BT PYRAMID MUTUAL FUNDS, 497, 1997-02-03

BT PYRAMID MUTUAL FUNDS
497, 1997-02-03

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o BT PYRAMID MUTUAL FUNDS o
BT Investment
Equity Appreciation Fund
Investment Class
Seeks capital growth over the long term through investment in medium-sized
companies that show growth potential. Current income is a secondary goal.
PROSPECTUS

JANUARY 31, 1997

BT Pyramid Mutual Funds (the "Trust") is an open-end management investment
company. The BT Investment Equity Appreciation Fund (the "Fund") is a
separate series of the Trust and offers two classes of shares. The shares
offered by this prospectus are the Investment Class of shares (the
"Shares"). The Fund seeks capital growth over the long-term through
investment primarily in companies with a strong profit growth orientation.
Current income is secondary to this investment objective.

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

A Statement of Additional Information ("SAI"), with respect to the Fund,
with the same date has been filed with the Securities and Exchange
Commission (`SEC'') and is incorporated herein by reference. For a free
copy of the SAI, call 1-800-730-1313 or contact the Trust at the address
below, or an Investment Professional.

Bankers Trust Company (`Bankers Trust'') is the investment adviser ( the
`Adviser'') of the Fund. Shares of the Fund are not deposits or
obligations of, or guaranteed or endorsed by, Bankers Trust or any other
banking or depository institution. Shares are not Federally guaranteed or
insured by the Federal Deposit Insurance Corporation (`FDIC''), the U.S.
government, the Federal Reserve Board or any other agency are subject to
investment risk, including the possible loss of principal amount invested.

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

Edgewood Services, Inc.
Clearing Operations o P.O. Box 897 o Pittsburgh, Pennsylvania o 15230-0897

TABLE OF CONTENTS
PAGE

The Fund 3
Who May Want to Invest 3
Summary of Fund Expenses 4
Financial Highlights 5
Investment Objective and Policies 6
Risk Factors: Matching the Fund to Your Investment Needs 7
Net Asset Value 12
Purchase and Redemption of Shares 13
Dividends, Distributions and Taxes 18
Performance Information and Reports 18
Management of the Trust 19

The Fund invests primarily in common stocks of U.S. companies expected to
produce strong and sustainable profit growth, and to a lesser extent,
growth-oriented international corporation. The Fund will generally invest a
majority of its assets in securities of medium-sized companies, which the
Fund believes includes the highest concentration of companies that meet the
profit growth-oriented objectives of the Fund.

WHO MAY WANT TO INVEST
The Fund is designed for investors who are willing to accept short-term
domestic and/or foreign stock market fluctuations in pursuit of potentially
higher long-term returns. The Fund invests for growth and does not pursue
income.

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

SUMMARY OF FUND EXPENSES
Annual operating expenses are paid out of the assets of the Fund. The Fund
pays an investment advisory fee and an administrative services fee to
Bankers Trust. The Fund also incurs expenses such as maintaining
shareholder records and furnishing shareholder statements. The Fund must
provide financial reports.

The following table provides (i) a summary of expenses allocable to the
Shares, as a percentage of the average daily net assets of the Fund; and
(ii) an example illustrating the dollar cost of such expenses on a $1,000
investment in the Shares.
Annual Operating Expenses
(as a percentage of the average daily net assets of the Fund)
Investment advisory fee (after reimbursements or waiver) 0.58%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.42
Total operating expenses (after reimbursements or waivers) 1.00%

Example 1 Year3 Years 5 Years 10 Years

You would pay the following expenses for each Fund
on a $1,000 investment, assuming (1) 5% annual return
and (2) redemption at the end of each time period $10 $32 $55 $122

The expense table and the example above show the costs and expenses that an
investor will bear as a shareholder of the Fund. While reimbursement of
distribution expenses in an amount on an annual basis equal to 0.20% of the
Fund's average daily net assets are authorized to be made pursuant to the
Trust's Plan of Distribution under Rule 12b-1 of the Investment Company Act
of 1940, as amended (the `1940 Act''), it is not expected that any
payments will actually be made under that plan in the foreseeable future.
Prior to the date of this Prospectus, the Fund had different investment
objectives and the Trust sought to achieve the Fund's investment objectives
by investing all of the Fund's investable assets in the Capital
Appreciation Portfolio (the `Portfolio''), a separate registered
investment company for which Bankers Trust Company served as investment
adviser. The Trust has now retained Bankers Trust as its investment adviser
and now invests directly in a portfolio of investment securities.

For more information with respect to the expenses of the Fund see
`Management of the Trust'' herein.

Bankers Trust has voluntarily agreed to waive a portion of its investment
advisory fee. Without such waiver during the Portfolio's last fiscal year,
the Portfolio's investment advisory fee would have been equal on an annual
basis to 0.65% of the Portfolio's average daily net assets. The expense
table and the example reflect a voluntary undertaking by Bankers Trust to
waive or reimburse expenses such that the total operating expenses
allocable to the Shares will not exceed on an annual basis 1.00%. For the
Fund's last fiscal year, in the absence of this undertaking and assuming
the Fund had invested directly in securities during that year, the total
operating expenses of the Fund would have been equal on an annual basis to
1.24%. 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%.

The Fund is distributed by Edgewood Services, Inc. (`Edgewood'') (the
`Distributor'') to investors including customers of Bankers Trust or to
customers of another bank, dealer or other financial intermediary that has
a shareholder servicing agreement with Bankers Trust (along with Bankers
Trust, a `Service Agent''). Some Service Agents may impose certain
conditions on their customers in addition to or different from those
imposed by the Fund and may charge their customers a direct fee for their
services. Each Service Agent has agreed to transmit to shareholders who are
its customers appropriate disclosures of any fees that it may charge them
directly.

Currently, the Fund has issued two classes of Shares. The Fund offers by
separate prospectus another class of Shares. Because the expenses vary
between classes, performance will vary with respect to each class.
Additional information concerning the Fund's other class of Shares is
available from Bankers Trust, as administrator at (800) 730-1313.

FINANCIAL HIGHLIGHTS
Prior to September 27, 1996, the Fund did not offer two classes and the
Shares were simply referred to as the Fund. The following table shows the
selected data for a share outstanding, total investment return, ratios to
average net assets and other supplemental data for the Fund for each period
indicated and has been audited by Coopers & Lybrand L.L.P., the Fund's
independent accountants, whose report thereon appears in the Fund's Annual
Report which is incorporated by reference.
<TABLE>
<CAPTION>
For the period
October 12, 1993
For the For the period For the (Commencement
year ended January 1, 1995 to year ended of Operations) to
September 30,1996 September
30, 1995** December 31, 1994 December
31, 1993
<S> <C> <C> <C> <C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $ 14.14 $ 10.14 $ 9.80 $ 10.00
Income (Loss) from Investment Operations
Net Investment Income (0.05) (0.02) (0.03) (0.00)
Net Realized and Unrealized Gain (Loss)
on Investments 1.72 4.02 0.37 (0.20)
Total from Investment Operations 1.67 4.00 0.34 (0.20)
Distributions to Shareholders
Net Realized Gain from Investment Transactions (0.58)
Total Distributions (0.58)
Net Asset Value, End of Period $ 15.23 $ 14.14 $ 10.14 $ 9.80
Total Investment Return 12.45% 39.45% 3.47% (8.81)%*

Ratios and Supplemental Data:
Ratios to Average Net Assets:
Net Investment Loss (0.42)% (0.38)%* (0.32)% (0.11)%*
Expenses, including Expenses of the
Capital Appreciation Portfolio 1.00% 1.00%* 1.00% 1.00%*
Decrease Reflected in Above Expense Ratio Due to
Absorption of Expenses by Bankers Trust 0.24% 0.33%* 0.46% 0.60%*
Net Assets, End of Period (000's omitted) $ 157,568 $ 92,033 $ 29,973 $ 19,465
</TABLE>

* Annualized
** Board of Trustees approved the change of the BT Investment Equity
Appreciation Fund year end from December 31 to September 30.
Prior to September 27, 1996, the Trust sought to achieve the Fund's
investment objective by investing all of the Fund's investable assets in
the Capital Appreciation Portfolio, a separate registered investment
company.

INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is capital growth over the long-term
through investment primarily in companies with a strong profit growth
orientation; the production of any current income is secondary to this
objective. There can be no assurances that the investment objective of the
Fund will be achieved. The investment objective of the Fund is not a
fundamental policy and may be changed upon notice to but without the
approval of the Fund's shareholders.

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

The Fund will generally invest a majority of its assets in securities of
medium-sized companies, which the Fund believes includes the highest
concentration of companies that meet the profit growth-oriented objectives
of the Fund. This portion of the Fund's portfolio will contain equity
securities of companies which fall within the dollar market capitalization
range of the companies in the S&P Mid-Cap 400 Index. The Fund as a whole
will seek to maintain a dollar-weighted average company market
capitalization approximately in the middle of the market capitalization of
the largest and the smallest companies contained in the S&P Mid-Cap 400
Index. The Fund may also invest in securities of companies having various
levels of market capitalization, both larger and smaller than the companies
contained in the S&P Mid-Cap 400 Index. Investments will be in companies
in various industries. Industry and company fundamentals along with key
investment themes and various quantitative screens will be used in the
investment process.

Criteria for selection of individual securities include the issuer's
competitive environment and position, prospects for growth, managerial
strength, earnings momentum and quality, underlying asset value, relative
market value, and overall marketability. The Fund will follow a disciplined
selling process to lessen market risks.

The Fund may invest up to 25% of its assets in securities of foreign
issuers. For further information on foreign investments and related hedging
techniques, see `Risk Factors: Matching the Fund to Your Investment
Needs,''``Additional Investment Techniques and Risks'' herein and the
SAI.

Equity Investments. The Fund invests primarily in common stock and other
securities with equity characteristics, such as trust or limited
partnership interests, rights and warrants. These investments may or may
not pay dividends and may or may not carry voting rights. The Fund may also
invest in convertible securities when, due to market conditions, it is more
advantageous to obtain a position in an attractive company by purchase of
its convertible securities than by purchase of its common stock. The
convertible securities in which the Fund invests may include any debt
securities or preferred stock which may be converted into common stock or
which carries the right to purchase common stock. Convertible securities
entitle the holder to exchange the securities for a specified number of
shares of common stock, usually of the same company, at specified prices
within a certain period of time and to receive interest or dividends until
the holder elects to exercise the conversion privilege. Since the Fund
invests in both common stock and convertible securities, the risks of the
general equity markets may be tempered to a degree by the Fund's
investments in convertible securities which are often not as volatile as
equity securities.

6
Fund's investment objective are unavailable in sufficient quantities or at
attractive prices, the Fund may hold short-term investments for a limited
time pending availability of such equity securities. Short-term
instruments consist of foreign and domestic: (i) short-term obligations of
sovereign governments, their agencies, instrumentalities, authorities or
political subdivisions; (ii) other short-term debt securities rated Aa or
higher by Moody's Investors Service, Inc. (`Moody's'') or AA or higher by
Standard & Poor's Ratings Group (`S&P'') or, if unrated, of comparable
quality in the opinion of Bankers Trust; (iii) commercial paper; (iv) bank
obligations, including negotiable certificates of deposit, time deposits
and bankers' acceptances; and (v) repurchase agreements. At the time the
Fund invests in commercial paper, bank obligations or repurchase
agreements, the issuer or the issuer's parent must have outstanding debt
rated Aa or higher by Moody's or AA or higher by S&P or outstanding
commercial paper or bank obligations rated Prime-1 by Moody's or A-1 by
S&P; or, if no such ratings are available, the instrument must be of
comparable quality in the opinion of Bankers Trust. These instruments may
be denominated in U.S. dollars or in foreign currencies.

Other Investments, Investment Risks and Techniques

The Fund may also utilize the following investments and investment
techniques and practices: Rule 144A securities, when-issued and delayed
delivery securities, securities lending, repurchase agreements, foreign
investments, options on stocks, options on stock indices, futures contracts
on stock indices, options on futures contracts, foreign currency exchange
transaction and options on foreign currencies. See `Additional Investment
Techniques and Risks''for further information.

Additional Investment Limitations

As a `diversified'' fund, with respect to 75% of the Fund's total assets,
no more than 5% of the total assets of the Fund may be invested in the
securities of any one issuer (excluding cash and cash-equivalents, U.S.
government securities and the securities of other investment companies) and
the Fund will not own more than 10% of the voting securities of any issuer.
The Fund will not invest more than 25% of its assets in the securities of
issuers in any one industry. These are fundamental investment policies of
the Fund which may not be changed without shareholder approval. No more
than 15% of the Fund's net assets may be invested in illiquid or not
readily marketable securities (including repurchase agreements and time
deposits with remaining maturities of more than seven calendar days).
Additional investment policies of the Fund are contained in the SAI.

The Fund's investment objective is not a fundamental policy and may be
changed upon 30 days prior written notice to but without the approval of
the Fund's shareholders. If there is a change in the Fund's investment
objective, the Fund's shareholders should consider whether the Fund remains
an appropriate investment in light of their then-current needs.

See `Investment Objective, Policies and Restrictions'' in the SAI for a
description of the additional fundamental policies of the Fund that cannot
be changed without approval by a `vote of a majority of the outstanding
voting securities''(as defined in the 1940 Act) of the Fund.

RISK FACTORS: MATCHING THE FUND TO YOUR INVESTMENT NEEDS
By itself, the Fund does not constitute a balanced investment plan; the
Fund seeks capital growth over the long-term, with the production of any
current income being secondary to this primary investment objective,
through investment primarily in the equity securities of companies expected
to produce strong and sustainable profit growth and, to a limited extent,
similarly oriented international corporations.

investments and investment techniques available to the Fund, including
foreign investments and the use of options and futures, and certain risks
associated with these investments and techniques is included under
`Additional Investment Techniques and Risks'' herein. The Shares' yield
and total return fluctuate, and your investment may be worth more or less
than your original cost when you redeem your Shares.

