As filed with the Securities and Exchange Commission on February 25, 1997
File Nos. 33-45973 and 811-06576
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-lA
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 14
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 17
BT PYRAMID MUTUAL FUNDS
(Exact Name of Registrant as Specified in Charter)
c/o Federated Services Company
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (800) 730-1313
Jay S. Neuman
c/o Federated Services Company
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
Copies to:
Donald W. Smith, Esq. Burton M. Leibert, Esq.
Brian F. McNally, Esq. Willkie Farr & Gallagher
Kirkpatrick & Lockhart LLP One Citicorp Center
1800 Massachusetts Avenue, N.W., 2nd Floor 153 East 53rd Street
Washington, D.C. 20036 New York, New York 10022-4669
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[x] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF ITS SHARES OF BENEFICIAL
INTEREST PURSUANT TO RULE 24f-2 UNDER THE INVESTMENT COMPANY ACT OF 1940.
REGISTRANT FILED THE NOTICE REQUIRED BY RULE 24f-2 ON OR ABOUT FEBRUARY 28, 1996
FOR REGISTRANT'S FISCAL YEAR ENDING DECEMBER 31, 1995. REGISTRANT FILED THE
NOTICE REQUIRED BY RULE 24f-2 ON OR ABOUT MAY 31, 1996 FOR REGISTRANT'S FISCAL
YEAR ENDED MARCH 31, 1996.
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BT PYRAMID MUTUAL FUNDS
CONTENTS OF REGISTRATION STATEMENT
This registration statement consists of the following papers and documents:
Cover Sheet
Contents of Registration Statement
Form N-1A Cross Reference Sheet
BT RetirementPlus Fund:
Part A - Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
This Post-Effective Amendment does not make any changes in the currently
effective prospectuses and statements of additional information for the other
series of BT Pyramid Mutual Funds.
<PAGE>
BT PYRAMID MUTUAL FUNDS
BT RETIREMENTPLUS FUND
FORM N-lA CROSS REFERENCE SHEET
Part A Item No. and Caption Prospectus Caption
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1. Cover Page Cover Page
2. Synopsis Expense Summary
3. Condensed Financial Information Not Applicable
4. General Description of Registrant Cover Page; Investment Principles
and Risks; Investment Objectives
and Policies; Risk Factors and
Certain Securities and Investment
Practices; Special Information
Concerning the Master-Feeder Fund
Structure; Securities and
Investment Practices of the
Portfolio
5. Management of the Fund Cover Page; Expense Summary;
Management of the Trusts
6. Capital Stock and Other Securities Cover Page; Who May Invest; Special
Information Concerning the Master-
Feeder Fund Structure; Other
Classes of Shares; Dividends and
Capital Gain Distributions; Tax
Considerations; Additional
Information About the Trusts
7. Purchase of Securities Being Offered Expense Summary; Other Classes of
Shares; Management of the Trusts;
Net Asset Value; Transactions in
Fund Shares
8. Redemption or Repurchase Expense Summary; Net Asset Value;
Transactions in Fund Shares
9. Pending Legal Proceedings Not Applicable
<PAGE>
BT PYRAMID MUTUAL FUNDS
BT RETIREMENTPLUS FUND
FORM N-lA CROSS REFERENCE SHEET
- Continued -
Statement of Additional Information
Part B Item No. and Caption Caption
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10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Organization of the Trust
13. Investment Objectives and Policies Investment Objective, Polices and
Restrictions
14. Management of the Fund Management of the Trusts;
Organization of the Trust
15. Control Persons and Principal Holders See Prospectus - Management of the
of Securities Trusts
16. Investment Advisory and Other Services Management of the Trusts
17. Brokerage Allocation and Other Investment Objective, Policies and
Practices Restrictions
18. Capital Stock and Other Securities See Prospectus - "Special
Information Concerning the Master-
Feeder Fund Structure" and "Other
Classes of Shares"
19. Purchase, Redemption and Pricing of Valuation of Securities;
Securities Being Offered Redemptions in Kind
20. Tax Status Taxation
21. Underwriters See Prospectus - "Management of the
Trusts" and "Special Information
Concerning the Master-Feeder Fund
Structure"
22. Calculation of Performance Data Performance Information
23. Financial Statements Not Applicable
Part C
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C of this Registration Statement.
<PAGE>
INFORMATION HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
Subject to Completion, dated February 25, 1997
BT PYRAMID MUTUAL FUNDS
BT PRESERVATIONPLUS FUND
PROSPECTUS: ___________, 1997
BT PreservationPlus Fund (the "Fund") seeks to provide investors with a high
level of current income while seeking to maintain a stable value per share. The
Fund is a separate series of BT Pyramid Mutual Funds (the "Trust"), an open-end,
management investment company (mutual fund). The Fund is offered solely to
participant-directed employee benefit plans meeting specified criteria.
Unlike other mutual funds, the Fund seeks to achieve its investment objective by
investing all of its net investable assets in BT PreservationPlus Portfolio (the
"Portfolio"), a separate subtrust of BT Investment Portfolios, a New York master
trust fund (the "Portfolio Trust"), with an identical investment objective. See
"Special Information Concerning the Master-Feeder Fund Structure." The Fund is
not a money market fund, and there can be no assurance that it will be able to
maintain a stable value per share or otherwise achieve its objective.
Please read this Prospectus before investing and keep it on file for future
reference. It contains important information concerning the Fund and the
Portfolio, including how the Portfolio invests and the services available to the
Fund's shareholders. Bankers Trust Company ("Bankers Trust") is the investment
adviser of the Portfolio.
LIKE SHARES OF ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
To learn more about the Fund and the Portfolio, investors can obtain a copy of
the Fund's Statement of Additional Information ("SAI"), dated __________, 1997,
which has been filed with the Securities and Exchange Commission (the "SEC")
<PAGE>
and is incorporated herein by this reference. For a free copy of this document,
please call the Trust's service agent at 1-800-667-7596.
Shares of the Fund are neither insured nor guaranteed by the U.S. Government.
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by, Bankers Trust Company, and the shares are not Federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board or any other
agency. An investment in the Fund is subject to risk that may cause the value of
the investment to fluctuate, and when the investment is redeemed, the value may
be higher or lower than the amount originally invested by the investor.
ii
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TABLE OF CONTENTS
PAGE
THE FUND.................................................................. 1
Who May Invest.......................................................... 1
Investment Principles and Risks......................................... 1
Expense Summary......................................................... 2
THE FUND IN DETAIL........................................................ 4
Investment Objective and Policies....................................... 4
Risk Factors and Certain Securities and Investment Practices............ 5
Special Information Concerning the Master-Feeder Fund Structure......... 9
Securities and Investment Practices of the Portfolio.................... 10
Classes of Shares....................................................... 14
Performance............................................................. 14
Management of the Trusts................................................ 15
Net Asset Value......................................................... 18
SHAREHOLDER AND ACCOUNT POLICIES.......................................... 19
Account Information..................................................... 19
Transactions in Fund Shares............................................. 19
Dividends and Capital Gain Distributions................................ 21
Tax Considerations...................................................... 21
Additional Information About the Trusts................................. 22
iii
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THE FUND
The Fund's investment objective is a high level of current income while seeking
to maintain a stable value per share. The Fund seeks to achieve its investment
objective by investing all of its net investable assets in the Portfolio. The
Portfolio will seek to achieve this objective by investing in a diversified
portfolio of fixed income securities, money market instruments, futures, options
and other instruments ("Portfolio Securities") and by entering into contracts
("Wrapper Agreements") with financial institutions, such as insurance companies
and banks, that are intended to stabilize the value per share of the Fund
("Share"). See "Risk Factors and Certain Securities and Investment Practices."
There can be no assurance that the Fund will achieve its objective.
WHO MAY INVEST
Shares of the Fund are offered solely to participant-directed employee benefit
plans meeting specified criteria ("Plans"). The Fund is designed for investors
seeking preservation and stability of principal and a level of current income
higher than money market mutual funds over most time periods.
The Fund offers two classes of Shares. Investment Class Shares are subject to
shareholder servicing charges, while Institutional Class Shares are not subject
to these charges. See "Account Information" and "Transactions in Fund Shares."
The Fund is not in itself a balanced investment plan. Plan participants should
consider their investment objective and tolerance for risk when making an
investment decision. When Shares are redeemed, they may be worth more or less
than what they originally cost, although the nature of the Portfolio's
investments -- particularly the Wrapper Agreements -- are intended by the Fund
to stabilize the value per Share. A Plan offering investments in the Fund must
impose certain restrictions on the ability of a Plan participant to exchange
Shares for similar investment options. See "Account Information."
INVESTMENT PRINCIPLES AND RISKS
The value of most of the Portfolio Securities will fluctuate based upon changes
in domestic or foreign interest rates, the credit quality of the issuer, market
conditions, and other economic and political news. In general, the prices of
Portfolio Securities will rise when interest rates fall, and fall when interest
rates rise. The Wrapper Agreements are intended to stabilize the value per Share
by offsetting fluctuations in the value of the Portfolio Securities under
certain conditions. Under most circumstances, the combination of Portfolio
Securities and Wrapper Agreements held by the Portfolio is expected to provide
Fund shareholders with a constant net asset value ("NAV") per Share and a
current rate of return that is higher than most money market mutual funds over
most time periods. However, there can be no guarantee that the Portfolio will
maintain a constant NAV, and consequently that the Fund will be able to maintain
a constant NAV per Share. There is also no guarantee that any Fund shareholder
or Plan participant will realize the same investment return as might be realized
by a direct investment in the Portfolio Securities without the Wrapper
Agreements or that the Fund's rate of return will be higher than that of most
money market mutual funds.
The Portfolio incurs costs in connection with its investment in Wrapper
Agreements which will reduce the Fund's investment return. The Wrapper
Agreements may not insulate the Portfolio from loss if an issuer of Portfolio
<PAGE>
Securities defaults on payments of interest or principal. Additionally, an
issuer of a Wrapper Agreement could default on its obligations under the
agreement or the Portfolio might be unable to obtain Wrapper Agreements covering
all of its assets. Either type of default or the inability to obtain Wrapper
Agreements might result in a decline in the value of the Shares. Moreover, in
valuing a Wrapper Agreement, the Board of Trustees of the Portfolio Trust may
determine that such agreement should not be carried by the Portfolio at a value
sufficient to maintain the Portfolio's NAV per Share.
Bankers Trust may use various investment techniques to hedge the Portfolio's
risks, but there is no guarantee that these strategies will work as intended.
See "Risk Factors and Certain Securities and Investment Practices" for more
information.
EXPENSE SUMMARY
Annual operating expenses are paid out of the assets of the Portfolio and the
Fund. The Portfolio pays an investment advisory fee and an administrative
services fee to Bankers Trust. The Fund incurs additional administrative
expenses such as maintaining shareholder records and furnishing shareholder
statements. The Fund must also provide semi-annual financial reports.
The following table is intended to assist investors in understanding the
expenses associated with investing in the Fund. The expenses shown below are
estimates for the first full year of operations. The table provides (i) a
summary of expenses related to purchases and redemptions (sales) of Shares and
the anticipated annual operating expenses of the Fund and the Portfolio, in the
aggregate, as a percentage of average daily net assets 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 expenses of the Fund
(including its proportionate share of the Portfolio's expenses) will be less
than or approximately equal to the expenses that the Fund would incur if the
Trust retained the services of an investment adviser and the assets of the Fund
were invested directly in Portfolio Securities and Wrapper Agreements.
Shareholder Transaction Expenses
Investment Institutional
Class Class
Maximum Sales Charge on Purchases NONE NONE
Maximum Sales Charge on Reinvested Dividends NONE NONE
Maximum Redemption Fee 2.0% 2.0%
Shareholder transaction expenses are charges paid when investors buy, redeem or
exchange Shares. Under normal circumstances, redemptions of Shares that are
directed by Plan participants are not subject to a redemption fee. Redemptions
of Shares that are not directed by Plan participants and that are made on less
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than twelve months' prior written notice to the Fund are subject to a redemption
fee payable to the Fund of 2% of the proceeds of the redemption. See
"Transactions in Fund Shares."
Annual Operating Expenses (as a percentage of the Fund's average daily net
assets)
<TABLE>
<CAPTION>
Investment Institutional
Class Class
<S> <C> <C>
Investment advisory fee (after reimbursement or waiver)* 0.25% 0.25%
12b-1 fee NONE NONE
Other expenses** 0.45% 0.25%
----- -----
Total operating expenses (after reimbursement or waiver) 0.70% 0.50%
</TABLE>
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* The Fund does not directly pay an investment advisory fee; the amount shown
reflects the Fund's proportionate share of the Portfolio's investment advisory
fee.
** "Other expenses" include premiums paid for Wrapper Agreements and certain
additional services provided to the Fund and the Portfolio by Bankers Trust. The
"other expenses" for Investment Class Shares also include a shareholder
servicing fee of 0.20%.
Expense Table Example:
An investor would pay the following expenses assuming (1) 5% annual return and
(2) redemption at the end of each time period. No redemption fee has been
included.
ONE YEAR THREE YEARS
Investment Class Shares $7 $22
Institutional Class Shares $5 $16
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. Bankers
Trust has voluntarily agreed to waive a portion of its investment advisory fee
payable by the Portfolio. Without such waiver, the Portfolio's investment
advisory fee would be 0.35% of its average daily net assets. Bankers Trust has
also voluntarily agreed to waive a portion of its administration fees (included
in "Other Expenses") payable by the Portfolio. Without such waiver, the
Portfolio's "Other Expenses" would be 0.53% for Investment Class Shares and
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<PAGE>
0.33% for Institutional Class Shares. In the absence of these undertakings, it
is estimated that "Total Operating Expenses" would be 0.88% for Investment Class
Shares and 0.68% for Institutional Class Shares. Bankers Trust may terminate
these voluntary waivers and reimbursements at any time in its sole discretion
without notice to shareholders. 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 the example assumes a 5% annual return,
actual performance will vary and may result in a return greater or less than 5%.
Shares of the Fund are sold by Edgewood Services, Inc. ("Edgewood") as the
Trust's distributor (the "Distributor"). For more information about the Fund's
and the Portfolio's expenses see "Management of the Fund" and "Valuation
Details" herein.
THE FUND IN DETAIL
INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks to achieve its investment objective by investing all of its net
investable assets in the Portfolio, which has the same investment objective as
the Fund. Since the investment characteristics of the Fund will correspond
directly to that of the Portfolio, the following is a discussion of the various
investments of and techniques employed by the Portfolio. Additional information
about the investment policies of the Portfolio appears in "Risk Factors and
Certain Securities and Investment Practices" in this Prospectus and the SAI.
There can be no assurance that the Fund's and the Portfolio's investment
objective will be achieved.
The Portfolio's investment objective is a high level of current income while
seeking to maintain a stable value per Share. The Portfolio expects to invest at
least 65% of its total assets in fixed income securities ("Fixed Income
Securities") of varying maturities rated, at the time of purchase, in one of the
top three long-term rating categories by Standard & Poor's Rating Services, a
division of the McGraw-Hill Companies, Inc. ("S&P"), Moody's Investors Service,
Inc. ("Moody's"), or Duff & Phelps Credit Rating Co., or comparably rated by
another nationally recognized statistical rating organization ("NRSRO"), or, if
not rated by a NRSRO, of comparable quality as determined by Bankers Trust in
its sole discretion.
In addition, the Portfolio will enter into Wrapper Agreements with insurance
companies, banks or other financial institutions ("Wrapper Providers") that are
rated, at the time of purchase, in one of the top two long-term rating
categories by Moody's or S&P. There is no active trading market for Wrapper
Agreements, and none is expected to develop; therefore, they will be considered
illiquid. At the time of purchase, the value of all of the Wrapper Agreements
and any other illiquid securities will not exceed 15% of the Portfolio's net
assets.
The Fixed Income Securities include fixed income securities issued or guaranteed
by the U.S. Government, or any agency or instrumentality thereof; publicly or
privately issued U.S. dollar-denominated debt of domestic or foreign entities,
including corporate, sovereign or supranational entities; publicly issued U.S.
dollar denominated asset-backed securities issued by domestic or foreign
entities; mortgage pass-through securities issued by the Government National
Mortgage Association, the Federal Home Loan Mortgage Corporation or the Federal
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<PAGE>
National Mortgage Association; mortgage pass-through securities issued by
non-government entities such as banks, mortgage lenders, or other financial
institutions, including private label mortgage pass-through securities and whole
loans; collateralized mortgage obligations ("CMOs") and real estate mortgage
investment conduits ("REMICs"), which are mortgage-backed debt instruments that
make payments of principal and interest at a variety of intervals and are
collateralized by any of the aforementioned mortgage pass-through securities or
whole loans; and obligations issued or guaranteed, or backed by securities
issued or guaranteed by, the U.S. Government, or any of its agencies or
instrumentalities, including Certificates of Accrual Treasury Securities
("CATS"), Treasury Income Growth Receipts ("TIGRs"), and Treasury Receipts
("TRs") and zero coupon securities (securities consisting solely of the
principal or interest component of a U.S. Treasury bond).
The Portfolio Securities purchased by the Portfolio also include short-term
investments rated, at the time of purchase, in one of the top two short-term
rating categories by an NRSRO or, if unrated, of comparable quality in the
opinion of Bankers Trust, including commercial paper and time deposits,
certificates of deposit, bankers' acceptances and other instruments of foreign
and domestics banks and thrift institutions. The Portfolio may invest up to 35%
of its total assets in such short-term investments for purposes of liquidity and
up to 100% of its total assets in such instruments for temporary defensive
purposes. The Portfolio may also invest in and utilize the following investments
and investment techniques and practices: Rule 144A securities (as defined
below), when-issued and delayed delivery securities, repurchase agreements,
reverse repurchase agreements and dollar rolls, and options and futures
contracts. See "Risk Factors and Certain Securities and Investment Practices" in
this Prospectus and the SAI for more information.
In selecting securities for the Portfolio, Bankers Trust attempts to maintain an
average portfolio duration of the Portfolio Securities within a range of 2.5 to
4.5 years. Duration is a measure of the expected life of a Fixed Income Security
on a present value basis which incorporates the security's yield, coupon
interest payments, final maturity and call features into a single measure.
RISK FACTORS AND CERTAIN SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of instruments
in which the Portfolio may invest and strategies Bankers Trust may employ in
pursuit of the Portfolio's investment objective. A summary of the risks and
restrictions associated with these investments and investment practices is
included as well.
Bankers Trust may not buy all of these instruments or use all of these
techniques to the full extent permitted unless it believes that doing so will
help the Portfolio achieve its goal. Current holdings and investment strategies
will be described in the financial reports of the Fund and the Portfolio, which
will be sent to Fund shareholders twice a year.
Risks of Investing in Fixed Income Securities
All fixed income investments have exposure to three types of risks. Credit risk
is the possibility that the issuer of a Fixed Income Security will fail to make
timely payments of either interest or principal to the Portfolio. Interest rate
risk is the potential for fluctuations in the prices of Fixed Income Securities
due to changing interest rates. Income risk is the potential for decline in the
Portfolio's income due to the investment or reinvestment of assets in Fixed
Income Securities when market interest rates are falling.
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Although there is no assurance that it will achieve its objective, the Portfolio
attempts to enhance yield while minimizing these risks. If an issuer of a Fixed
Income Security or a Wrapper Provider becomes financially impaired, it may
default on its obligations and the Portfolio's interest income may be reduced or
the Portfolio may incur a loss of principal. This is an example of credit risk.
In order to minimize credit risk, the Portfolio's assets are allocated among a
diversified group of issuers. Credit analysis is applied to every security and
Wrapper Provider selected for the Portfolio. Once purchased, a security and, in
the case of a Wrapper Agreement, the Wrapper Provider are monitored regularly by
Bankers Trust for maintenance of adequate credit characteristics. In the event
that the rating of a security or Wrapper Provider is downgraded by one or more
NRSRO, the Portfolio may elect to retain the security or applicable Wrapper
Agreement. However, some Wrapper Agreements may require that Fixed Income
Securities that fall below investment grade be liquidated within a set time
period, typically within one year or less. The Portfolio may elect not to cover
with Wrapper Agreements any Fixed Income Securities with a remaining maturity of
60 days of less and any cash or short term investment.
When interest rates rise, Fixed Income Security prices generally decline. When
interest rates fall, Fixed Income Security prices generally increase. Generally,
the longer the maturity of the Fixed Income Security, the higher its yield,
although longer-term Fixed Income Securities tend to offer less price stability
in response to changes in interest rates than do shorter-term investments.
Therefore, portfolios with shorter average maturities tend to have less risk and
lower returns than portfolios with longer average maturities. This is an example
of interest rate risk. In order to help maintain an average portfolio duration
of 2.5 to 4.5 years, the Portfolio will invest primarily in Fixed Income
Securities of short- to intermediate-term maturities. This will help to minimize
interest rate risk. In addition, unlike most traditional fixed income
portfolios, the Portfolio purchases Wrapper Agreements that should offset
substantially all of the price fluctuations typically associated with
longer-term Fixed Income Securities.
It is important to note the distinction between the Portfolio and short-term
investments such as money market funds. The securities held by the Portfolio
have a longer average maturity than those of money market funds. Because a money
market fund has a shorter average maturity, its yield will track the direction
of current market rates of return more closely than the Portfolio. For example,
in a rising interest rate environment, money market yields may rise more quickly
than will the Portfolio's. In a falling interest rate environment, money market
yields may fall more quickly than the Portfolio's. Over the long-term, however,
intermediate and long-term Fixed Income Securities such as those purchased by
the Portfolio have historically offered higher yields than short-term
investments (i.e., money market funds).
Risks of Wrapper Agreements
Each Wrapper Agreement obligates the Wrapper Provider to maintain the "Book
Value" of a portion of the Portfolio's assets ("Covered Assets") up to a
specified maximum dollar amount, upon the occurrence of certain events. The Book
Value of the Covered Assets is their purchase price (i) plus interest on the
Covered Assets at a rate specified in the Wrapper Agreement ("Crediting Rate"),
and (ii) less an adjustment to reflect any defaulted securities. The Crediting
Rate used in computing Book Value is calculated by a formula specified in the
Wrapper Agreement and is adjusted periodically. In the case of most Wrapper
Agreements purchased by the Portfolio, the Crediting Rate is based on the actual
interest income earned on the Covered Assets plus or minus an adjustment for an
amount receivable from or payable to the Wrapper Provider based on fluctuations
in the market value of the Covered Assets. As a result, while the Crediting Rate
will generally reflect movements in market rates of interest, it may at any time
be more or less than these rates or the actual interest income earned on the
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Covered Assets. The Crediting Rate may also be impacted by defaulted securities
and by increases and decreases of the amount of Covered Assets as a result of
contributions and withdrawals tied to the sale and redemption of Shares.
Furthermore, the premiums due Wrapper Providers in connection with the
Portfolio's investment in Wrapper Agreements are offset against and thus reduce
the Crediting Rate. These premiums are generally paid quarterly. In no event
will the Crediting Rate fall below zero percent under the Wrapper Agreements
entered into by the Portfolio.
Under the terms of a typical Wrapper Agreement, if the market value (plus
accrued interest on the underlying securities) of the Covered Assets is less
than their Book Value at the time the Covered Assets are liquidated in order to
provide proceeds for withdrawals of Portfolio interests resulting from
redemptions of Shares by Plan participants, the Wrapper Provider becomes
obligated to pay to the Portfolio the difference. Conversely, the Portfolio
becomes obligated to make a payment to the Wrapper Provider if it is necessary
for the Portfolio to liquidate Covered Assets at a price above their Book Value
in order to make withdrawal payments. (Withdrawals generally will arise when the
Fund must pay shareholders who redeem their Shares.) Because it is anticipated
that each Wrapper Agreement will cover all Covered Assets up to a specified
dollar amount, if more than one Wrapper Provider becomes obligated to pay to the
Portfolio the difference between Book Value and market value (plus accrued
interest on the underlying securities), each Wrapper Provider will be obligated
to pay a pro-rata amount in proportion to the maximum dollar amount of coverage
provided. Thus, the Portfolio will not have the option of choosing which Wrapper
Agreement to drawn upon in any such payment situation.
The terms of the Wrapper Agreements vary concerning when these payments must
actually be made between the Portfolio and the Wrapper Provider. In some cases,
payments may be due upon disposition of the Covered Assets; other Wrapper
Agreements provide for settlement only upon termination of the Wrapper Agreement
or total liquidation of the Covered Assets. A Wrapper Provider's obligation to
make payments to the Portfolio may be subject to prior notice requirements for
certain types of withdrawals from the Portfolio. For example, the Wrapper
Agreement may require that one year's notice be provided to obtain Book Value
payments with respect to withdrawals to provide liquidity for Fund redemptions
that are not directed by Plan participants. The Portfolio does not anticipate
that it will be required to liquidate Covered Assets for the purpose of paying
such withdrawals before any such notice period has expired. However, in the
unlikely event that this occurs, the NAV of the Portfolio, and hence of the
Shares, may be reduced. Additionally, a Wrapper Provider's obligation to make
payments for Plan withdrawals after twelve months' prior notice (as opposed to
those directed by Plan participants) may require adjustments to the Crediting
Rate and increases in the Portfolio's holdings of short term investments, which
might adversely affect the return of the Portfolio and the Fund. Please see
discussion of "Liquidity Reserve" below.
