1933 Act File No. 33-45973
1940 Act File No. 811-06576
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. ..........
Post-Effective Amendment No. 15 ............ X
- -
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 17 ........................... X
BT PYRAMID MUTUAL FUNDS
(Exact Name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
Jay S. Neuman, Esquire Copies to: Burton M. Leibert, Esq.
Federated Investors Tower Willkie Farr & Gallagher
Pittsburgh, Pennsylvania 15222-3779 One Citicorp Center
(Name and Address of Agent for Service) 153 East 53rd Street
New York, New York 10022
It is proposed that this filing will become effective
(check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on March 19, 1997 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Cash Management Portfolio and Equity 500 Index Portfolio have also executed
this Registration Statement.
Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of
1940, and:
X filed the Notice required by that Rule on February 28, 1997; or
intends to file the Notice required by that Rule on or about ; or
- ------
during the most recent fiscal year did not sell any securities pursuant
to Rule 24f-2 under the Investment Company Act of 1940, and, pursuant to
Rule 24f-2(b)(2), need not file the Notice.
CROSS-REFERENCE SHEET
This Amendment to the Registration Statement of BT PYRAMID MUTUAL
FUNDS, which is comprised of five Funds, relates only to (1) Investment
Money Market Fund and (2) Investment Equity 500 Index Fund and is comprised
of the following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page...............(1-2)Cover Page.
Item 2. Synopsis.................(1-2)Summary of Fund Expenses.
Item 3. Condensed Financial
Information.............(1-2)Financial Highlights; (1-
2)Performance Information and Reports.
Item 4. General Description of
Registrant..............(1-2) The Fund; (1-2)Who May Want to
Invest; (1-2)Investment Objective and
Policies; (2)Special Information
Concerning Master-Feeder Fund Structure;
(1-2)Risk Factors: Matching the Fund to
Your Investment Needs.
Item 5. Management of the Fund...(1-2) Management of the Trust and the
Portfolio;
Item 6. Capital Stock and Other
Securities..............(1-2)Net Asset Value; (1-2)Dividends,
Distributions, and Taxes;
Item 7. Purchase of Securities Being
Offered.................(1-2) Purchase and Redemption of Shares;
(1-2) How to Buy Shares; (1-2) Minimum
Investments; (1-2) Investor Services.
Item 8. Redemption or Repurchase.(1-2) How to Sell Shares; (1-2)
Additional Information About Selling
Shares; (1-2) Exchange Privilege.
Item 9. Legal Proceedings........None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page...............(1-2) Cover Page.
Item 11. Table of Contents........(1-2) Table of Contents.
Item 12. General Information and
History.................(1-2) Organization of the Trust.
Item 13. Investment Objectives and
Policies................(1-2) Investment Objectives, and
Policies.
Item 14. Management of the Fund...(1-2) Management of the Trust(s) and the
Portfolio(s).
Item 15. Control Persons and Principal
Holders of Securities...(1-2) Fund Ownership.
Item 16. Investment Advisory and Other
Services................(1-2) Investment Adviser; Administrator.
Item 17. Brokerage Allocation.....(1-2) Portfolio Transactions and
Brokerage Commissions.
Item 18. Capital Stock and Other
Securities..............(1-2) Not Applicable.
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered.................(1-2) Valuation of Securities;
Redemptions and Purchases in Kind.
Item 20. Tax Status...............(1-2) Taxation.
Item 21. Underwriters.............(1-2) Not applicable.
Item 22. Calculation of Performance
Data....................(1-2) Performance Information.
Item 23. Financial Statements.....(1-2) Incorporate by reference to the
Funds' Annual Reports dated December 31,
1996, pursuant to Rule 411 under the
Securities Act of 1933. (File Nos. 33-
45973 and 811-06576)
<PAGE>
- BT PYRAMID MUTUAL FUNDS -
BT INVESTMENT EQUITY 500 INDEX FUND
PROSPECTUS
- --------------------------------------------------------------------------------
MARCH 17, 1997
BT Pyramid Mutual Funds (the "Trust") is an open-end, management investment
company (mutual fund) which consists of a number of separate investment funds.
The BT Investment Equity 500 Index Fund (the "Fund") is a separate series of the
Trust. The Fund seeks to match the performance of the stock market as
represented by the Standard & Poor's Daily Stock Price Index of 500 Common
Stocks (the "S&P 500") before the deduction of expenses allocable to shares of
the Fund and the Equity 500 Index Portfolio (the "Portfolio") (the "Expenses").
There is no assurance, however, that the Fund will be able to achieve its stated
objective.
Please read this Prospectus carefully before investing and retain it for future
reference. It contains important information about the Fund that you should know
and can refer to in deciding whether the Fund's goals match your own.
A Statement of Additional Information ("SAI") with the same date has been filed
with the Securities and Exchange Commission ("SEC"), and is incorporated herein
by reference. You may request a free copy of the SAI by calling the Fund's
Service Agent at 1-800-730-1313.
UNLIKE OTHER OPEN-END MANAGEMENT INVESTMENT COMPANIES (MUTUAL FUNDS), THE FUND
SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING ALL OF ITS INVESTABLE
ASSETS ("ASSETS") IN THE PORTFOLIO, A SEPARATE INVESTMENT COMPANY WITH AN
IDENTICAL INVESTMENT OBJECTIVE. THE INVESTMENT PERFORMANCE OF THE FUND WILL
CORRESPOND DIRECTLY TO THE INVESTMENT PERFORMANCE OF THE PORTFOLIO. SEE "SPECIAL
INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE" HEREIN.
BANKERS TRUST COMPANY ("BANKERS TRUST") IS THE INVESTMENT ADVISER (THE
"ADVISER") OF THE PORTFOLIO. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR GUARANTEED OR ENDORSED BY, BANKERS TRUST OR ANY OTHER BANKING OR
DEPOSITORY INSTITUTION. SHARES ARE NOT FEDERALLY GUARANTEED OR INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE U.S. GOVERNMENT, THE FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
LIKE SHARES OF ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
EDGEWOOD SERVICES, INC.
Clearing Operations - P.O. Box 897 - Pittsburgh, Pennsylvania - 15230-0897
<PAGE>
TABLE OF CONTENTS
PAGE
The Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Who May Want to Invest . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Summary of Fund Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Investment Objective and Policies . . . . . . . . . . . . . . . . . . . . . .5
Risk Factors: Matching the Fund to Your Investment Needs . . . . . . . . . . .7
Net Asset Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Purchase and Redemption of Shares. . . . . . . . . . . . . . . . . . . . . . 10
Dividends, Distributions and Taxes . . . . . . . . . . . . . . . . . . . . . 15
Performance Information and Reports. . . . . . . . . . . . . . . . . . . . . 15
Management of the Trust and Portfolio. . . . . . . . . . . . . . . . . . . . 16
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2
<PAGE>
THE FUND
The Fund's investment objective is to seek to provide investment results that,
before Expenses, correspond to the total return of common stocks as represented
by the S&P 500.
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.
WHO MAY WANT TO INVEST
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.
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.
3
<PAGE>
SUMMARY OF FUND EXPENSES
The following table provides (i) a summary of expenses relating to purchases and
sales of the shares of the Fund and the annual operating expenses of the Fund
and the expenses of the Portfolio , as a percentage of average net assets of the
Fund; and (ii) an example illustrating the dollar cost of such expenses on a
$1,000 investment in the Fund. THE TRUSTEES OF 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 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 0.10%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.15
- --------------------------------------------------------------------------------
Total operating expenses (after reimbursements
or waivers) 0.25%
- --------------------------------------------------------------------------------
EXAMPLE 1 year 3 years 5 years 10 years
You would pay the following expenses for
each Fund 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 Distribution and Service Plan,
adopted 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 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, 1996, the total operating expenses would have been equal to
approximately 0.47% 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 distributed by Edgewood Services, Inc. ("Edgewood" or the
"Distributor") to investors including customers of Bankers Trust or to customers
of another bank, dealer or other financial intermediary 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.
For more information with respect to the expenses of the Fund and the Portfolio
see "Management of the Trust and Portfolio" herein.
4
<PAGE>
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 SAI.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED
DECEMBER 31, DECEMBER 31, 1992
----------------------------------------------------- (COMMENCEMENT
1996 1995 1994 1993 OF OPERATIONS)
-------- -------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . $ 13.82 $ 10.36 $ 10.57 $ 10.00 $ 10.00
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income. . . . . . . . . . . . . . . . . 0.30 0.29 0.22 0.24 --
Net Realized and Unrealized Gain (Loss) on Investments
and Futures Transactions. . . . . . . . . . . . . . . 2.83 3.53 (0.10) 0.71 --
-------- -------- -------- -------- --------
Total from Investment Operations . . . . . . . . . . . . 3.13 3.82 0.12 0.95 --
-------- -------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income. . . . . . . . . . . . . . . . . (0.30) (0.29) (0.22) (0.24) --
Net Realized Gain from Investments and Futures
Transactions. . . . . . . . . . . . . . . . . . . . . (0.14) (0.07) (0.11) (0.14) --
-------- -------- -------- -------- --------
Toal Distributions . . . . . . . . . . . . . . . . . . . (0.44) (0.36) (0.33) (0.38) --
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . $ 16.51 $ 13.82 $ 10.36 $ 10.57 $ 10.00
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . . . . 22.83% 37.15% 1.15% 9.53% --
SUPPLEMENTAL DATA AND RATIOS:
Net Assets, End of Period (000s omitted) . . . . . . . $451,762 $277,140 $181,898 $ 1,835 $ 100
Ratios to Average Net Assets:
Net Investment Income . . . . . . . . . . . . . . . 2.05% 2.38% 2.68% 2.53% --
Expenses, including expenses of the
Equity 500 Index Portfolio . . . . . . . . . . . . 0.25% 0.25% 0.25% 0.25% --
Decrease Reflected in Above Expense Ratio Due
to Absorption of Expenses by Bankers Trust . . . . 0.22% 0.23% 0.29% 1.82% --
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated December 31, 1996, which can be obtained free of charge.
INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks to provide investment results that, before Expenses, correspond
to the total return (I.E., the combination of capital changes and income) of
common stocks publicly traded in the United States, as represented by the S&P
500. The Fund offers investors a convenient means of diversifying their 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 the Fund
and the Portfolio is not a fundamental policy and may be changed upon notice to
but without the approval of the Fund's shareholders or the Portfolio's
investors, respectively. See "Special Information Concerning Master-Feeder Fund
Structure" herein.
Since the investment characteristics of the Fund will correspond directly to
those of the Portfolio, the following is a discussion of the various investments
and investment policies of the Portfolio. Additional information about the
investment policies of the Portfolio appears in the SAI.
EQUITY 500 INDEX PORTFOLIO
The Portfolio is not managed according to traditional methods of "active"
investment management, which
5
<PAGE>
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 targeted correlation is not
achieved, the Portfolio's Board of Trustees will consider alternative
structures.
The Adviser utilizes a two-stage sampling approach in seeking to obtain its
objective. Stage one, which encompasses large cap stocks, maintains the stock
holdings at or near their benchmark weights. Large capitalization stocks are
defined as those securities which represent 0.10% or more of the index. In stage
two, smaller stocks are analyzed and selected using risk characteristics and
industry weights in order to match the sector and risk characteristics of the
smaller companies in the S&P 500. This approach helps to maximize 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
6
<PAGE>
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 Ratings Group ("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 SAI.
ABOUT THE S&P 500 INDEX
The S&P 500 is a well-known stock market index that includes common stocks of
500 companies from several industrial sectors representing a significant 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 SAI.
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
7
<PAGE>
may make sense for you if you can afford to ride out changes in the stock market
both favorable and unfavorable. The Fund's share price, yield and total return
will fluctuate and your investment may be worth more or less than your original
cost when you redeem your shares.
The ability of the Fund and the Portfolio to meet their investment objective
depends to some extent on the cash flow experienced by the Fund and by the other
investors in the Portfolio, since investments and redemptions by 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 rates for the years ended December 31, 1996, and 1995, were
15% and 6%, respectively.
DERIVATIVES
The Portfolio may invest in stock index futures and options thereon which are
commonly known as derivatives. Generally, a derivative is a financial
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 1-800-730-1313.
The master-feeder structure is relatively complex, so shareholders should
carefully consider this investment approach.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may experience higher pro rata
operating expenses, thereby producing lower returns (however, this possibility
exists as well for traditionally structured funds which have large institutional
investors). Additionally, the Portfolio may become less diverse, resulting in
increased portfolio risk. Also, funds with a greater pro rata ownership in the
Portfolio could have effective voting control of the operations of the
Portfolio. Except as permitted by the SEC, whenev-
8
<PAGE>
er 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 and Policies" herein and in the SAI. For
descriptions of the management and expenses of the Portfolio, see "Management of
the Trust and Portfolio" herein and in the SAI.
NET ASSET VALUE
The net asset value ("NAV") per share of the Fund is calculated on each day on
which the NYSE is open (each such day being a "Valuation Day"). The NYSE is
currently open on each day, Monday through Friday, except (a) January 1st,
Presidents' Day (the third Monday in February), Good Friday, Memorial Day (the
last Monday in May), July 4th, Labor Day (the first Monday in September),
Thanksgiving Day (the last Thursday in November) and December 25th; and (b) the
preceding Friday or the subsequent Monday when one of the calendar determined
holidays falls on a Saturday or Sunday, respectively.
The NAV per share of the Fund is calculated once on each Valuation Day as of the
close of regular trading on the NYSE, which is currently 4:00 p.m., Eastern time
or in the event that the NYSE closes early, at the time of such early closing
(the "Valuation Time"). The NAV per share of the Fund is computed by dividing
the value of the Fund's Assets (I.E., the value of its investment in the
Portfolio and other assets), less all liabilities, by the total number of its
shares outstanding. The Portfolio's securities and other assets are valued
primarily on the basis of market quotations or, if quotations are not readily
available, by a method which the Portfolio's Board of Trustees believes
accurately reflects fair value.
Under procedures adopted by the Board, a NAV for a Fund later determined to have
been inaccurate for any reason will be recalculated. Purchases and redemptions
made at a NAV determined to have been inaccurate will be adjusted, although in
certain circumstances, such as where the difference between the original NAV and
the recalculated NAV divided by the recalculated NAV is 0.005 (1/2 of 1%) or
less or shareholder transactions are otherwise insubstantially affected, further
action is not required.
9
<PAGE>
PURCHASE AND REDEMPTION OF SHARES
HOW TO BUY SHARES
The Trust accepts purchase orders for shares of the Fund at the NAV per share
next determined after the order is received on each Valuation Day. See "Net
Asset Value" herein. Shares of the Fund may be available through Investment
Professionals, such as broker/dealers and investment advisers (including Service
Agents).
Purchase orders for shares of the Fund (including those purchased through a
Service Agent) that are transmitted to the Trust's Transfer Agent (the "Transfer
Agent"), prior to the Valuation Time on any Valuation Day will be effective at
that day's Valuation Time. The Trust and Transfer Agent reserve the right to
reject any purchase order.
Shares must be purchased in accordance with procedures established by the
Transfer Agent and each Service Agent. It is the responsibility of each Service
Agent to transmit to the Transfer Agent purchase and redemption orders and to
transmit to Bankers Trust as the Trust's custodian (the "Custodian") purchase
payments by the following business day (trade date + 1) after an order for
shares is placed. A shareholder must settle with the Service Agent for his or
her entitlement to an effective purchase or redemption order as of a particular
time. Because Bankers Trust is the Custodian and Transfer Agent of the Trust,
funds may be transferred directly from or to a customer's account held with
Bankers Trust to settle transactions with the Fund without incurring the
additional costs or delays associated with the wiring of Federal funds.
If orders are placed through an Investment Professional, it is the
responsibility of the Investment Professional to transmit the order to buy
shares to the Transfer Agent before 4:00 p.m. Eastern time.
The Transfer Agent must receive payment within one business day after an order
for shares is placed; otherwise, the purchase order may be canceled and the
investor could be held liable for resulting fees and/or losses.
Certificates for shares will not be issued. Each shareholder's account will be
maintained by a Service Agent or Transfer 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
IF YOU ARE NEW TO BT PYRAMID MUTUAL FUNDS, complete and sign an account
application and mail it along with your check to the address listed below. If
there is no account application accompanying this Prospectus, call the BT
Service Center at 1-800-730-1313.
BT Service Center
P.O. Box 419210
Kansas City, MO 64141-6210
Overnight mailings:
BT Service Center
210 West 10th Street, 8th Floor
Kansas City, MO 64105-1716
IF YOU ALREADY HAVE MONEY INVESTED IN A FUND IN THE BT FAMILY OF FUNDS, you can:
- - Mail an account application with a check,
- - Wire money into your account,
- - Open an account by exchanging from another fund in the BT Family of Funds,
or
- - Contact your Service Agent or Investment Professional.
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 or call BT Retirement Services Center at 1-800-730-1313 for more
information and a retirement account application.
10
<PAGE>
ADDITIONAL INFORMATION ABOUT BUYING SHARES
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
BY WIRE Call the BT Service Center at Call your Investment Professional
1-800-730-1313 to receive or wire additional investment to:
wire instructions for account
establishment.
ROUTING NO.: 021001033
ATTN: Bankers Trust/IFTC Deposit
DDA NO.: 00-226-296
FBO: (Account name)
(Account number)
CREDIT: Fund Number
BT Investment Equity 500 Index
Fund - 462
Specify the complete name of the
Fund of your choice, and include
your account number and your name.