Risks of Investing in Foreign Securities

In seeking its investment objectives, the Fund may invest in securities of
foreign issuers. Foreign securities may involve a higher degree of risk and
may be less liquid or more volatile than domestic investments. Foreign
securities usually are denominated in foreign currencies, which means their
value will be affected by changes in the strength of foreign currencies
relative to the U.S. dollar as well as the other factors that affect
security prices. Foreign companies may not be subject to accounting
standards or governmental supervision comparable to U.S. companies, and
there often is less publicly available information about their operations.
Generally, there is less governmental regulation of foreign securities
markets, and security trading practices abroad may offer less protection to
investors such as the Fund. The value of such investments may be adversely
affected by changes in political or social conditions, diplomatic
relations, confiscatory taxation, expropriation, nationalization,
limitation on the removal of funds or assets, or imposition of (or change
in) exchange control or tax regulations in those foreign countries.
Additional risks of foreign securities include settlement delays and costs,
difficulties in obtaining and enforcing judgments, and taxation of
dividends at the source of payment. The Fund will not invest more than 5%
of the value of its total assets in the securities of issuers based in
developing countries, including Eastern Europe.

Portfolio Turnover

The Fund intends to manage its holdings actively to pursue its investment
objective. Since the Fund has a long-term investment perspective, it does
not intend to respond to short-term market fluctuations or to acquire
securities for the purpose of short-term trading; however, it may take
advantage of short-term trading opportunities that are consistent with its
investment objective. The annual portfolio turnover rate of the Fund may
exceed 100%. Higher portfolio turnover rates result in higher brokerage
costs and possible adverse tax consequences. For the fiscal year ended
September 30, 1996, and for the period from January 1, 1995 to September
30, 1995, the Portfolio's annualized portfolio turnover rates were 271% and
125%, respectively.

Additional Investment Techniques and Risks

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

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

Securities Lending. The Fund is permitted to lend up to 30% of the total
value of its securities. These loans must be secured continuously by cash
or equivalent collateral or by a letter of credit at least equal to the
market value of the securities loaned plus accrued income. By lending its
securities, the Fund can increase its income by continuing to receive
income on the loaned securities as well as by the opportunity to receive
interest on the collateral. During the term of the loan, the Portfolio
continues to bear the risk of fluctuations in the price of the loaned
securities. In lending securities to brokers, dealers and other
organizations, the Fund is subject to risk which,

like those associated with other extensions of credit, include delays in
recovery and possible loss of rights in the collateral should the borrower
fail financially.
Repurchase Agreements. In a repurchase agreement the Fund buys a security
and simultaneously agrees to sell it back at a higher price at a future
date. In the event of the bankruptcy of the other party to either a
repurchase agreement or a securities loan, the Fund could experience delays
in recovering either its cash or the securities it lent. To the extent
that, in the meantime, the value of the securities repurchased had
decreased or the value of the securities lent had increased, the Fund could
experience a loss. In all cases, Bankers Trust must find the
creditworthiness of the other party to the transaction satisfactory. A
repurchase agreement is considered a collateralized loan under the 1940
Act.

ADRs, GDRs, EDRs. The Fund may invest in securities of foreign issuers
directly or in the form of American Depositary Receipts (`ADRs''), Global
Depositary Receipts (`GDRs''), European Depositary Receipts (``EDRs'') or
other similar securities representing securities of foreign issuers. These
securities may not necessarily be denominated in the same currency as the
securities they represent. Designed for use in U.S., international and
European securities markets, respectively, ADRs, GDRs and EDRs are
alternatives to the purchase of the underlying securities in their national
markets and currencies. ADRs, GDRs and EDRs are subject to the same risks
as the foreign securities to which they relate.

Investment in other Investment Companies. With respect to certain countries
in which capital markets are either less developed or not easily accessed,
investments by the Fund may be made through investment in other investment
companies that in turn are authorized to invest in the securities of such
countries. Investment in other investment companies is limited in amount by
the 1940 Act, will involve the indirect payment of a portion of the
expenses, including advisory fees, of such other investment companies and
may result in a duplication of fees and expenses. See the SAI for more
information with respect to the Fund's investing in other investment
companies.

Derivatives

The Fund may invest in various instruments that are commonly known as
derivatives. Generally, a derivative is a financial arrangement, the value
of which is based on, or `derived'' from, a traditional security, asset or
market index. There are, in fact, many different types of derivatives and
many different ways to use them. There are a range of risks associated with
those uses. Futures and options may be used for traditional hedging
purposes to attempt to protect a fund from exposure to changing interest
rates, securities prices or currency exchange rates and for cash management
purposes as a low cost method of gaining exposure to a particular
securities market without investing directly in those securities. The Fund
may invest in derivatives for hedging and cash management purposes, but
also as a substitute for investment directly in the corresponding
securities if the Adviser believes they offer the most economic means of
improving the risk/reward profile of the Fund. Some derivatives are used
for leverage, which tends to magnify the effects of an instrument's price
changes as market conditions change. Leverage involves the use of a small
amount of money to control a large amount of financial assets and can, in
some circumstances, lead to significant losses. The Fund will `cover'' its
positions in derivatives, pursuant to interpretive positions of the
Securities and Exchange Commission, which serves to reduce the resulting
leverage. Derivatives will not be used to increase the Fund's overall
portfolio risk above the level that could be achieved, within the Fund's
investment policies, using only traditional investment securities or to
acquire exposure to changes in the value of assets or indices that by
themselves would not be purchased for the Fund. The use of derivatives for
non-hedging purposes may be considered speculative. A description of the
derivatives that the Fund may use and some of their associated risks is
found below.
Options on Stocks. The Fund may write and purchase put and call options on
stocks. A call option gives the purchaser of the option the right to buy,
and obligates the writer to sell, the underlying stock at the exercise
price at any time during the option period. Similarly, a put option gives
the purchaser of the option the right to sell, and obligates the writer to
buy, the underlying stock at the exercise price at any time during the
option period. A covered call option, which is a call option with respect
to which the Fund owns the underlying stock, sold by the Fund exposes the
Fund during the term of the option to possible loss of opportunity to
realize appreciation in the market price of the underlying stock or to
possible continued holding of a stock which might otherwise have been sold
to protect against depreciation in the market price of the stock. A covered
put option sold by the Fund exposes the Fund during the term of the option
to a

decline in price of the underlying stock. A put option sold by the Fund is
covered when, among other things, cash or liquid securities are placed in a
segregated account to fulfill the obligations undertaken.

To close out a position when writing covered options, the Fund may make a
`closing purchase transaction,'' which involves purchasing an option on
the same stock with the same exercise price and expiration date as the
option which it has previously written on the stock. The Fund will realize
a profit or loss for a closing purchase transaction if the amount paid to
purchase an option is less or more, as the case may be, than the amount
received from the sale thereof. To close out a position as a purchaser of
an option, the Fund may make a `closing sale transaction,'' which involves
liquidating the Fund's position by selling the option previously purchased.

The Fund intends to treat over-the-counter options (`OTC Options'')
purchased and the assets used to `cover'' OTC Options written as not
readily marketable and therefore subject to the limitations described in
`Investment Restrictions'' in the Statement of Additional Information.

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

Options on stock indices are generally similar to options on stock except
that the delivery requirements are different. Instead of giving the right
to take or make delivery of stock at a specified price, an option on a
stock index gives the holder the right to receive a cash `exercise
settlement amount''equal to (a) the amount, if any, by which the fixed
exercise price of the option exceeds (in the case of a put) or is less than
(in the case of a call) the closing value of the underlying index on the
date of exercise, multiplied by (b) a fixed `index multiplier.'' Receipt
of this cash amount will depend upon the closing level of the stock index
upon which the option is based being greater than, in the case of a call,
or less than, in the case of a put, the exercise price of the option.