The Fund expects that the use of Wrapper Agreements by the Portfolio will under
most circumstances permit the Fund to maintain a constant NAV per Share and to
pay dividends that will generally reflect over time both the interest income of,
and market gains and losses on, the Covered Assets held by the Portfolio less
the expenses of the Fund and the Portfolio. However, there can be no guarantee
that the Fund will maintain a constant NAV per Share or that any Fund
shareholder or Plan participant will realize the same investment return as might
be realized by investing directly in the Portfolio assets other than the Wrapper
Agreements. For example, a default by the issuer of a Portfolio Security or a
Wrapper Provider on its obligations might result in a decrease in the value of
the Portfolio assets and, consequently, the Shares. The Wrapper Agreements
generally do not protect the Portfolio from loss if an issuer of Portfolio
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Securities defaults on payments of interest or principal. Additionally, a Fund
shareholder may realize more or less than the actual investment return on the
Portfolio Securities depending upon the timing of the shareholder's purchases
and redemption of Shares, as well as those of other shareholders. Furthermore,
there can be no assurance that the Portfolio will be able at all times to obtain
Wrapper Agreements. Although it is the current intention of the Portfolio to
obtain such agreements covering all of its assets (with the exceptions noted),
the Portfolio may elect not to cover some or all of its assets with Wrapper
Agreements should Wrapper Agreements become unavailable or should other
conditions such as cost, in Bankers Trust's sole discretion, render their
purchase inadvisable.
If, in the event of a default of a Wrapper Provider, the Portfolio were unable
to obtain a replacement Wrapper Agreement, participants redeeming Shares might
experience losses if the market value of the Portfolio's assets no longer
covered by the Wrapper Agreement is below Book Value. The combination of the
default of a Wrapper Provider and an inability to obtain a replacement agreement
could render the Portfolio and the Fund unable to achieve their investment
objective of maintaining a stable NAV per Share. If the Board of Trustees of the
Portfolio Trust (the "Portfolio Trust Board") determines that a Wrapper Provider
is unable to make payments when due, that Board may assign a fair value to the
Wrapper Agreement that is less than the difference between the Book Value and
the market value (plus accrued interest on the underlying securities) of the
applicable Covered Assets and the Portfolio might be unable to maintain NAV
stability.
Some Wrapper Agreements require that the Portfolio maintain a specified
percentage of its total assets in short-term investments ("Liquidity Reserve").
These short-term investments must be used for the payment of withdrawals from
the Portfolio and Portfolio expenses. To the extent the Liquidity Reserve falls
below the specified percentage of total assets, the Portfolio is obligated to
direct all net cash flow to the replenishment of the Liquidity Reserve. The
obligation to maintain a Liquidity Reserve may result in a lower return for the
Portfolio and the Fund than if these funds were invested in longer-term Fixed
Income Securities. The Liquidity Reserve required by all Wrapper Agreements is
not expected to exceed 20% of the Portfolio's total assets. However, the
Liquidity Reserve amount may be required to be increased above this limit as a
result of anticipated Plan redemptions within one year.
Wrapper Agreements also require that the Covered Assets have a specified
duration or maturity, consist of specified types of securities or be of a
specified investment quality. The Portfolio will purchase Wrapper Agreements
whose criteria in this regard are consistent with the Portfolio's (and the
Fund's) investment objective and policies as described in this Prospectus.
Wrapper Agreements may also require the disposition of securities whose ratings
are downgraded below a certain level. This may limit the Portfolio's ability to
hold such downgraded securities. Please see the SAI for additional information
concerning Wrapper Agreements.
Derivatives
The Portfolio may invest in various instruments, including the Wrapper
Agreements, that are commonly known as derivatives. Generally, a derivative is a
financial arrangement the value of which is based on, or "derived" from, a
traditional security, asset or market index. Some "derivatives" such as
mortgage-related and other asset-backed securities are in many respects like any
other investments, 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 contracts and options are commonly used for
traditional hedging purposes to attempt to protect an investor from exposure
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to changing interest rates, securities prices or currency exchange rates and for
cash management purposes as a low cost method of gaining exposure to a
particular securities market without investing directly in those securities.
However, some derivatives are used for leverage, which tends to magnify the
effect of an instrument's price changes as market conditions change. Leverage
involves the use of a small amount of money to control a large amount of
financial assets and can, in some circumstances, lead to significant losses.
Bankers Trust uses derivatives only in circumstances where it believes they
offer the most economic means of improving the risk/reward profile of the
Portfolio. Derivatives will not be used to increase portfolio risk above the
level that could be achieved using only traditional investment securities or to
acquire exposure to changes in the value of assets or indexes that by themselves
would not be purchased for the Portfolio. The use of derivatives for non-hedging
purposes may be considered speculative. A further description of the derivatives
that the Portfolio may use and some of their associated risks is found in
"Securities and Investment Practices of the Portfolio."
SPECIAL INFORMATION CONCERNING THE MASTER-FEEDER FUND STRUCTURE
Unlike other mutual funds that directly acquire and manage their own portfolio
securities, the Fund seeks to achieve its investment objective by investing all
of its net investable assets in the Portfolio, a separate subtrust of a
registered investment company with the same investment objective as the Fund.
Therefore, a Fund shareholder's interest in the Portfolio's assets 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 or
other interests 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 entities that invest in the Portfolio.
Such differences in returns are also present in other mutual fund structures.
Information concerning other holders of interests in the Portfolio is available
from Bankers Trust, as the Administrator, at 1-800-667-7596.
The master-feeder structure is relatively complex, so shareholders should
carefully consider this investment approach. Smaller investors in the Portfolio
may be materially affected by the actions of larger investors in the Portfolio.
For example, if a large investor withdraws from the Portfolio, the remaining
investors may experience higher pro rata operating expenses, thereby producing
lower returns (however, this possibility exists as well for traditionally
structured funds that have large investors). Additionally, the Portfolio may
become less diverse, resulting in increased portfolio risk. Also, investors with
a greater pro rata ownership in the Portfolio could have effective voting
control of its operations. Except as permitted by the SEC, whenever the Trust is
requested to vote on matters pertaining to the Portfolio, the Trust will hold a
meeting of shareholders of the Fund and will cast all of its votes in the same
proportion as the votes of the Fund's shareholders. Fund shareholders who do not
vote will not affect the Trust's votes on the Portfolio's matters; the Trust's
votes representing Fund shareholders not voting will be voted by the Trustees or
officers of the Trust in the same proportion as the Fund shareholders who do, in
fact, vote. Certain changes in the Portfolio's investment 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 assets (as
opposed to a cash distribution from the Portfolio). If securities are
distributed, the Fund could incur brokerage, tax or other charges in converting
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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 (the
"Trust Board") determines that it is in the best interests of the shareholders
of the Fund to do so. Upon any such withdrawal, the Trust Board would consider
what action might be taken, including the investment of all the assets of the
Fund in another pooled investment entity having the same investment objective as
the Fund or the retaining of an investment adviser to manage the Fund's assets
in accordance with the investment policies described herein with respect to the
Portfolio.
The Fund's investment objective is not a fundamental policy and may be changed
upon notice to, but without the need for approval of, its shareholders. If there
is a change in the Fund's investment objective, its shareholders should consider
whether the Fund remains an appropriate investment in light of their
then-current needs. The investment objective of the Portfolio also is 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 "Risk Factors and Certain Securities and Investment Practices" in
the SAI for a description of the fundamental policies of the Portfolio that
cannot be changed without approval by "the vote of a majority of the outstanding
voting securities" (as defined in the Investment Company Act of 1940 (the "1940
Act")) of the Portfolio.
SECURITIES AND INVESTMENT PRACTICES OF THE PORTFOLIO
U.S. Government Securities are high-quality debt securities issued or guaranteed
by the U.S. Treasury or by an agency or instrumentality of the U.S. Government.
Not all U.S. Government securities are backed by the full faith and credit of
the United States. For example, securities issued by the Federal Farm Credit
Bank or by the Federal National Mortgage Association are supported by the
instrumentality's right to borrow money from the U.S. Treasury under certain
circumstances. However, securities issued by certain other U.S. agencies or
instrumentalities are supported only by the credit of the entity that issued
them.
Other U.S. Dollar-Denominated Fixed Income Securities. Bonds and other debt
instruments are used by issuers to borrow money from investors. The issuer pays
the investor a fixed or variable rate of interest and must repay the amount
borrowed at maturity. Some debt securities, such as zero coupon bonds, do not
pay current interest but are purchased at a discount from their face values.
Debt securities, loans and other direct debt have varying degrees of quality and
varying levels of sensitivity to changes in interest rates. Longer-term bonds
are generally more sensitive to interest rate changes than short-term bonds.
U.S. Dollar-Denominated Sovereign and Supranational Fixed Income Securities.
Debt instruments issued or guaranteed by foreign governments, agencies and
supranational organizations ("sovereign debt obligations"), especially sovereign
debt obligations of developing countries, may involve a high degree of risk. The
issuer of the obligation or the governmental authorities that control the
repayment of the debt may be unable or unwilling to repay principal and interest
when due and may require renegotiation or rescheduling of debt payments. In
addition, prospects for repayment of principal and interest may depend on
political as well as economic factors.
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Mortgage-Backed Securities. The Portfolio may purchase mortgage-backed
securities issued by the U.S. Government, its agencies or instrumentalities and
non-governmental entities such as banks, mortgage lenders or other financial
institutions. Mortgage-backed securities include mortgage pass-through
securities, mortgage-backed bonds and mortgage pay-through securities. A
mortgage pass-through security is a pro rata interest in a pool of mortgages
where the cash flow generated from the mortgage collateral is passed through to
the security holder. A mortgage-backed bond is a general obligation of the
issuer, payable out of the issuer's general funds and additionally secured by a
first lien on a pool of mortgages. Mortgage pay-through securities exhibit
characteristics of both pass-through and mortgage-backed bonds. The mortgage
pass-through securities issued by non-governmental entities such as banks,
mortgage lenders or other financial institutions in which the Portfolio may
invest include private label mortgage pass-through securities and whole loans.
Mortgage- backed securities also include other debt obligations secured by
mortgages on commercial real estate or residential properties. Other types of
mortgage-backed securities will likely be developed in the future, and the
Portfolio may invest in them if Bankers Trust determines they are consistent
with the Portfolio's investment objective and policies.
Unlike ordinary Fixed Income Securities, which generally pay a fixed rate of
interest and return principal upon maturity, mortgage-backed securities repay
both interest income and principal as part of their periodic payments. Because
the mortgages underlying mortgage-backed certificates can be prepaid at any time
by homeowners or corporate borrowers, mortgage-backed securities give rise to
certain unique "pre-payment" risks. Prepayment risk or call risk is the
likelihood that, during periods of falling interest rates, securities with high
stated interest rates will be prepaid (or "called") prior to maturity, requiring
the Portfolio to invest the proceeds at generally lower interest rates.
Collateralized Mortgage Obligations ("CMOs") are pay-through securities
collateralized by mortgages or mortgage-backed securities. CMOs are issued in
classes and series that have different maturities and often are retired in
sequence. The issuer of a series of CMOs may elect to be treated as a REMIC.
Asset-Backed Securities. Asset-backed securities have structural characteristics
similar to mortgage-backed securities. However, the underlying assets are not
first lien mortgage loans or interests therein but include assets such as motor
vehicle installment sale contracts, other installment sale contracts, home
equity loans, leases of various types of real and personal property and
receivables from revolving credit (credit card) agreements. Such assets are
securitized through the use of trusts or special purpose corporations. Payments
or distributions of principal and interest on asset-backed securities may be
guaranteed up to certain amounts and for a certain time period by a letter of
credit or a pool insurance policy issued by a financial institution unaffiliated
with the issuer, or other credit enhancements may be present.
Asset-backed securities present certain risks that are not presented by
mortgage-backed securities. Primarily, these securities do not have the benefit
of the same type of security interest in the related collateral. Credit card
receivables are generally unsecured, and the debtors are entitled to the
protection of a number of state and federal consumer credit laws, many of which
give such debtors the right to avoid payment of certain amounts owed on the
credit cards, thereby reducing the balance due. There is the risk in connection
with automobile receivables that recoveries on repossessed collateral may not,
in some cases, be available to support payments on those securities.
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U.S. Dollar-Denominated Foreign Securities. The Portfolio may invest a portion
of its assets in the dollar-denominated debt securities of foreign companies.
Investing in the securities of foreign companies involves more risks than
investing in securities of U.S. companies. Their value is subject to economic
and political developments in the countries where the companies operate and to
changes in foreign currency values. Values may also be affected by foreign tax
laws, changes in foreign economic or monetary policies, exchange control
regulations and regulations involving prohibitions on the repatriation of
foreign currencies.
In general, less information may be available about foreign companies than about
U.S. companies, and foreign companies are generally not subject to the same
accounting, auditing and financial reporting standards as are U.S. companies.
Foreign securities markets may be less liquid and subject to less regulation
than the U.S. securities markets. The costs of investing outside the United
States frequently are higher than those in the United States. These costs
include relatively higher brokerage commissions and foreign custody expenses.
Zero Coupon Securities, including CATS, TIGRs and TRs, are the separate income
or principal components of a debt instrument. These involve risks that are
similar to those of other debt securities, although they may be more volatile,
and the value of certain zero coupon securities moves in the same direction as
interest rates. Zero coupon bonds do not make regular interest payments.
Rule 144A Securities are securities that are not registered for sale under the
federal securities laws but can be resold to institutions pursuant to Rule 144A
under the Securities Act of 1933. Provided that a dealer or institutional
trading market in such securities exists, these restricted securities are
treated as exempt from the Portfolio's 15% limit on illiquid securities. Under
the supervision of the Portfolio Trust Board, Bankers Trust determines the
liquidity of restricted securities; and through reports from Bankers Trust, the
Portfolio Trust Board monitors trading activity in restricted securities. If
institutional trading in restricted securities were to decline, the liquidity of
the Portfolio could be adversely affected.
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 late as a month or more after the date of
the purchase commitment. The value of these securities is subject to market
fluctuations during this period, and no income accrues to the Portfolio until
settlement takes place.
Repurchase Agreements. In a repurchase agreement, the Portfolio buys a security
at one price and simultaneously agrees to sell it back to the seller on a
specific date and at a higher price reflecting a market rate of interest
unrelated to the coupon rate or maturity of the underlying security. Delays or
losses could result if the other party to the agreement defaults or becomes
insolvent.
Reverse Repurchase Agreements and Dollar Rolls. In a reverse repurchase
agreement, the Portfolio temporarily transfers possession of a portfolio
instrument to another party in return for cash. This could increase the risk of
fluctuation in the Fund's yield or in the market value of its interest in the
Portfolio. In a dollar roll, the Portfolio sells mortgage-backed or other
securities for delivery in the current month and simultaneously contracts to
purchase substantially similar securities on a specified future date. Reverse
repurchase agreements and dollar rolls are forms of borrowing and will be
counted towards the Portfolio's borrowing restrictions. See "Borrowing" below
and the Fund's SAI. Wrapper Agreements would cover the cash proceeds of such
transactions but not the portfolio instruments transferred to another party
until possession of such instruments is returned to the Portfolio.
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Short-Term Investments. The Portfolio's assets may be invested in high quality
short-term investments with remaining maturities of 397 days or less to maintain
the Liquidity Reserve, to meet anticipated redemptions and expenses for
day-to-day operating purposes and when, in Bankers Trust's opinion, it is
advisable to adopt a temporary defensive position because of unusual and adverse
conditions affecting the respective markets.
Borrowing. The Portfolio will not borrow money (including through reverse
repurchase or dollar roll transactions) for any purpose in excess of 5% of its
total assets, except that it may borrow for temporary or emergency purposes up
to 1/3 of its total assets. Under the 1940 Act, the Portfolio is required to
maintain continuous asset coverage of 300% with respect to such borrowings and
to sell (within three days) sufficient portfolio holdings to restore such
coverage if it should decline to less than 300% due to market fluctuations or
otherwise, even if such liquidation of the Portfolio's holdings may be
disadvantageous from an investment standpoint.
Leveraging by means of borrowing may exaggerate the effect of any increase or
decrease in the value of the Portfolio's securities and the Fund's NAV per
Share, and money borrowed by the Portfolio will be subject to interest and other
costs (which may include commitment fees and/or the cost of maintaining minimum
average balances) that may exceed the income received from the securities
purchased with the borrowed funds. It is not the intention of Bankers Trust to
use leverage as a normal practice in the investment of the Portfolio's assets.
Hedging Strategies. The Portfolio may use certain strategies designed to adjust
the overall risk of its investment portfolio. These "hedging" strategies involve
derivative contracts, including U.S. Treasury and Eurodollar futures contracts
and exchange-traded put and call options on such futures contracts. New
financial products and risk management techniques continue to be developed and
may be used if consistent with the Portfolio's investment objective and
policies. Among other purposes, these hedging strategies may be used to
effectively maintain a desired portfolio duration or to protect against market
risk should the Portfolio change its investments among different types of Fixed
Income Securities. In this respect, these hedging strategies are designed for
different purposes than the investments in Wrapper Agreements. The SAI contains
further information on these strategies.
The Portfolio might not use any hedging strategies, and there can be no
assurance that any strategy used will succeed. If Bankers Trust is incorrect in
its judgment on market values, interest rates or other economic factors in using
a hedging strategy, the Portfolio may have lower net income and a net loss on
the investment. Each of these strategies involves certain risks, which include:
o the fact that the skills needed to use hedging instruments are
different from those needed to select securities for the Portfolio;
o the possibility of imperfect correlation, or even no correlation,
between the price movements of hedging instruments and price movements
of the securities or currencies being hedged;
o possible constraints placed on the Portfolio's ability to purchase or
sell portfolio investments at advantageous times due to the need for
the Portfolio to maintain "cover" or to segregate securities; and
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o the possibility that the Portfolio is unable to close out or liquidate
its hedged position.
Asset Coverage. To assure that the Portfolio's use of futures contracts and
related options, as well as when- issued and delayed-delivery securities, are
not used to achieve investment leverage, the Portfolio will cover such
transactions, as required under applicable interpretations of the SEC, either by
owning the underlying securities or by segregating liquid securities with the
Portfolio's custodian (Bankers Trust) in an amount at all times equal to or
exceeding the Portfolio's commitment with respect to these instruments or
contracts. Assets that are segregated for purposes of providing cover need not
be physically segregated in a separate account provided that the custodian notes
on its books that such assets are segregated. The Portfolio will also cover its
use of Wrapper Agreements to the extent required to avoid the creation of a
"senior security" (as defined in the 1940 Act) in connection with its use of
such agreements.
CLASSES OF SHARES
The Fund offers two classes of Shares, Investment Class and Institutional Class
(each a "Class"). Neither Class is subject to any initial sales charges or 12b-1
distribution fee. Investment Class Shares are subject to shareholder servicing
charges, while Institutional Class Shares are not subject to these charges.
Investment Class Shares are subject to shareholder servicing fees in the maximum
amount of 0.20% of the average daily net assets of the Class. The shareholder
services provided in exchange for these fees may include establishing and
maintaining shareholder and Plan participant accounts, processing purchase and
redemption transactions, arranging for bank wires, performing shareholder
sub-accounting, answering client inquiries regarding the Trust, providing
periodic statements showing the client's account balance and those of Plan
participants, 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 may reasonably be required. Institutional Class Shares are not
subject to shareholder servicing fees.
The investment advisory fee applicable (indirectly from the Portfolio) to both
Classes of Shares is the same. The amount of dividends payable to Investment
Class Shares will be less than those payable to Institutional Class Shares by
the amount of the difference between the expenses borne by the Shares of each
Class.
PERFORMANCE
The Portfolio's strategies, holdings and performance will be detailed twice a
year in the Fund's financial reports, which are sent to all Fund shareholders.
Mutual fund performance is commonly measured as total return and/or yield. The
Fund's performance is affected by its expenses and those of the Portfolio. The
Fund's performance may be used from time to time in advertisements, shareholder
reports or other communications to shareholders or prospective shareholders.
Explanation of Terms
Total Return is the change in value of an investment in the Fund over a given
period, assuming reinvestment of any dividends and capital gain distributions. A
cumulative total return reflects actual performance over a stated period of
time. An average annual total return is a hypothetical rate of return that, if
achieved annually, would have produced the same cumulative total return if
performance had been constant over the entire period. Average annual total
return calculations smooth out variations in performance; they are not the same
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as actual year-by-year results. Average annual total returns covering periods of
less than one year assume that performance will remain constant for the rest of
the year.
Yield refers to the income generated by an investment in the Fund over a given
period of time, expressed as an annual percentage rate. Yields are calculated
according to a standard that is required for all stock and bond funds. Because
this differs from other accounting methods, the quoted yield may not equal the
income actually paid to shareholders.
Performance information or advertisements may include comparisons of the Fund's
investment results to various unmanaged indices or results of other mutual funds
or investment or savings vehicles. From time to time, the Fund's ranking may be
quoted from various sources, such as Lipper Analytical Services, Inc., Value
Line, Inc. and Morningstar, Inc.
Unlike some bank deposits or other investments that 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 Portfolio Securities and the
Wrapper Agreements and changes in the expenses of the Fund and the Portfolio. In
addition, during certain periods for which total return may be provided, Bankers
Trust may have voluntarily agreed to waive portions of its fees, or to reimburse
certain operating expenses of the Fund or the Portfolio, on a month-to-month
basis. Such waivers will have the effect of increasing the Fund's net income
(and therefore its yield and total return) during the period such waivers are in
effect.
Total returns and yields are based on past results and are not an indication of
future performance.
MANAGEMENT OF THE TRUSTS
Boards of Trustees
The Trust and the Portfolio Trust (collectively the "Trusts") are each governed
by a Board of Trustees that is responsible for protecting the interests of
investors. A majority of the Trustees who are not "interested persons" (as
defined in the 1940 Act) of either Trust have adopted written procedures
reasonably appropriate to deal with potential conflicts of interest arising from
the fact that some of the same individuals may be Trustees of both Trusts, up to
and including creating separate boards of trustees. See "Management of the
Trusts" in the SAI for more information with respect to the Trustees and
officers of the Trusts.
Investment Adviser The Fund has not retained the services of an investment
adviser because it seeks to achieve its investment objective by investing all of
its net investable assets in the Portfolio. The Portfolio has retained the
services of Bankers Trust as its investment adviser pursuant to an Investment
Advisory Agreement between the Portfolio Trust and Bankers Trust dated April 28,
1993 (the "Investment Advisory Agreement").
Bankers Trust Company and Its Affiliates
Bankers Trust Company, a New York banking corporation with principal offices at
130 Liberty Street, New York, New York 10006, is a wholly owned subsidiary of
Bankers Trust New York Corporation. Bankers Trust conducts a variety of general
banking and trust activities and is a major wholesale supplier of financial
services to the international and domestic institutional market.
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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 80 offices in more than 50
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. Bankers Trust is
one of the nation's largest and most experienced investment managers, with over
$225 billion in assets under management globally. 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's officers have had
extensive experience in managing investment portfolios having objectives similar
to those of the Fund and the Portfolio. Bankers Trust has more than 50 years of
experience managing retirement assets for the nation's largest corporations and
institutions.
Bankers Trust, subject to the supervision and direction of the Portfolio Board,
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. Bankers
Trust may utilize the expertise of any of its worldwide subsidiaries and
affiliates to assist it 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, including Wrapper Agreements, for which Bankers Trust or any of its
affiliates is the ultimate obligor or accepting bank. The Portfolio may,
however, invest in the obligations of correspondents and customers of Bankers
Trust.
The Investment Advisory Agreement provides for the Portfolio Trust to pay
Bankers Trust a fee, accrued daily and paid monthly, equal to 0.35% per year of
the average daily net assets of the Portfolio. Bankers Trust has indicated that
it will voluntarily waive all but 0.25% of this fee.
Bankers Trust has been advised by its counsel that, in counsel's opinion,
Bankers Trust currently may perform the services for the Trusts described in
this Prospectus and the SAI without violation of the Glass-Steagall Act or other
applicable banking laws or regulations. State laws on this issue may differ from
the interpretations of relevant federal law, and banks and financial
institutions may be required to register as dealers pursuant to state securities
law.
Portfolio Management
Eric Kirsch (CFA), a Managing Director of Bankers Trust, is responsible for the
day-to-day investment management of the Portfolio. Mr. Kirsch heads the stable
value investment group of Bankers Trust's Global Investment Management business.
In this capacity, he manages stable value portfolios and coordinates fixed
income portfolio management and trading functions with regards to these
portfolios' investments. He joined Bankers Trust in 1980.
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John H. Dolan, a Managing Director of Bankers Trust, is head of the domestic
fixed income investment group that manages the Fixed Income Securities of the
Portfolio. From 1987 to 1995, Mr. Dolan was a Managing Director at Salomon
Brothers where he managed the CMO structuring effort and coordinated Salomon's
trading/syndicate relationship with the Resolution Trust Corporation. He joined
Bankers Trust in 1995.
