subsequent Monday when one of
the calendar-determined holidays falls on a Saturday or Sunday, respectively.

The net asset value per share of each Fund is calculated once on each Valuation
Day as of the close of regular trading on the NYSE (the "Valuation Time"), which
is currently 4:00 p.m., New York time or in the event that the NYSE closes
early, at the time of such early closing. The net asset value per share of the
Fund is computed by dividing the value of the Fund's Assets (i.e., the value of
its investment in the Portfolio and other assets), less all liabilities, by the
total number of its shares outstanding. The Portfolio's securities and other
assets are valued primarily on the basis of market quotations or, if quotations
are not readily available, by a method which the Portfolio's Board of Trustees
believes accurately reflects fair value.

Under procedures adopted by the Board, a net asset value for a Fund later
determined to have been inaccurate for any reason will be recalculated.
Purchases and redemptions made at a net asset value determined to have been
inaccurate will be adjusted, although in certain circumstances, such as where
the difference between the original net asset value and the recalculated net
asset value divided by the recalculated net asset value is 0.005% ( 1/2 of 1%)
or less or shareholder transactions are otherwise insubstantially affected,
further action is not required.

PURCHASE AND REDEMPTION OF SHARES

PURCHASE OF SHARES

Each Trust accepts purchase orders for shares of each Fund at the net asset
value per share of the Fund next determined on each Valuation Day. See "Net
Asset Value" above. There is no sales charge on the purchase of shares, but
costs of distributing shares of each Fund may be reimbursed from its assets, as
described herein. Service Agents may impose initial and subsequent investment
minimums that differ from the amounts presented in the "Minimum Investments"
table below. Shares of each Fund may be purchased in only those states where
they may be lawfully sold.

Purchase orders for shares of each Fund that are received by a Service Agent and
transmitted to Bankers Trust, as the Trust's transfer agent (the "Transfer
Agent"), prior to the Valuation Time (currently 4:00 p.m., New York time or
earlier should the NYSE close earlier) on any Valuation Day will be effective at
that day's Valuation Time. Each Trust and Signature reserve the right to reject
any purchase order.

Shares must be purchased in accordance with procedures established by the
Transfer Agent and Service Agents, including Bankers Trust, in connection with
customers' accounts. It is the responsibility of each Service Agent to transmit
to the Transfer Agent purchase and redemption orders and to transmit to Bankers
Trust as each Trust's custodian (the "Custodian") purchase payments on behalf of
its customers by the following business day (trade date +1) after an order for
shares is placed, and a shareholder must settle with the Service Agent his or
her entitlement to an effective purchase or redemption order as of a particular
time. Because Bankers Trust is the Custodian and Transfer Agent of each Trust,
funds may be transferred directly from or to a customer's account with Bankers
Trust to or from the Fund without incurring the additional costs or delays
associated with the wiring of Federal funds.

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

Automatic Investment Plan. Each Fund may offer shareholders an automatic
investment plan under which shareholders may authorize some Service Agents to
place a purchase order each month or quarter for Fund shares. For further
information regarding the automatic investment plan, shareholders should contact
their Service Agent.

MINIMUM INVESTMENTS

TO OPEN AN ACCOUNT $2,500
For retirement accounts $ 500
Through automatic investment plans $1,000

TO ADD TO AN ACCOUNT $ 250
For retirement accounts $ 100
Through automatic investment plans $ 100

MINIMUM BALANCE $1,000
For retirement accounts None

REDEMPTION OF SHARES

Shareholders may redeem shares at the net asset value per share next determined
on each Valuation Day. Redemption requests should be transmitted by customers in
accordance with procedures established by the Transfer Agent and the
shareholder's Service Agent. Redemption requests for shares of each Fund
received by the Service Agent and transmitted to the Transfer Agent prior to the
Valuation Time (currently 4:00 p.m., New York time or earlier should the NYSE
close earlier) on each Valuation Day will be effective at that day's Valuation
Time and the redemption proceeds normally will be delivered to the shareholder's
account with the Service Agent on the next day, but in any event within seven
calendar days following receipt of the request.

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

Redemption orders are processed without charge by each Trust. A Service Agent
may on at least 30 days' notice involuntarily redeem a shareholder's account
with the Fund having a balance below the minimum (as shown above), but not if an
account is below the minimum balance due to a change in market value. See
"Minimum Investments" above for minimum balance amounts.

Automatic Cash Withdrawal Plan. Service Agents may offer shareholders an
automatic cash withdrawal plan, under which shareholders who own shares of a
Fund may elect to receive periodic cash payments. Retirement plan accounts are
eligible for automatic cash withdrawal plans only where the shareholder is
eligible to receive qualified distributions. For further information regarding
the automatic cash withdrawal plan, shareholders should contact their Service
Agent.

EXCHANGE PRIVILEGE

Shareholders may exchange their shares for shares of certain other funds in the
BT Family of Funds registered in their state. Each Trust reserves the right to
terminate or modify the exchange privilege in the future with respect to any
Fund. To make an exchange, follow the procedures indicated in "Purchase of
Shares" and "Redemption of Shares" in that fund's prospectus. Before making an
exchange, please note the following:

* Call your Service Agent for information and a prospectus. Read the
prospectus for relevant information.

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

* Each exchange represents the sale of shares of one fund and the purchase of
shares of another, which may produce a gain or loss for tax purposes. Your
Service Agent will send a written confirmation of each exchange transaction.

TAX-SAVING RETIREMENT PLANS

Retirement plans offer significant tax savings and are available to individuals,
partnerships, small businesses, corporations, nonprofit organizations and other
institutions. Contact your Service Agent or Bankers Trust for further
information. Bankers Trust can set up your new account in a Fund under a number
of several tax-sheltered plans. These plans contain special tax advantages and
let you invest for retirement while sheltering your investment income from
current taxes. Minimums may differ from those listed elsewhere in the
Prospectus.

* Individual Retirement Accounts (IRAs): personal savings plans that offer tax
advantages for individuals to set aside money for retirement and allow new

contributions of $2,000 per tax year.

* Rollover IRAs: tax-deferred retirement accounts that retain the special tax
advantages of lump sum distributions from qualified retirement plans and
transferred IRA accounts.

* Simplified Employee Pension Plans (SEP): a relatively easy and inexpensive
alternative to retirement planning for sole proprietors, partnerships and
corporations. Under a SEP, employers make tax-deductible contributions to
their own and to eligible employees' IRA accounts. Employee contributions are
available through a "Salary Deferral" SEP for businesses with fewer than 25
eligible employees.

* Keogh Plans: defined contribution plans available to individuals with self-
employed income and nonincorporated businesses such as sole proprietors,
professionals and partnerships. Contributions are tax-deductible to the
employer and earnings are tax-sheltered until distribution.

* Corporate Profit-Sharing and Money-Purchase Plans: defined contribution
plans available to corporations to benefit their employees by making
contributions on their behalf and in some cases permitting their employees
to make contributions.

* 401(k) Programs: defined contribution plans available to corporations allowing
tax-deductible employer contributions and permitting employees to contribute a
percentage of their wages on a tax-deferred basis.

* 403(b) Custodian Accounts: defined contribution plans open to employees of
most nonprofit organizations and educational institutions.

* Deferred Benefit Plans: plan sponsors may invest all or part of their
pension assets in the Fund.

SHAREHOLDER AND ACCOUNT POLICIES

DIVIDENDS, CAPITAL GAINS, AND TAXES

Each Fund distributes substantially all of its net investment income and capital
gains to shareholders each year. Each Fund distributes capital gains annually.
Normally, income dividends for the Global High Yield Securities Fund, Small Cap
Fund and the Capital Appreciation Fund are distributed quarterly; income
dividends for the International Equity Fund, Pacific Basin Equity Fund and the
Latin American Equity Fund are distributed annually. Income dividends for the
Limited Term U.S. Government Securities Fund and the Intermediate Tax Free Fund
are declared daily and paid monthly.

Unless a shareholder instructs a Trust to pay such dividends and distributions
in cash, they will be automatically reinvested in additional shares of the Fund.

FOR RETIREMENT ACCOUNTS, all distributions are automatically reinvested. When
you are over 59 1/2 years old, you can receive distributions in cash. If
distributions from a retirement account for any taxable year following the year
in which the participant reaches age 70 1/2 are less than the "minimum required
distribution" for that taxable year, an excise tax equal to 50% of the
deficiency may be imposed by the Internal Revenue Service (the "IRS"). The
administrator, trustee or custodian of such a retirement account will be
responsible for reporting distributions from such accounts to the IRS.

When each of the Funds deducts a distribution from its NAV, the reinvestment
price is the applicable Fund's NAV at the close of business that day.
Distribution checks will be mailed within seven days, or longer for a December
ex-dividend date.

TAXES

As with any investment, you should consider how an investment in the Funds could
affect you. Below are some of the Funds' tax implications. If your account is
not a tax-deferred retirement account beware of these tax implications.

TAXES ON DISTRIBUTIONS. Distributions from the Funds are subject to federal
income tax and may also be subject to state or local taxes. Annual statements as
to the federal tax status of distributions, and distributions that are
attributable to state and local income and personal taxes, if applicable, will
be mailed to shareholders shortly after the end of the year. If living outside
the United States, your distributions from the Funds could also be taxed by the
country in which you reside.

For federal tax purposes, income and short-term capital gain distributions from
each of the Funds are taxed as dividends; long-term capital gain distributions
are taxed as long-term capital gains.

Mutual fund dividends from U.S. government securities are generally free from
state and local income taxes. However, particular states may limit this benefit,
and some types of securities, such as repurchase agreements and some
agency-backed securities, may not qualify for the benefit. In addition, some
states may impose intangible property taxes. You should consult your own tax
adviser for details and up-to-date information on the tax laws in your state.

Distributions are taxable when they are paid, whether you take them in cash or
reinvest them. However, distributions declared in December and paid in January
are taxable as if they were paid on December 31.

Every January, the Transfer Agent will send the IRS a statement showing the
taxable distributions paid to you in the previous year.

TAXES ON TRANSACTIONS. Your redemptions, including exchanges, are subject to
capital gains tax. A capital gain or loss is the difference between the cost of
your Shares and the price you receive when you sell them.

Whenever you sell Shares of a Fund, the Transfer Agent will send you or your
Investment Professional a confirmation statement showing how many Shares you
sold and at what price. You also receive a consolidated transaction statement at
least quarterly. However, it is up to you or your tax preparer to determine
whether this sale resulted in a capital gain and, if so, the amount of tax to be
paid. BE SURE TO KEEP YOUR REGULAR ACCOUNT STATEMENTS; the information they
contain will be essential in calculating the amount of your capital gains.

"BUYING A DIVIDEND." If you buy Shares just before a Fund deducts a capital gain
distribution or dividend distribution, as applicable, from its NAV, you will pay
the full price for the Shares and then receive a portion of the price back in
the form of a taxable distribution.

CURRENCY CONSIDERATIONS. If a Fund's dividends exceed its taxable income in any
year, which is sometimes the result of currency-related losses, all or a portion
of the Fund's dividends may be treated as a return of capital to shareholders
for tax purposes. To minimize the risk of a return of capital, each of the Funds
may adjust its dividends to take currency fluctuations into account, which may
cause the dividends to vary. Any return of capital will reduce the cost basis of
your Shares, which will result in a higher reported capital gain or a lower
reported capital loss when you sell your Shares. The statement you receive in
January will specify whether any distributions included a return of capital.

Undistributed net gains from currency transactions, if any, will generally be
distributed as a separate dividend in December.

There are tax requirements that all Funds must follow in order to avoid federal
taxation. In its effort to adhere to these requirements, a Fund may have to
limit its investment activity in some types of instruments.

ADDITIONAL INFORMATION ABOUT THE TRUSTS AND PORTFOLIOS

Each Fund is a mutual fund: an investment that pools shareholders' money and
invests it toward a specified goal. Each Fund (with the exception of the Limited
Term U.S. Government Securities Fund) is a separate series of BT Investment
Funds, a Massachusetts business trust. The Limited Term U.S. Government
Securities Fund is a separate series of BT Pyramid Mutual Funds, a Massachusetts
business trust. Each of the Global High Yield Securities Portfolio, Small Cap
Portfolio, Pacific Basin Equity Portfolio and Latin American Equity Portfolio is
a separate subtrust of BT Investment Portfolios, a New York master trust fund.
Each of the Capital Appreciation Portfolio, International Equity Portfolio,
Short/Intermediate U.S. Government Portfolio and Intermediate Tax Free Portfolio
is a New York trust.

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

Each Trust or a Portfolio may hold special meetings and mail proxy materials.
These meetings may be called to elect or remove trustees, change fundamental
policies, approve Portfolio's investment advisory agreement, or for other
purposes. Shareholders not attending these meetings are encouraged to vote by
proxy. Each Trust's Transfer Agent will mail proxy materials in advance,
including a voting card and information about the proposals to be voted on.

When matters are submitted for shareholder vote, shareholders of each Fund will
have one vote for each full share held and proportionate, fractional votes for
fractional shares held. A separate vote of one of the Funds is required on any
matter affecting only that Fund on which shareholders are entitled to vote.
Shareholders of a Fund are not entitled to vote on Trust matters that do not
affect that Fund and do not require a separate vote of the Fund. All series of a
Trust will vote together on certain matters, such as electing trustees or
approving independent public auditors. 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. The Trust will also
assist shareholders in communicating with one another as provided for in the
1940 Act.

Each series of the BT Investment Portfolios will vote separately on any matter
involving the corresponding Portfolio. Shareholders of all of the series of the
Trust will, however, vote together to elect Trustees of the Trust and for
certain other matters. Under certain circumstances, the shareholders of one or
more series could control the outcome of these votes. The series of BT
Investment Portfolios will vote together or separately on matters in the same
manner, and in the same circumstances, as do the series of the Trust. As with
the Trust, the investors in one or more series of BT Investment Portfolios could
control the outcome of these votes.

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

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

<PAGE>

APPENDIX

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

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

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

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

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

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

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

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

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

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

DESCRIPTION OF S&PS CORPORATE BOND RATINGS:

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

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

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

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

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

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

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

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

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

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

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

Description of S&P commercial paper ratings:

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

Description of Moody's commercial paper ratings:

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

Description of Fitch Investors Service's commercial paper ratings: F-1+
Exceptionally Strong Credit Quality. Issues assigned this rating are regarded as
having the strongest degree of assurance for timely payment.

F-1 Very Strong Credit Quality. Issues assigned this rating reflect an assurance
of timely payment only slightly less in degree than the strongest issue.

Description of 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.

Description of IBCA's Long-Term Ratings:

AAA - Obligations for which there is the lowest expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial. Adverse
changes in business, economic or financial conditions are unlikely to increase
investment risk significantly.

AA - Obligations for which there is a very low expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial. Adverse
changes in business economic or financial conditions may increase investment
risk albeit not very significantly.

A - Obligations for which there is a low expectation of investment risk.
Capacity for timely repayment of principal and interest is strong, although
adverse changes in business, economic or financial conditions may lead to
increased investment risk.

BBB - Capacity for timely repayment of principal and interest is adequate,
although adverse changes in business, economic or financial conditions are more
likely to lead to increased investment risk than for obligations in higher
categories.

BB - Obligations for which there is a possibility of investment risk developing.
Capacity for timely repayment of principal and interest exists, but is
susceptible over time to adverse changes in business, economic or financial
conditions.

B - Obligations for which investment risk exists. Timely repayment of principal
and interest is not sufficiently protected against adverse changes in business,
economic or financial conditions.

CCC - Obligations for which there is a current perceived possibility of default.
Timely repayment of principal and interest is dependent on favourable business,
economic or financial conditions.

CC - Obligations which are highly speculative or which have a high risk of
default.

C - Obligations which are currently in default.

Notes: "+" or "-" may be appended to a rating to denote relative status within
major rating categories.

Ratings of BB and below are assigned where it is considered that speculative
characteristics are present.

Description of IBCA's Short-Term Ratings:

A1+ - Obligations supported by the highest capacity for timely repayment.

A1 - Obligations supported by a strong capacity for timely repayment.

A2 - Obligations supported by a satisfactory capacity for timely repayment,
although such capacity may be susceptible to adverse changes in business,
economic or financial conditions.

A3 - Obligations supported by an adequate capacity for timely repayment. Such
capacity is more susceptible to adverse changes in business, economic or
financial conditions than for obligations in higher categories.

B - Obligations for which the capacity for timely repayment is susceptible to
adverse changes in business, economic or financial conditions.

C - Obligations for which there is an inadequate capacity to ensure timely
repayment.

D - Obligations which have a high risk of default or which are currently in
default.

Description of Thomson Bank Watch Short-Term Ratings:

TBW-1 - The highest category; indicates a very high likelihood that principal
and interest will be paid on a timely basis.

TBW-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".

TBW-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.

TBW-4 - The lowest rating category; this rating is regarded as non-investment
grade and therefore speculative.

Description of Thomson BankWatch Long-Term Ratings:

AAA - The highest category; indicates that the ability to repay principal and
interest on a timely basis is extremely high.

AA - The second-highest category; indicates a very strong ability to repay
principal and interest on a timely basis, with limited incremental risk compared
to issues rated in the highest category.

A - The third-highest category; indicates the ability to repay principal and
interest is strong. Issues rated "a" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.

BBB - The lowest investment-grade category; indicates an acceptable capacity to
repay principal and interest. Issues rated "BBB" are, however, more vulnerable
to adverse developments (both internal and external) than obligations with
higher ratings.

Non-Investment Grade

(Issues regarded as having speculative characteristics in the likelihood of
timely repayment of principal and interest.)

BB - While not investment grade, the "BB" rating suggests that the likelihood of
default is considerably less than for lower-rated issues. However, there are
significant uncertainties that could affect the ability to adequately service
debt obligations.

B - Issues rated "B" show a higher degree of uncertainty and therefore greater
likelihood of default than higher-rated issues. Adverse development could well
negatively affect the payment of interest and principal on a timely basis.

CCC - Issues rated "CCC" clearly have a high likelihood of default, with little
capacity to address further adverse changes in financial circumstances.

CC - "CC" is applied to issues that are subordinate to other obligations rated
"CCC" and are afforded less protection in the event of bankruptcy or
reorganization.

D - Default

These long-term debt ratings can also be applied to local currency debt. In such
cases the ratings defined above will be preceded by the designation "local
currency."

RATINGS IN THE LONG-TERM DEBT CATEGORIES MAY INCLUDE A PLUS (+) OR MINUS (-)
DESIGNATION, WHICH INDICATES WHERE WITHIN THE RESPECTIVE CATEGORY THE ISSUE IS
PLACED.

Description of S&P Municipal Bond Ratings:

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

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

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

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

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

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

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

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

Description of Moody's Municipal Bond Ratings:

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

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

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

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

Description of S&P Municipal Note Ratings:

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

Description of Moody's Municipal Note Ratings:

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

S&P's Commercial Paper Ratings:

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

Moody's Commercial Paper Ratings:

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

Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound,will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

Issuers rates Prime-3 (or related supporting institutions) have an acceptable
capacity for repayment of short-term promissory obligations. The effect of
industry characteristics and market composition may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained.

Fitch Investors Service and Duff & Phelps Commercial Paper Ratings:

Commercial paper rated "Fitch-1" is considered to be the highest grade paper and
is regarded as having the strongest degree of assurance for timely payment.
"Fitch-2" is considered very good grade paper and reflects an assurance of
timely payment only slightly less in degree than the strangest issue.

Commercial paper issues rated "Duff 1" by Duff & Phelps, Inc. have the following
characteristics: very high certainty of timely payment, excellent liquidity
factors supported by strong fundamental protection factors, and risk factors
which are very small. Issues rated "Duff 2" have a good certainty of timely
payment, sound liquidity factors and company fundamentals, small risk factors,
and good access to capital markets.
<PAGE>

INVESTMENT ADVISER OF EACH PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY

DISTRIBUTOR
SIGNATURE BROKER-DEALER SERVICES, INC.

CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY

INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.

COUNSEL

WILLKIE FARR & GALLAGHER

..............................................................................
No person has been authorized to give any information or to make any
representations other than those contained in the Trusts' Prospectuses, the
corresponding SAIs or the Trusts' official sales literature in connection with
the offering of the Trust's shares and, if given or made, such other
information or representations must not be relied on as having been authorized
by a Trust. This Prospectus does not constitute an offer in any state in
which, or to any person to whom, such offer may not lawfully be made.
..............................................................................

<PAGE>

BT INVESTMENT

PROSPECTUS: APRIL 29, 1996

Please read this Prospectus carefully before investing and retain it for future
reference. It contains important information about the Fund that you should know
and can refer to in deciding whether the Fund's goals match your own.

A Statement of Additional Information with the same date has been filed with the
Securities and Exchange Commission, and is incorporated herein by reference. You
may request a free copy of the Statement by calling the Fund's Service Agent at
1-800-730-1313.

UNLIKE OTHER MUTUAL FUNDS, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY
INVESTING ALL OF ITS INVESTABLE ASSETS IN A SEPARATE INVESTMENT COMPANY (A
"PORTFOLIO") WITH AN IDENTICAL INVESTMENT OBJECTIVE. THE INVESTMENT PERFORMANCE
OF THE FUND WILL CORRESPOND DIRECTLY TO THE INVESTMENT PERFORMANCE OF THE
PORTFOLIO. SEE "SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE" ON
PAGE 10.

SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, BANKERS TRUST COMPANY AND THE SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY. AN INVESTMENT IN THE FUND IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF
THE INVESTMENT TO FLUCTUATE, AND WHEN THE INVESTMENT IS REDEEMED, THE VALUE MAY
BE HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY INVESTED BY THE INVESTOR.

Equity 500
Index Fund

* Seeks to match the performance of the stock market, as represented by the S&P
500 market index, before expenses.

BANKERS TRUST COMPANY
Investment Adviser of the
Portfolio and Administrator

SIGNATURE BROKER-
DEALER SERVICES, INC.
Distributor
6 St. James Avenue
Boston, Massachusetts 02116

<PAGE>

TABLE OF CONTENTS
- ------------------------------------------------------------------------------
PAGE
..............................................................................
Summary of Fund Expenses 3
Fund Financial Highlights 5
Investment Objective, Policies and Risks 6
Risk Factors; Matching the Fund to Your Investment Needs 9
Net Asset Value 11
Purchase and Redemption of Shares 12
Dividends, Distributions and Taxes 15
Performance Information and Reports 16
Management of the Trust and Portfolio 17
Additional Information 22
- ------------------------------------------------------------------------------

<PAGE>

SUMMARY OF FUND EXPENSES
The following table provides (i) a summary of expenses relating to purchases
and sales of the shares of the BT Investment Equity 500 Index Fund (the
"Fund") and the annual operating expenses of the Fund and the expenses of the
Equity 500 Index Portfolio (the "Portfolio"), as a percentage of average net
assets of the Fund; and (ii) an example illustrating the dollar cost of such
expenses on a $1,000 investment in the Fund. THE TRUSTEES OF BT PYRAMID MUTUAL
FUNDS (THE "TRUST") BELIEVE THAT THE AGGREGATE PER SHARE EXPENSES OF THE FUND
AND THE PORTFOLIO WILL BE LESS THAN OR APPROXIMATELY EQUAL TO THE EXPENSES
WHICH THE FUND WOULD INCUR IF THE TRUST RETAINED THE SERVICES OF AN INVESTMENT
ADVISER AND THE INVESTABLE ASSETS ("ASSETS") OF THE FUND WERE INVESTED
DIRECTLY IN THE TYPE OF SECURITIES BEING HELD BY THE PORTFOLIO.

- ------------------------------------------------------------------------------
ANNUAL OPERATING EXPENSES
(as a percentage of the average daily net assets of the Fund)
..............................................................................
Investment advisory fee (after reimbursements or waivers) 0.07%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.18
..............................................................................
Total operating expenses (after reimbursements or waivers) 0.25%
..............................................................................
EXAMPLE 1 year 3 years 5 years 10 years
..............................................................................
You would pay the following
expenses on a $1,000
investment, assuming: (1) 5%
annual return and (2)
redemption at the end of each
time period $3 $8 $14 $32
- ------------------------------------------------------------------------------

The expense table and the example above show the costs and expenses that an
investor will bear directly or indirectly as a shareholder of the Fund. While
reimbursement of distribution expenses in amounts up to 0.20% of average net
assets are authorized to be made pursuant to the Plan of Distribution under
Rule 12b-1 of the Investment Company Act of 1940, as amended (the "1940 Act"),
it is not expected that any payments will actually be made under that plan in
the foreseeable future. Bankers Trust Company ("Bankers Trust") has
voluntarily agreed to waive a portion of its investment advisory fee. Without
such waiver, the Portfolio's investment advisory fee would be equal to 0.10%.
The expense table and the example reflect a voluntary undertaking, by Bankers
Trust or Signature Broker-Dealer Services, Inc. ("Signature") to waive or
reimburse expenses such that the total operating expenses will not exceed
0.25% of the Fund's average net assets annually. In the absence of this
undertaking, for the fiscal year ended December 31, 1995, the total operating
expenses would have been equal to approximately 0.48% of the Fund's average
net assets annually. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN. Moreover, while each example assumes a 5% annual return, actual
performance will vary and may result in a return greater or less than 5%.

The Fund is sold by Signature as the Trust's distributor (the "Distributor")
to customers of Bankers Trust or to customers of another bank or a dealer or
other institution that has a sub-shareholder servicing agreement with Bankers
Trust (along with Bankers Trust, a "Service Agent"). Some Service Agents may
impose certain conditions on their customers in addition to or different from
those imposed by the Fund and may charge their customers a direct fee for
their services. Each Service Agent has agreed to transmit to shareholders who
are its customers appropriate disclosures of any fees that it may charge them
directly.

In addition to the customers of Bankers Trust or other institutions described
above, the Fund is available for (a) accounts where an investment adviser or a
financial planner has discretion over such account and the account holder pays
such person as compensation for its advice and other services an annual fee of
at least 0.50% on the assets in the account; (b) accounts established under a
"wrap fee" program or formal asset allocation program where the account holder
pays the program sponsor an annual fee of at least 0.50% on the assets in the
account; and (c) accounts established through an automated clearing or similar
system established for the use of investment professionals and through which
purchases and redemptions are transmitted to the Fund on an omnibus basis.

For more information with respect to the expenses of the Fund and the
Portfolio see "Management of the Trust and Portfolio" herein.

FUND FINANCIAL HIGHLIGHTS
The following table shows selected data for a share outstanding, total
investment return, ratios to average net assets and other supplemental data
for the Fund for each period indicated and has been audited by Coopers &
Lybrand L.L.P., the Fund's independent accountants, whose report thereon
appears in the Fund's Annual Report which is incorporated by reference to the
Fund's Statement of Additional Information.
- ------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED DECEMBER 31, DECEMBER 31, 1992
---------------------------------------------- (COMMENCEMENT
1995 1994 1993 OF OPERATIONS)
....................................................................................................................
<S> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $10.36 $10.57 $10.00 $10.00
....................................................................................................................
Income from Investment Operations
Net Investment Income 0.29 0.22 0.24 --
Net Realized and Unrealized Gain
(Loss) on Securities and
Futures Transactions 3.53 (0.10) 0.71 --
....................................................................................................................
Total from Investment Operations 3.82 0.12 0.95 --
....................................................................................................................
Distributions From
Net Investment Income (0.29) (0.22) (0.24) --
Net Realized Gain from Securities
and Futures Transactions (0.07) (0.11) (0.14) --
....................................................................................................................
Total Distributions (0.36) (0.33) (0.38) --
....................................................................................................................
Net Asset Value, End of Period $13.82 $10.36 $10.57 $10.00
....................................................................................................................
TOTAL INVESTMENT RETURN 37.15% 1.15% 9.53% --
RATIOS AND SUPPLEMENTAL DATA
Ratio of Net Investment Income to
Average Net Assets 2.38% 2.68% 2.53% --
Ratio of Expenses to Average Net
Assets, Including Expenses of the
Equity 500 Index Portfolio 0.25% 0.25% 0.25% --
Decrease Reflected in Above Expense
Ratio Due to Absorption of
Expenses by Bankers Trust 0.23% 0.29% 1.82% --
Net Assets, End of Period (000's
omitted) $277,140 $181,898 $1,835 $ 100
- --------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

INVESTMENT OBJECTIVE, POLICIES AND RISKS
The Fund seeks to provide investment results that, before expenses, correspond
to the total return (i.e., the combination of capital changes and income) of
common stocks publicly traded in the United States, as represented by the
Standard & Poor's 500 Composite Stock Price Index (the "S&P 500"). The Fund
offers investors a convenient means of diversifying their holdings of common
stocks while relieving those investors of the administrative burdens typically
associated with purchasing and holding these instruments.

The Trust seeks to achieve the investment objective of the Fund by investing
all the Assets of the Fund in the Portfolio, which has the same investment
objective as the Fund. There can be no assurances that the investment
objective of either the Fund or the Portfolio will be achieved. The investment
objective of each of the Fund and the Portfolio is not a fundamental policy
and may be changed upon notice to but without the approval of the Fund's
shareholders or the Portfolio's investors, respectively. See "Special
Information Concerning Master-Feeder Fund Structure" on page 10 herein.

EQUITY 500 INDEX PORTFOLIO
The Portfolio is not managed according to traditional methods of "active"
investment management, which involve the buying and selling of securities
based upon economic, financial, and market analyses and investment judgment.
Instead, the Portfolio, utilizing a "passive" or "indexing" investment
approach, attempts to replicate, before expenses, the performance of the S&P
500. There is no assurance the Portfolio will achieve its investment
objective.

Under normal conditions when the Portfolio's assets are above $10 million, the
Portfolio will invest at least 80% of its assets in common stocks of companies
which compose the S&P 500. In seeking to duplicate the performance of the S&P
500, Bankers Trust, the Portfolio's investment adviser, will attempt over time
to allocate the Portfolio's investments among common stocks in approximately
the same weightings as the S&P 500, beginning with the heaviest-weighted
stocks that make up a larger portion of the Index's value. Over the long term,
Bankers Trust seeks a correlation between the performance of the Portfolio,
before expenses, and that of the S&P 500 of 0.98 or better (0.95 or better if
Portfolio asset levels are below $10 million). A figure of 1.00 would indicate
perfect correlation. In the unlikely event that the correlation is not
achieved, the Portfolio's Board of Trustees will consider alternative
structures.

The Adviser utilizes a two-stage sampling approach in seeking to obtain its
objective. Stage one, which encompasses large cap stocks, maintains the stock
holdings at or near their benchmark weights. Large capitalization stocks are
defined as those securities which represent 0.10% or more of the index. In
stage two, smaller stocks are analyzed and selected using risk characteristics
and industry weights in order to match the sector and risk characteristics of
the smaller companies in the S&P 500. This approach helps to maximize
portfolio liquidity while minimizing costs.

Bankers Trust generally will seek to match the composition of the S&P 500 but
usually will not invest the Portfolio's stock portfolio to mirror the Index
exactly. Because of the difficulty and expense of executing relatively small
stock transactions, the Portfolio may not always be invested in the less
heavily weighted S&P 500 stocks, and may at times have its portfolio weighted
differently from the S&P 500, particularly if the Portfolio has a low level of
assets. When the Portfolio's size is greater, Bankers Trust expects to
purchase more of the stocks in the S&P 500 and to match the relative weighting
of the S&P 500 more closely, and anticipates that the Portfolio will be able
to mirror, before expenses, the performance of the S&P 500 with little
variance at asset levels of $10 million or more. In addition, the Portfolio
may omit or remove any S&P 500 stock from the Portfolio if, following
objective criteria, Bankers Trust judges the stock to be insufficiently liquid
or believes the merit of the investment has been substantially impaired by
extraordinary events or financial conditions. Bankers Trust will not purchase
the stock of Bankers Trust New York Corporation, which is included in the
Index, and instead will overweight its holdings of companies engaged in
similar businesses.

Under normal conditions, Bankers Trust will attempt to invest as much of the
Portfolio's assets as is practical in common stocks included in the S&P 500.
However, the Portfolio may maintain up to 20% of its assets in short-term debt
securities and money market instruments hedged with stock index futures and
options to meet redemption requests or to facilitate the investment in common
stocks. See "Additional Information" for further information.

When the Portfolio has cash from new investments in the Portfolio or holds a
portion of its assets in money market instruments, it may enter into stock
index futures or options to attempt to increase its exposure to the stock
market. Strategies the Portfolio could use to accomplish this include
purchasing futures contracts, writing put options, and purchasing call
options. When the Portfolio wishes to sell securities, because of shareholder
redemptions or otherwise, it may use stock index futures or options thereon to
hedge against market risk until the sale can be completed. These strategies
could include selling futures contracts, writing call options, and purchasing
put options.

Bankers Trust will choose among futures and options strategies based on its
judgment of how best to meet the Portfolio's goals. In selecting futures and
options, Bankers Trust will assess such factors as current and anticipated
stock prices, relative liquidity and price levels in the options and futures
markets compared to the securities markets, and the Portfolio's cash flow and
cash management needs. If Bankers Trust judges these factors incorrectly, or
if price changes in the Portfolio's futures and options positions are not well
correlated with those of its other investments, the Portfolio could be
hindered in the pursuit of its objective and could suffer losses. The
Portfolio could also be exposed to risks if it could not close out its futures
or options positions because of an illiquid secondary market.

Short-Term Instruments. The Portfolio intends to stay invested in the
securities described above to the extent practical in light of its objective
and long-term investment perspective. However, the Portfolio's assets may be
invested in short-term instruments with remaining maturities of 397 days or
less to meet anticipated redemptions and expenses or for day-to-day operating
purposes. Short-term instruments consist of: (i) short-term obligations of the
U.S. Government, its agencies, instrumentalities, authorities or political
subdivisions; (ii) other short-term debt securities rated Aa or higher by
Moody's Investors Service, Inc. ("Moody's") or AA or higher by Standard &
Poor's Corporation ("S&P") or, if unrated, of comparable quality in the
opinion of Bankers Trust; (iii) commercial paper; (iv) bank obligations,
including negotiable certificates of deposit, time deposits and bankers'
acceptances; and (v) repurchase agreements. At the time the Portfolio invests
in commercial paper, bank obligations or repurchase agreements, the issuer or
the issuer's parent must have outstanding debt rated Aa or higher by Moody's
or AA or higher by S&P or outstanding commercial paper or bank obligations
rated Prime-1 by Moody's or A-1 by S&P; or, if no such ratings are available,
the instrument must be of comparable quality in the opinion of Bankers Trust.

ADDITIONAL INVESTMENT LIMITATIONS
As a diversified fund, no more than 5% of the assets of the Portfolio may be
invested in the securities of one issuer (other than U.S. Government
securities), except that up to 25% of the Portfolio's assets may be invested
without regard to this limitation. The Portfolio will not invest more than 25%
of its assets in the securities of issuers in any one industry. In the
unlikely event that the S&P 500 should concentrate to an extent greater than
that amount, the Portfolio's ability to achieve its investment objective may
be impaired. These are fundamental investment policies of the Portfolio which
may not be changed without investor approval. No more than 15% of the
Portfolio's net assets may be invested in illiquid or not readily marketable
securities (including repurchase agreements and time deposits with remaining
maturities of more than seven calendar days). Additional investment policies
of the Portfolio are contained in the Statement of Additional Information.

ABOUT THE S&P 500 INDEX
The S&P 500 is a well-known stock market index that includes common stocks of
500 companies from several industrial sectors representing a significant
portion of the market value of all common stocks publicly traded in the United
States, most of which are listed on the New York Stock Exchange Inc. (the
"NYSE"). Stocks in the S&P 500 are weighted according to their market
capitalization (i.e., the number of shares outstanding multiplied by the
stock's current price). Bankers Trust believes that the performance of the S&P
500 is representative of the performance of publicly traded common stocks in
general. The composition of the S&P 500 is determined by S&P and is based on
such factors as the market capitalization and trading activity of each stock
and its adequacy as a representation of stocks in a particular industry group,
and may be changed from time to time.

The Fund and the Portfolio are not sponsored, endorsed, sold or promoted by
S&P. S&P makes no representation or warranty, express or implied, to the
owners of the Fund or the Portfolio or any member of the public regarding the
advisability of investing in securities generally or in the Fund and the
Portfolio particularly or the ability of the S&P 500 to track general stock
market performance. S&P does not guarantee the accuracy and/or the
completeness of the S&P 500 or any data included therein.

S&P makes no warranty, express or implied, as to the results to be obtained by
the Fund or the Portfolio, owners of the Fund or the Portfolio, or any other
person or entity from the use of the S&P 500 or any data included therein. S&P
makes no express or implied warranties and hereby expressly disclaims all such
warranties of merchantability or fitness for a particular purpose or use with
respect to the S&P 500 or any data included therein.

For more complete information about the S&P 500, see the Statement of
Additional Information.

RISK FACTORS; MATCHING THE FUND TO
YOUR INVESTMENT NEEDS
By itself, the Fund does not constitute a balanced investment plan. The Fund
is designed as a relatively low-cost means for investors to diversify their
investment portfolios. As described above, the Portfolio invests in an index
of securities that is representative of the stock market as a whole. While the
performance of the S&P 500 has fluctuated considerably, the long-term
performance of the S&P 500 has been greater than inflation. Thus, the Fund may
make sense for you if you
can afford to ride out changes in the stock market. The Fund's share price,
yield and total return will fluctuate and your investment may be worth more or
less than your original cost when you redeem your shares.

The ability of the Fund and the Portfolio to meet their investment objective
depends to some extent on the cash flow experienced by the Fund and by the
other investors in the Portfolio, since investments and redemptions by
shareholders of the Fund will generally require the Portfolio to purchase or
sell securities. Bankers Trust will make investment changes to accommodate
cash flow in an attempt to maintain the similarity of the Portfolio to the S&P
500. You should also be aware that the performance of the S&P 500 is a
hypothetical number which does not take into account brokerage commissions and
other costs of investing, unlike the Portfolio which must bear these costs.
Finally, since the Portfolio seeks to track the S&P 500, Bankers Trust
generally will not attempt to judge the merits of any particular stock as an
investment.

PORTFOLIO TURNOVER
The frequency of portfolio transactions -- the Portfolio's turnover rate --
will vary from year to year depending on market conditions and the Portfolio's
cash flows. The Portfolio's annual turnover rate is not expected to exceed
100%. The Portfolio's turnover rate for the years ended December 31, 1995,
1994 and 1993 was 6%, 21% and 31%, respectively. The decrease in the
Portfolio's turnover rate from the year ended 1994 to 1995 was due to the
growth of assets in the period.

DERIVATIVES
The Portfolio may invest in stock index futures and options thereon which are
commonly known as derivatives. Generally, a derivative is a financial
arrangement, the value of which is based on, or "derived" from, a traditional
security, asset or market index. Some "derivatives" such as mortgage-related
and other asset-backed securities are in many respects like any other
investment, although they may be more volatile or less liquid than more
traditional debt securities. There are, in fact, many different types of
derivatives and many different ways to use them. There are a range of risks
associated with those uses. Futures and options are commonly used for
traditional hedging purposes to attempt to protect a fund from exposure to
changing interest rates, securities prices or currency exchange rates and for
cash management purposes as a low cost method of gaining exposure to a
particular securities market without investing directly in those securities.
The Adviser will only use derivatives for cash management purposes.
Derivatives will not be used to increase portfolio risk above the level that
could be achieved using only traditional investment securities or to acquire
exposure to changes in the value of assets or indices that by themselves would
not be purchased for the Portfolio.

SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE
Unlike other open-end management investment companies (mutual funds) which
directly acquire and manage their own portfolio securities, the Fund seeks to
achieve its investment objective by investing all of its Assets in the
Portfolio, a separate registered investment company with the same investment
objective as the Fund. Therefore, an investor's interest in the Portfolio's
securities is indirect. In addition to selling a beneficial interest to the
Fund, the Portfolio may sell beneficial interests to other mutual funds or
institutional investors. Such investors will invest in the Portfolio on the
same terms and conditions and will pay a proportionate share of the
Portfolio's expenses. However, the other investors investing in the Portfolio
are not required to sell their shares at the same public offering price as the
Fund due to variations in sales commissions and other operating expenses.
Therefore, investors in the Fund should be aware that these differences may
result in differences in returns experienced by investors in the different
funds that invest in the Portfolio. Such differences in returns are also
present in other mutual fund structures. Information concerning other holders
of interests in the Portfolio is available from Bankers Trust at (800) 730-
1313.

The master-feeder structure has been developed relatively recently, so
shareholders should carefully consider this investment approach.

Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large
fund withdraws from the Portfolio, the remaining funds may experience higher
pro rata operating expenses, thereby producing lower returns (however, this
possibility exists as well for traditionally structured funds which have large
institutional investors). Additionally, the Portfolio may become less diverse,
resulting in increased portfolio risk. Also, funds with a greater pro rata
ownership in the Portfolio could have effective voting control of the
operations of the Portfolio. Except as permitted by the Securities and
Exchange Commission ("SEC"), whenever the Trust is requested to vote on
matters pertaining to the Portfolio, the Trust will hold a meeting of
shareholders of the Fund and will cast all of its votes in the same proportion
as the votes of the Fund's shareholders. Fund shareholders who do not vote
will not affect the Trust's votes at the Portfolio meeting. The percentage of
the Trust's votes representing the Fund's shareholders not voting will be
voted by the Trustees or officers of the Trust in the same proportion as the
Fund shareholders who do, in fact, vote.

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

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

The Fund's investment objective is not a fundamental policy and may be changed
upon notice to but without the approval of the Fund's shareholders. If there
is a change in the Fund's investment objective, the Fund's shareholders should
consider whether the Fund remains an appropriate investment in light of their
then-current needs. The investment objective of the Portfolio is also not a
fundamental policy. Shareholders of the Fund will receive 30 days prior
written notice with respect to any change in the investment objective of the
Fund or the Portfolio. See "Investment Objective, Policies and Risks" for a
description of the fundamental policies of the Portfolio that cannot be
changed without approval by the holders of "a majority of the outstanding
voting securities" (as defined in the 1940 Act) of the Portfolio.

For descriptions of the investment objective, policies and restrictions of the
Portfolio, see "Investment Objective, Policies and Risks." For descriptions of
the management of the Portfolio, see "Management of the Trust and Portfolio"
herein and in the Statement of Additional Information. For descriptions of the
expenses of the Portfolio, see "Management of the Trust and Portfolio" herein.

NET ASSET VALUE
The net asset value per share of the Fund is calculated on each day on which
the NYSE is open (each such day being a "Valuation Day"). The NYSE is
currently open on each day, Monday through Friday, except (a) January 1st,
Presidents' Day (the third Monday in February), Good Friday, Memorial Day (the
last Monday in May), July 4th, Labor Day (the first Monday in September),
Thanksgiving Day (the last Thursday in November) and December 25th; and (b)
the preceding Friday or the subsequent Monday when one of the calendar
determined holidays falls on a Saturday or Sunday, respectively.

The net asset value per share of the Fund is calculated once on each Valuation
Day as of the close of regular trading on the NYSE (the "Valuation Time"),
which is currently 4:00 p.m., New York time or in the event that the NYSE
closes early, at the time of such early closing. The net asset value per share
of the Fund is computed by dividing the value of the Fund's Assets (i.e., the
value of its investment in the Portfolio and other assets), less all
liabilities, by the total number of its shares outstanding. The Portfolio's
securities and other assets are valued primarily on the basis of market
quotations or, if quotations are not readily available, by a method which the
Portfolio's Board of Trustees believes accurately reflects fair value.

PURCHASE AND REDEMPTION OF SHARES
PURCHASE OF SHARES
The Trust accepts purchase orders for shares of the Fund at the net asset
value per share of the Fund next determined on each Valuation Day. See "Net
Asset Value" above. There is no sales charge on the purchase of shares, but
costs of distributing shares of the Fund may be reimbursed from its assets, as
described herein. Service Agents may impose initial and subsequent investment
minimums that differ from the amounts presented in the "Minimum Investments"
table below. Shares of the Fund may be purchased in only those states where
they may be lawfully sold.

Purchase orders for shares of the Fund that are received by a Service Agent
and transmitted to Bankers Trust, as the Trust's transfer agent (the "Transfer
Agent"), prior to the Valuation Time (currently 4:00 p.m., New York time or
earlier, should the NYSE close earlier) on any Valuation Day will be effective
at that day's Valuation Time. The Trust and Signature reserve the right to
reject any purchase order.

Shares must be purchased in accordance with procedures established by the
Transfer Agent and Service Agents, including Bankers Trust, in connection with
customers' accounts. It is the responsibility of each Service Agent to transmit
to the Transfer Agent purchase and redemption orders and to transmit to Bankers
Trust as the Trust's custodian (the "Custodian") purchase payments on behalf of
its customers by the following business day (trade date +1) after an order for
shares is placed, and a shareholder must settle with the Service Agent his or
her entitlement to an effective purchase or redemption order as of a particular
time. Because Bankers Trust is the Custodian and Transfer Agent of the Trust,
funds may be transferred directly from or to a customer's account with Bankers
Trust to or from the Fund without incurring the additional costs or delays
associated with the wiring of federal funds.

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

Automatic Investment Plan. The Fund may offer shareholders an automatic
investment plan under which shareholders may authorize some Service Agents to
place a purchase order each month or quarter for Fund shares. For further
information regarding the automatic investment plan, shareholders should
contact their Service Agent.
- ------------------------------------------------------------------------------
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
For retirement accounts $ 500
Through automatic investment plans $1,000
TO ADD TO AN ACCOUNT $ 250
For retirement accounts $ 100
Through automatic investment plan $ 100
MINIMUM BALANCE $1,000
For retirement accounts None
- ------------------------------------------------------------------------------

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

Redemption orders are processed without charge by the Trust. A Service Agent
may on at least 30 days' notice involuntarily redeem a shareholder's account
with the Fund having a balance below the minimum (as shown above), but not if
an account is below the minimum balance due to a change in market value. See
"Minimum Investments" above for minimum balance amounts.

Automatic Cash Withdrawal Plan. The Fund may offer shareholders an automatic
cash withdrawal plan, under which shareholders who own shares of the Fund may
elect to receive periodic cash payments. Retirement plan accounts are eligible
for automatic cash withdrawal plans only where the shareholder is eligible to
receive qualified distributions. For further information regarding the
automatic cash withdrawal plan, shareholders should contact their Service
Agent.

EXCHANGE PRIVILEGE
Shareholders may exchange their shares for shares of certain other funds in
the BT Family of Funds registered in their state. The Fund reserves the right
to terminate or modify the exchange privilege in the future. To make an
exchange, follow the procedures indicated in "Purchase of Shares" and
"Redemption of Shares." Before making an exchange, please note the following:

* Call your Service Agent for information and a prospectus. Read the
prospectus for relevant information.

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

TAX-SAVING RETIREMENT PLANS
Retirement plans offer significant tax savings and are available to
individuals, partnerships, small businesses corporations, nonprofit
organizations and other institutions. Contact your Service Agent or Bankers
Trust for further information. Bankers Trust can set up your new account in
the Fund under a number of several tax-sheltered plans. These plans contain
special tax advantages and let you invest for retirement while sheltering your
investment income from current taxes. Minimums may differ from those listed
elsewhere in the Prospectus.

* Individual Retirement Accounts (IRAs): personal savings plans that offer tax
advantages for individuals to set aside money for retirement and allow new
contributions of $2,000 per tax year.

* Rollover IRAs: tax-deferred retirement accounts that retain the special tax
advantages of lump sum distributions from qualified retirement plans and
transferred IRA accounts.

* Simplified Employee Pension Plans (SEP): a relatively easy and inexpensive
alternative to retirement planning for sole proprietors, partnerships and
corporations. Under a SEP, employers make tax-deductible contributions to
their own and to eligible employees' IRA accounts. Employee contributions
are available through a "Salary Deferral" SEP for businesses with fewer than
25 eligible employees.

* 401(k) Programs: defined contribution plans available to corporations
allowing tax-deductible employer contributions and permitting employees to
contribute a percentage of their wages on a tax-deferred basis.

* 403(b) Custodian Accounts: defined contribution plans open to employees of
most nonprofit organizations and educational institutions.

* Deferred Benefit Plans: plan sponsors may invest all or part of their
pension assets in the Fund.

DIVIDENDS, DISTRIBUTIONS AND TAXES
Distributions. The Fund distributes substantially all of its net investment
income and capital gains to shareholders each year. Income dividends are
distributed on the first business day in April, July and October. In December,
another income dividend will be distributed, plus any net capital gains.
Unless a shareholder instructs the Trust to pay such dividends and
distributions in cash, they will be automatically reinvested in additional
shares of the Fund.

Federal Taxes. The Trust intends to qualify the Fund as a regulated investment
company, as defined in the Internal Revenue Code of 1986, as amended (the
"Code"). Provided the Fund meets the requirements imposed by the Code and
distributes all of its income and gains, the Fund will not pay any Federal
income or excise taxes. The Portfolio will also not be required to pay any
Federal income or excise taxes.

Distributions from the Fund's income and short-term capital gains are taxed as
dividends, and long-term capital gain distributions are taxed as long-term
capital gains. The Fund's distributions are taxable when they are paid,
whether you take them in cash or reinvest them in additional shares.
Distributions declared to shareholders of record in November and December and
paid in January are taxable as if paid on December 31. The Fund will send each
shareholder a tax statement by January 31 showing the tax status of the
distributions received in the past year.

Capital Gains. You may realize a capital gain or loss when you redeem (sell)
or exchange shares. Because the tax treatment also depends on your purchase
price and your personal tax position, you should keep your regular account
statements to use in determining your tax.

"Buying a Dividend." On the ex-date for a distribution from income and/or
capital gains, the Fund's share value is reduced by the amount of the
distribution. If you buy shares just before the ex-date ("buying a dividend"),
you will pay the full price for the shares and then receive a portion of the
price back as a taxable distribution.

Other Tax Information. In addition to Federal taxes, you may be subject to
state or local taxes on your investment, depending on the laws in your area.
You should consult with your own tax adviser concerning the application of
Federal, state and local taxes to your distributions from the Fund.

PERFORMANCE INFORMATION AND REPORTS
The Fund's performance may be used from time to time in advertisements,
shareholder reports or other communications to shareholders or prospective
shareholders. Performance information may include the Fund's investment
results and/or comparisons of its investment results to various unmanaged
indices, such as the S&P 500, or results of other mutual funds or investment
or savings vehicles. In addition, the Fund may compare various Portfolio
characteristics such as beta, price earnings ratio and sector diversification
to those of various unmanaged indices or other mutual funds or investment or
savings vehicles. The Fund's investment results as used in such communications
will be calculated on a yield or total rate of return basis in the manner set
forth below. From time to time, fund rankings may be quoted from various
sources, such as Lipper Analytical Services, Inc., Value Line and Morningstar,
Inc.

The Trust may provide period and average annualized "total return" quotations
for the Fund. The Fund's "total return" refers to the change in the value of
an investment in the Fund over a stated period based on any change in net
asset value per share and including the value of any shares purchasable with
any dividends or capital gains distributed during such period. Period total
return may be annualized. An annualized total return is a compounded total
return which assumes that the period total return is generated over a one-year
period, and that all dividends and capital gain distributions are reinvested.
An annualized total return will be higher than a period total return if the
period is shorter than one year, because of the compounding effect.

The Trust may provide annualized "yield" quotations for the Fund. The "yield"
of the Fund refers to the income generated by an investment in the Fund over a
30-day or one-month period (which period shall be stated in any such
advertisement or communications). This income is then annualized; that is, the
amount generated by the investment over the period is assumed to be generated
over a one-year period and is shown as a percentage of investment.

Unlike some bank deposits or other investments which pay a fixed yield for a
stated period of time, the total return of the Fund will vary depending upon
interest rates, the current market value of the securities held by the
Portfolio and changes in the Fund's expenses. In addition, during certain
periods for which total return or yields may be provided, Bankers Trust, as
Adviser, Service Agent or Administrator, or Signature, as Distributor, may
have voluntarily agreed to waive portions of their fees on a month-to-month
basis. Such waivers will have the effect of increasing the Fund's net income
(and therefore its total return or yield) during the period such waivers are
in effect.

Shareholders will receive financial reports semi-annually that include the
Portfolio's financial statements, including a listing of investment securities
held by the Portfolio at those dates. Annual reports are audited by
independent accountants.

MANAGEMENT OF THE TRUST AND PORTFOLIO
BOARD OF TRUSTEES
The affairs of the Trust and the Portfolio are managed under the supervision
of their respective Boards of Trustees. By virtue of the responsibilities
assumed by Bankers Trust, the administrator of the Trust and Portfolio,
neither the Trust nor the Portfolio requires employees other than its
executive officers. None of the executive officers of the Trust or the
Portfolio devotes full time to the affairs of the Trust or the Portfolio.

The Trustees of the Trust who are not "interested persons" (as defined in the
1940 Act) (the "Independent Trustees") of the Trust or of the Portfolio, as
the case may be, have adopted written procedures reasonably appropriate to
deal with potential conflicts of interest, up to and including creating
separate boards of trustees, arising from the fact that several of the same
individuals are Trustees of the Trust and the Portfolio. For more information
with respect to the Trustees of both the Trust and the Portfolio, see
"Management of the Trust and Portfolios" in the Statement of Additional
Information.

INVESTMENT ADVISER
The Trust has not retained the services of an investment adviser since the
Trust seeks to achieve the investment objective of the Fund by investing all
the Assets of the Fund in the Portfolio. The Portfolio has retained the
services of Bankers Trust, as investment adviser. Mr. Frank Salerno, Managing
Director of Bankers Trust, is responsible for the day-to-day management of the
Portfolio. Mr. Salerno has been employed at Bankers Trust since prior to 1989
and has managed the Portfolio's assets since the Portfolio commenced
operations.

Bankers Trust, a New York banking corporation with principal offices at 280
Park Avenue, New York, New York 10017, is a wholly owned subsidiary of Bankers
Trust New York Corporation. Bankers Trust conducts a variety of general
banking and trust activities and is a major wholesale supplier of financial
services to the international and domestic institutional markets. As of
December 31, 1995, Bankers Trust New York Corporation was the ninth largest
bank holding company in the United States with total assets of approximately
$104 billion. Bankers Trust is a worldwide merchant bank dedicated to
servicing the needs of corporations, governments, financial institutions and
private clients through a global network of over 120 offices in more than 40
countries. Investment management is a core business of Bankers Trust, built on
a tradition of excellence from its roots as a trust bank founded in 1903. The
scope of Bankers Trust's investment management capability is unique due to its
leadership positions in both active and passive quantitative management and
its presence in major equity and fixed income markets around the world.
Bankers Trust is one of the nation's largest and most experienced investment
managers, with approximately $200 billion in assets under management globally.
Of that total, approximately $82 billion are in U.S. equity index assets
alone. When bond and international funds are included, Bankers Trust manages
over $94 billion in total index assets. This makes Bankers Trust one of the
nation's leading managers of index funds.

Bankers Trust has more than 50 years of experience managing retirement assets
for the nation's largest corporations and institutions. In the past, these
clients have been serviced through separate account and commingled fund
structures. Now, the BT Family of Funds brings Bankers Trust's extensive
index fund investment management expertise -- once available to only the
largest institutions in the U.S. -- to individual investors. Bankers Trust's
officers have had extensive experience in managing investment portfolios
having objectives similar to those of the Portfolio.

Bankers Trust, subject to the supervision and direction of the Board of
Trustees of the Portfolio, manages the Portfolio in accordance with the
Portfolio's investment objectives and stated investment policies, makes
investment decisions for the Portfolio, places orders to purchase and sell
securities and other financial instruments on behalf of the Portfolio and
employs professional investment managers and securities analysts who provide
research services to the Portfolio. Bankers Trust may utilize the expertise of
any of its worldwide subsidiaries and affiliates to assist in its role as
investment adviser. All orders for investment transactions on behalf of the
Portfolio are placed by Bankers Trust with broker-dealers and other financial
intermediaries that it selects, including those affiliated with Bankers Trust.
A Bankers Trust affiliate will be used in connection with a purchase or sale
of an investment for the Portfolio only if Bankers Trust believes that the
affiliate's charge for the transaction does not exceed usual and customary
levels. The Portfolio will not invest in obligations for which Bankers Trust
or any of its affiliates is the ultimate obligor or accepting bank. The
Portfolio may, however, invest in the obligations of correspondents and
customers of Bankers Trust.

Under its Investment Advisory Agreement, Bankers Trust receives a fee from the
Portfolio, computed daily and paid monthly, at the annual rate of 0.10%
(before waiver) of the average daily net assets of the Portfolio.

Bankers Trust has been advised by its counsel that, in counsel's opinion,
Bankers Trust currently may perform the services for the Trust and the
Portfolio described in this Prospectus and the Statement of Additional
Information without violation of the Glass-Steagall Act or other applicable
banking laws or regulations. State laws on this issue may differ from the
interpretations of relevant Federal law and banks and financial institutions
may be required to register as dealers pursuant to state securities law.

ADMINISTRATOR
Under its Administration and Services Agreement with the Trust, Bankers Trust
calculates the net asset value of the Fund and generally assists the Board of
Trustees of the Trust in all aspects of the administration and operation of
the Trust. The Administration and Services Agreement provides for the Trust to
pay Bankers Trust a fee, computed daily and paid monthly, at the annual rate
of 0.30% of the average daily net assets of the Fund.

Under an Administration and Services Agreement with the Portfolio, Bankers
Trust calculates the value of the assets of the Portfolio and generally
assists the Board of Trustees of the Portfolio in all aspects of the
administration and operation of the Portfolio. The Administration and Services
Agreement provides for the Portfolio to pay Bankers Trust a fee, computed
daily and paid monthly, at the rate of 0.05% of the average daily net assets
of the Portfolio. Under each Administration and Services Agreement, Bankers
Trust may delegate one or more of its responsibilities to others, including
Signature, at Bankers Trust's expense. For more information, see the Statement
of Additional Information.

DISTRIBUTOR
Under its Distribution Agreement with the Trust, Signature, as Distributor,
serves as the Trust's principal underwriter on a best efforts basis. In
addition, Signature provides the Trust with office facilities. Signature is a
wholly owned subsidiary of Signature Financial Group, Inc. ("SFG"). SFG and
its affiliates currently provide administration and distribution services for
other registered investment companies. The principal business address of SFG
and Signature is 6 St. James Avenue, Boston, Massachusetts 02116.

Pursuant to the terms of the Trust's Plan of Distribution pursuant to Rule
12b-1 under the 1940 Act (the "Plan"), Signature may seek reimbursement in an
amount not exceeding 0.20% of the Fund's average daily net assets annually for
expenses incurred in connection with any activities primarily intended to
result in the sale of the Fund's shares, including, but not limited to:
compensation to and expenses (including overhead and telephone expenses) of
account executives or other employees of Signature who, as their primary
activity, engage in or support the distribution of shares; printing of
prospectuses, statements of additional information and reports for other than
existing Fund shareholders in amounts in excess of that typically used in
connection with the distribution of shares of the Fund; costs of placing
advertising in various media; services of parties other than Signature or its
affiliates in formulating sales literature; and typesetting, printing and
distribution of sales literature. All costs and expenses in connection with
implementing and operating the Plan will be paid by the Fund, subject to the
0.20% of net assets limitation. All costs and expenses associated with
preparing the prospectuses and statements of additional information and in
connection with printing them for and distributing them to existing
shareholders and regulatory authorities, which costs and expenses would not be
considered distribution expenses for purposes of the Plan, will also be paid
by the Fund. To the extent expenses of Signature under the Plan in any fiscal
year of the Trust exceed amounts payable under the Plan during that year,
those expenses will not be reimbursed in any succeeding fiscal year. Expenses
incurred in connection with distribution activities will be identified to the
Fund or the other series of the Trust involved, although it is anticipated
that some activities may be conducted on a Trust-wide basis, with the result
that those activities will not be identifiable to any particular series. In
the latter case, expenses will be allocated among the series of the Trust on
the basis of their relative net assets. It is not expected that any payments
will be made under the Plan in the foreseeable future.