BY PHONE Contact your Service Agent, Contact your Service Agent,
Investment Professional, or call Investment Professional, or call
BT's Service Center at BT's Service Center at
1-800-730-1313. If you are an 1-800-730-1313. If you are an
existing shareholder, you may existing shareholder, you may
exchange from another BT exchange from another BT
account with the same account with the same registration,
registration, including, name, including, name, address, and
address, and taxpayer ID number. taxpayer ID number.
BY MAIL Complete and sign the account Make your check payable to the
application. Make your check complete name of the Fund of your
payable to the complete name of choice. Indicate your Fund account
the Fund of your choice. Mail to number on your check and mail to
the appropriate address indicated the address printed on your
on the application. account statement.
HOW TO SELL SHARES
You can arrange to take money out of your Fund account at any time by selling
(redeeming) some or all of your shares. Your shares shall be sold at the next
NAV calculated after an order is received by the Transfer Agent. Redemption
requests should be transmitted by customers in accordance with procedures
established by the Transfer Agent and the Shareholder's Service Agent.
Redemption requests for shares of the Fund received by the Service Agent and
transmitted to the Transfer Agent prior to the Valuation Time on each Valuation
Day will be effective at that day's Valuation Time and the redemption proceeds
normally will be delivered to the shareholder's account the next day, but in any
event within seven calendar days following receipt of the request.
Service Agents may allow redemptions or exchanges by telephone and may disclaim
liability for following instructions communicated by telephone that the Service
Agent reasonably believes to be genuine. The Service Agent must provide the
investor with an opportunity to choose whether or not to utilize the telephone
redemption or exchange privilege. The Transfer Agent and the Service Agent must
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. If the Shareholder Servicing 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.
11
<PAGE>
Redemption orders are processed without charge by the Trust. A Service Agent may
on at least 30 days' notice involuntarily redeem a shareholder's account with
the Fund having a balance below the minimum, but not if an account is below the
minimum due to a change in market value. See "Minimum Investments" above for
minimum balance amounts.
TO SELL SHARES IN A RETIREMENT ACCOUNT, your request must be made in writing,
except for exchanges to other eligible funds in the BT Family of Funds, which
can be requested by phone or in writing. For information on retirement
distributions, contact your Service Agent or call the BT Service Center at
1-800-730-1313.
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 to protect you and Bankers
Trust from fraud. Redemption requests in writing must include a signature
guarantee if any of the following situations apply:
- - Your account registration has changed within the last 30 days,
- - The check is being mailed to a different address than the one on your
account (record address),
- - The check is being made payable to someone other than the account owner,
- - The redemption proceeds are being transferred to a BT account with a
different registration, or
- - You wish to have redemption proceeds wired to a non-predesignated bank
account.
A signature guarantee is also required if you change the pre-designated bank
information for receiving redemption proceeds on your account.
You should be able to obtain a signature guarantee from a bank, broker, dealer,
credit union (if authorized under state law), securities exchange or
association, clearing agency, or savings association. A notary public cannot
provide a signature guarantee.
ADDITIONAL INFORMATION ABOUT SELLING SHARES
BY WIRE - You must sign up for the wire feature before using it. To verify that
it is in place, call 1-800-730-1313. Minimum wire: $1,000. Your wire redemption
request must be received by the Transfer Agent before 4:00 p.m. Eastern time for
money to be wired on the next business day.
IN WRITING - Write a signed "letter of instruction" with your name, the Fund's
name and Fund's number, your Fund account number, the dollar amount or number of
Shares to be redeemed, and mail to one of the following addresses:
BT Service Center
P.O. Box 419210
Kansas City, MO 64141-6210
Overnight mailings:
BT Service Center
210 West 10th Street, 8th Floor
Kansas City, MO 64105-1716
For Trust accounts, the trustee must sign the letter indicating capacity as
trustee. If the trustee's name is not on the account registration, provide a
copy of the trust document certified within the last 60 days.
For a Business or Organization account, at least one person authorized by
corporate resolution to act on the account must sign the letter.
Unless otherwise instructed, the Transfer Agent will send a check to the account
address of record. The Trust reserves the right to close investor accounts via
30 day notice in writing if the Fund account balance falls below the Fund
minimums.
INVESTOR SERVICES
BT Pyramid Mutual Funds provides a variety of services to help you manage your
account.
12
<PAGE>
INFORMATION SERVICES
Statements and reports that your Investment Professional or the Transfer Agent
may send to you include the following:
- - Confirmation statements (after every transaction that affects your account
balance, including distributions or your account registration)
- - Account statements (monthly)
- - 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 or the BT Service Center at 1-800-730-1313 if you need additional
copies of financial reports.
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 "How to Buy Shares" and "How to Sell
Shares" herein. Before making an exchange, please note the following:
- - Call your Service Agent for information and a prospectus. Read the
prospectus for relevant information.
- - Your new account will have the identical account registration including 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 receive a written confirmation of each exchange
transaction.
Note that exchanges out of a Fund may be limited to four per calendar year and
that they may have tax consequences for you.
SYSTEMATIC PROGRAMS
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO BT PYRAMID MUTUAL FUNDS
MINIMUM MINIMUM FREQUENCY SETTING UP OR CHANGING
INITIAL SUBSEQUENT
$1,000 $100 Monthly, bimonthly, For a new account, complete the
quarterly or semi- appropriate section
annually 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 FREQUENCY SETTING UP OR CHANGING
$100 Monthly, quarterly, semi-annually To establish, call your Investment
or annually Professional or call 1-800-730-1313
after your account is open. The
accounts from which the withdrawals
will be processed must have a
minimum balance of $10,000.
13
<PAGE>
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 Bankers Trust for further information. Bankers Trust can
set up your new account in the Fund under a number of several tax-savings or
tax-deferred plans. Minimums may differ from those listed elsewhere in this
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 non-profit organizations and educational institutions.
- - DEFERRED BENEFIT PLANS: plan sponsors may invest all or part of their
pension assets in the Fund.
14
<PAGE>
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 quarterly. In addition, the Fund will distribute net capital gains,
if any, at least annually and potentially semi-annually, if required, to remain
in compliance with the applicable tax regulations. Unless a shareholder
instructs the Trust to pay such dividends and distributions in cash, they will
be automatically reinvested in additional shares of the Fund.
FEDERAL TAXES. The Fund intends to qualify as a regulated investment company, as
defined in the Internal Revenue Code of 1986, as amended (the "Code"). 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 to the Lipper S&P 500 Funds' Average, or other 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 NAV per share
and including the value of any shares purchasable with any dividends or capital
gains distributed during such period. Period total return may be annualized. An
annualized total return is a compounded total return which assumes that the
period total return is generated over a one-year period, and that all dividends
and capital gain distributions are reinvested. An annualized total return will
be higher than a period total return if the period is shorter than one year,
because of the compounding effect.
The Trust may provide annualized "yield" quotations for the Fund. The "yield" of
the Fund refers to the income generated by an investment in the Fund over a
30-day or one-month period (which period shall be stated in any such
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
15
<PAGE>
addition, during certain periods for which total return or yields may be
provided, Bankers Trust, as Adviser, Service Agent or Administrator, may have
voluntarily agreed to waive portions of its fees on a month-to-month basis. Such
waiver 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 Portfolio" in the SAI.
INVESTMENT ADVISER
The Trust has not retained the services of an investment adviser since the Trust
seeks to achieve the investment objective of the Fund by investing all the
Assets of the Fund in the Portfolio. The Portfolio has retained the 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 1981 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, 1996,
Bankers Trust New York Corporation was the seventh largest bank holding company
in the United States with total assets of approximately $120 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 $227 billion in assets under management globally. Of that total,
approximately $92 billion are in U.S. equity index assets alone.
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 pur-
16
<PAGE>
chase 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 SAI without violation of the Glass-Steagall
Act or other applicable banking laws or regulations.
ADMINISTRATOR
Under its Administration and Services Agreement with the Trust, Bankers Trust
calculates the NAV per share 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 Edgewood and its affiliates,
at Bankers Trust's expense. For more information, see the SAI.
DISTRIBUTOR
Edgewood Services, Inc. is the principal distributor for shares of the Fund. In
addition, Edgewood and its affiliates provide the Trust with office facilities
and currently provide administration and distribution services for other
registered investment companies. The principal business address of Edgewood and
its affiliates is Clearing Operations, P.O. Box 897, Pittsburgh, Pennsylvania
15230-0897.
Pursuant to the terms of the Trust's Distribution and Service Plan, adopted
pursuant to Rule 12b-1 under the 1940 Act (the "Plan"), Edgewood, 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
Edgewood who, as their primary activity, engage in or support the distribution
of shares; printing of prospectuses, SAIs 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 Edgewood 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
Edgewood 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
17
<PAGE>
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.
As of February 20, 1997, Bankers Trust Company, Jersey City, New Jersey, acting
in various capacities for numerous accounts, was the owner of record of
approximately 21,493,425 shares (76.13%) of the Fund, and, therefore, may, for
certain purposes, be deemed to control the Fund and be able to affect the
outcome of certain matters presented for a vote of shareholders.
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
18
<PAGE>
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 Edgewood,
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 Edgewood have agreed to reimburse the Fund to the extent
required by applicable state law for certain expenses that are described in the
SAI. The Portfolio bears its own expenses. Operating expenses for the Portfolio
generally consist of all costs not specifically borne by Bankers Trust or
Edgewood, 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 a repurchase agreement, the Portfolio could
experience delays in recovering either its cash or selling the securities
subject to the repurchase agreement. To the extent that, in the meantime, the
value of the securities repurchased had decreased or the value of the securities
had increased, the Portfolio could experience a loss. In all cases, Bankers
Trust must find the creditworthiness of the other party to the transaction
satisfactory.
SECURITIES LENDING. The Portfolio is permitted to lend up to 30% of the total
value of its securities. These loans must be secured continuously 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. During the term of the loan, the Portfolio continues to bear the
risk of fluctuations in the price of loaned securities. 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 securities lent 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 segregates with the Custodian liquid
securities in an amount at least equal to these commitments. When entering into
a when-issued or delayed delivery transaction, the Portfolio will rely on the
other party to consummate the transaction; if the other party fails to do so,
the Portfolio may be disadvantaged.
OPTIONS ON STOCK INDICES. The Portfolio may purchase and write put and call
options on stock indices listed on stock exchanges. A stock index fluctuates
with changes in the market values of the stocks included in the index.
Options on stock indices are generally similar to options on stock except that
the delivery requirements are different. Instead of giving the right to take or
make delivery of stock at a specified price, an option on a stock index gives
the holder the right to receive a cash "exercise set-
19
<PAGE>
tlement 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 "initial 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 (or options thereon) if immediately
thereafter its margin deposits on its outstanding Futures Contracts (and its
premium paid on outstanding options thereon) would exceed 5% of the market value
of the Portfolio's total assets.
OPTIONS ON FUTURES CONTRACTS. The Portfolio may invest in options on such
Futures Contracts for similar purposes.
ASSET COVERAGE. The Portfolio will cover the Portfolio's transactions in futures
and related options, as well as in when-issued and delayed delivery, as required
under applicable interpretations of the SEC, either by owning the underlying
securities or segregating with the Portfolio's Custodian liquid securities in an
amount at all times equal to or exceeding the Portfolio's commitment with
respect to these instruments or contracts.
20
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
21
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
22
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
23
<PAGE>
BT PYRAMID MUTUAL FUNDS
BT INVESTMENT EQUITY 500 INDEX FUND
INVESTMENT ADVISER OF THE PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY
280 Park Avenue
New York, NY 10017
DISTRIBUTOR
EDGEWOOD SERVICES, INC.
Clearing Operations
P.O. Box 897
Pittsburgh, PA 15230-0897
CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY
280 Park Avenue
New York, NY 10017
INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.
1100 Main Street, Suite 900
Kansas City, MO 64105
COUNSEL
WILLKIE FARR & GALLAGHER
153 East 53rd Street
New York, NY 10022
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.
Cusip #055847107
STA462300 (3/97)
BT PYRAMID MUTUAL FUNDS{PRIVATE }
BT INVESTMENT EQUITY 500 INDEX FUND MARCH 17, 1997
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 BT Investment Equity 500 Index Fund
(the `Fund'').
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 Daily Stock Price Index of 500 Common
Stocks (the `S&P 500'').
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 Equity 500 Index Portfolio (the `Portfolio''), an open-end management
investment company having the same investment objective as the Fund.
Shares of the Fund are sold by Edgewood Services, Inc. ("Edgewood"), the
Trust's distributor, to clients and customers (including affiliates and
correspondents) of Bankers Trust Company ("Bankers Trust"), the Portfolio's
investment adviser (`Adviser''), and to clients and customers of other
organizations.
The Trust's Prospectus for the Fund is dated March 17, 1997. 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 Fund's Prospectus.
INVESTMENT ADVISER OF THE PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY
DISTRIBUTOR
EDGEWOOD SERVICES, INC.
CLEARING OPERATIONS PITTSBURGH, PENNSYLVANIA 15230-0897(800) 730-1313
P.O. BOX 897
TABLE OF CONTENTS
Investment Objectives and Policies.....................1
Performance Information................................12
Valuation of Securities; Redemptions and Purchases in Kind 15
Management of the Trust and Portfolio..................16
Organization of the Trust..............................22
Taxation...............................................22
Financial Statements...................................24
Appendix ..............................................25
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
The investment objective of the Fund is described in the Fund's Prospectus.
There can, of course, be no assurance that the Fund will achieve its
investment objective.
INVESTMENT POLICIES
The Fund seeks to achieve its investment objective by investing all of its
Assets in the Portfolio. The Trust may withdraw a Fund's 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 Fund to do so.
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.
Certificates of Deposit and Bankers' Acceptances. The 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 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.
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"), or securities which are otherwise not readily marketable
and repurchase agreements having a remaining maturity of longer than seven
calendar 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 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.
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. (`NASD'').
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, Edgewood 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 percent cash collateral or equivalent securities
from the borrower; (ii) the borrower must increase this collateral whenever
the market value of the securities including accrued interest rises above
the level of the collateral; (iii) the Portfolio must be able to terminate
the loan at any time; (iv) the Portfolio must receive reasonable interest
on the loan, as well as any dividends, interest or other distributions on
the loaned securities, and any increase in market value; (v) the Portfolio
may pay only reasonable custodian fees in connection with the loan; and
(vi) voting rights on the loaned securities may pass to the borrower;
provided, however, that if a material event adversely affecting the
investment occurs, the Board of Trustees must terminate the loan and regain
the right to vote the securities.
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.
Futures Contracts. The 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. The
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. The 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 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.
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
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 Portfolio, if the Adviser's
investment judgment about the general direction of interest rates is
incorrect, the Portfolio's overall performance would be poorer than if it
had not entered into any such contract. For example, if the 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 the 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. The Portfolio may
have to sell securities at a time when it may be disadvantageous to do so.
Options on Futures Contracts. The 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 the 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 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 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, the 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 the 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.
Additional Risks of Options on Futures Contracts, Forward Contracts and
Options on Foreign Currencies. Unlike transactions entered into by the
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 securities exchange are cleared and guaranteed by the Options
Clearing Corporation ("OCC"), thereby reducing the risk of counterparty
default. Further, a liquid secondary market in options traded on a
national securities exchange may be more readily available than in the
over-the-counter market, potentially permitting a Portfolio to liquidate
open positions at a profit prior to exercise or expiration, or to limit
losses in the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency options, however,
is subject to the risks of the availability of a liquid secondary market
described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
political and economic events. In addition, exchange-traded options on
foreign currencies involve certain risks not presented by the over-the-
counter market. For example, exercise and settlement of such options must
be made exclusively through the OCC, which has established banking
relationships in applicable foreign countries for this purpose. As a
result, the OCC may, if it determines that foreign governmental
restrictions or taxes would prevent the orderly settlement of foreign
currency option exercises, or would result in undue burdens on the OCC or
its clearing member, impose special procedures on exercise and settlement,
such as technical changes in the mechanics of delivery of currency, the
fixing of dollar settlement prices or prohibitions on exercise.
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 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 of Securities. When the 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 the 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.
The 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.
When the 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.
The 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.
The 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.
The 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.
The 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 Portfolio's
Trustees.
Options on Securities Indices. The Portfolio may also purchase and write
(sell) call and put options on securities indices. Such options give the
holder the right to receive a cash settlement during the term of the option
based upon the difference between the exercise price and the value of the
index. Such options will be used for the purposes described above under
"Options on Securities."
Options on securities indices entail risks in addition to the risks of
options on securities. The absence of a liquid secondary market to close
out options positions on securities indices is more likely to occur,
although the Portfolio generally will only purchase or write such an option
if the Adviser believes the option can be closed out.
Use of options on securities indices also entails the risk that trading in
such options may be interrupted if trading in certain securities included
in the index is interrupted. 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 the 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.
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 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 used herein and in the Fund's
Prospectus is set forth in the Appendix to this Statement of Additional
Information.
INVESTMENT RESTRICTIONS
The following investment restrictions are "fundamental policies" of the
Fund and the 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 Investment Company Act of
1940, as amended (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 the Portfolio, the Trust will
hold a meeting of the Fund's shareholders and will cast its vote as
instructed by 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 of the Trust in the same proportion as the Fund
shareholders who do, in fact, vote.