Stephen C. Freidheim, a Managing Director of Bankers Trust, is the head of fixed
income management for Bankers Trust. Mr. Friedheim is responsible for overseeing
both the stable value investment group and the domestic fixed income investment
group. He has been employed by Bankers Trust since August 1993. From July 1990
to July 1993 he was a Senior Vice President and Director of Research and Trading
at Nomura Securities International. Mr. Friedheim was also on the Board of
Directors of Nomura Corporate Research and Asset Management.
Bankers Trust investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for personal
investing and restricts certain transactions.
Administrator
Under an Administration and Services Agreement with the Trust, Bankers Trust
calculates the NAV per Share of the Fund and generally assists the Trust Board
in all aspects of the administration and operation of the Fund. This
Administration and Services Agreement provides for the Trust to pay Bankers
Trust a fee, accrued daily and paid monthly, to 0.07% per year of the average
daily net assets of the Fund.
Under an Administration and Services Agreement with the Portfolio Trust, Bankers
Trust calculates the NAV of the Portfolio and generally assists the Portfolio in
all aspects of the administration and operation of the Portfolio. This
Administration and Services Agreement provides for the Portfolio to pay Bankers
Trust a fee, accrued daily and paid monthly, equal to 0.02% per year of the
Portfolio's average daily net assets. Under this Administration and Services
Agreement, Bankers Trust may delegate one or more of its responsibilities to
others, including the Distributor, at Bankers Trust's expense.
Distributor
Edgewood, as Distributor, serves as the Trust's principal underwriter on a best
efforts basis. In addition, Edgewood and its affiliates provide the Trust with
office facilities, and currently provide administration and distribution
services for other registered investment companies. Edgewood is a New York
corporation and a wholly-owned subsidiary of Federated Investors. Its principal
offices are at Clearing Operations, P.O. Box 897, Pittsburgh, PA 15230.
Custodian and Transfer Agent
Bankers Trust acts as custodian for the assets of the Portfolio and serves as
the Trust's transfer agent (the "Transfer Agent") under the Administration and
Services Agreement with the Trust. It is not separately compensated for these
services and may, at its own expense, delegate certain services to other service
providers.
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<PAGE>
NET ASSET VALUE
The NAV per Share is calculated on each day on which the New York Stock
Exchange, Inc. (the "NYSE") is open (each such day being a "Valuation Day"). The
NYSE is currently open on each day, Monday through Friday, except (a) January
1st, Presidents' Day (the third Monday in February), Good Friday, Memorial Day
(the last Monday in May), July 4th, Labor Day (the first Monday in September),
Thanksgiving Day (the last Thursday in November) and December 25th; and (b) the
preceding Friday or the subsequent Monday when one of the calendar-determined
holidays falls on a Saturday or Sunday, respectively.
The NAV per Share is calculated once on each Valuation Day as of the close of
regular trading on the NYSE (the "Valuation Time"), which is currently 4:00
p.m., Eastern time, or if the NYSE closes early, at the time of the early
closing. The NAV per Share is computed by dividing the value of the Fund's
assets (i.e., the value of its investment in the Portfolio and other assets, if
any), 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 that
the Portfolio Trust Board believes accurately reflects fair value.
Pursuant to procedures adopted by the Portfolio Trust Board, the fair value of a
Wrapper Agreement ("Wrapper Value") generally will be equal to the difference
between the Book Value and the market value (plus accrued interest on the
underlying securities) of the applicable Covered Assets. If the market value
(plus accrued interest on the underlying securities) of the Covered Assets is
greater than their Book Value, the Wrapper Value will be reflected as a
liability of the Portfolio in the amount of the difference, i.e., a negative
value, reflecting the potential liability of the Portfolio to the Wrapper
Provider. If the market value (plus accrued interest on the underlying
securities) of the Covered Assets is less than their Book Value, the Wrapper
Value will be reflected as an asset of the Portfolio in the amount of the
difference, i.e., a positive value, reflecting the potential liability of the
Wrapper Provider to the Portfolio. In performing its fair value determination,
the Portfolio Trust Board expects to consider the creditworthiness and ability
of a Wrapper Provider to pay amounts due under the Wrapper Agreement. If the
Portfolio Trust Board determines that a Wrapper Provider is unable to make such
payments, that Board may assign a fair value to the Wrapper Agreement that is
less than the difference between the Book Value and the market value (plus
accrued interest on the underlying securities) of the applicable Covered Assets
and the Portfolio might be unable to maintain NAV stability.
Under procedures adopted by the Trust Board, an NAV per Share later determined
to have been inaccurate for any reason will be recalculated. Purchases and
redemptions made at an NAV per Share determined to have been inaccurate will be
adjusted, although in certain circumstances, such as where the difference
between the original NAV per Share and the recalculated NAV per Share divided by
the latter is 0.005 ( 1/2 of 1%) or less or shareholder transactions are
otherwise insubstantially affected, action is not required.
SHAREHOLDER AND ACCOUNT POLICIES
ACCOUNT INFORMATION
The Fund is offered solely to Plans that limit their participants' ability to
direct a withdrawal from the Fund to the following circumstances:
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<PAGE>
o upon the Plan participant's death, retirement, disability or termination;
o to fund Plan participant loans and other "in service" withdrawals made
pursuant to the terms of the Plan; and
o for transfers to other Plan investment options that are not "competing funds."
"Competing funds" are any fixed income investment options with a targeted
average maturity of three years or less, including money market funds. Transfers
between the Fund and a non-competing fund will be required to remain in the non-
competing fund for a period of at least three months before transfer to a
competing fund.
Fund Shares will be owned by the Plans, which will in turn offer the Fund as an
investment option to their participants. Plan participants should contact their
Plan administrator or the organization that provides recordkeeping services if
they have questions concerning their account. Plan administrators and
fiduciaries should call 1-800-667-7596 for information regarding a Plan's
account with the Fund.
TRANSACTIONS IN FUND SHARES
Plan participant-directed purchases, exchanges and redemptions of Shares are
handled in accordance with each Plan's specific provisions. Plans may have
different provisions with respect to the timing and method of purchases,
exchanges and redemptions by Plan participants. Plan participants should contact
their Plan administrator for details concerning how they may direct transactions
in Shares. It is the responsibility of the Plan administrator or other Plan
service provider to forward instructions for these transactions to Bankers
Trust.
Purchase orders for Shares that are received by Bankers Trust, as the Transfer
Agent, or other authorized agent of the Fund, prior to the Valuation Time on any
Valuation Day will be effective at that Valuation Time. The Trust and the
Distributor reserve the right to reject any purchase order. Certificates for
Shares will not be issued. Redemption requests will be processed at the NAV next
determined after a request for redemption is received in good order by Bankers
Trust. Normally, the Fund will make payment for all Shares redeemed under this
procedure within one business day after a request is received. In no event will
payment be made more than seven days after receipt of a redemption request in
good order. The Fund may suspend the right of redemption or postpone the date at
times when both the NYSE and the Fund's custodian bank (Bankers Trust) are
closed, or under any emergency circumstances as determined by the SEC.
The Fund reserves the right to honor any request for redemption by making
payment in whole or in part in securities and in Wrapper Agreements, selected
solely in the discretion of Bankers Trust. To the extent that payment is made in
securities, a shareholder may incur transaction expenses in converting these
securities into cash. To the extent that a redemption in kind includes Wrapper
Agreements, the Fund will obtain from the Portfolio and assign to the redeeming
Plan one or more Wrapper Agreements issued by the Wrapper Providers covering the
Portfolio Securities distributed in kind. The terms and conditions of Wrapper
Agreements provided to a redeeming Plan will be the same or substantially
similar to the terms and conditions of the Wrapper Agreements held by the
Portfolio. Wrapper Agreements are not liquid securities and may impose
restrictions on termination or withdrawal, including notice periods of one year
or longer for non-participant directed withdrawals. The maintenance of Wrapper
Agreements distributed in kind will also require that a Plan pay fees to the
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<PAGE>
Wrapper Provider directly, rather than through the Fund, and that the securities
covered by the Wrapper Agreement continue to have a specified duration or
maturity, consist of specified types of securities or be of a specified
investment quality. Accordingly, although a redeeming Plan may freely buy and
sell securities covered by a Wrapper Agreement, its management of the securities
must be consistent with Wrapper Agreement requirements in order for it to obtain
the benefits of the Wrapper Agreement. Moreover, a Plan may be required to
obtain at its own expense the services of a qualified investment manager to
manage the securities distributed in kind in conformity with the Wrapper
Agreement provisions and may incur additional administrative expenses in
managing this portfolio. Please see the SAI for additional information
concerning Wrapper Agreements and redemptions in kind.
The Fund has elected, however, to redeem Shares solely in cash up to the lesser
of $250,000 or 1% of the NAV of the Fund during any 90-day period for any one
shareholder. The Fund anticipates that it will exercise this right to redeem in
kind in the case of redemptions of Shares that are not directed by Plan
participants and that are made on less than twelve months' prior written notice
to Bankers Trust. In such case, a redemption request by a withdrawing Plan will
not be considered received in good order unless that Plan has provided to
Bankers Trust: (i) its current name; (ii) a listing of its trustee(s); (iii)
copies of Plan documents or summaries thereof describing the investment options
available to and the restrictions imposed upon Plan participants; and (iv)
information indicating the allocation of Plan assets among available investment
options. Such redemptions will also be subject to a redemption fee, payable to
the Fund, of 2.0% of the proceeds of the redemption, whether in kind or in cash.
The Fund reserves the right to withhold from redemption proceeds the 2.0%
redemption fee if 15% or more of Plan assets invested in the Fund are redeemed
within five business days pending a determination of whether the redemption fee
is applicable. The Fund may incur costs in obtaining new Wrapper Agreements from
Wrapper Providers to be distributed in kind. These costs will be payable from,
and are not expected to exceed, the 2.0% redemption fee. The redemption price
may be more or less than the shareholder's cost, depending upon the market value
of the Fund's assets (its interest in the Portfolio) at the time.
The offering price is the NAV per Share. Shares may be purchased only in those
states where they may be lawfully sold.
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
The Fund intends to distribute all of its net investment income and net capital
gains, if any, to its shareholders each year. Dividends from net investment
income are declared daily and are paid monthly, and any net capital gains are
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<PAGE>
distributed annually. An additional annual distribution ("Additional
Distribution") may be paid to satisfy the tax requirements (outlined below) that
the Fund distribute each year substantially all of its investment company
taxable income (see "Tax Considerations").
Dividends and other distributions paid on each Class of Shares are calculated at
the same time and in the same manner. Dividends on the Investment Class Shares
are expected to be lower than the dividends on Institutional Class Shares,
however, because the Investment Class Shares have higher expenses resulting from
the shareholder servicing fees paid by them. Dividends paid on the two Classes
also might be affected differently by the allocation of other Class-specific
expenses. Dividends and other distributions are automatically reinvested in
additional Shares of the distributing Class unless the Plan participant directs
otherwise.
The Fund may declare and pay dividends in amounts which are not equal to the
amount of the net investment income it actually earns. Consequently, in any year
the amount actually distributed may differ from the income earned. If, for any
year, those distributions exceed the income earned, the excess may be considered
a return of capital. On the other hand, if the income earned exceeds the amount
of the dividends distributed, the Fund may make an Additional Distribution of
that excess. To enable the Fund to maintain a stable NAV per Share in the event
of an Additional Distribution, the Trust Board may declare, effective on the
ex-distribution date of an Additional Distribution, a reverse split of the
Shares in an amount that will cause the total number of Shares held by each
shareholder, including Shares acquired on reinvestment of that distribution, to
remain the same as before that distribution was paid.
For example, if the Fund declares an Additional Distribution of 10(cent) per
Share at a time when the NAV per Share is $10.00, a shareholder holding one
Share would receive 0.01 additional Shares on reinvestment of that distribution.
If there were no reverse split, the per Share NAV of the 1.01 Shares held by the
shareholder would be approximately $9.90, and the aggregate value thereof would
be $10.00. If a 1.01-for-1 reverse Share split were declared, however, the
shareholder's holdings would be consolidated back into one Share having an NAV
of $10.00. Thus, a reverse Share split will not affect the value of the total
holdings of a shareholder.
TAX CONSIDERATIONS
The Fund intends to qualify to be treated as a regulated investment company
under the Internal Revenue Code of 1986, as amended.
As a regulated investment company, the Fund will not be subject to U.S. federal
income tax on its investment company taxable income (generally consisting of net
investment income and the excess of net short-term capital gain over net
long-term capital loss, if any) and net capital gain (the excess of net
long-term capital gain over net short-term capital loss), if any, that it
distributes to its shareholders. The Fund intends to distribute to its
shareholders all of its investment company taxable income and net capital gain
at least annually, if necessary through Additional Distributions, and therefore
does not anticipate incurring any federal income tax liability.
For Plan participants utilizing the Fund as an investment option under their
Plan, dividend and capital gain distributions from the Fund generally will not
be subject to current taxation, but will accumulate on a tax-deferred basis. In
general, Plans are governed by a complex set of tax rules. See your Plan
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<PAGE>
administrator, your plan's Summary Plan Description, and/or a professional tax
adviser regarding the tax consequences of your participation in your Plan and of
any Plan contributions or withdrawals.
ADDITIONAL INFORMATION ABOUT THE TRUSTS
The Fund is a mutual fund: an investment that pools shareholders' money and
invests it toward a specified goal. The Fund is a separate series of the Trust,
a Massachusetts business trust organized pursuant to a Declaration of Trust
dated February 28, 1992. The Portfolio is a separate subtrust of the Portfolio
Trust, a New York master trust fund organized pursuant to a Declaration of Trust
dated March 27, 1993.
Each Trust reserves the right to add additional series/subtrusts in the future.
There are currently no other funds investing in the Portfolio. Other funds
investing in the Portfolio may have sales charges and/or different expenses than
the Fund, which may affect performance. The Trust also reserves the right to
issue additional classes of Shares of the Fund. The Fund currently offers two
Classes of Shares, Investment Class and Institutional Class. Each Class
represents an identical interest in the Fund's investment portfolio. As a
result, the Classes have the same rights, privileges and preferences, except
with respect to: (1) the designation of each Class; (2) the expenses allocated
exclusively to each Class; and (3) voting rights on matters exclusively
affecting a single Class. The Trust Board does not anticipate that there will be
any conflicts among the interests of the holders of the different Classes and
will take appropriate action if any such conflict arises. For more information
about the different Classes of Shares of the Fund, please call 1-800-667-7596.
Each Trust may hold special meetings and mail proxy materials. These meetings
may be called to elect or remove Trustees, change fundamental policies, approve
the Portfolio's investment advisory agreement, or for other purposes.
Shareholders not attending a Trust meeting are encouraged to vote by proxy. The
Transfer Agent will mail proxy materials in advance, including a voting card and
information about the proposals to be voted on.
When matters are submitted for shareholder vote, shareholders of 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 only 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 and do not require a separate vote of the Fund. All series of the Trust
will vote together on certain matters, such as electing Trustees or approving
independent public auditors. Under certain circumstances, the shareholders of
one of series of the Trust could control the outcome of these votes. 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 has been elected by shareholders, at which time the Trustees then in
office will call a shareholders' meeting for the election of Trustees. Any
Trustee may be removed from office upon the vote of shareholders holding at
least two-thirds of the Trust's outstanding shares at a meeting called for that
purpose. The Trustees are required to call such a meeting upon the written
request of shareholders holding at least 10% of the Trust's outstanding shares.
The Trust will also assist shareholders in communicating with one another as
provided for in the 1940 Act.
Each subtrust of the Portfolio Trust, including the Portfolio, will vote
separately on any matter involving that subtrust. Holders of interests in all
the subtrusts of the Portfolio Trust, however, will vote together to elect
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<PAGE>
Trustees of the Portfolio Trust and for certain other matters. The subtrusts of
the Portfolio Trust will vote together or separately on matters in the same
manner, and in the same circumstances, as do the series of the Trust. As with
the Trust, the investors in one or more subtrusts of the Portfolio Trust could
control the outcome of these votes. No subtrust of the Portfolio Trust has any
preference over any other subtrust.
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a business trust may,
under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder's incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
The Portfolio Trust was organized as a trust under the laws of the State of New
York. The Portfolio Trust's Declaration of Trust provides that the entities
investing in the Portfolio (e.g., investment companies such as the Fund and
common and commingled trust funds) will each be liable for all obligations of
the Portfolio. However, the risk of the Fund's 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.
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<PAGE>
Investment Adviser of the Portfolio and Administrator
BANKERS TRUST COMPANY
Distributor
EDGEWOOD SERVICES, INC.
Custodian and Transfer Agent
BANKERS TRUST COMPANY
Independent Accountants
ERNST & YOUNG LLP
Counsel
WILLKIE FARR & GALLAGHER
..................................................
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, the SAI or the
Fund's official sales literature in connection with the offering of the Shares
and, if given or made, such other information or representations must not be
relied on as having been authorized by the Fund. This Prospectus does not
constitute an offer in any state in which, or to any person to whom, such offer
may not lawfully be made.
....................................................
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<PAGE>
INFORMATION HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
Subject to Completion, dated February 25, 1997
STATEMENT OF
ADDITIONAL INFORMATION
________________, 1997
BT Pyramid Mutual Funds:
BT PreservationPlus Fund
BT PreservationPlus Fund (the "Fund") is a separate series of BT
Pyramid Mutual Funds (the "Trust"), an open-end, management investment company
(mutual fund). The Shares of the Fund are described herein.
Table of Contents
-----------------
Investment Objective, Policies and Restrictions...................... 3
Performance Information..............................................19
Valuation of Assets; Redemptions in Kind.............................20
Management of the Trusts.............................................23
Organization of the Trust............................................28
Taxation.............................................................29
Appendix.............................................................32
As described in the Prospectus, the Fund seeks to achieve its
investment objective by investing all its net investable assets in BT
PreservationPlus Portfolio (the "Portfolio"), a diversified open-end management
investment company having the same investment objective as the Fund. The
Portfolio is a separate subtrust of BT Investment Portfolios, a New York master
trust fund (the "Portfolio Trust").
Because the investment characteristics of the Fund correspond directly
to those of the 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 Portfolio. The Fund is designed as an alternative investment for employee
<PAGE>
benefit plans to guaranteed investment contracts ("GICs"), bank collective GIC
funds, bank investment contracts ("BICs"), and so-called "synthetic GICs."
Shares are sold by Edgewood Services, Inc., the Trust's distributor
(the "Distributor"), to participant-directed employee benefit plans meeting
specified criteria. Bankers Trust Company ("Bankers Trust") is the Portfolio's
investment adviser.
The Fund's Prospectus (the "Prospectus") is dated ____________, 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. This Statement of Additional Information, which
is not a prospectus, is intended to provide additional information regarding the
activities and operations of the Fund and the Portfolio and should be read in
conjunction with the Prospectus. This Statement of Additional Information is not
an offer by the Fund to an investor that has not received a Prospectus.
Capitalized terms not otherwise defined in this Statement of Additional
Information have the meanings accorded to them in the Prospectus.
BANKERS TRUST COMPANY
Investment Adviser of the Portfolio and Administrator
EDGEWOOD SERVICES, INC.
Distributor
Clearing Operations
P.O. Box 897 Pittsburgh, Pennsylvania 15230-0897 (800) 730-1313
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<PAGE>
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
Investment Objective
The investment objective of the Fund is a high level of current income
while seeking to maintain a stable per share value. 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 net investable assets in the Portfolio. The Trust may withdraw the Fund's
investment from the Portfolio at any time if the Trust Board determines that it
is in the best interests of the Fund to do so.
The following is a discussion of the various investments of and
techniques employed by the Portfolio.
Short-Term Instruments. The Portfolio may hold short-term investments
consisting of foreign and domestic (i) short-term obligations of sovereign
governments, their agencies, instrumentalities, authorities or political
subdivisions; (ii) other short-term debt securities rated in one of the top two
short-term rating categories by an NRSRO 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 an outstanding long-term debt rating of A or higher by
S&P or A-2 or higher by Moody's or outstanding commercial paper or bank
obligations rated A-1 by S&P or Prime-1 by Moody's; or, if no such ratings are
available, the instrument must be of comparable quality in the opinion of
Bankers Trust.
Certificates of Deposit and Bankers' Acceptances. Certificates of
deposit are receipts issued by a depository institution in exchange for the
deposit of funds. The issuer agrees to pay the amount deposited plus interest to
the bearer of the receipt on the date specified on the certificate. The
certificate usually can be traded in the secondary market prior to maturity.
Bankers' acceptances typically arise from short-term credit arrangements
designed to enable businesses to obtain funds to finance commercial
transactions. Generally, an acceptance is a time draft drawn on a bank by an
exporter or an importer to obtain a stated amount of funds to pay for specific
merchandise. The draft is then "accepted" by a bank that, in effect,
unconditionally guarantees to pay the face value of the instrument on its
maturity date. The acceptance may then be held by the accepting bank as an
earning asset or it may be sold in the secondary market at the going rate of
discount for a specific maturity. Although maturities for acceptances can be as
long as 270 days, most acceptances have maturities of six months or less.
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<PAGE>
Commercial paper. Commercial paper consists of short-term (usually from
one 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.
Mortgage- and Asset-Backed Securities. The yield characteristics of the
mortgage- and asset-backed securities in which the Portfolio may invest differ
from those of traditional debt securities. Among the major differences are that
interest and principal payments are made more frequently on mortgage- and
asset-backed securities (usually monthly) and that principal may be prepaid at
any time because the underlying mortgage loans or other assets generally may be
prepaid at any time. As a result, if the Portfolio purchases these securities at
a premium, a prepayment rate that is faster than expected will reduce their
yield, while a prepayment rate that is slower than expected will have the
opposite effect of increasing yield. Conversely, if the Portfolio purchases
these securities at a discount, faster than expected prepayments will increase,
while slower than expected prepayments will reduce, their yield. Amounts
available for reinvestment by the Portfolio are likely to be greater during a
period of declining interest rates and, as a result, are likely to be reinvested
at lower interest rates than during a period of rising interest rates.
In general, the prepayment rate for mortgage-backed securities
decreases as interest rates rise and increases as interest rates fall. However,
rising interest rates will tend to decrease the value of these securities. In
addition, an increase in interest rates may affect the volatility of these
securities by effectively changing a security that was considered a short-term
security at the time of purchase into a long-term security. Long-term securities
generally fluctuate more widely in response to changes in interest rates than
short- or intermediate-term securities.
The market for privately issued mortgage- and asset-backed securities
is smaller and less liquid than the market for U.S. government mortgage-backed
securities. CMO classes may be specially structured in a manner that provides
any of a wide variety of investment characteristics, such as yield, effective
maturity and interest rate sensitivity. As market conditions change, however,
and particularly during periods of rapid or unanticipated changes in market
interest rates, the attractiveness of the CMO classes and the ability of the
structure to provide the anticipated investment characteristics may be
significantly reduced. These changes can result in volatility in the market
value, and in some instances reduced liquidity, of the CMO class.
Zero-Coupon Securities. The Portfolio may invest in certain zero coupon
securities that are "stripped" U.S. Treasury notes and bonds. Zero coupon
securities usually trade at a substantial discount from their face or par value.
Zero coupon securities are subject to greater fluctuations of market value in
response to changing interest rates than debt obligations of comparable
maturities that make current distributions of interest in cash.
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<PAGE>
Wrapper Agreements. Wrapper Agreements are structured with a number of
different features. Wrapper Agreements purchased by the Portfolio are of three
basic types: (1) non-participating, (2) participating and (3) "hybrid." In
addition, the Wrapper Agreements will either be of fixed-maturity or open-end
maturity ("evergreen"). The Portfolio enters into particular types of Wrapper
Agreements depending upon their respective cost to the Portfolio and the Wrapper
Provider's creditworthiness, as well as upon other factors. Under most
circumstances, it is anticipated that the Portfolio will enter into
participating Wrapper Agreements of open-end maturity and hybrid Wrapper
Agreements.
Under a non-participating Wrapper Agreement, the Wrapper Provider
becomes obligated to make a payment to the Portfolio whenever the Portfolio
sells Covered Assets at a price below Book Value to meet withdrawals of a type
covered by the Wrapper Agreement (a "Benefit Event"). Conversely, the Portfolio
becomes obligated to make a payment to the Wrapper Provider whenever the
Portfolio sells Covered Assets at a price above their Book Value in response to
a Benefit Event. In neither case is the Crediting Rate adjusted at the time of
the Benefit Event. Accordingly, under this type of Wrapper Agreement, while the
Portfolio is protected against decreases in the market value of the Covered
Assets below Book Value, it does not realize increases in the market value of
the Covered Assets above Book Value; those increases are realized by the Wrapper
Providers.
Under a participating Wrapper Agreement, the obligation of the Wrapper
Provider or the Portfolio to make payments to each other typically does not
arise until all of the Covered Assets have been liquidated. Instead of payments
being made on the occurrence of each Benefit Event, these obligations are a
factor in the periodic adjustment of the Crediting Rate.