SERVICE AGENT
All shareholders must be represented by a Service Agent. Bankers Trust acts as
a Service Agent pursuant to its Administration and Services Agreement with the
Trust and receives no additional compensation from the Fund for such
shareholder services. The service fees of any other Service Agents, including
broker-dealers, will be paid by Bankers Trust from its fees. The services
provided by a Service Agent may include establishing and maintaining
shareholder accounts, processing purchase and redemption transactions,
arranging for bank wires, performing shareholder sub-accounting, answering
client inquiries regarding the Trust, assisting clients in changing dividend
options, account designations and addresses, providing periodic statements
showing the client's account balance, transmitting proxy statements, periodic
reports, updated prospectuses and other communications to shareholders and,
with respect to meetings of shareholders, collecting, tabulating and
forwarding to the Trust executed proxies and obtaining such other information
and performing such other services as the Administrator or the Service Agent's
clients may reasonably request and agree upon with the Service Agent. Service
Agents may separately charge their clients additional fees only to cover
provision of additional or more comprehensive services not already provided
under the Administration and Services Agreement with Bankers Trust, or of the
type or scope not generally offered by a mutual fund, such as cash management
services or enhanced retirement or trust reporting. In addition, investors may
be charged a transaction fee if they effect transactions in Fund shares
through a broker or agent. Each Service Agent has agreed to transmit to
shareholders, who are its customers, appropriate disclosures of any fees that
it may charge them directly.

CUSTODIAN AND TRANSFER AGENT
Bankers Trust acts as Custodian of the assets of the Trust and the Portfolio
and serves as the Transfer Agent for the Trust and the Portfolio under the
Administration and Services Agreement with the Trust and the Portfolio.

ORGANIZATION OF THE TRUST
The Trust was organized on February 28, 1992 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. No series of shares has any preference over any
other series.

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

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

The Portfolio, in which all the Assets of the Fund will be invested, is
organized as a trust under the laws of the State of New York. The Portfolio's
Declaration of Trust provides that the Fund and other entities investing in
the Portfolio (e.g., other investment companies, insurance company separate
accounts and common and commingled trust funds) will each be liable for all
obligations of the Portfolio. However, the risk of the Fund incurring
financial loss on account of such liability is limited to circumstances in
which both inadequate insurance existed and the Portfolio itself was unable to
meet its obligations. Accordingly, the Trustees of the Trust believe that
neither the Fund nor its shareholders will be adversely affected by reason of
the Fund's investing in the Portfolio.

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

EXPENSES OF THE TRUST
The Fund bears its own expenses. Operating expenses for the Fund generally
consist of all costs not specifically borne by Bankers Trust or Signature,
including administration and services fees, fees for necessary professional
services, amortization of organizational expenses, and costs associated with
regulatory compliance and maintaining legal existence and shareholder
relations. Bankers Trust and Signature have agreed to reimburse the Fund to
the extent required by applicable state law for certain expenses that are
described in the Statement of Additional Information. The Portfolio bears its
own expenses. Operating expenses for the Portfolio generally consist of all
costs not specifically borne by Bankers Trust or Signature, including
investment advisory and administration and services fees, fees for necessary
professional services, amortization of organizational expenses, the costs
associated with regulatory compliance and maintaining legal existence and
investor relations.

ADDITIONAL INFORMATION
Repurchase Agreements. In a repurchase agreement the Portfolio buys a security
and simultaneously agrees to sell it back at a higher price. In the event of
the bankruptcy of the other party to either a repurchase agreement or a
securities loan, the Portfolio could experience delays in recovering either
its cash or the securities it lent. To the extent that, in the meantime, the
value of the securities repurchased had decreased or the value of the
securities lent had increased, the Portfolio could experience a loss. In all
cases, Bankers Trust must find the creditworthiness of the other party to the
transaction satisfactory. A repurchase agreement is considered a
collateralized loan under the 1940 Act.

Securities Lending. The Portfolio is permitted to lend up to 30% of the total
value of its securities. These loans must be secured continuously by cash or
equivalent collateral or by a letter of credit at least equal to the market
value of the securities loaned plus accrued income. By lending its securities,
the Portfolio can increase its income by continuing to receive income on the
loaned securities as well as by the opportunity to receive interest on the
collateral. Any gain or loss in the market price of the borrowed securities
which occurs during the term of the loan inures to the Portfolio and its
investors. In lending securities to brokers, dealers and other organizations,
the Portfolio is subject to risks which, like those associated with other
extenstions of credit, include delays in recovery and possible loss of rights
in the collateral should the borrower fail financially.

When-Issued and Delayed Delivery Securities. The Portfolio may purchase
securities on a when-issued or delayed delivery basis. Delivery of and payment
for these securities may take place as long as a month or more after the date
of the purchase commitment. The value of these securities is subject to market
fluctuation during this period and no income accrues to the Portfolio until
settlement takes place. The Portfolio maintains with the Custodian a
segregated account containing high grade liquid securities in an amount at
least equal to these commitments. When entering into a when-issued or delayed
delivery transaction, the Portfolio will rely on the other party to consummate
the transaction; if the other party fails to do so, the Portfolio may be
disadvantaged.

Options on Stock Indices. The Portfolio may purchase and write put and call
options on stock indices listed on stock exchanges. A stock index fluctuates
with changes in the market values of the stocks included in the index.

Options on stock indices are generally similar to options on stock except that
the delivery requirements are different. Instead of giving the right to take
or make delivery of stock at a specified price, an option on a stock index
gives the holder the right to receive a cash "exercise settlement amount"
equal to (a) the amount, if any, by which the fixed exercise price of the
option exceeds (in the case of a put) or is less than (in the case of a call)
the closing value of the underlying index on the date of exercise, multiplied
by (b) a fixed "index multiplier." Receipt of this cash amount will depend
upon the closing level of the stock index upon which the option is based being
greater than, in the case of a call, or less than, in the case of a put, the
exercise price of the option. The amount of cash received will be equal to
such difference between the closing price of the index and the exercise price
of the option expressed in dollars times a specified multiple. The writer of
the option is obligated, in return for the premium received, to make delivery
of this amount. The writer may offset its position in stock index options
prior to expiration by entering into a closing transaction on an exchange or
the option may expire unexercised.

Because the value of an index option depends upon movements in the level of
the index rather than the price of a particular stock, whether the Portfolio
will realize a gain or loss from the purchase or writing of options on an
index depends upon movements in the level of stock prices in the stock market
generally or, in the case of certain indices, in an industry or market
segment, rather than movements in the price of a particular stock.
Accordingly, successful use by the Portfolio of options on stock indices will
be subject to Bankers Trust's ability to predict correctly movements in the
direction of the stock market generally or of a particular industry. This
requires different skills and techniques than predicting changes in the price
of individual stocks.

Futures Contracts on Stock Indices. The Portfolio may enter into contracts
providing for the making and acceptance of a cash settlement based upon
changes in the value of an index of securities ("Futures Contracts"). This
investment technique is designed only to hedge against anticipated future
change in general market prices which otherwise might either adversely affect
the value of securities held by the Portfolio or adversely affect the prices
of securities which are intended to be purchased at a later date for the
Portfolio. A Futures Contract may also be entered into to close out or offset
an existing futures position.

In general, each transaction in Futures Contracts involves the establishment
of a position which will move in a direction opposite to that of the
investment being hedged. If these hedging transactions are successful, the
futures positions taken for the Portfolio will rise in value by an amount
which approximately offsets the decline in value of the portion of the
Portfolio's investments that are being hedged. Should general market prices
move in an unexpected manner, the full anticipated benefits of Futures
Contracts may not be achieved or a loss may be realized.

Although Futures Contracts would be entered into for cash management purposes
only, such transactions do involve certain risks. These risks could include a
lack of correlation between the Futures Contract and the equity market being
hedged, a potential lack of liquidity in the secondary market and incorrect
assessments of market trends which may result in poorer overall performance
than if a Futures Contract had not been entered into.

Brokerage costs will be incurred and "margin" will be required to be posted
and maintained as a good-faith deposit against performance of obligations
under Futures Contracts written for the Portfolio. The Portfolio may not
purchase or sell a Futures Contract if immediately thereafter its margin
deposits on its outstanding Futures Contracts would exceed 5% of the market
value of the Portfolio's total assets.

Options on Futures Contracts. The Portfolio may invest in options on such
Futures Contracts for similar purposes.

Asset Coverage. The Portfolio will cover the Portfolio's transactions in
futures and related options, as well as in when-issued and delayed delivery,
as required under applicable interpretations of the SEC, either by owning the
underlying securities or by establishing a segregated account with the
Portfolio's Custodian containing high grade liquid debt securities in an
amount at all times equal to or exceeding the Portfolio's commitment with
respect to these instruments or contracts.

<PAGE>

INVESTMENT ADVISER OF THE PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY

DISTRIBUTOR
SIGNATURE BROKER-DEALER SERVICES, INC.

CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY

INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.

COUNSEL
WILLKIE FARR & GALLAGHER
..............................................................................

No person has been authorized to give any information or to make any
representations other than those contained in the Trust's Prospectuses, its
Statements of Additional Information or the Trust's official sales literature
in connection with the offering of the Trust's shares and, if given or made,
such other information or representations must not be relied on as having been
authorized by the Trust. This Prospectus does not constitute an offer in any
state in which, or to any person to whom, such offer may not lawfully be made.
..............................................................................
<PAGE>

PROSPECTUS: APRIL 29, 1996

SHARES OF THE FUND ARE NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, BANKERS TRUST COMPANY AND THE SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY. AN INVESTMENT IN THE FUND IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF
THE INVESTMENT TO FLUCTUATE, AND WHEN THE INVESTMENT IS REDEEMED, THE VALUE MAY
BE HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY INVESTED BY THE INVESTOR.

Limited Term
U.S. Government
Securities Fund

* Seeks high current income, through investment in short and intermediate term
U.S. Government securities, to the extent consistent with the preservation of
capital.

BANKERS TRUST COMPANY
Investment Adviser of the
Portfolio and Administrator

SIGNATURE BROKER-
DEALER SERVICES, INC.
Distributor
6 St. James Avenue
Boston, Massachusetts 02116

<PAGE>

TABLE OF CONTENTS
- ------------------------------------------------------------------------------
PAGE
..............................................................................
Summary of Fund Expenses 3
Fund Financial Highlights 5
Investment Objective and Policies 6
Risk Factors; Matching the Fund to Your Investment Needs 9
Net Asset Value 12
Purchase and Redemption of Shares 13
Dividends, Distributions and Taxes 16
Performance Information and Reports 17
Management of the Trust and Portfolio 18
- ------------------------------------------------------------------------------

<PAGE>

SUMMARY OF FUND EXPENSES
The following table provides (i) a summary of expenses relating to purchases
and sales of the shares of the BT Investment Limited Term U.S. Government
Securities Fund (the "Fund") and the annual operating expenses of the Fund and
the expenses of the Short/Intermediate U.S. Government Securities Portfolio
(the "Portfolio"), as a percentage of average net assets of the Fund; and (ii)
an example illustrating the dollar cost of such expenses on a $1,000
investment in the Fund. THE TRUSTEES OF BT PYRAMID MUTUAL FUNDS (THE "TRUST")
BELIEVE THAT THE AGGREGATE PER SHARE EXPENSES OF THE FUND AND THE PORTFOLIO
WILL BE LESS THAN OR APPROXIMATELY EQUAL TO THE EXPENSES WHICH THE FUND WOULD
INCUR IF THE TRUST RETAINED THE SERVICES OF AN INVESTMENT ADVISER AND THE
INVESTABLE ASSETS ("ASSETS") OF THE FUND WERE INVESTED DIRECTLY IN THE TYPE OF
SECURITIES BEING HELD BY THE PORTFOLIO.

- ------------------------------------------------------------------------------
ANNUAL OPERATING EXPENSES
(as a percentage of the average daily net assets of the Fund)
..............................................................................
Investment advisory fee (after reimbursements or waivers) 0.25%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.35
..............................................................................
Total operating expenses (after reimbursements or waivers) 0.60%
..............................................................................
EXAMPLE 1 year 3 years 5 years 10 years
..............................................................................
You would pay the following
expenses on a $1,000
investment, assuming: (1) 5%
annual return and (2)
redemption at the end of each
time period $6 $19 $33 $75
- ------------------------------------------------------------------------------

The expense table and the example above show the costs and expenses that an
investor will bear directly or indirectly as a shareholder of the Fund. While
reimbursement of distribution expenses in amounts up to 0.20% of average net
assets are authorized to be made pursuant to the Plan of Distribution under
Rule 12b-1 of the Investment Company Act of 1940, as amended (the "1940 Act"),
it is not expected that any payments will actually be made under that plan in
the foreseeable future. Bankers Trust Company ("Bankers Trust") has
voluntarily agreed to waive a portion of its investment advisory fee. Without
such waiver, the Portfolio's investment advisory fee would be equal to 0.25%.
The expense table and the example reflect a voluntary undertaking by Bankers
Trust or Signature Broker-Dealer Services, Inc. ("Signature") to waive or
reimburse expenses such that the total operating expenses will not exceed
0.60% of the Fund's average net assets annually. In the absence of this
undertaking, for the fiscal year ended December 31, 1995, the total operating
expenses would have been equal to approximately 0.84% of the Fund's average
net assets annually. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN. Moreover, while each example assumes a 5% annual return, actual
performance will vary and may result in a return greater or less than 5%.

For more information with respect to the expenses of the Fund and the
Portfolio see "Management of the Trust and Portfolio" herein.

<PAGE>

FUND FINANCIAL HIGHLIGHTS
The following table shows the selected data for a share outstanding, total
investment return, ratios to average net assets and other supplemental data
for the Fund for each period indicated and has been audited by Coopers &
Lybrand L.L.P., the Fund's independent accountants, whose report thereon
appears in the Fund's Annual Report which is incorporated by reference in the
Fund's Statement of Additional Information.

<TABLE>

- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C>
FOR THE PERIOD
AUGUST 24, 1992
FOR THE YEAR ENDED DECEMBER 31, (COMMENCEMENT
------------------------------- OF OPERATIONS) TO
1995 1994 1993 DECEMBER 31, 1992
................................................................................................................
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $ 9.61 $10.06 $ 9.93 $10.00
................................................................................................................
Income from Investment Operations
Net Investment Income 0.57 0.44 0.41 0.14
Net Realized and Unrealized
Gain (Loss) on Securities 0.35 (0.45) 0.20 (0.07)
................................................................................................................
Total from Investment Operations 0.92 (0.01) 0.61 0.07
................................................................................................................
Distributions from
Net Investment Income (0.57) (0.44) (0.41) (0.14)
Net Realized Gain from
Securities Transactions -- -- (0.07) --
................................................................................................................
Total Distributions (0.57) (0.44) (0.48) (0.14)
................................................................................................................
Net Asset Value, End of Period $ 9.96 $ 9.61 $10.06 $ 9.93
................................................................................................................
TOTAL INVESTMENT RETURN 9.81% (0.08%) 6.21% 2.02%*
RATIOS AND SUPPLEMENTAL DATA
Ratio of Net Investment Income
to Average Net Assets 5.81% 4.69% 4.35% 4.08%*
Ratio of Expenses to Average Net
Assets, Including Expenses of
the Short/Intermediate U.S.
Government Securities
Portfolio 0.60% 0.60% 0.60% 0.60%*
Decrease Reflected in Above
Expense Ratio Due to
Absorption of Expenses by
Bankers Trust 0.24% 0.34% 1.43% 5.60%*
Net Assets, End of Period
(000's omitted) $29,870 $31,302 $3,462 $3,188
- ------------------------------------------------------------------------------------------------------------------------

*Annualized
</TABLE>

<PAGE>

INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks a high level of current income consistent with preservation of
capital. The Fund offers investors a convenient means of participating in a
managed, diversified pool of short-term and intermediate-term U.S. Government
securities while relieving those investors of the administrative burdens
typically associated with purchasing and holding these instruments, such as
coordinating maturities and reinvestments, providing for safekeeping and
maintaining detailed records. The Fund's yield normally is expected to be
higher than a money market fund but lower than a longer-term or lower quality
bond fund.

The Trust seeks to achieve the investment objective of the Fund by investing
all the Assets of the Fund in the Short/Intermediate U.S. Government
Securities Portfolio, which has the same investment objective as the Fund.
There can be no assurances that the investment objective of either the Fund or
the Portfolio will be achieved. The investment objective of each of the Fund
and the Portfolio is not a fundamental policy and may be changed upon notice
to but without the approval of the Fund's shareholders or the Portfolio's
investors, respectively. See "Special Information Concerning Master-Feeder
Fund Structure" on page 11 herein.

SHORT/INTERMEDIATE U.S. GOVERNMENT SECURITIES PORTFOLIO
U.S. Government Securities. The Portfolio seeks to achieve its objective by
investing 100% of its assets in U.S. Government securities, including
repurchase agreements secured by U.S. Government securities.

In selecting securities for the Portfolio, Bankers Trust attempts to maintain
the Portfolio's overall sensitivity to interest rates in a range similar to
that of short-term to intermediate-term government bonds and notes with
weighted average maturities of two to five years. Because the Portfolio may
invest in mortgage securities whose prices are less sensitive to interest
rates than their relatively long maturities would suggest, the Portfolio's
dollar-weighted average maturity may be longer than five years from time to
time, but will not exceed seven years under normal conditions. The Portfolio
may hold individual securities with remaining maturities of more than seven
years as long as the Portfolio's dollar-weighted average maturity remains
within the above limit. The remaining maturities of individual securities,
excluding mortgage securities, will normally not exceed ten years.

"U.S. Government securities" as used herein means securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities. U.S.
Government securities have varying degrees of government backing. They may be
backed by the credit of the government as a whole or only by the issuing
agency. Securities issued by certain agencies are supported only by the credit
of the agency that issued them, and not by the U.S. Government. Securities
issued by the Federal Home Loan Mortgage Corporation and the Federal National
Mortgage Association are supported by the agency's right to borrow money from
the U.S. Treasury under certain circumstances. There is no assurance that the
U.S. government will support the obligations of its agencies or
instrumentalities if it is not required to do so by law. U.S. Treasury bonds,
notes and bills, and some agency securities, such as those issued by the
Government National Mortgage Association, are backed by the full faith and
credit of the U.S. Government as to payment of principal and interest and are
the highest quality government securities. The Fund itself, and its share
price and yield, are not guaranteed by the U.S. Government. For additional
information on U.S. Government securities, see below.

Repurchase Agreements. In a repurchase agreement the Portfolio buys a security
and simultaneously agrees to sell it back at a higher price. The Portfolio
will only enter repurchase agreements with respect to obligations backed by
the full faith and credit of the U.S. Government. The Portfolio shall always
receive U.S. Government securities as collateral with a market value equal to
102% of the purchase price plus accrued interest. In the event of the
bankruptcy of the other party to a repurchase agreement, the Portfolio could
experience delays in recovering its cash. To the extent that, in the meantime,
the value of the securities repurchased had decreased or the value of the
securities lent had increased, the Portfolio could experience a loss. In all
cases, Bankers Trust must find the creditworthiness of the other party to the
transaction satisfactory. A repurchase agreement is considered a
collateralized loan under the 1940 Act.

Rule 144A Securities. The Portfolio may purchase securities in the United
States that are not registered for sale under Federal securities laws but
which can be resold to institutions under the Securities and Exchange
Commission's ("SEC") Rule 144A. Provided that a dealer or institutional
trading market in such securities exists, these restricted securities are
treated as exempt from the Portfolio's 15% limit on illiquid securities. Under
the supervision of the Board of Trustees of the Portfolio, Bankers Trust
determines the liquidity of restricted securities and, through reports from
Bankers Trust, the Board will monitor trading activity in restricted
securities. Because Rule 144A is relatively new, it is not possible to predict
how these markets will develop. If institutional trading in restricted
securities were to decline, the liquidity of the Portfolio could be adversely
affected.

Securities Lending. The Portfolio is permitted to lend up to 30% of the total
value of its securities. These loans must be secured continuously by cash or
equivalent collateral or by a letter of credit at least equal to the market
value of the securities loaned plus accrued income. By lending its securities,
the Portfolio can increase its income by continuing to receive income on the
loaned securities as well as by the opportunity to receive interest on the
collateral. Any gain or loss in the market price of the borrowed securities
which occurs during the term of the loan inures to the Portfolio and its
investors. In lending securities to brokers, dealers and other organizations,
the Portfolio is subject to risks which, like those associated with other
extensions of credit, include delays in recovery and possible loss of rights
in the collateral should the borrower fail financially.

Mortgage-Backed Securities. The Portfolio may purchase mortgage-backed
securities issued by the U.S. Government and its agencies and
instrumentalities. Mortgage-backed securities include mortgage pass-through
securities, mortgage-backed bonds and mortgage pay-through securities. A
mortgage pass-through security is a pro rata interest in a pool of mortgages
where the cash flow generated from the mortgage collateral is passed through
to the security holder. Mortgage-backed bonds are general obligations of their
issuers, payable out of the issuers' general funds and additionally secured by
a first lien on a pool of mortgages. Mortgage pay-through securities exhibit
characteristics of both pass-throughs and mortgage-backed bonds. Mortgage-
backed securities also include other debt obligations secured by mortgages on
commercial real estate or residential properties. Other types of mortgage-
backed securities will likely be developed in the future, and the Portfolio
may invest in them if Bankers Trust determines they are consistent with the
Portfolio's investment objective and policies.

Collateralized Mortgage Obligations ("CMOs"). The Portfolio may purchase CMOs
issued by the U.S. Government and its agencies and instrumentalities. CMOs are
pay-through securities collateralized by mortgages or mortgage-backed
securities. CMOs are issued in classes and series that have different
maturities and often are retired in sequence.

Zero Coupon Bonds. These bonds can be issued directly by Federal agencies and
instrumentalities. Such issues of zero coupon bonds are originated in the form
of a zero coupon bond and are not created by stripping an outstanding bond.

Zero coupon bonds do not make regular interest payments. Instead they are sold
at a deep discount from their face value. Because a zero coupon bond does not
pay current income, its price can be very volatile when interest rates change.
In calculating its daily dividend, the Fund takes into account as income a
portion of the difference between a zero coupon bond's purchase price and its
face value.

Options and Futures Contracts. The Portfolio may buy and sell options and
futures contracts to manage its exposure to changing interest rates and
security prices. Some options and futures strategies, including selling
futures, buying puts, and writing calls, hedge the Portfolio's investments
against price fluctuations. Other strategies, including buying futures,
writing puts and buying calls, tend to increase market exposure. The Portfolio
may invest in options (including over-the-counter options) and futures
contracts with respect to any type of security which the Portfolio could hold
directly or indexes composed only of such securities.

Options and futures can be volatile investments, and involve certain risks. If
Bankers Trust applies a hedge at an inappropriate time or judges interest
rates incorrectly, options and futures strategies may lower the Portfolio's
return. The costs of hedging are not reflected in the Portfolio's yield but
are reflected in the Portfolio's total return. The Portfolio could also
experience losses if its options and futures positions were poorly correlated
with its other investments, or if it could not close out its positions because
of an illiquid secondary market.

Asset Coverage. To assure that the Portfolio's use of futures and related
options, as well as when-issued and delayed-delivery securities, are not used
to achieve investment leverage, the Portfolio will cover such transactions, as
required under applicable interpretations of the SEC, either by owning the
underlying securities or by establishing a segregated account with the
Portfolio's custodian containing high grade liquid debt securities in an
amount at all times equal to or exceeding the Portfolio's commitment with
respect to these instruments or contracts.

ADDITIONAL INVESTMENT LIMITATIONS
As a diversified fund, no more than 5% of the assets of the Portfolio may be
invested in the securities of one issuer (other than U.S. Government
securities), except that up to 25% of the Portfolio's assets may be invested
without regard to this limitation. The Portfolio will not invest more than 25%
of its assets in the securities of issuers in any one industry. These are
fundamental investment policies of the Portfolio which may not be changed
without investor approval. No more than 15% of the Portfolio's net assets may
be invested in illiquid or not readily marketable securities (including
repurchase agreements with remaining maturities of more than seven calendar
days). Additional investment policies of the Portfolio are contained in the
Statement of Additional Information.

RISK FACTORS; MATCHING THE FUND TO
YOUR INVESTMENT NEEDS
The Fund is designed for conservative investors looking for a relatively
stable, high quality investment. Because the Portfolio invests in high quality
instruments with short to intermediate maturities, its share price should be
more stable than that of a long-term bond fund, although it may be less stable
than that of a short-term bond fund. Generally, short to intermediate-term
instruments are less sensitive to interest rate fluctuations or changes in an
issuer's credit standing than longer-term bonds. At the same time, the Fund
may not offer the same yield or growth potential as a long-term bond fund. The
Fund should provide higher yields than mutual funds that maintain shorter
average maturities, but will not provide the same stability of principal. Bond
funds generally offer greater price stability than stock funds, although the
potential rewards of bonds are not as great. By itself, the Fund does not
constitute a balanced investment plan; the Fund and the Portfolio stress
income and preservation of capital rather than capital growth. The Fund's
share price, yield and total return fluctuate based on many factors, and the
value of Fund shares when redeemed may be more or less than their original
cost.

The value of Fund shares will tend to decrease when interest rates rise, and
increase when interest rates fall. The Fund's share price and yield also
depend on the quality of the Portfolio's investments. While U.S. Government
securities generally are of high quality, government securities that are not
backed by the full faith and credit of the United States may be affected by
changes in the creditworthiness of the agency that issued them. Many
securities can provide higher yields than U.S. Government securities, although
they may not provide the same high quality.

Some types of U.S. Government securities carry certain risks. For example,
mortgage-backed securities are subject to certain prepayment risks, while zero
coupon bonds may require the Portfolio to accrue income for which it has
received no actual cash. For additional information about these types of U.S.
Government securities, see above and "Investment Objective and Policies."

PORTFOLIO TURNOVER
Bankers Trust may engage in short-term trading when it believes it is
consistent with the Portfolio's investment objective. Also, a security may be
sold and another of comparable quality simultaneously purchased to take
advantage of what Bankers Trust believes to be a temporary disparity in the
normal yield relationship between the two securities. The frequency of
portfolio transactions -- the Portfolio's turnover rate -- will vary from year
to year depending on market conditions. Because a high turnover rate increases
transaction costs and may increase taxable capital gains, Bankers Trust
carefully weighs the anticipated benefits of short-term investment against
these consequences. The Portfolio's turnover rate for the years ended December
31, 1995, 1994 and 1993 and for the period from August 24, 1992 (commencement
of operations) to December 31, 1992 was 246%, 202%, 267% and 75%,
respectively. The increase in the Portfolio's turnover rate from the year
ended 1994 to 1995 was primarily due to the timing of subscriptions and
redemptions of Fund shares.

DERIVATIVES
The Portfolio may invest in various instruments that are commonly known as
derivatives. Generally, a derivative is a financial arrangement, the value of
which is based on, or "derived" from, a traditional security, asset or market
index. Some "derivatives" such as mortgage-related and other asset-backed
securities are in many respects like any other investment, although they may
be more volatile or less liquid than more traditional debt securities. There
are, in fact, many different types of derivatives and many different ways to
use them. There are a range of risks associated with those uses. Futures and
options are commonly used for traditional hedging purposes to attempt to
protect a fund from exposure to changing interest rates, securities prices or
currency exchange rates and for cash management purposes as a low cost method
of gaining exposure to a particular securities market without investing
directly in those securities. However, some derivatives are used for leverage,
which tends to magnify the effects of an instrument's price changes as market
conditions change. Leverage involves the use of a small amount of money to
control a large amount of financial assets and can, in some circumstances,
lead to significant losses. The Adviser will use derivatives only in
circumstances where the Adviser believes they offer the most economic means of
improving the risk/reward profile of the Portfolio. Derivatives will not be
used to increase portfolio risk above the level that could be achieved using
only traditional investment securities or to acquire exposure to changes in
the value of assets or indices that by themselves would not be purchased for
the Portfolio. The use of derivatives for non-hedging purposes may be
considered speculative. A description of the derivatives that the Portfolio
may use and some of their associated risks is found above and "Investment
Objective and Policies."

SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE
Unlike other open-end management investment companies (mutual funds) which
directly acquire and manage their own portfolio securities, the Fund seeks to
achieve its investment objective by investing all of its Assets in the
Portfolio, a separate registered investment company with the same investment
objective as the Fund. Therefore, an investor's interest in the Portfolio's
securities is indirect. In addition to selling a beneficial interest to the
Fund, the Portfolio may sell beneficial interests to other mutual funds or
institutional investors. Such investors will invest in the Portfolio on the
same terms and conditions and will pay a proportionate share of the
Portfolio's expenses. However, the other investors investing in the Portfolio
are not required to sell their shares at the same public offering price as the
Fund due to variations in sales commissions and other operating expenses.
Therefore, investors in the Fund should be aware that these differences may
result in differences in returns experienced by investors in the different
funds that invest in the Portfolio. Such differences in returns are also
present in other mutual fund structures. Information concerning other holders
of interests in the Portfolio is available from Bankers Trust at (800) 730-1313.

The master-feeder structure has been developed relatively recently, so
shareholders should carefully consider this investment approach.

Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large
fund withdraws from the Portfolio, the remaining funds may experience higher
pro rata operating expenses, thereby producing lower returns (however, this
possibility exists as well for traditionally structured funds which have large
institutional investors). Additionally, the Portfolio may become less diverse,
resulting in increased portfolio risk. Also, funds with a greater pro rata
ownership in the Portfolio could have effective voting control of the
operations of the Portfolio. Except as permitted by the SEC, whenever the
Trust is requested to vote on matters pertaining to the Portfolio, the Trust
will hold a meeting of shareholders of the Fund and will cast all of its votes
in the same proportion as the votes of the Fund's shareholders. Fund
shareholders who do not vote will not affect the Trust's votes at the
Portfolio meeting. The percentage of the Trust's votes representing Fund
shareholders not voting will be voted by the Trustees or officers of the Trust
in the same proportion as the Fund shareholders who do, in fact, vote.

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

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

The Fund's investment objective is not a fundamental policy and may be changed
upon notice to but without the approval of the Fund's shareholders. If there
is a change in the Fund's investment objective, the Fund's shareholders should
consider whether the Fund remains an appropriate investment in light of their
then-current needs. The investment objective of the Portfolio is also not a
fundamental policy. Shareholders of the Fund will receive 30 days prior
written notice with respect to any change in the investment objective of the
Fund or the Portfolio. See "Investment Objective and Policies" for a
description of the fundamental policies of the Portfolio that cannot be
changed without approval by the holders of "a majority of the outstanding
voting securities" (as defined in the 1940 Act) of the Portfolio.

For descriptions of the investment objective, policies and restrictions of the
Portfolio, see "Investment Objective and Policies." For descriptions of the
management of the Portfolio, see "Management of the Trust and Portfolio"
herein and in the Statement of Additional Information. For descriptions of the
expenses of the Portfolio, see "Management of the Trust and Portfolio" herein.

NET ASSET VALUE
The net asset value per share of the Fund is calculated on each day on which
the New York Stock Exchange Inc. (the "NYSE") is open (each such day being a
"Valuation Day"). The NYSE is currently open on each day, Monday through
Friday, except: (a) January 1st, Presidents' Day (the third Monday in
February), Good Friday, Memorial Day (the last Monday in May), July 4th, Labor
Day (the first Monday in September), Thanksgiving Day (the last Thursday in
November) and December 25th; and (b) the preceding Friday or the subsequent
Monday when one of the calendar-determined holidays falls on a Saturday or
Sunday, respectively.

The net asset value per share of the Fund is calculated on each Valuation Day
as of the close of regular trading on the NYSE (the "Valuation Time"), which
is currently 4:00 p.m., New York time or in the event that the NYSE closes
early, at the time of such early closing. The net asset value per share of the
Fund is computed by dividing the value of the Fund's Assets (i.e., the value
of its investment in the Portfolio and other assets), less all liabilities, by
the total number of its shares outstanding. The Portfolio's securities and
other assets are valued primarily on the basis of market quotations or, if
quotations are not readily available, by a method which the Portfolio's Board
of Trustees believes accurately reflects fair value.

Shares must be purchased in accordance with procedures established by the
Transfer Agent and Service Agents, including Bankers Trust, in connection with
customers' accounts. It is the responsibility of each Service Agent to transmit
to the Transfer Agent purchase and redemption orders and to transmit to Bankers
Trust as the Trust's custodian (the "Custodian") purchase payments on behalf of
its customers by the following business day (trade date +1) after an order for
shares is placed, and a shareholder must settle with the Service Agent his or
her entitlement to an effective purchase or redemption order as of a particular
time. Because Bankers Trust is the Custodian and Transfer Agent of the Trust,
funds may be transferred directly from or to a customer's account with Bankers
Trust to or from the Fund without incurring the additional costs or delays
associated with the wiring of federal funds.

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

EXCHANGE PRIVILEGE
Shareholders may exchange their shares for shares of certain other funds in
the BT Family of Funds registered in their state. The Fund reserves the right
to terminate or modify the exchange privilege in the future. To make an
exchange, follow the procedures indicated in "Purchase of Shares" and
"Redemption of Shares" in that fund's prospectus. Before making an exchange,
please note the following:

* Call your Service Agent for information and a prospectus. Read the
prospectus for relevant information.

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

TAX-SAVING RETIREMENT PLANS
Retirement plans offer significant tax savings and are available to
individuals, partnerships, small businesses, corporations, nonprofit
organizations and other institutions. Contact your Service Agent or Bankers
Trust for further information. Bankers Trust can set up your new account in
the Fund under a number of several tax-sheltered plans. These plans contain
special tax advantages and let you invest for retirement while sheltering your
investment income from current taxes. Minimums may differ from those listed
elsewhere in the Prospectus.

* Individual Retirement Accounts (IRAs): personal savings plans that offer tax
advantages for individuals to set aside money for retirement and allow new
contributions of $2,000 per tax year.

* Rollover IRAs: tax-deferred retirement accounts that retain the special tax
advantages of lump sum distributions from qualified retirement plans and
transferred IRA accounts.

* Simplified Employee Pension Plans (SEP): a relatively easy and inexpensive
alternative to retirement planning for sole proprietors, partnerships and
corporations. Under a SEP, employers make tax-deductible contributions to
their own and to eligible employees' IRA accounts. Employee contributions
are available through a "Salary Deferral" SEP for businesses with fewer than
25 eligible employees.

* 401(k) Programs: defined contribution plans available to corporations
allowing tax-deductible employer contributions and permitting employees to
contribute a percentage of their wages on a tax-deferred basis.

* 403(b) Custodian Accounts: defined contribution plans open to employees of
most nonprofit organizations and educational institutions.

* Deferred Benefit Plans: plan sponsors may invest all or part of their
pension assets in the Fund.

DIVIDENDS, DISTRIBUTIONS AND TAXES
Distributions. The Fund distributes substantially all of its net investment
income and capital gains to shareholders each year. Income dividends are
declared daily and paid monthly. Any net capital gains are distributed in
December. Unless a shareholder instructs the Trust to pay such dividends and
distributions in cash, they will be automatically reinvested in additional
shares of the Fund.

"Buying a Dividend." On the ex-date for a distribution from capital gains, the
Fund's share value is reduced by the amount of the distribution. If you buy
shares just before the ex-date ("buying a dividend"), you will pay the full
price for the shares and then receive a portion of the price back as a taxable
distribution.

Other Tax Information. In addition to Federal taxes, you may be subject to
state or local taxes on your investment, depending on the laws in your area.
You should consult with your own tax adviser concerning the application of
federal, state and local taxes to your distributions from the Fund.

PERFORMANCE INFORMATION AND REPORTS
The Fund's performance may be used from time to time in advertisements,
shareholder reports or other communications to shareholders or prospective
shareholders. Performance information may include the Fund's investment
results and/or comparisons of its investment results to various unmanaged
indices such as the Lehman Brothers 1-3 Year Government Index, the Lehman
Brothers Government Bond Index, the Lehman Brothers Intermediate Term Bond
Index, IBC/Donoghue's Money Fund Average, Lipper Short U.S. Government Average
or results of other mutual funds or investment or savings vehicles. In
addition, the Fund may compare various Portfolio characteristics such as
sector diversification, yield to maturity, duration, adjusted duration and
average maturity. The Fund's investment results as used in such communications
will be calculated on a yield or total rate of return basis in the manner set
forth below. From time to time, fund rankings may be quoted from various
sources, such as Lipper Analytical Services, Inc., Value Line and Morningstar,
Inc.

Unlike some bank deposits or other investments which pay a fixed yield for a
stated period of time, the total return of the Fund will vary depending upon
interest rates, the current market value of the securities held by the
Portfolio and changes in the Fund's expenses. In addition, during certain
periods for which total return quotations or yields may be provided, Bankers
Trust, as Adviser, Service Agent or Administrator, or Signature, as
Distributor, may have voluntarily agreed to waive portions of their fees on a
month-to-month basis. Such waivers will have the effect of increasing the
Fund's net income (and therefore its total return or yield) during the period
such waivers are in effect.

Shareholders will receive financial reports semi-annually that include the
Portfolio's financial statements, including listings of investment securities
held by the Portfolio at those dates. Annual reports are audited by
independent accountants.

MANAGEMENT OF THE TRUST AND PORTFOLIO
BOARD OF TRUSTEES
The affairs of the Trust and the Portfolio are managed under the supervision
of their respective Boards of Trustees. By virtue of the responsibilities
assumed by Bankers Trust, as the administrator of the Trust and the Portfolio,
neither the Trust nor the Portfolio requires employees other than its
executive officers. None of the executive officers of the Trust or the
Portfolio devotes full time to the affairs of the Trust or the Portfolio.

INVESTMENT ADVISER
The Trust has not retained the services of an investment adviser since the
Trust seeks to achieve the investment objective of the Fund by investing all
the Assets of the Fund in the Portfolio. The Portfolio has retained the
services of Bankers Trust, as investment adviser. Mr. Louis M. Hudson, Vice
President, is responsible for the day to day management of the Portfolio. Mr.
Hudson has been employed by Bankers Trust since 1961 and has managed the
Portfolio's assets since February, 1994.

Bankers Trust, a New York banking corporation with principal offices at 280
Park Avenue, New York, New York 10017, is a wholly owned subsidiary of Bankers
Trust New York Corporation. Bankers Trust conducts a variety of general
banking and trust activities and is a major wholesale supplier of financial
services to the international and domestic institutional markets. As of
December 31, 1995, Bankers Trust New York Corporation was the ninth largest
bank holding company in the United States with total assets of approximately
$104 billion. Bankers Trust is a worldwide merchant bank dedicated to
servicing the needs of corporations, governments, financial institutions and
private clients through a global network of over 120 offices in more than 40
countries. Investment management is a core business of Bankers Trust, built on
a tradition of excellence from its roots as a trust bank founded in 1903. The
scope of Bankers Trust's investment management capability is unique due to its
leadership positions in both active and passive quantitative management and
its presence in major equity and fixed income markets around the world.
Bankers Trust is one of the nation's largest and most experienced investment
managers, with approximately $200 billion in assets under management globally.
Of that total, approximately $64 billion are in actively managed fixed income
funds. This makes Bankers Trust one of the nation's leading managers of fixed
income funds.

Bankers Trust has more than 50 years of experience managing retirement assets
for the nation's largest corporations and institutions. In the past, these
clients have been serviced through separate account and commingled fund
structures. Now, the BT Family of Funds brings Bankers Trust's extensive
investment management expertise -- once available to only the largest
institutions in the U.S. -- to individual investors. Bankers Trust's officers
have had extensive experience in managing investment portfolios having
objectives similar to those of the Portfolio.

Bankers Trust, subject to the supervision and direction of the Board of
Trustees of the Portfolio, manages the Portfolio in accordance with the
Portfolio's investment objective and stated investment policies, makes
investment decisions for the Portfolio, places orders to purchase and sell
securities and other financial instruments on behalf of the Portfolio and
employs professional investment managers and securities analysts who provide
research services to the Portfolio. All orders for investment transactions on
behalf of the Portfolio are placed by Bankers Trust with broker-dealers and
other financial intermediaries that it selects, including those affiliated
with Bankers Trust. A Bankers Trust affiliate will be used in connection with
a purchase or sale of an investment for the Portfolio only if Bankers Trust
believes that the affiliate's charge for the transaction does not exceed usual
and customary levels. The Portfolio will not invest in obligations for which
Bankers Trust or any of its affiliates is the ultimate obligor or accepting
bank. The Portfolio may, however, invest in the obligations of correspondents
or customers of Bankers Trust.

Under its Investment Advisory Agreement, Bankers Trust receives a fee from the
Portfolio, computed daily and paid monthly, at the annual rate of 0.25% of the
average daily net assets of the Portfolio.

Under an Administration and Services Agreement with the Portfolio, Bankers
Trust calculates the value of the assets of the Portfolio and generally
assists the Board of Trustees of the Portfolio in all aspects of the
administration and operation of the Portfolio. The Administration and Services
Agreement provides for the Portfolio to pay Bankers Trust a fee computed daily
and paid monthly at the annual rate of 0.05% of the average daily net assets
of the Portfolio. Under each Administration and Services Agreement, Bankers
Trust may delegate one or more of its responsibilities to others, including
Signature, at Bankers Trust's expense. For more information, see the Statement
of Additional Information.

Pursuant to the terms of the Trust's Plan of Distribution pursuant to Rule
12b-1 under the 1940 Act (the "Plan"), Signature, as Distributor, may seek
reimbursement in an amount not exceeding 0.20% of the Fund's average daily net
assets annually for expenses incurred in connection with any activities
primarily intended to result in the sale of the Fund's shares, including, but
not limited to: compensation to and expenses (including overhead and telephone
expenses) of account executives or other employees of Signature who, as their
primary activity, engage in or support the distribution of shares; printing of
prospectuses, statements of additional information and reports for other than
existing Fund shareholders in amounts in excess of that typically used in
connection with the distribution of shares of the Fund; costs of placing
advertising in various media; services of parties other than Signature or its
affiliates in formulating sales literature; and typesetting, printing and
distribution of sales literature. All costs and expenses in connection with
implementing and operating the Plan will be paid by the Fund, subject to the
0.20% of net assets limitation. All costs and expenses associated with
preparing the prospectuses and statements of additional information and in
connection with printing them for and distributing them to existing
shareholders and regulatory authorities, which costs and expenses would not be
considered distribution expenses for purposes of the Plan, will also be paid
by the Fund. To the extent expenses of Signature under the Plan in any fiscal
year of the Trust exceed amounts payable under the Plan during that year,
those expenses will not be reimbursed in any succeeding fiscal year. Expenses
incurred in connection with distribution activities will be identified to the
Fund or the other series of the Trust involved, although it is anticipated
that some activities may be conducted on a Trust-wide basis, with the result
that those activities will not be identifiable to any particular series. In
the latter case, expenses will be allocated among the series of the Trust on
the basis of their relative net assets. It is not expected that any payments
will be made under the Plan in the foreseeable future.

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

EXPENSES OF THE TRUST
The Fund bears its own expenses. Operating expenses for the Fund generally
consist of all costs not specifically borne by Bankers Trust or Signature,
including administration and services fees, fees for necessary professional
services, amortization of organizational expenses, and costs associated with
regulatory compliance and maintaining legal existence and shareholder
relations. Bankers Trust and Signature have agreed to reimburse the Fund to
the extent required by applicable state law for certain expenses that are
described in the Statement of Additional Information. The Portfolio bears its
own expenses. Operating expenses for the Portfolio generally consist of all
costs not specifically borne by Bankers Trust or Signature, including
investment advisory and administration and services fees, fees for necessary
professional services, amortization of organization expenses, the costs
associated with regulatory compliance and maintaining legal existence and
investor relations.

INVESTMENT ADVISER OF THE PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY

DISTRIBUTOR
SIGNATURE BROKER-DEALER SERVICES, INC.

CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY

INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.

COUNSEL
WILLKIE FARR & GALLAGHER
..............................................................................

<PAGE>

BT INVESTMENT

PROSPECTUS: APRIL 29, 1996

A Statement of Additional Information (SAI) with the same date has been filed
with the Securities and Exchange Commission, and is incorporated herein by
reference. You may request a free copy of the Statement by calling the Fund's
Service Agent at 1-800-730-1313.

UNLIKE OTHER MUTUAL FUNDS, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY
INVESTING ALL OF ITS INVESTABLE ASSETS IN A SEPARATE INVESTMENT COMPANY (THE
"PORTFOLIO") WITH AN IDENTICAL INVESTMENT OBJECTIVE. THE INVESTMENT PERFORMANCE
OF THE FUND WILL CORRESPOND DIRECTLY TO THE INVESTMENT PERFORMANCE OF THE
PORTFOLIO. SEE "SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE" ON
PAGE 10.

SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, BANKERS TRUST COMPANY AND THE SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY. THE FUND INTENDS TO MAINTAIN A CONSTANT $1.00 PER SHARE NET ASSET VALUE,
ALTHOUGH THERE CAN BE NO ASSURANCE THAT IT WILL BE ABLE TO DO SO.

Money Market
Fund

* A money market fund that provides high current income to the extent consistent
with liquidity and capital preservation.

BANKERS TRUST COMPANY
Investment Adviser of the
Portfolio and Administrator

SIGNATURE BROKER-
DEALER SERVICES, INC.
Distributor
6 St. James Avenue
Boston, Massachusetts 02116

<PAGE>

TABLE OF CONTENTS
- ------------------------------------------------------------------------------
PAGE
..............................................................................
Summary of Fund Expenses 3
Fund Financial Highlights 5
Investment Objective and Policies 6
Risk Factors; Matching the Fund to Your Investment Needs 10
Net Asset Value 11
Purchase and Redemption of Shares 12
Dividends, Distributions and Taxes 16
Performance Information and Reports 17
Management of the Trust and Portfolio 18
- ------------------------------------------------------------------------------

<PAGE>

SUMMARY OF FUND EXPENSES
The following table provides (i) a summary of expenses relating to purchases
and sales of the shares of the BT Investment Money Market Fund (the "Fund")
and the aggregate annual operating expenses of the Fund and the expenses of
the Cash Management Portfolio (the "Portfolio"), as a percentage of average
net assets of the Fund and (ii) an example illustrating the dollar cost of
such expenses on a $1,000 investment in the Fund. THE TRUSTEES OF BT PYRAMID
MUTUAL FUNDS (THE "TRUST") BELIEVE THAT THE AGGREGATE PER SHARE EXPENSES OF
THE FUND AND THE PORTFOLIO WILL BE LESS THAN OR APPROXIMATELY EQUAL TO THE
EXPENSES WHICH THE FUND WOULD INCUR IF THE TRUST RETAINED THE SERVICES OF AN
INVESTMENT ADVISER AND THE INVESTABLE ASSETS ("ASSETS") OF THE FUND WERE
INVESTED DIRECTLY IN THE TYPE OF SECURITIES BEING HELD BY THE PORTFOLIO.

- ------------------------------------------------------------------------------
ANNUAL OPERATING EXPENSES
(as a percentage of the average daily net assets of the Fund)
..............................................................................
Investment advisory fee 0.15%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.20
..............................................................................
Total operating expenses (after reimbursements or waivers) 0.35%
..............................................................................
EXAMPLE 1 year 3 years 5 years 10 years
..............................................................................
You would pay the following
expenses on a $1,000
investment, assuming: (1) 5%
annual return and (2)
redemption at the end of each
time period $4 $11 $20 $44
- --------------------------------------------------------------------------------

The expense table and the example above show the costs and expenses that an
investor will bear directly or indirectly as a shareholder of the Fund. While
reimbursement of distribution expenses in amounts up to 0.20% of average net
assets are authorized to be made pursuant to the Plan of Distribution under
Rule 12b-1 of the Investment Company Act of 1940, as amended (the "1940 Act"),
it is not expected that any payments will actually be made under that plan in
the foreseeable future. The expense table and the example reflect a voluntary
undertaking by Bankers Trust Company ("Bankers Trust") or Signature Broker-
Dealer Services, Inc. ("Signature") to waive or reimburse expenses such that
the total operating expenses will not exceed 0.35% of the Fund's average net
assets annually. In the absence of this undertaking, for the fiscal year ended
December 31, 1995 the total operating expenses would have been equal to
approximately 0.51% of the Fund's average net assets annually. THE EXAMPLE
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Moreover, while each
example assumes a 5% annual return, actual performance will vary and may
result in a return greater or less than 5%.

For more information with respect to the expenses of the Fund and the
Portfolio see "Management of the Trust and Portfolio" herein.

<PAGE>

FUND FINANCIAL HIGHLIGHTS

The following table shows selected data for a share outstanding, total
investment return, ratios to average net assets and other supplemental data
for the Fund for each period indicated and has been audited by Coopers &
Lybrand L.L.P., the Fund's independent accountants, whose report thereon
appears in the Fund's Annual Report which is incorporated by reference in the
Fund's Statement of Additional Information.

- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 15, 1992
FOR THE YEAR ENDED DECEMBER 31, (COMMENCEMENT
------------------------------- OF OPERATIONS) TO
1995 1994 1993 DECEMBER 31, 1992
.........................................................................................................................
<S> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00
.........................................................................................................................
Income from Investment Operations
Net Investment Income 0.06 0.04 0.03 0.01
Net Realized Gain (Loss) from
Securities Transactions 0.00+ (0.01) 0.00+ 0.00+
.........................................................................................................................
Total from Investment Operations 0.06 0.03 0.03 0.01
.........................................................................................................................
Contribution of Capital -- 0.01 -- --
.........................................................................................................................
Distribution From:
Net Investment Income (0.06) (0.04) (0.03) (0.01)
Net Realized Gain from Securities
Transactions -- -- (0.00)+ (0.00)+
.........................................................................................................................
Total Distributions (0.06) (0.04) (0.03) (0.01)
.........................................................................................................................
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00
.........................................................................................................................
TOTAL INVESTMENT RETURN 5.76% 4.05%++ 2.91% 3.12%*
RATIOS AND SUPPLEMENTAL DATA
Ratio of Net Investment Income to
Average Net Assets 5.62% 4.24% 2.87% 3.06%*
Ratio of Expenses to Average Net
Assets, Including Expenses of the
Cash Management Portfolio 0.35% 0.35% 0.35% 0.35%*
Decrease Reflected in Above Expense
Ratio Due to Absorption of
Expenses by Bankers Trust 0.16% 0.21% 2.91% 3.56%*
Net Assets, End of Period
(000's omitted) $645,910 $976,472 $1,953 $789
.........................................................................................................................
<FN>
*Annualized
+Less than $0.01 per share
++Increased by 0.76% due to Contribution of Capital.
</FN>
</TABLE>

<PAGE>

INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks a high level of current income consistent with liquidity and
the preservation of capital through investment in high quality money market
instruments. The Fund offers investors a convenient means of diversifying
their holdings of short-term securities while relieving those investors of the
administrative burdens typically associated with purchasing and holding these
instruments, such as coordinating maturities and reinvestments, providing for
safekeeping and maintaining detailed records. High quality, short-term
instruments may result in a lower yield than instruments with a lower quality
or a longer term.

The Trust seeks to achieve the investment objective of the Fund by investing
all the Assets of the Fund in the Portfolio, which has the same investment
objective as the Fund. There can be no assurances that the investment
objective of either the Fund or the Portfolio will be achieved. The investment
objective of each of the Fund and the Portfolio is a fundamental policy and
may not changed without the approval of the Fund's shareholders or the
Portfolio's investors, respectively. See "Special Information Concerning
Master-Feeder Fund Structure" on page 10 herein.

CASH MANAGEMENT PORTFOLIO
The Portfolio will attempt to achieve its investment objective by investing in
the following money market instruments:

Bank Obligations. The Portfolio may invest in fixed rate or variable rate
obligations of U.S. or foreign banks which have total assets at the time of
purchase in excess of $1 billion and are rated Prime-1 by Moody's Investors
Service, Inc. ("Moody's") or A-1 or higher by Standard & Poor's Corporation
("S&P") or, if not rated, are believed by Bankers Trust, acting under the
supervision of the Board of Trustees of the Portfolio, to be of comparable
quality. Bank obligations in which the Portfolio invests include certificates
of deposit, bankers' acceptances, time deposits and other U.S. dollar-
denominated instruments issued or supported by the credit of U.S. or foreign
banks. If Bankers Trust, acting under the supervision of the Board of Trustees
of the Portfolio, deems the instruments to present minimal credit risk, the
Portfolio may invest in obligations of foreign banks or foreign branches of
U.S. banks, which include subsidiaries of U.S. 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
imposition of withholding taxes on interest payments, differing reserve
requirements, reporting and recordkeeping 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. Under normal market conditions the
Portfolio will invest more than 25% of its assets in the foreign and domestic
bank obligations described above. The Portfolio's concentration of its
investments in bank obligations will cause the Portfolio to be subject to the
risks peculiar to the domestic and foreign banking industries to a greater
extent than if its investments were not so concentrated. A description of the
ratings set forth above is provided in the Appendix to the Statement of
Additional Information.

Commercial Paper. The Portfolio may invest in fixed rate or variable rate
commercial paper, including variable rate master demand notes, issued by U.S.
or foreign corporations. Commercial paper when purchased by the Portfolio must
be rated Prime-1 by Moody's or A-1 or higher by S&P or, if not rated, must be
believed by Bankers Trust, acting under the supervision of the Board of
Trustees of the Portfolio, to be of comparable quality. Any commercial paper
issued by a foreign corporation and purchased by the Portfolio must be U.S.
dollar-denominated and must not be subject to foreign withholding tax at the
time of purchase. Investing in foreign commercial paper generally involves
risks similar to those described above relating to obligations of foreign
banks or foreign branches of U.S. banks.

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 Portfolio and the issuer, they are not normally
traded. Although no active secondary market may exist for these notes, the
Portfolio will purchase only those notes under which it may demand and receive
payment of principal and accrued interest daily 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 Portfolio,
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 Portfolio 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.

Other Corporate Debt Obligations. The Portfolio may invest in bonds, notes and
debentures issued by U.S. corporations that at the time of purchase have
outstanding commercial paper meeting the above rating requirements, or if such
commercial paper is unrated or if no such commercial paper is outstanding, are
rated at least AA by S&P or Aa by Moody's. Such obligations, at the time of
investment, must have or be deemed to have less than 397 days to maturity.

U.S. Government Obligations. The Portfolio may invest in obligations issued or
guaranteed by the U.S. Treasury or by agencies or instrumentalities of the
U.S. Government ("U.S. Government Obligations"). Obligations of certain
agencies and instrumentalities of the U.S. Government, such as short-term
obligations of the Government National Mortgage Association, are supported by
the "full faith and credit" of the U.S. Government; others, such as those of
the Export-Import Bank of the U.S., 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 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 only 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.

Repurchase Agreements. The Portfolio may engage in repurchase agreement
transactions with banks and governmental securities dealers approved by the
Board of Trustees of the Portfolio. Under the terms of a typical repurchase
agreement, the Portfolio would acquire an underlying debt obligation of a kind
in which the Portfolio could invest for a relatively short period (usually not
more than one week), subject to an obligation of the seller to repurchase, and
the Portfolio to resell, the obligation at an agreed price and time, thereby
determining the yield during the Portfolio's holding period. This arrangement
results in a fixed rate of return that is not subject to market fluctuations
during the Portfolio'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 Portfolio bears a risk of loss in the
event that the other party to a repurchase agreement defaults on its
obligations and the Portfolio is delayed in or prevented from exercising its
rights to dispose of the collateral securities, including the risk of a
possible decline in the value of the underlying securities during the period
in which the Portfolio seeks to assert these rights. Bankers Trust, acting
under the supervision of the Board of Trustees of the Portfolio, reviews the
creditworthiness of those banks and dealers with which the Portfolio 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.

Securities Lending. The Portfolio is permitted to lend up to 20% of the total
value of its securities to brokers, dealers and other financial organizations.
These loans must be secured continuously by cash or equivalent collateral or
by a letter of credit at least equal to 100% of the current market value of
the securities loaned plus accrued income. By lending its securities, the
Portfolio can increase its income by continuing to receive income on the
loaned securities as well as by the opportunity to receive interest on the
collateral. Any gain or loss in the market price of the borrowed securities
which occurs during the term of the loan inures to the Portfolio and its
investors. There may be risks of delay in receiving additional collateral or
risks of delay in recovery of the securities or even loss of rights in the
collateral should the borrower of the securities fail financially.

ADDITIONAL INVESTMENT TECHNIQUES
The Portfolio may enter into reverse repurchase agreements. See "Investment
Objectives and Policies" in the Statement of Additional Information for a more
detailed description of reverse repurchase agreements.

PORTFOLIO QUALITY AND MATURITY
The Portfolio will maintain a dollar-weighted average maturity of 90 days or
less. All securities in which the Portfolio invests will have or be deemed to
have remaining maturities of 397 days or less on the date of their purchase,
will be denominated in U.S. dollars and will have been granted the required
ratings established herein by two nationally recognized statistical rating
organizations ("NRSRO"): (or one such NRSRO if that NRSRO is the only such
NRSRO which rates the security), or if unrated, are believed by Bankers Trust,
under the supervision of the Portfolio's Board of Trustees, to be of
comparable quality. A description of such ratings is provided in the Appendix
to the Statement of Additional Information. Bankers Trust, acting under the
supervision of and procedures adopted by the Board of Trustees of the
Portfolio, will also determine that all securities purchased by the Portfolio
present minimal credit risks. Bankers Trust will cause the Portfolio 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 Portfolio.

ADDITIONAL INVESTMENT LIMITATIONS
The Fund's and the Portfolio's investment objectives, together with the
investment restrictions described in this paragraph and the Statement of
Additional Information, except as noted, are "fundamental policies," which
means that they may not be changed without the approval of the holders of the
Fund's and the Portfolio's outstanding voting securities. The Fund has the
same investment restrictions as the Portfolio, except that the Fund may invest
all of its Assets in another open-end investment company with the same
investment objective, such as the Portfolio. The Portfolio may not invest more
than 25% of its total assets in the securities of issuers in any single
industry, except that, under normal market conditions, more than 25% of the
total assets of the Portfolio will be invested in foreign and domestic bank
obligations. As an operating policy, the Portfolio may not invest more than 5%
of its total assets in the obligations of any one issuer except for U.S.
Government Obligations and repurchase agreements, which may be purchased
without limitation. The Portfolio is also authorized to borrow, including
entering into reverse repurchase transactions, in an amount up to 5% of its
total assets for temporary purposes, but not for leverage, and to pledge its
assets to the same extent in connection with these borrowings. See the
Statement of Additional Information for additional information with respect to
reverse repurchase transactions. At the time of an investment, the Portfolio's
aggregate holdings of repurchase agreements having a remaining maturity of
more than seven calendar days (or which may not be terminated within seven
calendar days upon notice by the Portfolio), time deposits having a remaining
maturity of more than seven calendar days, illiquid securities, restricted
securities and securities lacking readily available market quotations will not
exceed 10% of the Portfolio's net assets. If changes in the liquidity of
certain securities cause the Portfolio to exceed such 10% limit, the Portfolio
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 Portfolio. The Statement of Additional
Information contains further information on the Fund's and the Portfolio's
investment restrictions.

RISK FACTORS; MATCHING THE FUND TO
YOUR INVESTMENT NEEDS
The Fund is designed for conservative investors looking for high current
income approximating money market rates while remaining conveniently liquid
with a stable share price. The Portfolio follows practices which enable the
Fund to attempt to maintain a $1.00 share price: limiting average maturity of
the securities held by the Portfolio to 90 days or less; buying securities
which mature in 397 days or less; and buying only high quality securities with
minimal credit risks. Of course, the Fund cannot guarantee a $1.00 share
price, but these practices help to minimize any price fluctuations that might
result from rising or declining interest rates. While the Portfolio invests in
high quality money market securities, you should be aware that your investment
is not without risk. All money market instruments, including U.S. Government
securities, can change in value when interest rates or an issuer's
creditworthiness changes.

SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE
Unlike other open-end management investment companies (mutual funds) which
directly acquire and manage their own portfolio securities, the Fund seeks to
achieve its investment objective by investing all of its Assets in the
Portfolio, a separate registered investment company with the same investment
objective as the Fund. Therefore, an investor's interest in the Portfolio's
securities is indirect. In addition to selling a beneficial interest to the
Fund, the Portfolio may sell beneficial interests to other mutual funds or
institutional investors. Such investors will invest in the Portfolio on the
same terms and conditions and will pay a proportionate share of the
Portfolio's expenses. However, the other investors investing in the Portfolio
are not required to sell their shares at the same public offering price as the
Fund due to variations in sales commissions and other operating expenses.
Therefore, investors in the Fund should be aware that these differences may
result in differences in returns experienced by investors in the different
funds that invest in the Portfolio. Such differences in returns are also
present in other mutual fund structures. Information concerning other holders
of interests in the Portfolio is available from Bankers Trust at (800) 730-
1313.

The master-feeder structure has been developed relatively recently, so
shareholders should carefully consider this investment approach.

Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large
fund withdraws from the Portfolio, the remaining funds may experience higher
pro rata operating expenses, thereby producing lower returns (however, this
possibility exists as well for traditionally structured funds which have large
institutional investors). Additionally, the Portfolio may become less diverse,
resulting in increased portfolio risk. Also, funds with a greater pro rata
ownership in the Portfolio could have effective voting control of the
operations of the Portfolio. Except as permitted by the Securities and
Exchange Commission, whenever the Trust is requested to vote on matters
pertaining to the Portfolio, the Trust will hold a meeting of shareholders of
the Fund and will cast all of its votes in the same proportion as the votes of
the Fund's shareholders. Fund shareholders who do not vote will not affect the
Trust's votes at the Portfolio meeting. The percentage of the Trust's votes
representing the Fund's shareholders not voting will be voted by the Trustees
or officers of the Trust in the same proportion as the Fund shareholders who
do, in fact, vote.

NET ASSET VALUE
The net asset value per share of the Fund is calculated on each day on which
the Fund is open (each such day being a "Valuation Day"). The Fund is
currently open on each day, Monday through Friday, except (a) January 1st,
Martin Luther King Jr.'s Birthday (the third Monday in January), Presidents'
Day (the third Monday in February), Good Friday, Memorial Day (the last Monday
in May), July 4th, Labor Day (the first Monday in September), Columbus Day
(the second Monday in October), Veteran's Day (November 11th), Thanksgiving
Day (the last Thursday in November) and December 25th; and (b) the preceding
Friday or the subsequent Monday when one of the calendar-determined holidays
falls on a Saturday or Sunday, respectively.

The net asset value per share of the Fund is calculated twice on each
Valuation Day as of 2:00 p.m., New York time, and as of the close of regular
trading on the New York Stock Exchange Inc. ("NYSE"), which is currently 4:00
p.m., New York time or in the event that the NYSE closes early, at the time of
such early closing. The net asset value per share of the Fund is computed by
dividing the value of the Fund's assets (i.e., the value of its investment in
the Portfolio and other assets), less all liabilities, by the total number of
its shares outstanding. The Fund's net asset value will normally be $1.00.

The assets of the Portfolio are valued by using the amortized cost method of
valuation. This method involves valuing each security held by the Portfolio at
its cost at the time of its purchase and thereafter assuming a constant
amortization to maturity of any discount or premium. Accordingly, immaterial
fluctuations in the market value of the securities held by the Portfolio will
not be reflected in the Fund's net asset value. The Board of Trustees of the
Portfolio will monitor the valuation of assets by this method and will make
such changes as it deems necessary to assure that assets of the Portfolio are
valued fairly and in good faith.

Purchase orders for shares of the Fund will receive, on any Valuation Day, the
net asset value next determined following receipt by the Service Agent and
transmission to Bankers Trust, as the Trust's transfer agent (the "Transfer
Agent") of such order. If the purchase order is received by the Service Agent
and transmitted to the Transfer Agent prior to 2:00 p.m. (New York time) and
if payment in the form of federal funds is received on that day by Bankers
Trust, as the Trust's custodian (the "Custodian"), the shareholder will
receive the dividend declared on that day. If the purchase order is received
by the Service Agent and transmitted to the Transfer Agent after 2:00 p.m.
(New York time), and prior to the close of the NYSE (currently 4:00 p.m., New
York time or earlier, should the NYSE close earlier), the shareholder will
receive the dividend declared on the following day even if the Custodian
receives federal funds on that day. The Trust and Signature reserve the right
to reject any purchase order.

Another mutual fund investing in a Portfolio may accept purchase orders up
until a time later than 2:00 p.m., New York time. Such orders, when
transmitted to and executed by a Portfolio, may have an impact on the
corresponding Fund's performance.

Shares must be purchased in accordance with procedures established by the
Transfer Agent and Service Agents, including Bankers Trust, in connection with
customers' accounts. It is the responsibility of each Service Agent to
transmit to the Transfer Agent purchase and redemption orders and to transmit
to the Custodian purchase payments on behalf of its customers in a timely
manner, and a shareholder must settle with the Service Agent his or her
entitlement to an effective purchase or redemption order as of a particular
time. Because Bankers Trust is the Custodian and Transfer Agent of the Trust,
funds may be transferred directly from or to a customer's account with Bankers
Trust to or from the Fund without incurring the additional costs or delays
associated with the wiring of federal funds.

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

Automatic Investment Plan. The Fund may offer shareholders an automatic
investment plan under which shareholders may authorize some Service Agents to
place a purchase order each month or quarter for Fund shares. For further
information regarding the automatic investment plan, shareholder should
contact their Service Agent.
- --------------------------------------------------------------------------------
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
For retirement accounts $ 500
Through automatic investment plans $1,000
TO ADD TO AN ACCOUNT $ 250
For retirement accounts $ 100
Through automatic investment plan $ 100
MINIMUM BALANCE $1,000
For retirement accounts None
- ------------------------------------------------------------------------------

REDEMPTION OF SHARES
Shareholders may redeem shares at the net asset value per share next
determined on each Valuation Day. Redemption requests should be transmitted by
customers in accordance with procedures established by the Transfer Agent and
the shareholder's Service Agent. Redemption requests for shares of the Fund
received by the Service Agent and transmitted to the Transfer Agent prior to
2:00 p.m. (New York time) on each Valuation Day will be redeemed at the net
asset value per share as of 2:00 p.m. (New York time) and the redemption
proceeds normally will be delivered to the shareholder's account with the
Service Agent on that day; no dividend will be paid on the day of redemption.
Redemption requests received by the Service Agent and transmitted to the
Transfer Agent after 2:00 p.m. (New York time) on each Valuation Day and prior
to the close of the NYSE (currently 4:00 p.m., New York time or earlier should
the NYSE close earlier) will be redeemed at the net asset value per share as
of the close of the NYSE and redemption proceeds normally will be delivered to
the shareholder's account with the Service Agent the following day; shares
redeemed in this manner will receive the dividend declared on the day of the
redemption. Payments for redemptions will in any event be made within seven
calendar days following receipt of the request.

Another mutual fund investing in a Portfolio may accept redemption orders up
until a time later than 2:00 p.m., New York time. Such orders, when
transmitted to, and executed by, a Portfolio may have an impact on the
corresponding Fund's performance.

Redemption orders are processed without charge by the Trust. A Service Agent
may on at least 30 days' notice involuntarily redeem a shareholder's account
with the Fund having a balance below the minimum (as shown above). See
"Minimum Investments" above for minimum balance amounts.

Checkwriting. Shareholders of the Fund may redeem shares by check. Checks may
not be used to close an account. Shareholders will continue to earn dividends
on shares to be redeemed until the check clears. Checks will be returned to
shareholders at the end of the month. There is no charge for redemption of
shares by check. Additional information regarding the checkwriting privilege
may be obtained from a Service Agent.

EXCHANGE PRIVILEGE
Shareholders may exchange their shares for shares of certain other funds in
the BT Family of Funds registered in their state. The Fund reserves the right
to terminate or modify the exchange privilege in the future. To make an
exchange, follow the procedures indicated in "Purchase of Shares" and
"Redemption of Shares". Before making an exchange, please note the following:

* Call your Service Agent for information and a prospectus. Read the
prospectus for relevant information.

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

* Individual Retirement Accounts (IRAs): personal savings plans that offer
tax advantages for individuals to set aside money for retirement and allow
new contributions of $2,000 per tax year.

* Rollover IRAs: tax-deferred retirement accounts that retain the special tax
advantages of lump sum distributions from qualified retirement plans and
transferred IRA accounts.

* Simplified Employee Pension Plans (SEP): a relatively easy and inexpensive
alternative to retirement planning for sole proprietors, partnerships and
corporations. Under a SEP, employers make tax-deductible contributions to
their own and to eligible employees' IRA accounts. Employee contributions
are available through a "Salary Deferral" SEP for businesses with fewer than
25 eligible employees.

* 401(k) Programs: defined contribution plans available to corporations
allowing tax-deductible employer contributions and permitting employees to
contribute a percentage of their wages on a tax-deferred basis.

* 403(b) Custodian Accounts: defined contribution plans open to employees of
most nonprofit organizations and educational institutions.

* Deferred Benefit Plans: plan sponsors may invest all or part of their
pension assets in the Fund.

DIVIDENDS, DISTRIBUTIONS AND TAXES
The Portfolio determines its net income and realized capital gains, if any, on
each Valuation Day and allocates all such income and gain pro rata among the
Fund and the other investors in the Portfolio at the time of such
determination. The Fund declares dividends from its net income (i.e., the
Fund's pro rata share of the net income of the Portfolio) on each Valuation
Day and pays dividends for the preceding month within the first five Valuation
Days of each month. The Fund reserves the right to include realized short-term
gains, if any, in any such daily dividends. Distributions of the Fund's pro
rata share of the Portfolio's net realized long-term capital gains, if any,
and any undistributed net realized short-term capital gains are normally
declared and paid annually at the end of the fiscal year in which they were
earned to the extent they are not offset by any capital loss carryforwards.
Since the Fund is subject to a 4% nondeductible excise tax on certain
undistributed amounts of ordinary income and capital gains, the Fund expects
to make such other distributions as are necessary to avoid the application of
this tax. Unless a shareholder instructs the Fund to pay dividends or capital
gains distributions in cash, dividends and distributions will automatically be
reinvested at net asset value in additional shares of the Fund.

The Trust intends to qualify the Fund as a regulated investment company, as
defined in the Internal Revenue Code of 1986, as amended (the "Code").
Provided the Fund meets the requirements imposed by the Code, the Fund will
not pay any Federal income or excise taxes. The Portfolio will also not be
required to pay any Federal income or excise taxes. Dividends paid by the Fund
from its taxable net investment income and distributions by the Fund of its
net realized short-term capital gains are taxable to shareholders as ordinary
income, whether received in cash or reinvested in additional shares of the
Fund. The Trust does not expect that the Fund will realize long-term capital
gains and thus does not contemplate paying distributions taxable to
shareholders as long-term capital gains. The Fund's dividends and
distributions will not qualify for the dividends-received deduction for
corporations.

Statements as to the tax status of each shareholder's dividends and
distributions, if any, are mailed annually. Each shareholder will also
receive, if appropriate, various written notices after the end of the Fund's
prior taxable year as to the Federal income tax status of his or her dividends
and distributions which were received from the Fund during that year.
Shareholders should consult their tax advisers to assess the consequences of
investing in the Fund under state and local laws and to determine whether
dividends paid by the Fund that represent interest derived from U.S.
Government Obligations are exempt from any applicable state or local income
taxes.

PERFORMANCE INFORMATION AND REPORTS
From time to time, the Trust may advertise "current yield" and/or "effective
yield" for the Fund. All yield figures are based on historical earnings and
are not intended to indicate future performance. The "current yield" of the
Fund refers to the income generated by an investment in the Fund over a seven-
day period (which period will be stated in the advertisement). This income is
then "annualized;'" that is, the amount of income generated by the investment
during that week is assumed to be generated each week over a 52-week period
and is shown as a percentage of the investment. The "effective yield" is
calculated similarly but, when annualized, the income earned by an investment
in the Fund is assumed to be reinvested. The "effective yield" will be
slightly higher than the "current yield" because of the compounding effect of
this assumed reinvestment. The Trust may include this information in sales
material and advertisements for the Fund.

Yield is a function of the quality, composition and maturity of the securities
held by the Portfolio and operating expenses of the Fund and the Portfolio. In
particular, the Fund's yield will rise and fall with short-term interest
rates, which can change frequently and sharply. In periods of rising interest
rates, the yield of the Fund will tend to be somewhat lower than prevailing
market rates and in periods of declining interest rates the yield will tend to
be somewhat higher. In addition, when interest rates are rising, the inflow of
net new money to the Fund from the continuous sale of its shares will likely
be invested by the Portfolio in instruments producing higher yields than the
balance of the Portfolio's securities, thereby increasing the current yield of
the Fund. In periods of falling interest rates, the opposite can be expected
to occur. Accordingly, yields will fluctuate and do not necessarily indicate
future results. While yield information may be useful in reviewing the
performance of the Fund, it may not provide a basis for comparison with bank
deposits, other fixed rate investments, or other investment companies that may
use a different method of calculating yield. Any fees charged by Service
Agents for processing purchase and/or redemption transactions will effectively
reduce the yield for those shareholders.

From time to time, advertisements or reports to shareholders may compare the
yield of the Fund to that of other mutual funds with similar investment
objectives or to that of a particular index. The yield of the Fund might be
compared with, for example, the IBC/Donoghue's Taxable First Tier Money Fund
Average which is an average compiled by IBC/Donoghue's Money Fund Report, a
widely recognized, independent publication that monitors the performance of
money market mutual funds. Similarly, the yield of the Fund might be compared
with rankings prepared by Micropal Limited and/or Lipper Analytical Services,
Inc., which are widely recognized, independent services that monitor the
investment performance of mutual funds. The yield of the Fund might also be
compared with the average yield reported by the Bank Rate Monitor for money
market deposit accounts offered by the 50 leading banks and thrift
institutions in the top five standard metropolitan areas. Shareholders may
make inquiries regarding the Fund, including current yield quotations and
performance information, by contacting any Service Agent.

MANAGEMENT OF THE TRUST AND PORTFOLIO
BOARD OF TRUSTEES
The affairs of the Trust and Portfolio are managed under the supervision of
their respective Board of Trustees. By virtue of the responsibilities assumed
by Bankers Trust, the administrator of the Trust and Portfolio, neither the
Trust nor Portfolio require employees other than its executive officers. None
of the executive officers of the Trust or Portfolio devotes full time to the
affairs of the Trust or Portfolio.

The Trustees of the Trust who are not "interested persons" (as defined in the
1940 Act) (the "Independent Trustees") of the Trust or of the Portfolio, as
the case may be, have adopted written procedures reasonably appropriate to
deal with potential conflicts of interest, up to and including creating
separate boards of trustees, arising from the fact that several of the same
individuals are trustees of the Trust and the Portfolio. For more information
with respect to the Trustees of both the Trust and the Portfolio, see
"Management of the Trust and Portfolios" in the Statement of Additional
Information.

Bankers Trust, a New York banking corporation with principal offices at 280
Park Avenue, New York, New York 10017, is a wholly owned subsidiary of Bankers
Trust New York Corporation. Bankers Trust conducts a variety of general
banking and trust activities and is a major wholesale supplier of financial
services to the international and domestic institutional markets. As of
December 31, 1995, Bankers Trust New York Corporation was the ninth largest
bank holding company in the United States with total assets of approximately
$104 billion. Bankers Trust is a worldwide merchant bank dedicated to
servicing the needs of corporations, governments, financial institutions and
private clients through a global network of more than 40 offices in over 120
countries. Investment management is a core business of Bankers Trust, built on
a tradition of excellence from its roots as a trust bank founded in 1903. The
scope of Bankers Trust's investment management capability is unique due to its
leadership positions in both active and passive quantitative management and
its presence in major equity and fixed income markets around the world.
Bankers Trust is one of the nation's largest and most experienced investment
managers, with approximately $200 billion in assets under management globally.
Of that total, approximately $45 billion are in cash assets alone. This makes
Bankers Trust one of the nation's leading managers of cash funds.

Bankers Trust, subject to the supervision and direction of the Board of
Trustees of the Portfolio, manages the Portfolio in accordance with the
Portfolio's investment objective and stated investment policies, makes
investment decisions for the Portfolio, places orders to purchase and sell
securities and other financial instruments on behalf of the Portfolio and
employs professional investment managers and securities analysts who provide
research services to the Portfolio. All orders for investment transactions on
behalf of the Portfolio are placed by Bankers Trust with broker-dealers and
other financial intermediaries that it selects, including those affiliated
with Bankers Trust. A Bankers Trust affiliate will be used in connection with
a purchase or sale of an investment for the Portfolio only if Bankers Trust
believes that the affiliate's charge for the transaction does not exceed usual
and customary levels. The Portfolio will not invest in obligations for which
Bankers Trust or any of its affiliates is the ultimate obligor or accepting
bank. The Portfolio may, however, invest in the obligations of correspondents
and customers of Bankers Trust.

Under its Investment Advisory Agreement, Bankers Trust receives a fee from the
Portfolio, computed daily and paid monthly, at the annual rate of 0.15% of the
average daily net assets of the Portfolio.

Bankers Trust has been advised by its counsel that, in counsel's opinion,
Bankers Trust currently may perform the services for the Trust and the
Portfolio described in this prospectus and the statement of additional
information without violation of the Glass-Steagall Act or other applicable
banking laws or regulations. State laws on this issue may differ from the
interpretations of relevant Federal law and banks and financial institutions
may be required to register as dealers pursuant to state securities law.

Under an Administration and Services Agreement with the Portfolio, Bankers
Trust calculates the value of the assets of the Portfolio and generally
assists the Board of Trustees of the Portfolio in all aspects of the
administration and operation of the Portfolio. The Administration and Services
Agreement provides for the Portfolio to pay Bankers Trust a fee, computed
daily and paid monthly, at the annual rate of 0.05% of the average daily net
assets of the Portfolio. Under each Administration and Services Agreement,
Bankers Trust may delegate one or more of its responsibilities to others,
including Signature, at Bankers Trust's expense. For more information, see the
Statement of Additional Information.

INVESTMENT ADVISER OF THE PORTFOLIO AND ADMINISTRATOR

<PAGE>

BANKERS TRUST COMPANY

DISTRIBUTOR
SIGNATURE BROKER-DEALER SERVICES, INC.

CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY

INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.

COUNSEL
WILLKIE FARR & GALLAGHER
..............................................................................

BT0456N

BT ADVISOR FUNDS

PROSPECTUS - ADVISOR CLASS SHARES
JANUARY 16, 1996, AS AMENDED APRIL 29, 1996

U.S. BOND INDEX FUND
EQUITY 500 EQUAL WEIGHTED INDEX FUND

SMALL CAP INDEX FUND
EAFE(R) EQUITY INDEX FUND1

BT INVESTMENT EQUITY 500 INDEX FUND

BT Advisor Funds (the "Trust") is an open-end, management investment company
(mutual fund) which currently consists of ten funds. With the exception of the
BT Investment Equity 500 Index Fund (the "Equity 500 Index Fund"), each of the
diversified funds listed above (each, a "Fund") is a separate series of the
Trust and each offers two classes of shares. The shares offered by this
prospectus are the Advisor Class Shares (the "Shares"). The Equity 500 Index
Fund is a series of BT Pyramid Mutual Funds, an open-end management investment
company (together with the Trust, the "Trusts"). Each Fund seeks to replicate as
closely as possible the performance of a selected market index before the
deduction of the expenses allocable to the Shares of the Fund and the
corresponding Portfolio (the "Expenses"). There is no assurance, however, that
each Fund will achieve its stated objective.

UNLIKE OTHER OPEN-END MANAGEMENT INVESTMENT COMPANIES (MUTUAL FUNDS), EACH FUND
SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING ALL OF ITS INVESTABLE
ASSETS ("ASSETS") IN A SEPARATE INVESTMENT COMPANY (THE "PORTFOLIO") WITH AN
IDENTICAL INVESTMENT OBJECTIVE. THE INVESTMENT PERFORMANCE OF EACH FUND WILL
CORRESPOND DIRECTLY TO THE INVESTMENT PERFORMANCE OF THE CORRESPONDING
PORTFOLIO. SEE "SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE" ON
PAGE 21.

Bankers Trust Company ("Bankers Trust") is the investment adviser (the
"Adviser") of each Portfolio.

Please read this Prospectus before investing, and keep it on file for future
reference. It contains important information, including how each Fund invests
and the services available to shareholders.

To learn more about each Fund and its investments, investors can obtain a copy
of the Funds' Statement of Additional Information (the "SAI"), dated January 16,
1996, as amended April 29, 1996, which contains each Portfolio's most recent
financial report and portfolio listing. The SAI has been filed with the
Securities and Exchange Commission (the "SEC") and is incorporated herein by
reference. For a free copy of this document, call (800) 730-1313

<PAGE>

or contact the Trusts at 6 St. James Avenue, Boston, MA 02116, or
an Investment Professional.

1The EAFE index is the exclusive property of Morgan Stanley. Morgan Stanley
Capital International is a service mark of Morgan Stanley and has been licensed
for use by Bankers Trust Company.

<PAGE>

CONTENTS

THE FUNDS 5 WHO MAY WANT TO INVEST
6 INVESTMENT PRINCIPLES AND RISKS Each
Fund's overall approach to investing.
7 EXPENSE SUMMARY Each Fund's annual operating
expenses.

10 FUND FINANCIAL HIGHLIGHTS Selected
data for a share outstanding, total
investment return, ratios to
average net assets and other
supplemental data for the Fund.
THE FUNDS IN DETAIL 11 INVESTMENT OBJECTIVES AND POLICIES
19 RISK FACTORS AND CERTAIN SECURITIES
AND INVESTMENT PRACTICES

21 SPECIAL INFORMATION CONCERNING
MASTER-FEEDER FUND STRUCTURE
22 SECURITIES AND INVESTMENT PRACTICES
27 PERFORMANCE How each Fund has done over time.

29 MANAGEMENT OF THE TRUSTS AND THE PORTFOLIOS

ACCOUNT INFORMATION 32 TYPES OF ACCOUNTS Different ways to
setup your account, including
tax-sheltered retirement plans.
33 HOW TO BUY SHARES Opening an
account and making additional
investments.
36 HOW TO SELL SHARES Taking money out
and closing your account.
39 INVESTOR SERVICES To help you
manage your account.

SHAREHOLDER AND
ACCOUNT POLICIES 41 DIVIDENDS, CAPITAL GAINS AND TAXES
42 VALUATION DETAILS Share price

calculations and the timing of
purchases and redemptions.

45 EXCHANGE LIMITATIONS
46 ADDITIONAL INFORMATION ABOUT THE

TRUSTS AND THE PORTFOLIOS

<PAGE>

THE FUNDS

The U.S. BOND INDEX FUND seeks to replicate as closely as possible (before
deduction of Expenses) the investment performance of the Lehman Brothers
Aggregate Bond Index (the "Aggregate Bond Index"), a broad market weighted index
which encompasses U.S. Treasury and agency securities, corporate investment
grade bonds, international (dollar-denominated) investment grade bonds, and
mortgage-backed securities. The Fund

<PAGE>

will be invested primarily in fixed income securities of the U.S. Government or
any agency thereof, publicly issued fixed rate domestic debt of industrial,
financial, and utility corporations, and U.S. dollar denominated fixed income
securities of foreign and supranational entities issued publicly in the United
States. The Fund will also invest in mortgage pass-through securities issued by
the Government National Mortgage Association, the Federal Home Loan Mortgage
Corporation, and the Federal National Mortgage Association. The U.S. Bond Index
Fund invests all of its Assets in the U.S. Bond Index Portfolio.

The EQUITY 500 EQUAL WEIGHTED INDEX FUND seeks to replicate as closely as
possible the total return of the Standard & Poor's 500 Equal Weighted Index (the
"S&P 500 Equal Weighted Index"). The S&P 500 Equal Weighted Index is comprised
of all stocks that make up the Standard & Poor's 500 Composite Stock Price Index
with each security having the same weight. The S&P 500 Equal Weighted Index is
re-balanced to these equal weights at the end of each calendar month. The Fund
will include the common stock of each company included in the S&P 500, other
than Bankers Trust New York Corporation, in such a manner that the market value
of the Fund's holding of each stock will be approximately equal to the market
value of each other stock held in the Fund. The Equity 500 Equal Weighted Index
Fund invests all of its Assets in the Equity 500 Equal Weighted Index Portfolio.

The SMALL CAP INDEX FUND seeks to replicate as closely as possible (before
deduction of Expenses) the total return of the Russell 2000 Small Stock Index
(the "Russell 2000"), an index consisting of 2,000 small-capitalization common
stocks. The Fund will include the common stock of one or more companies included
in the Russell 2000 Index, on the basis of computer-generated statistical data,
that are deemed representative of the industry diversification of the entire
Russell 2000 Index. The Small Cap Index Fund invests all of its Assets in the
Small Cap Index Portfolio.

The EAFE(R) EQUITY INDEX FUND seeks to replicate as closely as possible (before
deduction of Expenses) the total return of the Morgan Stanley Capital
International Europe, Australia, Far East (EAFE) Index with net dividends (the
"EAFE Index"), a capitalization-weighted index containing approximately 1,100
equity securities of companies located outside the United States.
The Fund will be invested primarily in equity securities of business
enterprises organized and domiciled outside of the United States or for which
the principal trading market is outside the United States. Statistical methods
will be employed to replicate the Index by buying most of the relevant Index
securities. Securities purchased for the Fund will generally, but not
necessarily, be traded on a foreign securities exchange. The EAFE(R) Equity
Index Fund invests all of its Assets in the EAFE(R) Equity Index Portfolio.

<PAGE>

The EQUITY 500 INDEX FUND seeks to replicate as closely as possible (before
deduction of Expenses) the total return of the Standard & Poor's 500 Composite
Stock Price Index (the "S&P 500"), an index emphasizing large-capitalization
stocks. The Fund will include the common stock of those companies included in
the S&P 500, other than Bankers Trust New York Corporation, selected on the
basis of computer generated statistical data, that are deemed representative of
the industry diversification of the entire S&P 500. The Equity 500 Index Fund
invests all of its Assets in the Equity 500 Index Portfolio.

WHO MAY WANT TO INVEST

Shares of each Fund are offered through this Prospectus to investors who engage
an Investment Professional.

The Trusts seek to achieve the investment objective of each Fund by investing
all the Assets of the Fund in the corresponding Portfolio. The Portfolios are
not managed according to traditional methods of "active" investment management,
which involve the buying and selling of securities based upon economic,
financial and market analysis and investment judgment. Instead, the Portfolios,
utilizing a "passive" or "indexing" investment approach and attempt to replicate
the investment performance of their respective indices through statistical
procedures.

The U.S. BOND INDEX PORTFOLIO represents all major sectors of the investment
grade fixed-income securities markets. The U.S. Bond Index Fund may be a
suitable investment vehicle for those investors seeking ownership in the "bond
market" as a whole, without regard to particular sectors. The U.S. Bond Index
Fund is also suitable for those investors with common stock holdings who are
seeking a complementary fixed-income investment to create a more balanced asset
mix.

The EQUITY 500 EQUAL WEIGHTED, SMALL CAP INDEX, EAFE(R) EQUITY INDEX AND EQUITY
500 INDEX FUNDS may be appropriate for investors who are willing to ride out
domestic and/or foreign stock market fluctuations in pursuit of potentially
higher long-term returns. Each corresponding Portfolio invests for growth and
does not pursue income. Over time, stocks, although more volatile, have shown
greater growth potential than other types of securities. In the shorter term,
however, stock prices can fluctuate dramatically in response to market factors.

The EAFE(R) EQUITY INDEX FUND may be appropriate for investors who want to
pursue their investment goals in markets outside of the United States. By
including international investments in their portfolio, investors can achieve an
extra level of diversification and also participate in opportunities around the

<PAGE>

world. However, there are additional risks involved with international
investing. The performance of international funds depends upon currency values,
the political and regulatory environment, and overall economic factors in the
countries in which a Portfolio invests.

The Trust is intended to be a long-term investment vehicle and is not designated
to provide investors with a means of speculating on short-term market movements.
Investors who engage in excessive account activity generate additional costs
which are borne by all the Trusts' shareholders. In order to minimize such
costs, each Trust has adopted the following policies. Each Trust reserves the
right to reject any purchase request (including exchange purchases from other BT
Advisor Funds ) that is reasonably deemed to be disruptive to efficient
portfolio management, either because of the timing of the investment or previous
excessive trading by the investor. Additionally, each Trust has adopted exchange
privilege limitations as described in the section "Exchange Limitations."
Finally, each Trust reserves the right to suspend the offering of its shares.

Each Fund is not in itself a balanced investment plan. Investors should consider
their investment objective and tolerance for risk when making an investment
decision. When an investor sells their Fund Shares, they may be worth more or
less than what they paid for them.

INVESTMENT PRINCIPLES AND RISKS

The value of each Portfolio's investments varies based on many factors. The
value of bonds fluctuates based on changes in domestic or foreign interest
rates, the credit quality of the issuer, market conditions, and other economic
and political news.
In general, bond prices rise when interest rates fall, and vice versa. This
effect is usually more pronounced for longer-term securities. Lower-quality
securities offer higher yields, but also carry more risk.

Because many foreign investments are denominated in foreign currencies, changes
in the value of these currencies can significantly affect the EAFE(R) Equity
Index Fund's share price. General economic factors in the various world markets
can also impact the value of an investors investment. When investors sell Fund
Shares, they may be worth more or less than what they paid for them. See "Risk
Factors and Certain Securities and Investment Practices" for more information.

EXPENSE SUMMARY

<PAGE>

The following table provides: (i) a summary of expenses relating to purchases
and sales of the Shares of each Fund and the annual operating expenses of the
Fund and expenses of the corresponding Portfolio, in the aggregate, as a
percentage of average daily net assets of each Fund; and (ii) an example
illustrating the dollar cost of such expenses on a $1,000 investment in each
Fund. THE TRUSTEES OF EACH TRUST BELIEVE THAT THE EXPENSES OF EACH FUND AND
EXPENSES OF THE CORRESPONDING PORTFOLIO, IN THE AGGREGATE, WILL BE LESS THAN OR
APPROXIMATELY EQUAL TO THE EXPENSES WHICH THE FUND WOULD INCUR IF THE TRUSTS
RETAINED THE SERVICES OF AN INVESTMENT ADVISER AND THE ASSETS OF EACH FUND WERE
INVESTED DIRECTLY IN THE TYPE OF SECURITIES BEING HELD BY THE CORRESPONDING
PORTFOLIO.

SHAREHOLDER TRANSACTION EXPENSES

Maximum Sales Charge on Purchases
(as a percentage of offering price) None*

Maximum Sales Charge on Reinvested
Distributions None

Redemption Fee None*

Exchange Fee None

Shareholder transaction expenses are charges paid when investors buy, sell,
exchange, or hold Shares of a Fund. See "Account Information" for an explanation
of how and when these charges apply.

* A TRANSACTION FEE OF 0.50% IS DEDUCTED FROM REDEMPTIONS AND EXCHANGES OUT OF
THE SMALL CAP INDEX FUND AND THE EAFE(R) EQUITY INDEX FUND. THESE TRANSACTION
FEES ARE PAID TO THE RESPECTIVE FUNDS AND ARE DEDUCTED AUTOMATICALLY FROM THE
AMOUNT REDEEMED.

THE PURPOSE OF THE 0.50% TRANSACTION FEE IS TO ALLOCATE TRANSACTION COSTS
ASSOCIATED WITH REDEMPTIONS AND EXCHANGES TO INVESTORS MAKING THOSE REDEMPTIONS
AND EXCHANGES, THUS INSULATING EXISTING SHAREHOLDERS FROM THOSE TRANSACTION
COSTS. THESE COSTS INCLUDE: (1) BROKERAGE COSTS; (2) THE EFFECT OF THE "BID-ASK"
SPREAD IN SMALL AND MEDIUM SIZED COMPANY STOCK AND INTERNATIONAL MARKETS; AND
(3) TAXES IN SOME COUNTRIES. SINCE THE INVESTORS, NOT THE FUND, BEARS THESE
COSTS, THE FUND IS EXPECTED TO BE ABLE TRACK ITS BENCHMARK INDEX MORE CLOSELY.

<PAGE>

ANNUAL OPERATING EXPENSES

U.S. BOND INDEX FUND
Investment advisory fee
(after reimbursement or waiver) 0.10%
Other expenses
(after reimbursements or waivers) 0.25%
----
TOTAL OPERATING EXPENSES
(after reimbursements or waivers) 0.35%
=====
EQUITY 500 EQUAL WEIGHTED INDEX FUND
Investment advisory fee
(after reimbursement or waiver) 0.15%
Other expenses
(after reimbursements or waivers) 0.50%
----
TOTAL OPERATING EXPENSES
(after reimbursements or waivers) 0.65%
=====

SMALL CAP INDEX FUND
Investment advisory fee
(after reimbursement or waiver) 0.10%
Other expenses
(after reimbursements or waivers) 0.35%
TOTAL OPERATING EXPENSES
(after reimbursements or waivers) 0.45%

EAFE(R) EQUITY INDEX FUND
Investment advisory fee
(after reimbursement or waiver) 0.20%
Other expenses
(after reimbursements or waivers) 0.45%
TOTAL OPERATING EXPENSES
(after reimbursements or waivers) 0.65%

EQUITY 500 INDEX FUND
Investment advisory fee
(after reimbursement or waiver) 0.07%
12b-1 fees 0.00
Other expenses
(after reimbursements or waivers) 0.18%
----
TOTAL OPERATING EXPENSES
(after reimbursements or waivers) 0.25%
=====

EXPENSE TABLE EXAMPLE: An investor would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2) redemption at the end of each
time period:

EXAMPLES

U.S. BOND INDEX FUND 1 Year 3 Years

$4 $11

EQUITY 500 EQUAL WEIGHTED INDEX FUND 1 Year 3 Years

$7 $21

SMALL CAP INDEX FUND 1 Year 3 Years

$10 $20

<PAGE>

EAFE(R)EQUITY INDEX FUND 1 Year 3 Years

$12 $26

EQUITY 500 INDEX FUND 1 Year 3 Years 5 Years 10 Years

$3 $8 $14 $32

The expense table and the example above show the costs and expenses that an
investor will bear directly or indirectly as a shareholder of a Fund. Bankers
Trust has voluntarily agreed to waive a portion of its investment advisory fee
with respect to each Portfolio. Without such waiver, each Portfolio's investment
advisory fee would be equal to the following: U.S. Bond Index Portfolio --
0.15%; Equity 500 Equal Weighted Index Portfolio -- 0.25%; Small Cap Index
Portfolio -- 0.15%; EAFE(R) Equity Index Portfolio -- 0.25%; and Equity 500
Index Portfolio -- 0.10%. The expense table and the example reflect a voluntary
undertaking by Bankers Trust or Signature Broker-Dealer Services, Inc. ("SBDS"),
as the distributor (the "Distributor") of the Shares of each Fund, to waive or
reimburse expenses such that the total operating expenses of each Fund and the
corresponding Portfolio, with the exception of the Equity 500 Index Fund and
Equity 500 Index Portfolio, (as a percentage of the Fund's average daily net
assets) would be equal to the following: U.S. Bond Index -- 0.35%; Equity 500
Equal Weighted Index .65%; Small Cap Index -- 0.45%; and EAFE(R) Equity Index --
0.65%. In the absence of this undertaking, assuming total assets of $100 million
in each Fund, it is estimated that "Total Operating Expenses" of each Fund and
its corresponding Portfolio would be as follows: U.S. Bond Index -- 0.55%;
Equity 500 Equal Weighted Index -- 0.75%; Small Cap Index -- 0.60%; and EAFE(R)
Equity Index With respect to the Equity 500 Index Fund and the Equity 500 Index
Portfolio, in the absence of this undertaking, for the fiscal year ended
December 31, 1995, the total operating expenses would have been equal to
approximately 0.45% of the Fund's average net assets annually. THE EXAMPLE
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Moreover, while each example
assumes a 5% annual return, actual performance will vary and may result in a
return greater or less than 5%.

CURRENTLY, THE FUNDS (WITH THE EXCEPTION OF THE EQUITY 500 INDEX FUND) HAVE
ISSUED TWO CLASSES OF SHARES. THE FUNDS OFFER BY SEPARATE PROSPECTUS ANOTHER
CLASS OF SHARES. BECAUSE THE EXPENSES VARY BETWEEN THE CLASSES, PERFORMANCE WILL
VARY WITH RESPECT TO EACH CLASS. ADDITIONAL INFORMATION CONCERNING THE FUNDS'
OTHER CLASS OF SHARES IS AVAILABLE FROM BANKERS TRUST, AS ADMINISTRATOR, AT
(800) 730-1313.

For more information about each Fund's and each Portfolio's expenses see
"Management of the Trusts and the Portfolios" and

<PAGE>

"Valuation Details."

FUND FINANCIAL HIGHLIGHTS

The following table shows the selected data for a share outstanding, total
investment return, ratios to average net assets and other supplemental data of
the Equity 500 Index Fund for the periods indicated. The Equity 500 Index Fund's
Annual Report has been audited by Coopers & Lybrand L.L.P., the Fund's
independent accountants, whose report thereon appears in the Fund's Annual
Report. The Fund's Annual Report is incorporated by reference in the Trusts'
SAI.

FOR THE
PERIOD
12/31/92
FOR THE YEAR ENDED (COMMENCEMENT
DECEMBER 31, OF
1995 1994 1993 OPERATIONS)

SELECTED PER SHARE DATA
Net Asset Value,
Beginning of Period $10.36 $10.57 $10.00 $10.00

Income from Investment
Operations

Net Investment Income 0.29 0.22 0.24 __
Net Realized and

Unrealized Gain (Loss) on
Securities and Futures

Transactions 3.53 (0.10) 0.71 __

Total from Investment
Operations 3.82 0.12 0.95 __
Distributions from
Net Investment
Income (0.29) (0.22) (0.24) __
Net Realized

Gain from Securities and

Futures Transactions (0.07) (0.11) (0.14) __
Total
Distributions (0.36) (0.33) (0.38) __
Net Asset Value,
End of Period $13.82 $10.36 $10.57 $10.00

TOTAL INVESTMENT RETURN 37.15% 1.15% 9.53% __

RATIOS AND SUPPLEMENTAL
DATA

<PAGE>

Ratio of Net Investment
Income to Average Net

Assets 2.38% 2.68% 2.53% __
Ratio of Expenses to

Average Net Assets,
Including Expenses of
the Equity 500 Index

Portfolio 0.25% 0.25% 0.25% __
Decrease Reflected in

Above Expense Ratio
Due to Absorption of
Expenses by Bankers

Trust 0.23% 0.29% 1.82% __

Net Assets, End of

Period (000's omitted) $277,140 $181,898 $1,835 $ 100

THE FUNDS IN DETAIL

INVESTMENT OBJECTIVES AND POLICIES

The U.S. BOND INDEX PORTFOLIO seeks to replicate as closely as possible (before
deduction of Expenses) the investment performance of the Aggregate Bond Index, a
broad market weighted index which encompasses four major classes of investment
grade fixed-income securities in the United States: U.S. Treasury and agency
securities, corporate bonds, international (dollar-denominated) bonds, and
mortgage-backed securities, with maturities greater than one year.

As of December 31, 1995, the major classes of fixed-income securities
represented the following proportions of the Index's total market value:

<PAGE>
AGGREGATE
BOND INDEX

U.S. Treasury and

agency securities 53%
Corporate bonds 14%

International (dollar-
denominated) bonds 3%

Mortgage-backed securities 29%
Asset Backed Securities 1%
Dollar-weighted average
maturity (Years) 8.5 yrs

The U.S. Bond Index Portfolio will be unable to hold all of the individual
issues which comprise the Index because of the large number of securities
involved. Instead, the Portfolio will hold a representative sample of the
securities in the Index, selecting one or two issues to represent entire
"classes" or types of securities in the Index. The Portfolio will be constructed
so as to match as closely as possible the composition of the Index by investing
in fixed-income securities approximating their relative proportion of the
Index's total market value.

At the broadest level, the U.S. Bond Index Portfolio will seek to hold
securities and other investments which reflect the weighting of the major asset
classes in the Index. These classes include U.S. Treasury and agency securities,
corporate bonds, and mortgage-backed securities. For example, if U.S. Treasury
and agency securities represent approximately 54% of the Index's interest rate
risk, then approximately 54% of the Portfolio's interest rate risk will come
from such securities and other investments. Similarly, if corporate bonds
represent 14% of the interest rate risk of the Index, then they will represent
approximately 14% of the interest rate risk of the Portfolio. Such a sampling
technique is expected to be an effective means of substantially replicating the
income and capital returns provided by the Index before deduction of Fund and
Portfolio expenses.

The Portfolio may, from time to time, substitute one type of investment grade
bond for another. For instance, a Portfolio may hold more short-term corporate
bonds (and, in turn, hold fewer short U.S. Treasury bonds) than represented in
the Index so as to increase income. This corporate substitution strategy will
entail the assumption of additional credit risk; however, substantial
diversification within the corporate sector should moderate issue-specific
credit risk. Overall, credit risk is expected to be very low for the U.S. Bond
Index Portfolio.

Fixed-income securities will be primarily of investment grade quality - i.e.,
those rated at least Baa by Moody's Investors Service, Inc. ("Moody's") or BBB-
by Standard & Poor's Corporation ("S&P"). Securities rated Baa or BBB possess
some
speculative characteristics.

The Portfolio may invest in U.S. Treasury bills, notes and bonds
and other "full faith and credit" obligations of the U.S.
Government and in U.S. Government agency securities, which are

<PAGE>

debt obligations issued or guaranteed by agencies or
instrumentalities of the U.S. Government ("U.S. Government
Securities"). Such "agency" securities may NOT be backed by the
"full faith and credit" of the U.S. Government. Such U.S.
Government agencies may include the Federal Farm Credit Banks,
the Resolution Trust Corporation and the Government National
Mortgage Association. Even though they all carry top (AAA)
credit ratings, "agency" obligations are not explicitly
guaranteed by the U.S. Government and so are perceived as
somewhat riskier than comparable Treasury bonds.

As a mutual fund investing primarily in fixed-income securities,
the Portfolio is subject to interest rate, income, call and
credit risks. Since the Portfolio also invests in
mortgage-backed securities, it is also subject to prepayment
risk. See "Risk Factors and Certain Securities and Investment
Practices."

The EQUITY 500 EQUAL WEIGHTED INDEX PORTFOLIO seeks to replicate as closely as
possible the total return of the S&P 500 Equal Weighted Index. The S&P 500 Equal
Weighted Index is comprised of all stocks that make up the Standard & Poor's 500
Composite Stock Price Index with each security having the same weight. The S&P
500 Equal Weighted Index is re-balanced to these equal weights at the end of
each calendar month. Investing in a fund designed to replicate this benchmark
provides investors with diversified equity exposure with a small cap tilt and
value investment attributes.

The Equity 500 Equal Weighted Index Portfolio allocates its assets equally among
the equity securities which compose the S&P 500 Equal Weighted Index. The
Portfolio may omit or remove any S&P 500 Equal Weighted Index stock from the
Portfolio if, following objective criteria, Bankers Trust judges the stock to be
insufficiently liquid or believes the merit of the investment has been
substantially impaired by extraordinary events or financial conditions. Bankers
Trust will not purchase the stock of Bankers Trust New York Corporation, which
is included in the Index, and instead will overweight its holdings of companies
engaged in similar businesses.

The Equity 500 Equal Weighted Index Fund and the Equity 500 Equal Weighted Index
Portfolio are not sponsored, endorsed, sold or promoted by Wilshire Associates.
Wilshire makes no representation or warranty, express or implied, to the
shareholders of the Fund or investors in the Portfolio or any member of the
public regarding the advisability of investing in securities generally or in the
Fund or the Portfolio particularly or the ability of the index to track general
stock market performance.

The SMALL CAP INDEX PORTFOLIO seeks to replicate as closely as possible (before
deduction of expenses of the Fund and corresponding Portfolio) the total return
of the Russell 2000.

<PAGE>

The Russell 2000 Index is composed of approximately 2,000 small-capitalization
common stocks. A company's stock market capitalization is the total market value
of its floating outstanding shares. As of December 31, 1995, the average stock
market capitalization of the Russell 2000 was $280 million and the weighted
average stock market capitalization of the Russell 2000 was $540 million.

The Small Cap Portfolio is neither sponsored by nor affiliated with the Frank
Russell Company. Frank Russell's only relationship to the Portfolio is the
licensing of the use of the Russell 2000 Small Stock Index. Frank Russell
Company is the owner of the trademarks and copyrights relating to the Russell
indices.

The Small Cap Portfolio invests in a statistically selected sample of the
approximately 2,000 stocks included in the Russell 2000 Index. The stocks of the
Russell 2000 to be included in the Small Cap Index Portfolio will be selected
utilizing a statistical sampling technique known as "optimization." This process
selects stocks for the Portfolio so that various industry weightings, market
capitalizations and fundamental characteristics (e.g. price-to-book,
price-to-earnings, debt-to-asset ratios, and dividend yields) closely
approximate those of the Russell 2000. For instance, if 10% of the
capitalization of the Russell 2000 consists of utility companies with relatively
small capitalizations, then the Small Cap Portfolio is constructed so that
approximately 10% of the Portfolio's assets are invested in the stocks of
utility companies with relatively small capitalizations. The stocks held by the
Portfolio are weighted to make the Portfolio's aggregate investment
characteristics similar to those of the Russell 2000 Index as a whole.

The EAFE(R) EQUITY INDEX PORTFOLIO seeks to replicate as closely aS possible
(before deduction of expenses of the Fund and corresponding Portfolio) the total
return of the EAFE Index. The Portfolio attempts to achieve this objective by
investing in a statistically selected sample of the equity securities included
in the EAFE Index.

The EAFE Index is a capitalization-weighted index containing approximately 1,100
equity securities of companies located outside the United States. The countries
currently included in the EAFE Index are Australia, Austria, Belgium, Denmark,
Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, Malaysia, The
Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland and
United Kingdom.

Inclusion of a security in the EAFE Index in no way implies an opinion by Morgan
Stanley as to its attractiveness as an investment. Neither the Fund nor the
Portfolio is neither sponsored by nor affiliated with Morgan Stanley.

<PAGE>

The EAFE(R) Equity Index Portfolio is constructed to have aggregatE investment
characteristics similar to those of the EAFE Index. The Portfolio invests in a
statistically selected sample of the securities included in the EAFE Index,
although not all companies within a country will be represented in the Portfolio
at the same time. Stocks are selected for inclusion in the Portfolio based on
country of origin, market capitalization, yield, volatility and industry sector.
Banker Trust will manage the Portfolio using advanced statistical techniques to
determine which stocks are to be purchased or sold to replicate the EAFE Index.
From time to time, adjustments may be made in the Portfolio because of changes
in the composition of the EAFE Index, but such changes should be infrequent.

This Fund is not sponsored, endorsed, sold or promoted by Morgan Stanley. Morgan
Stanley makes no representation or warranty, express or implied, to the owners
of this Fund or any member of the public regarding the advisability of investing
in securities generally or in this Fund particularly or the ability of the EAFE
Index to track general stock market performance. Morgan Stanley is the licensor
of certain trademarks, service marks and trade names of Morgan Stanley and of
the EAFE Index which is determined, composed and calculated by Morgan Stanley
without regard to the issuer of this Fund or this Fund itself. Morgan Stanley
has no obligation to take the needs of the issuer of this Fund or the owners of
this Fund into consideration in determining, composing or calculating the EAFE
Index. Inclusion of a security in the EAFE Index in no way implies an opinion by
Morgan Stanley as to its attractiveness as an investment. Morgan Stanley is not
responsible for and has not participated in the determination of the timing of,
prices at, or quantities of this Fund to be issued or in the determination or
calculation of the equation by which this Fund is redeemable for cash. Morgan
Stanley has no obligation or liability to owners of this Fund in connection with
the administration, marketing or trading of this Fund. This Fund is neither
sponsored by nor affiliated with Morgan Stanley.

ALTHOUGH MORGAN STANLEY SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN
THE CALCULATION OF THE INDICES FROM SOURCES WHICH MORGAN STANLEY CONSIDERS
RELIABLE, MORGAN STANLEY DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS
OF THE INDICES OR ANY DATA INCLUDED THEREIN. MORGAN STANLEY MAKES NO WARRANTY,
EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, LICENSEE'S
CUSTOMERS AND COUNTERPARTIES, OWNERS OF THE PRODUCTS, OR ANY OTHER PERSON OR
ENTITY FROM THE USE OF THE INDICES OR ANY DATA INCLUDED THEREIN IN CONNECTION
WITH THE RIGHTS LICENSED HEREUNDER OR FOR ANY OTHER USE. MORGAN STANLEY MAKES NO
EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE INDEXES
OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT
SHALL MORGAN STANLEY HAVE ANY LIABILITY FOR ANY DIRECT,

<PAGE>

INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES
(INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF
SUCH DAMAGES.

The EQUITY 500 INDEX PORTFOLIO seeks to replicate as closely as possible (before
deduction of expenses of the Fund and the corresponding Portfolio) the total
return of the S&P 500.

The S&P 500 is an index of 500 common stocks, most of which trade on the New
York Stock Exchange Inc. (the "NYSE"). Bankers Trust believes that the S&P 500
is representative of the performance of publicly traded common stocks in the
U.S. in general.

In seeking to replicate the performance of the S&P 500, before deduction of Fund
and Portfolio expenses, Bankers Trust will attempt over time to allocate the
Equity 500 Index Portfolio's investment among common stocks in approximately the
same proportions as they are represented in as the S&P 500, beginning with the
heaviest weighted stocks that make up a larger portion of the Index's value.

The Adviser utilizes a two-stage sampling approach in seeking to obtain its
objective. Stage one, which encompasses large cap stocks, maintains the stock
holdings at or near their benchmark weights. Large capitalization stocks are
defined as those securities which represent 0.10% or more of the index. In stage
two, smaller stocks are analyzed and selected using risk characteristics and
industry weights in order to match the sector and risk characteristics of the
smaller companies in the S&P 500.
This approach helps to maximize portfolio liquidity while minimizing costs.

Bankers Trust generally will seek to match the composition of the S&P 500 but
usually will not invest the Equity 500 Index Portfolio's stock portfolio to
mirror the Index exactly. Because of the difficulty and expense of executing
relatively small stock transactions, the Portfolio may not always be invested in
the less heavily weighted S&P 500 stocks, and may at times have its portfolio
weighted differently from the S&P 500, particularly if the Portfolio has a low
level of assets. In addition, the Portfolio may omit or remove any S&P 500 stock
from the Portfolio if, following objective criteria, Bankers Trust judges the
stock to be insufficiently liquid or believes the merit of the investment has
been substantially impaired by extraordinary events or financial conditions.
Bankers Trust will not purchase the stock of Bankers Trust New York Corporation,
which is included in the Index, and instead will overweight its holdings of
companies engaged in similar businesses.

ABOUT THE S&P 500. The S&P 500 is composed of 500 common stocks, which are
chosen by S&P on a statistical basis to be included in the Index. The inclusion
of a stock in the S&P 500 in no way implies that S&P believes the stock to be an
attractive investment. The 500 securities, most of which trade on the NYSE,

<PAGE>

represented, as of December 31, 1995, approximately 81% of the market value of
all U.S. common stocks. Each stock in the S&P 500 is weighted by its market
value. Bankers Trust believes that the performance of the S&P 500 is
representative of the performance of publicly traded common stocks in general.
The composition of the S&P 500 is determined by S&P and is based on such factors
as the market capitalization and trading activity of each stock and its adequacy
as a representation of stocks in a particular industry group, and may be changed
from time to time.

The Equity 500 Index Fund and the Equity 500 Index Portfolio are not sponsored,
endorsed, sold or promoted by Standard & Poor's Corporation. S&P makes no
representation or warranty, express or implied, to the shareholders of the Fund
or investors in the Portfolio or any member of the public regarding the
advisability of investing in securities generally or in the Fund or the
Portfolio particularly or the ability of the S&P 500 to track general stock
market performance.

S&P does not guarantee the accuracy and/or the completeness of the S&P 500 or
any data included therein.

S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE RESULTS TO BE OBTAINED BY
THE FUND OR THE PORTFOLIO, OWNERS OF THE FUND OR THE PORTFOLIO, OR ANY OTHER
PERSON OR ENTITY FROM THE USE OF THE S&P 500 OR ANY DATA INCLUDED THEREIN. S&P
MAKES NO EXPRESS OR IMPLIED WARRANTIES AND HEREBY EXPRESSLY DISCLAIMS ALL SUCH
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH
RESPECT TO THE S&P 500 OR ANY DATA INCLUDED THEREIN.

For more information about the performance of the S&P 500, see "Appendix B" in
the SAI.

GENERAL

Over time, the correlation between the performance of each Fund, before the
deduction of Expenses, and the respective Index is expected to be 0.95 or higher
before deduction of Expenses of the Fund and expenses of the Portfolio. A
correlation of 1.00 would indicate perfect correlation, which would be achieved
when the net asset value of the Fund, including the value of its dividend and
any capital gain distributions, increases or decreases in exact proportion to
changes in the Index. Each Fund's ability to track its respective index may be
affected by, among other things, transaction costs, administration and other
expenses incurred by the Funds or the corresponding Portfolio, changes in either
the composition of the Index or the assets of a Portfolio, and the timing and
amount of Portfolio investor contributions and withdrawals, if any. In the
unlikely event that a high correlation is not achieved, the Trusts' Boards of
Trustees will consider alternatives. Because each Portfolio seeks to track the
respective index, Bankers Trust will not attempt to judge the merits of any
particular stock as an investment.

<PAGE>

Under normal circumstances, each Portfolio will invest at least 80% of its
assets in the securities of its respective Index.

As diversified funds, no more than 5% of the assets of each Portfolio may be
invested in the securities of one issuer (other than U.S. Government
Securities), except that up to 25% of each Portfolio's assets may be invested
without regard to this limitation. Each Portfolio will not invest more than 25%
of its assets in the securities of issuers in any one industry. In the unlikely
event that the S&P 500 should concentrate to an extent greater than that amount,
each Portfolio's ability to achieve its investment objectiver may be impaired.
These are fundamental investment policies of the Portfolios which may not be
changed without investor approval. No more than 15% of each Portfolio's net
assets may be invested in illiquid or not readily marketable securities
(including repurchase agreements and time deposits with remaining maturities of
more than seven calendar days). Additional investment policies of each Portfolio
are contained in the SAI.

Each Portfolio may maintain up to 20% of its assets in short-term debt
securities and money market instruments to meet redemption requests or to
facilitate investment in the securities of the respective Index. Securities
index futures contracts and related options, warrants, convertible securities
and swap agreements may be used for several reasons: to simulate full investment
in the underlying Index while retaining a cash balance for fund management
purposes, to facilitate trading, or to reduce transaction costs or to seek
higher investment returns when a futures contract, option, warrant, convertible
security or swap agreement is priced more attractively than the underlying
equity security or Index. These instruments may be considered derivatives. See
"Risk Factors and Certain Securities and Investment Practices -- Derivatives."

The use of derivatives for non-hedging purposes may be considered speculative.
While each of these securities can be used as leveraged investments, a Portfolio
may not use them to leverage its net assets. No Portfolio will invest in such
instruments as part of a temporary defensive strategy (such as altering the
aggregate maturity of the Portfolio) to protect the Portfolio against potential
market declines.

Each Portfolio may lend its investment securities and purchase securities on a
when-issued and a delayed delivery basis. The U.S. Bond Index Portfolio may
invest in mortgage-related and other asset-backed securities. The EAFE(R) Equity
Index Portfolio may engage in foreign currency forward and futures transactions
for the purpose of enhancing portfolio returns or hedging against foreign
exchange risk arising from the Portfolio's investment or anticipated investment
in securities denominated in foreign currencies. See "Risk Factors and Certain
Securities and Investment Practices" for more information about the investment
practices of the Portfolios.

RISK FACTORS AND CERTAIN SECURITIES AND INVESTMENT PRACTICES

<PAGE>

FIXED INCOME SECURITY RISK - U.S. BOND INDEX FUND Investors in the U.S. Bond
Index Fund are exposed to four types of risk from fixed income securities: (1)
Interest rate risk is the potential for fluctuations in bond prices due to
changing interest rates; (2) Income risk is the potential for a decline in a
Portfolio's income due to falling market interest rates; (3) Credit risk is the
possibility that a bond issuer will fail to make timely payments of either
interest or principal to the Portfolio; and (4) Prepayment risk or call risk is
the likelihood that, during periods of falling interest rates, securities with
high stated interest rates will be prepaid (or "called") prior to maturity,
requiring the Portfolio to invest the proceeds at generally lower interest
rates.

MARKET RISK - EQUITY 500 INDEX FUND, EQUITY 500 EQUAL WEIGHTED INDEX FUND, SMALL
CAP INDEX FUND AND EAFE(R) EQUITY INDEX FUND As mutual funds investing primarily
in common stocks, these Portfolios are subject to market risk -- i.e., the
possibility that common stock prices will decline over short or even extended
periods. The U.S. and foreign stock markets tend to be cyclical, with periods
when stock prices generally rise and periods when prices generally decline.

RISKS OF INVESTING IN MEDIUM- AND SMALL-CAPITALIZATION STOCKS SMALL CAP INDEX
FUND Historically, medium- and small-capitalization stocks have been more
volatile in price that the larger-capitalization stocks included in the S&P 500.
Among the reasons for the greater price volatility of these securities are the
less certain growth prospects of smaller firms, the lower degree of liquidity in
the markets for such stocks, and the greater sensitivity of medium- and
small-size companies to changing economic conditions. In addition to exhibiting
greater volatility, medium- and small-size company stocks may fluctuate
independently of larger company stocks. Medium- and small-size company stocks
may decline in price as large company stocks rise, or rise in prices as large
company stocks decline.

RISKS OF INVESTING IN FOREIGN SECURITIES - EAFE(R) EQUITY INDEX

<PAGE>

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

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

<PAGE>

to selling a beneficial interest to the corresponding Fund, each Portfolio may
sell beneficial interests to other mutual funds or institutional investors. Such
investors will invest in a Portfolio on the same terms and conditions and will
pay a proportionate share of the Portfolio's expenses. However, the other
investors investing in a Portfolio are not required to sell their shares at the
same public offering price as the Fund due to variations in sales commissions
and other operating expenses. Therefore, investors in a Fund should be aware
that these differences may result in differences in returns experienced by
investors in the different funds that invest in the Portfolio. Such differences
in returns are also present in other mutual fund structures. Information
concerning other holders of interests in the Portfolio is available from Bankers
Trust, as the Administrator, at (800) 730-1313.

The master-feeder structure has been developed relatively recently, so
shareholders should carefully consider this investment approach.