As a matter of fundamental policy, the Portfolio (or Fund) may not (except
that no investment restriction of the Fund shall prevent the 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 "Additional 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;
(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, up to 25% of its total
assets may be invested in any one industry; and
(6) issue any senior security (as that term is defined in the 1940 Act) if
such issuance is specifically prohibited by the 1940 Act or the rules and
regulations promulgated thereunder, provided that collateral arrangements
with respect to options and futures, including deposits of initial deposit
and variation margin, are not considered to be the issuance of a senior
security for purposes of this restriction.
Additional Restrictions. In order to comply with certain statutes and
policies each Portfolio (or the Trust, on behalf of each Fund) will not as
a matter of non-fundamental operating policy (except that no operating
policy shall prevent the 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 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 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;
(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 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);
(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
The Adviser is responsible for decisions to buy and sell securities,
futures contracts and options on such securities and futures for the
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 the Portfolio are frequently placed by the Adviser with the issuer or a
primary or secondary market-maker for these securities on a net basis,
without any brokerage commission being paid by the Portfolio. Trading
does, however, involve transaction costs. Transactions with dealers
serving as market-makers reflect the spread between the bid and asked
prices. Transaction costs may also include fees paid to third parties for
information as to potential purchasers or sellers of securities. Purchases
of underwritten issues may be made which will include an underwriting fee
paid to the underwriter.
The Adviser seeks to evaluate the overall reasonableness of the brokerage
commissions paid (to the extent applicable) in placing orders for the
purchase and sale of securities for a Portfolio taking into account such
factors as price, commission (negotiable in the case of national securities
exchange transactions), if any, size of order, difficulty of execution and
skill required of the executing broker-dealer through familiarity with
commissions charged on comparable transactions, as well as by comparing
commissions paid by the Portfolio to reported commissions paid by others.
The Adviser reviews on a routine basis commission rates, execution and
settlement services performed, making internal and external comparisons.
The Adviser is authorized, consistent with Section 28(e) of the Securities
Exchange Act of 1934, 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
NASD 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 the Portfolio's assets, as well as the assets of
other clients.
Except for implementing the policies stated above, there is no intention to
place portfolio transactions with particular brokers or dealers or groups
thereof. In effecting transactions in over-the-counter securities, orders
are placed with the principal market-makers for the security being traded
unless, after exercising care, it appears that more favorable results are
available otherwise.
Although certain research, market and statistical information from brokers
and dealers can be useful to the Portfolio and to the Adviser, it is the
opinion of the management of the Portfolio 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 Portfolio. 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 Portfolio.
In certain instances there may be securities which are suitable for the
Portfolio as well as for one or more of the Adviser's other clients.
Investment decisions for the 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 the Portfolio to participate in volume
transactions will produce better executions for the Portfolio.
For the years ended December 31, 1996, 1995, and 1994, Equity 500 Index
Portfolio incurred brokerage commissions in the amount of $289,791,
$172,924, and $97,069, respectively.
{PRIVATE }PERFORMANCE INFORMATION{TC "PERFORMANCE INFORMATION"}
STANDARD PERFORMANCE INFORMATION
From time to time, quotations of the 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 the 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 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 the 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 the
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.
The Fund's 30-day SEC yield for the period ended December 31, 1996 was
1.86%.
TOTAL RETURN: The 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. The Fund may also calculate total return
figures which represent aggregate performance over a period or year-
by-year performance.
The Fund's total return for the year ended December 31, 1996 was
22.83%. The Fund's cumulative total return for the period from
December 31, 1992 (commencement of operations) to December 31, 1996
was 86.62%. The Fund's average annualized total return for the period
from December 31, 1992 (commencement of operations) to December 31,
1996, was 16.88%.
PERFORMANCE RESULTS: Any total return quotation provided for the 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 Portfolio. These factors
and possible differences in the methods used to calculate total return
should be considered when comparing the total return of the 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, the 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
the Fund's performance made by independent sources may also be used in
advertisements concerning the Fund. Sources for a Fund's performance
information could include the following:
Asian Wall Street Journal, a weekly Asian newspaper that often reviews U.S.
mutual funds investing internationally.
Barron's, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance data.
Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds investing
abroad.
Changing Times, The Kiplinger Magazine, a monthly investment advisory
publication that periodically features the performance of a variety of
securities.
Consumer Digest, a monthly business/financial magazine that includes a
"Money Watch" section featuring financial news.
Financial Times, Europe's business newspaper, which features from time to
time articles on international or country-specific funds.
Financial World, a general business/financial magazine that includes a
"Market Watch" department reporting on activities in the mutual fund
industry.
Forbes, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.
Fortune, a national business publication that periodically rates the
performance of a variety of mutual funds.
Global Investor, a European publication that periodically reviews the
performance of U.S. mutual funds investing internationally.
Investor's Daily, a daily newspaper that features financial, economic and
business news.
Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis, a
weekly publication of industry-wide mutual fund averages by type of fund.
Money, a monthly magazine that from time to time features both specific
funds and the mutual fund industry as a whole.
Morningstar Inc., a publisher of financial information and mutual fund
research.
New York Times, a nationally distributed newspaper which regularly covers
financial news.
Personal Investing News, a monthly news publication that often reports on
investment opportunities and market conditions.
Personal Investor, a monthly investment advisory publication that includes
a "Mutual Funds Outlook" section reporting on mutual fund performance
measures, yields, indices and portfolio holdings.
Success, a monthly magazine targeted to the world of entrepreneurs and
growing business, often featuring mutual fund performance data.
U.S. News and World Report, a national business weekly that periodically
reports mutual fund performance data.
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. Other assets are
valued at fair value using methods determined in good faith by the
Portfolio's Board of Trustees.
The Trust, on behalf of the Fund, and the Portfolio reserves 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 has 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.
The Portfolio has agreed to make a redemption in kind to the Fund whenever
the Fund wishes to make a redemption in kind and therefore shareholders of
the Fund that receive redemptions in kind will receive portfolio securities
of the Portfolio and in no case will they receive a security issued by the
Portfolio. The Portfolio has advised the Trust that the Portfolio will not
redeem in kind except in circumstances in which the Fund is permitted to
redeem in kind or unless requested by the Fund.
Each investor in the Portfolio, including the 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. (Eastern
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 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 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.
The Fund may, at its own option, accept securities in payment for shares.
The securities delivered in payment for shares are valued by the method
described under "Net Asset Value" in the prospectus 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
Portfolio. In addition, securities accepted in payment for shares must:
(i) meet the investment objective and policies of the acquiring Fund's
Portfolio; (ii) be acquired by the applicable Fund for investment and not
for resale (other than for resale to the Fund's 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. The Fund reserves the
right to accept or reject at its own option any and all securities offered
in payment for its shares.
{PRIVATE }MANAGEMENT OF THE TRUST AND PORTFOLIO{TC "MANAGEMENT OF THE TRUST
AND PORTFOLIO"}
The Board of Trustees is composed of persons experienced in financial
matters who meet throughout the year to oversee the activities of the Fund
or Portfolio they represent. In addition, the Trustees review contractual
arrangements with companies that provide services to the Fund and/or
Portfolio and review the Fund's performance.
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 officer is Clearing Operations,
P.O. Box 897, Pittsburgh, Pennsylvania, 15230-0897.
TRUSTEES OF THE TRUST
{PRIVATE }{TC ""}
PHILIP W. COOLIDGE* (birthdate: September 2, 1951) - President and Trustee;
Chairman, Chief Executive Officer and President, Signature Financial Group,
Inc. ("SFG") (since December, 1988) and Signature (since April, 1989). His
address is 6 St. James Avenue, Boston, Massachusetts 02116.
MARTIN J. GRUBER (birthdate: July 15, 1937) - 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.
KELVIN J. LANCASTER (birthdate: December 10, 1924) - Trustee; Professor,
Department of Economics, Columbia University. His address is 35 Claremont
Avenue, New York, New York 10027.
HARRY VAN BENSCHOTEN (birthdate: February 18, 1928) - 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.
*Indicates an `interested person'' (as defined in the 1940 Act) for the
Trust.
TRUSTEES OF THE PORTFOLIOS
CHARLES P. BIGGAR (birthdate: October 13, 1930) - Trustee; Retired;
Director of Chase/NBW Bank Advisory Board; Director, Batemen, Eichler, Hill
Richards Inc.; formerly Vice President of International Business Machines
and President of the National Services and the Field Engineering Divisions
of IBM. His address is 12 Hitching Post Lane, Chappaqua, New York 10514.
PHILIP W. COOLIDGE* (birthdate: September 2, 1951) - Trustee and President;
Chairman, Chief Executive Officer and President, SFG (since December, 1988)
and Signature (since April, 1989). His address is 6 St. James Avenue,
Boston, Massachusetts 02116.
S. LELAND DILL (birthdate: March 28, 1930) - Trustee; Retired; Director,
Coutts Group; Coutts (U.S.A.) International; Coutts Trust Holdings, Ltd;
Director, Zweig Series Trust; formerly Partner of KPMG Peat Marwick;
Director, Vinters International Company Inc.; General Partner of Pemco (an
investment company registered under the 1940 Act). His address is 5070
North Ocean Drive, Singer Island, Florida 33404.
PHILIP SAUNDERS, JR. (birthdate: October 11, 1935) - Trustee; Principal,
Philip Saunders Associates (Consulting); former Director of Financial
Industry Consulting, Wolf & Company; President, John Hancock Home Mortgage
Corporation; and Senior Vice President of Treasury and Financial Services,
John Hancock Mutual Life Insurance Company, Inc. His address is 445 Glen
Road, Weston, Massachusetts 02193.
*Indicates an `interested person'' (as defined in the 1940 Act) for the
Trust.
OFFICERS OF THE TRUST AND PORTFOLIOS
Unless otherwise specified, each officer listed below holds the same
position with the Trust and each Portfolio.
RONALD M. PETNUCH (birthdate: February 27, 1960) - President and Treasurer;
Senior Vice President; Federated Services Company (`FSC''); formerly,
Director of Proprietary Client Services, Federated Administrative Services
(`FAS''), and Associate Corporate Counsel, Federated Investors (``FI'').
CHARLES L. DAVIS, JR. (birthdate: March 23, 1960) - Vice President and
Assistant Treasurer; Vice President, FAS.
JAY S. NEUMAN (birthdate: April 22, 1950) - Secretary; Corporate Counsel,
FI.
Messrs. Coolidge, Petnuch, Davis, and Neuman also hold similar positions
for other investment companies for which Signature, or Edgewood,
respectively, 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 Edgewood 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 following table reflects fees paid to the Trustees of the Trust and
Portfolio for the year ended December 31, 1996.
TRUSTEE COMPENSATION TABLE
NAME, AGGREGATE TOTAL
POSITION WITH COMPENSATION COMPENSATION FROM
TRUST/PORTFOLIO FROM TRUST FUND COMPLEX*
Harry Van Benschoten,
Trustee of Trust $12,130 $27,500
Philip W. Coolidge
Trustee of the Trust $115 $1,250
and Portfolio
Martin J. Gruber,
Trustee of Trust $12,130 $27,500
Kelvin J. Lancaster,
Trustee of Trust $11,850 $26,250
Charles P. Biggar,
Trustee of Portfolio none $28,750
S. Leland Dill,
Trustee of Portfolio none $28,750
Philip Saunders, Jr.,
Trustee of Portfolio none $28,750
*Aggregated information is furnished for the BT Family of Funds which
consists of the following: BT Investment Funds, BT Institutional Funds,
BT Pyramid Funds, BT Advisor Funds, BT Investment Portfolios, Cash
Management Portfolio, Treasury Money Portfolio, Tax Free Money Portfolio,
NY Tax Free Money Portfolio, International Equity Portfolio, Utility
Portfolio, Short Intermediate US Government Securities Portfolio,
Intermediate Tax Free Portfolio, Asset Management Portfolio, Equity 500
Index Portfolio, and Capital Appreciation Portfolio.
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 February 20, 1997, the Trustees and officers of the Trust and the
Portfolios owned in the aggregate less than 1% of the shares of the Fund or
the Trust (all series taken together).
As of February 20, 1997, the following shareholder of record owned 5% or
more of the shares of the Fund: Bankers Trust Company acting in various
capacities for numerous accounts, Jersey City, New Jersey, owned
approximately 21,493,425 shares (76.13%).
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 the Portfolio.
Bankers Trust bears all expenses in connection with the performance of
services under each Advisory Agreement. The Trust and the Portfolio bear
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, Edgewood or any of their affiliates; SEC fees and state Blue
Sky qualification fees; charges of custodians and transfer and dividend
disbursing agents; certain insurance premiums; outside auditing and legal
expenses; costs of maintenance of corporate existence; costs attributable
to investor services, including, without limitation, telephone and
personnel expenses; costs of preparing and printing prospectuses and
statements of additional information for regulatory purposes and for
distribution to existing shareholders; costs of shareholders' reports and
meetings of shareholders, officers and Trustees of the Trust or the
Portfolio; and any extraordinary expenses.
For the fiscal years ended December 31, 1996, 1995, and 1994, Bankers Trust
earned $1,505,963, $770,530, and $428,346, respectively, as compensation
for investment advisory services provided to the Portfolio. During the
same periods, Bankers Trust reimbursed $870,024, $418,814, and $249,230,
respectively, to the Portfolio to cover expenses.
The 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.
Bankers Trust may deposit, loan and have other commercial banking
relationships with the issuers of obligations which may be purchased on
behalf of the Portfolio, including outstanding loans to such issuers which
could be repaid in whole or in part with the proceeds of securities so
purchased. Such 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 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 Board of Trustees of the Trust and the Portfolio reasonably deem
necessary for the proper administration of the Trust or 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), 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") FSC performs such sub-administration duties for the Trust and
the Portfolios as from time to time may be agreed upon by Bankers Trust and
FSC. The Sub-Administration Agreement provides that FSC will receive such
compensation as from time to time may be agreed upon by FSC and Bankers
Trust. All such compensation will be paid by Bankers Trust.
For the years ended December 31, 1996, 1995, and 1994, Bankers Trust earned
$1,049,314, $686,078, and $447,359, respectively, in compensation for
administrative and other services provided to the Fund. During the same
periods, Bankers Trust reimbursed $595,135, $412,383, and $341,939,
respectively, to the Fund to cover expenses.
For the years ended December 31, 1996, 1995, and 1994, Bankers Trust earned
$752,981, $385,265, and $214,173, respectively, in compensation for
administrative and other services provided to the Portfolio.
Bankers Trust has agreed that if in any year the aggregate expenses of the
Fund and its 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 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.
CUSTODIAN AND TRANSFER AGENT
Bankers Trust, 280 Park Avenue, New York, New York 10017, serves as
Custodian for the Trust and for the Portfolio pursuant to the
administration and services agreements. As Custodian, it holds the Fund's
and the Portfolio's assets. Bankers Trust also serves as transfer agent of
the Trust and of the 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 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 may be reimbursed by the Fund or the Portfolio 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 Portfolio. 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
Portfolio contemplated by the investment advisory agreements and other
activities for the Fund 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 and the Portfolio. 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 the
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 the Portfolio.
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 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.
TAXATION
TAXATION OF THE FUNDS
The Trust intends to qualify annually and to elect the Fund to be treated
as a regulated investment company under the Internal Revenue Code of 1986,
as amended (the `Code'').
As a regulated investment company, the 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, 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 PORTFOLIO
The Portfolio is not subject to Federal income taxation. Instead, the Fund
and other investors investing in the 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.
BACKUP WITHHOLDING
The 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 the Fund.
OTHER TAXATION
The Trust is organized as a Massachusetts business trust and, under current
law, neither the Trust nor any Fund is liable for any income or franchise
tax in the Commonwealth of Massachusetts, provided that the Fund continues
to qualify as a regulated investment company under Subchapter M of the
Code.
The Portfolio is organized as a New York trust. The Portfolio is not
subject to any income or franchise tax in the State of New York or the
Commonwealth of Massachusetts.
FINANCIAL STATEMENTS
The financial statements for the Fund or Portfolio for the period ended
December 31, 1996, are incorporated herein by reference to the Annual
Report to shareholders for the Fund dated December 31, 1996. A copy of the
Fund's Annual Report may be obtained without charge by contacting the Fund.
APPENDIX
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.
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.
INVESTMENT ADVISER OF THE PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY
DISTRIBUTOR
EDGEWOOD 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.
<PAGE>
- BT PYRAMID MUTUAL FUNDS -
Cusip #055847107
BT0371B (3/97)
BT INVESTMENT MONEY MARKET FUND
A money market fund that seeks high current income to the extent consistent with
liquidity and capital preservation.
PROSPECTUS
- --------------------------------------------------------------------------------
MARCH 17, 1997
BT Pyramid Mutual Funds (the "Trust") is an open-end, management investment
company (mutual fund) which consists of a number of separate investment funds.
Please read this Prospectus carefully before investing and retain it for future
reference. It contains important information about the BT Investment Money
Market Fund (the "Fund") that you should know and can refer to in deciding
whether the Fund's goals match your own.
A Statement of Additional Information ("SAI") with the same date has been filed
with the Securities and Exchange Commission ("SEC"), and is incorporated herein
by reference. You may request a free copy of the SAI 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 ("ASSETS") IN THE CASH MANAGEMENT
PORTFOLIO (THE "PORTFOLIO"), A SEPARATE INVESTMENT COMPANY WITH AN IDENTICAL
INVESTMENT OBJECTIVE. THE INVESTMENT PERFORMANCE OF THE FUND WILL CORRESPOND
DIRECTLY TO THE INVESTMENT PERFORMANCE OF THE PORTFOLIO. SEE "SPECIAL
INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE" HEREIN.