Under a hybrid Wrapper Agreement, the obligation of the Wrapper
Provider or the Portfolio to make payments does not arise until withdrawals
exceed a specified percentage of the Covered Assets, after which time payment
covering the difference between market value and Book Value will occur.
A fixed-maturity Wrapper Agreement terminates at a specified date, at
which time settlement of any difference between Book Value and market value of
the Covered Assets occurs. A fixed-maturity Wrapper Agreement tends to ensure
that the Covered Assets provide a relatively fixed rate of return over a
specified period of time through bond immunization, which targets the duration
of the Covered Assets to the remaining life of the Wrapper Agreement.
An evergreen Wrapper Agreement has no fixed maturity date on which
payment must be made, and the rate of return on the Covered Assets accordingly
tends to vary. Unlike the rate of return under a fixed-maturity Wrapper
Agreement, the rate of return on assets covered by an evergreen Wrapper
Agreement tends to more closely track prevailing market interest rates and thus
tends to rise when interest rates rise and fall when interest rates fall. An
evergreen Wrapper Agreement may be converted into a fixed-maturity Wrapper
Agreement that will mature in the number of years equal to the duration of the
Covered Assets.
- 5 -
<PAGE>
Wrapper Providers are banks, insurance companies and other financial
institutions. The number of Wrapper Providers has been increasing in recent
years. As of November 1996, there were approximately fifteen Wrapper Providers
rated in the top two long-term rating categories by Moody's, S&P or another
NRSRO. The cost of Wrapper Agreements is typically 0.10% to 0.25% per dollar of
Covered Assets per annum.
In the event of the default of a Wrapper Provider, the Portfolio could
potentially lose the Book Value protections provided by the Wrapper Agreements
with that Wrapper Provider. However, the impact of such a default on the
Portfolio as a whole may be minimal or non-existent if the market value of the
Covered Assets thereunder is greater than their Book Value at the time of the
default, because the Wrapper Provider would have no obligation to make payments
to the Portfolio under those circumstances. In addition, the Portfolio may be
able to obtain another Wrapper Agreement from another Wrapper Provider to
provide Book Value protections with respect to those Covered Assets. The cost of
the replacement Wrapper Agreement might be higher than the initial Wrapper
Agreement due to market conditions or if the market value (plus accrued interest
on the underlying securities) of those Covered Assets is less than their Book
Value at the time of entering into the replacement agreement. Such cost would
also be in addition to any premiums previously paid to the defaulting Wrapper
Provider. If the Portfolio were unable to obtain a replacement Wrapper
Agreement, participants redeeming Shares might experience losses if the market
value of the Portfolio's assets no longer covered by the Wrapper Agreement is
below Book Value. The combination of the default of a Wrapper Provider and an
inability to obtain a replacement agreement could render the Portfolio and the
Fund unable to achieve their investment objective of seeking to maintain a
stable value per Share.
With respect to payments made under the Wrapper Agreements between the
Portfolio and the Wrapper Provider, some Wrapper Agreements, as noted in the
Fund's prospectus, provide that payments may be due upon disposition of the
Covered Assets, while others provide for payment only upon the total liquidation
of the Covered Assets or upon termination of the Wrapper Agreement. In none of
these cases, however, would the terms of the Wrapper Agreements specify which
Portfolio Securities are to be disposed of or liquidated other than Portfolio
Securities taht do not meet the Fund's credit criteria or other criteria noted
in the Prospectus. Moreover, because it is anticipated that each Wrapper
Agreement will cover all Covered Assets up to a specified dollar amount, if more
than one Wrapper Provider becomes obligated to pay to the Portfolio the
difference between Book Value and market value (plus accrued interest on the
underlying securities), each Wrapper Provider will pay a pro-rata amount in
proportion to the maximum dollar amount of coverage provided. Thus, the
Portfolio will not have the option of choosing which Wrapper Agreement to draw
upon in any such payment situation. In the event of termination of a Wrapper
Agreement or conversion of an evergreen Wrapper Agreement to a fixed maturity,
some Wrapper Agreements may require that the duration of some portion of the
Fund's portfolio securities be reduced to correspond to the fixed maturity or
termination date.
For a description of Wrapper Provider ratings, see the Appendix.
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Illiquid Securities. Mutual funds do not typically hold a significant
amount of 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 illiquid securities promptly or at reasonable prices and might
thereby experience difficulty satisfying redemptions within seven days. A mutual
fund might also have to register 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 SEC has adopted Rule 144A under the 1933 Act, 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 for resales of
certain securities to qualified institutional buyers. Bankers Trust anticipates
that the market for certain restricted securities such as institutional
commercial paper will expand further as a result of this rule 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.
Bankers Trust will monitor the liquidity of Rule 144A securities held
by the Portfolio under the supervision of the Portfolio Trust Board. In reaching
liquidity decisions, Bankers Trust will consider, among other things, the
following factors: (1) the frequency of trades and quotes for the security; (2)
the number of dealers and other potential purchasers or sellers of the security;
(3) dealer undertakings to make a market in the security; and (4) the nature of
the security and of the marketplace trades (e.g., the time needed to dispose of
the security, the method of soliciting offers and the mechanics of the
transfer).
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 can take place a month or more after the date of the
purchase commitment. The purchase price and the interest rate payable, if any,
on the securities are fixed on the purchase commitment date or at the time the
settlement date is fixed. The value of such securities is subject to market
fluctuation, and no interest accrues to the Portfolio until settlement takes
place. At the time the Portfolio makes the commitment to purchase securities on
a when-issued or delayed delivery basis, it will record the transaction, reflect
the value each day of such securities in determining its NAV and, if applicable,
calculate the maturity for the purposes of average maturity from that date. At
the time of settlement, a when-issued security may be valued at less than the
purchase price. To facilitate such acquisitions, the Portfolio will maintain
with its custodian (Bankers Trust) a segregated account with liquid assets,
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consisting of cash, U.S. Government securities or other appropriate securities,
in an amount at least equal to such commitments. On delivery dates for such
transactions, the Portfolio will meet its obligations from maturities or sales
of the securities held in the segregated account and/or from cash flow. If the
Portfolio chooses to dispose of the right to acquire a when-issued security
prior to its acquisition, it could, as with the disposition of any other
portfolio obligation, realize a gain or loss due to market fluctuation. It is
the current policy of the Portfolio not to enter into when-issued commitments
exceeding in the aggregate 15% of the market value of its total assets, less
liabilities other than the obligations created by when-issued commitments.
Additional U.S. Government Obligations. The Portfolio may invest in
obligations issued or guaranteed by U.S. Government agencies or
instrumentalities. These obligations may or may not be backed by the "full faith
and credit" of the United States. In the case of securities not backed by the
full faith and credit of the United States, the Portfolio must look principally
to the federal agency issuing or guaranteeing the obligation for ultimate
repayment and may not be able to assert a claim against the United States itself
in the event the agency or instrumentality does not meet its commitments.
Securities in which the Portfolio may invest that are not backed by the full
faith and credit of the United States include obligations of the Tennessee
Valley Authority, the Federal Home Loan Mortgage Corporation and the U.S. Postal
Service, each of which has the right to borrow from the U.S. Treasury to meet
its obligations, and obligations of the Federal Farm Credit System and the
Federal Home Loan Banks, both of whose obligations may be satisfied only by the
individual credit of the issuing agency. Securities that are backed by the full
faith and credit of the United States include obligations of the Government
National Mortgage Association (the "GNMA"), the Farmers Home Administration and
the Export-Import Bank.
Futures Contracts and Options on Futures Contracts -- In General. The
successful use of these instruments draws upon Bankers Trust's skill and
experience with respect to such instruments and usually depends on its ability
to forecast interest rate movements correctly. If interest rates move in an
unexpected manner, the Portfolio may not achieve the anticipated benefits of
futures contracts or options thereon 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
thereon and movements in the price of the securities 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 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 that have been designated "contracts
markets" by the Commodity Futures Trading Commission ("CFTC") and must be
executed through a futures commission merchant, or brokerage firm, that 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
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exchange. The Portfolio may enter into futures contracts 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, U.S. Treasury notes, GNMA modified
pass-through mortgage-backed securities and three-month U.S. Treasury bills. The
Portfolio may also enter into futures contracts that 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 margin"). It is
expected that the initial margin would be approximately 1 1/2% to 5% of a
contract's face value. Daily thereafter, the futures contract is valued and
"variation margin" may be required (that is, the Portfolio may have to provide
or may receive cash that reflects any decline or increase in the contract's
value).
At the time of delivery of securities pursuant to a futures 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 termination 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 Portfolio's acquisition or sale of a futures
contract is to attempt to protect the Portfolio from fluctuations in interest
rates without actually buying or selling fixed-income securities. For example,
if interest rates were expected to increase (which thus would cause the prices
of debt securities to decline), 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 securities held by the
Portfolio would decline, but the value of the futures contracts to the Portfolio
would increase at approximately the same rate, thereby keeping the Portfolio's
NAV 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 (thus
increasing the value of debt securities), futures contracts for the acquisition
of debt securities may be purchased to attempt to hedge against anticipated
purchases of debt securities at higher prices. Since the fluctuations in the
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value of futures contracts should be similar to those of the underlying debt
securities, the 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 the
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 and
variation margin requirements. Rather than meeting additional variation margin
requirements, investors may close futures contracts through offsetting
transactions that 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 Bankers Trust may still not
result in a successful transaction.
In addition, futures contracts entail risks. Although Bankers Trust
believes that use of such contracts will benefit the Portfolio, if its
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 that 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 that 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 securities
may be, but will not necessarily be, at increased prices that 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
(sell) 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
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<PAGE>
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 that is deliverable upon
exercise of the futures contract. If the futures price at expiration of the
option is below the price specified in the option ("exercise price"), the
Portfolio will retain the full amount of the net premium (the premium received
for writing the option less any commission), which will provide a partial hedge
against any decline that may have occurred in its portfolio holdings. The
writing of a put option on a futures contract constitutes a partial hedge
against increasing prices of the security that 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
net premium, which will provide a partial hedge against any increase in the
price of securities that the Portfolio intends to purchase. If a put or call
option the Portfolio has written is exercised, the Portfolio may incur a loss
that will be reduced by the amount of the net 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, such 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 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.
The Portfolio Trust Board has adopted a restriction that the Portfolio
will not enter into any futures contract or option on a futures contract if
immediately thereafter the amount of margin deposits on all the futures
contracts held by the Portfolio and premiums paid on outstanding options on its
futures contracts (other than those entered into for bona fide hedging purposes)
would exceed 5% of the market value of the Portfolio's total assets.
Options on Securities. The Portfolio may write (sell) covered call and
put options on its portfolio securities ("covered options") to a limited extent
in an attempt to increase income. However, the Portfolio may forgo the benefits
of appreciation on securities sold or may pay more than the market price on
securities acquired pursuant to call and put options it writes. A call option
written by a Portfolio is "covered" if the Portfolio owns the underlying
security covered by the call or has an absolute and immediate right to acquire
that security without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian) upon conversion or
exchange of other securities held in its portfolio. A call option is also
covered if the Portfolio holds a call option on the same security and in the
same principal amount as the written call option where the exercise price of the
call option so held (a) is equal to or less than the exercise price of the
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written call option or (b) is greater than the exercise price of the written
call option if the difference is maintained by the Portfolio in cash, U.S.
Government securities and other high quality liquid securities in a segregated
account with its custodian.
When the Portfolio writes a covered call option, it gives the purchaser
of the option the right to buy the underlying security at 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 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
exercise price at any time during the option period. If the option expires
unexercised, the Portfolio will realize income in the amount of the net 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, 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." The Portfolio will realize a profit or loss on a closing
purchase transaction if the amount paid to purchase the option is less or more,
as the case may be, than the amount received from the sale thereof. To close out
a position as a purchaser of an option, the Portfolio may enter into a "closing
sale transaction," which involves liquidating the Portfolio's position by
selling the option previously purchased. Where the Portfolio cannot effect a
closing purchase transaction, it may be forced to incur brokerage commissions or
dealer spreads in selling securities it receives or it may be forced to hold
underlying securities until an option is exercised or expires.
When the Portfolio writes an option, an amount equal to the net premium
received is included in the liability section of its 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.
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 prices. If an
option expires or if the Portfolio enters into a closing purchase transaction,
the Portfolio will realize a gain (or loss if the cost of the closing purchase
transaction exceeds the net 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
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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 holdings, at a
specified price during the option period. The purchase of protective puts is
designed merely to offset or hedge against a decline in the market value of the
Portfolio's holdings. Put options also may be purchased by the Portfolio for the
purpose of benefiting from a decline in the price of securities that 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 non-fundamental policies concerning
option transactions that 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 if 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 will not
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
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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
U.S. 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. Bankers Trust will monitor
the creditworthiness of dealers with whom the Portfolio enters into such options
transactions under the general supervision of the Portfolio Trust Board.
Options on Securities Indices. In addition to options on securities,
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 on expiration of the option based upon the difference between the
exercise price and the value of the index.
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 Bankers Trust
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
Bankers Trust 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 holdings may not correlate precisely
with movements in the level of an index, and, therefore, the use of options on
indices cannot serve as a complete hedge. Because options on securities indices
require settlement in cash, Bankers Trust 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 Portfolio Trust Board. 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
referred to herein and in the Prospectus is set forth in the Appendix.
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Investment Restrictions
The following investment restrictions are "fundamental policies" of the
Fund and the Portfolio and may not be changed without the approval of a
"majority of the outstanding voting securities" of the Fund or the Portfolio, as
the case may be. "Majority of the outstanding voting securities" under the 1940
Act, and as used in this Statement of Additional Information and the Prospectus,
means, with respect to the Fund (or the Portfolio), the lesser of (1) 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
(2) 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 them. Fund
shareholders who do not vote will not affect the Trust's votes at the Portfolio
meeting. 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.
None of the fundamental and non-fundamental policies described below
shall prevent the Fund from investing all of its assets in an open-end
investment company with substantially the same investment objective. Because the
Fund and the Portfolio have the same fundamental policies and the Fund invests
all of its net investable assets in the Portfolio, the following discussion
(though speaking only of the Portfolio) applies to the Fund as well.
Fundamental Restrictions. As a matter of fundamental policy, the
Portfolio may not:
(1) Borrow money (including through reverse repurchase or dollar roll
transactions) in excess of 5% of the Portfolio's total assets (taken at cost),
except that the Portfolio may borrow for temporary or emergency purposes up to
1/3 of its total assets. The Portfolio may pledge, mortgage or hypothecate not
more than 1/3 of such assets to secure such borrowings provided that collateral
arrangements with respect to options and futures, including deposits of initial
and variation margin, are not considered a pledge of assets for purposes of this
restriction and except that assets may be pledged to secure letters of credit
solely for the purpose of participating in a captive insurance company sponsored
by the Investment Company Institute;
(2) Underwrite securities issued by other persons except insofar as the
Portfolio may 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 portfolio securities and provided that any such loans not exceed 30%
of its 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),
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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 may hold and sell, for its portfolio, real estate acquired as
a result of the Portfolio'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 investment objective, up to 25% of its total assets may be
invested in any one industry;
(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 contracts, including deposits of initial and
variation margin, are not considered to be the issuance of a senior security for
purposes of this restriction;
(7) Purchase, with respect to 75% of the Portfolio's total assets,
securities of any issuer if such purchase at the time thereof would cause the
Portfolio 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
options or futures contracts shall not be subject to this restriction; and
(8) Invest, with respect to 75% of the Portfolio's total assets, more
than 5% of its total assets in the securities (excluding U.S. Government
securities) of any one issuer.
Non-Fundamental Restrictions. In order to comply with certain federal
statutes and policies and for other reasons, the Portfolio will not, as a matter
of operating policy (these restrictions may be changed by a vote of the Trustees
or the Portfolio Trust or the Trust as applicable without shareholder approval):
(i) purchase any security or evidence of interest therein on
margin, except that short-term credit necessary for the
clearance of purchases and sales of securities may be obtained
and deposits of initial and variation margin may be made in
connection with the purchase, ownership, holding or sale of
futures contracts;
(ii) sell securities it does not own (short sales). (This
restriction does not preclude short sales "against the box"
(that is, sales of securities (a) the Portfolio
contemporaneously owns or (b) where the Portfolio has the
right to obtain securities equivalent in kind and amount to
those sold). The Portfolio has no current intention to engage
in short selling);
(iii) purchase securities issued by any investment company except to
the extent permitted by the 1940 Act, except that this
limitation does not apply to securities received or acquired
as dividends, through offers of exchange, or as a result of
reorganization, consolidation or merger; and
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<PAGE>
(iv) invest more than 15% of the Portfolio's net assets (taken at
the greater of cost or market value) in securities that are
illiquid or not readily marketable (excluding Rule 144A
securities deemed by the Portfolio Board to be liquid).
An investment restriction will not be considered violated if that
restriction is complied with at the time the relevant action is taken,
notwithstanding a later change in the market value of an investment, in net or
total assets or in the change of securities rating of the investment or any
other later change.
The Portfolio will comply with the permitted investments and investment
limitations in the securities laws and regulations of all states in which the
corresponding Fund, or any other registered investment company investing in the
Portfolio, is registered.
Portfolio Transactions and Brokerage Commissions
Bankers Trust is responsible for decisions to buy and sell securities,
futures contracts and options thereon 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
contracts 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 Bankers Trust 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 that will include an
underwriting fee paid to the underwriter.
Bankers Trust 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 the 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. Bankers Trust reviews on a
routine basis commission rates, execution and settlement services performed,
making internal and external comparisons.
Bankers Trust is authorized, consistent with Section 28(e) of the
Securities Exchange Act of 1934, as amended, when placing portfolio transactions
for the 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
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<PAGE>
statistical information. The term "research, market or statistical information"
includes (a) advice as to (i) the value of securities, (ii) the advisability of
investing in, purchasing or selling securities, and (iii) the availability of
securities or purchasers or sellers of securities and (b) furnishing analyses
and reports concerning issuers, industries, securities, economic factors and
trends, portfolio strategy and the performance of accounts. 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.
Consistent with the policy stated above, the Conduct Rules of the
National Association of Securities Dealers, Inc. and such other policies as the
Portfolio Trust Board may determine, Bankers Trust may consider sales of shares
of the Fund and of other investment company clients of Bankers Trust as a factor
in the selection of broker-dealers to execute portfolio transactions. Bankers
Trust will make such allocations if commissions are comparable to those charged
by nonaffiliated, qualified broker-dealers for similar services.
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 or statistical information from
brokers and dealers can be useful to the Portfolio and to Bankers Trust, it is
the opinion of the Portfolio's management that such information is only
supplementary to Bankers Trust's own research effort, since the information must
still be analyzed, weighed and reviewed by Bankers Trust's staff. Such
information may be useful to Bankers Trust in providing services to clients
other than the Portfolio, and not all such information is used by Bankers Trust
in connection with the Portfolio. Conversely, such information provided to
Bankers Trust by brokers and dealers through whom other clients of Bankers Trust
effect securities transactions may be useful to Bankers Trust in providing
services to the Portfolio.
In certain instances there may be securities that are suitable for the
Portfolio, as well as for one or more of Bankers Trust's other clients.
Investment decisions for the Portfolio and for Bankers Trust'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 between (among) clients in a manner believed to be
equitable to each. It is recognized that in some cases this system could have a
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<PAGE>
detrimental effect on the price or volume of the security as far as the
Portfolio is concerned. However, it is believed that the ability of the
Portfolio to participate in volume transactions will produce better executions
for the Portfolio.
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: Yield refers to the income generated by an investment in the
Fund over a given period of time, expressed as an annual percentage
rate. Yields are calculated according to a standard that is required
for all stock and bond mutual funds. Because this differs from other
accounting methods, the quoted yield may not equal the income actually
paid to shareholders.
Performance information or advertisements may include comparisons of
the Fund's investment results to various unmanaged indices or results
of other mutual funds or investment or savings vehicles. From time to
time, the Fund's ranking may be quoted from various sources, such as
Lipper Analytical Services, Inc., Value Line, Inc. and Morningstar,
Inc.
Unlike some bank deposits or other investments that 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 the Wrapper Agreements and changes
in the expenses of the Fund and the Portfolio. In addition, during
certain periods for which total return may be provided, Bankers Trust
may have voluntarily agreed to waive portions of its fees, or to
reimburse certain operating expenses of the Fund or the Portfolio, on a
month-to-month basis. Such waivers will have the effect of increasing
the Fund's net income (and therefore its yield and total return) during
the period such waivers are in effect.
Total return: The Fund's average annual total return is calculated for
certain periods by determining the average annual compounded rates of
return over those periods that would cause an investment of $1,000
(made at the maximum public offering price with all distributions
reinvested) to reach the value of that investment at the end of the
periods. The Fund may also calculate total return figures that
represent aggregate performance over a period or year-by-year
performance.
Performance Results: Any performance information provided for the Fund
should not be considered as representative of its performance in the
future, because the NAV and public offering price of Shares will vary
based not only on the type, quality and maturities of the securities
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<PAGE>
held by the Portfolio but also on changes in the current value of such
securities and on changes in the expenses of the Fund and the
Portfolio. 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 the 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 that 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 the Fund's performance
information could include the following: Asian Wall Street Journal, Barron's,
Business Week, Changing Times The Kiplinger Magazine, Consumer Digest, Financial
Times, Financial World, Forbes, Fortune, Global Investor, Investor's Daily,
Lipper Analytical Services. Inc.'s Mutual Fund Performance Analysis, Money,
Morningstar Inc., New York Times, Personal Investing News, Personal Investor,
Success, U.S. News and World Report, ValueLine, Wall Street Journal,
Weisenberger Investment Companies Services, Working Women and Worth.
VALUATION OF ASSETS; REDEMPTIONS IN KIND
Debt securities (other than short-term debt obligations maturing in 60
days or less), including listed securities and securities for which price
quotations are available, will normally be valued on the basis of market
valuations furnished by a pricing service. Such market valuations may represent
the last quoted price on the securities' major trading exchange or quotes
received from dealers or market makers in the relevant securities or may be
determined through the use of matrix pricing. In matrix pricing, pricing
services may use various pricing models, involving comparable securities,
historic relative price movements, economic factors and dealer quotations.
Over-the-counter securities will normally be valued at the bid price. Short-term
debt obligations and money market securities maturing in 60 days or less are
valued at amortized cost.
Securities for which market quotations are not readily available are
valued by Bankers Trust pursuant to procedures adopted by the Portfolio Trust
Board.
The NAV per Share is calculated once on each Valuation Day as of the
Valuation Time, which is currently 4:00 p.m., Eastern time, or if the NYSE
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<PAGE>
closes early, at the time of such early closing. The NAV per Share is computed
by dividing the value of the Fund's assets (i.e., the value of its investment in
the Portfolio and other assets, if any), 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 that Portfolio Trust Board believes accurately
reflects fair value.
Pursuant to procedures adopted by the Portfolio Trust Board, the
Wrapper Value generally will be equal to the difference between the Book Value
and the market value (plus accrued interest on the underlying securities) of the
applicable Covered Assets. If the market value (plus accrued interest on the
underlying securities) of the Covered Assets is greater than their Book Value,
the Wrapper Value will be reflected as a liability of the Portfolio in the
amount of the difference, i.e., a negative value, reflecting the potential
liability of the Portfolio to the Wrapper Provider. If the market value (plus
accrued interest on the underlying securities) of the Covered Assets is less
than their Book Value, the Wrapper Value will be reflected as an asset of the
Portfolio in the amount of the difference, i.e., a positive value, reflecting
the potential liability of the Wrapper Provider to the Portfolio. In performing
its fair value determination, the Portfolio Trust Board expects to consider the
creditworthiness and ability of a Wrapper Provider to pay amounts due under the
Wrapper Agreement. If the Portfolio Trust Board determine that a Wrapper
Provider is unable to make such payments, that Board may assign a fair value to
the Wrapper Agreement that is less than the difference between the Book Value
and the market value (plus accrued interest on the underlying securities) of the
applicable Covered Assets and the Portfolio might be unable to maintain NAV
stability.
The problems inherent in making a good faith determination of value are
recognized in the codification effected by SEC Financial Reporting Release No. 1
(formerly Accounting Series Release No. 113) ("FRR 1"), which concludes that
there is "no automatic formula" for calculating the value of restricted
securities. It recommends that the best method simply is to consider all
relevant factors before making any calculation. According to FRR 1, such factors
would include consideration of the --
type of security involved, financial statements, cost at date
of purchase, size of holding, discount from market value of
unrestricted securities of the same class at the time of
purchase, special reports prepared by analysts, information as
to any transactions or offers with respect to the security,
existence of merger proposals or tender offers affecting the
security, price and extent of public trading in similar
securities of the issuer or comparable companies, and other
relevant matters.
Bankers Trust will value securities purchased by the Portfolio that are
restricted as to resale or for which current market quotations are not readily
available, [including Wrapper Agreements,] based upon all relevant factors as
outlined in FRR 1.