The amount of cash received will be equal to such difference between the
closing price of the index and the exercise price of the option expressed
in dollars times a specified multiple. The writer of the option is
obligated, in return for the premium received, to make delivery of this
amount. The writer may offset its position in stock index options prior to
expiration by entering into a closing transaction on an exchange or the
option may expire unexercised.

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

Futures Contracts on Stock Indices. The Fund may enter into contracts
providing for the making and acceptance of a cash settlement based upon
changes in the value of an index of securities (`Futures Contracts'').
This investment technique is designed only to hedge against anticipated
future change in general market prices which otherwise might either
adversely affect the value of securities held by the Fund or adversely
affect the prices of securities which are intended to be purchased at a
later date for the Fund. A Futures Contract may also be entered into to
close out or offset an existing futures position. In general, each
transaction in Futures Contracts involves the establishment of a position
which will move in a direction opposite to that of the investment being
hedged. If these hedging transactions are successful, the futures positions
taken for the Fund will rise in value by an amount which approximately
offsets the decline in value of the portion of the Fund's investments that
are being hedged. Should general market prices move in an unexpected
manner, the full anticipated benefits of Futures Contracts may not be
achieved or a loss may be realized.

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

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

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

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

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

The Fund may enter into foreign currency hedging transactions in an attempt
to protect against changes in foreign currency exchange rates between the
trade and settlement dates of specific securities transactions or changes
in foreign currency exchange rates that would adversely affect a portfolio
position or an anticipated investment position. Since consideration of the
prospect for currency parities will be incorporated into Bankers Trust's
long-term investment decisions, the Fund will not routinely enter into
foreign currency hedging transactions with respect to security
transactions; however, Bankers Trust believes that it is important to have
the flexibility to enter into foreign currency hedging transactions when it
determines that the transactions would be in the Fund's best interest.
Although these transactions tend to minimize the risk of loss due to a
decline in the value of the hedged currency, at the same time they tend to
limit any potential gain that might be realized should the value of the
hedged currency increase. The precise matching of the forward contract
amounts and the value of the securities involved will not generally be
possible because the future value of such securities in foreign currencies
will change as a consequence of market movements in the value of such
securities between the date the forward contract is entered into and the
date it matures. The projection of currency market movements is extremely
difficult, and the successful execution of a hedging strategy is highly
uncertain.

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

options it has written, the Fund will not be able to sell the underlying
currency or dispose of assets held in a segregated account until the
options expire or are exercised. Similarly, if the Fund is unable to effect
a closing sale transaction with respect to options it has purchased, it
would have to exercise the options in order to realize any profit and will
incur transaction costs upon the purchase or sale of underlying currency.
The Fund pays brokerage commissions or spreads in connection with its
options transactions.

As in the case of forward contracts, certain options on foreign currencies
are traded over-the-counter and involve liquidity and credit risks which
may not be present in the case of exchange-traded currency options. The
Fund's ability to terminate over-the-counter options (`OTC Options'') will
be more limited than with exchange-traded options. It is also possible that
broker-dealers participating in OTC Options transactions will not fulfill
their obligations. Until such time as the staff of the SEC changes its
position, the Fund will treat purchased OTC Options and assets used to
cover written OTC Options as illiquid securities. With respect to options
written with primary dealers in U.S. Government securities pursuant to an
agreement requiring a closing purchase transaction at a formula price, the
amount of illiquid securities may be calculated with reference to the
repurchase formula.

All options that the Fund writes will be covered under applicable
requirements of the SEC. The Fund will write and purchase options only to
the extent permitted by the policies of state securities authorities in
states where Shares are qualified for offer and sale.

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

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

NET ASSET VALUE
The net asset value (`NAV'') per share of the Shares 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 in the event that the NYSE closes early, at the
time of such early closing. The NAV per Share is computed by dividing the
value of the Fund's total assets, less all liabilities allocable to the
Shares, by the total number of Shares outstanding. The Fund's securities
and other assets are valued primarily on the basis of market quotations or,
if quotations are not readily available, by a method which the Trust's
Board of Trustees believes accurately reflects fair value.

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

PURCHASE AND REDEMPTION OF SHARES
How To Buy Shares

The Trust accepts purchase orders for shares of the Fund at the NAV per
share next determined after the order is received on each Valuation Day.
See `Net Asset Value'' herein. Shares of the Fund may be available through
Investment Professionals, such as broker/dealers and investment advisers
(including Service Agents).
Purchase orders for shares of the Fund (including those purchased through a
Service Agent) that are transmitted to the Trust's Transfer Agent (the
`Transfer Agent''), prior to the Valuation Time on any Valuation Day will
be effective at that day's Valuation Time. The Trust and Transfer Agent
reserve the right to reject any purchase order.

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

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

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

The Transfer Agent must receive payment within one business day after an
order for shares is placed; otherwise, the purchase order may be canceled
and the investor could be held liable for resulting fees and/or losses.

Minimum Investments

To Open an Account $2,500
For retirement accounts 500
Through automatic investment plans 1,000

To Add to an Account $250
For retirement accounts 100
Through automatic investment plan 100

Minimum Balance $1,000
For retirement accounts None

If you are new to BT Pyramid Mutual Funds, complete and sign an account
application and mail it along with your check to the address listed below.
If there is no account application accompanying this Prospectus, call the
BT Service Center at 1-800-730-1313.

BT Service Center
P.O. Box 419210
Kansas City, MO 64141-6210

Overnight mailings:

BT Service Center
210 West 10th Street, 8th Floor
Kansas City, MO 64105-1716

If you already have money invested in a fund in the BT Family of Funds, you
can:

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

If you are investing through a tax-sheltered retirement plan, such as an
IRA, for the first time, you will need a special application. Contact your
Investment Professional or call BT Retirement Services Center at 1-800-677-
7596 for more information and a retirement account application.

Additional Information About Buying Shares

To Open an Account To Add to an Account

By Wire Call the BT Service Center at Call your Investment
Professional or wire
1-800-730-1313 to receive additional investment to:
wire instructions for account
establishment.
Routing No.: 021001033
Attn: Bankers Trust/IFTC
Deposit
DDA No.: 00-226-296
FBO: (Account name)
(Account number)
Credit: Fund Number
BT Investment Equity
Appreciation Fund - 477

Specify the complete name of
the Fund of
your choice, and include your
account number
and your name.
By Phone Contact your Service Agent, Contact your Service Agent,
Investment Professional, or call Investment Professional,
or call
BT's Service Center at 1-800-730-1313. BT's Service
Center at 1-800-730-1313.
If you are an existing shareholder, If you are an
existing shareholder, you may
you may exchange from another BT exchange from
another BT account
account with the same registration, with the same
registration, including,
including, name, address, and taxpayer name, address,
and taxpayer ID number.
ID number.

By Mail Complete and sign the account appli- Make your check
payable to the complete
cation. Make your check payable to name of the Fund of
your choice. Indicate
the complete name of the Fund of your Fund account number
on your check
your choice. Mail to the appropriate and mail to the
address printed on your
address indicated on the application. account statement.

How to Sell Shares

You can arrange to take money out of your Fund account at any time by
selling (redeeming) some or all of your shares. Your shares shall be sold
at the next NAV calculated after an order is received by the Transfer
Agent. Redemption requests should be transmitted by customers in accordance
with procedures established by the Transfer Agent and the Shareholder's
Service Agent. Redemption requests for shares of the Fund received by the
Service Agent and transmitted to the Transfer Agent prior to the Valuation
Time on each Valuation Day will be effective at that day's Valuation Time
and the redemption proceeds normally will be delivered to the shareholder's
account the next day, but in any event within seven calendar days following
receipt of the request.