BANKERS TRUST COMPANY ("BANKERS TRUST") IS THE INVESTMENT ADVISER (THE
"ADVISER") OF THE PORTFOLIO. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR GUARANTEED OR ENDORSED BY, BANKERS TRUST OR ANY OTHER BANKING OR
DEPOSITORY INSTITUTION. SHARES ARE NOT FEDERALLY GUARANTEED OR INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE U.S. GOVERNMENT, THE FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. THE FUND INTENDS TO MAINTAIN A
CONSTANT $1.00 PER SHARE NET ASSET VALUE ("NAV"), ALTHOUGH THERE CAN BE NO
ASSURANCE THAT IT WILL BE ABLE TO DO SO.
LIKE SHARES OF ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
EDGEWOOD SERVICES, INC.
Clearing Operations - P.O. Box 897 - Pittsburgh, Pennsylvania - 15230-0897
<PAGE>
TABLE OF CONTENTS
PAGE
The Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Who May Want to Invest . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Summary of Fund Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Investment Objective and Policies. . . . . . . . . . . . . . . . . . . . . . .6
Risk Factors: Matching the Fund to Your Investment Needs . . . . . . . . . . .9
Net Asset Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Purchase and Redemption of Shares. . . . . . . . . . . . . . . . . . . . . . 11
Dividends, Distributions and Taxes . . . . . . . . . . . . . . . . . . . . . 16
Performance Information and Reports. . . . . . . . . . . . . . . . . . . . . 16
Management of the Trust and Portfolio. . . . . . . . . . . . . . . . . . . . 17
2
<PAGE>
THE FUND
The Fund's investment objective is to seek a high level of current income
consistent with liquidity and the preservation of capital through investment in
high quality money market instruments. The Fund intends to maintain a $1.00 per
share NAV although there can be no assurance that it will be able to do so.
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.
WHO MAY WANT TO INVEST
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.
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. When investors sell their Fund shares,
they may be worth more or less than what they originally paid for them.
3
<PAGE>
SUMMARY OF FUND EXPENSES
The following table provides (i) a summary of expenses relating to purchases and
sales of the shares of the Fund and the aggregate annual operating expenses of
the Fund and the expenses of the Portfolio , as a percentage of average net
assets of the Fund and (ii) an example illustrating the dollar cost of such
expenses on a $1,000 investment in the Fund. THE TRUSTEES OF 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
- --------------------------------------------------------------------------------
6
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 Distribution and Service Plan,
adopted 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 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, 1996 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%.
The Fund is distributed by Edgewood Services, Inc. ("Edgewood" or the
"Distributor") to investors including customers of Bankers Trust or to customers
of another bank, dealer or other financial intermediary 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.
For more information with respect to the expenses of the Fund and the Portfolio
see "Management of the Trust and Portfolio" herein.
4
<PAGE>
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 SAI.
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED JULY 15, 1992
DECEMBER 31, (COMMENCEMENT OF
----------------------------------------------------- OPERATIONS) TO
1996 1995 1994 1993 DECEMBER 31, 1992
-------- -------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income. . . . . . . . . . . . . . . . . 0.05 0.06 0.04 0.03 0.01
Net Realized Gain (Loss) from Investment Transactions. 0.00+ 0.00+ (0.01) 0.00+ 0.00+
-------- -------- -------- -------- --------
Total from Investment Operations . . . . . . . . . . . . 0.05 0.06 0.03 0.03 0.01
-------- -------- -------- -------- --------
CONTRIBUTIONS OF CAPITAL . . . . . . . . . . . . . . . . 0.00+ -- 0.01 -- --
-------- -------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income. . . . . . . . . . . . . . . . . (0.05) (0.06) (0.04) (0.03) (0.01)
Net Realized Gain from Investment Transactions . . . . -- -- -- (0.00)+ (0.00)+
-------- -------- -------- -------- --------
Total Distributions. . . . . . . . . . . . . . . . . . . (0.05) (0.06) (0.04) (0.03) (0.01)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . . . . 5.24%++ 5.76% 4.05%++ 2.91% 3.12%*
SUPPLEMENTAL DATA AND RATIOS:
Net Assets, End of Period (000s omitted) . . . . . . . $ 416,161 $ 645,910 $ 976,472 $ 1,953 $ 789
Ratios to Average Net Assets:
Net Investment Income . . . . . . . . . . . . . . . 5.12% 5.62% 4.24% 2.87% 3.06%*
Expenses, including expenses of the
Cash Management Portfolio. . . . . . . . . . . . . 0.35% 0.35% 0.35% 0.35% 0.35%*
Decrease Reflected in Above Expense Ratio Due
to Absorption of Expenses by Bankers Trust . . . . 0.16% 0.16% 0.21% 2.91% 3.56%*
</TABLE>
- ----------
* Annualized
+ Less than $0.01 per share.
++ Increased by approximately 0.10% and 0.81% due to Contributions of Capital
for the years ended December 31, 1996 and 1994, respectively.
5
<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"
herein.
Since the investment characteristics of the Fund will correspond directly to
those of the Portfolio, the following is a discussion of the various investments
and investment policies of the Portfolio. Additional information about the
investment policies of the Portfolio appears in the SAI.
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 Ratings Group
("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 SAI.
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
6
<PAGE>
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 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 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 counterparties 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 counterparties 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 the
value 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 securities lent should the borrower of
the securities fail financially.
ADDITIONAL INVESTMENT TECHNIQUES
The Portfolio may enter into reverse repurchase agreements. See "Investment
Objective and Policies" in the SAI for a more detailed description of reverse
repurchase agreements.
7
<PAGE>
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 SAI.
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.
CREDIT ENHANCEMENT. Certain of the Portfolio's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. Any bankruptcy,
receivership, default, or change in the credit quality of the party providing
the credit enhancement will adversely affect the quality and marketability of
the underlying security and could cause losses to the Portfolio and affect the
Fund's share price. The Portfolio may have more than 25% of its total assets
invested in securities credit-enhanced by banks.
ADDITIONAL INVESTMENT LIMITATIONS
The Fund's and the Portfolio's investment objectives, together with the
investment restrictions described in this paragraph and the SAI, 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 SAI
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 SAI contains further information on the Fund's and the
Portfolio's investment restrictions.
8
<PAGE>
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
1-800-730-1313.
The master-feeder structure is relatively complex, so shareholders should
carefully consider this investment approach.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large
fund withdraws from the Portfolio, the remaining funds may experience higher
pro rata operating expenses, thereby producing lower returns (however, this
possibility exists as well for traditionally structured funds which have
large institutional investors). Additionally, the Portfolio may become less
diverse, resulting in increased portfolio risk. Also, funds with a greater
pro rata ownership in the Portfolio could have effective voting control of
the 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.
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.
For descriptions of the investment objective, policies and restrictions of
the Portfolio, see "Investment Objective and Policies" herein and in the SAI.
For descriptions of the management and expenses of the Portfolio, see
"Management of the Trust and Portfolio" herein and in the SAI.
9
<PAGE>
NET ASSET VALUE
The NAV 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 NAV per share of the Fund is calculated twice on each Valuation Day as of
2:00 p.m., Eastern time, and as of the close of regular trading on the New York
Stock Exchange Inc. ("NYSE"), which is currently 4:00 p.m., Eastern time or in
the event that the NYSE closes early, at the time of such early closing (each a
"Valuation Time"). The NAV per share of the Fund is computed by dividing the
value of the Fund's assets (i.e., the value of its investment in the Portfolio
and other assets), less all liabilities, by the total number of its shares
outstanding. The Fund's NAV per share 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 NAV. 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.
10
<PAGE>
PURCHASE AND REDEMPTION OF SHARES
HOW TO BUY SHARES
The Trust accepts purchase orders for shares of the Fund at the NAV per share
next determined after the order is received on each Valuation Day. See "Net
Asset Value" herein. Shares of the Fund may be available through Investment
Professionals, such as broker/dealers and investment advisers (including Service
Agents).
Purchase orders for shares of the Fund (including those purchased through a
Service Agent) that are transmitted to the Trust's Transfer Agent (the "Transfer
Agent"), prior to the Valuation Time on any Valuation Day will be effective at
that day's applicable Valuation Time. If the purchase order is received by the
Service Agent and transmitted to the Transfer Agent after 2:00 p.m., (Eastern
time) and prior to the close of the NYSE, the shareholder will receive the
dividend declared on the following day even if Bankers Trust as the Trust's
custodian (the "Custodian") receives federal funds on that day. If the purchase
order is received prior to 2:00 p.m., the shareholder will receive that
Valuation Day's dividend. The Trust and Transfer Agent reserve the right to
reject any purchase order.
Another mutual fund investing in the Portfolio may accept purchase orders up
until a time later than 2:00 p.m., Eastern time. Such orders, when transmitted
to and executed by the Portfolio, may have an impact on the Fund's performance.
Shares must be purchased in accordance with procedures established by the
Transfer Agent and each Service Agent. It is the responsibility of each Service
Agent to transmit to the Transfer Agent purchase and redemption orders and to
transmit to the Custodian purchase payments by the following business day (trade
date + 1) after an order for shares is placed. A shareholder must settle with
the Service Agent for his or her entitlement to an effective purchase or
redemption order as of a particular time. Because Bankers Trust is the
Custodian and Transfer Agent of the Trust, funds may be transferred directly
from or to a customer's account held with Bankers Trust to settle transactions
with the Fund without incurring the additional costs or delays associated with
the wiring of Federal funds.
If orders are placed through a Service Agent, it is the responsibility of the
Investment Professional to transmit the order to buy shares to the Transfer
Agent before 2:00 p.m. or 4:00 p.m. Eastern time, as applicable.
The Transfer Agent must receive payment within one business day after an order
for shares is placed; otherwise, the purchase order may be canceled and the
investor could be held liable for resulting fees and/or losses.
Certificates for shares will not be issued. Each shareholder's account will be
maintained by a Service Agent or Transfer 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
If you are new to BT Pyramid Mutual Funds, complete and sign an account
application and mail it along with your check to the address listed below. If
there is no account application accompanying this Prospectus, call the BT
Service Center at 1-800-730-1313.
BT Service Center
P.O. Box 419210
Kansas City, MO 64141-6210
Overnight mailings:
BT Service Center
210 West 10th Street, 8th Floor
Kansas City, MO 64105-1716
IF YOU ALREADY HAVE MONEY INVESTED IN A FUND IN THE BT FAMILY OF FUNDS, you can:
- - Mail an account application with a check,
- - Wire money into your account,
- - Open an account by exchanging from another fund in the BT Family of Funds,
or
- - Contact your Service Agent or Investment Professional.
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 or call BT Retirement Services Center at 1-800-730-1313 for more
information and a retirement account application.
11
<PAGE>
ADDITIONAL INFORMATION ABOUT BUYING SHARES
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
BY WIRE Call the BT Service Center at Call your Investment Professional
1-800-730-1313 to receive or wire additional investment to:
wire instructions for account
establishment.
ROUTING NO.: 021001033
ATTN: Bankers Trust/IFTC Deposit
DDA NO.: 00-226-296
FBO: (Account name)
(Account number)
CREDIT: Fund Number
BT Investment Money Market
Fund - 460
Specify the complete name of the
Fund of your choice, and include
your account number and your name.
BY PHONE Contact your Service Agent, Contact your Service Agent,
Investment Professional, or call Investment Professional, or call
BT's Service Center at BT's Service Center at
1-800-730-1313. If you are an 1-800-730-1313. If you are an
existing shareholder, you may existing shareholder, you may
exchange from another BT exchange from another BT
account with the same account with the same registration,
registration, including, name, including, name, address, and
address, and taxpayer ID number. taxpayer ID number.
BY MAIL Complete and sign the account Make your check payable to the
application. Make your check complete name of the Fund of your
payable to the complete name of choice. Indicate your Fund account
the Fund of your choice. Mail number on your check and mail to
to the appropriate address the address printed on your
indicated on the application. account statement.
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 per share calculated after an order is received by the Transfer Agent.
Redemption requests should be transmitted by customers in accordance with
procedures established by the Transfer Agent and the Shareholder's Service
Agent. Redemption requests for shares of the Fund received by the Service Agent
and transmitted to the Transfer Agent prior to 2:00 p.m. (Eastern time) on each
Valuation Day will be redeemed at the NAV per share as of 2:00 p.m. (Eastern
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. (Eastern time) on each
Valuation Day and prior to the close of the NYSE will be redeemed at the NAV per
share at the close of the NYSE and the redemption proceeds normally will be
delivered to the shareholder's account with the Service Agent the next day, but
in any event within seven calendar days following receipt of the request. Shares
redeemed in this manner will receive the dividend declared on the day of
redemption.
Another mutual fund investing in the Portfolio may accept redemption orders up
until a time later than 2:00 p.m., Eastern time. Such orders, when transmitted
to, and executed by the Portfolio, may have an impact on the Fund's performance.
12
<PAGE>
Service Agents may allow redemptions or exchanges by telephone and may disclaim
liability for following instructions communicated by telephone that the Service
Agent reasonably believes to be genuine. The Service Agent must provide the
investor with an opportunity to choose whether or not to utilize the telephone
redemption or exchange privilege. The Transfer Agent and the Service Agent must
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. If the Shareholder Servicing 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, but not if an account is below the
minimum due to a change in market value. 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.
TO SELL SHARES IN A RETIREMENT ACCOUNT, your request must be made in writing,
except for exchanges to other eligible funds in the BT Family of Funds, which
can be requested by phone or in writing. For information on retirement
distributions, contact your Service Agent or call the BT Service Center at
1-800-730-1313.
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 to protect you and Bankers
Trust from fraud. Redemption requests in writing must include a signature
guarantee if any of the following situations apply:
- - Your account registration has changed within the last 30 days,
- - The check is being mailed to a different address than the one on your
account (record address),
- - The check is being made payable to someone other than the account owner,
- - The redemption proceeds are being transferred to a BT account with a
different registration, or
- - You wish to have redemption proceeds wired to a non-predesignated bank
account.
A signature guarantee is also required if you change the pre-designated bank
information for receiving redemption proceeds on your account.
You should be able to obtain a signature guarantee from a bank, broker, dealer,
credit union (if authorized under state law), securities exchange or
association, clearing agency, or savings association. A notary public cannot
provide a signature guarantee.
ADDITIONAL INFORMATION ABOUT SELLING SHARES
BY WIRE - You must sign up for the wire feature before using it. To verify that
it is in place, call 1-800-730-1313. Minimum wire: $1,000. Your wire redemption
request must be received by the Transfer Agent before 4:00 p.m. Eastern time for
money to be wired on the next business day.
IN WRITING - Write a signed "letter of instruction" with your name, the Fund's
name and Fund's number, your Fund account number, the dollar amount or number of
shares to be redeemed, and mail to one of the following addresses:
BT Service Center
P.O. Box 419210
Kansas City, MO 64141-6210
Overnight mailings:
BT Service Center
210 West 10th Street, 8th Floor
Kansas City, MO 64105-1716
For Trust accounts, the trustee must sign the letter indicating capacity as
trustee. If the trustee's name is not on
13
<PAGE>
the account registration, provide a copy of the trust document certified within
the last 60 days.
For a Business or Organization account, at least one person authorized by
corporate resolution to act on the account must sign the letter.
Unless otherwise instructed, the Transfer Agent will send a check to the account
address of record. The Trust reserves the right to close investor accounts via
30 day notice in writing if the Fund account balance falls below the Fund
minimums.
INVESTOR SERVICES
BT Pyramid Mutual Funds provides a variety of services to help you manage your
account.
INFORMATION SERVICES
Statements and reports that your Investment Professional or the Transfer Agent
may send to you include the following:
- - Confirmation statements (after every transaction that affects your account
balance, including distributions or your account registration)
- - Account statements (monthly)
- - 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 or the BT Service Center at 1-800-730-1313 if you need additional
copies of financial reports.
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 "How to Buy Shares" and "How to Sell 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).
- - 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.
SYSTEMATIC PROGRAMS
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO BT PYRAMID MUTUAL FUNDS
MINIMUM MINIMUM FREQUENCY SETTING UP OR CHANGING
INITIAL SUBSEQUENT
$1,000 $100 Monthly, bimonthly, For a new account, complete the
quarterly or semi- appropriate section on the
annually 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.
14
<PAGE>
SYSTEMATIC WITHDRAWAL PROGRAM lets you set up periodic redemptions from your
account.
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 Monthly, quarterly, semi-annually To establish, call your Investment
or annually Professional or call 1-800-730-1313
after your account is open. The
accounts from which the withdrawals
will be processed must have a
minimum balance of $10,000.
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.
- - 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.
15
<PAGE>
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 daily and pays the dividends
monthly. 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. Unless a
shareholder instructs the Fund to pay dividends or capital gains distributions
in cash, dividends and distributions will automatically be reinvested at NAV in
additional shares of the Fund.
The Fund intends to qualify 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 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
16
<PAGE>
be compared with, for example, the IBC First Tier All Taxable Money Fund Average
which is an average compiled by IBC 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.
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 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 SAI.
INVESTMENT ADVISER
The Trust has not retained the services of an investment adviser since the Trust
seeks to achieve the investment objective of the Fund by investing all the
Assets of the Fund in the Portfolio. The Portfolio has retained the services of
Bankers Trust, as investment adviser.