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<PAGE>
Each Trust, on behalf of the Fund, and the Portfolio reserves the
right, if conditions exist that make cash payments undesirable, or for other
reasons, to honor any request for redemption or withdrawal, respectively, by
making payment wholly or partly in Portfolio Securities and in Wrapper
Agreements, as the same may be chosen by Bankers Trust in its sole discretion (a
"redemption in kind"). Such securities and Wrapper Agreements shall be valued as
they are for purposes of computing the Fund's or the Portfolio's NAV, as the
case may be. If payment is made to a Fund shareholder in securities, the
shareholder may incur transaction expenses in converting those securities into
cash. To the extent that a redemption in kind includes Wrapper Agreements, the
Fund will obtain from the Portfolio and assign to the redeeming Plan one or more
Wrapper Agreements issued by the Wrapper Providers covering the Portfolio
Securities distributed in kind. The terms and conditions of Wrapper Agreements
provided to a redeeming Plan will be the same or substantially similar to the
terms and conditions of the Wrapper Agreements held by the Portfolio. Wrapper
Agreements are not liquid securities and may impose restrictions on termination
or withdrawal, including notice periods of one year or more for non-participant
directed withdrawals. The maintenance of Wrapper Agreements distributed in kind
may also require that a Plan pay fees to the Wrapper Provider directly, rather
than through the Fund. Such fees are anticipated to be comparable to the fees
paid by the Portfolio with respect to Covered Assets (typically 0.10% to 0.25%
per dollar of Covered Assets). Wrapper Agreements distributed in kind will also
require the portfolio securities covered be of a specified duration or maturity,
consist of specified types of securities or be of a specified investment
quality. Accordingly, although a redeeming Plan may freely buy and sell
portfolio securities covered by a Wrapper Agreement, its management of the
portfolio securities must be consistent with Wrapper Agreement requirements in
order for it to obtain the benefits of the Wrapper Agreement. Moreover, a Plan
may be required to obtain at its own expense the services of a qualified
investment manager to manage the securities distributed in kind in conformity
with the Wrapper Agreement provisions and may incur additional administrative
expenses in managing this portfolio. In some cases, however, a Plan may be able
to further assign the Wrapper Agreements and covered securities to other
commingled investment vehicles, such as a bank collective fund, and thereby
avoid the imposition of these additional expenses.
The Trust, on behalf of the Fund, and the Portfolio have elected to be
governed by Rule 18f-1 under the 1940 Act, as a result of which they are
obligated to redeem Shares or beneficial interests, respectively, 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 NAV of the Fund or the Portfolio, as the case may be, at
the beginning of the period. The Trust, on behalf of the Fund, is also seeking
an exemptive order from the SEC with respect to redemptions in kind made to 5%
or greater shareholders of the Fund.
The Portfolio has agreed to make a redemption in kind to the Fund
whenever the Fund wishes to make a redemption in kind to a shareholder thereof,
and therefore Fund shareholders that receive redemptions in kind will receive
Portfolio Securities and Wrapper Agreements 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.
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<PAGE>
Each investor in the Portfolio, including the Fund, may add to or
reduce its investment in the Portfolio on each business day the Portfolio
determines its NAV. At the close of business on each such 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
that represents that investor's share of the aggregate beneficial interests in
the Portfolio. Any additions or withdrawals that 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 a fraction (a) the numerator of which is the value of
the investor's investment in the Portfolio as of the close of business on that
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 that day, and (b) the denominator of which is the aggregate
NAV of the Portfolio as of the close of business on that 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 therein. The percentage
so determined will then be applied to determine the value of the investor's
interest in the Portfolio as the close of business on the following business
day.
MANAGEMENT OF THE TRUSTS
Each Board of Trustees is composed of persons experienced in financial
matters who meet throughout the year to oversee the activities of the Fund or
the Portfolio, as the case may be. In addition, the Trustees review contractual
arrangements with companies that provide services to the Fund/Portfolio and
review the Fund's performance.
The Trustees and officers of the Trusts, 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 is Clearing Operations, P.O. Box 897, Pittsburgh, Pennsylvania
15230-0897. An asterisk indicates that Trustee who is an "interested person" (as
defined in the 1940 Act) of either Trust.
Trustees of the Trust
PHILIP W. COOLIDGE* (birthdate: 9/2/1951) - Chairman, Chief Executive
Officer and President, Signature Financial Group, Inc. ("SFG") (since December,
1988) and Signature Broker-Dealer Services, Inc. ("Signature") (since April,
1989). His address is 6 St. James Avenue, Boston, Massachusetts 02116.
MARTIN J. GRUBER (birthdate: 7/15/1937) - Trustee; Chairman of the
Finance Department and Nomura Professor of Finance, Leonard N. Stern School of
Business, New York University (since 1964).
KELVIN J. LANCASTER (birthdate: 12/10/1924) - Trustee; Professor,
Department of Economics, Columbia University. His address is 35 Claremont
Avenue, New York, New York 10027.
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<PAGE>
HARRY VAN BENSCHOTEN (birthdate: 2/18/1928) - 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, Florida 33963.
Trustees of the Portfolio Trust
CHARLES P. BIGGAR (birthdate: 10/13/1930) - 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: 9/2/1951) - Chairman, Chief Executive
Officer and President, SFG (since December, 1988) and Signature (since April,
1989).
S. LELAND DILL (birthdate: 3/28/1930) - 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: 10/11/1935) - Trustee; Principal,
Philip Saunders Associates (Consulting); former Director of Financial Industry
Consulting, Wolf & Company; President, John Hancock Home Mortgage Corporation;
and Senior Vice President of Treasury and Financial Services, John Hancock
Mutual Life Insurance Company, Inc. His address is 445 Glen Road, Weston,
Massachusetts 02193.
Officers of the Trusts
Unless otherwise specified, each officer listed below holds the same
position with each Trust.
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, Federal 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.
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<PAGE>
Messrs. Coolidge, Petnuch, Davis and Neuman also hold similar positions
for other investment companies for which Signature or Edgewood Services, Inc.,
respectively, or an affiliate, serves as the principal underwriter.
Trustees' Compensation
<TABLE>
<CAPTION>
Compensation Compensation from
Name of Trustee from Trust* Portfolio Trust Fund Complex**
- --------------- ----------- -------------- --------------
<S> <C> <C> <C>
Harry Van Benschoten $12,000 N/A $27,500
Trustee of Trust
Philip W. Coolidge $ 115 $ 460 $ 1,250
Trustee of Trust and
Portfolio Trust
Martin J. Gruber $12,000 N/A $28,750
Trustee of Trust
Kelvin J. Lancaster $12,000 N/A $26,250
Trustee of Trust
Charles P. Biggar N/A $17,000 $30,000
Trustee of
Portfolio Trust
S. Leland Dill N/A $16,000 $30,000
Trustee of
Portfolio Trust
Philip Saunders, Jr. N/A $16,000 $30,000
Trustee of
Portfolio Trust
</TABLE>
* The aggregate compensation is provided for the Trust which is comprised of 6
funds. Information is furnished for the fiscal year ended December 31, 1996.
** Information provided for last calendar year.
As of February 25, 1997, the Trustees and officers of the Trusts and
the Fund owned in the aggregate less than 1% of the shares of any fund or the
Trust (all series taken together).
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<PAGE>
Investment Adviser
Under the terms of the 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 the 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 the Portfolio in
accordance with the Portfolio's investment objectives, restrictions and
policies; (iii) make investment decisions for the Portfolio; and (iv) place
purchase and sale orders for securities and other financial instruments on
behalf of the Portfolio.
Bankers Trust bears all expenses in connection with the performance of
services under the Advisory Agreement. The Trust and the Portfolio bears certain
other expenses incurred in its operation, including: taxes, interest, brokerage
fees and commissions, if any; fees of Trustees of the 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.
As of February 25, 1997, the Portfolio had not commenced investment
operations and did not accrue investment advisory fees.
Bankers Trust may have deposit, loan and 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 Portfolio that, in making its investment decisions, it
does not obtain or use material inside information in its possession or in the
possession of any of its affiliates. In making investment recommendations for
the Portfolio, Bankers Trust will not inquire or take into consideration whether
an issuer of securities proposed for purchase or sale by the Portfolio is a
customer of Bankers Trust, its parent or its subsidiaries or affiliates and, in
dealing with its customers, Bankers Trust, its parent, subsidiaries and
affiliates will not inquire or take into consideration whether securities of
such customers are held by any fund managed by Bankers Trust or any such
affiliate.
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<PAGE>
Administrator
Under the administration and services agreements, Bankers Trust is
obligated on a continuous basis to provide such administrative services as the
Board of Trustees of the Trust and 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 record keeping services (including without limitation the
maintenance of such books and records as are required under the 1940 Act and the
rules thereunder, except as maintained by other agents), 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
Portfolio as from time to time may be agreed upon by Bankers Trust and the 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.
As of February 25, 1997, the Portfolio had not commenced investment
operations and did not accrue administrative fees.
Custodian and Transfer Agent
Bankers Trust, 130 Liberty Street, New York, New York 10006, 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.
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<PAGE>
Use of Name
The Trust and Bankers Trust have agreed that the Trust may use the
letters "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 letters
"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 letters "BT" as part of its name. If this were to
occur, the Trustees would select an appropriate new name for the Trust, but
there would be no other material effect on the Trust, its shareholders or
activities.
Banking Regulatory Matters
Bankers Trust has been advised by its counsel that in its opinion
Bankers Trust may perform the services for the Portfolio contemplated by the
Advisory Agreement and 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 Trusts. Ernst & Young
LLP, 787 Seventh Avenue, New York, New York 10019, acts as independent
accountants of the Fund 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.
- 28 -
<PAGE>
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 that liabilities of
each series of the Trust (including the Fund) are chargeable only against assets
of that series and that a creditor of one series may not seek satisfaction from
the assets of another series. The Declaration of Trust also provides for
indemnification from the Fund's property for all losses and expenses of any
shareholder held personally liable for the obligations of the Fund. Thus, the
risk of a shareholder's incurring financial loss on account of shareholder
liability is limited to circumstances in which the Fund itself would be unable
to meet its obligations, a possibility that the Trust believes is remote. Upon
payment of any liability incurred by the Fund, the shareholder paying the
liability would be entitled to reimbursement from the general assets of the
Fund. The Trustees intend to conduct the operations of the Fund in a manner so
as to avoid, as far as possible, ultimate liability of the shareholders for
liabilities of the Fund.
The Trust was organized on February 28, 1992.
Except as described below, whenever the Fund is requested to vote on
matters pertaining to the Portfolio, the Fund will hold a meeting of its
shareholders and will cast its votes proportionately as instructed by Fund
shareholders. However, subject to applicable statutory and regulatory
requirements, the Fund will not request a vote of its shareholders with respect
to any proposal relating to the Portfolio that (a) if made with respect to the
Fund, would not require the vote of the shareholders of the Fund, or (b) is
identical in all material respects to a proposal that has previously been
approved by the Fund's shareholders. Any proposal submitted to holders in the
Portfolio, and that is not required to be voted on by the Fund's shareholders,
will nonetheless be voted on by the Trust Board.
TAXATION
Taxation of the Fund
The Fund intends to qualify annually to be treated as a regulated
investment company under the Code. To qualify for that treatment, the Fund must,
among other things, (a) derive at least 90% of its gross income each taxable
year from dividends, interest, payments with respect to securities loans and
gains from the sale or other disposition of securities, or other income
(including gains from options or futures contracts) derived with respect to its
business of investing in securities (the "Income Requirement"), (b) derive less
than 30% of its gross income each taxable year from the sale or other
disposition of securities, options or futures contracts held less than three
months (the "30% Limitation"), (c) diversify its holdings so that, at the end of
each quarter of its taxable year, (i) at least 50% of the value of its assets is
represented by cash and cash items (including receivables), U.S. Government
securities, securities of other regulated investment companies and other
securities, with such other securities of any one issuer limited to an amount
not greater than 5% of the value of the Fund's total assets and not greater
- 29 -
<PAGE>
than 10% of the issuer's outstanding voting securities and (ii) not more than
25% of the value of its total assets is invested in the securities of any one
issuer (other than U.S. Government securities or the securities of other
regulated investment companies), and (d) distribute for each taxable year at
least 90% of its investment company taxable income (generally consisting of
interest, dividends and the excess of net short-term capital gain over net
long-term capital loss).
The Fund will be subject to a nondeductible 4% excise tax to the extent
it fails to distribute by the end of any calendar year substantially all of its
ordinary income for that year and capital gain net income for the one-year
period ending on October 31 of that year, plus any undistributed amount from the
prior year.
The Fund, as an investor in the Portfolio, will be deemed to own a
proportionate share of the Portfolio's assets, and to earn a proportionate share
of the Portfolio's income, for purposes of determining whether the Fund
satisfies all the requirements described above to qualify as a regulated
investment company. See the next section for a discussion of the tax
consequences to the Fund of hedging transactions engaged in by the Portfolio.
The Trust is organized as a Massachusetts business trust, and neither
the Trust nor the Fund is liable for any income or franchise tax in the
Commonwealth of Massachusetts, provided the Fund continues to qualify as a
regulated investment company under Subchapter M of the Code. The investment by
the Fund in the Portfolio will not cause the Fund to be liable for any income or
franchise tax in the State of New York.
Taxation of the Portfolio
The Portfolio will be treated as a separate partnership for federal
income tax purposes and will not be a "publicly traded partnership." As a
result, the Portfolio will not be subject to federal income tax. Instead, the
Fund and other investors in the Portfolio will be required to take into account,
in computing their federal income tax liability, their respective shares of the
Portfolio's income, gains, losses, deductions and credits, without regard to
whether they have received any cash distributions from the Portfolio. The
Portfolio also will not be subject to state income or franchise tax.
Because, as noted above, the Fund will be deemed to own a proportionate
share of the Portfolio's assets, and to earn a proportionate share of the
Portfolio's income, for purposes of determining whether the Fund satisfies the
requirements to qualify as a regulated investment company, the Portfolio intends
to conduct its operations so that the Fund will be able to satisfy all those
requirements.
Distributions received by the Fund from the Portfolio (whether pursuant
to a partial or complete withdrawal or otherwise) generally will not result in
the Fund's recognizing any gain or loss for federal income tax purposes, except
- 30 -
<PAGE>
that (a) gain will be recognized to the extent any cash that is distributed
exceeds the Fund's basis for its interest in the Portfolio prior to the
distribution, (b) income or gain will be realized if the distribution is in
liquidation of the Fund's entire interest in the Portfolio and includes a
disproportionate share of any unrealized receivables held by the Portfolio, and
(c) loss will be recognized if a liquidation distribution consists solely of
cash and/or unrealized receivables. The Fund's basis for its interest in the
Portfolio generally will equal the amount of cash and the basis of any property
the Fund invests in the Portfolio, increased by the Fund's share of the
Portfolio's net income and gains and decreased by (i) the amount of any cash and
the basis of any property distributed from the Portfolio to the Fund and (ii)
the Fund's share of the Portfolio's losses, if any.
The Portfolio's use of hedging strategies, such as writing (selling)
and purchasing options and futures contracts, involves complex rules that will
determine for income tax purposes the character and timing of recognition of the
gains and losses it realizes in connection therewith. Gains from options and
futures contracts derived by the Portfolio with respect to its business of
investing in securities will qualify as permissible income for the Fund under
the Income Requirement. However, income from the disposition of options and
futures contracts will be subject to the 30% Limitation for the Fund if they are
held for less than three months.
Sale of Shares
Any gain or loss realized by a shareholder on the sale or other
disposition of Shares, or on receipt of a distribution in complete liquidation
of the Fund, generally will be a capital gain or loss that will be long-term or
short-term, depending upon the shareholder's holding period for the Shares. Any
loss realized on a sale or exchange will be disallowed to the extent the Shares
disposed of are replaced within a period of 61 days beginning 30 days before and
ending 30 days after disposition of the Shares. In such a case, the basis of the
Shares acquired will be adjusted to reflect the disallowed loss. Any loss
realized by a shareholder on a disposition of Shares held for six months or less
will be treated as a long-term capital loss to the extent of any distributions
of net capital gains received by the shareholder with respect to those Shares.
Foreign Withholding Taxes
Income received by the Portfolio from sources within foreign countries
may be subject to withholding and other taxes imposed by those countries that
would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors.
- 31 -
<PAGE>
APPENDIX
DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS:
- ----------------------------------------------
Aaa- Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa - Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.
A - Bonds rated A possess many favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds rated Baa are considered as medium-grade obligations, i.e. they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such, bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba - Bonds rated Ba are judged to have speculative elements. Their future cannot
be considered as well assured. Often the protection of interest and principal
payments may be very moderate and thereby not well safeguarded during both (good
and bad times over the future). Uncertainty of position characterizes bonds in
this class.
B - Bonds rated B generally lack characteristics of a desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa - Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
Ca - Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked short-comings.
- 32 -
<PAGE>
C - Bonds rated C are the lowest-rated class of bonds and issued so rated can be
regarded as having extremely poor prospects of ever attaining any real
investment standing.
Moody's applies numerical modifiers, 1, 2, and 3, in each generic rating
classification from Aa through B in its corporate bond system. The modifier 1
indicates that the security ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end of its generic rating category.
DESCRIPTION OF S&P'S CORPORATE BOND RATINGS:
- --------------------------------------------
AAA- Debt rated AAA has the highest rating assigned by Standard & Poor's to a
debt obligation. Capacity to pay interest and repay principal is extremely
strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher-rated issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to weakened capacity to pay interest and repay principal for debt
in this category than in higher-rated categories.
BB - Debt rate BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments.
B - Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal.
CC - Debt rated CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
- 33 -
<PAGE>
C - The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed but debt service
payments are continued.
CI - The rating CI is reserved for income bonds on which no interest is being
paid.
D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating will also be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
Plus (+) or minus (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
DUFF & PHELPS' LONG-TERM DEBT RATINGS:
- --------------------------------------
================================================================================
- --------------------------------------------------------------------------------
AAA Highest credit quality. The risk factors are negligible,
being only slightly more than for risk-free U.S. Treasury
debt.
- --------------------------------------------------------------------------------
AA+ High credit quality. Protection factors are strong. Risk is modest
AA but may vary slightly from time to time because of economic conditions.
AA-
- --------------------------------------------------------------------------------
A+ Protection factors are average but adequate. However, risk factors are
A more variable and greater in periods of economic stress.
A-
- --------------------------------------------------------------------------------
BBB+ Below-average protection factors but still considered sufficient
BBB for prudent investment. Considerable variability in risk during
BBB- economic cycles.
- --------------------------------------------------------------------------------
BB+ Below investment grade but deemed likely to meet obligation when due.
BB Present or prospective financial protection factors fluctuate according
BB- to industry conditions or company fortunes. Overall quality may move
up or down frequently within this category.
- 34 -
<PAGE>
- --------------------------------------------------------------------------------
B+ Below investment grade and possessing risk that obligations will not be
B met when due. Financial protection factors will fluctuate widely
B- according to economic cycles, industry conditions and/or company
fortunes. Potential exists for frequent changes in the rating within
this category or into a higher or lower rating grade.
- --------------------------------------------------------------------------------
CCC Well below investment-grade securities. Considerable
uncertainty exists as to timely payment of principal,
interest or preferred dividends. Protection factors are
narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable
company developments.
- --------------------------------------------------------------------------------
DD Defaulted debt obligations. Issuer failed to meet
scheduled principal and/or interest payments.
- --------------------------------------------------------------------------------
DP Preferred stock with dividend arrearages.
================================================================================
DESCRIPTION OF MOODY'S SHORT-TERM DEBT RATINGS:
- -----------------------------------------------
Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics: leasing
market positions in well-established industries; high rates of return on funds
employed; conservative capitalization structures with moderate reliance on debt
and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; well-established access to
a range of financial markets and assured sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound,will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Issuers rates Prime-3 (or related supporting institutions) have an acceptable
capacity for repayment of short-term promissory obligations. The effect of
industry characteristics and market composition may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained.
- 35 -
<PAGE>
DESCRIPTION OF S&P SHORT-TERM ISSUER CREDIT RATINGS:
- ----------------------------------------------------
A-1 An obligor rated 'A-1' has STRONG capacity to meet its financial
commitments. It is rated in the highest category by Standard & Poor's. Within
this category, certain obligors are designated with a plus sign (+). This
indicates that the obligor's capacity to meet its financial commitments is
EXTREMELY STRONG.
A-2 An obligor rated 'A-2' has SATISFACTORY capacity to meet its financial
commitments. However, it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligors in the highest
rating category.
A-3 An obligor rated 'A-3' has ADEQUATE capacity to meet its financial
obligations. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitments.
DESCRIPTION OF DUFF & PHELPS' COMMERCIAL PAPER RATINGS:
D-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.
D-1 Very high certainty of timely payment. Liquidity factors are excellent and
supported by good fundamental protection factors. Risk factors are minor.
D-1- High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very small.
D-2 Good certainty of timely payment. Liquidity factors and company fundamentals
are sound. Although ongoing funding needs may enlarge total financing
requirements, access to capital markets is good. Risk factors are small.
D-3 Satisfactory liquidity and other protection factors qualify issues as to
investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected.
DESCRIPTION OF MOODY'S INSURANCE FINANCIAL STRENGTH RATINGS:
Aaa
Insurance companies rated Aaa offer exceptional financial security. While the
financial strength of these companies is likely to change, such changes as can
be visualized are most unlikely to impair their fundamentally strong position.
Aa
- 36 -
<PAGE>
Insurance companies rated Aa offer excellent financial security. Together with
the Aaa group they constitute what are generally known as high grade companies.
They are rated lower than Aaa companies because long-term risks appear somewhat
larger.
A
Insurance companies rated A offer good financial security. However, elements may
be present which suggest a susceptibility to impairment sometime in the future.
Baa
Insurance companies rated Baa offer adequate financial security. However,
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time.
Ba
Insurance companies rated Ba offer questionable financial security. Often the
ability of these companies to meet policyholder obligations maybe very moderate
and thereby not well safeguarded in the future.
B
Insurance companies rated B offer poor financial security. Assurance of punctual
payment of policyholder obligations over any long period of time is small.
Caa
Insurance companies rated Caa offer very poor financial security. They may be in
default on their policyholder obligations or there may be present elements of
danger with respect to punctual payment of policyholder obligations and claims.
Ca
Insurance companies rated Ca offer extremely poor financial security. Such
companies are often in default on their policyholder obligations or have other
marked shortcomings.
C
Insurance companies rated C are the lowest rated class of insurance company and
can be regarded as having extremely poor prospects of ever offering financial
security.
- 37 -
<PAGE>
Numeric modifiers: Numeric modifiers are used to refer to the ranking within the
group -- one being the highest and three being the lowest. However, the
financial strength of companies within a generic rating symbol (Aa, for example)
is broadly the same.
DESCRIPTION OF S&P CLAIMS PAYING ABILITY RATING DEFINITIONS:
- ------------------------------------------------------------
Secure Range: AAA to BBB
"AAA" Superior financial security on an absolute and relative basis. Capacity to
meet policyholder obligations is overwhelming under a variety of economic and
underwriting conditions.
"AA" Excellent financial security. Capacity to meet policyholder obligations is
strong under a variety of economic and underwriting conditions.
"A" Good financial security, but capacity to meet policyholder obligations is
somewhat susceptible to adverse economic and underwriting conditions.
"BBB" Adequate financial security, but capacity to meet policyholder obligations
is susceptible to adverse economic and underwriting conditions.
Vulnerable Range: BB to CCC
"BB" Financial security may be adequate, but capacity to meet policyholder
obligations, particularly with respect to long-term or "long-tail" policies, is
vulnerable to adverse economic and underwriting conditions.
"B" Vulnerable financial security. Currently able to meet policyholder
obligations, but capacity to meet policyholder obligations is particularly
vulnerable to adverse economic and underwriting conditions.
"CCC" Extremely vulnerable financial security. Continued capacity to meet
policyholder obligations is highly questionable unless favorable economic and
underwriting conditions prevail.
"R" Regulatory action. As of the date indicated, the insurer is under
supervision of insurance regulators following rehabilitation, receivership,
liquidation, or any other action that reflects regulatory concern about the
insurer's financial condition. Information on this status is provided by the
National Association of Insurance Commissioners and other regulatory bodies.
Although believed to be accurate, this information is not guaranteed. The "R"
rating does not apply to insurers subject only to nonfinancial actions such as
market conduct violations.
- 38 -
<PAGE>
Plus (+) or minus (-) Ratings from "AA" to "B" may be modified by the addition
of a plus or minus sign to show relative standing within the major rating
categories.
DUFF & PHELPS' CLAIMS PAYING ABILITY RATINGS:
================================================================================
AAA Highest claims paying ability. Risk factors are negligible.
- --------------------------------------------------------------------------------
AA+ Very high claims paying ability. Protection factors are strong. Risk
AA is modest, but may vary slightly over time due to economic and/or
AA- underwriting conditions.
- --------------------------------------------------------------------------------
A+ High claims paying ability. Protection factors are average and there
A is an expectation of variability in risk over time due to economic
A- and/or underwriting conditions.