Smaller funds investing in a Portfolio may be materially affected by the actions
of larger funds investing in the Portfolio. For example, if a large fund
withdraws from a Portfolio, the remaining funds may experience higher pro rata
operating expenses, thereby producing lower returns (however, this possibility
exists as well for traditionally structured funds which have large institutional
investors). Additionally, a Portfolio may become less diverse, resulting in
increased portfolio risk. Also, funds with a greater pro rata ownership in a
Portfolio could have effective voting control of the operations of the
Portfolio. Except as permitted by the SEC, whenever a Trust is requested to vote
on matters pertaining to a Portfolio, each Trust will hold a meeting of
shareholders of the Fund and will cast all of its votes in the same proportion
as the votes of the Fund's shareholders. Fund shareholders who do not vote will
not affect a Trust's votes at the Portfolio meeting. The percentage of a Trust's
votes representing Fund shareholders not voting will be voted by the Trustees or
officers of the Trust in the same proportion as the Fund shareholders who do, in
fact, vote. Certain changes in the Portfolio's investment objectives, policies
or restrictions may require the Fund to withdraw its interest in the Portfolio.
Any such withdrawal could result in a distribution "in kind" of portfolio
securities (as opposed to a cash distribution from the Portfolio). If securities
are distributed, the Fund could incur brokerage, tax or other charges in
converting the securities to cash. In addition, the distribution in kind may
result in a less diversified portfolio of investments or adversely affect the
liquidity of the Fund. Notwithstanding the above, there are other means for
meeting redemption requests, such as borrowing.

A Fund may withdraw its investment from the Portfolio at any time, if the Board
of Trustees of a Trust determines that it is in the best interests of the
shareholders of the Fund to do so.

<PAGE>

Upon any such withdrawal, the Board of Trustees of the Trust would consider what
action might be taken, including the investment of all the Assets of the Fund in
another pooled investment entity having the same investment objectives as the
Fund or the retaining of an investment adviser to manage the Fund's Assets in
accordance with the investment policies described herein with respect to the
corresponding Portfolio.

For descriptions of the investment objective, policies and restrictions of each
Portfolio, see "The Funds in Detail" herein and "Risk Factors and Certain
Securities and Investment Practices" in this Prospectus and in the SAI. For
descriptions of the management of the Trusts and the Portfolios, see "Management
of the Trusts and the Portfolios" herein and in the SAI. For descriptions of the
expenses of the Portfolio, see "The Funds--Expense Summary," herein and
"Management of the Trusts and the Portfolios" herein and in the SAI.

SECURITIES AND INVESTMENT
PRACTICES

SHORT-TERM INVESTMENTS. Each Portfolio may invest in certain short-term fixed
income securities. Such securities may be used to invest uncommitted cash
balances, to maintain liquidity to meet shareholder redemptions or to serve as
collateral for the obligations underlying a Portfolio's investment in securities
index futures or related options or warrants. These securities include:
obligations issued or guaranteed by the U.S. Government or any of its agencies
or instrumentalities or by any of the states, repurchase agreements, time
deposits, certificates of deposit, bankers' acceptances and commercial paper.

U.S. GOVERNMENT SECURITIES are obligations of, or guaranteed by,
the U.S. Government, its agencies or instrumentalities. Some
U.S. Government securities, such as Treasury bills, notes and
bonds, are supported by the full faith and credit of the United
States; others, such as those of the Federal Home Loan Banks, are
supported by the right of the issuer to borrow from the Treasury;

<PAGE>

others, such as those of the Federal National Mortgage Association, 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 only by the credit of the instrumentality.

SECURITIES LENDING. Each Portfolio may lend its investment securities to
qualified institutional investors for either short-term or long-term purposes of
realizing additional income. Loans of securities by a Portfolio will be
collateralized by cash, letters of credit, or securities issued or guaranteed by
the U.S. Government or its agencies. The collateral will equal at least 100% of
the current market value of the loaned securities, and such loans may not exceed
30% of the value of a Portfolio's net assets. The risks in lending portfolio
securities, as with other extensions of credit, consist of possible loss of
rights in the collateral should the borrower fail financially. In determining
whether to lend securities, Bankers Trust will consider all relevant facts and
circumstances, including the creditworthiness of the borrower.

MORTGAGE-RELATED SECURITIES. As part of its effort to replicate the investment
performance of its Index, the U.S. Bond Index Portfolio may invest in
mortgage-backed securities. Mortgage-backed securities represent an interest in
an underlying pool of mortgages. Unlike ordinary fixed-income securities, which
generally pay a fixed rate of interest and return principal upon maturity,
mortgage-backed securities repay both interest income and principal as part of
their periodic payments. Because the mortgages underlying mortgage-backed
certificates can be prepaid at any time by homeowners or corporate borrowers,
mortgage-backed securities give rise to certain unique "pre-payment" risks.

<PAGE>

generally not secured by an explicit pledge of the U.S.
Government. The U.S. Bond Index Portfolio may also invest in
conventional mortgage securities, which are packaged by private
corporation and are not guaranteed by the U.S. Government.
Mortgage securities that are guaranteed by the U.S. Government
are guaranteed only as to the timely payment of principal and
interest. The market value of such securities is not guaranteed
and may fluctuate.

DERIVATIVES

Each Portfolio may invest in stock index futures and options thereon which
are commonly known as derivatives. Generally, a derivative is a financial
arrangement, the value of which is based on, or "derived" from, a traditional
security, asset, or market index. Some "derivatives" such as mortgage-related
and other asset-backed securities are in many respects like any other
investment, although they may be more volatile or less liquid than more
traditional debt securities. There are, in fact, many different types of
derivatives and many different ways to use them. There are a range of risks
associated with those uses. Futures and options are commonly used for
traditional hedging purposes to attempt to protect a fund from exposure to
changing interest rates, securities prices, or currency exchange rates and as a
low cost method of gaining exposure to a particular securities market without
investing directly in those securities. The Adviser will only use derivatives
for cash management purposes. Derivatives will not be used to increase portfolio
risk above the level that could be achieved using only traditional investment
securities or to acquire exposure to changes in the value of assets or indices
that by themselves would not be purchased for the Portfolio.

SECURITIES INDEX FUTURES AND RELATED OPTIONS. Each Portfolio may enter into
securities index futures contracts and related options provided that not more
than 5% of its assets are required as a margin deposit for futures contracts or
options and provided that not more than 20% of a Portfolio's assets are invested
in futures and options at any time. When a Portfolio has cash from new
investments in the Portfolio or holds a portion of its assets in money market
instruments, it may enter into index futures or options to attempt to increase
its exposure to the market. Strategies the Portfolio could use to accomplish
this include purchasing futures contracts, writing put options, and purchasing
call options. When the Portfolio wishes to sell securities, because of
shareholder redemptions or otherwise, it may use index futures or options to
hedge against market risk until the sale can be completed. These strategies
could include selling futures contracts, writing call options, and purchasing
put options.

SWAP AGREEMENTS. Each Portfolio may enter into swap agreements only to the
extent that obligations under such agreements represent not more than 10% of the
Portfolio's total assets.

<PAGE>

Swap agreements are contracts between parties in which one party agrees to make
payments to the other party based on the change in market value of a specified
index or asset. In return, the other party agrees to make payments to the first
party based on the return of a different specified index or asset.

Although swap agreements entail the risk that a party will default on its
payment obligations thereunder, a Portfolio will minimize this risk by entering
into agreements that mark to market no less frequently than quarterly. Swap
agreements also bear the risk that a Portfolio will not be able to meet its
obligation to the counterparty. This risk will be mitigated by investing a
Portfolio in the specific asset for which it is obligated to pay a return.

WARRANTS. Each Portfolio's investment in warrants will not exceed more than 5%
of its assets (2% with respect to warrants not listed on the New York or
American Stock Exchanges). Warrants are instruments which entitle the holder to
buy underlying equity securities at a specific price for a specific period of
time. A warrant tends to be more volatile than its underlying securities and
ceases to have value if it is not exercised prior to its expiration date. In
addition, changes in the value of a warrant do not necessarily correspond to
changes in the value of its underlying securities.

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

<PAGE>

FURTHER RISKS ASSOCIATED WITH THE USE OF FUTURES CONTRACTS, OPTIONS, WARRANTS,
CONVERTIBLE SECURITIES AND SWAP AGREEMENTS. The risk of loss associated with
futures contracts in some strategies can be substantial due to both the low
margin deposits required and the extremely high degree of leverage involved in
futures pricing. As a result, a relatively small price movement in a futures
contract may result in an immediate and substantial loss or gain. However, the
Portfolios will not use futures contracts, options, warrants, convertible
securities and swap agreements for speculative purposes or to leverage their net
assets. Accordingly, the primary risks associated with the use of futures
contracts, options, warrants, convertible securities and swap agreements by the
Portfolios are: (i) imperfect correlation between the change in market value of
the securities held by a Portfolio and the prices of futures contracts, options,
warrants, convertible securities and swap agreements; and (ii) possible lack of
a liquid secondary market for a futures contract and the resulting inability to
close a futures position prior to its maturity date. The risk of imperfect
correlation will be minimized by investing only in those contracts whose
behavior is expected to resemble that of a Portfolio's underlying securities.
The risk that a Portfolio will be unable to close out a futures position will
be minimized by entering into stock transactions on an exchange with an active
and liquid secondary market. However options, warrants, convertible securities
and swap agreements purchased or sold over-the-counter may be less liquid than
exchange-traded securities. Illiquid securities, in general, may not represent
more than 15% of the net assets of a Portfolio.

FOREIGN CURRENCY FORWARD, FUTURES AND RELATED OPTIONS TRANSACTIONS. The EAFE(R)
Equity Index Portfolio may enter into foreign currency forward and foreign
currency futures contracts in order to maintain the same currency exposure as
the EAFE Index. The Portfolio may not enter into such contracts as a way of
protecting against anticipated adverse changes in exchange rates between foreign
currencies and the U.S. dollar. A foreign currency forward contract is an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. Such contracts do not
eliminate fluctuations in the underlying prices of securities held by the
Portfolios. Although such contracts tend to minimize the risk of loss due to a
decline in the value of a currency that has been sold forward, and the risk of
loss due to an increase in the value of a currency that has been purchased
forward, at the same time they tend to limit any potential gain that might be
realized should the value of such currency increase.

ASSET COVERAGE. To assure that a Portfolio's use of futures and related options,
as well as when-issued and delayed-delivery securities, interest rate swaps and
foreign currency forward futures and related options transactions are not used
to achieve excessive investment leverage, a Portfolio will cover such
transactions, as required under applicable interpretations of the

<PAGE>

SEC, either by owning the underlying securities, entering into an off-setting
transaction, or by establishing a segregated account with the Portfolio's
custodian containing high grade liquid debt securities in an amount at all times
equal to or exceeding the Portfolio's commitment with respect to these
instruments or contracts.

PORTFOLIO TURNOVER

The frequency of Portfolio transactions-the Portfolio's portfolio turnover
rate-will vary from year to year depending on market conditions and the
Portfolio's cash flows. Each Portfolio's annual portfolio turnover rate is not
expected to exceed 100%. The Equity 500 Index Portfolio's portfolio turnover
rate for the years ended December 31, 1995, 1994 and 1993 was 6%, 21% and 31%,
respectively. The decrease in the Portfolio's turnover rate from the year 1994
to 1995 was due to the growth of assets in the period.

PERFORMANCE

Each Portfolio's recent strategies and holdings, and the corresponding Fund's
performance, is detailed twice a year in the Funds' financial reports (not
available during the first year for each Fund other than the Equity 500 Index
Fund), which are sent to all Fund shareholders.

For current Fund performance or a free copy of the Funds' financial report,
please contact an Investment Professional or Bankers Trust.

Mutual fund performance is commonly measured as TOTAL RETURN and/or YIELD. Each
Fund's performance is affected by the expenses of that Fund.

EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in a Fund over a given
period, assuming reinvestment of any dividends and capital gains. A cumulative
total return reflects actual performance over a stated period of time. An
AVERAGE annual total return is a hypothetical rate of return that, if achieved
annually, would have produced the same cumulative total return if performance
had been constant over the entire period. Average annual total return
calculations smooth out variations in performance; they are not the same as
actual year-by-year results. Average annual total returns covering periods of
less than one year assume that performance will remain constant for the rest of
the year.

<PAGE>

Average Annual
Total Return Total Return
for the period for the period
from from
commencement commencement
Total Return of operations of operations
Equity 500 for 1 year through through
Index Fund(a) ended 12/31/95 12/31/95 12/31/95

37.15% 51.94% 14.96%

(a) Fund commenced operations on December 31, 1992.

YIELDS

The 30-day SEC yield for the period ended December 31, 1995 for the Equity 500
Index Fund was 2.21%.

<PAGE>

MANAGEMENT OF THE TRUSTS AND THE PORTFOLIOS

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

INVESTMENT ADVISER
The Trusts have not retained the services of an investment adviser since the
Trusts seek to achieve the investment objective of each Fund by investing all
the Assets of the Fund in the corresponding Portfolio. Each Portfolio has
retained the services of Bankers Trust as investment adviser.

BANKERS TRUST COMPANY AND ITS AFFILIATES Bankers Trust Company, a New York
banking corporation with principal offices at 280 Park Avenue, New York, New
York 10017, is a wholly owned subsidiary of Bankers Trust New York Corporation.
Bankers Trust conducts a variety of general banking and trust activities and is
a major wholesale supplier of financial services to the international and
domestic institutional market.

<PAGE>

The Investment Advisory Agreements provide for each Portfolio to pay Bankers
Trust receives a fee from each Portfolio, accrued daily and paid monthly, equal
on an annual basis to the following percentages of the average daily net assets
of the Portfolio for its then-current fiscal year: U.S. Bond Index Portfolio,
0.15%; Equity 500 Equal Weighted Index Portfolio, 0.25%; Small Cap Index
Portfolio, 0.15%; EAFE(R) Equity Index Portfolio, 0.25%; and Equity 500 Index
Portfolio, 0.10%.

Bankers Trust has been advised by its counsel that, in counsel's opinion,
Bankers Trust currently may perform the services for the Trusts and the
Portfolios described in this Prospectus and the SAI without violation of the
Glass-Steagall Act or other applicable banking laws or regulations. State laws
on this issue may differ from the interpretations of relevant Federal law, and
banks and financial institutions may be required to register as dealers pursuant
to state securities law.

PORTFOLIO MANAGERS
Frank Salerno, Managing Director of Bankers Trust, is responsible
for the management of the Equity 500 Equal Weighted Index

<PAGE>

Portfolio, the Small Cap Portfolio and the Equity 500 Index Portfolio. Mr.
Salerno oversees administration, management and trading of international and
domestic equity index strategies. He has been employed by Bankers Trust since
1981 and has managed the Portfolios' assets since each Portfolio commenced
operations.

Richard J. Vella, Managing Director of Bankers Trust, is responsible for the
day-to-day management of the EAFE(R) Equity Index Portfolio. Mr. Vella has been
employed by Bankers Trust since 1985 and has ten years of trading and investment
experience.

Louis R. D'Arienzo, Vice President of Bankers Trust, is
responsible for the day-to-day management of the U.S. Bond Index
Portfolio. Mr. D'Arienzo has been employed by Bankers Trust
since 1981 and has twelve years of trading and investment
experience in fixed income securities.

ADMINISTRATOR
Under its Administration and Services Agreement with each Trust, Bankers Trust
calculates the net asset value of each Fund and generally assists the Board of
Trustees of the Trust in all aspects of the administration and operation of the
Funds. The Administration and Services Agreement provides for the respective
Trust to pay Bankers Trust a fee, accrued daily and paid monthly equal on an
annual basis to the following percentages of the average daily net assets of the
Fund, attributable to the Class, for its then-current fiscal year: U.S. Bond
Index Fund, 0.20%; Equity 500 Equal Weighted Index Fund, 0.30%; Small Cap Index
Fund, 0.25%; EAFE(R) Equity Index Fund, 0.30%; and Equity 500 Index Fund, 0.30%.

Under an Administration and Services Agreement with each Portfolio, Bankers
Trust calculates the value of the assets of the Portfolio and generally assists
the respective Board of Trustees in all aspects of the administration and
operation of the Portfolios. The Administration and Services Agreement provides
for each Portfolio to pay Bankers Trust a fee, accrued daily and paid monthly,
equal on an annual basis to the following percentages of the Portfolio's average
daily net assets for its then-current fiscal year: U.S. Bond Index Portfolio,
0.05%; Equity 500 Equal Weighted Index Portfolio, 0.05%; Small Cap Index
Portfolio, 0.05%; EAFE(R) Equity Index Portfolio, 0.10%; and Equity 500 Index
Portfolio, 0.05%. Under each Administration and Services Agreement, Bankers
Trust may delegate one or more of its responsibilities to others, including
SBDS, at Bankers Trust's expense.

DISTRIBUTOR
Under its Distribution Agreement with each Trust, SBDS, as
Distributor, serves as the Trusts' principal underwriter on a
best efforts basis. In addition, SBDS provides the Trusts with
office facilities. SBDS is a wholly owned subsidiary of Signature
Financial Group, Inc. ("SFG"). SFG and its affiliates currently
provide administration and distribution services for other

<PAGE>

registered investment companies. The principal business address
of SFG and SBDS is 6 St. James Avenue, Boston, Massachusetts
02116.

CUSTODIAN AND TRANSFER AGENT
Bankers Trust acts as custodian of the assets of the Trusts and each Portfolio
and serves as the transfer agent (the "Transfer Agent") for the Trusts and each
Portfolio under the Administration and Services Agreement with the Trusts and
each Portfolio.

ACCOUNT INFORMATION

TYPES OF ACCOUNTS

Read your Investment Professional's program materials in conjunction with this
Prospectus for details of services that may differ from those described in the
Prospectus and for additional fees that may apply. Some of the services and
features of this Prospectus may not be available to you. Certain features of the
Funds, such as minimum initial or subsequent investment amounts, may be modified
in these programs, and administrative charges may be imposed for the services
rendered.

The different ways to set up (register) your account with BT Advisor Funds are
listed below.

The account guidelines that follow may not apply to certain Funds
or to certain retirement accounts. If your employer offers a
Fund through a retirement program, contact your employer for more
information. Otherwise, call your Investment Professional
directly.

WAYS TO SET UP YOUR ACCOUNT

INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS

Individual accounts are owned by one person. Joint accounts can have two or more
owners (tenants). Joint accounts may only be joint tenants in common or joint
tenants with rights of survivorship.

RETIREMENT
TO SHELTER YOUR RETIREMENT SAVINGS FROM TAXES Retirement plans allow individuals
to shelter investment income and capital gains from current taxes. In addition,
contributions to these accounts may be tax deductible. Retirement accounts
require special applications and typically have lower minimums.

O INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow anyone of legal age under 70 1/2
with earned income to invest up to $2,000 per tax year.

<PAGE>

O ROLLOVER IRAS retain special tax advantages for certain distributions from
employer sponsored retirement plans.

O SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS) provide small business owners or
those with self-employed income (and their eligible employees) with many of the
same advantages as a Keogh, but with fewer administrative requirements.

O 401(K) PLANS allow employees of corporations of all sizes to contribute a
percentage of their wages on a tax deferred basis. These accounts need to be
established by the trustee of the plan.

MONEY PURCHASE/PROFIT SHARING PLANS (Keogh Plans) are tax deferred pension
accounts designated for employees of unincorporated businesses or for persons
who are self-employed.

GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA) TO INVEST FOR A CHILD'S EDUCATION OR
OTHER FUTURE NEEDS These custodial accounts provide a way to give money to a
child and obtain tax benefits. An individual can give up to $10,000 a year per
child without paying federal gift tax. Depending on state laws, you can set up a
custodial account under the Uniform Gifts to Minors Act (UGMA) or the Uniform
Transfers to Minors Act (UTMA). Contact your Investment Professional or Bankers
Trust.

TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before on account can be opened.

BUSINESS OR ORGANIZATION

FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS Contact your Investment Professional or Bankers Trust.

HOW TO BUY SHARES

Shares are purchased at the Fund's net asset value ("NAV") next calculated after
your investment is received and accepted. The NAV is normally calculated at 4:00
p.m. Eastern time.

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

The Transfer Agent must receive payment by the following business day (trade
date + 1) after an order for Shares is placed; otherwise your purchase order may
be canceled and you could be held liable for resulting fees and/or losses.

Share certificates are not available for Shares of the Funds.

IF YOU ARE NEW TO BT ADVISOR FUNDS, complete and sign an account
application and mail it along with your check. If there is no

<PAGE>

account application accompanying this Prospectus, call your
Investment Professional.

IF YOU ALREADY HAVE MONEY INVESTED IN A FUND IN THE BT FAMILY OF FUNDS you can:

o Mail an account application with a check,
o Wire money into your account,
o Open an account by exchanging from another fund in the BT
Family of Funds or
o Contact your Investment Professional.

MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
For retirement accounts $ 500
Through automatic investment plans $1,000
TO ADD TO AN ACCOUNT $ 250
For retirement accounts $ 100
Through automatic investment plan $ 100

MINIMUM BALANCE $1,000
For retirement accounts None

For further information on opening an account, please consult your Investment
Professional or refer to the account application.

<PAGE>

TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT

PHONE YOUR INVESTMENT Contact your Investment Professional. Contact your Investment Professional or
PROFESSIONAL If you are an existing shareholder, call 1-(800) 730-1313. You may exchange
you may exchange from another BT account from another BT Advisor Funds account (or
with the same registration, including a fund in the BT Family of Funds) with the
name, address, and taxpayer ID number. same registration, including name, address,
and taxpayer ID number.
- --------------------------------------------------------------------------------------------------------------------------

MAIL Complete and sign the account Make your check payable to the complete name
application. Make your check payable of the Fund of your choice. Indicate your Fund
to the complete name of the Fund of account number on your check and mail to the
your choice. Mail to the appropriate address printed on your account statement.
address indicated on the application. Exchange by mail: call your Investment Professional
for instructions.
- --------------------------------------------------------------------------------------------------------------------------

IN PERSON Take your account application Take your check to your Investment Professional.
and check to your Investment
Professional.
- --------------------------------------------------------------------------------------------------------------------------

WIRE Not available. Call your Investment Professional or wire to:

ROUTING NO.: 101003621
ATTN: Bankers Trust/IFTC Universal Account
DDA NO. 7527314
FBO: (Account name)
(Account number)

CREDIT: Fund Number
U.S. Bond Index Fund -507
Equity 500 Equal Weighted Index Fund - 508
Small Cap Index Fund -509
EAFE(R) Equity Index Fund -510
Equity 500 Index Fund - 518

Specify the complete name of the fund
of your choice, and include your account
number and your name.
- --------------------------------------------------------------------------------------------------------------------------

AUTOMATICALLY Not available. Use the Systematic Investment Program.
Sign up for this service when
opening your account, or call your
Investment Professional to begin the
program. The initial minimum investment
in this program is $1,000.
- --------------------------------------------------------------------------------------------------------------------------

</TABLE>

HOW TO SELL SHARES

You can arrange to take money out of your fund account at any time by selling
(redeeming) some or all of your Shares. Your Shares shall be sold at the next
NAV calculated after an order is received by the Transfer Agent. NAV is normally
calculated at 4:00 p.m. Eastern time.

TO SELL SHARES IN A RETIREMENT ACCOUNT, your request must be made in writing,
except for exchanges to other eligible funds in the BT Family of Funds, which
can be requested by phone or in writing. For information on retirement
distributions contact your Investment Professional or call 1-800- 943-2222.

IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR NON-RETIREMENT ACCOUNT SHARES, leave
at least $1,000 worth of Shares in the account to keep it open.

TO SELL SHARES BY BANK WIRE you will need to sign up for these services in
advance when completing your account application.

CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to protect
you and Bankers Trust from fraud. Your request must be made in writing and
include a signature guarantee if any of the following situations apply:

o You wish to redeem more than $100,000 worth of Shares, o Your account
registration has changed within the last 30 days, o The check is being mailed to
a different address than the one on your account (record address), o The check
is being made payable to someone other than the account owner, o The redemption
proceeds are being transferred to a BT account with a different registration, or
o You wish to have redemption proceeds wired to a non-predesignated bank
account.

You should be able to obtain a signature guarantee from a bank, broker, dealer,
credit union (if authorized under state law),

<PAGE>

securities exchange or association, clearing agency, or savings association. A
notary public cannot provide a signature guarantee.

SELLING SHARES IN WRITING

Write a "letter of instruction" with:

o Your name,
o The Fund's name and Fund's number,
o Your Fund account number,
o The dollar amount or number of Shares to be redeemed and o Any other
applicable requirements listed in the following table.

Deliver your letter to your Investment Professional, or mail it to the following
address:

Bankers Trust Company
P.O. Box 419210
Kansas City, MO 64141-6210

overnight mailings:
Bankers Trust Company
210 West 10th Street, 8th Floor
Kansas City, MO 64105-1716

Unless otherwise instructed, the Transfer Agent will send a check to the record
address.

ADDITIONAL INFORMATION ABOUT SELLING SHARES

ACCOUNT TYPE SPECIAL REQUIREMENTS

PHONE YOUR INVESTMENT All account types except retirement Maximum check
PROFESSIONAL request: $100,000

All account types You may exchange to other BT
Advisor Funds (or other funds
in the BT Family of Funds) if both
accounts are registered with the
same name(s), address, and
taxpayer ID number.
- --------------------------------------------------------------------------------------------------------------------------

MAIL OR IN PERSON Individual, Joint Tenant, The letter of instruction (with
Sale Proprietorship, signature guaranteed, if required)
UGMA,UTMA must be signed by all persons
required to sign for transactions,
exactly as their names appear on
the account and sent to your
Investment Professional or the
Transfer Agent.

Retirement account The account owner should complete a
retirement distribution form. Contact
your Investment Professional or call
1-800- 943-2222.

Trust The trustee must sign the letter
indicating capacity as trustee.
If the trustee's name is not on
the account registration, provide a
copy of the trust document certified
within the the last 60 days.

Business or At least one person authorized by
Organization corporate resolution to act on the
account must sign the letter.

Executor, For instructions contact your
Administrator, Investment Professional or
Conservator/Guardian call 1-800-730-1313.
- --------------------------------------------------------------------------------------------------------------------------

WIRE All account You must sign up for the wire
types except retirement feature before using it. To verify
that it is in place, contact your
Investment Professional or call
1-800-730-1313.
Minimum wire: $500.00.

Your wire redemption request must
be received by the Transfer Agent
before 4:00 p.m. Eastern time for
money to be wired on the next
business day.
--------------------------------------------------------------------------------------------------------------------------

AUTOMATICALLY Not available. To use the Systematic
Withdrawal Program. Sign up
for this service when opening
your account, or call your
Investment Professional to
begin the program.

</TABLE>

INVESTOR SERVICES

BT Advisor Funds provide a variety of services to help you manage your account.

INFORMATION SERVICES
STATEMENTS AND REPORTS that your Investment Professional or the Transfer Agent
will send to you include the following:

o Confirmation statements (after every transaction that affects your account
balance, including distributions or your account registration) o Account
statements (quarterly) o Financial reports (every six months)

To reduce expenses, only one copy of most financial reports will be mailed, even
if you have more than one account in the Fund. Call your Investment Professional
if you need additional copies of financial reports.

TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your Shares and buy Shares of other BT Funds by
telephone or in writing.

Note that exchanges out of a Fund may be limited to four per calendar year and
that they may have tax consequences for you. For detail on policies and
restrictions governing exchanges including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see page 45.

One easy way to pursue your financial goals is to invest money regularly. BT
Funds offer convenient services that let you transfer money into your fund
account, out of your fund account, or between fund accounts automatically. While
regular investment plans do not guarantee a profit and will not protect you
against loss in a declining market, they can be an excellent way to invest for
retirement, a home, educational expenses, and other long-term financial goals.
Certain restrictions apply for retirement accounts. Call your Investment
Professional for more information.

REGULAR INVESTMENT PLANS
SYSTEMATIC INVESTMENT PROGRAM

<PAGE>

TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A BT ADVISOR FUNDS FUND

MINIMUM MINIMUM FREQUENCY SETTING UP OR CHANGING
INITIAL SUBSEQUENT

$1,000 $100 Monthly,bimonthly. For a new account,
quarterly or semi- complete the appropriate
annually section on the application.

For existing accounts, call
your Investment Professional
for an application.

To change the amount or
frequency of your investment,
contact your Investment
Professional directly or
call 1-800-730-1313. Call at
least 10 business days prior
to your next scheduled
investment date.

SYSTEMATIC WITHDRAWAL PROGRAM lets you set up periodic redemptions from your
account.

MINIMUM: $100

FREQUENCY: Monthly, quarterly, semi-annually, or annually

SETTING UP OR CHANGING:

To establish call your Investment Professional or call 1-800-730-1313 after your
account is open. The accounts from which the withdrawals be processed must have
a minimum balance of $10,000.

SYSTEMATIC EXCHANGE PROGRAM
TO MOVE MONEY FROM ONE FUND IN THE BT FAMILY OF FUNDS TO ANOTHER.

MINIMUM FREQUENCY SETTING UP OR CHANGING

$100 Monthly, quarterly, To establish, call your
semi- annually or Investment Professional
annually after both accounts are
open. To change the amount
or frequency of your
investment, contact your
Investment Professional
directly or call
1-800-730-1313. Call at
least two business days
prior to your next
scheduled exchange date.

The account from which the
exchanges are to be
processed must have a
minimum balance of $10,000.
The account into which the
exchange is being processed
must have a minimum of
$1,000.

SHAREHOLDER AND ACCOUNT POLICIES

DIVIDENDS, CAPITAL GAINS, AND TAXES

Each Fund distributes substantially all of its net income and capital gains to
shareholders each year. Each Fund distributes capital gains annually. Normally,
income dividends for the Equity 500 Index Fund and Equity 500 Equal Weighted
Index Fund are distributed quarterly; income dividends for the Small Cap Index
Fund and EAFE(R) Equity Index Fund are distributed annually; and income
dividends for the U.S. Bond Index Fund are distributed monthly.

Distribution Options

When you open an account, specify on your account application how you want to
receive distributions. The Trusts offer four options:

1. REINVESTMENT OPTION. Your dividend and capital gain
distributions will be automatically reinvested in additional
Shares of the Fund. If you do not indicate a choice on your
application you will be assigned this option.

2. INCOME-EARNED OPTION. Your capital gain distributions will be
automatically reinvested in additional Shares of the Fund, but
you will be sent a check for each dividend distribution.

<PAGE>

3. CASH OPTION. You will be sent a check for your dividend and
capital gain distributions.

4. AUTOMATIC DIVIDENDS PROGRAM. Your dividend and capital gain
distributions be automatically invested in another fund in the BT
Family of Funds as long as the minimums for that account are met.

If you select distribution option 2 or 3 and the U.S. Postal Service cannot
deliver your checks, or if your checks remain uncashed for six months, those
checks will be reinvested in your account at the current NAV and your election
may be converted to the Reinvestment Option. You may change distribution option
at anytime by notifying the Transfer Agent in writing.

FEDERAL TAXES. The Trust intends to qualify the Fund as a regulated investment
company, as defined in the Internal Revenue Code of 1986, as amended (the
"Code"). Provided the Fund meets the requirements imposed by the Code and
distributes all of its income and gains, the Fund will not pay any Federal
income or excise taxes. The Portfolio will also not be required to pay any
Federal income or excise taxes

<PAGE>

Distributions from the Fund's income and short-term capital gains are taxed as
dividends, and long-term capital gains distributions are taxed as long-term
capital gains. The Fund's distributions are taxable when they are paid, whether
you take them in cash or reinvest them in additional shares. Distributions
declared to shareholders of record in November and December and paid in January
are taxable as if paid on December 31. The Fund will send each shareholder a tax
statement by January 31 showing the tax status of the distributions received in
the past year.

CAPITAL GAINS. You may realize a capital gain or loss when you redeem (sell) or
exchange shares. Because the tax treatment also depends on your purchase price
and your personal tax position, you should

keep your regular account statements to use in determining your tax.

"BUYING A DIVIDEND." On the ex-date for a distribution from
income and/or capital gains, the Fund's share value is reduced by
the amount of the distribution.

If you buy shares just before the ex-date ("buying a dividend"), you will pay
the full price for the shares and then receive a portion of the price back as a
taxable distribution.

<PAGE>

OTHER TAX INFORMATION. In addition to Federal taxes, you may be subject to state
or local taxes on your investment, depending on the laws in your area. You
should consult with your own tax adviser concerning the application of Federal,
state and local taxes to your distributions from the Fund.

VALUATION DETAILS

WITH THE EXCEPTION OF THE EAFE(R) EQUITY INDEX FUND, THE FUNDS ARE OPEN FOR
BUSINESS each day the NYSE is open. Each Fund's NAV is calculated as of the
close of regular trading on the NYSE, currently 4:00 p.m. Eastern time or in the
event that the NYSE closes early, at the time of such early closing. The EAFE(R)
Equity Index Fund will not process orders on any day when either the NYSE or the
Tokyo Stock Exchange is closed. Orders received on such days will be priced on
the next day the Fund computes its NAV. As such, investors may experience a
delay in purchasing or redeeming Shares of the EAFE(R) Equity Index Fund.

A FUND'S NAV is the value of a single Share. The NAV of each Fund is computed by
dividing the value of the Fund's Assets (i.e., the value of its investment in
the Portfolio and other assets), less all liabilities, allocable to the Advisor
Class Shares by the total number of its Shares outstanding. Each Portfolio's
securities and other assets are valued primarily on the basis of market
quotations or, if quotations are not readily available, by Bankers Trust
pursuant to procedures adopted by the Portfolio's Board of Trustees. These
procedures require Bankers Trust to value such a security at the same value as
an equivalent security which is readily marketable and, in making such
comparisons, to consider all relevant factors under applicable guidelines of the
SEC.

Under procedures adopted by the Board, a net asset value for a Fund later
determined to have been inaccurate for any reason will be recalculated.
Purchases and redemptions made at a net asset value determined to have been
inaccurate will be adjusted, although in certain circumstances, such as where
the difference between the original net asset value and the recalculated net
asset value divided by the recalculated net asset value is 0.005% (1/2 of 1%) or
less or shareholder transactions are otherwise insubstantially affected, further
action is not required.

<PAGE>

WHEN INVESTORS SIGN THEIR ACCOUNT APPLICATION, they will be asked to certify
that their social security or taxpayer identification number is correct and that
they are not subject to 31% backup withholding for failing to report income to
the IRS. If investors violate IRS regulations, the IRS can require a Fund to
withhold 31% of their taxable distributions and redemptions.

INVESTORS MAY INITIATE MANY TRANSACTIONS BY TELEPHONE: An Investment
Professional or the Transfer Agent may only be liable for losses resulting from
unauthorized transactions if they do not follow reasonable procedures designed
to verify the identity of the caller. An Investment Professional or the Transfer
Agent will request personalized security codes or other information, and may
also record calls. Investors should verify the accuracy of the confirmation
statements immediately after receipt. If investors do not want the ability to
redeem and exchange by telephone, they should call their Investment Professional
or the Transfer Agent for instructions. Additional documentation may be required
from corporations, associations and certain fiduciaries.

EACH FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period of
time. Each Fund also reserves the right to reject any specific purchase order,
including certain purchases by exchange. Purchase orders may be refused if, in
Bankers Trust's opinion, they would disrupt management of a Fund.

WHEN INVESTORS PLACE AN ORDER TO BUY SHARES, their Shares will be purchased at
the next NAV or offering price, as applicable, calculated after the order is
received and accepted by the Transfer Agent. Note the following:

o All checks should be made payable to the specific Fund.

o All purchases must be made in U.S. dollars and checks must
be drawn on U.S. banks.

o The Funds do not accept third party checks, except those payable to an
existing shareowner who is a natural person (not a corporation or
partnership), credit cards or cash.

o When making a purchase with more than one check, each check must have a
value of at least $50.

o Each Fund reserves the right to limit the number of checks
processed at one time.

o If a check does not clear, the purchase will be cancelled and the
investor could be liable for any losses or fees a Fund or the Transfer
Agent has incurred.

o When purchase are made by check or periodic automatic investment,
redemptions will not be allowed until the investment being redeemed has
been in the account for 15 business days.

o Direct Purchases: In the case of the U.S. Bond Index Fund,

<PAGE>

investors begin to earn dividends as of the first business day
following the day the Fund receives payment.

o Automated Order Purchases: In the case of the U.S. Bond
Index Fund, investors begin to earn dividends as of the
business day an order is received and accepted.

AUTOMATED ORDERS PURCHASE. Shares of the Funds can be purchased or sold through
Investment Professionals utilizing an automated order placement and settlement
system that guarantees payment for orders on a specified date.

TO AVOID THE COLLECTION PERIOD associated with check purchases, investors should
consider buying Shares by bank wire, U.S. Postal money order, U.S. Treasury
check, or Federal Reserve check.

WHEN INVESTORS PLACE AN ORDER TO SELL SHARES, Shares will be sold at the next
NAV calculated after the order is received and accepted. Note the following:

o Normally, redemption proceeds will be mailed on the next business day,
but if making immediate payment could adversely affect a Fund it may
take up to seven days to pay you.

o Shares of the Funds will earn dividends through the date of redemption;
however, in the case of the U.S. Bond Index Fund, Shares redeemed on a
Friday or prior to a holiday will continue to earn dividends until the
next business day.

o Each Fund may hold payment on redemptions until it is reasonably
satisfied that investments made by check have been collected which can
take up to seven business days.

o Redemptions may be suspended or payment dates postponed when the NYSE
is closed (other than weekends or holidays), when trading on the NYSE
is restricted, or as permitted by the SEC.

THE TRANSFER AGENT RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE of
$12.00 from accounts with a value of less than $2,500 (including any amount paid
as a sales charge). The fee, which is payable to the Transfer Agent, is designed
to offset in part the relatively higher costs of servicing smaller accounts.

IF A NON-RETIREMENT ACCOUNT BALANCE FALLS BELOW $1,000, the investor will be
given 30 days' notice to reestablish the minimum balance. If the investor does
not increase their balance, the Transfer Agent reserves the right to close the
account and send the proceeds to the investor. The investor's Shares will be
redeemed at the NAV on the day the account is closed.

THE TRANSFER AGENT MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its services.

EXCHANGE LIMITATIONS

<PAGE>

As a shareholder, investors have the privilege of exchanging Shares of a Fund
for Shares of other funds in the BT Family of Funds at NAV. However, investors
should note the following:

o The Fund an investor exchanges into must be registered for
sale in their state.

o Investors may only exchange between accounts that are registered in the
same name, address, and taxpayer identification number.

o Before exchanging into a Fund, investors should read its
Prospectus.

o Exchanges between the Funds described in this Prospectus and Funds
described in other BT Funds' Prospectuses are restricted during the 90
days following purchase. Exchanges among Funds described in this
Prospectus are permitted any time after purchase.

o If an investor exchanges into the EAFE(R)Equity Index Fund on
a day when the NYSE or the Tokyo Stock Exchange is closed,
the exchange out of the other BT Fund will be processed on
that day, but the EAFE(R)Equity Index Fund Shares will not be
purchase until the day the EAFE(R)Equity Index Fund reopens.
If an investor exchanges out of the EAFE(R)Equity Index Fund
on a day when the NYSE is open and the Tokyo Stock Exchange
is closed, the exchange will be delayed until the EAFE(R)
Equity Index Fund reopens.

o Exchanges may have tax consequences for you.

o Because excessive trading can hurt Fund performance and
shareholders, each Fund reserves the right to temporarily or
permanently terminate the exchange privilege of any investor
who makes more than four exchanges out of the Fund per
calendar year. Accounts under common ownership or control,
including accounts with the same taxpayer identification
number, will be counted together for purposes of the four
exchange limit.

o Each Fund reserves the right to refuse exchange purchases by any person
or group if, in Bankers Trust's judgment, the Fund would be unable to
invest the money effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely
affected.

o Exchanges may be restricted or refused if a Fund receives or
anticipates simultaneous orders affecting significant portions of the
Fund's assets. In particular, a pattern of exchanges that coincide with
a "market timing" strategy may be disruptive to a Fund.

o Although the Funds will attempt to give prior notice
whenever they are reasonably able to do so, they may impose

<PAGE>

these restrictions at any time. The Funds reserve the right to
terminate or modify the exchange privilege in the future on 60 days'
notice to shareholders.

ADDITIONAL INFORMATION ABOUT THE TRUSTS AND PORTFOLIOS

Each Fund is a mutual fund: an investment that pools shareholders' money and
invests it toward a specified goal. Each Fund (with the exception of the Equity
500 Index Fund) is a separate diversified series of BT Advisor Funds, a
Massachusetts business trust. The Equity 500 Index Fund is separate diversified
series of BT Pyramid Mutual Funds. Each Fund (with the exception of the Equity
500 Index Fund) offers two classes of Shares of beneficial interest, Advisor
Class Shares and Institutional Class Shares. Each of the U.S. Bond Index
Portfolio, Equity 500 Equal Weighted Index Portfolio, Small Cap Index Portfolio,
and EAFE(R) Equity Index Portfolio is a separate diversified series of BT
Investment Portfolios, a New York master trust fund. The Equity 500 Index
Portfolio is a New York trust.

Each Portfolio (other than the Equity 500 Index Portfolio) is a separate
subtrust (or "Series") of BT Investment Portfolios. Each Trust and BT Investment
Portfolios reserves the right to add additional series in the future. The Trust
also reserves the right to issue additional classes of Shares of each Fund.

The Trusts or a Portfolio may hold special meetings and mail proxy materials.
These meetings may be called to elect or remove trustees, change fundamental
policies, approve Portfolio's investment advisory agreement, or for other
purposes. Shareholders not attending these meetings are encouraged to vote by
proxy. Each Trust's Transfer Agent will mail proxy materials in advance,
including a voting card and information about the proposals to be voted on.

When matters are submitted for shareholder vote, shareholders of each Fund will
have one vote for each full share held and proportionate, fractional votes for
fractional shares held. A separate vote of one of the Funds or classes is
required on any matter affecting only that Fund or class on which shareholders
are entitled to vote. Shareholders of a Fund or class are not entitled to vote
on Trust matters that do not affect that Fund or class, respectively, and do not
require a separate vote of the Fund or class. All series of each Trust and all
classes will vote together on certain matters, such as electing trustees or
approving independent public auditors. 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 that
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 that Trust's outstanding shares. Each Trust will also
assist shareholders in

<PAGE>

communicating with one another as provided for in the 1940 Act.

Each series of a Trust will vote separately on any matter involving the
corresponding Portfolio. Shareholders of all of the series of a Trust will,
however, vote together to elect Trustees of that Trust and for certain other
matters. Under certain circumstances, the shareholders of one or more series
could control the outcome of these votes. The series of BT Investment Portfolios
will vote together or separately on matters in the same manner, and in the same
circumstances, as do the series of the Trusts. As with the Trusts, the investors
in one or more series of BT Investment Portfolios could control the outcome of
these votes.

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

The Declaration of Trust of each of BT Investment Portfolios and the Equity 500
Index Portfolio provides that each Fund and other entities investing in a
Portfolio (e.g., other investment companies, insurance company separate accounts
and common and commingled trust funds) will each be liable for all obligations
of that Portfolio. However, the risk of a Fund incurring financial loss on
account of such liability is limited to circumstances in which both inadequate
insurance existed and a Portfolio itself was unable to meet its obligations.
Accordingly, the Trustees of the Trusts believe that neither the Funds nor their
shareholders will be adversely affected by reason of the Funds' investing in the
Portfolios. No series of BT Investment

Portfolios has any preference over any other series.
BT0456N

<PAGE>
BT ADVISOR FUNDS
Advisor Class Shares

U.S. Bond Index Fund

Small Cap Index Fund

EAFE(R) Equity Index Fund1

BT Investment Equity 500 Index Fund

Prospectus: January 16, 1996 as amended April 29, 1996

Unlike other open-end management investment companies (mutual funds), each Fund
seeks to achieve its investment objective by investing all of its investable
assets ("Assets") in a separate investment company (the "Portfolio") with an
identical investment objective. The investment performance of each Fund will
correspond directly to the investment performance of the corresponding
Portfolio. See "Special Information Concerning Master-Feeder Fund Structure" on
page 11.

Bankers Trust Company ("Bankers Trust") is the investment adviser (the
"Adviser") of each Portfolio.

Please read this Prospectus before investing, and keep it on file for future
reference. It contains important information, including how each Fund invests
and the services available to shareholders.

To learn more about each Fund and its investments, investors can obtain a copy
of the Funds' Statement of Additional Information (the "SAI"), dated January 16,
1996, as amended April 29, 1996 which contains each Portfolio's most recent
financial report and portfolio listing. The SAI has been filed with the
Securities and Exchange Commission (the "SEC") and is incorporated herein by
reference. For a free copy of this document, call (800) 730-1313 or contact the
Trusts at 6 St. James Avenue, Boston, MA 02116, or your Investment Professional.

Mutual fund shares are not deposits or obligations of, or guaranteed by, Bankers
Trust or any depository institution. Shares are not insured by the FDIC, the
Federal Reserve Board or any other agency, and are subject to investment risk,
including the possible loss of principal.

1The EAFE index is the exclusive property of Morgan Stanley. Morgan Stanley
Capital International is a service mark of Morgan Stanley and has been licensed
for use by Bankers Trust Company.

TABLE OF CONTENTS
- -------------------------------------------------------------------------------
Page

THE FUNDS
Who May Want to Invest 3
Investment Principles and Risks
Each Fund's overall approach to investing.
Expense Summary
Each Fund's annual operating expenses.
Fund Financial Highlights
Selected data for a share outstanding, total
investment return, ratios to average net assets
and other supplemental data for the Fund.

THE FUNDS IN DETAIL 6
Investment Objectives and Policies
Risk Factors and Certain Securities and Investment Practices
Special Information Concerning Master-Feeder Fund Structure
Securities and Investment Practices
Performance
How each Fund has done over time.
Management of the Trusts and the Portfolios

ACCOUNT INFORMATION 17
Types of Accounts
Different ways to set up your account, including
tax-sheltered retirement plans.
How to Buy Shares
Opening an account and making additional investments.
How to Sell Shares
Taking money out and closing your account. Investor
Services To help you manage your account.

SHAREHOLDER AND ACCOUNT POLICIES 23
Dividends, Capital Gains and Taxes
Valuation Details
Share price calculations and the timing of
purchases and redemptions.
Exchange Limitations
Additional Information About the Trusts and the Portfolios
- -------------------------------------------------------------------------------

THE FUNDS

The U.S. Bond Index Fund seeks to replicate as closely as possible (before
deduction of Expenses) the investment performance of the Lehman Brothers
Aggregate Bond Index (the "Aggregate Bond Index"), a broad market weighted index
which encompasses U.S. Treasury and agency securities, corporate investment
grade bonds, international (dollar-denominated) investment grade bonds, and
mortgage-backed securities. The Fund will be invested primarily in fixed income
securities of the U.S. Government or any agency thereof, publicly issued fixed
rate domestic debt of industrial, financial, and utility corporations, and U.S.
dollar denominated fixed income securities of foreign and supranational entities
issued publicly in the United States. The Fund will also invest in mortgage
pass-through securities issued by the Government National Mortgage Association,
the Federal Home Loan Mortgage Corporation, and the Federal National Mortgage
Association. The U.S. Bond Index Fund invests all of its Assets in the U.S. Bond
Index Portfolio.

The Small Cap Index Fund seeks to replicate as closely as possible (before
deduction of Expenses) the total return of the Russell 2000 Small Stock Index
(the "Russell 2000"), an index consisting of 2,000 small-capitalization common
stocks. The Fund will include the common stock of one or more companies included
in the Russell 2000 Index, on the basis of computer-generated statistical data,
that are deemed representative of the industry diversification of the entire
Russell 2000 Index. The Small Cap Index Fund invests all of its Assets in the
Small Cap Index Portfolio.

The EAFE(R) Equity Index Fund seeks to replicate as closely as possible (before
deduction of Expenses) the total return of the Morgan Stanley Capital
International Europe, Australia, Far East (EAFE) Index with net dividends (the
"EAFE Index"), a capitalization-weighted index containing approximately 1,100
equity securities of companies located outside the United States. The Fund will
be invested primarily in equity securities of business enterprises organized and
domiciled outside of the United States or for which the principal trading market
is outside the United States. Statistical methods will be employed to replicate
the Index by buying most of the relevant Index securities. Securities purchased
for the Fund will generally, but not necessarily, be traded on a foreign
securities exchange. The EAFE(R) Equity Index Fund invests all of its Assets in
the EAFE(R) Equity Index Portfolio.

The Equity 500 Index Fund seeks to replicate as closely as possible (before
deduction of Expenses) the total return of the Standard & Poor's 500 Composite
Stock Price Index (the "S&P 500"), an index emphasizing large-capitalization
stocks. The Fund will include the common stock of those companies included in
the S&P 500, other than Bankers Trust New York Corporation, selected on the
basis of computer generated statistical data, that are deemed representative of
the industry diversification of the entire S&P 500. The Equity 500 Index Fund
invests all of its Assets in the Equity 500 Index Portfolio.

WHO MAY WANT TO INVEST

Shares of each Fund are offered through this Prospectus to investors who engage
an Investment Professional.

The Trusts seek to achieve the investment objective of each Fund by investing
all the assets of the Fund in the corresponding Portfolio. The Portfolios are
not managed according to traditional methods of "active" investment management,
which involve the buying and selling of securities based upon economic,
financial and market analysis and investment judgment. Instead, the Portfolios,
utilize a "passive" or "indexing" investment approach and attempt to replicate
the investment performance of their respective indices through statistical
procedures.

The U.S. Bond Index Portfolio represents all major sectors of the investment
grade fixed-income securities markets. The U.S. Bond Index Fund may be a
suitable investment vehicle for those investors seeking ownership in the "bond
market" as a whole, without regard to particular sectors. The U.S. Bond Index
Fund is also suitable for those investors with common stock holdings who are
seeking a complementary fixed-income investment to create a more balanced asset
mix.

The Small Cap Index, EAFE(R) Equity Index and Equity 500 Index Funds may be
appropriate for investors who are willing to ride out domestic and/or foreign
stock market fluctuations in pursuit of potentially higher long-term returns.
Each corresponding Portfolio invests for growth and does not pursue income. Over
time, stocks, although more volatile, have shown greater growth potential than
other types of securities. In the shorter term, however, stock prices can
fluctuate dramatically in response to market factors.

The EAFE(R) Equity Index Fund may be appropriate for investors who want to
pursue their investment goals in markets outside of the United States. By
including international investments in their portfolio, investors can achieve an
extra level of diversification and also participate in opportunities around the
world. However, there are additional risks involved with international
investing. The performance of international funds depends upon currency values,
the political and regulatory environment, and overall economic factors in the
countries in which a Portfolio invests. The Trust is intended to be a long-term
investment vehicle and is not designated to provide investors with a means of
speculating on short-term market movements. Investors who engage in excessive
account activity generate additional costs which are borne by all the Trusts'
shareholders. In order to minimize such costs, each Trust has adopted the
following policies. Each Trust reserves the right to reject any purchase request
(including exchange purchases from other BT Advisor Funds) that is reasonably
deemed to be disruptive to efficient portfolio management, either because of the
timing of the investment or previous excessive trading by the investor.
Additionally, each Trust has adopted exchange privilege limitations as described
in the section "Exchange Limitations." Finally, each Trust reserves the right to
suspend the offering of its shares.

INVESTMENT PRINCIPLES AND RISKS

Because many foreign investments are denominated in foreign currencies, changes
in the value of these currencies can significantly affect the EAFE(R) Equity
Index Fund's share price. General economic factors in the various world markets
can also impact the value of an investor's investment. When investors sell Fund
Shares, they may be worth more or less than what they paid for them. See "Risk
Factors and Certain Securities and Investment Practices" for more information.

EXPENSE SUMMARY

Annual operating expenses are paid out of the assets of each Portfolio and Fund.
Each Portfolio pays an investment advisory fee and an administrative services
fee to Bankers Trust. Each Fund incurs expenses such as maintaining shareholder
records and furnishing shareholder statements. Each Fund must provide financial
reports.

The following table provides: (i) a summary of expenses relating to purchases
and sales of the Shares of each Fund and the annual operating expenses of the
Fund and expenses of the corresponding Portfolio, in the aggregate, as a
percentage of average daily net assets of each Fund; and (ii) an example
illustrating the dollar cost of such expenses on a $1,000 investment in each
Fund. The Trustees of each Trust believe that the Expenses of each Fund and
expenses of the corresponding Portfolio, in the aggregate, will be less than or
approximately equal to the expenses which the Fund would incur if the Trusts
retained the services of an investment adviser and the Assets of each Fund were
invested directly in the type of securities being held by the corresponding
Portfolio.

- --------------------------------------------------------------------------------
Shareholder Transaction Expenses
Maximum Sales Charge on Purchases
(as a percentage of offering price) None
................................................................................
Maximum Sales Charge on Reinvested Distributions None
................................................................................
Redemption Fee None*
................................................................................
Exchange Fee None
................................................................................
- --------------------------------------------------------------------------------

* A transaction fee of 0.50% is deducted from redemptions and exchanges out of
the Small Cap Index Fund and the EAFE(R) Equity Index Fund. These transaction
fees are paid to the respective Funds and are deducted automatically from the
amount redeemed.

The purpose of the 0.50% transaction fee is to allocate transaction costs
associated with redemptions and exchanges to investors making those redemptions
and exchanges, thus insulating existing shareholders from those transaction
costs. These costs include: (1) brokerage costs; (2) the effect of the "bid-ask"
spread in small and medium sized company stock and international markets; and
(3) taxes in some countries. Since the investors, not the Fund, bears these
costs, the Fund is expected to be able track its benchmark index more closely.
- --------------------------------------------------------------------------------
Annual Operating Expenses

U.S. Bond Index Fund
................................................................................

Investment advisory fee (after reimbursement or waiver) 0.10%
Other expenses (after reimbursements or waivers) 0.25
................................................................................
Total operating expenses (after reimbursements or waivers) 0.35%
................................................................................

Small Cap Index Fund
................................................................................
Investment advisory fee (after reimbursement or waiver) 0.10%
Other expenses (after reimbursements or waivers) 0.35
................................................................................
Total operating expenses (after reimbursements or waivers) 0.45%
................................................................................

EAFE(R) Equity Index Fund
................................................................................
Investment advisory fee (after reimbursement or waiver) 0.20%
Other expenses (after reimbursements or waivers) 0.45
................................................................................
Total operating expenses (after reimbursements or waivers) 0.65%
................................................................................

Equity 500 Index Fund
................................................................................
Investment advisory fee (after reimbursement or waiver) 0.07%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.18
................................................................................
Total operating expenses (after reimbursements or waivers) 0.25%
................................................................................
- --------------------------------------------------------------------------------
Expense Table Example: An investor would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2) redemption at the end of each
time period:

Examples 1 year 3 years 5 years 10 years
................................................................................
U.S. Bond Index Fund $ 4 $11
Small Cap Index Fund $10 $20
EAFE(R)Equity Index Fund $12 $26
Equity 500 Index Fund $ 3 $ 8 $14 $32
- --------------------------------------------------------------------------------

The expense table and the example above show the costs and expenses that an
investor will bear directly or indirectly as a shareholder of a Fund. Bankers
Trust has voluntarily agreed to waive a portion of its investment advisory fee
with respect to each Portfolio. Without such waiver, each Portfolio's investment
advisory fee would be equal to the following: U.S. Bond Index Portfolio --
0.15%; Small Cap Index Portfolio -- 0.15%; EAFE(R) Equity Index Portfolio --
0.25%; and Equity 500 Index Portfolio -- 0.10%. The expense table and the
example reflect a voluntary undertaking by Bankers Trust or Signature
Broker-Dealer Services, Inc. ("SBDS"), as the distributor (the "Distributor") of
the Shares of each Fund, to waive or reimburse expenses such that the total
operating expenses of each Fund and the corresponding Portfolio, with the
exception of the Equity 500 Index Fund and Equity 500 Index Portfolio, (as a
percentage of the Fund's average daily net assets) would be equal to the
following: U.S. Bond Index-- 0.35%; Small Cap Index -- 0.45%; and EAFE(R) Equity
Index-- 0.65%. In the absence of this undertaking, assuming total assets of $100
million in each Fund, it is estimated that "Total Operating Expenses" of each
Fund and its corresponding Portfolio would be as follows: U.S. Bond Index --
0.55%; Small Cap Index-- 0.60%; and EAFE(R) Equity Index-- 0.80%. With respect
to the Equity 500 Index Fund and the Equity 500 Index Portfolio, in the absence
of this undertaking, for the fiscal year ended December 31, 1995, the total
operating expenses would have been equal to approximately 0.48% of the Fund's
average net assets annually. The example should not be considered a
representation of past or future expenses and actual expenses may be greater or
less than those shown. Moreover, while each example assumes a 5% annual return,
actual performance will vary and may result in a return greater or less than 5%.

Currently, the Funds (with the exception of the Equity 500 Index Fund) have
issued two classes of Shares. The Funds offer by separate prospectus another
class of Shares. Because the expenses vary between the classes, performance will
vary with respect to each class. Additional information concerning the Funds'
other class of Shares is available from Bankers Trust, as administrator at (800)
730-1313.

For more information about each Fund's and each Portfolio's expenses see
"Management of the Trusts and the Portfolios" and "Valuation Details."

FUND FINANCIAL HIGHLIGHTS

The following table shows the selected data for a share outstanding, total
investment return, ratios to average net assets and other supplemental data of
the Equity 500 Index Fund for the periods indicated. The Fund's Annual Report
has been audited by Coopers & Lybrand L.L.P., the Fund's independent
accountants, whose report thereon appears in the Fund's Annual Report. The
Fund's Annual Report is incorporated by reference in the Trusts' SAI.
- --------------------------------------------------------------------------------

For the Period
For the year ended 12/31/92
December 31, (Commencement
of Operations)
1995 1994 1993
<S> <C> <C> <C> <C>
...............................................................................................
Selected Per Share Data
Net Asset Value, Beginning of Period $10.36 $10.57 $10.00 $10.00
...............................................................................................
Income from Investment Operations
Net Investment Income 0.29 0.22 0.24 --
Net Realized and Unrealized Gain (Loss)
on Securities and Futures Transactions 3.53 (0.10) 0.71 --
...............................................................................................
Total from Investment Operations 3.82 0.12 0.95 --
...............................................................................................
Distributions From
Net Investment Income (0.29) (0.22) (0.24) --
Net Realized Gain from
Securities and Futures Transactions (0.07) (0.11) (0.14) --
................................................................................................
Total Distributions (0.36) (0.33) (0.38) --
................................................................................................
Net Asset Value, End of Period $13.82 $10.36 $10.57 $10.00
................................................................................................
Total Investment Return 37.15% 1.15% 9.53% --

Ratios and Supplemental Data
Ratio of Net Investment Income
to Average Net Assets 2.38% 2.68% 2.53% --
Ratio of Expenses to Average Net Assets,
Including Expenses of the Equity 500
Index Portfolio 0.25% 0.25% 0.25% --
Decrease Reflected in Above Expense Ratio
Due to Absorption of Expenses by Bankers
Trust 0.23% 0.29% 1.82% --
Net Assets, End of Period
(000's omitted) $277,140 $181,898 $1,853 $100
- ------------------------------------------------------------------------------------------------
</TABLE>

THE FUNDS IN DETAIL

INVESTMENT OBJECTIVES AND POLICIES

The U.S. Bond Index Portfolio seeks to replicate as closely as possible (before
deduction of Expenses) the investment performance of the Aggregate Bond Index, a
broad market weighted index which encompasses four major classes of investment
grade fixed-income securities in the United States: U.S. Treasury and agency
securities, corporate bonds, international (dollar-denominated) bonds, and
mortgage-backed securities, with maturities greater than one year.

As of December 31, 1995, the major classes of fixed-income securities
represented the following proportions of the Index's total market value:

Aggregate
Bond Index

U.S. Treasury and agency securities 53%
Corporate bonds 14%
International (dollar-denominated) bonds 3%
Mortgage-backed securities 29%
Asset Backed Securities 1%
Dollar-weighted average maturity (Years) 8.5 yrs

At the broadest level, the U.S. Bond Index Portfolio will seek to hold
securities and other investments which reflect the weighting of the major asset
classes in the Index. These classes include U.S. Treasury and agency securities,
corporate bonds, and mortgage-backed securities. For example, if U.S. Treasury
and agency securities represent approximately 53% of the Index's interest rate
risk, then approximately 53% of the Portfolio's interest rate risk will come
from such securities and other investments. Similarly, if corporate bonds
represent 14% of the interest rate risk of the Index, then they will represent
approximately 14% of the interest rate risk of the Portfolio. Such a sampling
technique is expected to be an effective means of substantially replicating the
income and capital returns provided by the Index before deduction of Fund and
Portfolio expenses.