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, 1996,
Bankers Trust New York Corporation was the seventh largest bank holding company
in the United States with total assets of approximately $120 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 $227 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 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.
17
<PAGE>
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 SAI without violation of the Glass-Steagall
Act or other applicable banking laws or regulations
ADMINISTRATOR
Under its Administration and Services Agreement with the Trust, Bankers Trust
calculates the NAV per share 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 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 SAI.
DISTRIBUTOR
Edgewood Services, Inc. is the principal distributor for shares of the Fund. In
addition, Edgewood and its affiliates provide the Trust with office facilities
and currently provide administration and distribution services for other
registered investment companies. The principal business address of Edgewood and
its affiliates is Clearing Operations, P.O. Box 897, Pittsburgh, Pennsylvania
15230-0897.
Pursuant to the terms of the Trust's Distribution and Service Plan, adopted
pursuant to Rule 12b-1 under the 1940 Act (the "Plan"), Edgewood, 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
Edgewood 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 Edgewood
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 SAIs 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 Edgewood
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.
18
<PAGE>
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.
As of February 20, 1997, Bankers Trust Company, Jersey City, New Jersey,
acting as custodian, was the owner of record of approximately 111,888,211
shares (25.00%) of the Fund, and, therefore, may, for certain purposes, be
deemed to control the Fund and be able to affect the outcome of certain
matters presented for a vote of shareholders.
19
<PAGE>
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 Edgewood,
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 Edgewood have agreed to reimburse the Fund to the extent
required by applicable state law for certain expenses that are described in the
SAI. The Portfolio bears its own expenses. Operating expenses for the Portfolio
generally consist of all costs not specifically borne by Bankers Trust or
Edgewood, 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.
20
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
21
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
22
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
23
<PAGE>
BT PYRAMID MUTUAL FUNDS
BT INVESTMENT MONEY MARKET FUND
INVESTMENT ADVISER OF EACH PORTFOLIO AND
ADMINISTRATOR
BANKERS TRUST COMPANY
280 Park Avenue
New York, NY 10017
DISTRIBUTOR
EDGEWOOD SERVICES, INC.
Clearing Operations
P.O. Box 897
Pittsburgh, PA 15230-0897
CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY
280 Park Avenue
New York, NY 10017
INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.
1100 Main Street, Suite 900
Kansas City, MO 64105
COUNSEL
WILLKIE FARR & GALLAGHER
153 East 53rd Street
New York, NY 10022
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.
Cusip #055847206
STA460300 (3/97) 24
BT INSTITUTIONAL FUNDS
{PRIVATE }INSTITUTIONAL CASH MANAGEMENT FUND MARCH 17, 1997
INSTITUTIONAL CASH RESERVES
INSTITUTIONAL LIQUID ASSETS FUND
INSTITUTIONAL TREASURY MONEY FUND
BT PYRAMID MUTUAL FUNDS
BT INVESTMENT MONEY MARKET FUND
STATEMENT OF ADDITIONAL INFORMATION
BT Institutional Funds and BT Pyramid Mutual Funds (each a
`Trust'' and, collectively, the ``Trusts''), are open-end management
investment companies that offer investors a selection of investment
portfolios, each having distinct investment objectives and policies. This
Statement of Additional Information (`SAI'') relates to the following
investment portfolios (each a `Fund'' and, collectively, the ``Funds''),
each of which seeks a high level of current income consistent with
liquidity and the preservation of capital.
INSTITUTIONAL CASH MANAGEMENT FUND-a diversified investment portfolio
that seeks a high level of current income through investment in a
portfolio of high quality money market instruments.
INSTITUTIONAL CASH RESERVES-a diversified investment portfolio that
seeks a high level of current income through investment in a portfolio
of high quality money market instruments.
INSTITUTIONAL LIQUID ASSETS FUND-a diversified investment portfolio
that seeks a high level of current income through investment in a
portfolio of high quality money market instruments.
INSTITUTIONAL TREASURY MONEY FUND-a diversified investment portfolio
that seeks a high level of current income through investment in a
portfolio of direct obligations of the U.S. Treasury and repurchase
agreements in respect of those obligations.
BT INVESTMENT MONEY MARKET FUND-a diversified investment portfolio
that seeks a high level of current income through investment in a
portfolio of high quality money market instruments.
As described in the prospectuses, the Trusts seek to achieve the
investment objectives of each Fund by investing all the investable assets
of the Fund in a diversified open-end management investment company having
the same investment objectives as such Fund. These investment companies
are, respectively, Cash Management Portfolio, BT Investment Portfolios-
Liquid Assets Portfolio (`Liquid Assets Portfolio''), and Treasury Money
Portfolio (collectively, the `Portfolios'').
Since the investment characteristics of each Fund 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 Edgewood Services, Inc.
(`Edgewood''), the Trusts' distributor (``Distributor''), to clients and
customers (including affiliates and correspondents) of Bankers Trust
Company (`Bankers Trust''), the Portfolios' investment adviser
(`Adviser''), and to clients and customers of other organizations.
The Trusts' prospectuses, which may be amended from time to time
(each, a `Prospectus''), with respect to Institutional Cash Management
Fund, Institutional Cash Reserves, Institutional Liquid Assets Fund,
Institutional Treasury Fund and BT Investment Money Market Fund, are dated
March 17, 1997. The Prospectuses provide the basic information investors
should know before investing and may be obtained without charge by calling
the Trusts at the telephone number listed below or by contacting any
Service Agent. This SAI, 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 Prospectuses.
Capitalized terms not otherwise defined in this SAI have the meanings
accorded to them in the Trusts' Prospectuses.
BANKERS TRUST COMPANY
INVESTMENT ADVISER OF EACH PORTFOLIO AND ADMINISTRATOR
EDGEWOOD SERVICES, INC.
DISTRIBUTOR
CLEARING OPERATIONSPITTSBURGH, PENNSYLVANIA 15230-0897(800) 368-4031
P.O. BOX 897
TABLE OF CONTENTS
Investment Objectives and Policies 1
Net Asset Value 7
Purchase and Redemption Information 9
Management of the Trusts and Portfolios 9
Organization of the Trusts 16
Taxes 17
Performance Information 17
Financial Statements 18
Appendix 19
INVESTMENT OBJECTIVES AND POLICIES
Each Fund's Prospectus discusses the investment objective of the Fund
and the policies to be employed to achieve those objectives by its
corresponding 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 Portfolios' investment policies with respect to
bank obligations, the assets of a bank will be deemed to include the assets
of its domestic and foreign branches. Obligations of foreign branches of
U.S. banks and foreign banks may be general obligations of the parent bank
in addition to the issuing bank or may be limited by the terms of a
specific obligation and by government regulation. If Bankers Trust, acting
under the supervision of the Board of Trustees, deems the instruments to
present minimal credit risk, each Portfolio other than Treasury Money
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, 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 that those applicable to
domestic branches of U.S. banks.
Commercial Paper
Commercial paper obligations in which the Portfolios 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 Prospectuses. 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.
U.S. Government Obligations
The Portfolios may invest in direct obligations issued by the U.S.
Treasury or, in the case of the Portfolios other than Treasury Money
Portfolio, 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, 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
Portfolios may hold include, but are not limited to, in addition to those
described above and direct U.S. Treasury obligations, the obligations of
the Federal Housing Administration, Farmers Home Administration, Small
Business Administration, General Services Administration, Central Bank for
Cooperatives, Farm Credit Banks, Federal Home Loan Banks, Federal Home Loan
Mortgage Corporation, Federal Intermediate Credit Banks, Federal Land Banks
and Maritime Administration.
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, Edgewood 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% cash collateral or equivalent securities from the borrower;
(ii) the borrower must increase this collateral whenever the market value
of the securities including accrued interest rises above the level of the
collateral; (iii) the Portfolio must be able to terminate the loan at any
time; (iv) the Portfolio must receive reasonable interest on the loan, as
well as any dividends, interest or other distributions on the loaned
securities, and any increase in market value; (v) the Portfolio may pay
only reasonable custodian fees in connection with the loan; and (vi) voting
rights on the loaned securities may pass to the borrower; provided,
however, that if a material event adversely affecting the investment
occurs, the Board of Trustees must terminate the loan and regain the right
to vote the securities.
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 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.
RATING SERVICES
The ratings of Moody's Investors Service, Inc. (`Moody's'') and
Standard & Poor's Ratings Group (`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 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
Prospectus is set forth in the Appendix to this SAI.
THE FOLLOWING FUNDAMENTAL INVESTMENT RESTRICTIONS AND NON-FUNDAMENTAL
INVESTMENT OPERATING POLICIES HAVE BEEN ADOPTED BY THE TRUST, WITH RESPECT
TO THE RESPECTIVE FUND, AND BY EACH RESPECTIVE PORTFOLIO. UNLESS AN
INVESTMENT INSTRUMENT OR TECHNIQUE IS DESCRIBED IN THE RESPECTIVE
PROSPECTUS OR ELSEWHERE HEREIN, THE RESPECTIVE FUND AND THE CORRESPONDING
PORTFOLIO MAY NOT INVEST IN THAT INVESTMENT INSTRUMENT OR ENGAGE IN THAT
INVESTMENT TECHNIQUE.
INVESTMENT RESTRICTIONS
The investment restrictions below have been adopted by the Trusts
with respect to each of the Funds and by the Portfolios 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
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 a Fund is requested
to vote on a change in the investment restrictions of a Portfolio, a 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 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 of the Trust in the same proportion as the Fund shareholders
who do, in fact, vote.
Each Portfolio (Fund) except Liquid Assets Portfolio (Fund)
Under investment policies adopted by the Trusts, on behalf of each
Fund, and by the Portfolios, each Fund and each 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 (i) 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 a Trust from investing all or
part of a Fund's assets in an open-end management investment company
with substantially the same investment objectives as such Fund.
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 Institutional Cash
Management Fund, Institutional Cash Reserves and BT Investment Money
Market Fund (and Cash Management Portfolio) will be invested in
obligations of foreign and U.S. Banks provided, however, that nothing
in this investment restriction shall prevent a Trust from investing
all or part of a Fund's Assets in an open-end management investment
company with substantially the same investment objectives as such
Fund.
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 a Trust from investing all of a Fund's Assets in an open-end
management investment company with substantially the same investment
objectives as such 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, with
respect to Institutional Cash Management Fund, Institutional Cash
Reserves, Institutional Treasury Money Fund and BT Investment Money
Market Fund (Cash Management Portfolio and Treasury Money Portfolio),
the lending of portfolio securities.
9. Invest more than an aggregate of 10% of the net assets of the Fund or
the Portfolio's, 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 maturing in more
than seven calendar days); provided, however, that nothing in this
investment restriction shall prevent a Trust from investing all or
part of a Fund's assets in an open-end management investment company
with substantially the same investment objectives as such 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 a Trust from investing all or part of a
Fund's Assets in an open-end management investment company with
substantially the same investment objectives as such 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 a Trust from investing all or part of a
Fund's Assets in an open-end management investment company with
substantially the same investment objectives as such 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) borrowing in accordance with
terms described in the Prospectus and this SAI.
13. Purchase or retain the securities of any issuer if any of the officers
or trustees of the Fund or the Portfolio or its 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.
Liquid Assets Portfolio (Fund)
As a matter of fundamental policy, the Portfolio (or Fund) may not
(except that no investment restriction of the Fund shall prevent the Fund
from investing all of its Assets in an open-end investment company with
substantially the same investment objectives):
1. Borrow money or mortgage or hypothecate assets of the Portfolio
(Fund), except that in an amount not to exceed 1/3 of the current
value of the Portfolio's (Fund's) total 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 `Additional Restrictions'' below. (As
an operating policy, the Portfolio 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 Securities Act of 1933, as amended (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 20% of the Portfolio's (Fund's) total assets (taken
at market value), (b) through the use of repurchase agreements or the
purchase of short-term obligations or (c) by purchasing a portion of
an issue of debt securities of types distributed publicly or
privately;
4. Purchase or sell real estate (including limited partnership interests
but excluding securities secured by real estate or interests therein),
interests in oil, gas or mineral leases, commodities or commodity
contracts (except futures and option contracts) in the ordinary course
of business (except that the Portfolio (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 the Portfolio's (Fund's) investment objective, up to
25% of its total assets may be invested in any one industry; and
6. Issue any senior security (as that term is defined in the 1940 Act) if
such issuance is specifically prohibited by the 1940 Act or the rules
and regulations promulgated thereunder, provided that collateral
arrangements with respect to options and futures, including deposits
of initial deposit and variation margin, are not considered to be the
issuance of a senior security for purposes of this restriction.
Additional Restrictions. In order to comply with certain statutes
and policies, each Portfolio (or Trust, on behalf of the Fund) will not as
a matter of operating policy (except that no operating policy shall prevent
a Fund from investing all of its Assets in an open-end investment company
with substantially the same investment objectives):
(i) 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,
are not considered a pledge of assets for purposes of this
restriction;
(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 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); and, provided further, that the
Portfolio shall not invest in any other 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) total net (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) 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;
(ix) 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;
(xii) purchase or retain in the Portfolio's (Fund's) portfolio 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 American Stock Exchange or the New York Stock Exchange, Inc.
(`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 Portfolio (Fund) has no current intention to engage
in short selling).
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 Fund, or any other registered
investment company investing in the Portfolio, is registered.
PORTFOLIO TURNOVER
Each 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 Portfolios as the purchases and sales of
portfolio securities are usually effected as principal transactions. The
Portfolios' turnover rates are not expected to have a material effect on
their income and have been and are expected to be zero for regulatory
reporting purposes.
PORTFOLIO TRANSACTIONS
Decisions to buy and sell securities and other financial instruments
for a 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 each Portfolio are reviewed
independently from those of the other accounts managed by Bankers Trust and
those of the other Portfolios, investments of the type the Portfolios may
make may also be made by these other accounts or Portfolios. When a
Portfolio and one or more other Portfolios or 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 a Portfolio or the size of the position obtained
or disposed of by a Portfolio.
Purchases and sales of securities on behalf of the Portfolios 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 Portfolios 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 transactions by
transmitting orders for execution.
In selecting brokers or dealers to execute portfolio transactions on
behalf of a 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
involved, the other Portfolios and/or other accounts over which Bankers
Trust or its affiliates exercise investment discretion. Bankers Trust's
fees under its agreements with the Portfolios are not reduced by reason of
its receiving brokerage services.
NET ASSET VALUE
The Prospectuses discuss the time(s) at which the net asset values
(`NAV'') of the Funds are determined for purposes of sales and
redemptions. The NAV of a Fund's investment in a 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 Portfolios in valuing their assets.
The valuation of each Portfolio's securities is based on their
amortized cost, which does not take into account unrealized capital gains
or losses. Amortized cost valuation involves initially valuing an
instrument at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, generally without regard to the impact
of fluctuating interest rates on the market value of the instrument.
Although this method provides certainty in valuation, it may result in
periods during which value, as determined by amortized cost, is higher or
lower than the price a Portfolio would receive if it sold the instrument.
The Portfolios' use of the amortized cost method of valuing their
securities is permitted by a rule adopted by the SEC. Under this rule, the
Portfolios must maintain a dollar-weighted average portfolio maturity of 90
days or less, purchase only instruments having remaining maturities of two
years or less (397 days or less with respect to Cash Management Portfolio
(BT Investment Money Market Fund)) 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 each Portfolio also has
established procedures designed to allow investors in the Portfolio, such
as the Trusts, 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 each 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 each 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 respective 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.
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 NAV. 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 NAV 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 NAV 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 of the close of the following
business day.
PURCHASE AND REDEMPTION INFORMATION
The Trusts may suspend the right of redemption or postpone the date
of payment for shares of the Funds 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.
Edgewood is the principal Distributor of shares of the Funds. In
addition to Edgewood's duties as Distributor, Edgewood and its affiliates
may, in their discretion, perform additional functions in connection with
transactions in the shares of the Funds. Pursuant to the terms of each
Trust's Distribution Plan (the `Plan''), pursuant to Rule 12b-1 under the
1940 Act, Edgewood may seek reimbursement in an amount not exceeding 0.10%
of each Institutional Fund's, and 0.20% in the case of BT Investment Money
Market Fund's, net assets annually for expenses incurred in connection with
any activities primarily intended to result in the sale of the Funds'
shares, which are described in the Prospectuses.
Each Plan provides that it will continue in effect from year to year
only if its continuance is approved annually by each Trust's Board of
Trustees, including a majority of the Trustees who are not `interested
persons,''as defined by the 1940 Act, of each Trust and who have no direct
or indirect financial interest in the operation of the Plan or any
agreements related thereto (the `Qualified Trustees''). The Plans may not
be amended to increase materially the amount to be spent for the services
provided by Edgewood without shareholder approval and all material
amendments of the Plans must also be approved by the Trustees in the manner
described above. The Plans may be terminated with respect to a Fund at any
time by majority vote of the Qualified Trustees or a majority of the shares
of the Fund outstanding. Pursuant to the Plans, Edgewood will provide to
the Board of Trustees periodic reports of any amounts expended under the
Plans and the purpose for which expenditures were made.
On September 30, 1996, the Trust entered into a Distribution Agreement
with Edgewood. Prior to September 30, Signature Broker-Dealer Services,
Inc. (`Signature'') was the Trust's distributor. For the year ended
December 31, 1996, there were no reimbursable expenses incurred under this
agreement.