Service Agents may allow redemptions or exchanges by telephone and may
disclaim liability for following instructions communicated by telephone
that the Service Agent reasonably believes to be genuine. The Service Agent
must provide the investor with an opportunity to choose whether or not to
utilize the telephone redemption or exchange privilege. The Transfer Agent
and the Service Agent must employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. If the Shareholder
Servicing Agent does not do so, it may be liable for any losses due to
unauthorized or

fraudulent instructions. Such procedures may include, among others,
requiring some form of personal identification prior to acting upon
instructions received by telephone, providing written confirmation of such
transactions and/or tape recording of telephone instructions.

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

To sell Shares in a retirement account, your request must be made in
writing, except for exchanges to other eligible funds in the BT Family of
Funds, which can be requested by phone or in writing. For information on
retirement distributions, contact your Service Agent or call the BT Service
Center at 1-800-730-1313.

If you are selling some but not all of your non-retirement account shares,
leave at least $1,000 worth of shares in the account to keep it open.

To sell shares by bank wire you will need to sign up for these services in
advance when completing your account application.

Certain requests must include a signature guarantee to protect you and
Bankers Trust from fraud. Redemption requests in writing must include a
signature guarantee if any of the following situations apply:

o Your account registration has changed within the last 30 days,
o The check is being mailed to a different address than the one on your
account (record address),
o The check is being made payable to someone other than the account
owner,
o The redemption proceeds are being transferred to a BT account with a
different registration, or
o You wish to have redemption proceeds wired to a non-predesignated bank
account.

A signature guarantee is also required if you change the pre-designated
bank information for receiving redemption proceeds on your account.

You should be able to obtain a signature guarantee from a bank, broker,
dealer, credit union (if authorized under state law), securities exchange
or association, clearing agency, or savings association. A notary public
cannot provide a signature guarantee.

Additional Information About Selling Shares
By Wire - You must sign up for the wire feature before using it. To verify
that it is in place, call 1-800-730-1313. Minimum wire: $1,000. Your wire
redemption request must be received by the Transfer Agent before 4:00 p.m.
Eastern time for money to be wired on the next business day.

In Writing - Write a signed `letter of instruction'' with your name, the
Fund's name and Fund's number, your Fund account number, the dollar amount
or number of Shares to be redeemed, and mail to one of the following
addresses:

BT Service Center
P.O. Box 419210
Kansas City, MO 64141-6210

Overnight mailings:

BT Service Center
210 West 10th Street, 8th Floor
Kansas City, MO 64105-1716

For Trust accounts, the trustee must sign the letter indicating capacity as
trustee. If the trustee's name is not on the account registration, provide
a copy of the trust document certified within the last 60 days.

For a Business or Organization account, at least one person authorized by
corporate resolution to act on the account must sign the letter.

Unless otherwise instructed, the Transfer Agent will send a check to the
account address of record. The Trust reserves the right to close investor
accounts via 30 day notice in writing if the Fund account balance falls
below the Fund minimums.

Investor Services

BT Pyramid Mutual Funds provide a variety of services to help you manage
your account.

Information Services
Statements and reports that your Investment Professional or the Transfer
Agent may send to you include the following:

o Confirmation statements (after every transaction that affects your
account balance, including distributions or your account registration)
o Account statements (monthly)
o Financial reports (every six months)

To reduce expenses, only one copy of most financial reports will be mailed,
even if you have more than one account in the Fund. Call your Investment
Professional or the BT Service Center at 1-800-730-3131 if you need
additional copies of financial reports.

Exchange Privilege

Shareholders may exchange their shares for shares of certain other funds in
the BT Family of Funds registered in their state. The Fund reserves the
right to terminate or modify the exchange privilege in the future. To make
an exchange, follow the procedures indicated in `How to Buy Shares'' and
`How to Sell Shares'' herein. Before making an exchange, please note the
following:

o Call your Service Agent for information and a prospectus. Read the
prospectus for relevant information.
o Your new account will have the identical account registration
including same name, address and taxpayer identification number as your
existing account(s).

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

Note that exchanges out of a Fund may be limited to four per calendar year
and that they may have tax consequences for you.

Systematic Programs
To move money from your bank account to BT Pyramid Mutual Funds

Minimum Minimum Frequency Setting up or changing
Initial Subsequent

$1,000 $100 Monthly, bimonthly, For a new account, complete
the appropriate section
quarterly or semi- on the application.
annually
For existing accounts, call your
Investment
Professional for an application.
To change the amount or frequency
of your
investment, contact your Investment
Professional directly or call 1-
800-730-1313.
Call at least 10 business days
prior to your next
scheduled investment date.

Systematic Withdrawal Program lets you set up periodic redemptions from
your account.

Minimum Frequency Setting up or changing

$100 Monthly, quarterly, semi-annually or To establish, call
your Investment Professional or call
annually 1-800-730-1313 after your account
is open. The
accounts from which the withdrawals
will be
processed must have a minimum
balance of $10,000.

Tax-Saving Retirement Plans

Retirement plans offer significant tax savings and are available to
individuals, partnerships, small businesses, corporations, nonprofit
organizations and other institutions. Contact Bankers Trust for further
information. Bankers Trust can set up your new account in the Fund under a
number of several tax-savings or tax-deferred plans. Minimums may differ
from those listed elsewhere in this Prospectus.

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

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

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

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

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

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

o 403(b) Custodian Accounts: defined contribution plans open to
employees of most non-profit organizations and educational institutions.

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

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

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

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

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

Other Tax Information. In addition to federal taxes, you may be subject to
state or local taxes on your investment, depending on the laws in your
area. Income received by the Fund from sources within foreign countries may
be subject to withholding and other taxes imposed by such countries. You
should consult with your own tax adviser concerning the application of
federal, state and local taxes to your distributions from the Fund.

PERFORMANCE INFORMATION AND REPORTS
The Shares' performance may be used from time to time in advertisements,
shareholder reports or other communications to shareholders or prospective
shareholders. Performance information may include the Shares' investment
results and/or comparisons of its investment results to the Russell Mid-Cap
Index, the Standard and Poor's 500 Composite Stock Price Index, the
Standard and Poor's Mid-Cap 400 Index, the Lipper General Equity Averages,
the Lipper Mid Cap Average, the Lipper Growth Fund Average or other various
unmanaged indices or results of other mutual funds or investment or savings
vehicles. The Shares' investment results as used in such communications
will be calculated on a yield or total return basis in the manner set forth
herein. From time to time, fund rankings may be quoted from various
sources, such as Lipper Analytical Services, Inc., Value Line and
Morningstar, Inc.

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

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

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

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

MANAGEMENT OF THE TRUST
Board of Trustees
The affairs of the Trust are managed under the supervision of its Board of
Trustees. By virtue of the responsibilities assumed by Bankers Trust, as
the Administrator of the Trust, the Trust does not require employees other
than its officers. None of the Trust's officers devote full time to the
affairs of the Trust. For more information with respect to the Trustees of
the Trust, see `Management of the Trust'' in the SAI.