The Portfolio may invest in U.S. Treasury bills, notes and bonds and other "full
faith and credit" obligations of the U.S. Government and in U.S. Government
agency securities, which are debt obligations issued or guaranteed by agencies
or instrumentalities of the U.S. Government ("U.S. Government Securities"). Such
"agency" securities may not be backed by the "full faith and credit" of the U.S.
Government. Such U.S. Government agencies may include the Federal Farm Credit
Banks, the Resolution Trust Corporation and the Government National Mortgage
Association. Even though they all carry top (AAA) credit ratings, "agency"
obligations are not explicitly guaranteed by the U.S. Government and so are
perceived as somewhat riskier than comparable Treasury bonds.

As a mutual fund investing primarily in fixed-income securities, the Portfolio
is subject to interest rate, income, call and credit risks. Since the Portfolio
also invests in mortgage-backed securities, it is also subject to prepayment
risk. See "Risk Factors and Certain Securities and Investment Practices."

The Small Cap Index Portfolio seeks to replicate as closely as possible (before
deduction of expenses of the Fund and corresponding Portfolio) the total return
of the Russell 2000 Index.

The EAFE(R) Equity Index Portfolio seeks to replicate as closely as possible
(before deduction of expenses of the Fund and corresponding Portfolio) the total
return of the EAFE Index. The Portfolio attempts to achieve this objective by
investing in a statistically selected sample of the equity securities included
in the EAFE Index.

The EAFE(R) Equity Index Portfolio is constructed to have aggregate investment
characteristics similar to those of the EAFE Index. The Portfolio invests in a
statistically selected sample of the securities included in the EAFE Index,
although not all companies within a country will be represented in the Portfolio
at the same time. Stocks are selected for inclusion in the Portfolio based on
country of origin, market capitalization, yield, volatility and industry sector.
Bankers Trust will manage the Portfolio using advanced statistical techniques to
determine which stocks are to be purchased or sold to replicate the EAFE Index.
From time to time, adjustments may be made in the Portfolio because of changes
in the composition of the EAFE Index, but such changes should be infrequent.

ALTHOUGH MORGAN STANLEY SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN
THE CALCULATION OF THE INDICES FROM SOURCES WHICH MORGAN STANLEY CONSIDERS
RELIABLE, MORGAN STANLEY DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS
OF THE INDICES OR ANY DATA INCLUDED THEREIN. MORGAN STANLEY MAKES NO WARRANTY,
EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, LICENSEE'S
CUSTOMERS AND COUNTERPARTIES, OWNERS OF THE PRODUCTS, OR ANY OTHER PERSON OR
ENTITY FROM THE USE OF THE INDICES OR ANY DATA INCLUDED THEREIN IN CONNECTION
WITH THE RIGHTS LICENSED HEREUNDER OR FOR ANY OTHER USE. MORGAN STANLEY MAKES NO
EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE INDICES
OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT
SHALL MORGAN STANLEY HAVE ANY LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL,
PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF
NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.

The Equity 500 Index Portfolio seeks to replicate as closely as possible (before
deduction of expenses of the Fund and the corresponding Portfolio) the total
return of the S&P 500.

The Adviser utilizes a two-stage sampling approach in seeking to obtain its
objective. Stage one, which encompasses large cap stocks, maintains the stock
holdings at or near their benchmark weights. Large capitalization stocks are
defined as those securities which represent 0.10% or more of the index. In stage
two, smaller stocks are analyzed and selected using risk characteristics and
industry weights in order to match the sector and risk characteristics of the
smaller companies in the S&P 500. This approach helps to maximize portfolio
liquidity while minimizing costs.

About the S&P 500. The S&P 500 is composed of 500 common stocks, which are
chosen by S&P on a statistical basis to be included in the Index. The inclusion
of a stock in the S&P 500 in no way implies that S&P believes the stock to be an
attractive investment. The 500 securities, most of which trade on the NYSE,
represented, as of December 31, 1995, approximately 81% of the market value of
all U.S. common stocks. Each stock in the S&P 500 is weighted by its market
value. Bankers Trust believes that the performance of the S&P 500 is
representative of the performance of publicly traded common stocks in general.
The composition of the S&P 500 is determined by S&P and is based on such factors
as the market capitalization and trading activity of each stock and its adequacy
as a representation of stocks in a particular industry group, and may be changed
from time to time.

S&P does not guarantee the accuracy and/or the completeness of the S&P 500 or
any data included therein.

For more information about the performance of the indices mentioned herein, see
the SAI.

General

Over time, the correlation between the performance of each Fund and the
respective Index is expected to be 0.95 or higher before deduction of Expenses
of each Fund and each corresponding Portfolio. A correlation of 1.00 would
indicate perfect correlation, which would be achieved when the net asset value
of the Fund, including the value of its dividend and any capital gain
distributions, increases or decreases in exact proportion to changes in the
Index. Each Fund's ability to track its respective index may be affected by,
among other things, transaction costs, administration and other expenses
incurred by the Funds or the corresponding Portfolio, changes in either the
composition of the Index or the assets of a Portfolio, and the timing and amount
of Portfolio investor contributions and withdrawals, if any. In the unlikely
event that a high correlation is not achieved, the Trusts' Boards of Trustees
will consider alternatives. Because each Portfolio seeks to track the respective
index, Bankers Trust will not attempt to judge the merits of any particular
stock as an investment.

Under normal circumstances, each Portfolio will invest at least 80% of its
assets in the securities of its respective Index.

As diversified funds, no more than 5% of the assets of each Portfolio may be
invested in the securities of one issuer (other than U.S. Government
Securities), except that up to 25% of each Portfolio's assets may be invested
without regard to this limitation. Each Portfolio will not invest more than 25%
of its assets in the securities of issuers in any one industry. In the unlikely
event that the S&P 500 should concentrate to an extent greater than that amount,
each Portfolio's ability to achieve its investment objective may be impaired.
These are fundamental investment policies of the Portfolios which may not be
changed without investor approval. No more than 15% of each Portfolio's net
assets may be invested in illiquid or not readily marketable securities
(including repurchase agreements and time deposits with remaining maturities of
more than seven calendar days). Additional investment policies of each Portfolio
are contained in the SAI.

RISK FACTORS AND CERTAIN SECURITIES AND INVESTMENT PRACTICES

Fixed Income Security Risk - U.S. Bond Index Fund

Investors in the U.S. Bond Index Fund are exposed to four types of risk from
fixed income securities. (1) Interest rate risk is the potential for
fluctuations in bond prices due to changing interest rates. (2) Income risk is
the potential for a decline in a Portfolio's income due to falling market
interest rates. (3) Credit risk is the possibility that a bond issuer will fail
to make timely payments of either interest or principal to the Portfolio. (4)
Prepayment risk or call risk is the likelihood that, during periods of falling
interest rates, securities with high stated interest rates will be prepaid (or
"called") prior to maturity, requiring the Portfolio to invest the proceeds at
generally lower interest rates.

Market Risk - Equity 500 Index Fund, Small Cap Index Fund and
EAFE(R) Equity Index Fund

As mutual funds investing primarily in common stocks, these Portfolios are
subject to market risk ---- i.e., the possibility that common stock prices will
decline over short or even extended periods. The U.S. and foreign stock markets
tend to be cyclical, with periods when stock prices generally rise and periods
when prices generally decline.

Risks of Investing in Medium- and Small-Capitalization Stocks -
Small Cap Index Fund

Historically, medium- and small-capitalization stocks have been more volatile in
price than the larger-capitalization stocks included in the S&P 500. Among the
reasons for the greater price volatility of these securities are the less
certain growth prospects of smaller firms, the lower degree of liquidity in the
markets for such stocks, and the greater sensitivity of medium- and small-size
companies to changing economic conditions. In addition to exhibiting greater
volatility, medium- and small-size company stocks may fluctuate independently of
larger company stocks. Medium- and small-size company stocks may decline in
price as large company stocks rise, or rise in prices as large company stocks
decline. Risks of Investing in Foreign Securities - EAFE(R) Equity Index
Portfolio

SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE

Unlike other open-end management investment companies (mutual funds) which
directly acquire and manage their own portfolio securities, each Fund seeks to
achieve its investment objective by investing all of its Assets in the
corresponding Portfolio, a separate registered investment company with the same
investment objectives as the Fund. Therefore, an investor's interest in the
Portfolio's securities is indirect, like investments in other investment
companies and pooled investment vehicles. In addition to selling a beneficial
interest to the corresponding Fund, each Portfolio may sell beneficial interests
to other mutual funds or institutional investors. Such investors will invest in
a Portfolio on the same terms and conditions and will pay a proportionate share
of the Portfolio's expenses. However, the other investors investing in a
Portfolio are not required to sell their shares at the same public offering
price as the Fund due to variations in sales commissions and other operating
expenses. Therefore, investors in a Fund should be aware that these differences
may result in differences in returns experienced by investors in the different
funds that invest in the Portfolio. Such differences in returns are also present
in other mutual fund structures. Information concerning other holders of
interests in the Portfolio is available from Bankers Trust, as the
Administrator, at (800) 730-1313.

The master-feeder structure has been developed relatively recently, so
shareholders should carefully consider this investment approach.

Smaller funds investing in a Portfolio may be materially affected by the actions
of larger funds investing in the Portfolio. For example, if a large fund
withdraws from a Portfolio, the remaining funds may experience higher pro rata
operating expenses, thereby producing lower returns (however, this possibility
exists as well for traditionally structured funds which have large institutional
investors). Additionally, a Portfolio may become less diverse, resulting in
increased portfolio risk. Also, funds with a greater pro rata ownership in a
Portfolio could have effective voting control of the operations of the
Portfolio. Except as permitted by the SEC, whenever a Trust is requested to vote
on matters pertaining to a Portfolio, each Trust will hold a meeting of
shareholders of the Fund and will cast all of its votes in the same proportion
as the votes of the Fund's shareholders. Fund shareholders who do not vote will
not affect a Trust's votes at the Portfolio meeting. The percentage of a Trust's
votes representing Fund shareholders not voting will be voted by the Trustees or
officers of the Trust in the same proportion as the Fund shareholders who do, in
fact, vote. Certain changes in the Portfolio's investment objectives, policies
or restrictions may require the Fund to withdraw its interest in the Portfolio.
Any such withdrawal could result in a distribution "in kind" of portfolio
securities (as opposed to a cash distribution from the Portfolio). If securities
are distributed, the Fund could incur brokerage, tax or other charges in
converting the securities to cash. In addition, the distribution in kind may
result in a less diversified portfolio of investments or adversely affect the
liquidity of the Fund. Notwithstanding the above, there are other means for
meeting redemption requests, such as borrowing.

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

For descriptions of the investment objective, policies and restrictions of each
Portfolio, see "The Funds in Detail" herein and "Risk Factors and Certain
Securities and Investment Practices" in this Prospectus and in the SAI. For
descriptions of the management of the Trusts and the Portfolios, see "Management
of the Trusts and the Portfolios" herein and in the SAI. For descriptions of the
expenses of the Portfolio, see "The Funds--Expense Summary," herein and
"Management of the Trusts and the Portfolios" herein and in the SAI.

SECURITIES AND INVESTMENT PRACTICES

Short-Term Investments. Each Portfolio may invest in certain short-term fixed
income securities. Such securities may be used to invest uncommitted cash
balances, to maintain liquidity to meet shareholder redemptions or to serve as
collateral for the obligations underlying a Portfolio's investment in securities
index futures or related options or warrants. These securities include:
obligations issued or guaranteed by the U.S. Government or any of its agencies
or instrumentalities or by any of the states, repurchase agreements, time
deposits, certificates of deposit, bankers' acceptances and commercial paper.

U.S. Government Securities are obligations of, or guaranteed by, the U.S.
Government, its agencies or instrumentalities. Some U.S. Government securities,
such as Treasury bills, notes and bonds, are supported by the full faith and
credit of the United States; others, such as those of the Federal Home Loan
Banks, are supported by the right of the issuer to borrow from the Treasury;
others, such as those of the Federal National Mortgage Association, 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 only by the credit of the instrumentality.

Securities Lending. Each Portfolio may lend its investment securities to
qualified institutional investors for either short-term or long-term purposes of
realizing additional income. Loans of securities by a Portfolio will be
collateralized by cash, letters of credit, or securities issued or guaranteed by
the U.S. Government or its agencies. The collateral will equal at least 100% of
the current market value of the loaned securities, and such loans may not exceed
30% of the value of a Portfolio's net assets. The risks in lending portfolio
securities, as with other extensions of credit, consist of possible loss of
rights in the collateral should the borrower fail financially. In determining
whether to lend securities, Bankers Trust will consider all relevant facts and
circumstances, including the creditworthiness of the borrower.

When Issued and Delayed Delivery Securities. Each Portfolio may purchase
securities on a when-issued or delayed delivery basis. Delivery of and payment
for these securities may take place as long as a month or more after the date of
the purchase commitment. The value of these securities is subject to market
fluctuation during this period and no income accrues to the Portfolio until
settlement takes place. The Portfolio maintains with the Custodian a segregated
account containing high grade liquid securities in an amount at least equal to
these commitments.

Mortgage-Related Securities. As part of its effort to replicate the investment
performance of its Index, the U.S. Bond Index Portfolio may invest in
mortgage-backed securities. Mortgage-backed securities represent an interest in
an underlying pool of mortgages. Unlike ordinary fixed-income securities, which
generally pay a fixed rate of interest and return principal upon maturity,
mortgage-backed securities repay both interest income and principal as part of
their periodic payments. Because the mortgages underlying mortgage-backed
certificates can be prepaid at any time by homeowners or corporate borrowers,
mortgage-backed securities give rise to certain unique "pre-payment" risks.

The U.S. Bond Index Portfolio may purchase mortgage-backed securities issued by
the Government National Mortgage Association (GNMA), the Federal Home Loan
Mortgage Corporation (FHLMC), the Federal National Mortgage Association (FNMA),
and the Federal Housing Authority (FHA). GNMA securities are guaranteed by the
U.S. Government as to the timely payment of principal and interest; securities
from other Government-sponsored entities are generally not secured by an
explicit pledge of the U.S. Government. The U.S. Bond Index Portfolio may also
invest in conventional mortgage securities, which are packaged by private
corporations and are not guaranteed by the U.S. Government. Mortgage securities
that are guaranteed by the U.S. Government are guaranteed only as to the timely
payment of principal and interest. The market value of such securities is not
guaranteed and may fluctuate.

Derivatives

Each Portfolio may invest in stock index futures and options thereon which are
commonly known as derivatives. Generally, a derivative is a financial
arrangement, the value of which is based on, or "derived" from, a traditional
security, asset, or market index. Some "derivatives" such as mortgage-related
and other asset-backed securities are in many respects like any other
investment, although they may be more volatile or less liquid than more
traditional debt securities. There are, in fact, many different types of
derivatives and many different ways to use them. There are a range of risks
associated with those uses. Futures and options are commonly used for
traditional hedging purposes to attempt to protect a fund from exposure to
changing interest rates, securities prices, or currency exchange rates and as a
low cost method of gaining exposure to a particular securities market without
investing directly in those securities. The Adviser will only use derivatives
for cash management purposes. Derivatives will not be used to increase portfolio
risk above the level that could be achieved using only traditional investment
securities or to acquire exposure to changes in the value of assets or indices
that by themselves would not be purchased for the Portfolio.

Securities Index Futures and Related Options. Each Portfolio may enter into
securities index futures contracts and related options provided that not more
than 5% of its assets are required as a margin deposit for futures contracts or
options and provided that not more than 20% of a Portfolio's assets are invested
in futures and options at any time. When a Portfolio has cash from new
investments in the Portfolio or holds a portion of its assets in money market
instruments, it may enter into index futures or options to attempt to increase
its exposure to the market. Strategies the Portfolio could use to accomplish
this include purchasing futures contracts, writing put options, and purchasing
call options. When the Portfolio wishes to sell securities, because of
shareholder redemptions or otherwise, it may use index futures or options to
hedge against market risk until the sale can be completed. These strategies
could include selling futures contracts, writing call options, and purchasing
put options.

Swap Agreements. Each Portfolio may enter into swap agreements only to the
extent that obligations under such agreements represent not more than 10% of the
Portfolio's total assets. Swap agreements are contracts between parties in which
one party agrees to make payments to the other party based on the change in
market value of a specified index or asset. In return, the other party agrees to
make payments to the first party based on the return of a different specified
index or asset.

Warrants. Each Portfolio's investment in warrants will not exceed more than 5%
of its assets (2% with respect to warrants not listed on the New York or
American Stock Exchanges). Warrants are instruments which entitle the holder to
buy underlying equity securities at a specific price for a specific period of
time.

A warrant tends to be more volatile than its underlying securities and ceases to
have value if it is not exercised prior to its expiration date. In addition,
changes in the value of a warrant do not necessarily correspond to changes in
the value of its underlying securities.

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

Further risks associated with the use of futures contracts, options, warrants,
convertible securities and swap agreements. The risk of loss associated with
futures contracts in some strategies can be substantial due to both the low
margin deposits required and the extremely high degree of leverage involved in
futures pricing. As a result, a relatively small price movement in a futures
contract may result in an immediate and substantial loss or gain. However, the
Portfolios will not use futures contracts, options, warrants, convertible
securities and swap agreements for speculative purposes or to leverage their net
assets. Accordingly, the primary risks associated with the use of futures
contracts, options, warrants, convertible securities and swap agreements by the
Portfolios are: (i) imperfect correlation between the change in market value of
the securities held by a Portfolio and the prices of futures contracts, options,
warrants, convertible securities and swap agreements; and (ii) possible lack of
a liquid secondary market for a futures contract and the resulting inability to
close a futures position prior to its maturity date. The risk of imperfect
correlation will be minimized by investing only in those contracts whose
behavior is expected to resemble that of a Portfolio's underlying securities.
The risk that a Portfolio will be unable to close out a futures position will be
minimized by entering into stock transactions on an exchange with an active and
liquid secondary market. However options, warrants, convertible securities and
swap agreements purchased or sold over-the-counter may be less liquid than
exchange-traded securities. Illiquid securities, in general, may not represent
more than 15% of the net assets of a Portfolio.

Foreign Currency Forward, Futures and Related Options Transactions. The EAFE(R)
Equity Index Portfolio may enter into foreign currency forward and foreign
currency futures contracts in order to maintain the same currency exposure as
the EAFE Index. The Portfolio may not enter into such contracts as a way of
protecting against anticipated adverse changes in exchange rates between foreign
currencies and the U.S. dollar. A foreign currency forward contract is an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. Such contracts do not
eliminate fluctuations in the underlying prices of securities held by the
Portfolios. Although such contracts tend to minimize the risk of loss due to a
decline in the value of a currency that has been sold forward, and the risk of
loss due to an increase in the value of a currency that has been purchased
forward, at the same time they tend to limit any potential gain that might be
realized should the value of such currency increase.

Asset Coverage. To assure that a Portfolio's use of futures and related options,
as well as when-issued and delayed-delivery securities, interest rate swaps and
foreign currency forward futures and related options transactions are not used
to achieve excessive investment leverage, a Portfolio will cover such
transactions, as required under applicable interpretations of the SEC, either by
owning the underlying securities, entering into an off-setting transaction, or
by establishing a segregated account with the Portfolio's custodian containing
high grade liquid debt securities in an amount at all times equal to or
exceeding the Portfolio's commitment with respect to these instruments or
contracts.

Portfolio Turnover

The frequency of Portfolio transactions - the Portfolio's portfolio turnover
rate - will vary from year to year depending on market conditions and the
Portfolio's cash flows. Each Portfolio's annual portfolio turnover rate is not
expected to exceed 100%. The Equity 500 Index Portfolio's portfolio turnover
rate for the years ended December 31, 1995, 1994 and 1993 was 6%, 21% and 31%,
respectively. The decrease in the Portfolio's turnover rate for the year 1994 to
1995 was due to the growth of assets in the period.

PERFORMANCE

For current Fund performance or a free copy of the Funds' financial report,
please contact your Investment Professional or Bankers Trust.

Mutual fund performance is commonly measured as total return and/or yield. Each
Fund's performance is affected by the expenses of that Fund.

Explanation of Terms

Total return is the change in value of an investment in a Fund over a given
period, assuming reinvestment of any dividends and capital gains. A cumulative
total return reflects actual performance over a stated period of time. An
average annual total return is a hypothetical rate of return that, if achieved
annually, would have produced the same cumulative total return if performance
had been constant over the entire period. Average annual total return
calculations smooth out variations in performance; they are not the same as
actual year-by-year results. Average annual total returns covering periods of
less than one year assume that performance will remain constant for the rest of
the year.

Total Returns
- --------------------------------------------------------------------------------
Average annual
total return
Total return for period from
for the period from commencement
Total return commencement of of operations
for 1 year operations through through
ended 12/31/95 12/31/95 12/31/95

Equity 500 Index Fund(a) 37.15% 51.94% 14.96%
................................................................................

(a) Fund commenced operations on December 31, 1992.

Yield refers to the income generated by an investment in a Fund over a given
period of time, expressed as an annual percentage rate. Yields are calculated
according to a standard that is required for all stock and bond funds. Because
this differs from other accounting methods, the quoted yield may not equal the
income actually paid to shareholders. This difference may be significant for a
Fund investing in a Portfolio whose investments are denominated in foreign
currencies.

The 30-day SEC yield for the period ended December 31, 1995 for the Equity 500
Index Fund was 2.21%.

Total returns and yields are based on past results and are not an indication of
future performance.

MANAGEMENT OF THE TRUSTS AND THE PORTFOLIOS

Board of Trustees

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

Investment Adviser

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

Bankers Trust Company and its Affiliates

Bankers Trust Company, a New York banking corporation with principal offices at
280 Park Avenue, New York, New York 10017, is a wholly owned subsidiary of
Bankers Trust New York Corporation. Bankers Trust conducts a variety of general
banking and trust activities and is a major wholesale supplier of financial
services to the international and domestic institutional market.

The Investment Advisory Agreements provide for each Portfolio to pay Bankers
Trust a fee from each Portfolio, accrued daily and paid monthly, equal on an
annual basis to the following percentages of the average daily net assets of the
Portfolio for its then-current fiscal year: U.S. Bond Index Portfolio, 0.15%;
Small Cap Index Portfolio, 0.15%; EAFE(R) Equity Index Portfolio, 0.25%; and
Equity 500 Index Portfolio, 0.10%.

Portfolio Managers

Frank Salerno, Managing Director of Bankers Trust, is responsible for the
management of the Small Cap Portfolio and the Equity 500 Index Portfolio. Mr.
Salerno oversees administration, management and trading of international and
domestic equity index strategies. He has been employed by Bankers Trust since
1981 and has managed the Portfolios' assets since each Portfolio commenced
operations.

Louis R. D'Arienzo, Vice President of Bankers Trust, is responsible for the
day-to-day management of the U.S. Bond Index Portfolio. Mr. D'Arienzo has been
employed by Bankers Trust since 1981 and has twelve years of trading and
investment experience in fixed income securities.

Administrator

Under its Administration and Services Agreement with each Trust, Bankers Trust
calculates the net asset value of each Fund and generally assists the Board of
Trustees of the Trust in all aspects of the administration and operation of the
Funds. The Administration and Services Agreement provides for the respective
Trust to pay Bankers Trust a fee, accrued daily and paid monthly equal on an
annual basis to the following percentages of the average daily net assets of the
Fund, attributable to the Class, for its then-current fiscal year: U.S. Bond
Index Fund, 0.20%; Small Cap Index Fund, 0.25%; EAFE(R) Equity Index Fund,
0.30%; and Equity 500 Index Fund, 0.30%. Under an Administration and Services
Agreement with each Portfolio, Bankers Trust calculates the value of the assets
of the Portfolio and generally assists the respective Board of Trustees in all
aspects of the administration and operation of the Portfolios. The
Administration and Services Agreement provides for each Portfolio to pay Bankers
Trust a fee, accrued daily and paid monthly, equal on an annual basis to the
following percentages of the Portfolio's average daily net assets for its
then-current fiscal year: U.S. Bond Index Portfolio, 0.05%; Small Cap Index
Portfolio, 0.05%; EAFE(R) Equity Index Portfolio, 0.10%; and Equity 500 Index
Portfolio, 0.05%. Under each Administration and Services Agreement, Bankers
Trust may delegate one or more of its responsibilities to others, including
SBDS, at Bankers Trust's expense.

Distributor

Under its Distribution Agreement with each Trust, SBDS, as Distributor, serves
as the Trusts' principal underwriter on a best efforts basis. In addition, SBDS
provides the Trusts with office facilities. SBDS is a wholly owned subsidiary of
Signature Financial Group, Inc. ("SFG"). SFG and its affiliates currently
provide administration and distribution services for other registered investment
companies. The principal business address of SFG and SBDS is 6 St. James Avenue,
Boston, Massachusetts 02116.

Custodian and Transfer Agent

Bankers Trust acts as custodian of the assets of the Trusts and each Portfolio
and serves as the transfer agent (the "Transfer Agent") for the Trusts and each
Portfolio under the Administration and Services Agreement with the Trusts and
each Portfolio.

ACCOUNT INFORMATION

TYPES OF ACCOUNTS

The different ways to set up (register) your account with the BT Advisor Funds
are listed below.

The account guidelines that follow may not apply to certain Funds or to certain
retirement accounts. If your employer offers a Fund through a retirement
program, contact your employer for more information. Otherwise, call your
Investment Professional directly.

Ways to Set Up Your Account

Individual or Joint Tenant
For your general investment needs
Individual accounts are owned by one person. Joint accounts can have two or more
owners (tenants). Joint accounts may only be joint tenants with rights of
survivorship.

Retirement
To shelter your retirement savings from taxes
Retirement plans allow individuals to shelter investment income and capital
gains from current taxes. In addition, contributions to these accounts may be
tax deductible. Retirement accounts require special applications and typically
have lower minimums.

o Individual Retirement Accounts (IRAs) allow anyone of legal age under 70 1/2
with earned income to invest up to $2,000 per tax year.

o Rollover IRAs retain special tax advantages for certain distributions from
employer sponsored retirement plans.

o Simplified Employee Pension Plans (SEP-IRAs) provide small business owners or
those with self-employed income (and their eligible employees) with many of the
same advantages as a Keogh, but with fewer administrative requirements.

o 401(k) Plans allow employees of corporations of all sizes to contribute a
percentage of their wages on a tax deferred basis. These accounts need to be
established by the trustee of the plan.

Money Purchase/Profit Sharing Plans (Keogh Plans) are tax deferred pension
accounts designated for employees of unincorporated businesses or for persons
who are self-employed.

Gifts or Transfers to a Minor (UGMA, UTMA)
To invest for a child's education or other future needs
These custodial accounts provide a way to give money to a child and obtain tax
benefits. An individual can give up to $10,000 a year per child without paying
federal gift tax. Depending on state laws, you can set up a custodial account
under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors
Act (UTMA). Contact your Investment Professional or Bankers Trust.

Trust
For money being invested by a trust
The trust must be established before an account can be opened.

Business or Organization
For investment needs of corporations, associations, partnerships, or other
groups Including accounts established for investment professionals through
automated clearing or smilar systems through which trades are transmitted to
each Fund on an ommibus basis. Contact your Investment Professional or Bankers
Trust.

HOW TO BUY SHARES

Shares are purchased at the Fund's net asset value ("NAV") next calculated after
your investment is received and accepted. The NAV is normally calculated at 4:00
p.m. Eastern time (or in the event that the NYSE closes early, at the time of
such early closing.)

Share certificates are not available for Shares of the Funds.

If you are new to BT Advisor Funds, complete and sign an account application and
mail it along with your check. If there is no account application accompanying
this Prospectus, call your Investment Professional.

If you already have money invested in a fund in the BT Family of Funds you can:

o Mail an account application with a check,

o Wire money into your account,

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

o Contact your Investment Professional.

If you are investing through a tax-sheltered retirement plan, such as an IRA,
for the first time, you will need a special application. Contact your Investment
Professional for more information and a retirement account application.
- --------------------------------------------------------------------------------
Minimum Investments
To Open an Account $2,500
For retirement accounts $ 500
Through automatic investment plans $1,000

To Add to an Account $ 250
For retirement accounts $ 100
Through automatic investment plan $ 100

Minimum Balance $1,000
For retirement accounts None

For further information on opening an account, please consult your Investment
Professional or refer to the account application.
- --------------------------------------------------------------------------------

TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT

PHONE YOUR INVESTMENT Phone your Investment Professional. Contact your Investment Professional or
PROFESSIONAL If you are an existing shareholder, call 1-(800) 730-1313. You may exchange
you may exchange from another BT account from another BT Advisor Funds account (or
with the same registration, including a fund in the BT Family of Funds) with the
name, address, and taxpayer ID number. same registration, including name, address,
and taxpayer ID number.
- --------------------------------------------------------------------------------------------------------------------------

WIRE Not available. Call your Investment Professional or wire to:

ROUTING NO.: 101003621
ATTN: Bankers Trust/IFTC Universal Account
DDA NO. 7527314
FBO: (Account name)
(Account number)

CREDIT: Fund Number
U.S. Bond Index Fund -507
Small Cap Index Fund -509
EAFE(R) Equity Index Fund -510
Equity 500 Index Fund - 518

</TABLE>

HOW TO SELL SHARES

To sell Shares in a retirement account, your request must be made in writing,
except for exchanges to other eligible funds in the BT Family of Funds, which
can be requested by phone or in writing. For information on retirement
distributions contact your Investment Professional or call 1-800-943-2222.

If you are selling some but not all of your non-retirement account Shares, leave
at least $1,000 worth of Shares in the account to keep it open.

To sell Shares by bank wire you will need to sign up for these services in
advance when completing your account application.

Certain requests must include a signature guarantee. It is designed to protect
you and Bankers Trust from fraud. Your request must be made in writing and
include a signature guarantee if any of the following situations apply:

o You wish to redeem more than $100,000 worth of Shares,
o Your account registration has changed within the last 30 days,
o The check is being mailed to a different address than the one on your account
(record address),
o The check is being made payable to someone other than the
account owner,
o The redemption proceeds are being transferred to a BT account
with a different registration, or
o You wish to have redemption proceeds wired to a non-predesignated bank
account.

You should be able to obtain a signature guarantee from a bank, broker, dealer,
credit union (if authorized under state law), securi-ties exchange or
association, clearing agency, or savings association. A notary public cannot
provide a signature guarantee.

Selling Shares in Writing

Write a "letter of instruction" with:

o Your name,
o The Fund's name and Fund's number,
o Your Fund account number,
o The dollar amount or number of Shares to be redeemed and oAny other applicable
requirements listed in the following table.

Deliver your letter to your Investment Professional, or mail it to the following
address:

Bankers Trust Company
P.O. Box 419210
Kansas City, MO 64141-6210

overnight mailings:

Bankers Trust Company
210 West 10th Street, 8th Floor
Kansas City, MO 64105-1716

Unless otherwise instructed, the Transfer Agent will send a check to the record
address.

ADDITIONAL INFORMATION ABOUT SELLING SHARES

ACCOUNT TYPE SPECIAL REQUIREMENTS

PHONE YOUR INVESTMENT All account types except retirement Maximum check
PROFESSIONAL request: $100,000

MAIL OR IN PERSON Individual, Joint Tenant, The letter of instruction (with
Sole Proprietorship, signature guaranteed, if required)
UGMA,UTMA must be signed by all persons
required to sign for transactions,
exactly as their names appear on
the account and sent to your
Investment Professional or the
Transfer Agent.

Retirement account The account owner should complete a
retirement distribution form. Contact
your Investment Professional or call
1-800- 943-2222.

Business or At least one person authorized by
Organization corporate resolution to act on the
account must sign the letter.

AUTOMATICALLY Not available. To use the Systematic
Withdrawal Program. Sign up
for this service when opening
your account, or call your
Investment Professional to
begin the program.

</TABLE>

INVESTOR SERVICES

BT Advisor Funds provide a variety of services to help you manage your account.

Information Services

Statements and reports that your Investment Professional or the Transfer Agent
will send to you include the following:

o Confirmation statements (after every transaction that affects your account
balance, including distributions or your account registration)
o Account statements (quarterly)
o Financial reports (every six months)

Exchange privilege. You may sell your Shares and buy Shares of other BT Funds by
telephone or in writing.

Regular Investment Plans
Systematic Investment Program
To periodically move money from your bank account to a BT Advisor Fund
<TABLE>
<S> <C> <C> <C>

Minimum Minimum Frequency Setting up or changing
Initial Subsequent

$1,000 $100 Monthly, bimonthly. For a new account, complete the appropriate
quarterly or semi- section on the application.
annually
For existing accounts, call your Investment
Professional for an application.

To change the amount or frequency of
your investment, contact your Investment
Professional directly or call
1-800-730-1313. Call at least 10 business
days prior to your next scheduled investment date.
</TABLE>

Systematic Withdrawal Program
To periodically withdraw money from your BT Advisor Fund to your bank account
<TABLE>
<S> <C> <C>

Minimum Frequency Setting up or changing

$100 Monthly, quarterly, To establish call your Investment Professional or call
semi-annually, or call 1-800-730-1313 after your account is open.
or annually The accounts from which the withdrawal is being process
must have a minimum balance of $10,000

</TABLE>

Systematic Exchange Program
To move money from one fund in the BT Family of Funds to another
<TABLE>
<S> <C> <C>

Minimum Frequency Setting up or changing

$100 Monthly, quarterly, To establish, call your Investment Professional
semi-annually, after both accounts are open.
or annually

To change the amount or frequency of your investment
contact your Investment Professional directly or call
1-800-730-1313. Call at least two business days prior
to your next scheduled exchange date.

The account from which the exchanges are to be processed
must have a minimum balance of $10,000. The account into
which the exchange is being processed must have a minimum
balance of $1,000.

</TABLE>

SHAREHOLDER AND ACCOUNT POLICIES

DIVIDENDS, CAPITAL GAINS, AND TAXES
Each Fund distributes substantially all of its net income and capital gains to
shareholders each year. Each Fund distributes capital gains annually. Normally,
income dividends for the Equity 500 Index Fund are distributed quarterly; income
dividends for the Small Cap Index Fund and EAFE(R) Equity Index Fund are
distributed annually; and income dividends for the U.S. Bond Index Fund are
distributed monthly.

Distribution Options

When you open an account, specify on your account application how you want to
receive distributions. The Trusts offer four options:

1. Reinvestment Option. Your dividend and capital gain distributions will be
automatically reinvested in additional Shares of the Fund. If you do not
indicate a choice on your application you will be assigned this option.

2. Income-Earned Option. Your capital gain distributions will be automatically
reinvested in additional Shares of the Fund, but you will be sent a check for
each dividend distribution.

3. Cash Option. You will be sent a check for your dividend and capital gain
distributions.

4. Automatic Dividends Program. Your dividend and capital gain distributions
will be automatically invested in another fund in the BT Family of Funds as long
as the minimums for that account are met.

For retirement accounts, all distributions are automatically reinvested. When
you are over 59 1/2 years old, you can receive distributions in cash. If
distributions from a retirement account for any taxable year following the year
in which the participant reaches age 70 1/2 are less than the "minimum required
distribution" for that taxable year, an excise tax equal to 50% of the
deficiency may be imposed by the Internal Revenue Service (the "IRS"). The
administrator, trustee or custodian of such a retirement account will be
responsible for reporting distributions from such accounts to the IRS.

Taxes

Distributions from the Fund's income and short term capital gains are taxed as
dividends, and long-term capital gain distributions are taxed as long-term
capital gains. The Fund's distributions are taxable when they are paid, whether
you take them in cash or reinvest them in additional shares. Distributions
declared to shareholders of record in November and December and paid in January
are taxable as if paid on December 31. The Fund will send each shareholder a tax
statement by January 31 showing the tax status of the distributions received in
the past year.

Capital Gains. You may realize a capital gain or loss when you redeem (sell) or
exchange shares. Because the tax treatment also depends on your purchase price
and your personal tax position, you should keep your regular account statements
to use in determining your tax.

Other Tax Information. In addition to Federal taxes, you may be subject to state
or local taxes on your investment, depending on the laws in your area. You
should consult with your own tax adviser concerning the application of federal,
state and local taxes to your distributions from the Fund.

VALUATION DETAILS

With the exception of the EAFE(R) Equity Index Fund, the Funds are open for
business each day the NYSE is open. Each Fund's NAV is calculated as of the
close of regular trading on the NYSE, currently 4:00 p.m. Eastern time or in the
event that the NYSE closes early, at the time of such early closing). The
EAFE(R) Equity Index Fund will not process orders on any day when either the
NYSE or the Tokyo Stock Exchange is closed. Orders received on such days will be
priced on the next day the Fund computes its NAV. As such, investors may
experience a delay in purchasing or redeeming Shares of the EAFE(R) Equity Index
Fund.

A Fund's NAV is the value of a single Share. The NAV of each Fund is computed by
dividing the value of the Fund's Assets (i.e., the value of its investment in
the Portfolio and other assets), less all liabilities, allocable to the Advisor
Class Shares by the total number of its Shares outstanding. Each Portfolio's
securities and other assets are valued primarily on the basis of market
quotations or, if quotations are not readily available, by Bankers Trust
pursuant to procedures adopted by the Portfolio's Board of Trustees. These
procedures require Bankers Trust to value such a security at the same value as
an equivalent security which is readily marketable and, in making such
comparisons, to consider all relevant factors under applicable guidelines of the
SEC.

Under the procedures adopted by the Board, a net asset value for a Fund later
determined to have been inaccurate for any reason will be recalculated.
Purchases and redemptions made at a net asset value determined to have been
inaccurate will be adjusted, although in certain circumstances, such as where
the difference between the original net asset value and the recalculated net
asset value is 0.005% (1/2 0f 1%) or less or shareholder transactions are
otherwise insubstantially affected, further action is not required.

When investors sign their account application, they will be asked to certify
that their social security or taxpayer identification number is correct and that
they are not subject to 31% backup withholding for failing to report income to
the IRS. If investors violate IRS regulations, the IRS can require a Fund to
withhold 31% of their taxable distributions and redemptions.

Investors may initiate many transactions by telephone: An Investment
Professional or the Transfer Agent may only be liable for losses resulting from
unauthorized transactions if they do not follow reasonable procedures designed
to verify the identity of the caller. An Investment Professional or the Transfer
Agent will request personalized security codes or other in-formation, and may
also record calls. Investors should verify the accuracy of the confirmation
statements immediately after receipt. If investors do not want the ability to
redeem and exchange by telephone, they should call their Investment Professional
or the Transfer Agent for instructions. Additional documentation may be required
from corporations, associations and certain fiduciaries.

Each Fund reserves the right to suspend the offering of Shares for a period of
time. Each Fund also reserves the right to reject any specific purchase order,
including certain purchases by exchange. Purchase orders may be refused if, in
Bankers Trust's opinion, they would disrupt management of a Fund.

When investors place an order to buy Shares, their Shares will be purchased at
the next NAV or offering price, as applicable, calculated after the order is
received and accepted by the Transfer Agent. Note the following:

o All checks should be made payable to the specific Fund.

o All purchases must be made in U.S. dollars and checks must be drawn on U.S.
banks.

o The Funds do not accept third party checks, except those payable to an
existing shareowner who is a natural person (not a corporation or partnership),
credit cards or cash.

o When making a purchase with more than one check, each check must have a value
of at least $50.

o Each Fund reserves the right to limit the number of checks processed at one
time.

o If a check does not clear, the purchase will be cancelled and the investor
could be liable for any losses or fees a Fund or the Transfer Agent has
incurred.

o When purchase orders are made by check or periodic automatic investment,
redemptions will not be allowed until the investment being redeemed has been
in the account for 15 business days.

o Direct Purchases: In the case of the U.S. Bond Index Fund, investors begin to
earn dividends as of the first business day following the day the Fund receives
payment.

o Automated Order Purchases: In the case of the U.S. Bond Index Fund, investors
begin to earn dividends as of the business day an order is received and
accepted.

Automated Orders Purchase. Shares of the Funds can be purchased or sold through
Investment Professionals utilizing an automated order placement and settlement
system that guarantees payment for orders on a specified date.

To avoid the collection period associated with check purchases, investors should
consider buying Shares by bank wire, U.S. Postal money order, U.S. Treasury
check, or Federal Reserve check.

When investors place an order to sell Shares, Shares will be sold at the next
NAV calculated after the order is received and accepted. Note the following:

o Normally, redemption proceeds will be mailed on the next business day, but if
making immediate payment could adversely affect a Fund it may take up to seven
days to pay you.

o Shares of the Funds will earn dividends through the date of redemption,
however, in the case of the U.S. Bond Index Fund, Shares redeemed on a Friday or
prior to a holiday will continue to earn dividends until the next business day.

o Each Fund may hold payment on redemptions until it is reasonably satisfied
that investments made by check have been collected which can take up to seven
business days.

o Redemptions may be suspended or payment dates postponed when the NYSE is
closed (other than weekends or holidays), when trading on the NYSE is
restricted, or as permitted by the SEC.

The Transfer Agent reserves the right to deduct an annual maintenance fee of
$12.00 from accounts with a value of less than $2,500. The fee, which is payable
to the Transfer Agent, is designed to offset in part the relatively higher costs
of servicing smaller accounts.

If a non-retirement account balance falls below $1,000, the investor will be
given 30 days' notice to reestablish the minimum balance. If the investor does
not increase their balance, the Transfer Agent reserves the right to close the
account and send the proceeds to the investor. The investor's Shares will be
redeemed at the NAV on the day the account is closed.

The Transfer Agent may charge a fee for special services, such as providing
historical account documents, that are beyond the normal scope of its services.

EXCHANGE LIMITATIONS

As a shareholder, investors have the privilege of exchanging Shares of a Fund
for Shares of other funds in the BT Family of Funds at NAV. However, investors
should note the following:

o The Fund an investor exchanges into must be registered for sale in their
state.

o Investors may only exchange between accounts that are registered in the same
name, address, and taxpayer identification number.

o Before exchanging into a Fund, investors should read its Prospectus.

o Exchanges between the Funds described in this Prospectus and Funds described
in other BT Funds' Prospectuses, are restricted during the 90 days following
purchase. Exchanges among Funds described in this Prospectus are permitted any
time after purchase.

o If an investor exchanges into the EAFE(R) Equity Index Fund on a day when the
NYSE or the Tokyo Stock Exchange is closed, the exchange out of the other BT
Fund will be processed on that day, but the EAFE(R) Equity Index Fund Shares
will not be purchased until the day the EAFE(R) Equity Index Fund reopens. If an
investor exchanges out of the EAFE(R) Equity Index Fund on a day when the NYSE
is open and the Tokyo Stock Exchange is closed, the exchange will be delayed
until the EAFE(R) Equity Index Fund reopens.

o Exchanges may have tax consequences for you.

o Because excessive trading can hurt Fund performance and shareholders, each
Fund reserves the right to temporarily or permanently terminate the exchange
privilege of any investor who makes more than four exchanges out of the Fund per
calendar year. Accounts under common ownership or control, including accounts
with the same taxpayer identification number, will be counted together for
purposes of the four exchange limit.

o Each Fund reserves the right to refuse exchange purchases by any person or
group if, in Bankers Trust's judgment, the Fund would be unable to invest the
money effectively in accordance with its investment objective and policies, or
would otherwise potentially be adversely affected.

o Exchanges may be restricted or refused if a Fund receives or anticipates
simultaneous orders affecting significant portions of the Fund's assets. In
particular, a pattern of exchanges that coincide with a "market timing" strategy
may be disruptive to a Fund.

o Although the Funds will attempt to give prior notice whenever they are
reasonably able to do so, they may impose these restrictions at any time. The
Funds reserve the right to terminate or modify the exchange privilege in the
future on 60 days' notice to shareholders.

ADDITIONAL INFORMATION ABOUT THE TRUSTS AND PORTFOLIOS

Each Fund is a mutual fund: an investment that pools shareholders' money and
invests it toward a specified goal. Each Fund (with the exception of the Equity
500 Index Fund) is a separate diversified series of BT Advisor Funds, a
Massachusetts business trust. The Equity 500 Index Fund is separate diversified
series of BT Pyramid Mutual Funds. Each Fund (with the exception of the Equity
500 Index Fund) offers two classes of Shares of beneficial interest, Advisor
Class Shares and Institutional Class Shares. Each of the U.S. Bond Index
Portfolio, Small Cap Index Portfolio, and EAFE(R) Equity Index Portfolio is a
separate diversified series of BT Investment Portfolios, a New York master trust
fund. The Equity 500 Index Portfolio is a New York trust.

When matters are submitted for shareholder vote, shareholders of each Fund will
have one vote for each full share held and proportionate, fractional votes for
fractional shares held. A separate vote of one of the Funds or classes is
required on any matter affecting only that Fund or class on which shareholders
are entitled to vote. Shareholders of a Fund or class are not entitled to vote
on Trust matters that do not affect that Fund or class, respectively, and do not
require a separate vote of the Fund or class. All series of each Trust and all
classes will vote together on certain matters, such as electing trustees or
approving independent public auditors. 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 that
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 that Trust's outstanding shares. Each Trust will also
assist shareholders in communicating with one another as provided for in the
1940 Act.

<PAGE>

BT PYRAMID MUTUAL FUNDS

BT INVESTMENT MONEY MARKET FUND
APRIL 29, 1996

STATEMENT OF ADDITIONAL INFORMATION

BT Pyramid Mutual 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. This Statement of
Additional Information relates only to the BT Investment Money Market Fund (the
"Fund") which seeks a high level of current income consistent with liquidity and
the preservation of capital through investment in a portfolio of high quality
money market instruments.

As described in the Prospectus, the Trust seeks to achieve the
investment objective of the Fund by investing all the investable assets of the
Fund in the Cash Management Portfolio (the "Portfolio"), a diversified open-end
management investment company having the same investment objective as the Fund.

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

Shares of the Fund are sold by Signature Broker-Dealer Services, Inc.
("Signature"), the Trust's Distributor, to clients and customers (including
affiliates and correspondents) of Bankers Trust Company ("Bankers Trust"), the
Portfolio's Adviser, and to clients and customers of other organizations.

The Trust's Prospectus for the Fund dated April 29, 1996 (the
"Prospectus") provides the basic information investors should know before
investing and may be obtained without charge by calling the Trust at the
telephone number listed below or by contacting any Service Agent. This Statement
of Additional Information, which is not a Prospectus, is intended to provide
additional information regarding the activities and operations of the Trust and
should be read in conjunction with the Prospectus. Capitalized terms not
otherwise defined in this Statement of Additional Information have the meanings
accorded to them in the Prospectus applicable to the Fund.

<PAGE>

BANKERS TRUST COMPANY
INVESTMENT ADVISER OF THE PORTFOLIO AND ADMINISTRATOR
SIGNATURE BROKER-DEALER SERVICES, INC.
DISTRIBUTOR

6 ST. JAMES AVENUE BOSTON, MASSACHUSETTS 02116 (800) 730-1313

<PAGE>

INVESTMENT OBJECTIVE AND POLICIES

The Prospectus discusses the investment objective of the Fund and the
policies to be employed to achieve that objective by the Portfolio. This section
contains supplemental information concerning the types of securities and other
instruments in which the Portfolio may invest, the investment policies and
portfolio strategies that the Portfolio may utilize and certain risks attendant
to those investments, policies and strategies.

BANK OBLIGATIONS

For purposes of the Portfolio'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 Trusts, deems the instruments to present minimal credit risk, the
Portfolio may invest in obligations of foreign banks or foreign branches of U.S.
banks which 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 imposition of withholding taxes on interest
payments, differing reserve requirements, reporting and recordkeeping
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 recordkeeping standards than those applicable to domestic branches of U.S.
banks.

COMMERCIAL PAPER

Commercial paper obligations in which the Portfolio may invest are
short-term, unsecured negotiable promissory notes of U.S. or foreign
corporations that at the time of purchase meet the rating criteria described in
the Prospectus. 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.

<PAGE>
U.S. GOVERNMENT OBLIGATIONS

The Portfolio 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 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 Portfolio
may hold include, in addition to those described above and direct U.S. Treasury
obligations, the obligations of the Federal Housing Administration, 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.

LENDING OF PORTFOLIO SECURITIES

The Portfolio has the authority to lend portfolio securities to brokers,
dealers and other financial organizations. The Portfolio will not lend
securities to Bankers Trust, Signature or their affiliates. By lending its
securities, the Portfolio can increase its income by continuing to receive
interest on the loaned securities as well as by either investing the cash
collateral in short-term securities or obtaining yield in the form of interest
paid by the borrower when U.S. Government Obligations are used as collateral.
There may be risks of delay in receiving additional collateral or risks of delay
in recovery of the securities or even loss of rights in the collateral should
the borrower of the securities fail financially. The Portfolio will adhere to
the following conditions whenever its securities are loaned: (i) the Portfolio
must receive at least 100% cash collateral or equivalent securities from the
borrower; (ii) the borrower must increase this collateral whenever the market
value of the securities including accrued interest rises above the level of the
collateral; (iii) the Portfolio must be able to terminate the loan at any time;
(iv) the Portfolio must receive reasonable interest on the loan, as well as any
dividends, interest or other distributions on the loaned securities, and any
increase in market value; (v) the Portfolio may pay only

<PAGE>

reasonable custodian fees in connection with the loan; and (vi) voting rights on
the loaned securities may pass to the borrower; provided, however, that if a
material event adversely affecting the investment occurs, the Board of Trustees
must terminate the loan and regain the right to vote the securities.

REVERSE REPURCHASE AGREEMENTS

The Portfolio 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 Portfolio enters into a reverse repurchase agreement it will place in a
segregated custodial account 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 Portfolio may decline below the repurchase price
of those securities. Reverse repurchase agreements are considered to be
borrowings by the Portfolio.

RATING SERVICES

The ratings of Moody's Investors Service, Inc. ("Moody's") and Standard
& Poor's Corporation ("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, Bankers Trust also makes its own evaluation of these securities,
subject to review by the Board of Trustees. After purchase by the Portfolio, an
obligation may cease to be rated or its rating may be reduced below the minimum
required for purchase by the Portfolio. Neither event would require the
Portfolio to eliminate the obligation from its portfolio, but Bankers Trust will
consider such an event in its determination of whether the Portfolio 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 Statement of Additional
Information.

INVESTMENT RESTRICTIONS

The investment restrictions below have been adopted by the Trust with
respect to the Fund and by the Portfolio as fundamental policies. 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 or Portfolio, respectively, to which it relates,
which is defined in the 1940 Act as the lesser of (a) 67% or more of the shares
present at a shareholder meeting if the holders of more than 50% of the
outstanding shares are present or

<PAGE>

represented by proxy, or (b) more than 50% of the outstanding shares. The
percentage limitations contained in the restrictions listed below apply at the
time of the purchase of the securities.

Whenever the Fund is requested to vote on a change in the investment
restrictions of the Portfolio, the Trust will hold a meeting of Fund
shareholders and will cast its votes as instructed by the shareholders. Fund
shareholders who do not vote will not affect the Trust's votes at the Portfolio
meeting. The percentage of the Trust's votes representing Fund shareholders not
voting will be voted by the Trustees of the Trust in the same proportion as the
Fund shareholders who do, in fact, vote.

Under investment policies adopted by the Trust, on behalf of the Fund,
and by the Portfolio, the Fund and the Portfolio may not:

1. Borrow money, except for temporary or emergency (not
leveraging) purposes in an amount not exceeding 5% of the value of the
Fund's or the Portfolio's total assets (including the amount borrowed),
as the case may be, calculated in each case at the lower of cost or
market.

2. Pledge, hypothecate, mortgage or otherwise encumber more than
5% of the total assets of the Fund or the Portfolio, as the case may be,
and only to secure borrowings for temporary or emergency purposes.

3. Invest more than 5% of the total assets of the Fund or the
Portfolio, as the case may be, in any one issuer (other than U.S.
Government Obligations) or purchase more than 10% of any class of
securities of any one issuer; provided, however, that up to 25% of the
assets of the Fund and the Portfolio may be invested without regard to
this restriction; provided, however, that nothing in this investment
restriction shall prevent the Trust from investing all of the Fund's
assets in an open-end management investment company with substantially
the same investment objective as the Fund (as an operating policy, the
Portfolio will comply with the above 5% diversification requirement with
respect to 100% of its assets).

4. Invest more than 25% of the total assets of the Fund or the
Portfolio, as the case may be, in the securities of issuers in any
single industry; provided that (i) this limitation shall not apply to
the purchase of U.S. Government Obligations, (ii) under normal market
conditions more than 25% of the total assets of the Fund or the
Portfolio will be invested in obligations of foreign and U.S. Banks;
provided, however, that nothing in this investment restriction shall
prevent the Trust from investing all of the Fund's assets in an open-end
management investment company with substantially the same investment
objective as the Fund.

<PAGE>

5. Make short sales of securities, maintain a short position or
purchase any securities on margin, except for such short-term credits as
are necessary for the clearance of transactions.

6. Underwrite the securities issued by others (except to the
extent the Fund or Portfolio may be deemed to be an underwriter under
the Federal securities laws in connection with the disposition of its
portfolio securities) or knowingly purchase restricted securities;
provided, however, that nothing in this investment restriction shall
prevent the Trust from investing all of the Fund's assets in an open-end
management investment company with substantially the same investment
objective as the Fund.

7. Purchase or sell real estate, real estate investment trust
securities, commodities or commodity contracts, or oil, gas or mineral
interests, but this shall not prevent the Fund or the Portfolio from
investing in obligations secured by real estate or interests therein.

8. Make loans to others, except through the purchase of qualified
debt obligations, the entry into repurchase agreements and the lending
of portfolio securities.

9. Invest more than an aggregate of 10% of the net assets of the
Fund or the Portfolio, respectively, (taken, in each case, at current
value) in (i) securities that cannot be readily resold to the public
because of legal or contractual restrictions or because there are no
market quotations readily available or (ii) other "illiquid" securities
(including time deposits and repurchase agreements having a remaining
maturity of in more than seven calendar days); provided, however, that
nothing in this investment restriction shall prevent the Trust from
investing all of the Fund's assets in an open-end management investment
company with substantially the same investment objective as the Fund.

10. Purchase more than 10% of the voting securities of any issuer
or invest in companies for the purpose of exercising control or
management; provided, however, that nothing in this investment
restriction shall prevent the Trust from investing all of the Fund's
assets in an open-end management investment company with substantially
the same investment objective as the Fund.

11. Purchase securities of other investment companies, except to
the extent permitted under the 1940 Act or in connection with a merger,
consolidation, reorganization, acquisition of assets or an offer of
exchange; provided, however, that nothing in this investment restriction
shall prevent the Trust from investing all of the Fund's assets in

<PAGE>

an open-end management investment company with substantially the same
investment objective as the Fund.

12. Issue any senior securities, except insofar as it may be
deemed to have issued a senior security by reason of (i) entering into a
reverse repurchase agreement or (ii) other borrowing in accordance with
terms described in the Prospectus and this Statement of Additional
Information.

13. Purchase or retain the securities of any issuer if any of the
officers or trustees of the Fund or the Portfolio or its investment
adviser owns individually more than 1/2 of 1% of the securities of such
issuer, and together such officers and directors own more than 5% of the
securities of such issuer.

14. Invest in warrants, except that the Fund or the Portfolio may
invest in warrants if, as a result, the investments (valued in each case
at the lower of cost or market) would not exceed 5% of the value of the
net assets of the Fund or the Portfolio, as the case may be, of which
not more than 2% of the net assets of the Fund or the Portfolio, as the
case may be, may be invested in warrants not listed on a recognized
domestic stock exchange. Warrants acquired by the Fund or the Portfolio
as part of a unit or attached to securities at the time of acquisition
are not subject to this limitation.

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

(i) borrow money (including through dollar roll transactions) for any
purpose in excess of 10% of the Portfolio's (Fund's) total assets
(taken at cost), except that the Portfolio (Fund) may borrow for
temporary or emergency purposes up to 1/3 of its total assets;

(ii) pledge, mortgage or hypothecate for any purpose in
excess of 10% of the Portfolio's (Fund's) total assets
(taken at market value), provided that collateral
arrangements with respect to options and futures,
including deposits of initial deposit and variation
margin, and reverse repurchase agreements are not
considered a pledge of assets for purposes of this
restriction;

(iii) purchase any security or evidence of interest therein

<PAGE>

on margin, except that such short-term credit as may be necessary
for the clearance of purchases and sales of securities may be
obtained and except that deposits of initial deposit and
variation margin may be made in connection with the purchase,
ownership, holding or sale of futures;

(iv) sell any security which it does not own unless by virtue of its
ownership of other securities it has at the time of sale a right
to obtain securities, without payment of further consideration,
equivalent in kind and amount to the securities sold and provided
that if such right is conditional the sale is made upon the same
conditions;

(v) invest for the purpose of exercising control or
management;

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

(vii) invest more than 15% of the Portfolio's (Fund's) net assets
(taken at the greater of cost or market value) in

<PAGE>

securities that are (a) Rule 144A securities that have been
determined to be liquid by the Board of Trustees; and (b)
commercial paper that is sold under section 4(2) of the 1933 Act
which: (i) is not traded flat or in default as to interest or
principal; and (ii) is rated in one of the two highest categories
by at least two nationally recognized statistical rating
organizations and the Portfolio's (Fund's) Board of Trustees have
determined the commercial paper to be liquid; or (iii) is rated
in one of the two highest categories by one nationally recognized
statistical rating agency and the Portfolio's (Fund's) Board of
Trustees have determined that the commercial paper is equivalent
quality and is liquid;

(viii) no more than 5% of the Portfolio's (Fund's) total assets are
invested in securities issued by issuers which (including
predecessors) have been in operation less than three years;

(viv) invest more than 10% of the Portfolio's (Fund's) total assets
(taken at the greater of cost or market value) in securities
that are restricted as to resale under the 1933 Act (other than
Rule 144A securities deemed liquid by the Portfolio's (Fund's)
Board of Trustees);

(x) with respect to 75% of the Portfolio's (Fund's) total assets,
purchase securities of any issuer if such purchase at the time
thereof would cause the Portfolio (Fund) to hold more than 10%
of any class of securities of such issuer, for which purposes
all indebtedness of an issuer shall be deemed a single class and
all preferred stock of an issuer shall be deemed a single class,
except that futures or option contracts shall not be subject to
this restriction;

(xi) if the Portfolio (Fund) is a "diversified" fund with respect to
75% of its assets, invest more than 5% of its total assets in
the securities (excluding U.S. Government securities) of any one
issuer;

<PAGE>

(Trust), or is an officer or partner of the Adviser, if after the
purchase of the securities of such issuer for the Portfolio
(Fund) one or more of such persons owns beneficially more than
1/2 of 1% of the shares or securities, or both, all taken at
market value, of such issuer, and such persons owning more than
1/2 of 1% of such shares or securities together own beneficially
more than 5% of such shares or securities, or both, all taken at
market value;

(xiii) invest more than 5% of the Portfolio's (Fund's)
net assets in warrants (valued at the lower of
cost or market) (other than warrants acquired by
the Portfolio (Fund) as part of a unit or attached
to securities at the time of purchase), but not
more than 2% of the Portfolio's (Fund's) net
assets may be invested in warrants not listed on
the American Stock Exchange or the New York Stock
Exchange, Inc. (the "NYSE")
;

(xiv) make short sales of securities or maintain a short
position, unless at all times when a short position is
open it owns an equal amount of such securities or
securities convertible into or exchangeable, without
payment of any further consideration, for securities of
the same issue and equal in amount to, the securities
sold short, and unless not more than 10% of the
Portfolio's (Fund's) net assets (taken at market value)
is represented by such securities, or securities
convertible into or exchangeable for such securities,
at any one time (the Portfolios (Funds) have no current
intention to engage in short selling);

The Fund will comply with the state securities laws and regulations of
all states in which it is registered. The Portfolio will comply with the
permitted investments and

<PAGE>

investment limitations in the securities laws and regulations of all states in
which the Fund, or any other registered investment company investing in the
Portfolio, is registered.