- --------------------------------------------------------------------------------
BBB+ Adequate claims paying ability. Protection factors are adequate. There
BBB is considerable variability in risk over time due to economic and/or
BBB- underwriting conditions.
- --------------------------------------------------------------------------------
BB+ Uncertain claims paying ability and less than investment grade
BB quality. However, the company is deemed likely to meet these
BB- obligations when due. Protection factors will vary widely with
changes in economic and/or underwriting conditions.
- --------------------------------------------------------------------------------
B+ Possessing risk that policyholder and contractholder obligations will
B not be paid when due. Protection factors will vary widely with changes
B- in economic and underwriting conditions or company fortunes.
- --------------------------------------------------------------------------------
CCC There is substantial risk that policyholder and contractholder
obligations will not be paid when due. Company has been or is
likely to be placed under state insurance department
supervision.
- --------------------------------------------------------------------------------
DD Company is under an order of liquidation.
================================================================================
- 39 -
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
Included in Part A of this Registration Statement for BT
RetirementPlus Fund:
Not Applicable
Included in Part B of this Registration Statement for BT
RetirementPlus Fund:
Not Applicable
(b) Exhibits:
1. (a) Declaration of Trust 5/
(b) Second Amended and Restated Designation of Series 5/
(c) Third Amended and Restated Establishment and
Designation of Series 5/
(d) Fourth Amended and Restated Establishment and
Designation of Series 5/
(e) Fifth Amended and Restated Establishment and
Designation of Series 5/
(f) Seventh Amended and Restated Establishment
and Designation of Series 6/
(g) Eighth Amended and Restated Establishment and
Designation of Series 7/
2. By-Laws of the Trust 5/
3. Voting Trust Agreement - None
4. Instruments Defining the Rights of Holders of the
Registrant's Shares of Beneficial Interest -
None
5. (a) Investment Advisory Agreement 6/
(b) Investment Advisory Agreements with respect to BT
RetirementPlus Fund 7/
6. (a) Distribution Agreement 6/
(b) Distributor's Contract with respect to BT
RetirementPlus Fund 7/
7. Bonus, Profit Sharing or Pension Plans - None
8. Custodian Agreement (See Exhibit 9)
9. Administration and Services Agreement 3/
10. Opinion and Consent of Kirkpatrick & Lockhart LLP, with
respect to BT RetirementPlus Fund 7/
11. Consent of Independent Accountants - Not Applicable
12. Financial Statements Omitted from Prospectus - None
<PAGE>
13. Investment representation letters of initial shareholders
of the Trust 1/
14. Prototype Retirement Plan - None
15. (a) Plan of Distribution pursuant to Rule 12b-1 1/
(b) Amended Plan of Distribution 6/
16. Schedule for Computation of Performance Quotations 1/
17. Financial Data Schedule - Not Applicable
18. (a) Multiple Class Allocation Plan Pursuant to Rule
18f-3 6/
(b) Multiple Class Allocation Plan Pursuant to Rule
18f-3, with respect to BT RetirementPlus Fund 7/
- --------------------------
1/ Incorporated by reference herein from Pre-Effective Amendment No. 1 to
this Registration Statement as filed with the SEC on June 9, 1992.
2/ Incorporated by reference herein from Post-Effective Amendment No. 1 to
this Registration Statement as filed with the SEC on August 17, 1992.
3/ Incorporated by reference herein from Post-Effective Amendment No. 5 to
this Registration Statement as filed with the SEC on April 30, 1993.
4/ Incorporated by reference herein from Post-Effective Amendment No. 4 to
this Registration Statement as filed with the SEC on April 28, 1995.
5/ Incorporated by reference herein from Post-Effective Amendment No. 5 to
this Registration Statement as filed with the SEC on July 31, 1995.
6/ Incorporated by reference herein from Post-Effective Amendment No. 14 to
this Registration Statement as filed with the SEC on September 27, 1996.
7/ Filed herein.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE TRUST
None
<PAGE>
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
Number of Record Holders
Title of Class as of January 22, 1997
-------------- ----------------------
BT Investment Money Market Fund 380
BT Investment Limited Term U.S. Government Securities Fund 213
BT Investment Equity 500 Index Fund 579
BT Institutional Asset Management Fund 21
BT Investment Equity Appreciation Fund 15
BT RetirementPlus Fund 0
ITEM 27. INDEMNIFICATION
Reference is made to Article V of the Trust's Declaration of Trust, which
is incorporated by reference into this Registration Statement.
Insofar as indemnification for liability arising under the 1933 Act may be
permitted to Trustees, officers and controlling persons of the Trust pursuant to
the Trust's Declaration of Trust, or otherwise, the Trust has been advised that
in the opinion of the SEC such indemnification is against public policy as
expressed in the 1933 Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Trust of expenses incurred or paid by a Trustee, officer or controlling
person of the Trust in the successful defense of any action, suit or proceeding)
is asserted by such Trustee, officer or controlling person in connection with
the securities being registered, the Trust will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the 1933 Act and will be governed by the
final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Bankers Trust serves as investment adviser to the Trust. 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 any time 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 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 10015.
<PAGE>
NAME AND PRINCIPAL BUSINESS ADDRESS, PRINCIPAL OCCUPATION AND OTHER INFORMATION
George B. Beitzel, International Business Machines Corporation, Old Orchard
Road, Armonk, NY 10504. Retired Senior Vice President and Director, Member of
Advisory Board of International Business Machines Corporation. Director of
Bankers Trust and Bankers Trust New York Corporation. Director of FlightSafety
International, Inc. Director of Phillips Petroleum Company. Director of Roadway
Services, Inc. Director of Rohm and Hass Company.
William R. Howell, J.C. Penney Company, Inc., P.O. Box 10001, Plano, TX
75301-0001. Chairman of the Board and Chief Executive Officer, J.C. Penney
Company, Inc. and Director of Bankers Trust and Bankers Trust New York
Corporation. Also a Director of Exxon Corporation, Halliburton Company and
Warner-Lambert Corporation.
Jon M. Huntsman, Huntsman Chemical Corporation, 2000 Eagle Gate Tower, Salt
Lake City, UT 84111. Chairman and Chief Executive Officer, Huntsman Chemical
Corporation, Director of Bankers Trust and Bankers Trust New York Corporation.
Chairman of Constar Corporation, Huntsman Corporation, Huntsman Holdings
Corporation and Petrostar Corporation. President of Autostar Corporation,
Huntsman Polypropylene Corporation and Restar Corporation. Director of
Razzleberry Foods Corporation and Thiokol Corporation. General Partner of
Huntsman Group Ltd., McLeod Creek Partnership and Trustar Ltd.
Vernon E. Jordan, Jr., Partner, Akin, Gump, Strauss, Hauer & Feld, LLP,
1333 New Hampshire Ave., N.W., Washington, D.C. 20036. 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., RJR
Nabisco Inc., Revlon Group Incorporated, Ryder System, Inc., Sara Lee
Corporation, Union Carbide Corporation and Xerox Corporation.
Hamish Maxwell, Philip Morris Companies Inc., 120 Park Avenue, New York, NY
10017. Chairman of the Executive Committee, Philip Morris Companies Inc.
Director of Bankers Trust and Bankers Trust New York Corporation. Director of
The News Corporation Limited.
Donald F. McCullough, Collins & Aikman Corporation, 210 Madison Avenue, New
York, NY 10016. Chairman Emeritus, Collins & Aikman Corporation. Director of
Bankers Trust and Bankers Trust New York Corporation. Director of Massachusetts
Mutual Life Insurance Co. and Melville Corporation.
N.J. Nicholas Jr., 745 Fifth Avenue, New York, NY 10020. 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 Xerox
Corporation.
Russell E. Palmer, The Palmer Group, 3600 Market Street, Suite 530,
Philadelphia, PA 19109. Chairman and Chief Executive Officer of The Palmer
Group. Director of Bankers Trust and Bankers Trust New York Corporation. Also
Director of Allied-Signal Inc., Contel Cellular, Inc., Federal Home Loan
Mortgage Corporation, GTE Corporation, Goodyear Tire & Rubber Company, Imasco
Limited, May Department Stores Company and Safeguard Scientifics, Inc. Member,
Radnor Venture Partners Advisory Board.
Didier Pineau-Valencienne, Schneider S.A., 4 Rue de Longchamp, 75116 Paris,
France. Chairman and Chief Executive Officer, Schneider S.A. Director and member
of the European Advisory Board of Bankers Trust and Director of Bankers Trust
New York Corporation. Director of AXA (France) and Equitable Life Assurance
Society of America, Arbed (Luxembourg), Banque Paribas (France), Ciments
Francais (France), Cofibel (Belgique), Compagnie Industrielle de Paris (France),
SIAPAP, Schneider USA, Sema Group PLC (Great Britain), Spie-Batignolles,
Tractebel (Belgique) and Whirlpool. Chairman and Chief Executive Officer of
Societe Parisienne d'Entreprises et de Participations.
<PAGE>
Charles S. Sanford, Jr., Bankers Trust Company, 280 Park Avenue, New York,
NY 10017. Chairman of the Board of Bankers Trust and Bankers Trust New York
Corporation. Also a Director of Mobil Corporation and J.C. Penney Company, Inc.
Eugene B. Shanks, Jr., Bankers Trust Company, 280 Park Avenue, New York, NY
10017. President of Bankers Trust and Bankers Trust New York Corporation.
Patricia Carry Stewart, c/o Office of the Secretary, 280 Park Avenue, 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.
George J. Vojta, Bankers Trust Company, 280 Park Avenue, New York, NY
10017. Vice Chairman of the Board of Bankers Trust and Bankers Trust New York
Corporation. Director of Northwest Airlines and Private Export Funding Corp.
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: FTI Funds, Excelsior Institutional Trust (formerly, Master
Funds, Inc.), Excelsior Tax-Exempt Funds, Inc. (formerly, UST Master
Tax-Exempt Funds, Inc.), Excelsior Institutional Trust, Marketvest Funds,
Marketvest Funds, Inc., BT Institutional Funds, and BT Advisor Funds,
BT Investment Funds.
(b) Set forth below are the names, principal business addresses and positions
of each trustee and officer of the Distributor.
<TABLE>
<CAPTION>
<S> <C> <C>
(1) (2) (3)
Name and Principal Business Positions and Offices with Positions and Offices with
Address Distributor Registrant
------- ----------- ----------
Douglas L. Hein 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
Ernest L. Linane Assistant Vice President, __
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222--3779
S. Elliott Cohan Secretary, __
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222--3779
<PAGE>
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
</TABLE>
<PAGE>
(c) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Registrant: Federated Investors Towers
Pittsburgh, PA 15222-3779
Bankers Trust Company: 280 Park Avenue
New York, NY 10017
Investors Fiduciary
Trust Company: 127 West 10th Street,
Kansas City, MO 64105
Edgewood Services, Inc.: Clearing Operations,
P.O. Box 897
Pittsburgh, PA 15230-0897
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS
(a) The Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders, with
respect to the respective series of the Trust, upon request
and without charge.
(b) The Registrant hereby undertakes to file a post-effective
amendment, using financial statements which need not be
certified, within four to six months from the effective
date of Registrant's 1933 Act Registration Statement.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, as amended, the Registrant has duly caused this
Post-Effective Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in this City of Pittsburgh
and Commonwealth of Pennsylvania, on this 21st day of February, 1997.
BT PYRAMID MUTUAL FUNDS
By:/s/ Ronald M. Petnuch*
------------------------
Ronald M. Petnuch
President
Pursuant to the requirements of the Securities Act of 1933, this instrument
has been signed below by the following persons in the capacities and on the
dates indicated with respect to BT Pyramid Mutual Funds.
Signature Title Date
--------- ----- ----
/s/ Philip W. Coolidge* Trustee February 21, 1997
- -----------------------
Philip W. Coolidge
/s/ Martin J. Gruber* Trustee February 21, 1997
- -----------------------
Martin J. Gruber
/s/ Kelvin J. Lancaster* Trustee February 21, 1997
- -----------------------
Kelvin J. Lancaster
/s/ Harry Van Benschoten* Trustee February 21, 1997
- ------------------------
Harry Van Benschoten
/s/ Ronald M. Petnuch* Treasurer February 21, 1997
- ------------------------
Ronald M. Petnuch (Principal Financial Officer and
Principal Accounting Officer)
* Signature affixed by Jay S. Neuman pursuant to powers of attorney dated
September 30, 1996.
<PAGE>
SIGNATURES
BT Investment Portfolios has duly caused this Post-Effective Amendment No.
14 to the Registration Statement on Form N-1A of BT Pyramid Mutual Funds to be
signed on its behalf by the undersigned, thereto duly authorized, in the City of
Pittsburgh and Commonwealth of Pennsylvania on February 21, 1997.
BT INVESTMENT PORTFOLIOS
By: /s/ Ronald M. Petnuch*
-------------------------
Ronald M. Petnuch
President
This Post-Effective Amendment No. 14 to the Registration Statement on Form
N-1A of BT Pyramid Mutual Funds has been signed below by the following persons
in the capacities indicated with respect to BT Investment Portfolios on February
21, 1997.
Signature Title
--------- -----
/s/ Philip W. Coolidge* Trustee
- ----------------------
Philip W. Coolidge
/s/ Charles P. Biggar* Trustee
- ---------------------
Charles P. Biggar
/s/ Philip Saunders, Jr.* Trustee
- ------------------------
Philip Saunders, Jr.
/s/ S. Leland Dill* Trustee
- ------------------
S. Leland Dill
/s/ Ronald M. Petnuch* President and Treasurer
- --------------------- (Chief Executive Officer, Principal
Ronald M. Petnuch* Financial and Accounting Officer)
* By: /s/ Jay S. Neuman
-----------------
Jay S. Neuman, Secretary of BT Investment
Portfolios, as Attorney-In-Fact
<PAGE>
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.
<TABLE>
<CAPTION>
SIGNATURES TITLE
- ---------- -----
<S> <C>
/s/ Ronald M. Petnuch President and Treasurer (Chief
_____________________ Executive Officer, Principal
Ronald M. Petnuch Financial and Accounting Officer) of
each Trust and Portfolio Trust
<PAGE>
SIGNATURES TITLE
- ---------- -----
______________________ Trustee of each Trust and Portfolio
Philip W. Coolidge Trust
_____________________ Trustee of each Portfolio Trust and
Charles P. Biggar BT Institutional Funds
______________________ Trustee of each Portfolio Trust and
S. Leland Dill BT Investment Funds
______________________ Trustee of each Portfolio Trust and
Philip Saunders, Jr. BT Investment Funds
_____________________ Trustee of BT Investment Funds and
Kelvin J. Lancaster BT Pyramid Mutual Funds
______________________ Trustee of BT Institutional Funds and
Richard J. Herring BT Advisor Funds
______________________ Trustee of BT Institutional Funds and
Bruce E. Langton BT Advisor Funds
______________________ Trustee of BT Pyramid Mutual Funds,
Martin J. Gruber The Leadership Trust, and BT Advisor
Funds
______________________ Trustee of BT Pyramid Mutual Funds,
Harry Van Benschoten The Leadership Trust, and BT Advisor
Funds
</TABLE>
<PAGE>
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.
<TABLE>
<CAPTION>
SIGNATURES TITLE
- ---------- -----
<S> <C>
President and Treasurer (Chief
_____________________ Executive Officer, Principal
Ronald M. Petnuch Financial and Accounting Officer) of
each Trust and Portfolio Trust
<PAGE>
SIGNATURES TITLE
- ---------- -----
/s/ Philip W. Coolidge Trustee of each Trust and Portfolio
______________________ Trust
Philip W. Coolidge
_____________________ Trustee of each Portfolio Trust and
Charles P. Biggar BT Institutional Funds
______________________ Trustee of each Portfolio Trust and
S. Leland Dill BT Investment Funds
______________________ Trustee of each Portfolio Trust and
Philip Saunders, Jr. BT Investment Funds
_____________________ Trustee of BT Investment Funds and
Kelvin J. Lancaster BT Pyramid Mutual Funds
______________________ Trustee of BT Institutional Funds and
Richard J. Herring BT Advisor Funds
______________________ Trustee of BT Institutional Funds and
Bruce E. Langton BT Advisor Funds
______________________ Trustee of BT Pyramid Mutual Funds,
Martin J. Gruber The Leadership Trust, and BT Advisor
Funds
______________________ Trustee of BT Pyramid Mutual Funds,
Harry Van Benschoten The Leadership Trust, and BT Advisor
Funds
</TABLE>
<PAGE>
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.
<TABLE>
<CAPTION>
SIGNATURES TITLE
- ---------- -----
<S> <C>
President and Treasurer (Chief
_____________________ Executive Officer, Principal
Ronald M. Petnuch Financial and Accounting Officer) of
each Trust and Portfolio Trust
<PAGE>
SIGNATURES TITLE
- ---------- -----
______________________ Trustee of each Trust and Portfolio
Philip W. Coolidge Trust
_____________________ Trustee of each Portfolio Trust and
Charles P. Biggar BT Institutional Funds
______________________ Trustee of each Portfolio Trust and
S. Leland Dill BT Investment Funds
______________________ Trustee of each Portfolio Trust and
Philip Saunders, Jr. BT Investment Funds
/s/ Kelvin J. Lancaster Trustee of BT Investment Funds and
_____________________ BT Pyramid Mutual Funds
Kelvin J. Lancaster
______________________ Trustee of BT Institutional Funds and
Richard J. Herring BT Advisor Funds
______________________ Trustee of BT Institutional Funds and
Bruce E. Langton BT Advisor Funds
______________________ Trustee of BT Pyramid Mutual Funds,
Martin J. Gruber The Leadership Trust, and BT Advisor
Funds
______________________ Trustee of BT Pyramid Mutual Funds,
Harry Van Benschoten The Leadership Trust, and BT Advisor
Funds
</TABLE>
<PAGE>
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.
<TABLE>
<CAPTION>
SIGNATURES TITLE
- ---------- -----
<S> <C>
President and Treasurer (Chief
_____________________ Executive Officer, Principal
Ronald M. Petnuch Financial and Accounting Officer) of
each Trust and Portfolio Trust
<PAGE>
SIGNATURES TITLE
- ---------- -----
______________________ Trustee of each Trust and Portfolio
Philip W. Coolidge Trust
_____________________ Trustee of each Portfolio Trust and
Charles P. Biggar BT Institutional Funds
______________________ Trustee of each Portfolio Trust and
S. Leland Dill BT Investment Funds
______________________ Trustee of each Portfolio Trust and
Philip Saunders, Jr. BT Investment Funds
Trustee of BT Investment Funds and
______________________ BT Pyramid Mutual Funds
Kelvin J. Lancaster
______________________ Trustee of BT Institutional Funds and
Richard J. Herring BT Advisor Funds
______________________ Trustee of BT Institutional Funds and
Bruce E. Langton BT Advisor Funds
/s/ Martin J. Gruber Trustee of BT Pyramid Mutual Funds,
______________________ The Leadership Trust, and BT Advisor
Martin J. Gruber Funds
______________________ Trustee of BT Pyramid Mutual Funds,
Harry Van Benschoten The Leadership Trust, and BT Advisor
Funds
</TABLE>
<PAGE>
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.
<TABLE>
<CAPTION>
SIGNATURES TITLE
- ---------- -----
<S> <C>
President and Treasurer (Chief
_____________________ Executive Officer, Principal
Ronald M. Petnuch Financial and Accounting Officer) of
each Trust and Portfolio Trust
<PAGE>
SIGNATURES TITLE
- ---------- -----
______________________ Trustee of each Trust and Portfolio
Philip W. Coolidge Trust
_____________________ Trustee of each Portfolio Trust and
Charles P. Biggar BT Institutional Funds
______________________ Trustee of each Portfolio Trust and
S. Leland Dill BT Investment Funds
______________________ Trustee of each Portfolio Trust and
Philip Saunders, Jr. BT Investment Funds
_____________________ Trustee of BT Investment Funds and
Kelvin J. Lancaster BT Pyramid Mutual Funds
______________________ Trustee of BT Institutional Funds and
Richard J. Herring BT Advisor Funds
______________________ Trustee of BT Institutional Funds and
Bruce E. Langton BT Advisor Funds
______________________ 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,
________________________ The Leadership Trust, and BT Advisor
Harry Van Benschoten Funds
</TABLE>
<PAGE>
BT PYRAMID MUTUAL FUNDS
EXHIBIT INDEX
Exhibit Number:
1. (a) Declaration of Trust 5/
(b) Second Amended and Restated Designation of Series 5/
(c) Third Amended and Restated Establishment and
Designation of Series 5/
(d) Fourth Amended and Restated
Establishment and Designation of Series 5/
(e) Fifth Amended and Restated Establishment and
Designation of Series 5/
(f) Seventh Amended and Restated Establishment and
Designation of Series 6/
(g) Eighth Amended and Restated Establishment and
Designation of Series 7/
2. By-Laws of the Trust 5/
3. Voting Trust Agreement - None
4. Instruments Defining the Rights of Holders of the
Registrant's Shares of Beneficial Interest -
None
5. (a) Investment Advisory Agreement 6/
(b) Investment Advisory Agreements with respect to BT
RetirementPlus Fund 7/
6. (a) Distribution Agreement 6/
(b) Distributor's Contract with respect to BT
RetirementPlus Fund 7/
7. Bonus, Profit Sharing or Pension Plans - None
8. Custodian Agreement (See Exhibit 9)
9. Administration and Services Agreement 3/
10. Opinion and Consent of Kirkpatrick & Lockhart LLP, with
respect to BT RetirementPlus Fund 7/
11. Consent of Independent Accountants - Not Applicable
12. Financial Statements Omitted from Prospectus - None
13. Investment representation letters of initial shareholders
of the Trust 1/
14. Prototype Retirement Plan - None
15. (a) Plan of Distribution pursuant to Rule 12b-1 1/
(b) Amended Plan of Distribution 6/
16. Schedule for Computation of Performance Quotations 1/
17. Financial Data Schedule - None
18. (a) Multiple Class Allocation Plan Pursuant to Rule
18f-3 6/
(b) Multiple Class Allocation Plan Pursuant to Rule 18f-3,
with respect to BT RetirementPlus Fund 7/
<PAGE>
- --------------------------
1/ Incorporated by reference herein from Pre-Effective Amendment No. 1 to
this Registration Statement as filed with the SEC on June 9, 1992.
2/ Incorporated by reference herein from Post-Effective Amendment No. 1 to
this Registration Statement as filed with the SEC on August 17, 1992.
3/ Incorporated by reference herein from Post-Effective Amendment No. 5 to
this Registration Statement as filed with the SEC on April 30, 1993.
4/ Incorporated by reference herein from Post-Effective Amendment No. 4 to
this Registration Statement as filed with the SEC on April 28, 1995.
5/ Incorporated by reference herein from Post-Effective Amendment No. 5 to
this Registration Statement as filed with the SEC on July 31, 1995.
6/ Incorporated by reference herein from Post-Effective Amendment No. 14
to this Registration Statement as filed with the SEC on September 27,
1996.
7/ Filed herein.
Exhibit 1(g)
BT PYRAMID MUTUAL FUNDS
Eighth Amended and Restated Establishment and
Designation of Series of Shares of
Beneficial Interest (par value $0.001 per share)
as of December 11, 1996
Pursuant to Sections 6.9 and 9.3 of the Amended and Restated
Declaration of Trust, dated as of February 28, 1992 (the "Declaration of
Trust"), of the BT Pyramid Mutual Funds (the "Trust"), the Trustees of the Trust
hereby amend and restate the Seventh Amended and Restated Establishment and
Designation of Series of Shares of Beneficial Interest (par value $0.001 per
share), dated as of December 11, 1996 to designate a New Series, BT
RetirementPlus Fund, with two classes of shares referred to as the "Investment
Class and "Institutional Class. " The Fund and the Classes shall have the
following special and relative rights:
1. The Funds and Classes shall be designated as follows:
BT Investment Money Market Fund
BT Investment Limited Term U.S. Government Securities Fund
BT Investment Equity 500 Index Fund
BT Institutional Asset Management Fund
BT Investment Equity Appreciation Fund-Investment Class Shares
BT Investment Equity Appreciation Fund-Advisor Class Shares
BT Retirement Plus Fund-Investment Class Shares
BT Retirement Plus Fund-Institutional Class Shares
and shall have the following special and relative rights:
2. Each Fund shall be authorized to hold cash, invest in
securities, instruments and other properties and use investment techniques as
from time to time described in the Trust's then currently effective registration
statement under the Securities Act of 1933 to the extent pertaining to the
offering of Shares of such Fund (or Class thereof). Each Share of a Fund (or
Class thereof) shall be redeemable, shall be entitled to one vote (or fraction
thereof in respect of a fractional share) on matters on which Shares of the Fund
(or Class thereof) shall be entitled to vote, shall represent a pro rata
beneficial interest in the assets allocated or belonging to the Fund (or
allocated or belonging to the Class thereof), and shall be entitled to receive
its pro rata share of the net assets of the Fund (or Class thereof) upon
liquidation of the Fund (or Class thereof), all as provided in Section 6.9 of
the Declaration of Trust. The proceeds of sales of Shares of a Fund (or Class
thereof), together with any income and gain thereon, less any diminution or
expenses thereof, shall irrevocably belong to that Fund (or allocated to the
Class thereof), unless otherwise required by law.