Investment Adviser

Bankers Trust, a New York banking corporation with principal offices at 280
Park Avenue, New York, New York 10017, is a wholly owned subsidiary of
Bankers Trust New York Corporation. Bankers Trust conducts a variety of
general banking and trust activities and is a major wholesale supplier of
financial services to the international and domestic institutional market.
As of June 30, 1996, Bankers Trust New York Corporation was the seventh
largest bank holding company in the United States with total assets of
approximately $115 billion. Bankers Trust is a worldwide merchant bank
dedicated to servicing the needs of corporations, governments, financial
institutions and private clients through a global network of over 120
offices in more than 40 countries. Investment management is a core business
of Bankers Trust, built on a tradition of excellence from its roots as a
trust bank founded in 1903. The scope of Bankers Trust's investment
management capability is unique due to its leadership positions in both
active and passive quantitative management and its presence in major equity
and fixed income markets around the world. Bankers Trust is one of the
nation's largest and most experienced investment managers with
approximately $215 billion in assets under management globally.

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

Bankers Trust's officers have had extensive experience in managing
investment portfolios having objectives similar to those of the Fund.

Bankers Trust, subject to the supervision and direction of the Board of
Trustees of the Trust, manages the Fund, in accordance with the Fund's
investment objective and stated investment policies, makes investment
decisions for the Fund, places orders to purchase and sell securities and
other financial instruments on behalf of the Fund and employs professional
investment managers and securities analysts who provide research services
to the Fund. 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
Fund 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 Fund only if Bankers Trust
believes that the affiliate's charge for the transaction does not exceed
usual and customary levels. The Fund will not invest in obligations for
which Bankers Trust or any of its affiliates is the ultimate obligor or
accepting bank. The Fund may, however, invest in the obligations of
correspondents or customers of Bankers Trust.

Under its Investment Advisory Agreement with the Trust, Bankers Trust
receives a fee from the Fund computed daily and paid monthly at the annual
rate of 0.65% of the average daily net assets of the Fund.

Prior to September 27, 1996, Bankers Trust received an identical fee
pursuant to its Investment Advisory Agreement with the Portfolio. For the
Portfolio's fiscal year ended September 30, 1996, Bankers Trust, after a
partial waiver, was paid investment advisory fees by the Portfolio equal to
0.58% of the average daily net assets of the Portfolio.

Bankers Trust has been advised by its counsel that, in counsel's opinion,
Bankers Trust currently may perform the services for the Trust described in
this Prospectus and the SAI without violation of the Glass-Steagall Act or
other applicable banking laws or regulations.

Administrator

Under its Administration and Services Agreement with the Trust, Bankers
Trust calculates the NAV of the Fund and generally assists the Board of
Trustees of the Trust in all aspects of the administration and operation of
the Trust. The Administration and Services Agreement provides for the Trust
to pay Bankers Trust a fee computed daily and paid monthly at the annual
rate of 0.50% of the average daily net assets of the Fund. For the fiscal
years of each the Fund and Portfolio ended September 30, 1996, after
partial waivers, Bankers Trust received administrative service fees of
0.25% of the average daily net assets of the Fund and 0.05% of the average
daily net assets of the Portfolio, respectively.
Under the Administration and Services Agreement, Bankers Trust may delegate
one or more of its responsibilities to others, including Edgewood and its
affiliates, at Bankers Trust's expense. For more information, see the SAI.

Distributor

Edgewood Services, Inc. is the principal distributor for Shares of the
Fund. In addition, Edgewood and its affiliates provide the Trust with
office facilities and currently provide administration and distribution
services for other registered investment companies. The principal business
address of Edgewood and its affiliates is Clearing Operations, P.O. Box
897, Pittsburgh, Pennsylvania 15230-0897.

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

Service Agent

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

Custodian and Transfer Agent

Bankers Trust acts as Custodian of the assets of the Trust and serves as
the Transfer Agent for the Trust under the Administration and Services
Agreement with the Trust.

Organization of the Trust

The Trust was organized on February 28, 1992, under the laws of the
Commonwealth of Massachusetts. The Fund was established and designated as a
separate series of the Trust on June 23, 1992. The Trust offers Shares of
beneficial interest of separate series, par value $0.001 per share. On
August 6, 1996, the Trustees of the Trust established and designated two
classes of shares of beneficial interest of the Fund-the Advisor class of
Shares and the Investment class of Shares. The shares of the other series
of the Trust are offered through separate prospectuses. The Board of
Trustees may establish additional series or add additional classes of
shares to the Fund or other series of the Trust in the future. No series of
shares has any preference over any other series.

The Trust is an entity commonly known as a `Massachusetts business
trust.''Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for
its obligations. However, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in
which both inadequate insurance existed and the Trust itself was unable to
meet its obligations. When matters are submitted for shareholder vote,
shareholders of a Fund will have one vote for each full share held and
proportionate, fractional votes for fractional shares held. A separate vote
of a Fund or Class is required on any matter affecting the Fund or Class on
which shareholders are entitled to vote. Shareholders of a Fund or Class
are not entitled to vote on Trust matters that do not affect that Fund or
Class, respectively. There normally will be no meetings of shareholders for
the purpose of electing Trustees unless and until such time as less than a
majority of Trustees holding office have been elected by shareholders, at
which time the Trustees then in office will call a shareholders' meeting
for the election of Trustees. Any Trustee may be removed from office upon
the vote of shareholders holding at least two-thirds of the Trust's
outstanding shares at a meeting called for that purpose. The Trustees are
required to call such a meeting upon the written request of shareholders
holding at least 10% of the Trust's outstanding shares.

As of December 31, 1996, Northern Telecom Omnibus ACCO c/o Bankers Trust
Company, Jersey City, New Jersey, owned 48.42% of the Investment Class
Shares of the Fund and, therefore, may, for certain purposes, be deemed to
control the Fund and be able to affect the outcome of certain matters
presented for a vote of its shareholders.

BT PYRAMID MUTUAL FUNDS
BT Investment Equity Appreciation Fund

Investment Adviser and Administrator
BANKERS TRUST COMPANY
280 Park Avenue
New York, NY 10017

Distributor
Edgewood Services, Inc.
Clearing Operations
P.O. Box 897
Pittsburgh, PA 15230-0897

Custodian and Transfer Agent
BANKERS TRUST COMPANY
280 Park Avenue
New York, NY 10017

Independent Accountants
COOPERS & LYBRAND L.L.P.
1100 Main Street, Suite 900
Kansas City, MO 64105

Counsel
WILLKIE FARR & GALLAGHER
153 East 53rd Street
New York, NY 10022

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

Cusip #055922751
STA477300 (1/97)

o BT PYRAMID MUTUAL FUNDS o
BT Investment
Equity Appreciation Fund
Advisor Class
Seeks capital growth over the long term through investment in medium-sized
companies that show growth potential. Current income is a secondary goal.
PROSPECTUS

JANUARY 31, 1997

BT Pyramid Mutual Funds (the "Trust") is an open-end management investment
company. The BT Investment Equity Appreciation Fund (the "Fund") is a
separate series of the Trust and offers two classes of shares. The shares
offered by this prospectus are the Advisor Class of shares (the "Shares").
The Fund seeks capital growth over the long-term through investment
primarily in companies with a strong profit growth orientation. Current
income is secondary to this investment objective.