PORTFOLIO TURNOVER

The Portfolio may attempt to increase yields 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 Portfolio as the purchases and sales of portfolio securities are usually
effected as principal transactions. The Portfolio's turnover rate is not
expected to have a material effect on its 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 Portfolio are made by Bankers Trust, which also is responsible for placing
these transactions, subject to the overall review of the Board of Trustees.
Although investment requirements for the Portfolio are reviewed independently
from those of the other accounts managed by Bankers Trust, investments of the
type the Portfolio may make may also be made by these other accounts. When the
Portfolio 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 Portfolio
or the size of the position obtained or disposed of by the Portfolio.

Purchases and sales of securities on behalf of the Portfolio usually are
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 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 and principal transactions are not entered
into with persons affiliated with the Portfolio except pursuant to exemptive
rules or orders adopted by the Securities and Exchange Commission (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

<PAGE>

transactions by transmitting orders for execution.

In selecting brokers or dealers to execute portfolio transactions on
behalf of the Portfolio, 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, the financial condition and
execution capability of the broker or dealer and the reasonableness of the
commission, if any, 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, but not research, services (as those terms are defined
in Section 28(e) of the Securities Exchange Act of 1934, as amended) provided to
the Portfolio and/or the other accounts over which Bankers Trust or its
affiliates exercise investment discretion. Bankers Trust's fees under its
agreement with the Portfolio are not reduced by reason of its receiving
brokerage services.

NET ASSET VALUE

The Prospectus discusses the time at which the net asset values of the
Fund is determined for purposes of sales and redemptions. The net asset value of
the Fund's investment in the Portfolio is equal to the Fund's pro rata share of
the total investment of the Fund and of the other investors in the Portfolio
less the Fund's pro rata share of the Portfolio's liabilities. The following is
a description of the procedures used by the Portfolio in valuing its assets.

The valuation of the Portfolio's securities is based on its 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 periods during which value, as determined by
amortized cost, is higher or lower than the price the Portfolio would receive if
it sold the instrument.

The Portfolio's use of the amortized cost method of valuing its
securities is permitted by a rule adopted by the SEC. Under this rule, the
Portfolio must maintain a dollar-weighted average portfolio maturity of 90 days
or less, purchase only instruments having remaining maturities of 397 days or
less and invest only in securities determined by or under the supervision of the
Board of Trustees to be of high quality with minimal credit risks.

Pursuant to the rule, the Board of Trustees of the Portfolio
also has established procedures designed to allow investors in

<PAGE>

the Portfolio, such as the Trust, to stabilize, 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 Portfolio's
holdings by the Portfolio's Board of Trustees, at such intervals as it deems
appropriate, to determine whether the value of the Portfolio'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 Portfolio's assets based on available market quotations or market
equivalents and such valuation based on amortized cost must be examined by the
Portfolio's Board of Trustees. In the event the Portfolio'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
Portfolio's Board of Trustees must cause the Portfolio to take such corrective
action as such 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 Portfolio'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 on the NYSE
is restricted by applicable rules and regulations of the SEC; (b) the NYSE is
closed for other 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 Distribution Agreement, Signature acts as
distributor on a "best efforts" basis to solicit orders for the sale of shares
of the Fund and will undertake such advertising and promotion as it believes
reasonable in connection with soliciting orders. In addition to Signature's
duties as distributor, Signature may, in its discretion, perform additional
functions in connection with transactions in the shares of the Fund. Pursuant to
the terms of the Trust's distribution plan pursuant to Rule 12b-1 under the 1940
Act (the "Plan"), Signature may seek reimbursement in an amount not exceeding
0.20% of the Trust's net assets annually for expenses incurred in connection
with any activities primarily intended to result in the sale of the Fund's
shares, which are described in the Prospectus.

The Plan provides that it will continue in effect from year to year only
if its continuance is approved annually by the Trust's Board of Trustees,
including a majority of the Trustees who are not interested persons of the Trust
and who have no direct or indirect financial interest in the operation of the

<PAGE>

Plan or any agreements related thereto (the "Qualified Trustees"). The Plan may
not be amended to increase materially the amount to be spent for the services
provided by Signature without shareholder approval and all material amendments
of the Plan must also be approved by the Trustees in the manner described above.
The Plan may be terminated with respect to the Fund at any time by majority vote
of the Qualified Trustees or a majority of the shares of the Fund outstanding.
Pursuant to the Plan, Signature will provide to the Board of Trustees periodic
reports of any amounts expended under the Plan and the purpose for which
expenditures were made.

Signature did not seek reimbursement under the Plan during the Trust's
year ended December 31, 1995.

MANAGEMENT OF THE TRUST AND PORTFOLIO

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

The Trustees and officers of the Trust and their principal occupations
during the past five years are set forth below. Their titles may have varied
during that period. Asterisks indicate those Trustees who are "interested
persons" (as defined in the 1940 Act) of the Trust. Unless otherwise indicated,
the address of each Trustee and officer is 6 St. James Avenue, Boston,
Massachusetts 02116.

TRUSTEES OF THE TRUST

KELVIN J. LANCASTER (age 71) -- Trustee; Professor, Department of
Economics, Columbia University. His address is 35 Claremont Avenue, New York,
New York 10027.

HARRY VAN BENSCHOTEN (age 68) -- Trustee; Director, Canada Life
Insurance Company of New York; Director, Competitive Technologies, Inc., a
public company listed on the American Stock Exchange; retired (since 1987);
Corporate Vice President, Newmont Mining Corporation (prior to 1987). His
address is 6581 Ridgewood Drive, Naples, Florida 33963.

MARTIN J. GRUBER (age 58) -- Trustee; Chairman of the Finance
Department and Nomura Professor of Finance, Leonard N. Stern School of Business,
New York University (since 1964). His address is 229 S. Irving Street,
Ridgewood, New Jersey 07450.

PHILIP W. COOLIDGE* (age 44) -- President and Trustee;

Chairman, Chief Executive Officer and President, Signature Financial Group,
Inc. ("SFG") (since December, 1988) and

<PAGE>

Signature (since April, 1989).

TRUSTEES OF THE PORTFOLIO

PHILIP SAUNDERS, JR. (age 60) -- Trustee; Principal, Philip Saunders
Associates (Consulting); former Director of Financial Industry Consulting, Wolf
& Company; President, John Hancock Home Mortgage Corporation; and Senior Vice
President of Treasury and Financial Services, John Hancock Mutual Life Insurance
Company, Inc. His address is 445 Glen Road, Weston, Massachusetts 02193.

CHARLES P. BIGGAR (age 65) -- Trustee; Retired; Director of Chase/NBW
Bank Advisory Board; Director, Batemen, Eichler, Hill Richards Inc.; formerly
Vice President of International Business Machines and President of the National
Services and the Field Engineering Divisions of IBM. His address is 12 Hitching
Post

Lane, Chappaqua, New York 10514.

S. LELAND DILL (age 65) -- Trustee; Retired; Director, Coutts & Co.
Group, Coutts & Co. (U.S.A.) International; Director, Zweig Series Trust;
formerly Partner of KPMG Peat Marwick; Director, Vinters International Company
Inc.; General Partner of Pemco (an investment company registered under the 1940
Act). His address is 5070 North Ocean Drive, Singer Island, Florida 33404.

PHILIP W. COOLIDGE* (age 44) -- President and Trustee; Chairman, Chief
Executive Officer and President, SFG (since December, 1988) and Signature (since
April, 1989).

OFFICERS OF THE TRUST AND THE PORTFOLIO

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

DAVID G. DANIELSON (age 30) -- Assistant Treasurer; Assistant Manager,
SFG (since May, 1991); Graduate Student, Northeastern University (from April,
1990 to March, 1991); Tax Accountant & Systems Analyst, Putnam Companies (prior
to March, 1990).

JOHN R. ELDER (age 47) -- Treasurer; Vice President, SFG (since April
1995); Treasurer, Phoenix Family of Mutual Funds (prior to April 1995).

BARBARA M. O'DETTE (age 36) -- Assistant Treasurer;

<PAGE>

Assistant Treasurer, SFG (since December, 1988); Assistant Treasurer, Signature
(since April, 1989).

DANIEL E. SHEA (age 33) -- Assistant Treasurer; Assistant Manager, SFG
(since November 1993); Supervisor and Senior Technical Advisor, Putnam
Investments (prior to November 1993).

LINDA T. GIBSON (age 30) -- Assistant Secretary; Vice President, Global
Product Management, and Assistant Secretary, SFG (since May, 1992); Assistant
Secretary, Signature (since October, 1992); student, Boston University School of
Law (September, 1989 to May, 1992) .

THOMAS M. LENZ (age 37) -- Secretary; Senior Vice President and
Associate General Counsel, SFG (since November, 1989); Assistant Secretary,
Signature (since February, 1991); Attorney, Ropes & Gray (prior to November,
1989).

MOLLY S. MUGLER (age 44) -- Assistant Secretary; Legal Counsel and
Assistant Secretary, SFG (since December, 1988); Assistant Secretary, Signature
(since April, 1989).

ANDRES E. SALDANA (age 33) -- Assistant Secretary; Legal Counsel, SFG
(since November, 1992); Assistant Secretary, Signature (since September, 1993);
Attorney, Ropes & Gray (September, 1990 to November, 1992) .

Messrs. Coolidge, Danielson, Elder, Lenz, Saldana and Shea and Mss.
Gibson, Mugler and O'Dette also hold similar positions for other investment
companies for which Signature or an affiliate serves as the principal
underwriter.

No person who is an officer or director of Bankers Trust is an officer
or Trustee of the Trust or the Portfolio. No director, officer or employee of
Signature or any of its affiliates will receive any compensation from the Trust
or the Portfolio for serving as an officer or Trustee of the Trust or the
Portfolio. The Trust pays each Trustee who is not a director, officer or
employee of the Adviser, the Distributor, the Administrator or any of their
affiliates an annual fee of $10,000, respectively, per annum plus $1,250,
respectively, per meeting attended and reimburses them for travel and
out-of-pocket expenses. The Portfolio and Treasury Money, Tax Free Money, NY Tax
Free Money, International Equity, Utility, Equity 500 Index, Short/Intermediate
U.S. Government Securities, Intermediate Tax Free, Capital Appreciation, Asset
Management and BT Investment Portfolios (together with the Trust, the "Fund
Complex") collectively pay each Trustee who is not a director, officer or
employee of the Adviser, the Distributor, the Administrator or any of their
affiliates an annual fee of $10,000, respectively, per annum plus $1,250,
respectively, per meeting attended and reimburses them for travel and
out-of-pocket expenses.

<PAGE>

For the year ended December 31, 1995, the Fund incurred Trustees fees
equal to $6,559 and the Portfolio incurred Trustees fees equal to $1,868.

The following table reflects fees paid to the Trustees of the Trust and
Portfolio for the year ended December 31, 1995 .

TRUSTEE COMPENSATION TABLE

AGGREGATE TOTAL COMPENSATION
NAME OF PERSON COMPENSATION FROM FUND COMPLEX
POSITION FROM TRUST PAID TO TRUSTEES

Harry Van Benschoten, $12,500 $12,500

Trustee of Trust

Martin J. Gruber, $12,500 $12,500

Trustee of Trust

Charles P. Biggar, none $12,500

Trustee of Portfolio

S. Leland Dill, none $12,500

Trustee of Portfolio

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

As of March 31, 1996, the Trustees and officers of the Trust and the
Portfolio owned in the aggregate less than 1% of the shares of the Fund or of
the Trust (all series taken together). As of March 31, 1996, Bankers Trust on

<PAGE>

behalf of its customers was the record owner of 12.76% of the
Outstanding shares of the Fund. As of the same date, Iroquois Gas Transmission,
One Corporate Drive, Shelton, Connecticut was the beneficial owner of 5.19% of
the outstanding shares of the Fund. Shareholders owning 25% or more of the
outstanding shares of a Fund may diminish the voting power of other shareholders
proportionately.

INVESTMENT ADVISER

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

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

For the Portfolio's years ended December 31, 1995, 1994 and 1993,
Bankers Trust earned $3,847,729, $3,807,085 and $2,687,216 , respectively, as
compensation for investment advisory services provided to the Portfolio. During
the same periods, Bankers Trust reimbursed $578,251, $537,651 and $54,176 ,
respectively, to the

Portfolio to cover expenses.

Bankers Trust may have deposit, loan and other commercial banking
relationships with the issuers of obligations which may

<PAGE>

be purchased on behalf of the Portfolio, including outstanding loans to
such issuers which could be repaid in whole or in part with the proceeds of
securities so purchased. Such 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 Portfolio that, in making
its investment decisions, it does not obtain or use material inside information
in its possession or in the possession of any of its affiliates. In making
investment recommendations for the Portfolio, Bankers Trust will not inquire or
take into consideration whether an issuer of securities proposed for purchase or
sale by the Portfolio is a customer of Bankers Trust, its parent or its
subsidiaries or affiliates and, in dealing with its customers, Bankers Trust,
its parent, subsidiaries, and affiliates will not inquire or take into
consideration whether securities of such customers are held by any fund managed
by Bankers Trust or any such affiliate.

ADMINISTRATOR

Under the administration and services agreements, Bankers Trust is
obligated on a continuous basis to provide such administrative services as the
respective Board of Trustees of the Trust and the Portfolio reasonably deems
necessary for the proper administration of the Trust and the Portfolio. Bankers
Trust will generally assist in all aspects of the Fund's and Portfolio'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 recordkeeping services (including without
limitation the maintenance of such books and records as are required under the
1940 Act and the rules thereunder, except as maintained by other agents of the
Trust or the Portfolio), 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; supply supporting documentation for meetings of the Board of
Trustees; provide monitoring reports and assistance regarding compliance with
the Trust's and the Portfolio's Declaration of Trust, by-laws, investment
objectives and policies and with Federal and state securities laws; arrange for
appropriate insurance coverage; calculate the net asset value, net income and
realized capital gains or losses of the Trust; and negotiate arrangements with,
and supervise and coordinate the activities of, agents and others retained to
supply services.

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

<PAGE>

by Signature and Bankers Trust. All such compensation will be paid by Bankers
Trust.

Bankers Trust has agreed that if in any year the aggregate expenses of
the Fund and the Portfolio (including fees pursuant to the Advisory Agreement,
but excluding interest, taxes, brokerage and, if permitted by the relevant state
securities commissions, extraordinary expenses) exceed the expense limitation of
any state having jurisdiction over the Fund, Bankers Trust will reimburse the
Fund for the excess expense to the extent required by state law. As of the date
of this Statement of Additional Information, the most restrictive annual expense
limitation applicable to the Fund is 2.5% of the Fund's first $30 million of
average annual net assets, 2.0% of the next $70 million of average annual net
assets and 1.5% of the remaining average annual net assets.

For the years ended December 31, 1995, 1994 and 1993, Bankers Trust
earned $2,418,113, $2,104,780 and $4,253 for administrative and other services
provided to the Fund. During the same periods, Bankers Trust reimbursed
$1,110,205, $1,309,180 and $41,172 , respectively, to the Fund to cover
expenses. For the years ended December 31, 1995, 1994 and 1993 , Bankers Trust
earned $1,282,576, $1,269,028 and $895,738 , respectively, as compensation for

administrative and other services provided to the Portfolio.

CUSTODIAN AND TRANSFER AGENT

Bankers Trust, 280 Park Avenue, New York, New York 10017, serves as
custodian and transfer agent for the Trust and as custodian for the Portfolio
pursuant to the administration and services agreements discussed above. As
custodian, Bankers Trust holds the Fund's and the Portfolio's assets. For such
services, Bankers Trust receives monthly fees from the Fund and the Portfolio,
which are included in the administrative services fees discussed above. As
transfer agent for the Trust, Bankers Trust 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. Bankers Trust is also reimbursed by the Fund for its out-of-pocket
expenses. The Trust and Bankers Trust will comply with the self-custodian
provisions of Rule 17f-2 under the 1940 Act.

USE OF NAME

The Trust and Bankers Trust have agreed that the Trust may use "BT" as
part of its name for so long as Bankers Trust serves as investment adviser. The
Trust has acknowledged that the term "BT" is used by and is a property right of
certain subsidiaries

<PAGE>

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 Portfolio contemplated by the
Advisory Agreement and the other activities for the Trust and the Portfolio
described in the Prospectus and this Statement of Additional Information without
violation of the Glass-Steagall Act or other applicable banking laws or
regulations. However, counsel has pointed out that future changes in either
Federal or state statutes and regulations concerning the permissible activities
of banks or trust companies, as well as future judicial or administrative
decisions or interpretations of present and future statutes and regulations,
might prevent Bankers Trust from continuing to perform those services for the
Trust or the Portfolio. 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, One Citicorp Center, 153 East 53rd Street,
New York, New York 10022-4669, serves as Counsel to the Trust and from time to
time provides certain legal services to Bankers Trust. Coopers & Lybrand L.L.P.,
1100 Main Street, Suite 900, Kansas City, Missouri 64105, has been selected as
Independent Accountants for the Trust.

ORGANIZATION OF THE TRUST

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

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

<PAGE>

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 the Trust itself
would be unable to meet its obligations, a possibility that the Trust believes
is remote. Upon payment of any liability incurred by the Trust, the shareholder
paying the liability will be entitled to reimbursement from the general assets
of the Trust. The Trustees intend to conduct the operations of the Trust in a
manner so as to avoid, as far as possible, ultimate liability of the
shareholders for liabilities of the Trust.

The Trust was organized on February 28, 1992.

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.

As described above and in the Fund's Prospectus, the Fund is designed
to provide investors with current income. The Fund is not intended to constitute
a balanced investment program and is not designed for investors seeking capital
gains or maximum income irrespective of fluctuations in principal.

The Fund intends to 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 its taxable net investment income and its 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 it is
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 as described in the Fund's
Prospectus. Such distributions ("capital gain dividends"), if any, will be
taxable to shareholders as long-term capital gains, regardless of how long a
shareholder has held Fund shares, and will be designated as capital gain
dividends in a written notice mailed by the Fund to shareholders after the close
of the Fund's prior taxable year.

<PAGE>

If a shareholder fails to furnish a correct taxpayer identification
number, fails to report fully dividend or interest income or fails to certify
that he or she has provided a correct taxpayer identification number and that he
or she is not subject to "backup withholding," then the shareholder may be
subject to a 31% backup withholding tax with respect to (i) any taxable
dividends and distributions and (ii) the proceeds of any redemptions of Fund
shares. An individual's taxpayer identification number is his or her social
security number. The 31% backup withholding tax is not an additional tax and may
be credited against a taxpayer's regular Federal income tax liability.

PERFORMANCE INFORMATION

From time to time the Fund may quote its performance in terms of
"current yield" and "effective yield" in reports or other communications to
shareholders or in advertising material.

The effective yield 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

For the seven day period ended December 31, 1995, the current and
effective yields of the Fund were 5.43% and 5.57%, respectively.

<PAGE>

FINANCIAL STATEMENTS

The following financial statements for the Fund or Portfolio are
incorporated herein by reference from its annual report dated

December 31, 1995, a copy of which is attached hereto:

FOR BT INVESTMENT MONEY MARKET FUND:

Statement of Assets and Liabilities, December 31, 1995 Statement of
Operations for the year ended December 31, 1995 Statements of Changes in Net
Assets for the years ended December 31, 1995 and 1994 Financial Highlights:
Supplemental data for each of the periods presented Notes to Financial
Statements Report of Independent Accountants

<PAGE>
FOR CASH MANAGEMENT PORTFOLIO:

Statement of Assets and Liabilities, December 31, 1995

Statement of Operations for the year ended December 31, 1995

Statements of Changes in Net Assets for the years ended December 31,
1995 and 1994
Financial Highlights: Selected ratios and supplemental data for
each of the periods presented
Schedule of Portfolio Investments, December 31, 1995

Notes to Financial Statements
Report of Independent Accountants

<PAGE>

APPENDIX
DESCRIPTION OF RATINGS

DESCRIPTION OF S&P CORPORATE BOND RATINGS:

AAA - Bonds rated AAA have the highest rating assigned by S&P to a debt
obligation. Capacity to pay interest and repay principal is extremely strong.

AA - Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small degree.

S&P's letter ratings may be modified by the addition of a plus or a
minus sign, which is used to show relative standing

A-1

<PAGE>

within the major categories, except in the AAA rating category.

DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS:

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

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

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

DESCRIPTION OF FITCH INVESTORS SERVICE'S CORPORATE BOND RATINGS:

AAA--Securities of this rating are regarded as strictly high-grade,
broasdly marketable, suitable for investment by trustees and fiduciary
institutions, and liable to but slight market fluctuation other than through
changes in the money rate. The factor last named is of importance varying with
the length of maturity. Such securities are mainly senior issues of strong
companies, and are most numerous in the railway and public utility fields,
though some industrial obligations have this rating. The prime feature of an AAA
rating is showing of earnings several times or many times interest requirements
with such stability of applicable earnings that safety is beyond reasonable
question whatever changes occur in conditions. Other features may enter in, such
as a wide margin of protection through collateral security or direct lien on
specific property as in the case of high class equipment certificates or bonds
that are first mortgages on valuable real estate. Sinking funds or voluntary
reduction of the debt by call or purchase are often factors, while guarantee or
assumption by parties other than the original debtor may also influence the
rating.

A-2

<PAGE>

AA--Securities in this group are of safety virtually beyond question,
and as a class are readily salable while many are highly active. Their merits
are not greatly unlike those of the AAA class, but a security so rated may be of
junior though strong lien - in many cases directly following an AAA security -
or the margin of safety is less strikingly broad. The issue may be the
obligation of a small company, strongly secured but influenced as to ratings by
the lesser financial power of the enterprise and more local type of market.

DESCRIPTION OF DUFF & PHELPS' CORPORATE BOND RATINGS:

AAA--Highest credit quality. The risk factors are negligible, being
only slightly more than for risk-free U.S. Treasury Funds.

AA+ AA, AA--High credit quality. Protection factors are strong. Risk is
modest but may vary slightly from time to time because of economic conditions.

DESCRIPTION OF MOODY'S COMMERCIAL PAPER RATINGS:

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

DESCRIPTION OF FITCH INVESTORS SERVICE'S COMMERCIAL PAPER RATINGS:

F-1+--Exceptionally Strong Credit Quality. Issues assigned this rating
are regarded as having the strongest degree of asssurance for timely payment.

F-1--Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than the strongest
issue.

DESCRIPTION OF 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.

A-3

<PAGE>

DESCRIPTION OF IBCA'S LONG-TERM RATINGS:

AAA--Obligations for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal

A-4

<PAGE>

and interest is substantial. Adverse changes in business, economic or
financial conditions are unlikely to increase investment risk significantly.

AA--Obligations for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial.
Adverse changes in business economic or financial conditions may increase
investment risk albeit not very significantly.

A--Obligations for which there is a low expectation of investment risk.
Capacity for timely repayment of principal and interest is strong, although
adverse changes in business, economic or financial conditions may lead to
increased investment risk.

BBB--Capacity for timely repayment of principal and interest is
adequate, although adverse changes in business, economic or financial conditions
are more likely to lead to increased investment risk than for obligations in
higher categories.

BB--Obligations for which there is a possibility of investment risk
developing. Capacity for timely repayment of principal and interest exists, but
is susceptible over time to adverse changes in business, economic or financial
conditions.

B--Obligations for which investment risk exists. Timely repayment of
principal and interest is not sufficiently protected against adverse changes in
business, economic or financial conditions.

CCC--Obligations for which there is a current perceived possibility of
default. Timely repayment of principal and interest is dependent on favourable
business, economic or financial conditions.

CC--Obligations which are highly speculative or which have a high risk
of default.

C--Obligations which are currently in default.

Notes: "+" or "-" may be appended to a rating to denote relative status
within major rating categories.

Ratings of BB and below are assigned where it is considered that
speculative characteristics are present.

DESCRIPTION OF IBCA'S SHORT-TERM RATINGS:

A1+--Obligations supported by the highest capacity for timely
repayment.

A1--Obligations supported by a strong capacity for timely repayment.

A-5

<PAGE>

A2--Obligations supported by a satisfactory capacity for timely
repayment, although such capacity may be susceptible to adverse changes in
business, economic or financial conditions.

A3--Obligations supported by an adequate capacity for timely repayment.
Such capacity is more susceptible to adverse changes in business, economic or
financial conditions than for obligations in higher categories.

B--Obligations for which the capacity for timely repayment is
susceptible to adverse changes in business, economic or financial conditions.

C--Obligations for which there is an inadequate capacity to ensure
timely repayment.

D--Obligations which have a high risk of default or which are currently
in default.

DESCRIPTION OF THOMSON BANK WATCH SHORT-TERM RATINGS:

TBW-1--The highest category; indicates a very high likelihood that
principal and interest will be paid on a timely basis.

TBW-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".

TBW-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.

TBW-4--The lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.

DESCRIPTION OF THOMSON BANKWATCH LONG-TERM RATINGS:

AAA--The highest category; indicates that the ability to repay
principal and interest on a timely basis is extremely high.

AA--The second-highest category; indicates a very strong ability to
repay principal and interest on a timely basis, with limited incremental risk
compared to issues rated in the highest category.

A--The third-highest category; indicates the ability to repay principal
and interest is strong. Issues rated "a" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.

A-6

<PAGE>

BBB--The lowest investment-grade category; indicates an acceptable
capacity to repay principal and interest. Issues rated "BBB" are, however, more
vulnerable to adverse developments (both internal and external) than obligations
with higher ratings.

NON-INVESTMENT GRADE (ISSUES REGARDED AS HAVING SPECULATIVE
CHARACTERISTICS IN THE LIKELIHOOD OF TIMELY REPAYMENT OF PRINCIPAL AND
INTEREST.)

BB--While not investment grade, the "BB" rating suggests that the
likelihood of default is considerably less than for lower-rated issues. However,
there are significant uncertainties that could affect the ability to adequately
service debt obligations.

B--Issues rated "B" show a higher degree of uncertainty and therefore
greater likelihood of default than higher-rated issues. Adverse development
could well negatively affect the payment of interest and principal on a timely
basis.

CCC--Issues rated "CCC" clearly have a high likelihood of default, with
little capacity to address further adverse changes in financial circumstances.

CC--"CC" is applied to issues that are subordinate to other obligations
rated "CCC" and are afforded less protection in the event of bankruptcy or
reorganization.

D--Default These long-term debt ratings can also be applied to local
currency debt. In such cases the ratings defined above will be preceded by the
designation "local currency".

RATINGS IN THE LONG-TERM DEBT CATEGORIES MAY INCLUDE A PLUS (+) OR
MINUS (-) DESIGNATION, WHICH INDICATES WHERE WITHIN THE RESPECTIVE CATEGORY THE
ISSUE IS PLACED.

A-7

<PAGE>

CONTENTS

Investment Objectives and Policies...................................... 2
Net Asset Value......................................................... 10
Purchase and Redemption Information..................................... 11
Management of the Trust and Portfolio................................... 12
Organizations to the Trust.............................................. 18

Taxes................................................................... 18

Performance
Information............................................................. 19
Financial Statements.................................................... 21

Appendix: Description of Ratings........................................ A-1

INVESTMENT ADVISER OF THE PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY
--------------------

DISTRIBUTOR
SIGNATURE BROKER-DEALER SERVICES, INC.

CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY

INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.

COUNSEL
WILLKIE FARR & GALLAGHER

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

No person has been authorized to give any information or to make any
representations other than those contained in the Prospectus, this Statement of
Additional Information or the Trust's official sales literature with respect to
the Fund in connection with the offering of the shares of the Fund and, if given
or made, such other information or representations must note relied on as having
been authorized by the Trust. This Prospectus does not constitute an offer in
any state in which, or to any person to whom, such offer may not lawfully be
made.

<PAGE>

STATEMENT OF
ADDITIONAL INFORMATION

JANUARY 16, 1996, AS AMENDED APRIL 29, 1996

BT ADVISOR FUNDS -- ADVISORS CLASS SHARES

U.S. BOND INDEX FUND
EQUITY 500 EQUAL WEIGHTED INDEX FUND
SMALL CAP INDEX FUND
EAFE(R) EQUITY INDEX FUND
BT INVESTMENT EQUITY 500 INDEX FUND

BT Advisor Funds (the "Trust") is comprised of ten funds. The funds
listed above (with the exception of BT Investment Equity 500 Index Fund) (each,
a "Fund") are each a series of the Trust and offers two classes of shares (each
a "Class" and collectively the "Classes"). This Statement of Additional
Information describes the Advisor Class Shares. BT Investment Equity 500 Index
Fund (the "Equity 500 Index Fund") is a series of BT Pyramid Mutual Funds (the
"Pyramid Trust") (together with the Trust, the "Trusts").

As described in the Prospectus, the Trusts seek to achieve the
investment objectives of each Fund by investing all the investable assets
("Assets") of the Fund in a diversified open-end management investment company
(or a series thereof) having the same investment objectives as such Fund. These
investment companies are, respectively, Equity 500 Index Portfolio and BT
Investment Portfolios. U.S. Bond Index Portfolio, Equity 500 Equal Weighted
Index Portfolio, Small Cap Index Portfolio and EAFE(R) Equity Index Portfolio
are each a

<PAGE>

series of BT Investment Portfolios.

Since the investment characteristics of the Funds will correspond
directly to those of the respective Portfolio in which the Fund invests all of
its Assets, the following is a discussion of the various investments of and
techniques employed by the Portfolios.

Shares of the Funds are sold by Signature Broker-Dealer Services, Inc.
("Signature"), the Trusts' Distributor, to clients and customers (including
affiliates and correspondents) of Bankers Trust Company ("Bankers Trust"), the
Portfolios' Adviser, and to clients and customers of other organizations.

The Trusts' Prospectus for the Funds is dated January 16, 1996, as
amended April 29, 1996. The Prospectus provides the basic information investors
should know before investing and may be obtained without charge by calling the
Trust at the telephone number listed below or by contacting your Investment
Professional. This Statement of Additional Information, which is not a
Prospectus, is intended to provide additional information regarding the
activities and operations of the Trusts and should be read in conjunction with
the Funds' Prospectus. This Statement of Additional Information is not an offer
of any Fund for which an investor has not received a Prospectus. Capitalized
terms not otherwise defined in this Statement of Additional Information have the
meanings accorded to them in the Fund's Prospectus.

<PAGE>

BANKERS TRUST COMPANY
INVESTMENT ADVISER OF EACH PORTFOLIO AND ADMINISTRATOR
SIGNATURE BROKER-DEALER SERVICES, INC.
DISTRIBUTOR

6 St. James Avenue Boston, Massachusetts 02116 (800) 730-1313

<PAGE>

RISK FACTORS AND CERTAIN SECURITIES AND INVESTMENT PRACTICES

INVESTMENT OBJECTIVES

The investment objective(s) of each Fund is described in that Fund's
Prospectus. There can, of course, be no assurance that any Fund will achieve its
investment objective(s).

INVESTMENT PRACTICES

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

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

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

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

For a description of commercial paper ratings, see Appendix A to this
Statement of Additional Information.

<PAGE>

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

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

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

The Adviser will monitor the liquidity of Rule 144A securities in each
Portfolio's portfolio under the supervision of the Portfolio's Board of
Trustees. In reaching liquidity decisions, the Adviser will consider, among
other things, the following factors: (i) the frequency of trades and quotes for
the security; (ii) the number of dealers and other potential

<PAGE>

purchasers wishing to purchase or sell the security; (iii) dealer undertakings
to make a market in the security and (iv) the nature of the security and of the
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers and the mechanics of the transfer).

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

SHORT-TERM INSTRUMENTS. When a Portfolio experiences large cash inflows
through the sale of securities and desirable equity securities, that are
consistent with the Portfolio's investment objective, which are unavailable in
sufficient quantities or at attractive prices, the Portfolio may hold short-term
investments for a limited time pending availability of such equity securities.
Short-term instruments consist of foreign and domestic: (i) short-term
obligations of sovereign governments, their agencies, instrumentalities,
authorities or political subdivisions; (ii) other short-term debt securities
rated AA or higher by S&P or Aa or higher by Moody's or, if unrated, of
comparable quality in the opinion of Bankers Trust; (iii) commercial paper; (iv)
bank obligations, including negotiable certificates of deposit, time deposits
and banker's acceptances; and (v) repurchase agreements. At the time the
Portfolio invests in commercial paper, bank obligations or repurchase
agreements, the issuer of the issuer's parent must have outstanding debt rated
AA or higher by S&P or Aa or higher by Moody's or outstanding commercial paper
or bank obligations rated A-1 by S&P

<PAGE>

or Prime-1 by Moody's; or, if no such ratings are available, the instrument must
be of comparable quality in the opinion of Bankers Trust. These instruments may
be denominated in U.S dollars or in foreign currencies.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. Each Portfolio may
purchase securities on a when-issued or delayed delivery basis. For example,
delivery of and payment for these securities can take place a month or more
after the date of the purchase commitment. The purchase price and the interest
rate payable, if any, on the securities are fixed on the purchase commitment
date or at the time the settlement date is fixed. The value of such securities
is subject to market fluctuation and no interest accrues to a Portfolio until
settlement takes place. At the time a Portfolio makes the commitment to purchase
securities on a when-issued or delayed delivery basis, it will record the
transaction, reflect the value each day of such securities in determining its
net asset value and, if applicable, calculate the maturity for the purposes of
average maturity from that date. At the time of settlement a when-issued
security may be valued at less than the purchase price. To facilitate such
acquisitions, each Portfolio will maintain with the Custodian a segregated
account with liquid assets, consisting of cash, U.S. Government securities or
other appropriate securities, in an amount at least equal to such commitments.
On delivery dates for such transactions, each Portfolio will meet its
obligations from maturities or sales of the securities held in the segregated
account and/or from cash flow. If a Portfolio chooses to dispose of the right to
acquire a when-issued security prior to its acquisition, it could, as with the
disposition of any other portfolio obligation, incur a gain or loss due to
market fluctuation. It is the current policy of each Portfolio not to enter into
when-issued commitments exceeding in the aggregate 15% of the market value of
the Portfolio's total assets, less liabilities other than the obligations
created by when-issued commitments.

ADDITIONAL U.S. GOVERNMENT OBLIGATIONS. Each Portfolio may invest in
obligations issued or guaranteed by U.S. Government agencies or
instrumentalities. These obligations may or may not be backed by the "full faith
and credit" of the United States. In the case of securities not backed by the
full faith and credit of the United States, each Portfolio must look principally
to the federal agency issuing or guaranteeing the obligation for ultimate
repayment, and may not be able to assert a claim against the United States
itself in the event the agency or instrumentality does not meet its commitments.
Securities in which each Portfolio may invest that are not backed by the full
faith and credit of the United States include, but are not limited to,
obligations of the Tennessee Valley Authority, the Federal Home Loan Mortgage
Corporation and the U.S. Postal Service, each of which has the right to borrow
from the U.S. Treasury to meet its obligations, and obligations of the Federal
Farm Credit System and the Federal Home Loan Banks, both of whose

<PAGE>

obligations may be satisfied only by the individual credits of each issuing
agency. Securities which are backed by the full faith and credit of the United
States include obligations of the Government National Mortgage Association, the
Farmers Home
Administration, and the Export-Import Bank.

EQUITY INVESTMENTS. With the exception of the U.S. Bond Index
Portfolio, each Portfolio may invest in equity securities listed on any domestic
or foreign securities exchange or traded in the over-the-counter market as well
as certain restricted or unlisted securities. They may or may not pay dividends
or carry voting rights. Common stock occupies the most junior position in a
company's capital structure.

SWAP AGREEMENTS. Swap agreements are contracts entered into by two
parties, primarily institutional investors, for periods ranging from a few weeks
to more than one year. In a standard swap transaction, two parties agree to
exchange the returns (or differentials in rates of return) earned or realized on
particular predetermined investments or instruments. The gross returns to be
exchanged or swapped between the parties are calculated with respect to a
notional amount, I.E., the return on or increase in value of a particular dollar
amount invested at a particular interest rate, in a particular foreign currency,
or in a basket of securities representing a particular index. The notional
amount of the swap agreement is only a fictive basis on which to calculate the
obligations which the parties to a swap agreement have agreed to exchange. A
Portfolio's obligations (or rights) under a swap agreement will generally be
equal only to the net amount to be paid or received under the agreement based on
the relative values of the positions held by each party to the agreement (the
"net amount"). A Portfolio's obligations under a swap agreement will be accrued
daily (offset against any amounts owing to the Portfolio) and any accrued but
unpaid net amounts owed to a swap counterparty will be covered by the
maintenance of a segregated account consisting of cash, U.S. Government
securities, or high grade debt obligations, to avoid any potential leveraging of
the Portfolio's portfolio.

The use of swap agreements will be successful in furthering its
investment objective will depend on the Adviser's ability to correctly predict
whether certain types of investments are likely to produce greater returns than
other investments. Swap agreements may be considered to be illiquid because they
are two party contracts and because they may have terms of greater than seven
days. Moreover, a Portfolio bears the risk of loss of the amount expected to be
received under a swap agreement in the event of the default or bankruptcy of a
swap agreement counterparty. A Portfolio will enter into swap agreements only
with counterparties that would be eligible for consideration as repurchase
agreement counterparties under the Portfolio's repurchase agreement guidelines.
Certain restrictions imposed on the Portfolios by the Internal Revenue Code may
limit the Portfolios' ability to use swap agreements. The swaps market is

<PAGE>

a relatively new market and is largely unregulated. It is possible that
developments in the swaps market, including potential government regulation,
could adversely affect a Portfolio's ability to terminate existing swap
agreements or to realize amounts to be received under such agreements.

Certain swap agreements are exempt from most provisions of the
Commodity Exchange Act (the "CEA") and, therefore, are not regulated as futures
or commodity option transactions under the CEA, pursuant to regulations approved
by the Commodity Futures Trading Commission (the "CFTC") effective February 22,
1993. To qualify for this exemption, a swap agreement must be entered into by
eligible participants, which includes the following, provided the participant's
total assets exceed established levels: a bank or trust company, savings
association or credit union, insurance company, investment company subject to
regulation under the Investment Company Act of 1940, as amended (the "1940
Act"), commodity pool, corporation, partnership, proprietorship, organization,
trust or other entity, employee benefit plan, governmental entity,
broker-dealer, futures commission merchant, natural person, or regulated foreign
person. To be eligible, natural persons and most other entities must have total
assets exceeding $10 million; commodity pools and employee benefit plans must
have asset exceeding $5 million. In addition, an eligible swap transaction must
meet three conditions. First, the swap agreement may not be part of a fungible
class of agreements that are standardized as to their material economic terms.
Second, the creditworthiness of parties with actual or potential obligations
under the swap agreement must be a material consideration in entering into or
determining the terms of the swap agreement, including pricing, cost or credit
enhancement terms. Third, swap agreements may not be entered into and traded on
or through a multilateral transaction execution facility.

This exemption is not exclusive, and participants may continue to rely
on existing exclusions for swaps, such as the Policy Statement issued in July
1989 which recognized a "safe harbor" for swap transactions from regulation as
futures or commodity option transactions under the CEA or its regulations. The
Policy Statement applies to swap transactions settled in cash that: (i) have
individually tailored terms; (ii) lack exchange style offset and the use of a
clearing organization or margin system; (iii) are undertaken in conjunction with
a line of business; and (iv) are not marketed to the public.

REVERSE REPURCHASE AGREEMENTS. The Portfolios 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 a Portfolio enters into a reverse
repurchase agreement it will place in a segregated custodial account cash, U.S.
Government Obligations or high-grade

<PAGE>

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 a Portfolio may decline below the repurchase price of
those securities. Reverse repurchase agreements are considered to be borrowings
by a Portfolio.

WARRANTS. Warrants entitle the holder to buy common stock from the
issuer at a specific price (the strike price) for a specific period of time. The
strike price of warrants sometimes is much lower than the current market price
of the underlying securities, yet warrants are subject to similar price
fluctuations. As a result, warrants may be more volatile investments than the
underlying securities.

Warrants do not entitle the holder to dividends or voting rights with
respect to the underlying securities and do not represent any rights in the
assets of the issuing company. Also, the value of the warrant does not
necessarily change with the value of the underlying securities and a warrant
ceases to have value if it is not exercised prior to the expiration date.

CONVERTIBLE SECURITIES. Convertible securities may be a debt security
or preferred stock which may be converted into common stock or carries the right
to purchase common stock. Convertible securities entitle the holder to exchange
the securities for a specified number of shares of common stock, usually of the
same company, at specified prices within a certain period of time.

The terms of any convertible security determine its ranking in a
company's capital structure. In the case of subordinated convertible debentures,
the holders' claims on assets and earnings are subordinated to the claims of
other creditors, and are senior to the claims of preferred and common
shareholders. In the case of convertible preferred stock, the holders' claims on
assets and earnings are subordinated to the claims of all creditors and are
senior to the claims of common shareholders.

GINNIE MAE CERTIFICATES. Ginnie Mae is a wholly-owned corporate
instrumentality of the United States within the Department of Housing and Urban
Development. The National Housing Act of 1934, as amended (the "Housing Act"),
authorizes Ginnie Mae to guarantee the timely payment of the principal of and
interest on certificates that are based on and backed by a pool of mortgage
loans insured by the Federal Housing Administration under the Housing Act, or
Title V of the Housing Act of 1949 ("FHA Loans"), or guaranteed by the
Department of Veterans Affairs under the Servicemen's Readjustment Act of 1944,
as amended ("VA Loans"), or by pools of other eligible mortgage loans. The
Housing Act provides that the full faith and credit of the U.S. Government is
pledged to the payment of all amounts that may be required to be paid under any
GNMA guaranty. In order to meet its obligations under such guaranty, Ginnie Mae
is

<PAGE>

authorized to borrow from the U.S. Treasury with no limitations
as to amount.

The Ginnie Mae Certificates in which the U.S. Bond Index Portfolio will
invest will represent a pro rata interest in one or more pools of the following
types of mortgage loans: (i) fixed-rate level payment mortgage loans; (ii)
fixed-rate graduated payment mortgage loans; (iii) fixed-rate growing equity
mortgage loans; (iv) fixed-rate mortgage loans secured by manufactured (mobile)
homes; (v) mortgage loans on multifamily residential properties under
construction; (vi) mortgage loans on completed multifamily projects; (vii)
fixed-rate mortgage loans as to which escrowed funds are used to reduce the
borrower's monthly payments during the early years of the mortgage loans
("buydown" mortgage loans); (viii) mortgage loans that provide for adjustments
in payments based on periodic changes in interest rates or in other payment
terms of the mortgage loans; and (ix) mortgage-backed serial notes. All of these
mortgage loans will be FHA Loans or VA Loans and, except as otherwise specified
above, will be fully-amortizing loans secured by first liens on one- to
four-family housing units.

FANNIE MAE CERTIFICATES. Fannie Mae is a federally
chartered and privately owned corporation organized and existing
under the Federal National Mortgage Association Charter Act of
1938. The obligations of FNMA are not backed by the full faith
and credit of the U.S. Government.

Each Fannie Mae Certificate will represent a pro rata interest in one
or more pools of FHA Loans, VA Loans or conventional mortgage loans (I.E.,
mortgage loans that are not insured or guaranteed by any governmental agency) of
the following types: (i) fixed-rate level payment mortgage loans; (ii)
fixed-rate growing equity mortgage loans; (iii) fixed-rate graduated payment
mortgage loans; (iv) variable rate mortgage loans; (v) other adjustable rate
mortgage loans; and (vi) fixed-rate and adjustable mortgage loans secured by
multifamily projects.

FREDDIE MAC CERTIFICATES. Freddie Mac is a corporate instrumentality of
the United States created pursuant to the Emergency Home Finance Act of 1970, as
amended (the "FHLMC Act").
The obligations of Freddie Mac are obligations solely of Freddie Mac and are
not backed by the full faith and credit of the U.S. Government.

Freddie Mac Certificates represent a pro rata interest in a group of
mortgage loans (a "Freddie Mac Certificate group") purchased by Freddie Mac. The
mortgage loans underlying the Freddie Mac Certificates will consist of
fixed-rate or adjustable rate mortgage loans with original terms to maturity of
between ten and thirty years, substantially all of which are secured by first
liens on one-to four-family residential properties or multifamily projects. Each
mortgage loan must meet the

<PAGE>

applicable standards set forth in the FHLMC Act. A Freddie Mac Certificate group
may include whole loans, participating interests in whole loans and undivided
interests in whole loans and participations comprising another Freddie Mac
Certificate group.

ADJUSTABLE RATE MORTGAGES - INTEREST RATE INDICES. Adjustable rate
mortgages in which the U.S. Bond Index Portfolio invests may be adjusted on the
basis of one of several indices. The One Year Treasury Index is the figure
derived from the average weekly quoted yield on U.S. Treasury Securities
adjusted to a constant maturity of one year. The Cost of Funds Index reflects
the monthly weighted average cost of funds of savings and loan associations and
savings banks whose home offices are located in Arizona, California and Nevada
(the "FHLB Eleventh District") that are member institutions of the Federal Home
Loan Bank of San Francisco (the "FHLB of San Francisco"), as computed from
statistics tabulated and published by the FHLB of San Francisco. The FHLB of San
Francisco normally announces the Cost of Funds Index on the last working day of
the month following the month in which the cost of funds was incurred.

A number of factors affect the performance of the Cost of Funds Index
and may cause the Cost of Funds Index to move in a manner different from indices
based upon specific interest rates, such as the One Year Treasury Index. Because
of the various origination dates and maturities of the liabilities of members of
the FHLB Eleventh District upon which the Cost of Funds Index is based, among
other things, at any time the Cost of Funds Index may not reflect the average
prevailing market interest rates on new liabilities of similar maturities. There
can be no assurance that the Cost of Funds Index will necessarily move in the
same direction or at the same rate as prevailing interest rates since as longer
term deposits or borrowings mature and are renewed at market interest rates, the
Cost of Funds Index will rise or fall depending upon the differential between
the prior and the new rates on such deposits and borrowings. In addition,
dislocations in the thrift industry in recent years have caused and may continue
to cause the cost of funds of thrift institutions to change for reasons
unrelated to changes in general interest rate levels. Furthermore, any movement
in the Cost of Funds Index as compared to other indices based upon specific
interest rates may be affected by changes instituted by the FHLB of San
Francisco in the method used to calculate the Cost of Funds Index. To the extent
that the Cost of Funds Index may reflect interest changes on a more delayed
basis than other indices, in a period of rising interest rates, any increase may
produce a higher yield later than would be produced by such other indices, and
in a period of declining interest rates, the Cost of Funds Index may remain
higher than other market interest rates which may result in a higher level of
principal prepayments on mortgage loans which adjust in accordance with the Cost
of Funds Index than mortgage loans which adjust in accordance with other
indices.

<PAGE>

LIBOR, the London interbank offered rate, is the interest rate that the
most creditworthy international banks dealing in U.S. dollar-denominated
deposits and loans charge each other for large dollar-denominated loans. LIBOR
is also usually the base rate for large dollar-denominated loans in the
international market. LIBOR is generally quoted for loans having rate
adjustments at one, three, six or twelve month intervals.

ASSET-BACKED SECURITIES. The asset-backed securities in which the U.S.
Bond Index Portfolio may invest are limited to those which are readily
marketable, dollar-denominated and rated BBB or higher by Standard & Poor's
Corporation ("S&P") or Baa or higher by Moody's Investors Services, Inc.
("Moody's"). Asset-backed securities present certain risks that are not
presented by mortgage-backed securities. Primarily, these securities do not have
the benefit of the same type of security interest in the related collateral.
Credit card receivables are generally unsecured and the debtors are entitled to
the protection of a number of state and federal consumer credit laws, many of
which give such debtors the right to avoid payment of certain amounts owed on
the credit cards, thereby reducing the balance due. Most issuers of automobile
receivables permit the servicer to retain possession of the underlying
obligations. If the servicer were to sell these obligations to another party,
there is a risk that the purchaser would acquire an interest superior to that of
the holders of the related automobile receivables. In addition, because of the
large number of vehicles involved in a typical issuance and technical
requirements under state laws, the trustee for the holders of the automobile
receivables may not have a proper security interest in all of the obligations
backing such receivables. Therefore, there is the possibility that recoveries on
repossessed collateral may not, in some cases, be available to support payments
on these securities.

MORTGAGE-BACKED SECURITIES AND ASSET-BACKED SECURITIES--TYPES OF CREDIT
SUPPORT. The mortgage-backed securities in which the U.S. Bond Index Portfolio
may invest are limited to those relating to residential mortgages.
Mortgage-backed securities and asset-backed securities are often backed by a
pool of assets representing the obligations of a number of different parties. To
lessen the effect of failure by obligors on underlying assets to make payments,
such securities may contain elements of credit support. Such credit support
falls into two categories: (i) liquidity protection and (ii) protection against
losses resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the pass-through of
payments due on the underlying pool occurs in a timely fashion. Protection
against losses resulting from ultimate default enhances the likelihood of
ultimate payment of the obligations on at least a portion of the assets in the
pool. Such protection may be provided through guarantees, insurance

<PAGE>

policies or letters of credit obtained by the issuer or sponsor from third
parties, through various means of structuring the transaction or through a
combination of such approaches. The U.S. Bond Index Portfolio will not pay any
additional fees for such credit support, although the existence of credit
support may increase the price of a security.

The ratings of mortgage-backed securities and asset-backed securities
for which third-party credit enhancement provides liquidity protection or
protection against losses from default are generally dependent upon the
continued creditworthiness of the provider of the credit enhancement. The
ratings of such securities could be subject to reduction in the event of
deterioration in the creditworthiness of the credit enhancement provider even in
cases where the delinquency and loss experience on the underlying pool of assets
is better than expected.

Examples of credit support arising out of the structure of the
transaction include "senior-subordinated securities" (multiple class securities
with one or more classes subordinate to other classes as to the payment of
principal thereof and interest thereon, with the result that defaults on the
underlying assets are borne first by the holders of the subordinated class),
creation of "reserve funds" (where cash or investments, sometimes funded from a
portion of the payments on the underlying assets, are held in reserve against
future losses) and "over-collateralization" (where the scheduled payments on, or
the principal amount of, the underlying assets exceed those required to make
payment of the securities and pay any servicing or other fees). The degree of
credit support provided for each issue is generally based on historical
information with respect to the level of credit risk associated with the
underlying assets. Delinquency or loss in excess of that which is anticipated
could adversely affect the return on an investment in such a security.

STRIPPED MORTGAGE-BACKED SECURITIES. The cash flows and yields on IO
and PO classes are extremely sensitive to the rate of principal payments
(including prepayments) on the related underlying mortgage assets. For example,
a rapid or slow rate of principal payments may have a material adverse effect on
the yield to maturity of IOs or POs, respectively. If the underlying mortgage
assets experience greater than anticipated prepayments of principal, an investor
may fail to recoup fully its initial investment in an IO class of a stripped
mortgage-backed security, even if the IO class is rated AAA or Aaa. Conversely,
if the underlying mortgage assets experience slower than anticipated prepayments
of principal, the yield on a PO class will be affected more severely than would
be the case with a traditional mortgage-backed security.

FOREIGN SECURITIES: SPECIAL CONSIDERATIONS CONCERNING HONG
KONG, MALAYSIA, SINGAPORE AND JAPAN. Many Asian countries may be
subject to a greater degree of social, political and economic
instability than is the case in the United States and European

<PAGE>

countries. Such instability may result from (i) authoritarian governments or
military involvement in political and economic decision-making; (ii) popular
unrest associated with demands for improved political, economic and social
conditions; (iii) internal insurgencies; (iv) hostile relations with neighboring
countries; and (v) ethnic, religious and racial disaffection.

The economies of most of the Asian countries are heavily dependent upon
international trade and are accordingly affected by protective trade barriers
and the economic conditions of their trading partners, principally, the United
States, Japan, China and the European Community. The enactment by the United
States or other principal trading partners of protectionist trade legislation,
reduction of foreign investment in the local economies and general declines in
the international securities markets could have a significant adverse effect
upon the securities markets of the Asian countries.

Hong Kong's impending return to Chinese dominion in 1997 has not
initially had a positive effect on its economic growth which was vigorous in the
1980s. However, authorities in Beijing have agreed to maintain a capitalist
system for 50 years that, along with Hong Kong's economic growth, continued to
further strong stock market returns. In preparation for 1997, Hong Kong has to
develop trade with China, where it is the largest foreign investor, while also
maintaining its longstanding export relationship with the United States.
Spending on infrastructure improvements is a significant priority of the
colonial government while the private sector continues to diversify abroad based
on its position as an established international trade center in the Far East.

The Hong Kong stock market is undergoing a period of growth and change
which may result in trading volatility and difficulties in the settlement and
recording of transactions, and in interpreting and applying the relevant law and
regulations.

The Malaysian economy continued to perform well, growing at an average
annual rate of 9% from 1987 through 1991. This placed Malaysia as one of the
fastest growing economies in the Asian-Pacific region. Malaysia has become the
world's third-largest producer of semiconductor devices (after the US and Japan)
and the world's largest exporter of semiconductor devices.
More remarkable is the country's ability to achieve rapid economic growth with
relative price stability (2% inflation over the past five years) as the
government followed prudent fiscal/monetary policies. Malaysia's high export
dependence level leaves it vulnerable to a recession in the Organization for
Economic Cooperation and Development countries or a fall in world commodity
prices.

Singapore has an open entrepreneurial economy with strong service and
manufacturing sectors and excellent international trading links derived from its
entrepot history. During the

<PAGE>

1970's and early 1980's, the economy expanded rapidly, achieving an average
annual growth rate of 9%. Per capita GDP is among the highest in Asia. Singapore
holds a position as a major oil refining and services center.

Investing in Japanese securities may involve the risks associated with
investing in foreign securities generally. In addition, because it invests in
Japan, the EAFE(R) Equity Index Portfolio will be subject to the general
economic and political conditions in Japan.

Share prices of companies listed on Japanese stock exchanges and on the
Japanese OTC market reached historical peaks (which were later referred to as
the "bubble") as well as historically high trading volumes in 1989 and 1990.
Since then, stock prices in both markets decreased significantly, with listed
stock prices reaching their lowest levels in the third quarter of 1992 and OTC
stock prices reaching their lowest levels in the fourth quarter of 1992. During
the period from January 1, 1989 through December 31, 1994, the highest Nikkei
stock average and Nikkei OTC average were 38,915.87 and 4,149.20, respectively,
and the lowest for each were 14,309.41 and 1,099.32, respectively. There can be
no assurance that additional market corrections will not occur.

The common stocks of many Japanese companies continue to trade at high
price earnings ratios in comparison with those in the United States, even after
the recent market decline. Differences in accounting methods make it difficult
to compare the earnings of Japanese companies with those of companies in other
countries, especially the United States.

Since the EAFE(R) Equity Index Portfolio invests in securitieS
denominated in yen, changes in exchange rates between the U.S. dollar and the
yen affect the U.S. dollar value of the EAFE(R) Equity Index Portfolio's assets.
Such rate of exchange is determined by forces of supply and demand on the
foreign exchange markets. These forces are in turn affected by the international
balance of payments and other economic, political and financial conditions,
government intervention, speculation and other factors.

Japanese securities held by the EAFE(R) Equity Index PortfoliO are not
registered with the SEC nor are the issuers thereof subject to its reporting
requirements. There may be less publicly available information about issuers of
Japanese securities than about U.S. companies and such issuers may not be
subject to accounting, auditing and financial reporting standards and
requirements comparable to those to which U.S. companies are subject.

Although the Japanese economy has grown substantially over the past
four decades, recently the rate of growth had slowed substantially. During 1991,
1992 and 1993, the Japanese economy grew at rates of 4.3%, 1.1% and 0.1%,
respectively, as measured

<PAGE>

by real gross domestic product.

Japan's success in exporting its products has generated a sizeable
trade surplus. Such trade surplus has caused tensions at times between Japan and
some of its trading partners. In particular, Japan's trade relations with the
United States have recently been the subject of discussion and negotiation
between the two nations. The United States has imposed certain measures designed
to address trade issues in specific industries. These measures and similar
measures in the future may adversely affect the performance of the EAFE(R)
Equity Index Portfolio.

Japan's economy has typically exhibited low inflation and low interest
rates. There can be no assurance that low inflation and low interest rates will
continue, and it is likely that a reversal of such factors would adversely
affect the Japanese economy. Moreover, the Japanese economy may differ,
favorably or unfavorably, from the U.S. economy in such respects as
growth of gross national product, rate of inflation, capital reinvestment,
resources, self-sufficiency and balance of payments position.

Japan has a parliamentary form of government. In 1993 a coalition
government was formed which, for the first time since 1955, did not include the
Liberal Democratic Party. Since mid-1993, there have been several changes in
leadership in Japan. What, if any, effect the current political situation will
have on prospective regulatory reforms of the economy in Japan cannot be
predicted. Recent and future developments in Japan and neighboring Asian
countries may lead to changes in policy that might adversely affect the EAFE(R)
Equity Index Portfolio.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

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

Successful use of the futures contract and related options are subject
to special risk considerations. A liquid secondary market for any futures or
options contract may not be available when a futures or options position is
sought to be closed. In addition, there may be an imperfect correlation between
movements in the securities or currency in the Portfolio. Successful use

<PAGE>

of futures or options contracts is further dependent on Bankers Trust's ability
to correctly predict movements in the securities or foreign currency markets and
no assurance can be given that its judgement will be correct. Successful use of
options on securities or stock indices are subject to similar risk
considerations. In addition, by writing covered call options, the Portfolio
gives up the opportunity, while the option is in effect, to profit from any
price increase in the underlying securities above the options exercise price.

FUTURES CONTRACTS. Each Portfolio may enter into contracts for the
purchase or sale for future delivery of fixed-income securities, foreign
currencies, or contracts based on financial indices including any index of U.S.
Government securities, foreign government securities or corporate debt
securities. U.S. futures contracts have been designed by exchanges which have
been designated "contracts markets" by the CFTC, and must be executed through a
futures commission merchant, or brokerage firm, which is a member of the
relevant contract market. Futures contracts trade on a number of exchange
markets, and, through their clearing corporations, the exchanges guarantee
performance of the contracts as between the clearing members of the exchange.
Each Portfolio may enter into futures contracts which are based on debt
securities that are backed by the full faith and credit of the U.S. Government,
such as long-term U.S. Treasury Bonds, Treasury Notes, GNMA modified
pass-through mortgage-backed securities and three-month U.S. Treasury Bills. A
Portfolio may also enter into futures contracts which are based on bonds issued
by entities other than the U.S. Government.

At the same time a futures contract is purchased or sold, the Portfolio
must allocate cash or securities as a deposit payment ("initial deposit"). It is
expected that the initial deposit would be approximately 1 1/2% to 5% of a
contract's face value. Daily thereafter, the futures contract is valued and the
payment of "variation margin" may be required, since each day the Portfolio
would provide or receive cash that reflects any decline or increase in the
contract's value.

At the time of delivery of securities pursuant to such a contract,
adjustments are made to recognize differences in value arising from the delivery
of securities with a different interest rate from that specified in the
contract. In some (but not many) cases, securities called for by a futures
contract may not have been issued when the contract was written.

Although futures contracts by their terms call for the actual delivery
or acquisition of securities, in most cases the contractual obligation is
fulfilled before the date of the contract without having to make or take
delivery of the securities. The offsetting of a contractual obligation is
accomplished by buying (or selling, as the case may be) on a commodities
exchange an identical futures contract calling for delivery in the same month.
Such a transaction, which is

<PAGE>

effected through a member of an exchange, cancels the obligation to make or take
delivery of the securities. Since all transactions in the futures market are
made, offset or fulfilled through a clearinghouse associated with the exchange
on which the contracts are traded, the Portfolio will incur brokerage fees when
it purchases or sells futures contracts.