<PAGE>
3. Shareholders of each Fund (or Class thereof) shall vote
separately as a class on any matter to the extent required by, and any matter
shall be deemed to have been effectively acted upon with respect to the Fund (or
Class thereof) as provided in, Rule 18f-2, as from time to time in effect, under
the Investment Company Act of 1940, as amended, or any successor rule, and by
the Declaration of Trust.
4. The assets and liabilities of the Trust shall be allocated among
the Funds (or Class thereof) as set forth in Section 6.9 of the Declaration of
Trust.
5. Subject to the provisions of Section 6.9 and Article IX of the
Declaration of Trust, the Trustees (including any successor Trustees) shall have
the right at any time from time to time to reallocate assets and expenses, to
change the designation of any Fund (or Class thereof) created previously or now
or hereafter created, or otherwise to change the special and relative rights of
any Fund (or Class thereof).
IN WITNESS WHEREOF, the undersigned have signed this instrument as
of December 11, 1996. This instrument may be executed by the Trustees on
separate counterparts but shall be effective only when signed by a majority of
the Trustees.
/s/ Philip Coolidge
-------------------
Philip W. Coolidge
As Trustee and not Individually
/s/ Harry Van Benschoten
------------------------
Harry Van Benschoten
As Trustee and not Individually
/s/ Kelvin J. Lancaster
-----------------------
Kelvin J. Lancaster
As Trustee and not Individually
/s/ Martin J. Gruber
--------------------
Martin J. Gruber
As Trustee and not Individually
2
Exhibit 5(b)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of April 28, 1993 by and between BT INVESTMENT
PORTFOLIOS, a New York trust (herein called the "Trust") and BANKERS TRUST
COMPANY (herein called the "Investment Adviser").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940;
WHEREAS, the Trust desires to retain the Investment Adviser to render
investment advisory and other services to the Trust with respect to its series
of beneficial interests as listed on Exhibit A hereto (each a "Portfolio" and
collectively, the "Portfolios"), and the Investment Adviser is willing to so
render such services on the terms hereinafter set forth;
NOW, THEREFORE, this Agreement
W I T N E S S E T H:
In consideration of the promises and mutual covenants herein contained,
it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints the Investment Adviser to act
as investment adviser to the Trust for the period and on the terms set forth in
this Agreement. The Investment Adviser accepts such appointment and agrees to
render the services herein set forth for the compensation herein provided.
2. Management. Subject to the supervision of the Board of Trustees of
the Trust, the Investment Adviser will provide a continuous investment program
for each Portfolio, including investment research and management with respect to
all securities, investments, cash and cash equivalents in the Portfolio. The
Investment Adviser will determine from time to time what securities and other
investments will be purchased, retained or sold by each Portfolio. The
Investment Adviser will provide the services rendered by it hereunder in
accordance with the investment objective(s) and policies of that Portfolio as
stated in the Trust's then current Registration Statement on Form N-1A. The
Investment Adviser further agrees that it:
(a) will conform with all applicable Rules and Regulations of the
Securities and Exchange Commission (herein called the "Rules") and with the
Securities Act of 1933, the Securities Exchange Act of 1934, the Investment
Company Act of 1940 (the "1940 Act") and the Investment Advisers Act of 1940,
all as amended, and will in addition conduct its activities under this Agreement
in accordance with regulations of the Board of Governors of the Federal Reserve
System pertaining to the investment advisory activities of bank holding
companies and their subsidiaries;
<PAGE>
(b) will place orders pursuant to its investment determinations for
each Portfolio either directly with the issuer or with any broker or dealer
selected by it. In placing orders with brokers and dealers, the Investment
Adviser will use its reasonable best efforts to obtain the best net price and
the most favorable execution of its orders, after taking into account all
factors it deems relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution capability of
the broker or dealer, and the reasonableness of the commission, if any, both for
the specific transaction and on a continuing basis. Consistent with this
obligation, the Investment Adviser may, to the extent permitted by law, purchase
and sell portfolio securities to and from brokers and dealers who provide
brokerage and research services (within the meaning of Section 28(e) of the
Securities Exchange Act of 1934) to or for the benefit of any fund and/or other
accounts over which the Investment Adviser or any of its affiliates exercises
investment discretion. Subject to the review of the Trust's Board of Trustees
from time to time with respect to the extent and continuation of the policy, the
Investment Adviser is authorized to pay to a broker or dealer who provides such
brokerage and research services a commission for effecting a securities
transaction which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if the Investment
Adviser determines in good faith that such commission was reasonable in relation
to the value of the brokerage and research services provided by such broker or
dealer, viewed in terms of either that particular transaction or the overall
responsibilities of the Investment Adviser with respect to the accounts as to
which it exercises investment discretion; and
(c) will maintain books and records with respect to the securities
transactions of each Portfolio and will render to the Trust's Board of Trustees
such periodic and special reports as the Board may request.
3. Services Not Exclusive. The investment management services rendered
by the Investment Adviser hereunder are not to be deemed exclusive, and the
Investment Adviser shall be free to render similar services to others so long as
its services under this Agreement are not impaired thereby.
4. Books and Records. In compliance with the requirements of Rule 31a-3
of the Rules under the 1940 Act, the Investment Adviser hereby agrees that all
records which it maintains for the Trust are the property of the Trust and
further agrees to surrender promptly to the Trust any of such records upon
request of the Trust. The Investment Adviser further agrees to preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act and to comply in full with the
requirements of Rule 204-2 under the Investment Advisers Act of 1940 pertaining
to the maintenance of books and records.
5. Expenses. During the term of this Agreement, the Investment Adviser
will pay all expenses incurred by it in connection with its activities under
this Agreement other than the cost of securities (including brokerage
commissions, if any) purchased for a Portfolio.
<PAGE>
In addition if the aggregate expenses of a Portfolio and any registered
investment company investing substantially all of its assets in the Portfolio (a
"Feeder Fund") exceed in any fiscal year of such Feeder Fund, the applicable
expense limitations imposed by the securities regulations of any state in which
the shares of such Feeder Fund are registered or qualified for sale to the
public, the Investment Adviser shall reimburse the Feeder Fund for the excess
expense to the extent required by state law.
6. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, the Trust will pay the Investment Adviser and the
Investment Adviser will accept as full compensation therefor fees, computed
daily and payable monthly, on an annual basis equal to the percentages of the
Portfolios' respective average daily net assets as listed on Exhibit A hereto.
7. Limitation of Liability of the Investment Adviser; Indemnification.
(a) The Investment Adviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by a Portfolio in connection with the
matters to which this Agreement relates, except a loss resulting from a breach
of fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Investment Adviser in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement.
(b) Subject to the exceptions and limitations contained in Section
7(c) below:
(i) the Investment Adviser (hereinafter referred to as a
"Covered Person") shall be indemnified by the respective Portfolio(s) to the
fullest extent permitted by law, against liability and against all expenses
reasonably incurred or paid by him in connection with any claim, action, suit or
proceeding in which he becomes involved, as a party or otherwise, by virtue of
his being or having been the Investment Adviser of such Portfolio(s), and
against amounts paid or incurred by him in the settlement thereof;
(ii) the words "claim," "action, " "suit," or "proceeding" shall
apply to ll claims, actions, suits or proceedings (civil, criminal or other,
including appeals), actual or threatened while in office or thereafter, and the
words "liability" and "expenses" shall include, without limitation, attorneys'
fees, costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
(c) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before
which the proceeding was brought (A) to be liable to the Portfolio(s) or
its(their) investors by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office or (B) not to have acted in good faith in the reasonable belief that his
action was in the best interest of the Portfolio(s); or
<PAGE>
(ii) in the event of a settlement, unless there has been a
determination that such Covered Person did not engage in willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office,
(A) by the court or other body approving the settlement; or
(B) by at least a majority of those Trustees who are neither
Interested Persons of the Trust nor are parties to the matter based upon a
review of readily available facts (as opposed to a full trial-type inquiry); or
(C) by written opinion of independent legal counsel based
upon a review of readily available facts (as opposed to a full trial-type
inquiry); provided, however, that any investor in a Portfolio may, by
appropriate legal proceedings, challenge any such determination by the Trustees
or by independent counsel.
(d) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may now or
hereafter be entitled, shall continue as to a person who has ceased to be a
Covered Person and shall inure to the benefit of the successors and assigns of
such person. Nothing contained herein shall affect any rights to indemnification
to which Trust personnel and any other persons, other than a Covered Person, may
be entitled by contract or otherwise under law.
(e) Expenses in connection with the preparation and presentation of
a defense to any claim, suit or proceeding of the character described in
subsection (b) of this Section 7 may be paid by the Trust from time to time
prior to final disposition thereof, upon receipt of an undertaking by or on
behalf of such Covered Person that such amount will be paid over by him to the
Trust if it is ultimately determined that he is not entitled to indemnification
under this Section 7; provided, however, that either (i) such Covered Person
shall have provided appropriate security for such undertaking or (ii) the Trust
shall be insured against losses arising out of any such advance payments, or
(iii) either a majority of the Trustees who are neither Interested Persons of
the Trust nor parties to the matter, or independent legal counsel in a written
opinion, shall have determined, based upon a review of readily available facts
as opposed to a trial-type inquiry or full investigation, that there is reason
to believe that such Covered Person will be entitled to indemnification under
this Section 7.
8. Duration and Termination. This Agreement shall be effective as to a
Portfolio as of the date the Portfolio commences investment operations after
this Agreement shall have been approved by the Board of Trustees of the Trust
and the investor(s) in the Portfolio in the manner contemplated by Section 15 of
the 1940 Act and, unless sooner terminated as provided herein, shall continue
until the second anniversary of such date. Thereafter, if not terminated, this
Agreement shall continue in effect as to the Trust for successive periods of 12
months each, provided such continuance is specifically approved at least
annually (a) by the vote of a majority of those members of the Board of Trustees
of the Trust who are not parties to this Agreement or interested Persons of any
such party, cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the Board of Trustees of the Trust by vote of a Majority of
the Outstanding Voting Securities of the Trust; provided, however, that this
Agreement may be terminated by the Trust at any time, without the payment of any
<PAGE>
penalty, by the Board of Trustees of the Trust, by vote of a Majority of the
Outstanding Voting Securities of the Trust on 60 days' written notice to the
Investment Adviser, or by the Investment Adviser as to the Trust at any time,
without payment of any penalty, on 90 days' written notice to the Trust. This
Agreement will immediately terminate in the event of its assignment. (As used in
this Agreement, the terms "Majority of the Outstanding Voting Securities,"
"Interested Person" and "Assignment" shall have the same meanings as such terms
have in the 1940 Act and the rules and regulatory constructions thereunder.)
9. Amendment of this Agreement. No material term of this Agreement may
be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of a material term of this
Agreement shall be effective with respect to a Portfolio, until approved by vote
of a Majority of the Outstanding Voting Securities of that Portfolio.
10. (a) Representations and Warranties. The Investment Adviser hereby
represents and warrants as follows:
(i) The Investment Adviser is exempt from registration under
the Investment Advisers Act of 1940;
(ii) The Investment Adviser has all requisite authority to
enter into, execute, deliver and perform its obligations under, this Agreement;
(iii) This Agreement is legal, valid and binding, and
enforceable in accordance with its terms; and
(iv) The performance by the Investment Adviser of its
obligations under this Agreement does not conflict with any law to which it is
subject.
(b) Covenants. The Investment Adviser hereby covenants and agrees
that, so long as this Agreement shall remain in effect,
(i) The Investment Adviser shall remain either exempt from, or
registered under, the registration provisions of the Investment Advisers Act of
1940; and
(ii) The performance by the Investment Adviser of its
obligations under this Agreement shall not conflict with any law to which it is
then subject.
11. Notices. Any notice required to be given pursuant to this Agreement
shall be deemed duly given if delivered or mailed by registered mail, postage
<PAGE>
prepaid, (a) to the Investment Adviser at 280 Park Avenue, New York, New York
10015 or (b) to the Trust at 6 St. James Avenue, Boston, Massachusetts 02116.
12. Waiver. With full knowledge of the circumstances and the effect of
its action, the Investment Adviser hereby waives any and all rights which it may
acquire in the future against the property of any investor in any Portfolio or
any Feeder Fund, other than beneficial interests in a Portfolio or shares of
beneficial interest in a Feeder Fund at their then net asset value, which arise
out of any action or inaction of the Trust under this Agreement.
13. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby.
This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and shall be governed by the
laws of the State of New York, without reference to principles of conflicts of
law. The Trust is organized under the laws of the State of New York pursuant to
a Declaration of Trust dated March 27, 1993. No Trustee, officer or employee of
the Trust shall be personally bound by or liable hereunder, nor shall resort be
had to their private property for the satisfaction of any obligation or claim
hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
Attest: BT INVESTMENT PORTFOLIOS
/s/ (illegible) By: /s/ Philip W. Coolidge
- ------------------- --------------------------
Philip W. Coolidge
President
Attest: BANKERS TRUST COMPANY
/s/ Stephen Hart By: /s/ Michael Baresich
- ---------------- -------------------------
Stephen Hart Michael Baresich
Managing Director
<PAGE>
EXHIBIT A
BT INVESTMENT PORTFOLIOS
SCHEDULE OF FEES UNDER INVESTMENT ADVISORY AGREEMENT
Latin American Equity Portfolio 1.00%
Small Cap Portfolio 0.65%
European Equity Portfolio 0.65%
Pacific Basin Equity Portfolio 0.75%
Asset Management Portfolio II 0.65%
Asset Management Portfolio III 0.65%
Liquid Assets Portfolio 0.15%
Mortgage-Backed Securities Portfolio 0.30%
Global High Yield Securities Portfolio 0.80%
International Bond Portfolio 0.65%
RetirementPlus Portfolio TBA
<PAGE>
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of August 6, 1996 by and between BT PYRAMID MUTUAL
FUNDS, a Massachusetts business trust (herein called the "Trust") and BANKERS
TRUST COMPANY (herein called the "Investment Adviser").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940;
WHEREAS, the Trust desires to retain the Investment Adviser to render
investment advisory and other services to the Trust with respect to certain of
its series of shares of beneficial interests as may currently exist or be
created in the future (each, a "Fund") as listed on Exhibit A hereto, and the
Investment Adviser is willing to so render such services on the terms
hereinafter set forth;
NOW, THEREFORE, this Agreement
W I T N E S S E T H:
In consideration of the promises and mutual covenants herein contained,
it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints the Investment Adviser to act
as investment adviser to each Fund for the period and on the terms set forth in
this Agreement. The Investment Adviser accepts such appointment and agrees to
render the services herein set forth for the compensation herein provided.
2. Management. Subject to the supervision of the Board of Trustees of
the Trust, the Investment Adviser will provide a continuous investment program
for each Fund, including investment research and management with respect to all
securities, investments, cash and cash equivalents in the Fund. The Investment
Adviser will determine from time to time what securities and other investments
will be purchased, retained or sold by each Fund. The Investment Adviser will
provide the services rendered by it hereunder in accordance with the investment
objective(s) and policies of each Fund as stated in the Fund's then-current
prospectus and statement of additional information (or the Fund's then-current
registration statement on Form N-1A as filed with the Securities and Exchange
Commission (the "SEC")) and the then-current offering memorandum if the Fund is
not registered under the 1933 Act. The Investment Adviser further agrees that
it:
(a) will conform with all applicable rules and regulations of the
SEC (herein called the "Rules") and with the 1933 Act, as amended; the
Securities Exchange Act of 1934, as amended (the "1934 Act"); the Investment
Company Act of 1940, as amended (the "1940 Act"); and the Investment Advisers
Act of 1940, as amended (the "Advisers Act"), and will in addition conduct its
activities under this Agreement in accordance with regulations of the Board of
<PAGE>
Governors of the Federal Reserve System pertaining to the investment advisory
activities of bank holding companies and their subsidiaries;
(b) will place orders pursuant to its investment determinations for
each Fund either directly with the issuer or with any broker or dealer selected
by it. In placing orders with brokers and dealers, the Investment Adviser will
use its reasonable best efforts to obtain the best net price and the most
favorable execution of its orders, after taking into account all factors it
deems relevant, including the breadth of the market in the security, the price
of the security, the financial condition and execution capability of the broker
or dealer, and the reasonableness of the commission, if any, both for the
specific transaction and on a continuing basis. Consistent with this obligation,
the Investment Adviser may, to the extent permitted by law, purchase and sell
portfolio securities to and from brokers and dealers who provide brokerage and
research services (within the meaning of Section 28(e) of the 1934 Act) to or
for the benefit of any fund and/or other accounts over which the Investment
Adviser or any of its affiliates exercises investment discretion. Subject to the
review of the Trust's Board of Trustees from time to time with respect to the
extent and continuation of the policy, the Investment Adviser is authorized to
pay to a broker or dealer who provides such brokerage and research services a
commission for effecting a securities transaction which is in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction if the Investment Adviser determines in good faith that such
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the overall responsibilities of the Investment Adviser
with respect to the accounts as to which it exercises investment discretion; and
(c) will maintain books and records with respect to the securities
transactions of each Fund and will render to the Trust's Board of Trustees such
periodic and special reports as the Board may request.
3. Services Not Exclusive. The investment advisory services rendered by
the Investment Adviser hereunder are not to be deemed exclusive, and the
Investment Adviser shall be free to render similar services to others so long as
its services under this Agreement are not impaired thereby.
4. Books and Records. In compliance with the requirements of Rule 31a-3
of the Rules under the 1940 Act, the Investment Adviser hereby agrees that all
records which it maintains for the Trust are the property of the Trust and
further agrees to surrender promptly to the Trust any of such records upon
request of the Trust. The Investment Adviser further agrees to preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act and to comply in full with the
requirements of Rule 204-2 under the Advisers Act pertaining to the maintenance
of books and records.
5. Expenses. During the term of this Agreement, the Investment Adviser
will pay all expenses incurred by it in connection with its activities under
this Agreement other than the cost of purchasing securities (including brokerage
commissions, if any) for the Fund.
<PAGE>
In addition, if the aggregate expenses of a Fund exceed, in its fiscal
year, the applicable expense limitations imposed by the securities regulations
of any state in which the shares of any Fund are registered or qualified for
sale to the public, the Investment Adviser shall reimburse the Fund for the
excess expense to the extent required by state law.
6. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, the Trust will pay the Investment Adviser, and the
Investment Adviser will accept as full compensation therefor, fees, computed
daily and payable monthly, on an annual basis equal to the percentage set forth
on Exhibit A hereto of that Fund's average daily net assets.
7. Limitation of Liability of the Investment Adviser; Indemnification.
(a) The Investment Adviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by a Fund in connection with the matters
to which this Agreement relates, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Investment Adviser in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement.
(b) Subject to the exceptions and limitations contained in Section
7(c) below:
(i) the Investment Adviser (hereinafter referred to as a
"Covered Person") shall be indemnified by the respective Fund to the fullest
extent permitted by law, against liability and against all expenses reasonably
incurred or paid by him in connection with any claim, action, suit or proceeding
in which he becomes involved, as a party or otherwise, by virtue of his being or
having been the Investment Adviser of the Fund, and against amounts paid or
incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall
apply to all claims, actions, suits or proceedings (civil, criminal or other,
including appeals), actual or threatened while in office or thereafter, and the
words "liability" and "expenses" shall include, without limitation, attorneys'
fees, costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
(c) No indemnification shall be provided hereunder to a Covered
Person:
(i) who shall have been adjudicated by a court or body before
which the proceeding was brought (A) to be liable to the Trust or to one or more
Funds' investors by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his office or (B)
not to have acted in good faith in the reasonable belief that his action was in
the best interest of a Fund; or
(ii) in the event of a settlement, unless there has been a
determination that such Covered Person did not engage in willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office,
<PAGE>
(A) by the court or other body approving the settlement;
or
(B) by at least a majority of those Trustees who are
neither Interested Persons of the Trust nor are parties to the matter based upon
a review of readily available facts (as opposed to a full trial-type inquiry);
or
(C) by written opinion of independent legal counsel based
upon a review of readily available facts (as opposed to a full trial-type
inquiry); provided, however, that any investor in a Fund may, by appropriate
legal proceedings, challenge any such determination by the Trustees or by
independent counsel.
(d) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may now or
hereafter be entitled, shall continue as to a person who has ceased to be a
Covered Person and shall inure to the benefit of the successors and assigns of
such person. Nothing contained herein shall affect any rights to indemnification
to which Trust personnel and any other persons, other than a Covered Person, may
be entitled by contract or otherwise under law.
(e) Expenses in connection with the preparation and presentation of
a defense to any claim, suit or proceeding of the character described in
subsection (b) of this Section 7 may be paid by the Trust on behalf of the
respective Fund from time to time prior to final disposition thereof, upon
receipt of an undertaking by or on behalf of such Covered Person that such
amount will be paid over by him to the Trust on behalf of the respective Fund if
it is ultimately determined that he is not entitled to indemnification under
this Section 7; provided, however, that either (i) such Covered Person shall
have provided appropriate security for such undertaking or (ii) the Trust shall
be insured against losses arising out of any such advance payments, or (iii)
either a majority of the Trustees who are neither Interested Persons of the
Trust nor parties to the matter, or independent legal counsel in a written
opinion, shall have determined, based upon a review of readily available facts
as opposed to a trial-type inquiry or full investigation, that there is reason
to believe that such Covered Person will be entitled to indemnification under
this Section 7.
8. Duration and Termination. This Agreement shall be effective as to a
Fund as of the date the Fund commences investment operations after this
Agreement shall have been approved by the Board of Trustees of the Trust with
respect to that Fund and the investor(s) in the Fund in the manner contemplated
by Section 15 of the 1940 Act and, unless sooner terminated as provided herein,
shall continue until the second anniversary of such date. Thereafter, if not
terminated, this Agreement shall continue in effect as to such Fund for
successive periods of 12 months each, provided such continuance is specifically
approved at least annually (a) by the vote of a majority of those members of the
Board of Trustees of the Trust who are not parties to this Agreement or
Interested Persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval, and (b) by the Board of Trustees of the
Trust by "Vote of a Majority of the Outstanding Voting Securities" of the Trust;
provided, however, that this Agreement may be terminated by the Trust at any
<PAGE>
time, without the payment of any penalty, by the Board of Trustees of the Trust,
by Vote of a Majority of the Outstanding Voting Securities of the Trust on 60
days' written notice to the Investment Adviser, or by the Investment Adviser as
to the Trust at any time, without payment of any penalty, on 90 days' written
notice to the Trust. This Agreement will immediately terminate in the event of
its assignment. (As used in this Agreement, the terms "Vote of a Majority of the
Outstanding Voting Securities," "Interested Person" and "Assignment" shall have
the same meanings as such terms have in the 1940 Act and the rules and
regulatory constructions thereunder.)
9. Amendment of this Agreement. No material term of this Agreement may
be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of a material term of this
Agreement shall be effective with respect to a Fund, until approved by Vote of a
Majority of the Outstanding Voting Securities of that Fund.
10. (a) Representations and Warranties. The Investment Adviser hereby
represents and warrants as follows:
(i) The Investment Adviser is exempt from registration under
the 1940 Act;
(ii) The Investment Adviser has all requisite authority to
enter into, execute, deliver and perform its obligations under, this Agreement;
(iii) This Agreement is legal, valid and binding, and
enforceable in accordance with its terms; and
(iv) The performance by the Investment Adviser of its
obligations under this Agreement does not conflict with any law to which it is
subject.
(b) Covenants. The Investment Adviser hereby covenants and agrees
that, so long as this Agreement shall remain in effect,
(i) The Investment Adviser shall remain either exempt from, or
registered under, the registration provisions of the Advisers Act; and
(ii) The performance by the Investment Adviser of its
obligations under this Agreement shall not conflict with any law to which it is
then subject.
11. Notices. Any notice required to be given pursuant to this Agreement
shall be deemed duly given if delivered or mailed by registered mail, postage
prepaid, (a) to the Investment Adviser, Four Albany Street, 2nd Floor, (Between
Greenwich and Washington Streets), New York, NY 10006 or (b) to the Trust, c/o
Signature Financial Group, Inc., 6 St. James Avenue, 9th Floor, Boston,
Massachusetts 02116.
<PAGE>
12. Waiver. With full knowledge of the circumstances and the effect of
its action, the Investment Adviser hereby waives any and all rights which it may
acquire in the future against the property of any investor in a Fund, other than
shares in that Fund, which arise out of any action or inaction of the Trust
under this Agreement.
13. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby.