Edgewood Services, Inc.
Clearing Operations o P.O. Box 897 o Pittsburgh, Pennsylvania o 15230-0897

TABLE OF CONTENTS
PAGE

The Fund 3
Who May Want to Invest 3
Summary of Fund Expenses 4
Investment Objective and Policies 5
Risk Factors: Matching the Fund to Your Investment Needs 7
Net Asset Value 11
Purchase and Redemption of Shares 13
Dividends, Distributions and Taxes 20
Performance Information and Reports 20
Management of the Trust 21

THE FUND
The Fund's investment objective is capital growth over the long-term
through investment primarily in companies with a strong profit growth
orientation; the production of any current income is secondary to this
objective.
The Fund invests primarily in common stocks of U.S. companies expected to
produce strong and sustainable profit growth, and to a lesser extent,
growth-oriented international corporations. The Fund will generally invest
a majority of its assets in securities of medium-sized companies, which the
Fund believes includes the highest concentration of companies that meet the
profit growth-oriented objectives of the Fund.

Shareholder Transaction Expenses
Maximum Sales Charge on Purchases
(as a percentage of offering price) 4.75%

Maximum Sales Charge on Reinvested Distributions None

Redemption Fee None

Shareholder transaction expenses are charges paid when investor buy, sell,
exchange, or hold Shares of the Fund. Lower front-end sales charges may be
available with purchases of $50,000 or more and/or in conjunction with
various programs. See `Net Asset Value'' for an explanation of how and
when these charges apply.

Annual Operating Expenses
(as a percentage of the average daily net assets of the Fund)
Investment advisory fee (after reimbursements or waiver) 0.58%
12b-1 fees 0.50
Other expenses (after reimbursements or waivers) 0.42
Total operating expenses (after reimbursements or waivers) 1.50%

Example 1 Year 3 Years

You would pay the following expenses for each Fund
on a $1,000 investment, assuming (1) 5% annual return
and (2) redemption at the end of each time period $62 $93

The expense table and the example above show the costs and expenses that an
investor will bear as a shareholder of the Fund. While reimbursement of
distribution expenses in an amount on an annual basis equal to 0.50% of the
Fund's average daily net assets are authorized to be made pursuant to the
Trust's Plan of Distribution under Rule 12b-1 of the Investment Company Act
of 1940, as amended (the `1940 Act''), it is not expected that any
payments will actually be made under that plan in the foreseeable future.
Prior to the date of this Prospectus, the Fund had different investment
objectives and the Trust sought to achieve the Fund's investment objectives
by investing all of the Fund's investable assets in the Capital
Appreciation Portfolio (the `Portfolio''), a separate registered
investment company for which Bankers Trust Company served as investment
adviser. The Trust has now retained Bankers Trust as its investment adviser
and now invests directly in a portfolio of investment securities.

For more information with respect to the expenses of the Fund see
`Management of the Trust'' herein.

Bankers Trust has voluntarily agreed to waive a portion of its investment
advisory fee. Without such waiver during the Portfolio's last fiscal year,
the Portfolio's investment advisory fee would have been equal on an annual
basis to 0.65% of the Portfolio's average daily net assets. The expense
table and the example reflect a voluntary undertaking by Bankers Trust to
waive or reimburse expenses such that the total operating expenses
allocable to the Shares will not exceed on an annual basis 1.50%. In the
absence of this undertaking and assuming the Fund had invested directly in
securities during that year, the total operating expenses of the Fund would
have been equal on an annual basis to 2.41%. 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%.

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

idends and may or may not carry voting rights. The Fund may also invest in
convertible securities when, due to market conditions, it is more
advantageous to obtain a position in an attractive company by purchase of
its convertible securities than by purchase of its common stock. The
convertible securities in which the Fund invests may include any debt
securities or preferred stock which may be converted into common stock or
which carries the right to purchase common stock. Convertible securities
entitle the holder to exchange the securities for a specified number of
shares of common stock, usually of the same company, at specified prices
within a certain period of time and to receive interest or dividends until
the holder elects to exercise the conversion privilege. Since the Fund
invests in both common stock and convertible securities, the risks of the
general equity markets may be tempered to a degree by the Fund's
investments in convertible securities which are often not as volatile as
equity securities.

Short-Term Instruments. The Fund intends to stay invested in the securities
described above to the extent practical in light of its objective and long-
term investment perspective. However, the Fund's assets may be invested in
short-term instruments with remaining maturities of 397 days or less to
meet anticipated redemptions and expenses or for day-to-day operating
purposes and, without limit, when, in Bankers Trust's opinion, it is
advisable to adopt a temporary defensive position because of unusual and
adverse conditions affecting the equity markets. In addition, when the Fund
experiences large cash inflows through the sale of securities and desirable
equity securities that are consistent with the Fund's investment objective
are unavailable in sufficient quantities or at attractive prices, the Fund
may hold short-term investments for a limited time pending availability of
such equity securities. Short-term instruments consist of foreign and
domestic: (i) short-term obligations of sovereign governments, their
agencies, instrumentalities, authorities or political subdivisions; (ii)
other short-term debt securities rated Aa or higher by Moody's Investors
Service, Inc. (`Moody's'') or AA or higher by Standard & Poor's Ratings
Group (`S&P'') or, if unrated, of comparable quality in the opinion of
Bankers Trust; (iii) commercial paper; (iv) bank obligations, including
negotiable certificates of deposit, time deposits and bankers' acceptances;
and (v) repurchase agreements. At the time the Fund invests in commercial
paper, bank obligations or repurchase agreements, the issuer or the
issuer's parent must have outstanding debt rated Aa or higher by Moody's or
AA or higher by S&P or outstanding commercial paper or bank obligations
rated Prime-1 by Moody's or A-1 by S&P; or, if no such ratings are
available, the instrument must be of comparable quality in the opinion of
Bankers Trust. These instruments may be denominated in U.S. dollars or in
foreign currencies.

Other Investments, Investment Risks and Techniques

Additional Investment Limitations

In view of the long-term capital growth objective of the Fund and the
Fund's ability to invest in smaller- and medium-sized companies, the size
range in which many of the best profit growth-oriented companies are found,
the risks of investment in the Fund may be greater than the risks presented
by the general equity markets, and, since the Fund may also invest in
preferred stock and convertible bonds, changes in domestic and foreign
interest rates may also affect the value of the Fund's investments, and
rising interest rates can be expected to reduce the Shares' value. A
description of a number of investments and investment techniques available
to the Fund, including foreign investments and the use of options and
futures, and certain risks associated with these investments and techniques
is included under `Additional Investment Techniques and Risks.'' The
Shares' yield and total return fluctuate, and your investment may be worth
more or less than your original cost when you redeem your Shares.

Risks of Investing in Foreign Securities

Portfolio Turnover

Additional Investment Techniques and Risks

When-Issued and Delayed Delivery Securities. The Fund may purchase
securities on a when-issued or delayed delivery basis. Delivery of and
payment for these securi-

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

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

Investment in other Investment Companies. With respect to certain countries
in which capital markets are either less developed or not easily accessed,
investments by the Fund may be made through investment in other investment
companies that in turn are authorized to invest in the securities of such
countries. Investment in other investment companies which is limited in
amount by the 1940 Act, will involve the indirect payment of a portion of
the expenses, including advisory fees, of such other investment companies
and may result in a duplication of fees and expenses. See the Statement of
Additional Information for more information with respect to the Fund's
investing in other investment companies.