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

Similarly, when it is expected that interest rates may decline, futures
contracts may be purchased to attempt to hedge against anticipated purchases of
debt securities at higher prices. Since the fluctuations in the value of futures
contracts should be similar to those of debt securities, a Portfolio could take
advantage of the anticipated rise in the value of debt securities without
actually buying them until the market had stabilized. At that time, the futures
contracts could be liquidated and the Portfolio could then buy debt securities
on the cash market. To the extent a Portfolio enters into futures contracts for
this purpose, the assets in the segregated asset account maintained to cover the
Portfolio's obligations with respect to such futures contracts will consist of
cash, cash equivalents or high quality liquid debt securities from its portfolio
in an amount equal to the difference between the fluctuating market value of
such futures contracts and the aggregate value of the initial and variation
margin payments made by the Portfolio with respect to such futures contracts.

<PAGE>

offsetting transactions which could distort the normal relationship between the
cash and futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the margin deposit requirements in the futures
market are less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market may
cause temporary price distortions. Due to the possibility of distortion, a
correct forecast of general interest rate trends by the Adviser may still not
result in a successful transaction.

In addition, futures contracts entail risks. Although the Adviser
believes that use of such contracts will benefit the Portfolios, if the
Adviser's investment judgment about the general direction of interest rates is
incorrect, a Portfolio's overall performance would be poorer than if it had not
entered into any such contract. For example, if a Portfolio has hedged against
the possibility of an increase in interest rates which would adversely affect
the price of debt securities held in its portfolio and interest rates decrease
instead, the Portfolio will lose part or all of the benefit of the increased
value of its debt securities which it has hedged because it will have offsetting
losses in its futures positions. In addition, in such situations, if a Portfolio
has insufficient cash, it may have to sell debt securities from its portfolio to
meet daily variation margin requirements. Such sales of bonds may be, but will
not necessarily be, at increased prices which reflect the rising market. A
Portfolio may have to sell securities at a time when it may be disadvantageous
to do so.

OPTIONS ON FUTURES CONTRACTS. Each Portfolio may purchase and write
options on futures contracts for hedging purposes. The purchase of a call option
on a futures contract is similar in some respects to the purchase of a call
option on an individual security. Depending on the pricing of the option
compared to either the price of the futures contract upon which it is based or
the price of the underlying debt securities, it may or may not be less risky
than ownership of the futures contract or underlying debt securities. As with
the purchase of futures contracts, when a Portfolio is not fully invested it may
purchase a call option on a futures contract to hedge against a market advance
due to declining interest rates.

The writing of a call option on a futures contract constitutes a
partial hedge against declining prices of the underlying security or foreign
currency which is deliverable upon exercise of the futures contract. If the
futures price at expiration of the option is below the exercise price, a
Portfolio will retain the full amount of the option premium which provides a
partial hedge against any decline that may have occurred in the Portfolio's
portfolio holdings. The writing of a put option on a

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futures contract constitutes a partial hedge against increasing prices of the
underlying security or foreign currency which is deliverable upon exercise of
the futures contract. If the futures price at expiration of the option is higher
than the exercise price, the Portfolio will retain the full amount of the option
premium which provides a partial hedge against any increase in the price of
securities which the Portfolio intends to purchase. If a put or call option the
Portfolio has written is exercised, the Portfolio will incur a loss which will
be reduced by the amount of the premium it receives. Depending on the degree of
correlation between changes in the value of its portfolio securities and changes
in the value of its futures positions, the Portfolio's losses from existing
options on futures may to some extent be reduced or increased by changes in the
value of portfolio securities.

The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities. For
example, a Portfolio may purchase a put option on a futures contract to hedge
its portfolio against the risk of rising interest rates.

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

The Board of Trustees of each Portfolio has adopted the requirement
that futures contracts and options on futures contracts be used as a hedge and
may also use stock index futures on continual basis to equitize cash so that the
fund may maintain 100% equity exposure. In addition to this requirement, the
Board of Trustees of each Portfolio has also adopted a restriction that the
Portfolio will not enter into any futures contracts or options on futures
contracts if immediately thereafter the amount of margin deposits on all the
futures contracts of the Portfolio and premiums paid on outstanding options on
futures contracts owned by the Portfolio (other than those entered into for bona
fide hedging purposes) would exceed 5% of the market value of the total assets
of the Portfolio.

OPTIONS ON FOREIGN CURRENCIES. The EAFE(R) Equity Index Portfolio may
purchase and write options on foreign currencies for hedging purposes in a
manner similar to that in which futures contracts on foreign currencies, or
forward contracts, will be utilized. For example, a decline in the dollar value
of a foreign currency in which portfolio securities are denominated will reduce
the dollar value of such securities, even if their value in the foreign currency
remains constant. In order to protect against such diminutions in the value of
portfolio securities, the Portfolio may purchase put options on the foreign
currency. If the value of the currency does decline, the

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Portfolio will have the right to sell such currency for a fixed amount in
dollars and will thereby offset, in whole or in part, the adverse effect on its
portfolio which otherwise would have resulted.

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

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

Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar cost of securities to be acquired, the
EAFE(R) Equity Index Portfolio could write a put option on the relevant currency
which, if rates move in the manner projected, will expire unexercised and allow
the Portfolio to hedge such increased cost up to the amount of the premium. As
in the case of other types of options, however, the writing of a foreign
currency option will constitute only a partial hedge up to the amount of the
premium, and only if rates move in the expected direction. If this does not
occur, the option may be exercised and the Portfolio would be required to
purchase or sell the underlying currency at a loss which may not be offset by
the amount of the premium. Through the writing of options on foreign currencies,
the Portfolio also may be required to forego all or a portion of the benefits
which might otherwise have been obtained from favorable movements in exchange
rates.

The EAFE(R) Equity Index Portfolio intends to write covered call
options on foreign currencies. A call option written on a foreign currency by
the Portfolio is "covered" if the Portfolio owns the underlying foreign currency
covered by the call or has an absolute and immediate right to acquire that
foreign currency without additional cash consideration (or for additional cash
consideration held in a segregated account by its Custodian) upon

<PAGE>

conversion or exchange of other foreign currency held in its portfolio. A call
option is also covered if the Portfolio has a call on the same foreign currency
and in the same principal amount as the call written where the exercise price of
the call held (a) is equal to or less than the exercise price of the call
written or (b) is greater than the exercise price of the call written if the
difference is maintained by the Portfolio in cash, U.S. Government securities
and other high quality liquid debt securities in a segregated account with its
custodian.

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

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

Options on foreign currencies traded on national securities exchanges
are within the jurisdiction of the SEC, as are other securities traded on such
exchanges. As a result, many of the protections provided to traders on organized
exchanges will be available with respect to such transactions. In particular,
all foreign currency option positions entered into on a national

<PAGE>

securities exchange are cleared and guaranteed by the Options Clearing
Corporation (the "OCC"), thereby reducing the risk of counterparty default.
Further, a liquid secondary market in options traded on a national securities
exchange may be more readily available than in the over-the-counter market,
potentially permitting a Portfolio to liquidate open positions at a profit prior
to exercise or expiration, or to limit losses in the event of adverse market
movements.

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

As in the case of forward contracts, certain options on foreign
currencies are traded over-the-counter and involve liquidity and credit risks
which may not be present in the case of exchange-traded currency options. A
Portfolio's ability to terminate over-the-counter options will be more limited
than with exchange-traded options. It is also possible that broker-dealers
participating in over-the-counter options transactions will not fulfill their
obligations. Until such time as the staff of the SEC changes its position, each
Portfolio will treat purchased over-the-counter options and assets used to cover
written over-the-counter options as illiquid securities. With respect to options
written with primary dealers in U.S. Government securities pursuant to an
agreement requiring a closing purchase transaction at a formula price, the
amount of illiquid securities may be calculated with reference to the repurchase
formula.

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

<PAGE>

nonbusiness hours in the United States; (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States; and (v) lesser trading volume.

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

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

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

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

<PAGE>

closing purchase transaction, it may be forced to incur brokerage commissions or
dealer spreads in selling securities it receives or it may be forced to hold
underlying securities until an option is exercised or expires.

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

A Portfolio may purchase call and put options on any securities in
which it may invest. The Portfolio would normally purchase a call option in
anticipation of an increase in the market value of such securities. The purchase
of a call option would entitle the Portfolio, in exchange for the premium paid,
to purchase a security at a specified price during the option period. The
Portfolio would ordinarily have a gain if the value of the securities increased
above the exercise price sufficiently to cover the premium and would have a loss
if the value of the securities remained at or below the exercise price during
the option period.

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

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the value of the securities remained at or above the exercise price. Gains and
losses on the purchase of protective put options would tend to be offset by
countervailing changes in the value of underlying portfolio securities.

Each Portfolio has adopted certain other nonfundamental policies
concerning option transactions which are discussed below. The Portfolio's
activities in options may also be restricted by the requirements of the Internal
Revenue Code of 1986, as amended (the "Code"), for qualification as a regulated
investment company.

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

A Portfolio may engage in over-the-counter options transactions with
broker-dealers who make markets in these options. At present, approximately ten
broker-dealers, including several of the largest primary dealers in U.S.
Government securities, make these markets. The ability to terminate
over-the-counter option positions is more limited than with exchange-traded
option positions because the predominant market is the issuing broker rather
than an exchange, and may involve the risk that broker-dealers participating in
such transactions will not fulfill their obligations. To reduce this risk, the
Portfolio will purchase such options only from broker-dealers who are primary
government securities dealers recognized by the Federal Reserve Bank of New York
and who agree to (and are expected to be capable of) entering into closing
transactions, although there can be no guarantee that any such option will be
liquidated at a favorable price prior to expiration. The Adviser will monitor
the creditworthiness of dealers with whom the Portfolio enters into such options
transactions under the general supervision of the Portfolios' Trustees.

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

EAFE(R) Equity Index Portfolio may, to the extent allowed by Federal
and state securities laws, invest in securities indices instead of investing
directly in individual foreign securities.

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

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

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

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

A forward foreign currency exchange contract is an obligation by a
Portfolio to purchase or sell a specific currency at a future date, which may be
any fixed number of days from the date of the contract. Forward foreign currency
exchange contracts establish an exchange rate at a future date. These contracts
are transferable in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. A forward foreign
currency exchange contract generally has no deposit requirement and is traded at
a net price without commission. Each Portfolio maintains with its custodian a
segregated account of high grade liquid assets in an amount at least equal to
its obligations under each forward foreign currency exchange contract. Neither
spot transactions nor forward foreign currency exchange contracts eliminate
fluctuations in the prices of the Portfolio's securities or in foreign exchange
rates, or prevent loss if the prices of these securities should decline.

Each Portfolio may enter into foreign currency hedging transactions in
an attempt to protect against changes in foreign

<PAGE>

currency exchange rates between the trade and settlement dates of specific
securities transactions or changes in foreign currency exchange rates that would
adversely affect a portfolio position or an anticipated investment position.
Since consideration of the prospect for currency parities will be incorporated
into Bankers Trust's long-term investment decisions, a Portfolio will not
routinely enter into foreign currency hedging transactions with respect to
security transactions; however, Bankers Trust believes that it is important to
have the flexibility to enter into foreign currency hedging transactions when it
determines that the transactions would be in the Portfolio's best interest.
Although these transactions tend to minimize the risk of loss due to a decline
in the value of the hedged currency, at the same time they tend to limit any
potential gain that might be realized should the value of the hedged currency
increase. The precise matching of the forward contract amounts and the value of
the securities involved will not generally be possible because the future value
of such securities in foreign currencies will change as a consequence of market
movements in the value of such securities between the date the forward contract
is entered into and the date it matures. The projection of currency market
movements is extremely difficult, and the successful execution of a hedging
strategy is highly uncertain.

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

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

<PAGE>

subject of such cross-hedges are denominated.

RATING SERVICES

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

INVESTMENT RESTRICTIONS

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

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

(1) borrow money or mortgage or hypothecate assets of the

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Portfolio (Fund), except that in an amount not to exceed 1/3 of the current
value of the Portfolio's (Fund's) 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 1/3 of such assets to secure such
borrowings (it is intended that money would be borrowed only from banks and only
either to accommodate requests for the withdrawal of beneficial interests
(redemption of shares) 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) or
reverse repurchase agreements, 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; for additional related restrictions, see
clause (i) under the caption "State and Federal Restrictions" below (as an
operating policy, the Portfolios may not engage in dollar roll transactions);

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

(3) make loans to other persons except: (a) through the lending of the
Portfolio's (Fund's) portfolio securities and provided that any such loans not
exceed 30% of the Portfolio's (Fund's) total assets (taken at market value); (b)
through the use of repurchase agreements or the purchase of short-term
obligations; or (c) by purchasing a portion of an issue of debt securities of
types distributed publicly or privately (under current regulations, the
Portfolio's (Fund's) fundamental policy with respect to 20% risk weighing for
financial institutions prevent the Portfolio (Fund) from engaging in securities
lending);

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

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

<PAGE>

invested in any one industry; and

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

(i) borrow money (including through reverse repurchase or forward
roll transactions) for any purpose in excess of 5% of the
Portfolio's (Fund's) total assets (taken at cost), except that
the Portfolio (Fund) may borrow for temporary or emergency
purposes up to 1/3 of its total assets;

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

(iv) sell securities it does not own such that the dollar
amount of such short sales at any one time exceeds 25%
of the net equity of the Portfolio (Fund), and the
value of securities of any one issuer in which the
Portfolio (Fund) is short exceeds the lesser of 2.0% of
the value of the Portfolio's (Fund's) net assets or
2.0% of the securities of any class of any U.S. issuer
and, provided that short sales may be made only in
those securities which are fully listed on a national
securities exchange or a foreign exchange (This
provision does not include the sale of securities of
the Portfolio (Fund) contemporaneously owns or has the

<PAGE>

right to obtain securities equivalent in kind and
amount to those sold, i.e., short sales against the
box.) (the Portfolios (Funds) have no current intention
to engage in short selling);

(v) invest for the purpose of exercising control or
management;

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

(vii) invest more than 10% of the Portfolio's (Fund's) total assets
(taken at the greater of cost or market value) in securities
that are restricted as to resale under the 1933 Act (other
than Rule 144A securities deemed liquid by the Portfolio's
(Fund's) Board of Trustees);

(viii) invest more than 15% of the Portfolio's (Fund's) net assets
(taken at the greater of cost or market value) in securities
that are illiquid or not readily marketable not including (a)
Rule 144A securities that have been determined to be liquid by
the Board of

<PAGE>

Trustees; and (b) commercial paper that is sold under section
4(2) of the 1933 Act which: (i) is not traded flat or in
default as to interest or principal; and (ii) is rated in one
of the two highest categories by at least two nationally
recognized statistical rating organizations and the
Portfolio's (Fund's) Board of Trustees have determined the
commercial paper to be liquid; or (iii) is rated in one of the
two highest categories by one nationally recognized
statistical rating agency and the Portfolio's (Fund's) Board
of Trustees have determined that the commercial paper is
equivalent quality and is liquid;

(ix) no more than 5% of the Portfolio's (Fund's) total assets are
invested in securities issued by issuers which (including
predecessors) have been in operation less than three years;

(x) with respect to 75% of the Portfolio's (Fund's) total assets,
purchase securities of any issuer if such purchase at the time
thereof would cause the Portfolio (Fund) to hold more than 10%
of any class of securities of such issuer, for which purposes
all indebtedness of an issuer shall be deemed a single class
and all preferred stock of an issuer shall be deemed a single
class, except that futures or option contracts shall not be
subject to this restriction;

(xi) if the Portfolio (Fund) is a "diversified" fund with respect
to 75% of its assets, invest more than 5% of its total assets
in the securities (excluding U.S. Government securities) of
any one issuer;

(xii) invest in securities issued by an issuer any of whose
officers, directors, trustees or security holders is an
officer or Trustee of the Portfolio (Trust), or is an officer
or partner of the Adviser, if after the purchase of the
securities of such issuer for the Portfolio (Fund) one or more
of such persons owns beneficially more than 1/2 of 1% of the
shares or securities, or both, all taken at market value, of
such issuer, and such persons owning more than 1/2 of 1% of
such shares or securities together own beneficially more than
5% of such shares or securities, or both, all taken at market
value;

(xiii) invest in warrants (other than warrants acquired by the
Portfolio (Fund) as part of a unit or attached to securities
at the time of

<PAGE>

purchase) if, as a result, the investments (valued at the
lower of cost or market) would exceed 5% of the value of the
Portfolio's (Fund's) net assets or if, as a result, more than
2% of the Portfolio's (Fund's) net assets would be invested in
warrants not listed on a recognized United States or foreign
stock exchange, to the extent permitted by applicable state
securities laws;

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

(xv) buy and sell puts and calls on securities, stock index futures
or options on stock index futures, or financial futures or
options on financial futures unless such options are written
by other persons and: (a) the options or futures are offered
through the facilities of a national securities association or
are listed on a national

<PAGE>

securities or commodities exchange, except for put and call
options issued by non-U.S. entities or listed on non-U.S.
securities or commodities exchanges; (b) the aggregate
premiums paid on all such options which are held at any time
do not exceed 20% of the Portfolio's (Fund's) total net
assets; and (c) the aggregate margin deposits required on all
such futures or options thereon held at any time do not exceed
5% of the Portfolio's (Fund's) total assets.

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

Each Fund will comply with the state securities laws and regulations of
all states in which it is registered. Each Portfolio will comply with the
permitted investments and investment limitations in the securities laws and
regulations of all states in which the corresponding Fund, or any other
registered investment company investing in the Portfolio, is registered.

PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS

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

The Adviser seeks to evaluate the overall reasonableness of the
brokerage commissions paid (to the extent applicable) in placing orders for the
purchase and sale of securities for a

<PAGE>

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

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

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

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

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

<PAGE>

clients other than the Portfolios, and not all such information is used by the
Adviser in connection with the Portfolios. Conversely, such information provided
to the Adviser by brokers and dealers through whom other clients of the Adviser
effect securities transactions may be useful to the Adviser in providing
services to the Portfolios.

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

For the years ended December 31, 1995, 1994 and 1993, Equity 500 Index
Portfolio paid brokerage commissions in the amount of $172,924, $97,069 and
$63,408, respectively.

PERFORMANCE INFORMATION

STANDARD PERFORMANCE INFORMATION

From time to time, quotations of a Fund's performance may be included
in advertisements, sales literature or shareholder reports. These performance
figures are calculated in the following manner:

YIELD: Yields for a Fund used in advertising are computed by dividing
the Fund's interest and dividend income for a given 30-day or one-month
period, net of expenses, by the average number of shares entitled to
receive distributions during the period, dividing this figure by the
Fund's net asset value per share at the end of the period, and
annualizing the result (assuming compounding of income) in order to
arrive at an annual percentage rate. Income is calculated for purpose
of yield quotations in accordance with standardized methods applicable
to all stock and bond mutual funds. Dividends from equity investments
are treated as if they were accrued on a daily basis, solely for the

<PAGE>

purpose of yield calculations. In general, interest income is reduced
with respect to bonds trading at a premium over their par value by
subtracting a portion of the premium from income on a daily basis, and
is increased with respect to bonds trading at a discount by adding a
portion of the discount to daily income. Capital gains and losses
generally are excluded from the calculation.

Income calculated for the purposes of calculating a Fund's yield
differs from income as determined for other accounting purposes.
Because of the different accounting methods used, and because of the
compounding assumed in yield calculations, the yield quoted for a Fund
may differ from the rate of distributions of the Fund paid over the
same period or the rate of income reported in the Fund's financial
statements.

TOTAL RETURN: A Fund's average annual total return is calculated for
certain periods by determining the average annual compounded rates of
return over those periods that would cause an investment of $1,000
(made at the maximum public offering price with all distributions
reinvested) to reach the value of that investment at the end of the
periods. A Fund may also calculate total return figures which represent
aggregate performance over a period or year-by-year performance.

PERFORMANCE RESULTS: Any total return quotation provided for a Fund
should not be considered as representative of the performance of the
Fund in the future since the net asset value and public offering price
of shares of the Fund will vary based not only on the type, quality and
maturities of the securities held in the corresponding Portfolio, but
also on changes in the current value of such securities and on changes
in the expenses of the Fund and the corresponding Portfolio. These
factors and possible differences in the methods used to calculate total
return should be considered when comparing the total return of a Fund
to total returns published for other investment companies or other
investment vehicles. Total return reflects the performance of both
principal and income.

COMPARISON OF FUND PERFORMANCE

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

In connection with communicating its performance to current or
prospective shareholders, a Fund also may compare these figures to the
performance of other mutual funds tracked by

<PAGE>

mutual fund rating services or to unmanaged indices which may assume
reinvestment of dividends but generally do not reflect deductions for
administrative and management costs.

Evaluations of a Fund's performance made by independent sources may
also be used in advertisements concerning the Fund. Sources for a Fund's
performance information could include the following:

ASIAN WALL STREET JOURNAL, a weekly Asian newspaper that often reviews
U.S. mutual funds investing internationally.

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

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

CHANGING TIMES, THE KIPLINGER MAGAZINE, a monthly investment advisory
publication that periodically features the performance of a variety of
securities.

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

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

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

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

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

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

INVESTOR'S DAILY, a daily newspaper that features financial, economic
and business news.

LIPPER ANALYTICAL SERVICES, INC.'S MUTUAL FUND PERFORMANCE
ANALYSIS, a weekly publication of industry-wide mutual fund
averages by type of fund.

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

<PAGE>

MORNINGSTAR INC., a publisher of financial information and mutual fund
research.

NEW YORK TIMES, a nationally distributed newspaper which regularly
covers financial news.

PERSONAL INVESTING NEWS, a monthly news publication that often reports
on investment opportunities and market conditions.

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

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

U.S. NEWS AND WORLD REPORT, a national business weekly that
periodically reports mutual fund performance data.

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

WALL STREET JOURNAL, a Dow Jones and Company, Inc.
newspaper which regularly covers financial news.

WEISENBERGER INVESTMENT COMPANIES SERVICES, an annual compendium of
information about mutual funds and other investment companies, including
comparative data on funds' backgrounds, management policies, salient features,
management results, income and dividend records, and price ranges.

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

VALUATION OF SECURITIES; REDEMPTIONS AND PURCHASES IN KIND

Equity and debt securities (other than short-term debt obligations
maturing in 60 days or less), including listed securities and securities for
which price quotations are available, will normally be valued on the basis of
market valuations furnished by a pricing service. Short-term debt obligations
and money market securities maturing in 60 days or less are valued at amortized
cost, which approximates market.

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

<PAGE>

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

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

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

The Trust, on behalf of each Fund, and each Portfolio reserve the
right, if conditions exist which make cash payments undesirable, to honor any
request for redemption or repurchase order by making payment in whole or in part
in readily marketable securities chosen by the Trust, or the Portfolio, as the
case may be, and valued as they are for purposes of computing the Fund's or the
Portfolio's net asset value, as the case may be (a redemption in kind). If
payment is made to a Fund shareholder in securities, an investor, including the
Fund, the shareholder may incur transaction expenses in converting these
securities into cash. The Trust, on behalf of each Fund, and each Portfolio have
elected, however, to be governed by Rule 18f-1 under the 1940 Act as a result of
which each Fund and each Portfolio are obligated to redeem shares or beneficial
interests, as the case may be, with respect to any one investor during any
90-day period, solely in cash up to the lesser of $250,000 or 1% of the net
asset value of the Fund or the Portfolio, as the case may be, at the beginning
of the period.

Each Portfolio has agreed to make a redemption in kind to the
corresponding Fund whenever the Fund wishes to make a redemption in kind and
therefore shareholders of the Fund that receive redemptions in kind will receive
portfolio securities of the corresponding Portfolio and in no case will they
receive a

<PAGE>

security issued by the Portfolio. The Portfolio has advised the Trust that the
Portfolio will not redeem in kind except in circumstances in which the Fund is
permitted to redeem in kind or unless requested by the Fund.

Each investor in a Portfolio, including the corresponding Fund, may add
to or reduce its investment in the Portfolio on each day the Portfolio
determines its net asset value. At the close of each such business day, the
value of each investor's beneficial interest in the Portfolio will be determined
by multiplying the net asset value of the Portfolio by the percentage, effective
for that day, which represents that investor's share of the aggregate beneficial
interests in the Portfolio. Any additions or withdrawals which are to be
effected as of the close of business on that day will then be effected. The
investor's percentage of the aggregate beneficial interests in the Portfolio
will then be recomputed as the percentage equal to the fraction (i) the
numerator of which is the value of such investor's investment in the Portfolio
as of the close of business on such day plus or minus, as the case may be, the
amount of net additions to or withdrawals from the investor's investment in the
Portfolio effected as of the close of business on such day, and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of the
close of business on such day plus or minus, as the case may be, the amount of
net additions to or withdrawals from the aggregate investments in the Portfolio
by all investors in the Portfolio. The percentage so determined will then be
applied to determine the value of the investor's interest in the Portfolio as
the close of business on the following business day.

Each Fund may, at its own option, accept securities in payment for
shares. The securities delivered in payment for shares are valued by the method
described under "Net Asset Value" as of the day the Fund receives the
securities. This is a taxable transaction to the shareholder. Securities may be
accepted in payment for shares only if they are, in the judgment of Bankers
Trust, appropriate investments for the Fund's corresponding Portfolio. In
addition, securities accepted in payment for shares must: (i) meet the
investment objective and policies of the acquiring Fund's corresponding
Portfolio; (ii) be acquired by the applicable Fund for investment and not for
resale (other than for resale to the Fund's corresponding Portfolio); (iii) be
liquid securities which are not restricted as to transfer either by law or
liquidity of market; and (iv) if stock, have a value which is readily
ascertainable as evidenced by a listing on a stock exchange, over-the-counter
market or by readily available market quotations from a dealer in such
securities. When securities are used as payment for shares or as a redemption in
kind from the fund, the transaction fee will not be assessed. However, the
shareholder will be charged the costs associated with receiving or delivering
the securities. These costs include security movement costs and taxes and
registration costs. Each Fund reserves the right to accept or reject at its

<PAGE>

own option any and all securities offered in payment for its
shares.

MANAGEMENT OF THE TRUSTS AND THE PORTFOLIOS

The Trustees and officers of the Trusts and Portfolios and their
principal occupations during the past five years are set forth below. Their
titles may have varied during that period. Asterisks indicate those Trustees who
are "interested persons" (as defined in the 1940 Act) of the Trust. Unless
otherwise indicated, the address of each Trustee and officer is 6 St. James
Avenue, Boston, Massachusetts.

TRUSTEES OF THE BT ADVISOR FUNDS

PHILIP W. COOLIDGE* (age 44) -- President and Trustee;

Chairman, Chief Executive Officer and President, Signature
Financial Group, Inc. ("SFG") (since December, 1988) and
Signature (since April, 1989).

MARTIN J. GRUBER (age 58) -- Trustee; Chairman of the
Finance Department and Nomura Professor of Finance, Leonard N.
Stern School of Business, New York University (since 1964).

RICHARD J. HERRING (age 50) -- Trustee; Professor, Finance
Department, The Wharton School, University of Pennsylvania. His
address is The Wharton School, University of Pennsylvania Finance
Department, 3303 Steinberg Hall/Dietrich Hall, Philadelphia,
Pennsylvania 19104.

BRUCE E. LANGTON (age 64) -- Trustee; Retired; Director,
Adela Investment Co. and University Patents, Inc.; formerly
Assistant Treasurer of IBM Corporation (until 1986). His address
is 99 Jordan Lane, Stamford, Connecticut 06903.

HARRY VAN BENSCHOTEN (age 68) -- Trustee; Retired (since 1987);
Corporate Vice President, Newmont Mining Corporation (prior to 1987); Director,
Canada Life Insurance

<PAGE>

Company of New York and Competitive Technologies, Inc., a public company listed
on the American Stock Exchange. His address is 6581 Ridgewood Drive, Naples,
Florida 33963.

TRUSTEES OF BT PYRAMID MUTUAL FUNDS

PHILIP W. COOLIDGE* (age 44) -- President and Trustee; Chairman, Chief
Executive Officer and President, SFG (since December, 1988) and Signature (since
April, 1989).

MARTIN J. GRUBER (age 58) -- Trustee; Chairman of the
Finance Department and Nomura Professor of Finance, Leonard N.
Stern School of Business, New York University (since 1964).

KELVIN J. LANCASTER (age 71) -- Trustee; Professor,
Department of Economics, Columbia University. His address is
35 Claremont Avenue, New York, New York 10027.

HARRY VAN BENSCHOTEN (age 68) -- Trustee; retired (since 1987);
Corporate Vice President, Newmont Mining Corporation (prior to 1987); Director,
Canada Life Insurance Company of New York and Competitive Technologies, Inc., a
public company listed on the American Stock Exchange. His address is 6581
Ridgewood Drive, Naples, Florida 33963.

TRUSTEES OF THE PORTFOLIOS

CHARLES P. BIGGAR (age 65) -- Trustee; Retired; Director of Chase/NBW Bank
Advisory Board; Director, Batemen, Eichler, Hill Richards Inc.; formerly Vice
President of International Business Machines and President of the National
Services and the Field Engineering Divisions of IBM. His address is 12 Hitching
Post

Lane, Chappaqua, New York 10514.

PHILIP W. COOLIDGE* (age 44) -- President and Trustee; Chairman, Chief
Executive Officer and President, SFG (since December, 1988) and Signature (since
April, 1989).

S. LELAND DILL (age 65) -- Trustee; Retired; Director,
Coutts & Co. Group, Coutts & Co. (U.S.A.) International;
Director, Zweig Series Trust; formerly Partner of KPMG Peat
Marwick; Director, Vinters International Company Inc.; General
Partner of Pemco (an investment company registered under the
1940 Act). His address is 5070 North Ocean Drive, Singer Island,
Florida 33404.

<PAGE>

PHILIP SAUNDERS, JR. (age 60) -- Trustee; Principal, Philip Saunders Associates
(Consulting); former Director of Financial Industry Consulting, Wolf & Company;
President, John Hancock Home Mortgage Corporation; and Senior Vice President of
Treasury and Financial Services, John Hancock Mutual Life Insurance Company,
Inc. His address is 445 Glen Road, Weston, Massachusetts 02193.

OFFICERS OF THE TRUSTS AND PORTFOLIOS

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

JOHN R. ELDER (age 47) - Treasurer; Vice President, SFG
(since April, 1995); Treasurer, Phoenix Family of Mutual Funds
(prior to April, 1995); Audit Manager, Price Waterhouse (prior to

1983).

DAVID G. DANIELSON (age 31) -- Assistant Treasurer; Assistant Manager,
SFG (since May, 1991); Graduate Student, Northeastern University (from April,
1990 to March, 1991); Tax Accountant & Systems Analyst, Putnam Companies (prior
to March, 1990).

BARBARA M. O'DETTE (age 36) -- Assistant Treasurer; Assistant
Treasurer, SFG (since December, 1988) and Signature (since April, 1989);
Administrative Controller, Massachusetts Financial Services Company (prior to
December, 1988).

DANIEL E. SHEA (age 33) -- Assistant Treasurer; Assistant
Manager, SFG (since November 1993); Supervisor and Senior
Technical Advisor, Putnam Investments (prior to November 1993).

THOMAS M. LENZ (age 37) -- Secretary; Senior Vice President
and Associate General Counsel, SFG (since November, 1989);
Assistant Secretary, Signature (since February, 1991); Attorney,

Ropes & Gray (prior to November, 1989).

LINDA T. GIBSON (age 30) -- Assistant Secretary;
Vice President, Global Product Management and Assistant
Secretary, SFG (since May, 1992); Assistant Secretary, Signature

<PAGE>

(since October, 1992); student, Boston University School of Law
(September, 1989 to May, 1992)
.

MOLLY S. MUGLER (age 44) -- Assistant Secretary; Legal
Counsel and Assistant Secretary, SFG (since December, 1988);
Assistant Secretary, Signature (since April, 1989).

Messrs. Coolidge, Danielson, Elder, Lenz, Saldana and
Shea and Mss. Gibson, Mugler and O'Dette also hold similar
positions for other investment companies for which Signature or
an affiliate serves as the principal underwriter.

No person who is an officer or director of Bankers Trust is an officer
or Trustee of the Trusts or the Portfolios. No director, officer or employee of
Signature or any of its affiliates will receive any compensation from the Trusts
or the Portfolios for serving as an officer or Trustee of the Trusts or the
Portfolios. Each Portfolio and International Equity, Capital Appreciation, Cash
Management, Treasury Money, Tax Free Money, NY Tax Free Money, Utility,
Short/Intermediate U.S. Government Securities, Intermediate Tax Free, Asset
Management and BT Investment Portfolios (together with the Trusts, the "Fund
Complex") collectively pay each Trustee who is not a director, officer or
employee of the Adviser, the Distributor, the Administrator or any of their
affiliates an annual fee of $10,000, respectively, per annum plus $1,250,
respectively, per meeting attended and reimburses them for travel and
out-of-pocket expenses.

For the year ended December 31, 1995, the BT Investment Equity 500
Index Fund incurred Trustees fees equal to $6,634. For the year ended December
31, 1995, the Equity 500 Index Portfolio incurred Trustees fees of $1,868.

Bankers Trust reimbursed the BT Investment Equity 500 Index Fund and
Equity 500 Index Portfolio for a portion of its their Trustees fees for the
period above. See "Investment Adviser" and "Administrator" below.

As of March 31, 1996, the Trustees and officers of the Trusts and the
Portfolios owned in the aggregate less than 1% of the shares of any Fund or
Trust (all series taken together). As of the same date, Bankers Trust on behalf
of its customers was the record owner of 100% of the outstanding shares of the
Funds. Shareholders owning 25% or more of the outstanding shares of the Fund may
diminish the voting power of othe shareholders

<PAGE>

proportionately.

The following table reflects fees paid to the Trustees of the Pyramid
Trust and Portfolio for the year ended December 31, 1995.

AGGREGATE TOTAL COMPENSATION
NAME OF PERSON, COMPENSATION FROM FUND
COMPLEX
POSITION FROM TRUST PAID TO
TRUSTEES

Martin J. Gruber,
Trustee of Pyramid Trust $12,500 $12,500

Kelvin J. Lancaster,
Trustee of Pyramid Trust none $12,500

Harry Van Benschoten,
Trustee of Pyramid Trust $12,500 $12,500

Charles P. Biggar,
Trustee of Portfolio none $12,500

S. Leland Dill,
Trustee of Portfolio none $12,500

Philip Saunders, Jr.,
Trustee of Portfolio none $12,500

INVESTMENT ADVISER

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

<PAGE>

Blue Sky qualification fees; charges of custodians and transfer and dividend
disbursing agents; certain insurance premiums; outside auditing and legal
expenses; costs of maintenance of corporate existence; costs attributable to
investor services, including, without limitation, telephone and personnel
expenses; costs of preparing and printing prospectuses and statements of
additional information for regulatory purposes and for distribution to existing
shareholders; costs of shareholders' reports and meetings of shareholders,
officers and Trustees of the Trust or the Portfolio; and any extraordinary
expenses.

For the years ended December 31, 1995, 1994 and 1993, Bankers Trust
earned $770,530, $428,346 and $74,893, respectively, as compensation for
investment advisory services provided to the Equity 500 Index Portfolio. During
the same periods, Bankers Trust reimbursed $418,814, $249,230 and $72,112,
respectively, to the Portfolio to cover expenses.

Bankers Trust may have deposit, loan and other commercial banking
relationships with the issuers of obligations which may be purchased on behalf
of the Portfolios, 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 Portfolios 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 Portfolios, Bankers Trust will not inquire or take into consideration
whether an issuer of securities proposed for purchase or sale by a Portfolio is
a customer of Bankers Trust, its parent or its subsidiaries or affiliates and,
in dealing with its customers, Bankers Trust, its parent, subsidiaries and
affiliates will not inquire or take into consideration whether securities of
such customers are held by any fund managed by Bankers Trust or any such
affiliate.

The Advisor Class Shares' prospectus contains disclosure as to the
amount of Bankers Trust's investment advisory and administration and services
fees, including waivers thereof. Bankers Trust may not recoup any of its waived
investment advisory or administration and services fees. Such waivers by Bankers
Trust shall stay in effect for at least 12 months.

ADMINISTRATOR

<PAGE>

office facilities (which may be in Bankers Trust's own offices), statistical and
research data, data processing services, clerical, accounting, bookkeeping and
recordkeeping services (including without limitation the maintenance of such
books and records as are required under the 1940 Act and the rules thereunder,
except as maintained by other agents), 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; supply supporting documentation for meetings
of the Board of Trustees; provide monitoring reports and assistance regarding
compliance with Declarations of Trust, by-laws, investment objectives and
policies and with Federal and state securities laws; arrange for appropriate
insurance coverage; calculate net asset values, net income and realized capital
gains or losses; and negotiate arrangements with, and supervise and coordinate
the activities of, agents and others to supply services.

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

For the years ended December 31, 1995, 1994 and 1993, Bankers Trust
earned $686,078, $447,359 and $4,277, respectively as compensation for
administrative and other services provided to BT Investment Equity 500 Index
Fund. During the same periods, Bankers Trust reimbursed $412,383, $341,939 and
$24,566, respectively, to BT Investment Equity 500 Index Fund to cover expenses.

For the years ended December 31, 1995, 1994 and 1993, Bankers Trust
earned $385,265, $214,173 and $37,446, respectively, as compensation for
administrative and other services provided to the Equity 500 Index Portfolio.

Bankers Trust has agreed that if in any fiscal year the aggregate
expenses of any Fund and its respective Portfolio (including fees pursuant to
the Advisory Agreement, but excluding interest, taxes, brokerage and, if
permitted by the relevant state securities commissions, extraordinary expenses)
exceed the expense limitation of any state having jurisdiction over a Fund or
Class, Bankers Trust will reimburse that Fund for the excess expense to the
extent required by state law. As of the date of this Statement of Additional
Information, the most restrictive annual expense limitation applicable to any
Fund or Class is 2.50% of the Fund's or Class' first $30 million of average
annual net assets, 2.00% of the next $70 million of average annual net

<PAGE>

assets and 1.50% of the remaining average annual net assets.

CUSTODIAN AND TRANSFER AGENT

Bankers Trust, 280 Park Avenue, New York, New York 10017, serves as
Custodian for the Trusts and for the Portfolios pursuant to the administration
and services agreements. As Custodian, it holds the Funds' and each Portfolio's
assets. Bankers Trust also serves as transfer agent of the Trusts and of each
Portfolio pursuant to the respective administration and services agreement.
Under its transfer agency agreement with the Trusts, Bankers Trust maintains the
shareholder account records for each Class of shares of each Fund, handles
certain communications between shareholders and the Trusts and causes to be
distributed any dividends and distributions payable by the Trusts. Bankers Trust
may be reimbursed by the Funds or the Portfolios for its out-of-pocket expenses.
Bankers Trust will comply with the self-custodian provisions of Rule 17f-2 under
the 1940 Act.

USE OF NAME

The Trusts and Bankers Trust have agreed that each Trust may use "BT"
as part of its name for so long as Bankers Trust serves as investment adviser to
the Portfolios. The Trusts have 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.

Each 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 each Trust, but
there would be no other material effect on the Trusts, their shareholders or
activities.

BANKING REGULATORY MATTERS

Bankers Trust has been advised by its counsel that in its opinion
Bankers Trust may perform the services for the Portfolios contemplated by the
Advisory Agreements and other activities for the Funds and the Portfolios
described in the Prospectuses and this Statement of Additional Information
without violation of the Glass-Steagall Act or other applicable banking laws or
regulations. However, counsel has pointed out that future changes in either
Federal or state statutes and regulations concerning the permissible activities
of banks or trust companies, as well as future judicial or administrative
decisions or interpretations of present and future statutes and regulations,
might prevent Bankers Trust from continuing to perform those services for the
Trusts and the Portfolios. State laws on this issue may differ from the
interpretations of relevant Federal law and banks and financial institutions may
be required to register as dealers pursuant to state securities law.

<PAGE>

If the circumstances described above should change, the Boards of Trustees
would review the relationships with Bankers Trust and consider taking all
actions necessary in the circumstances.

COUNSEL AND INDEPENDENT ACCOUNTANTS

Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street,
New York, New York 10022-4669, serves as Counsel to the Trusts and each
Portfolio. Coopers & Lybrand L.L.P., 1100 Main Street, Suite 900, Kansas City,
Missouri 64105 acts as Independent Accountants of the Trusts and each Portfolio.

ORGANIZATION OF THE TRUSTS

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

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

TAXATION

TAXATION OF THE FUNDS

The Trust intends to qualify annually and to elect each Fund to be
treated as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code").

<PAGE>

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

<PAGE>

, and therefore does not anticipate incurring a Federal income tax liability.

DISTRIBUTIONS

Dividends paid out of the Fund's investment company taxable income will
be taxable to a U.S. shareholder as ordinary income. Distributions of net
capital gains, if any, designated as capital gain dividends are taxable as
long-term capital gains, regardless of how long the shareholder has held the
Fund's shares, and are not eligible for the dividends-received deduction.
Shareholders receiving distributions in the form of additional shares, rather
than cash, generally will have a cost basis in each such share equal to the net
asset value of a share of the Fund on the reinvestment date. Shareholders will
be notified annually as to the U.S. Federal tax status of distributions.
Shareholders should consult their own tax adviser concerning the application of
federal, state and local taxes to the distributions they receive from the Fund.

TAXATION OF THE PORTFOLIOS

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

<PAGE>

BACKUP WITHHOLDING

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

FOREIGN SHAREHOLDERS

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

OTHER TAXATION

The Trust is organized as a Massachusetts business trust and, under
current law, neither the Trust nor any Fund is liable for any income or
franchise tax in the Commonwealth of Massachusetts, provided that the Fund
continues to qualify as a regulated investment company under Subchapter M of the
Code.

Each Portfolio is organized as a New York trust. Each Portfolio is not
subject to any income or franchise tax in the State of New York or the
Commonwealth of Massachusetts.

<PAGE>

FOREIGN WITHHOLDING TAXES

Income received by a Portfolio from sources within foreign countries
may be subject to withholding and other taxes imposed by such countries.

BACKUP WITHHOLDING

FOREIGN SHAREHOLDERS

OTHER TAXATION

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

BT Investment Portfolios and Equity 500 Index Portfolio are each a New
York master trust fund. Each Portfolio is not subject to any income or franchise
tax in the State of New York or the Commonwealth of Massachusetts.

<PAGE>

FINANCIAL STATEMENTS

The Statement of Assets and Liabilities and report of

Independent Accountants for each Portfolio, except the Equity 500 Index
Portfolio, are attached hereto.

The following financial statements for the BT Investment Equity 500
Index Fund and Equity 500 Index Portfolio are incorporated herein by reference
from its current reports to shareholders filed with the SEC pursuant to Section
30(b) of the 1940 Act and Rule 30b2-1 thereunder. A copy of each such report
will be provided, without charge, to each person receiving this Statement of
Additional Information.

BT INVESTMENT EQUITY 500 INDEX FUND

Statement of Assets and Liabilities, December 31,
1995
Statement of Operations for the Year Ended December 31,
1995
Statements of Changes in Net Assets for the
Years Ended
December 31, 1995 and 1994

Financial Highlights: Selected Ratios and Supplemental
Data for

each of the periods presented

Notes to Financial Statements
Report of Independent Accountants

EQUITY 500 INDEX PORTFOLIO

Statement of Assets and Liabilities, December 31,
1995
Statement of Operations for the Year Ended December 31,
1995
Statements of Changes in Net Assets for the
Years Ended
December 31, 1995 and 1994

Financial Highlights: Selected Ratios and Supplemental
Data for

each of the periods presented
Schedule of Portfolio Investments, December 31,
1995

Notes to Financial Statements
Report of Independent Accountants

<PAGE>

BT INVESTMENT PORTFOLIOS --
U.S. BOND INDEX PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES

JANUARY 2, 1996

ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . . .$ 10
Deferred organization expenses . . . . . . . . . . . . 9,000
Total assets . . . . . . . . . . . . . . . . . 9,010

LIABILITIES:
Accrued organization expenses . . . . . . . . . . . . 9,000
Net assets . . . . . . . . . . . . . . . . . .$ 10

NOTES:

(1) BT Investment Portfolios, a New York master trust, (the
"Portfolio Trust") was organized on March 27, 1993 and has
been inactive since that date with respect to U.S. Bond
Index Portfolio (the "Portfolio") except for matters
relating to the Portfolio's establishment and designation as
a subtrust or series of the Portfolio Trust, and the sale of
a beneficial interest therein at the purchase price of
$10.00 to BT Advisor Funds --Institutional U.S. Bond Index
Fund (the "Fund") (the "Initial Interests"). The Portfolio
is one of fifteen series of the Portfolio Trust.

<PAGE>

Portfolio, determined by the proportion of the amount of the Initial
Interest withdrawn to the aggregate amount of the Initial Interests in
the Portfolio then-outstanding after taking into account any prior
withdrawals of any of the Initial Interests in the Portfolio.

(3) At 4:00 p.m., New York time, on each business day of the
Portfolio, the value of an investor's beneficial interest in
the Portfolio is equal to the product of (i) the aggregate
net asset value of the Portfolio multiplied by (ii) the
percentage representing that investor's share of the
aggregate beneficial interests in the Portfolio effective
for that day.

(4) The Portfolio Trust has entered into an Investment Advisory Agreement
with Bankers Trust Company and an Administration and Services Agreement
with Bankers Trust Company under which Bankers Trust Company provides
administration, custody and transfer agency services to the Portfolio
Trust.

<PAGE>

BT INVESTMENT PORTFOLIOS --
EQUITY 500 EQUAL WEIGHTED INDEX PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES

JANUARY 2, 1996

ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . . .$ 10
Deferred organization expenses . . . . . . . . . . . . 9,000
Total assets . . . . . . . . . . . . . . . . . 9,010

LIABILITIES:
Accrued organization expenses . . . . . . . . . . . . 9,000
Net assets . . . . . . . . . . . . . . . . . .$ 10

NOTES:

(1) BT Investment Portfolios, a New York master trust, (the
"Portfolio Trust") was organized on March 27, 1993 and has
been inactive since that date with respect to Equity 500
Equal Weighted Index Portfolio (the "Portfolio") except for
matters relating to the Portfolio's establishment and
designation as a subtrust or series of the Portfolio Trust,
and the sale of a beneficial interest therein at the
purchase price of $10.00 to BT Advisor Funds --
Institutional Equity 500 Equal Weighted Index Fund (the
"Fund") (the "Initial Interests"). The Portfolio is one of
fifteen series of the Portfolio Trust.

(2) Organization expenses of the Portfolio are being deferred
and will be amortized on a straight-line basis over a period
not to exceed five years from the commencement of investment
operations of the Portfolio. Any amount received by the
Portfolio from the Fund as a result of a redemption by
Signature Financial Group, Inc. will be applied so as to
reduce the amount of unamortized organization expenses. The
amount paid by the Portfolio Trust on any withdrawal by the
Fund of an Initial Interest in the Portfolio will be reduced
by a portion of any unamortized organization expenses of the
Portfolio, determined by the proportion of the amount of the
Initial Interest withdrawn to the aggregate amount of the
Initial Interests in the Portfolio then-outstanding after
taking into account any prior withdrawals of any of the
Initial Interests in the Portfolio.

<PAGE>

percentage representing that investor's share of the aggregate
beneficial interests in the Portfolio effective for that day.

<PAGE>

BT INVESTMENT PORTFOLIOS --
SMALL CAP INDEX PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES

JANUARY 2, 1996

ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . . .$ 10
Deferred organization expenses . . . . . . . . . . . . 9,000
Total assets . . . . . . . . . . . . . . . . . 9,010

LIABILITIES:
Accrued organization expenses . . . . . . . . . . . . 9,000
Net assets . . . . . . . . . . . . . . . . . .$ 10

NOTES:

(1) BT Investment Portfolios, a New York master trust, (the
"Portfolio Trust") was organized on March 27, 1993 and has
been inactive since that date with respect to Small Cap
Index Portfolio (the "Portfolio") except for matters
relating to the Portfolio's establishment and designation as
a subtrust or series of the Portfolio Trust, and the sale of
a beneficial interest therein at the purchase price of
$10.00 to BT Advisor Funds --Institutional Small Cap Index
Fund (the "Fund") (the "Initial Interests"). The Portfolio
is one of fifteen series of the Portfolio Trust.

(3) At 4:00 p.m., New York time, on each business day of the Portfolio, the
value of an investor's beneficial interest in the Portfolio is equal to
the product of (i) the aggregate net asset value of the Portfolio
multiplied by (ii) the percentage representing that investor's share of
the

<PAGE>

aggregate beneficial interests in the Portfolio effective
for that day.

<PAGE>

BT INVESTMENT PORTFOLIOS --
EAFE(R) EQUITY INDEX PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES

JANUARY 2, 1996

ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . . .$ 10
Deferred organization expenses . . . . . . . . . . . . 9,000

Total assets . . . . . . . . . . . . . . . . .$ 9,010

LIABILITIES:
Accrued organization expenses . . . . . . . . . . . . 9,000
Net assets . . . . . . . . . . . . . . . . . .$ 10

NOTES:

(1) BT Investment Portfolios, a New York master trust, (the
"Portfolio Trust") was organized on March 27, 1993 and has
been inactive since that date with respect to EAFE(R)Equity
Index Portfolio (the "Portfolio") except for matters
relating to the Portfolio's establishment and designation as
a subtrust or series of the Portfolio Trust, and the sale of
a beneficial interest therein at the purchase price of
$10.00 to BT Advisor Funds --Institutional EAFE(R)Equity
Index Fund (the "Fund") (the "Initial Interests"). The
Portfolio is one of fifteen series of the Portfolio Trust.

(3) At 4:00 p.m., New York time, on each business day of the Portfolio, the
value of an investor's beneficial interest in the Portfolio is equal to
the product of (i) the aggregate net asset value of the Portfolio
multiplied by (ii) the percentage representing that investor's share of
the

<PAGE>

aggregate beneficial interests in the Portfolio effective
for that day.

<PAGE>

APPENDIX A

DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS:

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

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

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

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

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

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

C - Bonds rated C are the lowest-rated class of bonds and issued

A-1

<PAGE>

so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.

DESCRIPTION OF S&P'S CORPORATE BOND RATINGS:

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

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

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

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

A-2

<PAGE>

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

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

A-3

<PAGE>

APPENDIX B

The tables on the following pages shows the performance of the S&P 500,
the Russell 2000, the Aggregate Bond Index and the EAFE Index for the periods
indicated. Stock prices fluctuated widely during the period but were higher at
the end than at the beginning. The results shown should not be considered as a
representation of the income or capital gain or loss which may be generated by
the respective Index in the future. Nor should this be considered as a
representation of the past or future performance of the Fund.

B-1

<PAGE>

STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX*
<TABLE>
<CAPTION>

Year Total Return Year Total Return
<S> <C> <C> <C>

1995 37.49% 1960 0.47%

1994 1.32% 1959
11.96%

1993 9.99% 1958 43.36%

1992 7.67% 1957 -10.78%

1991 30.55% 1956 6.56%

-3.17% 1955 31.56%
1990

1989 31.49% 1954 52.62%

1988 16.81% 1953 -0.99%

1987 1952 18.73%
5.23%

1986 18.47% 1951 24.02%

1985 32.16% 1950 31.71%

1984 6.27% 1949 18.79%

1983 22.51% 1948 5.50%

1982 21.41% 1947 5.71%

1981 -4.91% 1946
-8.07%

1980 32.42% 1945 36.44%

1979 18.44% 1944 19.75%

1978 6.56% 1943 25.90%

-7.18% 1942 20.34%
1977

1976 23.84% 1941 -11.59%

1975 37.20% 1940 -9.78%

1974 1939 -0.41%
-26.47%

1973 -14.66% 1938 31.12%

1972 18.98% 1937 -35.03%

1971 1936 33.92%
14.31%

1970 4.01% 1935 47.67%

1969 -8.51% 1934 -1.44%

1968 11.06% 53.99%
1933

1967 23.98% 1932 -8.19%

1966 -10.06% 1931 -43.34%

1965 12.45% -24.90%
1930

1964 16.48% 1929 -8.42%

1963 22.08% 1928 43.61%

1962 -8.73% 1927
37.49%

1961 26.89% 1926 11.62%

</TABLE>

*Source: Ibbotson Associates

B-2

<PAGE>

LEHMAN BROTHERS AGGREGATE BOND INDEX*

TOTAL
YEAR RETURN

1994 -2.92%
1993 9.75%
1992 7.40%
1991 16.00%
1990 8.96%
1989 14.53%

1988 7.89%
1987 2.76%
1986 15.26%
1985 22.10%
1984 15.15%
1983 8.36%
1982 32.62%
1981 6.25%
1980 2.71%
1979 1.93%
1978 1.39%
1977 3.04%
1976 15.60%
*Source: Lipper Analytical Services, Inc.

RUSSELL 2000 SMALL STOCK INDEX*

TOTAL
YEAR RETURN

1995 28.44%
1994 - 1.82%
1993 18.91%
1992 18.42%
1991 46.05%
1990 -19.51%
1989 16.24%
1988 24.89%
1987 -8.77%
1986 5.68%
1985 31.05%
1984 -7.19%
1983 29.13%
1982 24.95%
1981 2.03%
1980 35.58%
1979 42.80%

*Source: Frank Russell Company

B-5

<PAGE>

MORGAN STANLEY CAPITAL INTERNATIONAL
EAFE INDEX*

TOTAL

YEAR RETURN

1995 11.21%
1994 10.10%
1993 32.56%
1992 -12.17%
1991 12.13%
1990 -23.45%
1989 10.54%
1988 28.57%
1987 24.63%
1986 69.44%
1985 56.16%
1984 7.38%
1983 23.69%
1982 -1.86%
1981 -2.28%
1980 22.58%
1979 4.75%
1978 32.62%

B-6

<PAGE>

1977 18.06%
1976 2.54%
1975 35.39%
1974 -23.16%
1973 -14.92%
1972 36.35%
1971 29.59%
1970 -11.66%

*Source: Morgan Stanley Capital International (MSCI) EAFE Index

B-7

<PAGE>

STANDARD & POOR'S 500 EQUAL WEIGHTED WILSHIRE INDEX

TOTAL
YEAR RETURN
1972 11.70%
1973 -21.86%
1974 -24.33%
1975 55.30%
1976 36.51%
1977 -1.61%
1978 10.70%
1979 28.87%
1980 30.72%
1981 4.89%
1982 29.41%
1983 31.05%
1984 3.25%
1985 31.14%
1986 17.54%
1987 5.37%
1988 20.72%
1989 25.88%
1990 -11.91%
1991 35.78%
1992 14.88%
1993 14.85%
1994 1.11%
1995 32.30%

*Source: Wilshire Associates

B-8

<PAGE>

CONTENTS

Risk Factors and Certain Securities and Investment Practices............ 3
Performance Information................................................ 32
Valuation of Securities; Redemptions and Purchases in Kind.............. 35
Management of the Trusts and the Portfolios............................. 37
Organization of the Trusts.............................................. 43
Taxation................................................................ 44
Financial Statements.................................................... 47
Appendix A..............................................................A-1
Appendix B..............................................................B-1

INVESTMENT ADVISER OF EACH PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY

DISTRIBUTOR

SIGNATURE BROKER-DEALER SERVICES, INC.

CUSTODIAN AND TRANSFER AGENT

<PAGE>

BANKERS TRUST COMPANY

INDEPENDENT ACCOUNTANTS

COOPERS & LYBRAND L.L.P.

COUNSEL
WILLKIE FARR & GALLAGHER

____________________

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

BT0466I

BT0466I
B-10

<PAGE>

BT PYRAMID MUTUAL FUNDS

BT INVESTMENT LIMITED TERM U.S. GOVERNMENT SECURITIES FUND
BT INVESTMENT EQUITY 500 INDEX FUND
APRIL 29, 1996

STATEMENT OF ADDITIONAL INFORMATION

BT Pyramid Mutual 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. This Statement of
Additional Information relates only to the following investment portfolios (each
a "Fund" and, collectively, the "Funds"):

BT INVESTMENT LIMITED TERM U.S. GOVERNMENT SECURITIES FUND - seeks a
high level of current income through investment in short-term and
intermediate- term U.S. Government securities.

BT INVESTMENT EQUITY 500 INDEX FUND - seeks to provide investment
results that, before expenses, correspond to the total return (I.E.,
the combination of capital changes and income) of common stocks
publicly traded in the United States, as represented by the Standard &
Poor's 500 Composite Stock Price Index.

As described in the Prospectuses, the Trust seeks to achieve the investment
objective of each Fund by investing all the investable assets of the Fund in an
open-end management investment company having the same investment objective as
such Fund. These investment companies are, respectively, Short/Intermediate U.S.
Government Securities Portfolio and Equity 500 Index Portfolio (collectively,
the "Portfolios").

Since the investment characteristics of the Funds will correspond
directly to those of the respective Portfolio in which the Fund invests all of
its assets, the following is a discussion of the various investments of and
techniques employed by the Portfolios.

Shares of the Funds are sold by Signature Broker-Dealer Services, Inc.
("Signature"), the Trust's Distributor, to clients and customers (including
affiliates and correspondents) of Bankers Trust Company ("Bankers Trust"), the
Portfolios' Adviser, and to clients and customers of other organizations.

The Trust's Prospectuses for each Fund are each dated April 29, 1996.
The Prospectuses provide the basic information investors should know before
investing, and may be obtained without charge by calling the Trust at the
telephone number listed below or by contacting any Service Agent. This Statement
of Additional Information, which is not a Prospectus, is intended to provide
additional information regarding the activities and operations of the Trust and
should be read in conjunction with the Prospectuses. Capitalized terms not

<PAGE>

otherwise defined in this Statement of Additional Information have the meanings
accorded to them in the Trust's Prospectuses.

BANKERS TRUST COMPANY
INVESTMENT ADVISER OF EACH PORTFOLIO AND ADMINISTRATOR
SIGNATURE BROKER-DEALER SERVICES, INC.
DISTRIBUTOR

6 ST. JAMES AVENUE BOSTON, MASSACHUSETTS 02116
(800)730-1313

<PAGE>

INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS

INVESTMENT OBJECTIVES

The investment objective of each Fund is described in that Fund's
Prospectus. There can, of course, be no assurance that any Fund will achieve its
investment objective.

INVESTMENT POLICIES

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

CERTIFICATES OF DEPOSIT AND BANKERS' ACCEPTANCES. The Equity 500 Index
Portfolio may invest in certificates of deposit which are receipts issued by a
depository institution in exchange for the deposit of funds. The issuer agrees
to pay the amount deposited plus interest to the bearer of the receipt on the
date specified on the certificate. The certificate usually can be traded in the
secondary market prior to maturity. Bankers' acceptances typically arise from
short-term credit arrangements designed to enable businesses to obtain funds to
finance commercial transactions. Generally, an acceptance is a time draft drawn
on a bank by an exporter or an importer to obtain a stated amount of funds to
pay for specific merchandise. The draft is then "accepted" by a bank that, in
effect, unconditionally guarantees to pay the face value of the instrument on
its maturity date. The acceptance may then be held by the accepting bank as an
earning asset or it may be sold in the secondary market at the going rate of
discount for a specific maturity. Although maturities for acceptances can be as
long as 270 days, most acceptances have maturities of six months or less.

COMMERCIAL PAPER. The Equity 500 Index Portfolio may invest in
commercial paper which consists of short-term (usually from 1 to 270 days)
unsecured promissory notes issued by corporations in order to finance their
current operations. A variable amount master demand note (which is a type of
commercial paper) represents a direct borrowing arrangement involving
periodically fluctuating rates of interest under a letter agreement between a
commercial paper issuer and an institutional lender pursuant to which the lender
may determine to invest varying amounts.

For a description of commercial paper ratings, see the Appendix.