MANAGEMENT OF THE TRUSTS AND PORTFOLIOS
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 Trusts and the Portfolios, their
birthdates and their principal occupations during the past five years are
set forth below. Their titles may have varied during that period. Unless
otherwise indicated, the address of each officer is Clearing Operations,
P.O. Box 897, Pittsburgh, Pennsylvania 15230-0897.
TRUSTEES OF BT INSTITUTIONAL FUNDS
CHARLES P. BIGGAR (birthdate: October 13, 1930) - Trustee; Retired;
Director of Chase/NBW Bank Advisory Board; Director, Batemen, Eichler, Hill
Richards Inc.; formerly Vice President of International Business Machines
and President of the National Services and the Field Engineering Divisions
of IBM. His address is 12 Hitching Post Lane, Chappaqua, New York 10514.
RICHARD J. HERRING (birthdate: February 18, 1946) - Trustee;
Professor, Finance Department, The Wharton School, University of
Pennsylvania. His address is The Wharton School, University of
Pennsylvania Finance Department, 3303 Steinberg Hall/Dietrich Hall,
Philadelphia, Pennsylvania 19104.
BRUCE E. LANGTON (birthdate: May 10, 1931) - Trustee; Retired;
Director, Adela Investment Co. and University Patents, Inc.; formerly
Assistant Treasurer of IBM Corporation (until 1986). His address is 99
Jordan Lane, Stamford, Connecticut 06903.
PHILIP W. COOLIDGE* (birthdate: September 2, 1951) -Trustee;
Chairman, Chief Executive Officer and President, Signature Financial Group,
Inc. (`SFG'') (since December, 1988) and Signature (since April, 1989).
His address is 6 St. James Avenue, Boston, Massachusetts 02116.
TRUSTEES OF BT PYRAMID MUTUAL FUNDS
KELVIN J. LANCASTER (birthdate: December 10, 1924) - Trustee;
Professor, Department of Economics, Columbia University. His address is
35 Claremont Avenue, New York, New York 10027
HARRY VAN BENSCHOTEN (birthdate: February 18, 1928) - 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.
MARTIN J. GRUBER (birthdate: July 15, 1937) - 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* (birthdate: September 2, 1951) -Trustee; Chairman,
Chief Executive Officer and President, SFG (since December, 1988) and
Signature (since April, 1989). His address is 6 St. James Avenue, Boston,
Massachusetts 02116.
TRUSTEES OF THE PORTFOLIOS
PHILIP SAUNDERS, JR. (birthdate: October 11, 1935) - Trustee;
Principal, Philip Saunders Associates (Consulting); former Director of
Financial Industry Consulting, Wolf & Company; President, John Hancock Home
Mortgage Corporation; and Senior Vice President of Treasury and Financial
Services, John Hancock Mutual Life Insurance Company, Inc. His address is
445 Glen Road, Weston, Massachusetts 02193.
CHARLES P. BIGGAR (birthdate: October 13, 1930) - Trustee; Retired;
Director of Chase/NBW Bank Advisory Board; Director, Batemen, Eichler, Hill
Richards Inc.; formerly Vice President of International Business Machines
and President of the National Services and the Field Engineering Divisions
of IBM. His address is 12 Hitching Post Lane, Chappaqua, New York 10514.
S. LELAND DILL (birthdate: March 28, 1930) - Trustee; Retired;
Director, Coutts Group; Coutts (U.S.A.) International; Coutts Trust
Holdings Ltd; Director, Zweig Series Trust; formerly Partner of KPMG Peat
Marwick; Director, Vinters International Company Inc.; General Partner of
Pemco (an investment company registered under the 1940 Act). His address
is 5070 North Ocean Drive, Singer Island, Florida 33404.
PHILIP W. COOLIDGE* (birthdate: September 2, 1951) - Trustee;
Chairman, Chief Executive Officer and President, SFG (since December, 1988)
and Signature (since April, 1989). His address is 6 St. James Avenue,
Boston, Massachusetts 02116.
*Indicates an `interested person'' (as defined in the 1940 Act) for the
Trust.
OFFICERS OF THE TRUST AND PORTFOLIOS
Unless otherwise specified, each officer listed below holds the same
position with each Trust and Portfolio.
RONALD M. PETNUCH (birthdate: February 27, 1960) - President and
Treasurer; Senior Vice President; Federated Services Company (`FSC'');
formerly, Director of Proprietary Client Services, Federated Administrative
Services (`FAS''), and Associate Corporate Counsel, Federated Investors
(`FI'').
CHARLES L. DAVIS, JR. (birthdate: March 23, 1960) - Vice President and
Assistant Treasurer; Vice President, FAS.
JAY S. NEUMAN (birthdate: April 22, 1950) - Secretary; Corporate
Counsel, FI.
Messrs. Coolidge, Petnuch, Davis, and Neuman also hold similar
positions for other investment companies for which Signature, Edgewood 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 Edgewood or any of its affiliates will receive any compensation
from the Trusts or any Portfolio for serving as an officer or Trustee of
the Trusts or the Portfolios.
For the fiscal year ended December 31, 1996, Institutional Cash
Management Fund, Institutional Cash Reserves, Institutional Liquid Assets
Fund, Institutional Treasury Money Fund and BT Investment Money Market Fund
incurred Trustees fees equal to $7,351, $7,352, $6,904, $7,402, and $7,085,
respectively. For the same period, Cash Management Portfolio, Liquid
Assets Portfolio and Treasury Money Portfolio incurred Trustees fees equal
to $2,365, $2,372, and $2,365, respectively.
TRUSTEE COMPENSATION TABLE
The following table reflects fees paid to the Trustees of the
Trusts and the Portfolios for the year ended December 31, 1996.
AGGREGATE AGGREGATE
COMPENSATION COMPENSATION TOTAL COMPENSATION
NAME OF PERSON, FROM BT FROM BT PYRAMID FROM FUND COMPLEX
POSITION INSTITUTIONAL FUNDS MUTUAL FUNDS PAID
TO TRUSTEES*
Philip W. Coolidge
Trustee of BT Institutional
Funds, BT Pyramid Mutual $140 $115 $1,250
Funds and Portfolios
Martin J. Gruber,
Trustee of BT Pyramid $625 $12,130 $27,500
Mutual Funds
Kelvin J. Lancaster,
Trustee of BT Pyramid none $11,850 $26,250
Mutual Funds
Harry Van Benschoten,
Trustee of BT Pyramid $625 $12,130 $27,500
Mutual Funds
Bruce E. Langton,
Trustee of BT Institutional $12,800 none $27,500
Funds
Richard J. Herring,
Trustee of BT Institutional $12,800 none $27,500
Funds
Charles P. Biggar,
Trustee of BT Institutional $12,350 none $28,750
Funds and Portfolios
S. Leland Dill,
Trustee of Portfolios $625 none $28,750
Philip Saunder, Jr.,
Trustee of Portfolios $625 none $28,750
*Aggregated information is furnished for the BT Family of Funds which
consists of the following: BT Investment Funds, BT Institutional Funds,
BT Pyramid Funds, BT Advisor Funds, BT Investment Portfolios, Cash
Management Portfolio, Treasury Money Portfolio, Tax Free Money Portfolio,
NY Tax Free Money Portfolio, International Equity Portfolio, Utility
Portfolio, Short Intermediate US Government Securities Portfolio,
Intermediate Tax Free Portfolio, Asset Management Portfolio, Equity 500
Index Portfolio, and Capital Appreciation Portfolio.
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 February 20, 1997, the Trustees and Officers of the Trusts
and the Trustees of each Portfolio, owned in the aggregate less than 1% of
the shares of any Fund or of the Trusts (all series taken together).
As of February 20, 1997, the following shareholders of record owned 5%
or more of the outstanding shares of Institutional Cash Management Fund:
First Deposit Master Trust, San Francisco, CA, owned approximately
102,214,588 (5.65%) shares; Individual Small Group Demographic Pool c/o
Alicare, Inc., New York, NY, owned approximately 104,147,787 (5.75%) shares
and John Hancock Mutual Life Insurance Co., Boston, MA, owned approximately
177,697,862 (9.81%) shares.
As of February 20, 1997, the following shareholders of record owned 5%
or more of the outstanding shares of Institutional Cash Reserves: Thrifty
Rent-A-Car, New York, NY, owned approximately 94,458,580 (5.59%) shares;
AT&T Universal Card Master Trust Spread Account, New York, NY, owned
approximately 96,046,407 (5.68%); General Electric Capital Corp., Stamford,
CT, owned approximately 100,434,637 (5.94%) shares and Banc One Collection,
New York, NY, owned approximately 223,240,733 (13.20%) shares.
As of February 20, 1997, the following shareholder of record owned 5%
or more of the outstanding shares of Institutional Liquid Assets Fund:
Bankers Trust Funds Valuation Group, Jersey City, NJ, owned 2,432,152,595
(100%) shares.
As of February 20, 1997, no shareholder of record owned 5% or more of
the outstanding shares of Institutional Treasury Money Fund.
As of February 20, 1997, the following shareholders or record owned 5%
or more of the outstanding shares of BT Investment Money Market Fund: Duff
& Phelps Investment Management, Chicago, IL, owned approximately 28,363,100
(6.34%) shares and Bankers Trust Co., Jersey City, NJ, acting as Custodian,
owned approximately 111,888,210 (25.00%) shares.
INVESTMENT ADVISER
Under the terms of an investment advisory agreement (the `Advisory
Agreement') between each Portfolio and Bankers Trust, the adviser manages
each 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 Advisors Act of 1940, as the same may from time to time be
amended; (ii) manage each Portfolio in accordance with the Portfolio's
and/or Fund's investment objectives, restrictions and policies, as stated
herein and in the Prospectus; (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 the Advisory Agreement. The Trusts and each Portfolio bear
certain other expenses incurred in their operation, including: taxes,
interest, brokerage fees and commissions, if any; fees of Trustees of each
Trust or Portfolio who are not officers, directors or employees of Bankers
Trust, Edgewood or any of their affiliates; SEC fees and state Blue Sky
qualification fees, if any; administrative and services fees; 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;
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 Trusts or the Portfolios; and any extraordinary expenses.
For the fiscal years ended December 31, 1996, 1995 and 1994,
Bankers Trust earned $4,935,288, $3,847,729, and $3,807,085, respectively,
in compensation for investment advisory services provided to Cash
Management Portfolio. During the same periods, Bankers Trust reimbursed
$761,230, $578,251, and $537,651, respectively, to Cash Management
Portfolio to cover expenses.
For the fiscal year ended December 31, 1996, the period ended
December 31, 1995 and the fiscal year ended December 31, 1994, Bankers
Trust earned $2,794,472, $127,704, and $22,347, respectively, in
compensation for investment advisory services provided to Liquid Assets
Portfolio. During the same periods, Bankers Trust reimbursed $3,187,013,
$178,381, and $44,908, respectively, to Liquid Assets Portfolio to cover
expenses.
For the fiscal years ended December 31, 1996, 1995 and 1994, Bankers
Trust earned $2,787,544, $1,764,890, and $1,176,759, respectively, in
compensation for investment advisory services provided to Treasury Money
Portfolio. During the same periods, Bankers Trust reimbursed $60,530,
$69,965, and $65,359, respectively, to Treasury Money 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.
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 each Trust and each Portfolio
reasonably deems necessary for the proper administration of each Trust and
each 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 of the Trusts or the
Portfolios), 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 each Trust's and each 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
NAV, net income and realized capital gains or losses of a 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') FSC performs such sub-administration duties for
the Trusts and each Portfolio as from time to time may be agreed upon by
Bankers Trust and FSC. The Sub-Administration Agreement provides that FSC
will receive such compensation as from time to time may be agreed upon by
FSC and Bankers Trust. All such compensation will be paid by Bankers
Trust.
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 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 SAI, the most
restrictive annual expense limitation applicable to any Fund is 2.50% of
the Fund's first $30 million of average annual net assets, 2.00% of the
next $70 million of average annual net assets and 1.50% of the remaining
average annual net assets.
For the fiscal years ended December 31, 1996, 1995 and 1994,
Bankers Trust earned $622,176, $327,340, and $429,664, respectively, in
compensation for administrative and other services provided to
Institutional Cash Management Fund. During the same periods, Bankers Trust
reimbursed $280,146, $129,230, and $59,280, respectively, to the
Institutional Cash Management Fund to cover expenses.
For the fiscal years ended December 31, 1996, 1995 and for the period
from January 25, 1994 (commencement of operations) to December 31, 1994,
Bankers Trust earned $674,983, $462,879 and $414,739, respectively in
compensation for administrative and other services provided to the
Institutional Cash Reserves. During the same periods, Bankers Trust
reimbursed $805,636, $508,395 and $452,281, respectively to the
Institutional Cash Reserves to cover expenses.
For the fiscal year ended December 31, 1996, and for the period from
December 11, 1995 (commencement of operations) to December 31, 1995,
Bankers Trust earned $929,288 and $38,038 in compensation for
administrative and other services provided to the Institutional Liquid
Assets Fund. During the same periods, Bankers Trust reimbursed $879,347,
and $526,169, respectively to the Institutional Liquid Assets Fund to cover
expenses.
For the fiscal years ended December 31, 1996, 1995 and 1994, Bankers
Trust earned $640,788, $274,216, and $74,378, respectively, in compensation
for administrative and other services provided to Institutional Treasury
Money Fund. During the same periods, Bankers Trust reimbursed $48,531,
$340,378, and $46,491, respectively, to Institutional Treasury Money Fund
to cover expenses.
For the fiscal years ended December 31, 1996, 1995, and 1994, Bankers
Trust earned $1,648,203, $2,418,113, and $2,104,780, respectively for
administrative and other services provided to the BT Investment Money
Market Fund. During the same periods, Bankers Trust reimbursed $782,979,
$1,110,205, and $1,309,180, respectively, to the BT Investment Money Market
Fund to cover expenses.
For the fiscal years ended December 31, 1996, 1995 and 1994, Bankers
Trust earned compensation of $1,645,096, $1,282,576, and $1,269,028,
respectively, for administrative and other services provided to the Cash
Management Portfolio.
For the fiscal year ended December 31, 1996, the period ended December
31, 1995 and the fiscal year ended December 31, 1994, Bankers Trust earned
compensation of $931,490, $42,568, and $7,449, respectively, for
administrative and other services provided to the Liquid Assets Portfolio.
For the fiscal years ended December 31, 1996, 1995 and 1994, Bankers
Trust earned compensation of $929,181, $588,297, and $392,252,
respectively, for administrative and other services provided to the
Treasury Money Portfolio.
CUSTODIAN AND TRANSFER AGENT
Bankers Trust, 280 Park Avenue, New York, New York 10017, serves as
custodian and transfer agent for the Trusts and as custodian for each
Portfolio pursuant to the administration and services agreements discussed
above. As custodian, Bankers Trust holds the Funds' and each Portfolio's
assets. For such services, Bankers Trust receives monthly fees from each
Fund and Portfolio, which are included in the administrative services fees
discussed above. As transfer agent for each Trust, Bankers Trust maintains
the shareholder account records for each Fund, handles certain
communications between shareholders and each Trust and causes to be
distributed any dividends and distributions payable by each Trust. Bankers
Trust is also reimbursed by the Funds 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 the Trusts may use
`BT'' as part of their name for so long as Bankers Trust serves as
Adviser. 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.
The Trusts may be required, on 60 days' notice from Bankers Trust at
any time, to abandon use of the acronym `BT'' as part of their name. If
this were to occur, the Trustees would select an appropriate new name for
the Trusts, 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 Trusts and the
Portfolios described in the Prospectuses and this SAI without violation of
the Glass-Steagall Act or other applicable banking laws or regulations.
However, counsel has pointed out that future changes in either Federal or
state statutes and regulations concerning the permissible activities of
banks or trust companies, as well as future judicial or administrative
decisions or interpretations of present and future statutes and
regulations, might prevent Bankers Trust from continuing to perform those
services for the Trusts or the Portfolios. If the circumstances described
above should change, the Boards of Trustees would review each 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, serve as Counsel to the Trusts 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 Trusts.
ORGANIZATION OF THE TRUSTS
BT Institutional Funds was organized on March 26, 1990 as a series
Trust. BT Pyramid Mutual Funds was organized on February 28, 1992. The
shares of each series participate equally in the earnings, dividends and
assets of the particular series. The Trusts may create and issue
additional series of shares. Each Trust's Declaration of Trust permits the
Trustees to divide or combine the shares into a greater or lesser number of
shares without thereby changing the proportionate beneficial interest in a
series. Each share represents an equal proportionate interest in a series
with each other share. Shares when issued are fully paid and non-
assessable, except as set forth below. Shareholders are entitled to one
vote for each share held.
Shares of the Trusts do not have cumulative voting rights, which means
that holders of more than 50% of the shares voting for the election of
Trustees can elect all Trustees. Shares are transferable but have no
preemptive, conversion or subscription rights. Shareholders generally vote
by Fund, except with respect to the election of Trustees and the
ratification of the selection of independent accountants.
The Trusts are not required to hold annual meetings of shareholders
but will hold special meetings of shareholders when in the judgment of the
Trustees it is necessary or desirable to submit matters for a shareholder
vote. Shareholders have under certain circumstances the right to
communicate with other shareholders in connection with requesting a meeting
of shareholders for the purpose of removing one or more Trustees without a
meeting. Upon liquidation of a Fund, shareholders of that Fund would be
entitled to share pro rata in the net assets of the Fund available for
distribution to shareholders.