This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and shall be governed by the
laws of the Commonwealth of Massachusetts, without reference to principles of
conflicts of law. The Trust is organized under the laws of the Commonwealth of
Massachusetts pursuant to a Declaration of Trust dated February 29, 1992. No
Trustee, officer or employee of the Trust shall be personally bound by or liable
hereunder, nor shall resort be had to their private property for the
satisfaction of any obligation or claim hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
BT PYRAMID MUTUAL FUNDS
By:___________________________
Philip W. Coolidge
President
BANKERS TRUST COMPANY
By:___________________________
Name:
Title:
<PAGE>
EXHIBIT A
INVESTMENT ADVISORY ACREEMENT BETWEEN
BT PYRAMID MUTUAL FUNDS AND BANKERS TRUST COMPANY
Investment
Fund Advisory Fee
BT Investment Equity Appreciation Fund 0.65%
BT RetirementPlus Fund TBA
Exhibit 6(b)
BT PYRAMID MUTUAL FUNDS
DISTRIBUTOR'S CONTRACT
AGREEMENT made as of this 30th day of September, 1996, by and between
BT PYRAMID MUTUAL FUNDS (the "Trust"), a Massachusetts business trust, and
Edgewood Services, Inc. ("EDGEWOOD"), a New York corporation.
In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. The Trust hereby appoints EDGEWOOD as its principal underwriter, to act as
agent in selling and distributing shares of the Trust which may be offered in
one or more series (the "Funds") consisting of one or more classes (the
"Classes") of shares (the "Shares"), as described and set forth on one or more
exhibits to this Agreement, at the current offering price thereof as described
and set forth in the current Prospectuses of the Trust. EDGEWOOD hereby accepts
such appointment and agrees to provide such other services for the Trust, if
any, and accept such compensation from the Trust, if any, as set forth in the
applicable exhibits to this Agreement.
2. The sale of any Shares may be suspended without prior notice whenever in the
judgment of the Trust it is in its best interest to do so. In addition, the
Trust and EDGEWOOD reserve the right to reject any purchase order.
3. Neither EDGEWOOD nor any other person is authorized by the Trust to give any
information or to make any representation relative to any Shares other than
those contained in the Registration Statement, Prospectuses, or Statements of
Additional Information ("SAIs") filed with the Securities and Exchange
Commission, as the same may be amended from time to time, or in any supplemental
information to said Prospectuses or SAIs approved by the Trust. EDGEWOOD agrees
that any other information or representations other than those specified above
which it or any dealer or other person who purchases Shares through EDGEWOOD may
make in connection with the offer or sale of Shares, shall be made entirely
without liability on the part of the Trust. With respect to the duties and
services provided for in this Agreement, no person or dealer, other than
EDGEWOOD, is authorized to act as agent for the Trust for any purpose. EDGEWOOD
agrees that in offering or selling Shares as agent of the Trust, it will, in all
respects, duly conform to all applicable state and federal laws and the rules
and regulations of the National Association of Securities Dealers, Inc.,
including its Rules of Fair Practice. EDGEWOOD will submit to the Trust copies
of all sales literature before using the same and will not use such sales
literature if disapproved by the Trust.
4. This Agreement is effective with respect to each Class as of the date of
execution of the applicable exhibit and shall continue in effect with respect to
each Class presently set forth on an exhibit and any subsequent Classes added
<PAGE>
pursuant to an exhibit during the initial term of this Agreement for one year
from the date set forth above, and thereafter for successive periods of one year
if such continuance is approved at least annually by the Trustees of the Trust
including a majority of the members of the Board of Trustees of the Trust who
are not interested persons of the Trust and have no direct or indirect financial
interest in the operation of any Distribution Plan relating to the Trust or in
any related documents to such Plan ("Disinterested Trustees") cast in person at
a meeting called for that purpose. If a Class is added after the first annual
approval by the Trustees as described above, this Agreement will be effective as
to that Class upon execution of the applicable exhibit and will continue in
effect until the next annual approval of this Agreement by the Trustees and
thereafter for successive periods of one year, subject to approval as described
above.
5. This Agreement may be terminated with regard to a particular Fund or Class at
any time, without the payment of any penalty, by the vote of a majority of the
Disinterested Trustees or by a majority of the outstanding voting securities of
the particular Fund or Class on not more than sixty (60) days' written notice to
any other party to this Agreement. This Agreement may be terminated with regard
to a particular Fund or Class by EDGEWOOD on sixty (60) days' written notice to
the Trust.
6. This Agreement may not be assigned by EDGEWOOD and shall automatically
terminate in the event of an assignment by EDGEWOOD as defined in the Investment
Company Act of 1940, as amended, provided, however, that EDGEWOOD may employ
such other person, persons, corporation or corporations as it shall determine in
order to assist it in carrying out its duties under this Agreement.
7. EDGEWOOD shall not be liable to the Trust for anything done or omitted by it,
except acts or omissions involving willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties imposed by this Agreement.
8. This Agreement may be amended at any time by mutual agreement in writing of
all the parties hereto, provided that such amendment is approved by the Trustees
of the Trust including a majority of the Disinterested Trustees of the Trust
cast in person at a meeting called for that purpose.
9. This Agreement shall be construed in accordance with and governed by the laws
of the State of New York.
10. (a) Subject to the conditions set forth below, the Trust agrees to
indemnify and hold harmless EDGEWOOD and each person, if any, who
controls EDGEWOOD within the meaning of Section 15 of the Securities Act
of 1933 and Section 20 of the Securities Exchange Act of 1934, as
amended, against any and all loss, liability, claim, damage and expense
whatsoever (including but not limited to any and all expenses whatsoever
reasonably incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever) arising out
2
<PAGE>
of or based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, any Prospectuses
or SAIs (as from time to time amended and supplemented) or the omission
or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading,
unless such statement or omission was made in reliance upon and in
conformity with written information furnished to the Trust about EDGEWOOD
by or on behalf of EDGEWOOD expressly for use in the Registration
Statement, any Prospectuses and SAIs or any amendment or supplement
thereof.
If any action is brought against EDGEWOOD or any controlling person
thereof with respect to which indemnity may be sought against the Trust
pursuant to the foregoing paragraph, EDGEWOOD shall promptly notify the
Trust in writing of the institution of such action and the Trust shall
assume the defense of such action, including the employment of counsel
selected by the Trust and payment of expenses. EDGEWOOD or any such
controlling person thereof shall have the right to employ separate
counsel in any such case, but the fees and expenses of such counsel shall
be at the expense of EDGEWOOD or such controlling person unless the
employment of such counsel shall have been authorized in writing by the
Trust in connection with the defense of such action or the Trust shall
not have employed counsel to have charge of the defense of such action,
in any of which events such fees and expenses shall be borne by the
Trust. Anything in this paragraph to the contrary notwithstanding, the
Trust shall not be liable for any settlement of any such claim of action
effected without its written consent. The Trust agrees promptly to notify
EDGEWOOD of the commencement of any litigation or proceedings against the
Trust or any of its officers or Trustees or controlling persons in
connection with the issue and sale of Shares or in connection with the
Registration Statement, Prospectuses, or SAIs.
(b) EDGEWOOD agrees to indemnify and hold harmless the Trust, each of its
Trustees, each of its officers who have signed the Registration Statement
and each other person, if any, who controls the Trust within the meaning
of Section 15 of the Securities Act of 1933, against any and all loss,
liability, claims, damage and expense whatsoever (including but not
limited to any and all expenses whatsoever reasonably incurred in
investigating, preparing or defending against any litigation, commenced
or threatened, or any claim whatsoever) arising out of or based upon any
untrue statement or any alleged untrue statement of material fact
contained in the Registration Statement, any Prospectuses or SAIs (as
from time to time amended or supplemented) or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only with
respect to alleged statements or alleged omissions or statements or
omissions, if any, made in the Registration Statement or any Prospectus,
SAI, or any amendment or supplement thereof in reliance upon, and in
conformity with, information furnished to the Trust about EDGEWOOD by or
on behalf of EDGEWOOD expressly for use in the Registration Statement or
any Prospectus, SAI, or any amendment or supplement thereof. In case any
action shall be brought against the Trust or any other person so
indemnified based on the Registration Statement or any Prospectus, SAI,
3
<PAGE>
or any amendment or supplement thereof, and with respect to which
indemnity may be sought against EDGEWOOD, EDGEWOOD shall have the rights
and duties given to the Trust, and the Trust and each other person so
indemnified shall have the rights and duties given to EDGEWOOD by the
provisions of subsection (a) above.
(c) Nothing herein contained shall be deemed to protect any person
against liability to the Trust or its shareholders to which such person
would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of the duties of such person or by
reason of the reckless disregard by such person of the obligations and
duties of such person under this Agreement.
(d) Insofar as indemnification for liabilities may be permitted pursuant
to Section 17 of the Investment Company Act of 1940, as amended, for
Trustees, officers, EDGEWOOD, and controlling persons of the Trust by the
Trust pursuant to this Agreement, the Trust is aware of the position of
the Securities and Exchange Commission as set forth in the Investment
Company Act Release No. IC-11330. Therefore, the Trust undertakes that in
addition to complying with the applicable provisions of this Agreement,
in the absence of a final decision on the merits by a court or other body
before which the proceeding was brought, that an indemnification payment
will not be made unless in the absence of such a decision, a reasonable
determination based upon factual review has been made (i) by a majority
vote of a quorum of non-party Disinterested Trustees, or (ii) by
independent legal counsel in a written opinion that the indemnitee was
not liable for an act of willful misfeasance, bad faith, gross negligence
or reckless disregard of duties. The Trust further undertakes that
advancement of expenses incurred in the defense of a proceeding (upon
undertaking for repayment unless it is ultimately determined that
indemnification is appropriate) against an officer, Trustee, EDGEWOOD or
controlling person of the Trust will not be made absent the fulfillment
of at least one of the following conditions: (i) the indemnitee provides
security for his undertaking; (ii) the Trust is insured against losses
arising by reason of any lawful advances; or (iii) a majority of a quorum
of non-party Disinterested Trustees or independent legal counsel in a
written opinion makes a factual determination that there is reason to
believe the indemnitee will be entitled to indemnification.
11. EDGEWOOD is hereby expressly put on notice of the limitation of liability as
set forth in the Declaration of Trust and agrees that the obligations assumed by
the Trust pursuant to this Agreement shall be limited in any case to the Trust
and its assets and EDGEWOOD shall not seek satisfaction of any such obligation
from the shareholders of the Trust, the Trustees, officers, employees or agents
of the Trust, or any of them.
12. This Agreement will become binding on the parties hereto upon the execution
of the attached exhibits to the Agreement.
13. EDGEWOOD shall be responsible for reviewing and making any filings of
advertisements and sales literature relating to the Funds that have been
furnished to EDGEWOOD.
4
<PAGE>
14. EDGEWOOD agrees on behalf of itself and its employees to treat
confidentially and as proprietary information of the Trust all records and other
information not otherwise publicly available relative to the Trust and its
prior, present or potential shareholders and not to use such records and
information for any purpose other than performance of its responsibilities and
duties hereunder, except after prior notification to and approval in writing by
the Trust, which approval shall not be unreasonably withheld and may not be
withheld where EDGEWOOD may be exposed to civil or criminal contempt proceedings
for failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Trust.
15. EDGEWOOD and the Trust each hereby represents and warrants to the other that
it has all the requisite authority to enter into, execute, deliver and perform
its obligations under this Agreement and that, with respect to it, this
Agreement is legal, valid and binding, and enforceable in accordance with its
terms.
5
<PAGE>
Exhibit A
to the
Distributor's Contract
BT PYRAMID MUTUAL FUNDS
As Last Amended: December 11, 1996
The following provisions are hereby incorporated and made part of the
Distributor's Contract dated as of September 30, 1996, between BT Pyramid Mutual
Funds and Edgewood Services, Inc. with respect to the Funds and Classes of
shares set forth in Schedule A to this Exhibit, attached hereto (collectively,
"Funds").
1. The Trust hereby appoints EDGEWOOD to engage in activities principally
intended to result in the sale of shares of the Funds ("Shares"). Pursuant to
this appointment, EDGEWOOD is authorized to select a group of financial
institutions ("Financial Institutions") to sell Shares at the current offering
price thereof as described and set forth in the respective prospectuses of the
Trust and/or provide services and shareholder account maintenance services to
Fund shareholders.
2. During the term of this Agreement, the Trust will pay EDGEWOOD for services
pursuant to this Agreement, a monthly fee computed at the annual rate indicated
on Schedule A on the average aggregate net asset value of the Shares held during
the month. For the month in which this Agreement becomes effective or
terminates, there shall be an appropriate proration of any fee payable on the
basis of the number of days that the Agreement is in effect during the month.
3. EDGEWOOD may from time-to-time and for such periods as it deems appropriate
reduce its compensation to the extent any Fund's expenses exceed such lower
expense limitation as EDGEWOOD may, by notice to the Trust, voluntarily declare
to be effective.
4. EDGEWOOD will enter into separate written agreements with various firms to
provide certain of the services set forth in Paragraph 1 herein. EDGEWOOD, in
its sole discretion, may pay Financial Institutions a periodic fee in respect of
Shares owned from time to time by their clients or customers. The schedules of
such fees and the basis upon which such fees will be paid shall be determined
from time to time by EDGEWOOD in its sole discretion.
<PAGE>
5. EDGEWOOD will prepare reports to the Board of Trustees of the Trust on a
quarterly basis showing amounts expended hereunder including amounts paid to
Financial Institutions and the purpose for such expenditures.
In consideration of the mutual covenants set forth in the Distributor's
Contract dated as of September 30, 1996 between BT Pyramid Mutual Funds and
EDGEWOOD, BT Pyramid Mutual Funds executes and delivers this Exhibit on behalf
of the Funds, and with respect to the Classes set forth in Schedule A to this
Exhibit.
Witness the due execution hereof this 30th day of September, 1996.
ATTEST: BT Pyramid Mutual Funds
/s/ Jay S. Neuman By: /s/ Charles L. Davis
- ------------------- --------------------------
[Secretary] [Vice President]
(SEAL)
ATTEST: Edgewood Services, Inc.
/s/ S. Elliott Cohan By: /s/ R. Jeffrey Niss
- -------------------- ---------------------------
[Secretary] [Senior Vice President]
(SEAL)
<PAGE>
SCHEDULE A
OF
EXHIBIT A
TO THE
DISTRIBUTOR'S CONTRACT
As Last Amended: December 11, 1996
The provisions of the Distributor's Contract between BT Pyramid Mutual Funds and
Edgewood Services, Inc. shall be effective with respect to each Fund and Class
as of the date set forth below.
Name of Fund Effective Date Fee
- ------------ -------------- ---
BT Investment Money Market Fund September 30, 1996 0.20%
BT Investment Equity 500 Index Fund September 30, 1996 0.20%
BT Investment Limited Term U.S. Government September 30, 1996 0.20%
Securities Fund
BT Investment Equity Appreciation Fund
Investment Class September 30, 1996 0.20%
Advisor Class September 30, 1996 0.50%
BT Institutional Asset Management Fund September 30, 1996 0.20%
BT RetirementPlus Fund December 11, 1996 0.20%
Investment Class
<PAGE>
Exhibit B
to the
Distributor's Contract
BT PYRAMID MUTUAL FUNDS
In consideration of the mutual covenants set forth in the Distributor's
Contract dated September 30, 1996 between BT PYRAMID MUTUAL FUNDS and EDGEWOOD,
BT PYRAMID MUTUAL FUNDS executes and delivers this Exhibit on behalf of the
Funds and Classes of shares first set forth in Schedule A to this Exhibit,
attached hereto.
Witness the due execution hereof this 30th day of September, 1996.
ATTEST: BT Pyramid Mutual Funds
/s/ Jay S. Neuman By: /s/ Charles L. Davis
- ----------------- ------------------------
[Secretary] [Vice President]
(SEAL)
ATTEST: Edgewood Services, Inc.
/s/ S. Elliott Cohan By: /s/ R. Jeffrey Niss
- -------------------- -------------------------
[Secretary] [Senior Vice President]
(SEAL)
<PAGE>
SCHEDULE A
OF
EXHIBIT B
TO THE
DISTRIBUTOR'S CONTRACT
The provisions of the Distributor's Contract between BT Pyramid Mutual
Funds and Edgewood Services, Inc. shall be effective with respect to each Fund
and Class as of the date set forth below.
Name of Fund Effective Date
------------ --------------
BT Retirement PlusFund December 11, 1996
Institutional Class
<PAGE>
Kirkpatrick & Lockhart LLP
One International Place
Boston, Massachusetts 02110-2637
(617) 261-3100
(617) 261-3175
February 24, 1997
BT Pyramid Mutual Funds
130 Liberty Street
Bankers Trust Plaza
New York, New York
Re: BT Retirement Plus Fund
Ladies and Gentlemen:
BT Pyramid Mutual Funds (the "Trust") is an unincorporated voluntary
association organized under the laws of The Commonwealth of Massachusetts on
March 4, 1992. You have requested our opinion in connection with the Trust's
issuance of shares of beneficial interest (the "Shares") in the series
designated as BT Retirement Plus Fund (the "Fund").
We have, as special counsel to the Trust, participated in certain
proceedings related to the Trust. We have examined copies, either certified or
otherwise proved to be genuine, of the Declaration of Trust, and any amendments
thereto, and by-laws of the Trust, the minutes of meetings of its board of
trustees and other documents relating to its organization and operation. We have
also received the certificate of an officer of the Fund as attached hereto and
have, with your consent, relied upon the information set forth in such
certificate. Based upon the foregoing, and subject to compliance with the
Securities Act of 1933, the Investment Company Act of 1940 and applicable state
laws regulating the offer and sale of securities, it is our opinion that the
unlimited number of Shares of the Fund that are currently being registered may
be legally and validly issued in accordance with the Trust's Declaration of
Trust, as amended, and by-laws; and when so issued, the Shares will be legally
issued, fully paid and non-assessable by the Trust.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust. The
Declaration of Trust, as amended, provides that "[n]o Shareholder shall be
subject to any personal liability whatsoever to any Person [defined as
individuals, corporations, partnerships, trusts, associations, joint ventures
and other entities, whether or not legal entities, and governments and agencies
and political subdivisions thereof, whether domestic or foreign] in connection
with Trust Property or the acts, obligations or affairs of the Trust...and all
such Persons shall look solely to the Trust Property for satisfaction of claims
of any nature arising in connection with the affairs of the Trust." The
Declaration of Trust also
<PAGE>
BT Pyramid Mutual Funds
February 24, 1997
page two
provides that "[e]very written obligation contract, instrument, artifact, Share,
other security of the Trust or undertaking made or issued by the Trustees shall
recite...that the obligations of any such instrument are not binding upon any of
the Trustees or Shareholders individually, but bind only the Trust estate." The
Declaration of Trust further provides that the Trust "shall indemnify and hold
each Shareholder harmless from and against all claims and liabilities to which
such Shareholder may become subject by reason of his being or having been a
Shareholder, and shall reimburse such Shareholder for all legal and other
expenses reasonably incurred by him in connection with any such claim or
liability...[provided that] no Trust Property shall be used to indemnify or
reimburse any Shareholder of any shares of any series other than Trust Property
allocated or belonging to that series." Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Trust or series would be unable to meet its
obligations.
We hereby consent to the filing of this opinion in connection with
Post-Effective Amendment No. 14 to the Trust's Registration Statement on Form
N-1A (File No. 33-45973) to be filed with the Securities and Exchange
Commission. We also consent to the reference to our firm under the caption
"Counsel" in the Statement of Additional Information filed as part of the
Registration Statement.
Very truly yours,
Kirkpatrick & Lockhart LLP
By: /s/ Joel D. Almquist
------------------------
Joel D. Almquist
Exhibit 18(b)
BT PYRAMID MUTUAL FUNDS
Multiple Class Expense Allocation Plan Adopted Pursuant to Rule 18f-3
WHEREAS, BT Pyramid Mutual Funds, a Massachusetts business trust (the '"Trust"),
engages in business as an open-end management investment company and is
registered as such under the Investment Company Act of l940, as amended (the
"Act"); and
WHEREAS, the Trust is authorized to (i) issue shares of beneficial interest
("Shares") in separate series, with the Shares of each such series representing
the interests in a separate portfolio of securities and other assets, and (ii)
divide the Shares within each series into two or more Classes; and
WHEREAS, the Trust has established six series as of the date hereof: BT
Investment Money Market Fund, BT Investment Equity 500 Index Fund, BT Investment
Limited Term U.S. Government Securities Fund, BT Institutional Asset Management
Fund, BT Investment Equity Appreciation Fund, and BT RetirementPlus Fund (such
portfolios being referred to collectively herein as the "Initial Series," such
series, together with all other series subsequently established by the Trust and
made subject to this Plan, being referred to herein individually as a "Series"
and collectively as the "Series"); and
WHEREAS, Shares of the BT Investment Equity Appreciation Fund Series of the
Trust have been divided into two Classes, such Classes having been established
and designated as "No-Load] Class" shares and "[Load] Class" shares (each a
"Class," such Classes together with all other Classes subsequently established
by the Trust and made subject to this Plan, being referred to herein
individually as a "Class" and collectively as the "Classes"); and
WHEREAS, Shares of the BT RetirementPlus Fund series of the Trust have been
divided into two Classes, such Classes having been established and designated as
"Investment Class" shares and "Institutional Class" shares (each a "Class," such
Classes together with all other Classes subsequently established by the Trust
and made subject to this Plan, being referred to herein individually as a
"Class" and collectively as the "Classes"); and
WHEREAS, the Board of Trustees as a whole, and the Trustees who are not
Interested Persons (as defined in the Act) of the Trust (the "Qualified
Trustees"), having determined in the exercise of their reasonable business
judgment that this Plan is in the best interest of each Class of each Initial
Series, each Initial Series as a whole, and the Trust as a whole, have
accordingly approved this Plan.
<PAGE>
NOW, THEREFORE, the Trust hereby adopts this Plan in accordance with Rule l8f-3
under the Act, on the following terms and conditions:
1. Class Differences.
Each Class of Shares of an Initial Series shall represent interests in
the same portfolio of investments of such Initial Series and shall be
identical in all respects, except that each Class shall differ with
respect to: (i) arrangements for shareholder services or the
distribution of Shares, or both, and the allocation of expenses, as
provided for in Section 2 of this Plan; (ii) the exclusive right of a
Class to vote on certain matters relating to the Distribution and
Services Plan adopted by the Trust pursuant to Rule 12b-1 under the Act
with respect to such Class, if any; (iii) such differences relating to
purchase minimums, sales charges, eligible investors, conversion
features and exchange privileges as may be set forth in the
prospectuses and statements of additional information of the Initial
Series, as the same may be amended or supplemented from time to time
(the "Prospectuses" and "SAIs," respectively); and (iv) the designation
of each Class of Shares.
2. Allocation of Expenses.
a) Class Expenses. Expenses relating to different arrangement for
shareholder services or the distribution of Shares, or both,
shall be allocated to and paid by that Class. A Class may pay a
different share of the other expenses, not including advisory
or custodial fees or other expenses related to the management
of a Series' assets, if such expenses are actually incurred in
a different amount by that Class, or if the Class receives
services of a different kind or to a different degree than
other Classes. For example, expenses incurred in connection
with any meeting of shareholders of a particular Class, and
litigation expenses incurred with respect to matters affecting
only a particular Class shall be allocated to that Class.
b) Other Allocations. All other expenses of a Series shall be
allocated to each Class on the basis of the net asset value of
that Class in relation to the net asset value of the Series.
Notwithstanding the foregoing, the distributor or adviser of a
Series may waive or reimburse the expenses of a specific Class
or Classes to the extent permitted under Rule 18f-3 under the
Act.
3. Term and Termination.
a) Initial Series. This Plan shall become effective with respect
to each Class of an Initial Series as of the later of (i) the
date on which a Registration Statement with respect to the
[No-Load] Class Shares and [Load] Class Shares of such Initial
Series becomes effective under the Securities Act of 1933, as
amended, or (ii) the date on which each such Class of each
Initial Series commences offering its Shares to the public, and
shall continue in effect with respect to such Class of Shares
(subject to Section 3(c) hereof) until terminated in accordance
with the provisions of Section 3(c) hereof.
2
<PAGE>
b) Additional Series or Classes. This Plan shall become effective
with respect to any Class of an Initial Series other than the
[No-Load] Class Shares and the [Load] Class Shares and with
respect to each additional Series or Class thereof established
by the Trust after the date hereof and made subject to this
Plan, upon commencement of the initial public offering thereof,
provided that the Plan has previously been approved with
respect to such additional Series or Class by votes of a
majority of both (i) the Board of Trustees of the Trust and
(ii) the Qualified Trustees, and shall continue in effect with
respect to each such additional Series or Class (subject to
Section 3(c) hereof) until terminated in accordance with the
provisions of Section 3(c) hereof. An addendum hereto setting
forth any specific and different terms of such additional
Series or Classes shall be attached to this Plan.
c) Termination. This Plan may be terminated at any time with
respect to the Trust or any Series or Class thereof, as the
case may be, by vote of a majority of both the Trustees of the
Trust and the Qualified Trustees. The Plan may remain in effect
with respect to a Series or Class thereof even if it has been
terminated in accordance with this Section 3(c) with respect to
one or more other Series or Classes of the Trust.
4. Amendments.
Any material amendment to this Plan shall require the affirmative vote
of a majority of both the Trustees of the Trust and the Qualified
Trustees.
Dated: December 5, 1996
3