<PAGE>

significant amount of these restricted or other illiquid securities because of
the potential for delays on resale and uncertainty in valuation. Limitations on
resale may have an adverse effect on the marketability of portfolio securities
and a mutual fund might be unable to dispose of restricted or other illiquid
securities promptly or at reasonable prices and might thereby experience
difficulty satisfying redemptions within seven calendar days. A mutual fund
might also have to register such restricted securities in order to dispose of
them resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities.

The Adviser will monitor the liquidity of Rule 144A securities in the
Short/Intermediate U.S. Government Securities Portfolio's portfolio holdings
under the supervision of the Portfolio's Board of Trustees. In reaching
liquidity decisions, the Adviser will consider, among other things, the
following factors: (1) the frequency of trades and quotes for the security; (2)
the number of dealers and other potential purchasers wishing to purchase or sell
the security; (3) dealer undertakings to make a market in the security; and (4)
the nature of the security and of the marketplace trades (e.g., the time needed
to dispose of the security, the method of soliciting offers and the mechanics of
the transfer).

LENDING OF PORTFOLIO SECURITIES. The Portfolios have the authority to
lend portfolio securities to brokers, dealers and other financial organizations.
The Portfolios will not lend securities to Bankers Trust, Signature or their
affiliates. By lending its securities, a Portfolio can increase its income by
continuing to receive interest on the loaned securities as well as by either
investing the cash collateral in short-term securities or obtaining yield in the
form of interest paid by the borrower when U.S. Government obligations are used
as collateral. There may be risks of delay in receiving additional collateral or
risks of delay in recovery of the securities or even loss of rights in the
collateral should the borrower of the securities fail financially. Each
Portfolio will adhere to the following conditions whenever its securities are
loaned: (i) the Portfolio must receive at least 100 percent cash collateral or
equivalent securities from the borrower; (ii) the borrower must increase this
collateral whenever the market value of the securities including accrued
interest

<PAGE>

rises above the level of the collateral; (iii) the Portfolio must be able to
terminate the loan at any time; (iv) the Portfolio must receive reasonable
interest on the loan, as well as any dividends, interest or other distributions
on the loaned securities, and any increase in market value; (v) the Portfolio
may pay only reasonable custodian fees in connection with the loan; and (vi)
voting rights on the loaned securities may pass to the borrower; provided,
however, that if a material event adversely affecting the investment occurs, the
Board of Trustees must terminate the loan and regain the right to vote the
securities.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

FUTURES CONTRACTS. A Portfolio may enter into contracts for the
purchase or sale for future delivery of fixed-income securities, foreign
currencies, or contracts based on financial indices including any index of U.S.
Government securities, foreign government securities or corporate debt
securities. U.S. futures contracts have been designed by exchanges which have
been designated "contracts markets" by the Commodity Futures Trading Commission
("CFTC"), and must be executed through a futures commission merchant, or
brokerage firm, which is a member of the relevant contract market. Futures
contracts trade on a number of exchange markets, and, through their clearing
corporations, the exchanges guarantee performance of the contracts as between
the clearing members of the exchange. A Portfolio may enter into futures
contracts which are based on debt securities that are backed by the full faith
and credit of the U.S. Government, such as long-term U.S. Treasury Bonds,
Treasury Notes, Government National Mortgage Association modified pass-through
mortgage-backed securities and three-month U.S. Treasury Bills. A Portfolio may
also enter into futures contracts which are based on bonds issued by entities
other than the U.S. Government.

<PAGE>

securities. The offsetting of a contractual obligation is accomplished by buying
(or selling, as the case may be) on a commodities exchange an identical futures
contract calling for delivery in the same month. Such a transaction, which is
effected through a member of an exchange, cancels the obligation to make or take
delivery of the securities. Since all transactions in the futures market are
made, offset or fulfilled through a clearinghouse associated with the exchange
on which the contracts are traded, the Portfolio will incur brokerage fees when
it purchases or sells futures contracts.

The ordinary spreads between prices in the cash and futures market, due
to differences in the nature of those markets, are subject to distortions.
First, all participants in the futures market are subject to initial deposit and
variation margin requirements. Rather than meeting additional variation margin
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the margin deposit requirements in the futures
market are less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market may
cause temporary price distortions. Due to the possibility of distortion, a
correct

<PAGE>

forecast of general interest rate trends by the Adviser may still not result in
a successful transaction.

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

The amount of risk a Portfolio assumes when it purchases an option on a
futures contract is the premium paid for the option plus related transaction

<PAGE>

costs. In addition to the correlation risks discussed above, the purchase of an
option also entails the risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the option purchased.

The Board of Trustees of the Short/Intermediate U.S. Government
Securities Portfolio has adopted the requirement that futures contracts and
options on futures contracts be used only as a hedge and not for speculation. In
addition, the Portfolio will not enter into any futures contracts or options on
futures contracts if immediately thereafter the amount of margin deposits on all
the futures contracts of the Portfolio and premiums paid on outstanding options
on futures contracts owned by the Portfolio would exceed 5% of the market value
of the total assets of the Portfolio.

<PAGE>

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

<PAGE>

thereby reducing the risk of counterparty default. Further, a liquid secondary
market in options traded on a national securities exchange may be more readily
available than in the over-the-counter market, potentially permitting a
Portfolio to liquidate open positions at a profit prior to exercise or
expiration, or to limit losses in the event of adverse market movements.

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

When a Portfolio writes a covered call option, it gives the purchaser
of the option the right to buy the underlying security at the price specified in
the

<PAGE>

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

A Portfolio may terminate its obligation as the writer of a call or put
option by purchasing an option with the same exercise price and expiration date
as the option previously written. This transaction is called a "closing purchase
transaction." Where the Portfolio cannot effect a closing purchase transaction,
it may be forced to incur brokerage commissions or dealer spreads in selling
securities it receives or it may be forced to hold underlying securities until
an option is exercised or expires.

<PAGE>

if the value of the securities remained at or below the exercise price
during the option period.

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

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

<PAGE>

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

<PAGE>

RATING SERVICES

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

INVESTMENT RESTRICTIONS

<PAGE>

outstanding voting securities" under the Investment Company Act of 1940, as
amended (the "1940 Act"), and as used in this Statement of Additional
Information and the Prospectuses, means, with respect to the Fund (or the
Portfolio), the lesser of (i) 67% or more of the outstanding voting securities
of the Fund (or of the total beneficial interests of the Portfolio) present at a
meeting, if the holders of more than 50% of the outstanding voting securities of
the Fund or of the total beneficial interests of the Portfolio) are present or
represented by proxy or (ii) more than 50% of the outstanding voting securities
of the Fund (or of the total beneficial interests of the Portfolio). Whenever
the Trust is requested to vote on a fundamental policy of a Portfolio, the Trust
will hold a meeting of the corresponding Fund's shareholders and will cast its
vote as instructed by that Fund's shareholders. Fund shareholders who do not
vote will not affect the Trust's votes at the Portfolio meeting. The percentage
of the Trust's votes representing Fund shareholders not voting will be voted by
the Trustees of the Trust in the same proportion as the Fund shareholders who
do, in fact, vote.

As a matter of fundamental policy, each Portfolio (or Fund) may not
(except that no investment restriction of a Fund shall prevent a Fund from
investing all of its Assets in an open-end investment company with substantially
the same investment objective):

(1) borrow money or mortgage or hypothecate assets of the Portfolio
(Fund), except that in an amount not to exceed 1/3 of the current value of the
Portfolio's (Fund's) 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 1/3 of such assets to secure such borrowings (it is
intended that money would be borrowed only from banks and only either to
accommodate requests for the withdrawal of beneficial interests (redemption of
shares) 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) or reverse
repurchase agreements, 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; for additional related restrictions, see clause
(i) under the caption "State and Federal Restrictions" below. (As an operating
policy, the Portfolios may not engage in dollar roll transactions);

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

(3) make loans to other persons except: (a) through the lending of the
Portfolio's (Fund's) portfolio securities and provided that any such loans not
exceed 30% of the Portfolio's (Fund's) net assets (taken at market value); (b)
through the use of repurchase agreements or the purchase of short-term
obligations; or (c) by purchasing a portion of an issue of debt securities of
types distributed publicly or privately (under current regulations, the
Portfolio's (Fund's) fundamental policy with respect to 20% risk weighing for
financial institutions prevent the Portfolio (Fund) from engaging in securities
lending);

<PAGE>

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

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

(i) borrow money (including through dollar roll transactions) for
any purpose in excess of 10% of the Portfolio's (Fund's) total
assets (taken at cost), except that the Portfolio (Fund) may
borrow for temporary or emergency purposes up to 1/3 of its
total assets;

(ii) pledge, mortgage or hypothecate for any purpose in excess of
10% of the Portfolio's (Fund's) total assets (taken at market
value), provided that collateral arrangements with respect to
options and futures, including deposits of initial deposit and
variation margin, and reverse repurchase agreements are not
considered a pledge of assets for purposes of this
restriction;

(iv) sell any security which it does not own unless by virtue of
its ownership of other securities it has at the time of sale a
right to obtain securities, without payment of further
consideration, equivalent in kind and amount to the securities
sold and provided that if such right is conditional the sale
is made upon the same conditions;

(v) invest for the purpose of exercising control or management;

<PAGE>

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

(vii) invest more than 15% of the Portfolio's (Fund's) net assets
(taken at the greater of cost or market value) in securities that are illiquid
or not readily marketable not including (a) Rule 144A securities that have been
determined to be liquid by the Board of Trustees; and (b) commercial paper that
is sold under section 4(2) of the 1933 Act which: (i) is not traded flat or in
default as to interest or principal; and (ii) is rated in one of the two highest
categories by at least two nationally recognized statistical rating
organizations and

the Portfolio's (Fund's) Board of Trustees have determined the commercial paper
to be liquid; or (iii) is rated in one of the two highest categories by one
nationally recognized statistical rating agency and the Portfolio's (Fund's)
Board of Trustees have determined that the commercial paper is equivalent
quality and is liquid;

(viii) invest more than 10% of the Portfolio's (Fund's)
total assets (taken at the greater of cost or market
value) in securities that are restricted as to resale
under the 1933 Act (other than Rule 144A securities
deemed liquid by the Portfolio's (Fund's) Board of
Trustees)

(ix) no more than 5% of the Portfolio's (Fund's) total assets are
invested in securities issued by issuers which (including
predecessors) have been in operation less than three years;

<PAGE>

(x) with respect to 75% of the Portfolio's (Fund's) total assets,
purchase securities of any issuer if such purchase at the time thereof would
cause the Portfolio (Fund) to hold more than 10% of any class of securities of
such issuer, for which purposes all indebtedness of an issuer shall be deemed a
single class and all preferred stock of an issuer shall be deemed a single
class, except that futures or option contracts shall not be subject to this
restriction;

(xi) if the Portfolio (Fund) is a "diversified" fund with respect to
75% of its assets, invest more than 5% of its total assets in the securities
(excluding U.S. Government securities) of any one issuer;

(xii) purchase or retain in the Portfolio's (Fund's) portfolio
securities any securities issued by an issuer any of whose officers, directors,
trustees or security holders is an officer or Trustee of the Portfolio (Trust),
or is an officer or partner of the Adviser, if after the purchase of the
securities of such issuer for the Portfolio (Fund) one or more of such persons
owns beneficially more than 1/2 of 1% of the shares or securities, or both, all
taken at market value, of such issuer, and such persons owning more than 1/2 of
1% of such shares or securities together own beneficially more than 5% of such
shares or securities, or both, all taken at market value;

(xiii) invest more than 5% of the Portfolio's (Fund's) net assets in
warrants (valued at the lower of cost or market) (other than warrants acquired
by the Portfolio (Fund) as part of a unit or attached to securities at the time
of purchase), but not more than 2% of the Portfolio's (Fund's) net assets may be
invested in warrants not listed on the New York Stock Exchange Inc. (the "NYSE")
or the American Stock Exchange;

(xiv) make short sales of securities or maintain a short position,
unless at all times when a short position is open it owns an equal amount of
such securities or securities convertible into or exchangeable, without payment
of any further consideration, for securities of the same issue and equal in
amount to, the securities sold short, and unless not more than 10% of the
Portfolio's (Fund's) net assets (taken at market value) is represented by such
securities, or securities convertible into or exchangeable for such securities,
at any one time (the Portfolios (Funds) have no current intention to engage in
short selling);

<PAGE>

(xv) write puts and calls on securities unless each of the following conditions
are met: (a) the security underlying the put or call is within the investment
policies of the Portfolio (Fund) and the option is issued by the Options
Clearing Corporation, except for put and call options issued by non- U.S.
entities or listed on non-U.S. securities or commodities exchanges; (b) the
aggregate value of the obligations underlying the puts determined as of the date
the options are sold shall not exceed 50% of the Portfolio's (Fund's) net
assets; (c) the securities subject to the exercise of the call written by the
Portfolio (Fund) must be owned by the Portfolio (Fund) at the time the call is
sold and must continue to be owned by the Portfolio (Fund) until the call has
been exercised, has lapsed, or the Portfolio (Fund) has purchased a closing
call, and such purchase has been confirmed, thereby extinguishing the
Portfolio's (Fund's) obligation to deliver securities pursuant to the call it
has sold; and (d) at the time a put is written, the Portfolio (Fund) establishes
a segregated account with its custodian consisting of cash or short-term U.S.
Government securities equal in value to the amount the Fund will be obligated to
pay upon exercise of the put (this account must be maintained until the put is
exercised, has expired, or the Portfolio (Fund) has purchased a closing put,
which is a put of the same series as the one previously written); and

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

PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS

<PAGE>

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

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

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

<PAGE>

after exercising care, it appears that more favorable results are available
otherwise.

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

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

For the years ended December 31, 1995, 1994 and 1993, Equity 500 Index Portfolio
incurred brokerage commissions in the amount of $172,924, $97,069 and $63,408,
respectively.

For the years ended December 31, 1995, 1994 and 1993 ,
Short/Intermediate U.S. Government Securities Portfolio did not incur brokerage
commissions.

PERFORMANCE INFORMATION

STANDARD PERFORMANCE INFORMATION

From time to time, quotations of a Fund's performance may be included
in advertisements, sales literature or shareholder reports. These performance
figures are calculated in the following manner:

YIELD: Yields for a Fund used in advertising are computed by dividing
the Fund's interest and dividend income for a given 30-day or one-month

<PAGE>

period, net of expenses, by the average number of shares entitled to
receive distributions during the period, dividing this figure by the
Fund's net asset value per share at the end of the period, and
annualizing the result (assuming compounding of income) in order to
arrive at an annual percentage rate. Income is calculated for purpose
of yield quotations in accordance with standardized methods applicable
to all stock and bond mutual funds. Dividends from equity investments
are treated as if they were accrued on a daily basis, solely for the
purpose of yield calculations. In general, interest income is reduced
with respect to bonds trading at a premium over their par value by
subtracting a portion of the premium from income on a daily basis, and
is increased with respect to bonds trading at a discount by adding a
portion of the discount to daily income. Capital gains and losses
generally are excluded from the calculation.

The 30-day SEC yield for the period ended December 31, 1995 were as
follows:

BT Investment Limited Term U.S. Government Securities Fund
4.97%
BT Investment Equity 500 Index Fund
2.21%

TOTAL RETURN: A Fund's average annual total return will be calculated
for certain periods by determining the average annual compounded rates
of return over those periods that would cause an investment of $1,000
(made at the maximum public offering price with all distributions
reinvested) to reach the value of that investment at the end of the
periods. A Fund may also calculate total return figures which represent
aggregate performance over a period or year-by-year performance.

BT Investment Limited
Term U.S. Government BT Investment
SECURITIES EQUITY 500 INDEX
------------------- ----------------------
FUND1 FUND2
--------- ------

Total Return for
the One Year Period 9.81% 37.15%
the One Year Period
Ended 12/31/95

Total Return for the
Period

Commencement of 17.37% 51.94%
Operations through
12/31/95

Average Annual Total
Return for the
Period
Commencement of 4.89% 14.
Operations through
12/31/95

1Fund commenced operations on August 24, 1992.
2Fund commenced operations on December 31, 1992.
</TABLE>

PERFORMANCE RESULTS: Any total return quotation provided for a Fund should not
be considered as representative of the performance of the Fund in the future
since the net asset value and public offering price of shares of the Fund will
vary based not only on the type, quality and maturities of the securities held
in the corresponding Portfolio, but also on changes in the current value of such
securities and on changes in the expenses of the Fund and the corresponding
Portfolio. These factors and possible differences in the methods used to
calculate total return should be considered when comparing the total return of a
Fund to total returns published for other investment companies or other
investment vehicles. Total return reflects the performance of both principal and
income.

COMPARISON OF FUND PERFORMANCE

<PAGE>

effect of the methods used to calculate performance when comparing performance
of a Fund with performance quoted with respect to other investment companies or
types of investments.

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

ASIAN WALL STREET JOURNAL, a weekly Asian newspaper that often reviews U.S.
mutual funds investing internationally.

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

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

CHANGING TIMES, THE KIPLINGER MAGAZINE, a monthly investment advisory
publication that periodically features the performance of a variety of
securities.

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

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

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

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

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

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

INVESTOR'S DAILY, a daily newspaper that features financial, economic and
business news.

LIPPER ANALYTICAL SERVICES, INC.'S MUTUAL FUND PERFORMANCE ANALYSIS, a weekly
publication of industry-wide mutual fund averages by type of fund.

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

MORNINGSTAR INC., a publisher of financial information and mutual fund research.

NEW YORK TIMES, a nationally distributed newspaper which regularly covers
financial news.

<PAGE>

PERSONAL INVESTING NEWS, a monthly news publication that often reports on
investment opportunities and market conditions.

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

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

U.S. NEWS AND WORLD REPORT, a national business weekly that periodically reports
mutual fund performance data.

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

WALL STREET JOURNAL, a Dow Jones and Company, Inc. newspaper which regularly
covers financial news.

WEISENBERGER INVESTMENT COMPANIES SERVICES, an annual compendium of information
about mutual funds and other investment companies, including comparative data on
funds' backgrounds, management policies, salient features, management results,
income and dividend records, and price ranges.

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

VALUATION OF SECURITIES; REDEMPTIONS AND PURCHASES IN KIND

<PAGE>

portfolio securities of the corresponding Portfolio and in no case will they
receive a security issued by the Portfolio. The Portfolio has advised the Trust
that the Portfolio will not redeem in kind except in circumstances in which the
Fund is permitted to redeem in kind or unless requested by the Fund.

Each investor in a Portfolio, including the corresponding Fund, may add
to or reduce its investment in the Portfolio on each day that the NYSE is open
for business and New York charter banks are not closed owing to customary or
local holidays. As of the close of the NYSE, currently 4:00 p.m. (New York time
or earlier if the NYSE closes earlier) on each such day, the value of each
investor's interest in a Portfolio will be determined by multiplying the net
asset value of the Portfolio by the percentage representing that investor's
share of the aggregate beneficial interests in the Portfolio. Any additions or
reductions which are to be effected on that day will then be effected. The
investor's percentage of the aggregate beneficial interests in a Portfolio will
then be recomputed as the percentage equal to the fraction (i) the numerator of
which is the value of such investor's investment in the Portfolio as of the
close of the NYSE on such day plus or minus, as the case may be, the amount of
net additions to or reductions in the investor's investment in the Portfolio
effected on such day and (ii) the denominator of which is the aggregate net
asset value of the Portfolio as of 4:00 p.m. or the close of the NYSE on such
day plus or minus, as the case may be, the amount of net additions to or
reductions in the aggregate investments in the Portfolio by all investors in the
Portfolio. The percentage so determined will then be applied to determine the
value of the investor's interest in the Portfolio as of 4:00 p.m. or the close
of the NYSE on the following day the NYSE is open for trading.

Each Fund may, at its own option, accept securities in payment for
shares. The securities delivered in payment for shares are valued by the method
described under "Net Asset Value" as of the day the Fund receives the
securities. This is a taxable transaction to the shareholder. Securities may be
accepted in payment for shares only if they are, in the judgment of Bankers
Trust, appropriate investments for the Fund's corresponding Portfolio. In
addition, securities accepted in payment for shares must: (i) meet the
investment objective and policies of the acquiring Fund's corresponding
Portfolio; (ii) be acquired by the applicable Fund for investment and not for
resale (other than for resale to the Fund's corresponding Portfolio); (iii) be
liquid securities which are not restricted as to transfer either by law or
liquidity of market; and (iv) if stock, have a value which is readily
ascertainable as evidenced by a listing on a stock exchange, over-the-counter
market or by readily available market quotations from a dealer in such
securities. When securities are used as payment for shares or as a redemption in
kind from the Fund, the transaction fee will not be assessed. However, the
shareholder will be charged the costs associated with receiving or delivering
the securities. These costs include security movement costs and taxes and
registration costs. Each Fund reserves the right to accept or reject at its own
option any and all securities offered in payment for its shares.

MANAGEMENT OF THE TRUST AND PORTFOLIOS

<PAGE>

The Trustees and officers of the Trust and Portfolios and their
principal occupations during the past five years are set forth below. Their
titles may have varied during that period. Asterisks indicate those Trustees who
are "interested persons" (as defined in the 1940 Act) of the Trust. Unless
otherwise indicated, the address of each Trustee and officer is 6 St. James
Avenue, Boston, Massachusetts.

TRUSTEES OF THE TRUST

PHILIP W. COOLIDGE* (age 44) -- President and Trustee; Chairman, Chief
Executive Officer and President, Signature Financial Group, Inc. ("SFG") (since

December, 1988) and Signature (since April, 1989).

MARTIN J. GRUBER (age 58) -- Trustee; Chairman of the Finance
Department and Nomura Professor of Finance, Leonard N. Stern School of Business,
New York University (since 1964).

KELVIN J. LANCASTER (age 71) -- Trustee; Professor, Department of
Economics, Columbia University. His address is 35 Claremont Avenue, New York,
New York 10027.

HARRY VAN BENSCHOTEN (age 68) -- Trustee; Director, Canada Life
Insurance Company of New York; Director, Competitive Technologies, Inc., a
public company listed on the American Stock Exchange; Retired (since 1987);
Corporate Vice President, Newmont Mining Corporation (prior to 1987). His
address is 6581 Ridgewood Drive, Naples, FL 33963.

TRUSTEES OF THE PORTFOLIOS

PHILIP W. COOLIDGE* (age 44) -- Trustee and President; Chairman, Chief
Executive Officer and President, SFG (since December, 1988) and Signature (since
April, 1989).

S. LELAND DILL -- (age 65) Trustee: Retired; Director, Coutts &
Company Group and Coutts & Co. (U.S.A.) International; Director,
Zwieg Series Trust; formerly, Partner of KPMG Peat Marwick,
Mitchell & Co.; Director, Vintners International Company, Inc.; General Partner
of Pemco (an investment company registered under the 1940 Act). His address is
5070 North Ocean Drive, Singer Island, Florida 33404.

<PAGE>

OFFICERS OF THE TRUST AND PORTFOLIOS

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

JOHN R. ELDER (age 47) -- Treasurer ;
Vice President, SFG (since
April 1995);
Treasurer, Phoenix Family of Mutual Funds (prior to April 1995).

BARBARA M. O'DETTE (age 36) -- Assistant Treasurer; Assistant
Treasurer, SFG (since December, 1988); Assistant Treasurer, Signature (since
April, 1989).

DANIEL E. SHEA (age 33) -- Assistant Treasurer; Assistant Manager, SFG
(since November 1993); Supervisor and Senior Technical Advisor, Putnam

Investments (prior to November 1993).

THOMAS M. LENZ (age 37) -- Secretary; Senior Vice President and Associate
General Counsel, SFG (since November, 1989); Assistant Secretary, Signature
(since February, 1991); Attorney, Ropes & Gray (prior to November, 1989).

LINDA T. GIBSON (age 30) -- Assistant Secretary; Vice President, Global
Product Management and Assistant Secretary, SFG (since May, 1992); Assistant
Secretary, Signature (since October, 1992); student, Boston University School of
Law (September, 1989 to May, 1992).

MOLLY S. MUGLER (age 44) -- Assistant Secretary; Legal Counsel and
Assistant Secretary, SFG (since December, 1988); Assistant Secretary, Signature

(since April, 1989).

ANDRES E. SALDANA (age 33) -- Assistant Secretary; Legal Counsel, SFG
(since November, 1992); Assistant Secretary, Signature (since September, 1993);

<PAGE>
Attorney, Ropes & Gray (September, 1990 to November, 1992); student, Yale Law
School (September, 1987 to May, 1990).

Messrs. Coolidge, Danielson, Elder, Lenz, Saldana and Shea
and Mss. Gibson, Mugler and O'Dette also hold similar positions for other
investment companies for which Signature or an affiliate serves as the principal
underwriter.

No person who is an officer or director of Bankers Trust is an officer
or Trustee of the Trust or the Portfolios. No director, officer or employee of
Signature or any of its affiliates will receive any compensation from the Trust
or the Portfolios for serving as an officer or Trustee of the Trust or the
Portfolios. The Trust pays each Trustee who is not a director, officer or
employee of the Adviser, the Distributor, the Administrator or any of their
affiliates an annual fee of $10,000, respectively, per annum plus $1,250,
respectively, per meeting attended and reimburses them for travel and
out-of-pocket expenses. The Portfolios and Cash Management, Treasury Money, Tax
Free Money, NY Tax Free Money, International Equity, Utility, Capital
Appreciation, Intermediate Tax Free, Asset Management and BT Investment
Portfolios (together with the Trust, the "Fund Complex") collectively pay each
Trustee who is not a director, officer or employee of the Adviser, the
Distributor, the Administrator or any of their affiliates an annual fee of
$10,000, respectively, per annum plus $1,250, respectively, per meeting attended
and reimburses them for travel and out-of-pocket expenses.

For the year ended December 31, 1995, BT Investment Limited Term U.S.
Government Securities Fund incurred Trustees fees equal to $6,534. For the year
ended December 31, 1995, Short/Intermediate U.S. Government Securities Portfolio
incurred Trustees fees equal to $1,917.

For the year ended December 31, 1995, BT Investment Equity 500 Index
Fund incurred Trustees fees equal to $6,634. For the year ended December 31,
1995, Equity 500 Index Portfolio incurred Trustees fees
equal to $1,868.

The following table reflects fees paid to the Trustees of the Trust and
Portfolios for the year ended December 31, 1995.

TRUSTEE COMPENSATION TABLE

Aggregate

Compensation Total
Name of Person Compensation from Fund Complex
Position from Trust Paid to Trustees
Martin J. Gruber,
Trustee of Trust $12,500 $12,500

<PAGE>
Kelvin J. Lancaster,
Trustee of Trust $12,500 $12,500

Harry Van Benschoten,
Trustee of Trust $12,500 $12,500

Charles P. Biggar,
Trustee of Portfolios none $12,500

S. Leland Dill,
Trustee of Portfolios none $12,500

Philip Saunders, Jr.,
Trustee of Portfolios none $12,500

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

As of March 31, 1996, the Trustees and officers of the Trust and the
Portfolios owned in the aggregate less than 1% of the shares of any Fund or the
Trust (all series taken together). As of the same date, Bankers Trust on behalf
of its customers was the record owner of 91.57% and 85.04%, respectively, of the
outstanding shares of BT Investment Limited Term U.S. Government Securities Fund
and BT Investment Equity 500 Index Fund. Shareholders owning 25% or more of the
outstanding shares of a Fund may diminish the voting power of other shareholders
proportionately.

INVESTMENT ADVISER

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

Bankers Trust bears all expenses in connection with the performance of
services under each Advisory Agreement. The Trust and each Portfolio bears
certain other expenses incurred in its operation, including: taxes, interest,
brokerage fees and commissions, if any; fees of Trustees of the Trust or the
Portfolio who are not officers, directors or employees of Bankers Trust,
Signature or any of their affiliates; SEC fees and state Blue Sky qualification
fees; charges of custodians and transfer and dividend disbursing agents; certain
insurance premiums; outside auditing and legal expenses; costs of maintenance of

<PAGE>

corporate existence; costs attributable to investor services, including, without
limitation, telephone and personnel expenses; costs of preparing and printing
prospectuses and statements of additional information for regulatory purposes
and for distribution to existing shareholders; costs of shareholders' reports
and meetings of shareholders, officers and Trustees of the Trust or the
Portfolio; and any extraordinary expenses.

For the years ended December 31, 1995, 1994 and 1993, Bankers Trust
earned $130,819, $90,050 and $34,664, respectively, in compensation for
investment advisory services provided to Short/Intermediate U.S. Government
Securities Portfolio. During the same periods, Bankers Trust reimbursed $25,406,
$31,730 and $34,158 , respectively, to Short/Intermediate U.S. Government
Securities Portfolio to cover expenses.

For the years ended December 31, 1995, 1994 and 1993, Bankers Trust
earned $770,530, $428,346 and $74,893, respectively, in compensation for
investment advisory services provided to Equity 500 Index Portfolio. During the
same periods, Bankers Trust reimbursed $418,814, $249,230 and $72,112,
respectively, to Equity 500 Index Portfolio to cover expenses.

Each Fund's prospectus contains disclosure as to the amount of Bankers
Trust's investment advisory and administration and services fees, including
waivers thereof. Bankers Trust may not recoup any of its waived investment
advisory or administration and services fees. Such waivers by Bankers Trust
shall stay in effect for at least 12 months.

<PAGE>

ADMINISTRATOR

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

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

For the years ended December 31, 1995, 1994 and 1993, Bankers Trust
earned $91,142, $60,306 and $9,960, respectively, in compensation for
administrative and other services provided to BT Investment Limited Term U.S.
Government Securities Fund. During the same periods, Bankers Trust reimbursed
$58,676, $49,475 and $39,322 , respectively, to BT Investment Limited Term U.S.
Government Securities Fund to cover expenses.

For the years ended December 31, 1995, 1994 and 1993, Bankers Trust
earned $26,164, $18,010 and $6,933, respectively, in compensation for
administrative and other services provided to Short/Intermediate U.S. Government
Securities Portfolio.

For the years ended December 31, 1995, 1994 and 1993, Bankers Trust
earned $686,078, $447,359 and $4,277, respectively, in compensation for
administrative and other services provided to BT Investment Equity 500 Index
Fund. During the same periods, Bankers Trust reimbursed $412,383, $341,939 and
$24,566, respectively, to BT Investment Equity 500 Index Fund to cover expenses.

For the years ended December 31, 1995, 1994 and 1993, Bankers Trust
earned $385,265, $214,173 and $37,446, respectively, in compensation for
administrative and other services provided to Equity 500 Index Portfolio.

<PAGE>

Bankers Trust has agreed that if in any year the aggregate expenses of
any Fund and its respective Portfolio (including fees pursuant to the investment
advisory agreement, but excluding interest, taxes, brokerage and, if permitted
by the relevant state securities commissions, extraordinary expenses) exceed the
expense limitation of any state having jurisdiction over a Fund, Bankers Trust
will reimburse the Fund for the excess expense to the extent required by state
law. As of the date of this Statement of Additional Information, the most
restrictive annual expense limitation applicable to any Fund is 2.5% of the
Fund's first $30 million of average annual net assets, 2.0% of the next $70
million of average annual net assets and 1.5% of the remaining average annual
net assets.

CUSTODIAN AND TRANSFER AGENT

Bankers Trust, 280 Park Avenue, New York, New York 10017, serves as
Custodian for the Trust and for each Portfolio pursuant to the administration
and services agreements. As Custodian, it holds the Funds' and each Portfolio's
assets. Bankers Trust also serves as transfer agent of the Trust and of each
Portfolio pursuant to the respective administration and services agreement.
Under its transfer agency agreement with the Trust, Bankers Trust maintains the
shareholder account records for each Fund, handles certain communications
between shareholders and the Trust and causes to be distributed any dividends
and distributions payable by the Trust. Bankers Trust may be reimbursed by the
Funds or the Portfolios for its out-of-pocket expenses. Bankers Trust will
comply with the self-custodian provisions of Rule 17f-2 under the 1940 Act.

USE OF NAME

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

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

BANKING REGULATORY MATTERS

Bankers Trust has been advised by its counsel that, in counsel's
opinion, Bankers Trust currently may perform the services for the Trust and the

<PAGE>

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

COUNSEL AND INDEPENDENT ACCOUNTANTS

Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street,
New York, New York 10022-4669, serves as Counsel to the Trust and each
Portfolio. Coopers & Lybrand L.L.P., 1100 Main Street, Suite 900, Kansas City,
Missouri 64105 has been selected as Independent Accountants for the Trust and
each
Portfolio.

ORGANIZATION OF THE TRUST

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

The Trust was organized on February 28, 1992.

<PAGE>

TAXATION

TAXATION OF THE FUNDS

The Trust intends to qualify annually and to elect each Fund to be
treated as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code").

<PAGE>

DISTRIBUTIONS

TAXATION OF THE PORTFOLIOS

The Portfolios are not subject to the Federal income taxation. Instead,
the Fund and other investors investing in a Portfolio must take into account, in

<PAGE>

computing their Federal income tax liability, their share of the Portfolio's
income, gains, losses, deductions, credits and tax preference items, without
regard to whether they have received any cash distributions from the Portfolio.

BACKUP WITHHOLDING

FOREIGN SHAREHOLDERS

<PAGE>

OTHER TAXATION

Each Portfolio is organized as a New York trust. Each Portfolio is not
subject to any income or franchise tax in the State of New York or the
Commonwealth of Massachusetts.

FINANCIAL STATEMENTS

The following financial statements for the BT Investment Limited Term
U.S. Government Securities Fund, Short/Intermediate U.S. Government Securities
Portfolio, BT Investment Equity 500 Index Fund and Equity 500 Index Portfolio
are incorporated herein by reference from its current reports to shareholders
filed with the SEC pursuant to Section 30(b) of the 1940 Act and Rule 30b2-1
thereunder. A copy of each such report will be provided, without charge, to each
person receiving this Statement of Additional Information.

BT INVESTMENT LIMITED TERM U.S. GOVERNMENT SECURITIES FUND

Statement of Assets and Liabilities, December 31, 1995 Statement of
Operations for the year ended December 31, 1995 Statements of Changes
in Net Assets for the years ended December 31, 1995 and 1994
Financial Highlights: Supplemental data for each of the periods
presented
Notes to Financial Statements
Report of Independent Accountants

SHORT/INTERMEDIATE U.S. GOVERNMENT SECURITIES PORTFOLIO

Statement of Assets and Liabilities, December 31, 1995 Statement of
Operations for the year ended December 31, 1995 Statements of Changes
in Net Assets for the years ended December 31, 1995 and 1994
Financial Highlights: Selected ratios and supplemental data for
each of the periods presented
Schedule of Portfolio Investments, December 31, 1995
Notes to Financial Statements
Report of Independent Accountants

<PAGE>

BT INVESTMENT EQUITY 500 INDEX FUND:

Statement of Assets and Liabilities, December 31, 1995 Statement of
Operations for the year ended December 31, 1995 Statements of Changes
in Net Assets for the years ended December 31, 1995 and 1994
Financial Highlights: Supplemental data for each of the periods
presented
Notes to Financial Statements
Report of Independent Accountants

EQUITY 500 INDEX PORTFOLIO:

Statement of Assets and Liabilities, December 31, 1995 Statement of
Operations for the year ended December 31, 1995 Statements of Changes
in Net Assets for the years ended
December 31, 1995 and 1994
Financial Highlights: Selected ratios and supplemental data for
each of the periods presented
Schedule of Portfolio Investments, December 31, 1995
Notes to Financial Statements
Report of Independent Accountants

<PAGE>

APPENDIX A

BOND AND COMMERCIAL PAPER RATINGS

Set forth below are descriptions of the ratings of Moody's and S&P,
which represent their opinions as to the quality of the securities which they
undertake to rate. It should be emphasized, however, that ratings are relative
and subjective and are not absolute standards of quality.

S&P'S BOND RATINGS

An S&P corporate debt rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. Debt rated
"AAA" has the highest rating assigned by S&P. Capacity to pay interest and repay
principal is extremely strong. Debt rated "AA" has a very strong capacity to pay
interest and to repay principal and differs from the highest rated issues only
in small degree.

The rating "AA" may be modified by the addition of a plus or minus sign
to show relative standing within such category.

MOODY'S BOND RATINGS

Excerpts from Moody's description of its corporate bond ratings:
Aaa--judged to be the best quality, carry the smallest degree of investment
risk; Aa--judged to be of high quality by all standards.

FITCH INVESTORS SERVICE BOND RATINGS

AAA. Securities of this rating are regarded as strictly high-grade,
broadly marketable, suitable for investment by trustees and fiduciary
institutions, and liable to but slight market fluctuation other than through
changes in the money rate. The factor last named is of importance varying with

A-1

<PAGE>

the length of maturity. Such securities are mainly senior issues of strong
companies, and are most numerous in the railway and public utility fields,
though some industrial obligations have this rating. The prime feature of an AAA
rating is showing of earnings several times or many times interest requirements
with such stability of applicable earnings that safety is beyond reasonable
question whatever changes occur in conditions. Other features may enter in, such
as a wide margin of protection through collateral security or direct lien on
specific property as in the case of high class equipment certificates or bonds
that are first mortgages on valuable real estate. Sinking funds or voluntary
reduction of the debt by call or purchase are often factors, while guarantee or
assumption by parties other than the original debtor may also influence the
rating.

AA. Securities in this group are of safety virtually beyond question,
and as a class are readily salable while many are highly active. Their merits
are not greatly unlike those of the AAA class, but a security so rated may be of
junior though strong lien--in many cases directly following an AAA security--or
the margin of safety is less strikingly broad. The issue may be the obligation
of a small company, strongly secured but influenced as to ratings by the lesser
financial power of the enterprise and more local type of market.

S&P'S COMMERCIAL PAPER RATINGS

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

MOODY'S COMMERCIAL PAPER RATINGS

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

Issuers rated Prime-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.

Issuers rated Prime-3 (or related supporting institutions) have an
acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.

A-2

<PAGE>

FITCH INVESTORS SERVICE AND DUFF & PHELPS COMMERCIAL PAPER RATINGS

Commercial paper rated "Fitch-1" is considered to be the highest grade
paper and is regarded as having the strongest degree of assurance for timely
payment. "Fitch-2" is considered very good grade paper and reflects an assurance
of timely payment only slightly less in degree than the strangest issue.

Commercial paper issues rated "Duff 1" by Duff & Phelps, Inc. have the
following characteristics: very high certainty of timely payment, excellent
liquidity factors supported by strong fundamental protection factors, and risk
factors which are very small. Issues rated "Duff 2" have a good certainty of
timely payment, sound liquidity factors and company fundamentals, small risk
factors, and good access to capital markets.

A-3

<PAGE>

A-4

<PAGE>

APPENDIX B

The table on the following page shows the performance of the S&P 500 Composite
Stock Price Index for the periods indicated. Stock prices fluctuated widely
during the periods but were higher at the end than at the beginning. The results
shown should not be considered as a representation of the income or capital gain
or loss which may be generated by the Index in the future. Nor should this be
considered as a representation of the past or future performance of the Fund.

B-1

<PAGE>

STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX*

<TABLE>

Year Total Return Year Total Return
<S> <C> <C> <C> <C>

1995 37.49% 1960 0.47%

1994 1.32% 1959 11.96%

1993 9.99% 1958 43.36%

1992 7.67% 1957 -10.78%

1991 30.55% 1956 6.56%

1990 -3.17% 1955 31.56%

1989 31.49% 1954 52.62%

1988 16.81% 1953 -0.99%

1987 5.23% 1952 18.73%

1986 18.47% 1951 24.02%

1985 32.16% 1950 31.71%

1984 6.27% 1949 18.79%

1983 22.51% 1948 5.50%

1982 21.41% 1947 5.71%

1981 -4.91% 1946 -8.07%

1980 32.42% 1945 36.44%

1979 18.44% 1944 19.75%

1978 6.56% 1943 25.90%

1977 -7.18% 1942 20.34%

1976 23.84% 1941 -11.59%

1975 37.20% 1940 -9.78%

1974 -26.47% 1939 -0.41%

1973 -14.66% 1938 31.12%

1972 18.98% 1937 -35.03%

1971 14.31% 1936 33.92%

1970 4.01% 1935 47.67%

1969 -8.51% 1934 -1.44%

1968 11.06% 1933 53.99%

1967 23.98% 1932 -8.19%

1966 -10.06% 1931 -43.34%

1965 12.45% 1930 -24.90%

1964 16.48% 1929 -8.42%

1963 22.08% 1928 43.61%

1962 -8.73% 1927 37.49%

1961 26.89% 1926 11.62%

*Source: Ibbotson Associates

</TABLE>

BT0371B

<PAGE>

CONTENTS

Investment Objectives, Policies and Restrictions........................ 2
Performance Information................................................. 17
Valuation of Securities; Redemptions and Purchases in
Kind.............. 20
Management of the Trust and Portfolios.................................. 22
Organization of the Trust............................................... 28
Taxation................................................................ 28
Financial Statements.................................................... 31
Appendix
A.............................................................. A-1
Appendix B.............................................................. B-1

INVESTMENT ADVISER OF EACH PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY

DISTRIBUTOR
SIGNATURE BROKER-DEALER SERVICES, INC.

CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY

INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.

COUNSEL
WILLKIE FARR & GALLAGHER

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

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

BT0371B

<PAGE>

BT0176G

PART C

OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

(a) FINANCIAL STATEMENTS

The following are included in Part B:

To be added by amendment.

(b) EXHIBITS:

(1A) Declaration of Trust of the Trust.5
(1B) Second Amended and Restated Designation of
Series.5
(1C) Third Amended and Restated Establishment and
Designation of Series.5
(1D) Fourth Amended and Restated Establishment and
Designation of Series.5
(1E) Fifth Amended and Restated Establishment and
Designation of Series.5

(2) By-Laws of the Trust.5

(3) Inapplicable.

(4) Inapplicable.

(5) Inapplicable.

(6) Distribution Agreement.1

(7) Inapplicable.

(8) See Exhibit (9).

(9) Administration and Services Agreement.3

(10) Inapplicable.

(11) Consents of Independent Accountants.6

(12) Inapplicable.

(13) Investment representation letters of initial
shareholders of the Trust.1

(14) Inapplicable.

<PAGE>

C-2

(15) Plan of Distribution pursuant to Rule 12b-1 under
the Investment Company Act of 1940, as amended
(the "1940 Act").1

(16) Schedule for Computation of Performance
Quotations.1

(17) Financial Data Schedules 6

(25A) Powers of Attorney.1
(25B) Powers of Attorney for the Trustees of
Capital Growth Portfolio and Capital
Appreciation Portfolio.2

1 Incorporated by reference herein from Pre-Effective Amendment
No. 1 to this Registration Statement as filed with the SEC on
June 9, 1992.

2 Incorporated by reference herein from Post-Effective Amendment
No. 1 to this Registration Statement as filed with the SEC on
August 17, 1992.

3 Incorporated by reference herein from Post-Effective Amendment
No. 5 to this Registration Statement as filed with the SEC on
April 30, 1993.

4 Incorporated by reference herein from Post-Effective Amendment
No. 4 to this Registration Statement as filed with the SEC on
April 28, 1995.

5 Incorporated by reference herein from Post-Effective Amendment
No. 5 to this Registration Statement as filed with the SEC on
July 31, 1995.

6 Filed herein.

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE
TRUST.

Inapplicable.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
<TABLE>
<CAPTION>

Number of Record Holders

TITLE OF CLASS (AS OF APRIL 15, 1996)
-------------- ----------------------
<S> <C>

BT Investment Money Market Fund 386
BT Investment Limited Term U.S. Government
Securities Fund 27
BT Investment Equity 500 Index Fund 57
BT Institutional Asset Management Fund 23
BT Investment Equity Appreciation Fund 18

</TABLE>

<PAGE>

C-3

ITEM 27. INDEMNIFICATION.

Reference is made to Article V of the Trust's Declaration of Trust,
filed as Exhibit 1 to this Registration Statement.

Insofar as indemnification for liability arising under the 1933 Act,
may be permitted to Trustees, officers and controlling persons of the
Trust pursuant to the Trust's Declaration of Trust, or otherwise, the
Trust has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the 1933 Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Trust of expenses incurred or paid by a Trustee, officer or controlling
person of the Trust in the successful defense of any action, suit or
proceeding) is asserted by such Trustee, officer or controlling person
in connection with the securities being registered, the Trust will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.

Inapplicable.

ITEM 29. PRINCIPAL UNDERWRITERS.

(a) Signature Broker-Dealer Services, Inc. ("Signature") is
the Distributor (the "Distributor") for the shares of
BT Pyramid Mutual Funds. The Distributor also serves
as the principal underwriter or placement agent for
other registered investment companies.

(b) Set forth below are the names, principal business
addresses and positions of each director and officer of
the Distributor. The principal business address of
these individuals is Signature Broker-Dealer Services,
Inc., 6 St. James Avenue, Boston, Massachusetts 02116.
Unless otherwise specified, none of the officers and
directors of the Distributor serve as officers and
Trustees of the Trust.

PHILIP W. COOLIDGE: Chief Executive

Officer, President

and Director of Signature and President and Trustee of the
Registrant.

<PAGE>

C-4

LINWOOD C. DOWNS: Treasurer of Signature.

JOHN R. ELDER: Assistant Treasurer of Signature and Treasurer
of the Registrant.

JOAN GULINELLO: Secretary of Signature.

THOMAS M. LENZ: Assistant Secretary of Signature and Assistant
Secretary of the Registrant.

MOLLY S. MUGLER: Assistant Secretary of Signature and Assistant
Secretary of the Registrant.

LINDA T. GIBSON: Assistant Secretary of Signature and
Assistant Secretary of the Registrant.

ANDRES E. SALDANA: Assistant Secretary of Signature and
Assistant Secretary of the Registrant.

SUSAN JAKUBOSKI: Assistant Treasurer of Signature.

DAVID G. DANIELSON: Assistant Treasurer
of the Registrant.

DANIEL E. SHEA: Assistant Treasurer of the Registrant.

BARBARA M. O'DETTE: Assistant Treasurer of Signature and
Assistant Treasurer of the Registrant.

BETH A. REMY: Assistant Treasurer of Signature.

JULIE J. WYETZNER: Product Management
Officer of Signature.

ROBERT G. DAVIDOFF: Director of Signature;
CMNY Capital, L.P, 135 East 57th Street, New York, NY 10022.

DONALD S. CHADWICK: Director of Signature;
Scarborough & Company, 110 East 42nd Street, New York, NY 10017
.

LEEDS HACKETT: Director of Signature;

National Credit

Management Corporation, 10155 York Road, Cockeysville, MD 21030.

LAURENCE E. LEVINE: Director of Signature;

First International

Capital, Ltd., 130 Sunrise Avenue, Palm Beach, FL 33480.

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.

BT Pyramid Mutual Funds

<PAGE>

C-5

6 St. James Avenue
Boston, MA 02116

Bankers Trust Company
4 Albany Street
New York, NY 10006

Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, MO 64105

Signature Broker-Dealer Services, Inc.
6 St. James Avenue
Boston, MA 02116

ITEM 31. MANAGEMENT SERVICES.

Inapplicable.

ITEM 32. UNDERTAKINGS.

(a) The Registrant undertakes to furnish to each person to whom a
prospectus is delivered a copy of the Registrant's latest
annual report, with respect to the respective series of the
Trust, to shareholders upon request and without charge.

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

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, as amended, the Registrant certifies that it
meets all the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the 1933 Act and that it has duly caused this
Amendment to Registrant's Registration Statement on Form N-1A to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Boston
and the Commonwealth of Massachusetts on the 24th day of April, 1996.

BT PYRAMID MUTUAL FUNDS

By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge
President

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated with respect to BT Pyramid Mutual Funds

on April 24, 1996.

SIGNATURE TITLE

/S/PHILIP W. COOLIDGE President and Trustee
Philip W. Coolidge

HARRY VAN BENSCHOTEN* Trustee
Harry Van Benschoten

KELVIN J. LANCASTER* Trustee
Kelvin J. Lancaster

MARTIN J. GRUBER* Trustee
Martin J. Gruber

/S/JOHN R. ELDER Treasurer (Principal Financial
John R. Elder Officer and PrincipalAccounting
Officer)

*By: /S/PHILIP W. COOLIDGE

<PAGE>

Philip W. Coolidge as Attorney-in-Fact pursuant to a Power of Attorney
filed previously.

<PAGE>

SIGNATURES

Short/Intermediate U.S. Government Securities Portfolio has duly caused
this Registration Statement on Form N-1A of BT Pyramid Mutual Funds to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Boston and the Commonwealth of Massachusetts on the 24th day of April, 1996.

SHORT/INTERMEDIATE U.S. GOVERNMENT SECURITIES
PORTFOLIO

By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge
President

This Registration Statement on Form N-1A of BT Pyramid
Mutual Funds has been signed below by the following persons in
the capacities indicated with respect to Short/Intermediate U.S.
Government Securities Port folio on
April 24, 1996.

SIGNATURE TITLE

/S/PHILIP W. COOLIDGE President and Trustee
Philip W. Coolidge

S. LELAND DILL* Trustee
S. Leland Dill

PHILIP SAUNDERS, JR. Trustee
Philip Saunders, Jr.

CHARLES P. BIGGAR* Trustee
Charles P. Biggar

/S/JOHN R. ELDER Treasurer (Principal Financial and
John R. Elder Principal Accounting Officer)

*By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge

<PAGE>

as Attorney-in-Fact pursuant to a
Power of Attorney filed previously.

<PAGE>

SIGNATURES

Equity 500 Index Portfolio has duly caused this Registration Statement
on Form N-1A of BT Pyramid Mutual Funds to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston and the
Commonwealth of Massachusetts on the 24th day of April, 1996.

EQUITY 500 INDEX PORTFOLIO

By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge
President

This Registration Statement on Form N-1A of BT Pyramid Mutual Funds has
been signed below by the following persons in the capacities indicated with
respect to Equity 500 Index Portfolio on April 24, 1996.

SIGNATURE TITLE

/S/PHILIP W. COOLIDGE President and Trustee
Philip W. Coolidge

S. LELAND DILL* Trustee
S. Leland Dill

PHILIP SAUNDERS, JR. Trustee
Philip Saunders, Jr.

CHARLES P. BIGGAR* Trustee
Charles P. Biggar

/S/JOHN R. ELDER Treasurer (PrincipalFinancial and
John R. Elder Principal Accounting Officer)

*By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge as Attorney-in-Fact pursuant to a Power of Attorney
filed previously.

<PAGE>

SIGNATURES

Capital Appreciation Portfolio has duly caused this Registration
Statement on Form N-1A of BT Pyramid Mutual Funds to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Boston and the
Commonwealth of Massachusetts on the 24th day of April, 1996.

CAPITAL APPRECIATION PORTFOLIO

By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge
President

This Registration Statement on Form N-1A of BT Pyramid Mutual Funds has
been signed below by the following persons in the capacities indicated with
respect to Capital Appreciation Portfolio on April 24, 1996.

SIGNATURE TITLE

/S/PHILIP W. COOLIDGE President and Trustee
Philip W. Coolidge

S. LELAND DILL* Trustee
S. Leland Dill

PHILIP SAUNDERS, JR. Trustee
Philip Saunders, Jr.

CHARLES P. BIGGAR* Trustee
Charles P. Biggar

/S/JOHN R. ELDER Treasurer (Principal Financial and
John R. Elder Principal Accounting Officer)

*By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge as Attorney-in-Fact pursuant to a Power of Attorney
filed previously.

<PAGE>

SIGNATURES

Asset Management Portfolio has duly caused this Registration Statement
on Form N-1A of BT Pyramid Mutual Funds to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston and the
Commonwealth of Massachusetts on the 24th day of April, 1996.

ASSET MANAGEMENT PORTFOLIO

By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge
President

This Registration Statement on Form N-1A of BT Pyramid Mutual Funds has
been signed below by the following persons in the capacities indicated with
respect to Asset Management Portfolio on April 24, 1996.

SIGNATURE TITLE

/S/PHILIP W. COOLIDGE President and Trustee
Philip W. Coolidge

S. LELAND DILL* Trustee
S. Leland Dill

PHILIP SAUNDERS, JR. Trustee
Philip Saunders, Jr.

CHARLES P. BIGGAR* Trustee
Charles P. Biggar

/S/JOHN R. ELDER Treasurer (Principal Financial and
John R. Elder Principal Accounting Officer)

*By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge as Attorney-in-Fact pursuant to a Power of Attorney
filed previously.

<PAGE>

SIGNATURES

Cash Management Portfolio has duly caused this Registration Statement
on Form N-1A of BT Pyramid Mutual Funds to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston and the
Commonwealth of Massachusetts on the 24th day of April, 1996.

CASH MANAGEMENT PORTFOLIO

By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge
President

This Registration Statement on Form N-1A of BT Pyramid Mutual Funds has
been signed below by the following persons in the capacities indicated with
respect to Cash Management Portfolio on April 24, 1996.

SIGNATURE TITLE

/S/PHILIP W. COOLIDGE President and Trustee
Philip W. Coolidge

S. LELAND DILL* Trustee
S. Leland Dill

PHILIP SAUNDERS, JR. Trustee
Philip Saunders, Jr.

CHARLES P. BIGGAR* Trustee
Charles P. Biggar

/S/JOHN R. ELDER Treasurer (Principal Financial and
John R. Elder Principal Accounting Officer)

*By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge as Attorney-in-Fact pursuant to a Power of Attorney
filed previously.

<PAGE>

BT PYRAMID MUTUAL FUNDS
EXHIBITS
TO
REGISTRATION STATEMENT ON
FORM N-1A
EXHIBIT INDEX

EXHIBIT NO.

(II) Consent of independent accountants

(17) Financial Data Schedules

<PAGE>

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this Post-effective Amendment to the Registration
Statement of the Cash Management Portfolio on Form N- 1A of our report dated
February 13, 1996 on our audit of the financial statements and financial
highlights of the Portfolio, which report is included in the Annual Report to
Shareholders for the year ended December 31, 1995 which is included in the
Registration Statement.

COOPERS & LYBRAND L.L.P.

Kansas City, Missouri
April 26, 1996

<PAGE>

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this Post-effective Amendment to the Registration
Statement of the Equity 500 Index Portfolio on Form N- 1A of our report dated
February 13, 1996 on our audit of the financial statements and financial
highlights of the Portfolio, which report is included in the Annual Report to
Shareholders for the year ended December 31, 1995 which is included in the
Registration Statement.

COOPERS & LYBRAND L.L.P.

Kansas City, Missouri
April 26, 1996

<PAGE>

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this Post-effective Amendment to the Registration
Statement of the BT Investment Equity 500 Index Fund (one of the funds
comprising BT Pyramid Mutual Funds) on Form N-1A of our report dated February
13, 1996 on our audit of the financial statements and financial highlights of
the Fund, which report is included in the Annual Report to Shareholders for the
year ended December 31, 1995 which is included in the Registration Statement.

COOPERS & LYBRAND L.L.P.

Kansas City, Missouri
April 26, 1996

<PAGE>

CONSENT OF INDEPENDENT ACCOUNTANTS

COOPERS & LYBRAND L.L.P.

Kansas City, Missouri
April 26, 1996

<PAGE>

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this Post-effective Amendment to the
Registration Statement of the BT Investment Money Market Fund (one of the funds
comprising BT Pyramid Mutual Funds) on Form N-1A of our report dated February
13, 1996 on our audit of the financial statements and financial highlights of
the Fund, which report is included in the Annual Report to Shareholders for the
year ended December 31, 1995 which is included in the Registration Statement.

COOPERS & LYBRAND L.L.P.

Kansas City, Missouri
April 26, 1996

WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Money
Market Fund Annual Report dated December 31, 1995 and is qualified in its
entirety by reference to such Report.
</LEGEND>
<CIK> 0000884463
<NAME> INVESTMENT MONEY MARKET FUND

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 646859061
<INVESTMENTS-AT-VALUE> 646859061
<RECEIVABLES> 67351
<ASSETS-OTHER> 20785
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 646947197
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1036925
<TOTAL-LIABILITIES> 1036925
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 646850037
<SHARES-COMMON-STOCK> 646850037
<SHARES-COMMON-PRIOR> 977497505
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (939765)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 645910272
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 46673944
<EXPENSES-NET> 1370264
<NET-INVESTMENT-INCOME> 45303680
<REALIZED-GAINS-CURRENT> 85772
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 45389452
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 45303680
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8257458394
<NUMBER-OF-SHARES-REDEEMED> 8629738538
<SHARES-REINVESTED> 41632676
<NET-CHANGE-IN-ASSETS> (330561696)
<ACCUMULATED-NII-PRIOR> 29756785
<ACCUMULATED-GAINS-PRIOR> (1025537)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2480469
<AVERAGE-NET-ASSETS> 806043874
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .06
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .06
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Equity
500 Index Fund Annual Report dated December 31, 1995 and is qualified in its
entirety by reference to such Annual Report.
</LEGEND>
<CIK> 0000884463
<NAME> EQUITY 500 INDEX FUND

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 279814911
<INVESTMENTS-AT-VALUE> 279814911
<RECEIVABLES> 1284646
<ASSETS-OTHER> 16822
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 281116379
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3976489
<TOTAL-LIABILITIES> 3976489
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 214804819
<SHARES-COMMON-STOCK> 20048015
<SHARES-COMMON-PRIOR> 17565327
<ACCUMULATED-NII-CURRENT> 1750
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1962070)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 64295391
<NET-ASSETS> 277139890
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 5790827
<EXPENSES-NET> 343039
<NET-INVESTMENT-INCOME> 5447788
<REALIZED-GAINS-CURRENT> 1496201
<APPREC-INCREASE-CURRENT> 63867891
<NET-CHANGE-FROM-OPS> 70811880
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5486695
<DISTRIBUTIONS-OF-GAINS> 1330630
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4695533
<NUMBER-OF-SHARES-REDEEMED> 2741244
<SHARES-REINVESTED> 528399
<NET-CHANGE-IN-ASSETS> 95242257
<ACCUMULATED-NII-PRIOR> 40657
<ACCUMULATED-GAINS-PRIOR> (2127641)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 755422
<AVERAGE-NET-ASSETS> 228687300
<PER-SHARE-NAV-BEGIN> 10.36
<PER-SHARE-NII> .29
<PER-SHARE-GAIN-APPREC> 3.53
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .36
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.82
<EXPENSE-RATIO> 25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the Limited
Term U.S. Government Fund Annual Report dated December 31, 1995, and is
qualified in its entirety by reference to such Annual Report.
</LEGEND>
<CIK> 0000884463
<NAME> LIMITED TERM U.S. GOVERNMENT FUND

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 29770837
<INVESTMENTS-AT-VALUE> 29770837
<RECEIVABLES> 103541
<ASSETS-OTHER> 20559
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 29894937
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 25045
<TOTAL-LIABILITIES> 25045
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 29601204
<SHARES-COMMON-STOCK> 3000289
<SHARES-COMMON-PRIOR> 3257305
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 25624
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 243064
<NET-ASSETS> 29869892
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 1857232
<EXPENSES-NET> 91142
<NET-INVESTMENT-INCOME> 1766090
<REALIZED-GAINS-CURRENT> 463090
<APPREC-INCREASE-CURRENT> 628130
<NET-CHANGE-FROM-OPS> 2857310
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1766090
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1207729
<NUMBER-OF-SHARES-REDEEMED> 1643080
<SHARES-REINVESTED> 178335
<NET-CHANGE-IN-ASSETS> (1432139)
<ACCUMULATED-NII-PRIOR> 944156
<ACCUMULATED-GAINS-PRIOR> (422528)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 149818
<AVERAGE-NET-ASSETS> 30380547
<PER-SHARE-NAV-BEGIN> 9.61
<PER-SHARE-NII> .57
<PER-SHARE-GAIN-APPREC> .35
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .57
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.96
<EXPENSE-RATIO> 60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>