Massachusetts law provides that shareholders could under certain
circumstances be held personally liable for the obligations of the Trusts.
However, the Declarations of Trust disclaim shareholder liability for acts
or obligations of the Trusts and require that notice of this disclaimer be
given in each agreement, obligation or instrument entered into or executed
by a Trust or a Trustee. The Declarations of Trust provide for
indemnification from each 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 Trusts
believe 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 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 the Trust.
Whenever a Trust is requested to vote on a matter pertaining to a
Portfolio, the Trust will vote its shares without a meeting of shareholders
of the respective Fund if the proposal is one, if which made with respect
to a Fund, would not require the vote of shareholders of that Fund as long
as such action is permissible under applicable statutory and regulatory
requirements. For all other matters requiring a vote, a Trust will hold a
meeting of shareholders of the respective Funds and, at the meeting of
investors in a Portfolio, the Trust will cast all of its votes in the same
proportion as the votes all its shares at the Portfolio meeting, other
investors with a greater pro rata ownership of the Portfolio could have
effective voting control of the operations of the Portfolio.
TAXES
The following is only a summary of certain tax considerations
generally affecting the Funds and their 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 Funds' Prospectuses, each Fund is
designed to provide investors with current income. The Funds are not
intended to constitute balanced investment programs and are not designed
for investors seeking capital gains, maximum income or maximum tax-exempt
income irrespective of fluctuations in principal.
Each Fund intends to qualify as a separate regulated investment
company under the Internal Revenue Code of 1986, as amended (the `Code'').
Provided that each Fund is a regulated investment company, each Fund will
not be liable for Federal income taxes to the extent all of its taxable net
investment income and net realized long- and short-term capital gains, if
any, are distributed to its shareholders. Although each Trust expects the
Funds to be relieved of all or substantially all Federal income taxes,
depending upon the extent of their activities in states and localities in
which their offices are maintained, in which their agents or independent
contractors are located or in which they are otherwise deemed to be
conducting business, that portion of a 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 a Fund would reduce the amount of income and
gains available for distribution to its shareholders.
While each Fund does not expect to realize net long-term capital
gains, any such gains realized will be distributed annually as described in
the Funds' Prospectuses. 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.
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 a Fund may quote its performance in terms of
`current yield,'' ``effective yield'' or `tax equivalent 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
Tax Equivalent Yield = Current Yield
(1 - Tax Rate)
The following table sets forth various measures of the performance
for the indicated Funds for the seven days ended December 31, 1996.
Institutional Institutional Institutional
Institutional BT Investment
Cash Management Cash Reserves Liquid Assets
Treasury Money Money Market
Fund Fund Fund Fund
Current Yield 5.26% 5.31% 5.35% 5.02% 4.74%
Effective Yield 5.45% 5.51% 5.52% 5.17%
5.32%
FINANCIAL STATEMENTS
The financial statements for each Fund and Portfolio for the period
ended December 31, 1996, are incorporated herein by reference to the Annual
Report to shareholders for each Fund dated December 31, 1996. A copy of a
Fund's Annual Report may be obtained without charge by contacting the
respective Fund.
APPENDIX
DESCRIPTION OF SECURITIES RATINGS
Description of S&P's 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 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,
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 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.
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 S&P's municipal bond ratings:
AAA-Prime-These are obligations of the highest quality. They have the
strongest capacity for timely payment of debt service.
General Obligation 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.
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.
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's municipal note ratings:
Municipal notes with maturities of three years or less are usually
given note ratings (designated SP-1 or SP-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 rated 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 and broad-based access to the
market for refinancing, or both. Loans bearing the designation
MIG-2/VMIG-2 are of high quality, with ample margins of protection,
although not as large as the preceding group.
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
favorable 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.
INVESTMENT ADVISER OF EACH PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY
DISTRIBUTOR
EDGEWOOD 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 Fund's Prospectus, its
SAI or the Fund's official sales literature in connection with the offering
of the Fund's shares and, if given or made, such other information or
representations must not be relied on as having been authorized by the
Trust. 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.
Cusip #055924104
Cusip #055924872
Cusip #055924864
Cusip #055924203
Cusip #055847206
BT0440A (3/97)
PART C OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
Incorporated by reference to the Annual Reports to Shareholders
dated December 31, 1996, pursuant to Rule 411 under the
Securities Act of 1933.
(b) Exhibits:
(l) (i) Declaration of Trust of the Trust; 5
(ii) Second Amended and Restated Designation of Series; 5
(iii) Third Amended and Restated Designation of Series; 5
(iv) Fourth Amended and Restated Establishment and
Designation of Series; 5
(v) Fifth Amended and Restated Establishment and
Designation of Series; 5
(vi) Sixth Amended and Restated Establishment and
Designation of Series; 6
(vii) Seventh Amended and Restated Establishment and
Designation of Series; 6
(viii) Eighth Amended and Restated Establishment and
Designation of Series; 8
(2) By-Laws of the Trust; 5
(3) Not Applicable
(4) Not Applicable
(5) (i) Conformed Copy of Investment Advisory Agreement; 8
(ii) Copy of Exhibit A to Investment Advisory Agreement; 8
(6) (i) Copy of Distributor's Contract; 8
(ii) Conformed Copy of Exhibit A to the Distributor's
Contract; 8
(iii) Schedule A of Exhibit A to the Distributor's
Contract; 8
(iv) Exhibit B to the Distributor's Contract; 8
(v) Schedule A of Exhibit B to the Distributor's
Contract; 8
(7) Not Applicable
(8) See Exhibit (9)
(9) Administration and Services Agreement; 3
(10) Conformed Copy of Opinion and Consent of Kirkpatrick &
Lockhart LLP, with respect to BT RetirementPlus Fund; 8
(11) Conformed copies of Consents of Independent Accountants; +
(12) Not Applicable
(13) Investment representation letters of initial shareholders of
the Trust; 1
+ All exhibits have been filed electronically.
(1) Incorporated by reference herein to Pre-Effective Amendment No. 1 to
Registrant's Registration Statement as filed with the Commission on
June 9, 1992.
(3) Incorporated by reference to Post-Effective Amendment No. 3 to
Registrant's Registration Statement as filed with the Commission on
April 30, 1993.
(5) Incorporated by reference to Post-Effective Amendment No. 5 to
Registrant's Registration Statement as filed with the Commission on July
31, 1995.
(6) Incorporated by reference to Post-Effective Amendment No. 11 to
Registrant's Registration Statement as filed with the Commission on
September 27, 1996.
(8) Incorporated by reference to Post-Effective Amendment No. 14
to Registrant's Registration Statement as filed with the Commission on
February 25, 1997.
(14) Not Applicable
(15) (i) Copy of Distribution and Service Plan; +
(ii) Copy of Schedule of Fees under the Distribution and
Service Plan; +
(16) Schedule for computation of Fund Performance; 1
(17) (i) Copy of Financial Data Schedule, BT Investment Limited
Term U.S. Government Securities Fund and BT Investment
Equity Appreciation Fund; 7
(ii) Copy of Financial Data Schedule, BT Investment Equity
500 Index Fund and BT Investment Money Market Fund; +
(18) Multiple Class Expense Allocation Plan Adopted
Pursuant of Rule 18f-3; 8
(19) Conformed copies of Power of Attorney of Registrant, Equity
500 Index Portfolio and Cash Management Portfolio; +
ITEM 25. Persons Controlled by or Under Common Control with Registrant:
Not Applicable
ITEM 26. Number of Holders of Securities.
Title of Class Number of Record Holders
as of December 31, 1996
BT Investment Money Market Fund 370
BT Investment Limited Term U.S.
Government Securities Fund 198
BT Investment Equity 500 Index Fund 529
BT Institutional Asset Management Fund 20
BT Investment Equity Appreciation Fund
Advisor Class 15
Investment Class 0
BT RetirementPlus Fund
Investor Class Shares 0
Institutional Class Shares 0
ITEM 27. Indemnification; 8
ITEM 28. Business and Other Connections of Investment Adviser:
Bankers Trust serves as investment adviser to the Trust with respect to BT
Investment Equity Appreciation Fund and BT RetirementPlus Fund. Bankers
Trust, a New York banking corporation, is a wholly owned subsidiary of
Bankers Trust New York Corporation. Bankers Trust conducts a variety of
commercial banking and trust activities and is a major wholesale supplier
of financial services to the international institutional market. To the
knowledge of the Trust, none of the directors or officers of Bankers Trust,
except those set forth below, is or has been at anytime during the past two
fiscal years engaged in any other business, profession, vocation or
employment of a substantial nature, except that certain directors and
officers also hold various positions with and engage in business for
Bankers Trust New York
+ All exhibits have been filed electronically.
(1) Incorporated by reference herein to Pre-Effective Amendment No. 1 to
Registrant's Registration Statement as filed with the Commission on
June 9, 1992.
(7) Incorporated by reference to Post-Effective Amendment No. 13
to Registrant's Registration Statement as filed with the Commission on
January 30, 1997.
(8) Incorporated by reference to Post-Effective Amendment No. 14
to Registrant's Registration Statement as filed with the Commission on
February 25, 1997.
Corporation. Set forth below are the names and principal businesses of the
directors and officers of Bankers Trust who are or during the past two
fiscal years have been engaged in any other business, profession, vocation
or employment of a substantial nature. These persons may be contacted c/o
Bankers Trust Company, 280 Park Avenue, New York, New York 10017.
George B. Beitzel, 29 King Street, Chappaqua, NY 10514-3432. Retired
Senior Vice President and Director of International Business Machines
Corporation. Director of Bankers Trust and Bankers Trust New York
Corporation. Director of Computer Task Group, FlightSafety International,
Inc., Phillips Gas Company, Phillips Petroleum Company, Caliber Systems,
Inc. (formerly Roadway Services, Inc.), Rohm and Hass Company and TIG
Holdings, Chairman Emeritus of Amherst College, and Chairman of the
Colonial Williamsburg Foundation.
William R. Howell, J.C. Penney Company, Inc., P.O. Box 10001, Dallas, TX
75301-0001. Chairman of the Board and Chief Executive Officer, J.C. Penney
Company, Inc. Director of Bankers Trust and Bankers Trust New York
Corporation. Also a Director of Exxon Corporation, Halliburton Company,
Warner-Lambert Corporation, National Urban League, Inc. and the National
Retail Federation.
Jon M. Huntsman, Huntsman Corporation, 500 Huntsman Way, Salt Lake City, UT
84108. Chairman and Chief Executive Officer, Huntsman Corporation and
other affiliated companies. Director of Bankers Trust and Bankers Trust
New York Corporation. Chairman, chief executive officer and director of
Sunstar Corporation and JK Corp. Chairman and director of Co-Ex Plastics
Inc. and Global Polymers Corporation. President of Autostar Corporation and
Restar Corporation. Director of Airstar Corporation, Consolidated Press
International (Australia), Razzleberry Foods Corporation and Thiokol
Corporation. General Partner of Huntsman Group Ltd., McLeod Creek
Partnership and Trustar Ltd. Chairman of Primary Children's Medical Center
Foundation, an overseer, The Wharton School, University of Pennsylvania, an
advisor, University of Utah, Eccles Business School, founder of Huntsman
Cancer Institute, University of Utah, chairman and director of the Huntsman
Cancer Foundation, and a trustee and president of the Jon and Karen
Huntsman Foundation.
Vernon E. Jordan, Jr., Akin, Gump, Strauss, Hauer & Feld, LLP, 1333 New
Hampshire Ave., N.W., Suite 400, Washington, DC 20036. Senior Partner,
Akin, Gump, Strauss, Hauer & Feld, LLP. Director of Bankers Trust and
Bankers Trust New York Corporation. Also a Director of American Express
Company, Corning Incorporated, Dow Jones, Inc., J.C. Penney Company, Inc.,
Revlon Group Incorporated, Ryder System, Inc., Sara Lee Corporation, Union
Carbide Corporation and Xerox Corporation, a trustee of Brookings
Institution, The Ford Foundation and Howard University, and governor of the
Joint Center for Political and Economic Studies.
Hamish Maxwell, Philip Morris Companies Inc., 100 Park Avenue, 10th Floor,
New York, NY 10017. Retired Chairman and Chief Executive Officer, Philip
Morris Companies Inc. Director of Bankers Trust and Bankers Trust New York
Corporation. Director of The New Corporation Limited and Sola
International Inc.
N.J. Nicholas Jr., 15 West 53rd Street, New York, NY 10019. Former
President, Co-Chief Executive Officer and Director of Time Warner Inc.
Director of Bankers Trust and Bankers Trust New York Corporation. Also a
Director of Boston Scientific Corporation and Xerox Corporation.
Russell E. Palmer, The Palmer Group, 3600 Market Street, Suite 530,
Philadelphia, PA 19104. Chairman and Chief Executive Officer of The Palmer
Group. Director of Bankers Trust and Bankers Trust New York Corporation.
Former Dean of The Wharton School, University of Pennsylvania and former
chief executive officer of Touche Ross & Co. (now Deloitte and Touche).
Also Director of Allied-Signal Inc., Contel Cellular, Inc., Federal Home
Loan Mortgage Corporation, GTE Corporation, Goodyear Tire & Rubber Company,
Imasco Limited, The May Department Stores Company and Safeguard
Scientifics, Inc. Member, Radnor Venture Partners Advisory Board, advisory
board of the Controller General of the United States, and a trustee, the
University of Pennsylvania.
Patricia Carry Stewart, c/o Office of the Secretary, 280 Park Avenue - 17W,
New York, NY 10017. Former Vice President, The Edna McConnell Clark
Foundation. Director of Bankers Trust and Bankers Trust New York
Corporation. Director, Borden Inc., Continental Corp. and Melville
Corporation, director and vice chair of Community Foundation for Palm Beach
and Martin Counties, and a trustee emerita of Cornell University.
George J. Vojta, Bankers Trust Company, 130 Liberty Street, New York, NY
10006. Vice Chairman of the Board of Bankers Trust and Bankers Trust New
York Corporation. Director of Northwest Airlines and Private Export
Funding UST Corp., the New York State Banking Board and St. Lukes-Roosevelt
Hospital Center, a partner of New York City Partnership and chairman,
Wharton Financial Services Center.
ITEM 29. Principal Underwriters
(a) Edgewood Services, Inc. the Distributor for shares of the Registrant,
also acts as principal underwriter for the following open-end
investment companies: Excelsior Institutional Trust (formerly, UST
Master Funds, Inc.), Excelsior Tax-Exempt Funds, Inc. (formerly, UST
Master Tax-Exempt Funds, Inc.), Excelsior Institutional Trust, FTI
Funds, Marketvest Funds, Marketvest Funds, Inc. and Old Westbury
Funds, Inc.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
Lawrence Caraccoilo Trustee and President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Arthru L. Cherry, III Trustee, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
J. Christopher Donahue Trustee, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Newton Heston, III Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Ronald M. Petnuch Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Thomas P. Schmitt Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
S. Elliott Cohan Secretary, Assistant Secretary
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Thomas J. Ward Assistant Secretary, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Kenneth W. Pegher, Jr. Treasurer, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
(c) Not Applicable.
ITEM 30. Location of Accounts and Records:
BT Pyramid Mutual Funds Federated Investors Tower
(Registrant) Pittsburgh, PA 15222-3779
Bankers Trust Company: 280 Park Avenue, New York, NY 10017
(Custodian,Investment Adviser
and Administrator)
Investors Fiduciary Trust Company: 127 West 10th Street,
(Transfer Agent and Dividend Kansas City, MO 64105.
Disbursing Agent)
Edgewood Services, Inc.: Clearing Operations, P.O. Box 897,
(Distributor) Pittsburgh, PA 15230-0897.
ITEM 31. Management Services:
Not Applicable
ITEM 32. Undertakings
The Registrant undertakes to comply with Section 16(c) of the 1940
Act as though such provisions of the Act were applicable to the
Registrant except that the request referred to in the third full
paragraph thereof may only be made by shareholders who hold in the
aggregate at least 10% of the outstanding shares of the
Registrant, regardless of the net asset value or values of shares
held by such requesting shareholders.
If the information called for by Item 5A of Form N-lA is contained
in the latest annual report to shareholders, the Registrant shall
furnish each person to whom a prospectus is delivered with a copy
of the Registrant's latest annual report to shareholders upon
request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, the Registrant, BT PYRAMID
MUTUAL FUNDS certifies that it meets all of the requirements for
effectiveness of this Amendment to its Registration Statement pursuant to
Rule 485(b) under the Securities act of 1933, and has duly caused this
Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of Pittsburgh and the
Commonwealth of Pennsylvania on the 17th day of March, 1997.
BT PYRAMID MUTUAL FUNDS
By: /s/ Jay S. Neuman
Jay S. Neuman, Secretary
March 17, 1997
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the
following person in the capacity and on the date indicated:
NAME TITLE DATE
By: /s/ Jay S. Neuman Attorney in Fact March 17, 1997
Jay S. Neuman For the Persons
SECRETARY Listed Below
/s/RONALD M. PETNUCH* President and Treasurer
Ronald M. Petnuch (Chief Executive Officer,
Principal Financial and Accounting
Officer)
/s/PHILIP W. COOLIDGE* Trustee
Philip W. Coolidge
/s/HARRY VAN BENSCHOTEN* Trustee
Harry Van Benschoten
/s/MARTIN J. GRUBER* Trustee
Martin J. Gruber
/s/ KELVIN J. LANCASTER* Trustee
Kelvin J. Lancaster
* By Power of Attorney
EQUITY 500 INDEX PORTFOLIO has duly caused this Post-Effective
amendment No. 15 to the Registration Statement on Form N-1A of BT Pyramid
Mutual Funds to be signed on its behalf by the undersigned thereto
authorized in the City of Pittsburgh and the Commonwealth of Pennsylvania
on the 17th day of March, 1997.
EQUITY 500 INDEX PORTFOLIO
By: /s/ Jay S. Neuman
Jay S. Neuman, Secretary
March 17, 1997
This Post-Effective amendment No. 15 to the Registration Statement has
been signed below by the following persons in the capacity and on the date
indicated:
NAME TITLE DATE
By: /s/ Jay S. Neuman Attorney in Fact March 17, 1997
Jay S. Neuman For the Persons
SECRETARY Listed Below
/s/RONALD M. PETNUCH* President and Treasurer
Ronald M. Petnuch (Chief Executive Officer,
Principal Financial and Accounting
Officer)
/s/PHILIP W. COOLIDGE* Trustee
Philip W. Coolidge
/s/CHARLES P. BIGGAR* Trustee
Charles P. Biggar
/s/S. LELAND DILL* Trustee
S. Leland Dill
/s/PHILIP SAUNDERS, JR.* Trustee
Philip Saunders, Jr.
* By Power of Attorney
CASH MANAGEMENT PORTFOLIO has duly caused this Post-Effective
amendment No. 15 to the Registration Statement on Form N-1A of BT Pyramid
Mutual Funds to be signed on its behalf by the undersigned thereto
authorized in the City of Pittsburgh and the Commonwealth of Pennsylvania
on the 17th day of March, 1997.
CASH MANAGEMENT PORTFOLIO
By: /s/ Jay S. Neuman
Jay S. Neuman, Secretary
March 17, 1997
This Post-Effective amendment No. 15 to the Registration Statement has
been signed below by the following persons in the capacity and on the date
indicated:
NAME TITLE DATE
By: /s/ Jay S. Neuman Attorney in Fact March 17, 1997
Jay S. Neuman For the Persons
SECRETARY Listed Below
/s/RONALD M. PETNUCH* President and Treasurer
Ronald M. Petnuch (Chief Executive Officer,
Principal Financial and Accounting
Officer)
/s/PHILIP W. COOLIDGE* Trustee
Philip W. Coolidge
/s/CHARLES P. BIGGAR* Trustee
Charles P. Biggar
/s/S. LELAND DILL* Trustee
S. Leland Dill
/s/PHILIP SAUNDERS, JR.* Trustee
Philip Saunders, Jr.
* By Power of Attorney
Exhibit (11) under N-1A
Exhibit 23 under Item 601/Reg SK
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Post-Effective Amendment
No. 15 tot he 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 January 27, 1997 on our audits of the financial statements
and financial highlights of the BT Pyramid Mutual Funds, which report is
included in the Annual Report to Shareholders for the year ended December
31, 1996 which is incorporated by reference in the Post-Effective Amendment
to the Registration Statement. We also consent tot he reference in the
Statement of Additional Information to our Firm under the caption `Counsel
and Independent Accountants.''
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Kansas City, Missouri
March 11, 1997
Exhibit (11) under N-1A
Exhibit 23 under Item 601/Reg SK
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Post-Effective Amendment
No. 15 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 12, 1997 on our audits of the financial statements
and financial highlights of the BT Pyramid Mutual Funds, which report is
included in the Annual Report to Shareholders for the year ended December
31, 1996 which is incorporated by reference in the Post-Effective Amendment
to the Registration Statement. We also consent tot he reference in the
Statement of Additional Information to our Firm under the caption `Counsel
and Independent Accountants.''
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Kansas City, Missouri
March 11, 1997
BT PYRAMID MUTUAL FUNDS
DISTRIBUTION AND SERVICE PLAN
This distribution and Service Plan (the `Plan''), when effective in
accordance with its terms, shall be a written plan of BT Pyramid Mutual
Funds, a Massachusetts business trust (the `Trust''), as contemplated by
Rule 12b-1 under the Investment Company Act of 1940, as amended (the
`Act'').
WHEREAS:
The Trust has been organized to operate as a open-end management
investment company and is registered as such under the Act;
The Trust intends to distribute the shares of its series (each, a
`Fund''), which may be divided into one or more separate classes of shares
of beneficial interest (a `Class'') as listed on Schedule A hereto, and
desires to adopt a distribution and service plan pursuant to Rule 12b-1
under the Act with respect to such Funds or Classes, as the case may be,
and the Trustees of the Trust have determined, in the exercise of their
reasonable business judgment and in light of their fiduciary duty, that
there is a reasonable likelihood that adoption of this Plan will benefit
each Fund or Class and its shareholders; and
The Trust desires to engage Edgewood Services, Inc. (`ESI'') to
provide (or cause to be provided) certain distribution and shareholder
services for each Fund or Class.
NOW, THEREFORE, in consideration of the foregoing, the Trust hereby
adopts this Plan in accordance with Rule 12b-1 under the Act on the
following terms and conditions:
1. The Trust may reimburse ESI, as the distributor, for costs and
expenses (or forward ESI fees in anticipation of such expenses) incurred in
connection with the distribution and marketing of shares of the Funds or
Classes, at an annual rate not exceeding the percentage of the average
daily net assets of each Fund or Class as set forth in Schedule A attached
hereto. Such expenses shall be calculated and accrued daily and reimbursed
monthly or at such other intervals as the Board of Trustees shall
determine.
2. ESI may seek reimbursement under paragraph 1 of this Plan for
expenses incurred, or in anticipation of such expenses, in connection with
any activities primarily intended to result in the sale of shares of a Fund
or Class, including, but not limited to: compensation to and expenses
(including overhead and telephone expenses) of account executives or other
employees of ESI who, as their primary activity, engage in or support the
distribution of shares; payment of asset-based sales charges and service
fees to broker-dealers who provide shareholders with personal services and
account maintenance services or payment of similar fees to banks or other
financial institutions; printing of prospectuses, statements of additional
information and reports for other than existing shareholders in amounts in
excess of that typically used in connection with the distribution of shares
of a Fund or Class; costs of placing advertising in various media; services
of parties other than ESI or its affiliates in formulating sales
literature; and typesetting, printing and distribution of sales literature.
3. The Trust may pay ESI service fees from each Fund (and allocate to
a Class if applicable) not to exceed on an annual basis the percentage as
presented on Schedule A hereto of the average daily net assets of the Fund
or Class for the Fund's then-current fiscal year (and with regard to future
Funds or Classes such percentage of the average daily net assets of such
2
Fund or Class as is agreed to by the Trust and the Distributor) in
connection with providing (or causing to be provided) (or in anticipation
of) personal services and shareholder account maintenance services.
4. The Trust may also pay ESI distribution fees from each Fund or
Class not to exceed on an annual basis the percentage as presented on
Schedule A of the average daily net assets of the Fund or Class for its
then-current fiscal year (and with regard to future Funds or Classes, such
percentage of the average daily net assets of such Fund or class as is
agreed to by the Trust and ESI) as reimbursement and added on to Schedule A
for costs and expenses incurred in connection with the distribution and
sales of the respective Fund or Class, or in anticipation of such expenses.
To the extent such expenses exceed the stated limit, ESI will bear such
expenses.
5. This Plan together with any related agreements shall not take
effect, with respect to a Fund or Class, until it has been approved by a
``ote of a ``majority of the outstanding voting Securities'' (as defined
in the Act) (``ajority Shareholder Vote'') of the Fund or Class, if so
required by Rule 12b-1 under the Act.
6. This Plan with any related agreements shall become effective with
respect to a Fund or Class upon approval, by a majority vote of both (i)
the Board of Trustees and (ii) those Trustees who are not ``nterested
persons''(as defined in the Act) (``Independent Trustees'') of the Trust
and have no direct or indirect financial interest in the operation of this
Plan or any agreements related to it (the ``ualified Trustees''), cast in
person at a meeting called for the purpose of voting on this Plan and such
related agreements.
3
7. This Plan shall continue in effect for so long as such continuance
is specifically approved at least annually in the manner provided in
paragraph 6 hereof.
8. In each year that the Plan remains in effect, any person
authorized to direct the disposition of monies paid or payable by the Trust
pursuant to this Plan or any related agreement shall prepare and furnish to
the Board and the Board shall review, at least quarterly, written reports
complying with the requirements of Rule 12b-1 under the Act of the amounts
expended under the Plan and purposes for which such expenditures were made.
9. This Plan may be terminated at any time with respect to a Fund or
Class by a majority vote of the Qualified Trustees or by a Majority
Shareholder Vote of the Fund or Class.
10.This Plan may not be amended in order to increase materially the
amount of distribution expenses provided for in paragraph 1 hereof unless
such amendment is approved in the manner provided for initial approval in
paragraph 5 hereof and no material amendment to the Plan shall be made
unless approved in the manner provided for approval and annual renewal in
paragraph 6 hereof.
11.While this Plan shall be in effect, the selection and nomination
of Trustees who are not Interested Persons of the Trust shall be committed
to the discretion of the Independent Trustees then in office.
12.To the extent expenses of ESI under this Plan in any fiscal year
of a Fund exceed amounts payable under this Plan on behalf of such Fund
(and allocable to such Class, if applicable) during such Fund's fiscal
year, such expenses shall be payable to ESI in any succeeding fiscal year
4
of the Fund; however no carrying or interest charges shall be payable by
the Fund or Class to ESI.
13.ESI hereby acknowledges that (i) payments to be made by the Trust
to ESI pursuant to this Plan shall be for, or in anticipation of, actual
expenses of ESI as contemplated hereunder, and (ii) upon termination of
this Plan with respect to a Fund or Class, the benefits inuring to ESI
hereunder, with respect to that Fund or Class, shall immediately cease.
14.The Trust shall preserve copies of this Plan and any related
agreements and all reports made pursuant to paragraph 8 hereof for a period
of not less than six years from the date of (a) this Plan or (b) the
agreements or such report, as the case may be, the first two years in an
easily accessible place.
Dated: August 7, 1996
Revised: September 30, 1996
SCHEDULE A
BT PYRAMID MUTUAL FUNDS
SCHEDULE OF FEES UNDER THE DISTRIBUTION AND SERVICE PLAN
AS LAST AMENDED: AUGUST 7, 1996
Distribution Service
5
Fee Fee
BT Investment Money Market Fund 0.20%
BT Investment Equity 500 Index Fund 0.20%
BT Investment Limited Term U.S.
Governement Securities Fund 0.20%
BT Institutional Asset Management Fund0.20%
BT Investment Equity Apprecation Fund - -
Investment Class Shares 0.20%
Advisor Class Shares 0.25% 0.25%
SCHEDULE A
BT PYRAMID MUTUAL FUNDS
SCHEDULE OF FEES UNDER THE DISTRIBUTION AND SERVICE PLAN
AS LAST AMENDED: DECEMBER 11, 1996
Distribution Service
Fee Fee
BT Investment Money Market Fund 0.20%
BT Investment Equity 500 Index Fund 0.20%
BT Investment Limited Term U.S.
Governement Securities Fund 0.20%
BT Institutional Asset Management Fund0.20%
BT Investment Equity Apprecation Fund - -
Investment Class Shares 0.20%
Advisor Class Shares 0.25% 0.25%
BT RetirementPlus Fund --
Investment Class
POWER OF ATTORNEY
The undersigned Trustees and officers, as indicated respectively
below, of BT Investment Funds, BT Institutional Funds, BT Pyramid Mutual
Funds, The Leadership Trust, and BT Advisor Funds (each, a `Trust'') and,
Cash Management Portfolio, Treasury Money Portfolio, Tax Free Money
Portfolio, NY Tax Free Money Portfolio, International Equity Portfolio,
Utility Portfolio, Short/Intermediate U.S. Government Securities Portfolio,
Equity 500 Index Portfolio, Asset Management Portfolio, Capital
Appreciation Portfolio, Intermediate Tax Free Portfolio, and BT Investment
Portfolios (each, a `Portfolio Trust'') each hereby constitutes and
appoints the Secretary and each Assistant Secretary of each Trust and each
Portfolio Trust and the Deputy General Counsel of Federated Investors, each
of them with full powers of substitution, as his true and lawful attorney-
in-fact and agent to execute in his name and on his behalf in any and all
capacities the Registration Statements on Form N-1A, and any and all
amendments thereto, and all other documents, filed by a Trust or a
Portfolio Trust with the Securities and Exchange Commission (the `SEC'')
under the Investment Company Act of 1940, as amended, and (as applicable)
the Securities Act of 1933, as amended, and any and all instruments which
such attorneys and agents, or any of them, deem necessary or advisable to
enable the Trust or Portfolio Trust to comply with such Acts, the rules,
regulations and requirements of the SEC, and the securities or Blue Sky
laws of any state or other jurisdiction, and to file the same, with all
exhibits thereto and other documents in connection therewith, with the SEC
and such other jurisdictions, and the undersigned each hereby ratifies and
confirms as his own act and deed any and all acts that such attorneys and
agents, or any of them, shall do or cause to be done by virtue hereof. Any
one of such attorneys and agents has, and may exercise, all of the powers
hereby conferred. The undersigned each hereby revokes any Powers of
Attorney previously granted with respect to any Trust or Portfolio Trust
concerning the filings and actions described herein.
IN WITNESS WHEREOF, each of the undersigned has hereunto set his hand
as of the 30th day of September, 1996.
SIGNATURES TITLE
/s/ Ronald M. Petnuch President and Treasurer (Chief Executive
Officer,
Ronald M. Petnuch Principal Financial and Accounting Officer)
of each Trust and Portfolio Trust
/s/ Philip W. Coolidge Trustee of each Trust and
Philip W. Coolidge Portfolio Trust
/s/ Charles P. Biggar Trustee of each Portfolio Trust
Charles P. Biggar and BT Institutional Funds
SIGNATURES TITLE
/s/ S. Leland Dill Trustee of each Portfolio Trust
S. Leland Dill and BT Investment Funds
2
/s/ Philip Saunders, Jr. Trustee of each Portfolio Trust
Philip Saunders, Jr. and BT Investment Funds
/s/ Kelvin J. Lancaster Trustee of BT Investment Funds
Kelvin J. Lancaster. and BT Pyramid Mutual Funds
/s/ Martin J. Gruber Trustee of BT Pyramid Mutual Funds,
Martin J. Gruber The Leadership Trust, and BT Advisor Funds
/s/ Harry Van Benschoten Trustee of BT Pyramid Mutual Funds,
Harry Van Benschoten. The Leadership Trust, and BT Advisor Funds
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the BT
Pyramid Funds Annual Report dated December 31, 1996, and is qualified in
its entirety by reference to such Annual Report.
</LEGEND>
<RESTATED>
<CIK> 0081145973
<NAME> BT PYRAMID FUNDS
<SERIES>
<NUMBER> 2
<NAME> EQUITY 500 INDEX FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 447439852
<INVESTMENTS-AT-VALUE> 447439852
<RECEIVABLES> 4435393
<ASSETS-OTHER> 11634
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 451886879
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 124439
<TOTAL-LIABILITIES> 124439
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 325520978
<SHARES-COMMON-STOCK> 27370025
<SHARES-COMMON-PRIOR> 20048015
<ACCUMULATED-NII-CURRENT> 24622
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (749375)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 126966215
<NET-ASSETS> 451762440
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 7700258
<EXPENSES-NET> 539243
<NET-INVESTMENT-INCOME> 7161015
<REALIZED-GAINS-CURRENT> 4916943
<APPREC-INCREASE-CURRENT> 62670824
<NET-CHANGE-FROM-OPS> 74748782
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7138143
<DISTRIBUTIONS-OF-GAINS> 3704248
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 173561745
<NUMBER-OF-SHARES-REDEEMED> 73440345
<SHARES-REINVESTED> 10594759
<NET-CHANGE-IN-ASSETS> 174622550
<ACCUMULATED-NII-PRIOR> 1750
<ACCUMULATED-GAINS-PRIOR> (1962070)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1134378
<AVERAGE-NET-ASSETS> 349771306
<PER-SHARE-NAV-BEGIN> 13.82
<PER-SHARE-NII> .30
<PER-SHARE-GAIN-APPREC> 2.83
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .44
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.51
<EXPENSE-RATIO> 25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the BT
Pyramid Funds Annual Report dated December 31, 1996, and is qualified in
its entirety by reference to such Annual Report.
</LEGEND>
<CIK> 0081145973
<NAME> BT PYRAMID FUNDS
<SERIES>
<NUMBER> 1
<NAME> INVESTMENT MONEY MARKET FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 416134632
<INVESTMENTS-AT-VALUE> 416134632
<RECEIVABLES> 301468
<ASSETS-OTHER> 12214
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 416448314
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 287090
<TOTAL-LIABILITIES> 287090
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 416518570
<SHARES-COMMON-STOCK> 416518570
<SHARES-COMMON-PRIOR> 646850037
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (357346)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 416161224
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 29083094
<EXPENSES-NET> 933982
<NET-INVESTMENT-INCOME> 28149112
<REALIZED-GAINS-CURRENT> 582419
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 28169527
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 28149112
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5387962169
<NUMBER-OF-SHARES-REDEEMED> 5643193645
<SHARES-REINVESTED> 24900009
<NET-CHANGE-IN-ASSETS> (229749048)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (939765)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1716961
<AVERAGE-NET-ASSETS> 549405882
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .05
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