Derivatives

8
to acquire exposure to changes in the value of assets or indices that by
themselves would not be purchased for the Fund. The use of derivatives for
non-hedging purposes may be considered speculative. A description of the
derivatives that the Fund may use and some of their associated risks is
found below.

Options on Stocks. The Fund may write and purchase put and call options on
stocks. A call option gives the purchaser of the option the right to buy,
and obligates the writer to sell, the underlying stock at the exercise
price at any time during the option period. Similarly, a put option gives
the purchaser of the option the right to sell, and obligates the writer to
buy, the underlying stock at the exercise price at any time during the
option period. A covered call option, which is a call option with respect
to which the Fund owns the underlying stock, sold by the Fund exposes the
Fund during the term of the option to possible loss of opportunity to
realize appreciation in the market price of the underlying stock or to
possible continued holding of a stock which might otherwise have been sold
to protect against depreciation in the market price of the stock. A covered
put option sold by the Fund exposes the Fund during the term of the option
to a decline in price of the underlying stock. A put option sold by the
Fund is covered when, among other things, cash or liquid securities are
placed in a segregated account to fulfill the obligations undertaken.

securities which are intended to be purchased at a later date for the Fund.
A Futures Contract may also be entered into to close out or offset an
existing futures position. In general, each transaction in Futures
Contracts involves the establishment of a position which will move in a
direction opposite to that of the investment being hedged. If these hedging
transactions are successful, the futures positions taken for the Fund will
rise in value by an amount which approximately offsets the decline in value
of the portion of the Fund's investments that are being hedged. Should
general market prices move in an unexpected manner, the full anticipated
benefits of Futures Contracts may not be achieved or a loss may be
realized.

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

rities and against increases in the dollar cost of securities to be
acquired. The Fund may use options on foreign currency to cross-hedge,
which involves writing or purchasing options on one currency to hedge
against changes in exchange rates for a different, but related currency. As
with other types of options, however, the writing of an option on a foreign
currency will constitute only a partial hedge up to the amount of the
premium received, and the Fund could be required to purchase or sell a
foreign currency at disadvantageous exchange rates, thereby incurring
losses. The purchase of an option on foreign currency may be used to hedge
against fluctuations in exchange rates although, in the event of exchange
rate movements adverse to the Fund's position, it may forfeit the entire
amount of the premium plus related transaction costs. In addition, the Fund
may purchase call options on a foreign currency when the Adviser
anticipates that the currency will appreciate in value.

There is no assurance that a liquid secondary market on an options exchange
will exist for any particular option, or at any particular time. If the
Fund is unable to effect a closing purchase transaction with respect to
covered options it has written, the Fund will not be able to sell the
underlying currency or dispose of assets held in a segregated account until
the options expire or are exercised. Similarly, if the Fund is unable to
effect a closing sale transaction with respect to options it has purchased,
it would have to exercise the options in order to realize any profit and
will incur transaction costs upon the purchase or sale of underlying
currency. The Fund pays brokerage commissions or spreads in connection with
its options transactions.
As in the case of forward contracts, certain options on foreign currencies
are traded over-the-counter and involve liquidity and credit risks which
may not be present in the case of exchange-traded currency options. The
Fund's ability to terminate over-the-counter options (`OTC Options'') will
be more limited than with exchange-traded options. It is also possible that
broker-dealers participating in OTC Options transactions will not fulfill
their obligations. Until such time as the staff of the SEC changes its
position, the Fund will treat purchased OTC Options and assets used to
cover written OTC Options as illiquid securities. With respect to options
written with primary dealers in U.S. Government securities pursuant to an
agreement requiring a closing purchase transaction at a formula price, the
amount of illiquid securities may be calculated with reference to the
repurchase formula.

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

number of Shares outstanding. The Fund's securities and other assets are
valued primarily on the basis of market quotations or, if quotations are
not readily available, by a method which the Trust's Board of Trustees
believes accurately reflects fair value.

The NAV per Share is computed by dividing the value of the Fund's total
assets, less all liabilities allocable to the Shares, by the total number
of Shares outstanding. The Fund's securities and other assets are valued
primarily on the basis of market quotations or, if quotations are not
readily available, by a method which the Trust's Board of Trustees believes
accurately reflects fair value.

The offering price (price to buy one Share) is the Fund's NAV, plus a sales
charge. The Fund has a maximum sales charge of 4.75% of the offering price.

Sales Charges and Investment Professional Concessions

Investment
Sales Charge Professional
as a % of Concession as
Offering Net Amount % of Offering
Amount Invested Price Invested Price
Less than $50,000 4.75% 4.99% 4.00%
$50,000 to less than $100,000 4.50 4.71 4.00
$100,000 to less than $250,000 3.50 3.63 3.00
$250,000 to less than $500,000 2.50 2.56 2.00
$500,000 to less than $1 million 2.00 2.04 1.75
$1 million or more None None See Below (a)

(a) Investment Professionals will be compensated with a fee (based on
average assets) of 1.00% for purchase amounts of $1 million to $3 million
of assets, 0.50% on the next $3 million to $20 million of assets and 0.15%
for assets over $20 million. Assets must remain in the Fund for a period of
18 uninterrupted months. or the Investment Professional will be required
to refund this fee to the Distributor. If the assets are exchanged into a
BT Fund which does not have a sales charge within the 18 month period, the
Investment Professional will be required to refund this fee.

Reinstatement Privilege If an investor sold all or part of their Shares of
a Fund, they may reinvest an amount equal to all or a portion of the
redemption proceeds in the Fund or another BT Fund, without paying any
sales charge at the NAV next determined after receipt of the investment
order, provided that such reinvestment is made within 30 days of
redemption. An investor must reinstate their shares into an account with
the same registration. This privilege may be exercised only once by a
shareholder with respect to a Fund and certain restrictions may apply.
Under procedures adopted by the Board, a NAV for a Fund later determined to
have been inaccurate for any reason will be recalculated. Purchases and
redemptions made at a NAV determined to have been inaccurate will be
adjusted, although in certain circumstances, such as where the difference
between the original NAV and the recalculated NAV divided by the
recalculated NAV is 0.005 (1/2 of 1%) or less or shareholder transactions
are otherwise insubstantially affected, further action is not required.

PURCHASE AND REDEMPTION OF SHARES
How To Buy Shares

Once each business day, two share prices are calculated for shares of the
Fund: the offering price and the NAV. The offering price includes a front-
end sales charge, which you pay when you buy shares of the Fund, unless you
qualify for a reduction or waiver as described herein. When you buy shares
at the offering price, the Transfer Agent deducts the applicable sales
charge and invests the rest at NAV.

Shares are purchased at the next offering price or NAV, as applicable,
calculated after your investment is received and accepted. The offering
price and NAV are normally calculated at 4:00 p.m. Eastern time.

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

The Transfer Agent must receive payment within three business days after an
order for Shares is placed: otherwise, your purchase order may be canceled
and you could be held liable for resulting fees and/or losses.

Share certificates are not available for Shares of the Funds.

If you are new to BT Pyramid Mutual Funds, complete and sign an account
application and mail it along with your check. If there is no account
application accompanying this Prospectus, call your Investment
Professional.

If you already have money invested in a fund in the BT Family of Funds, you
can:

If you are investing through a tax-sheltered retirement plan, such as an
IRA, for the first time, you will need a special application. Contact your
Investment Professional for more information and a retirement account
application.

Minimum Investments

To Open an Account $2,500
For retirement accounts 500
Through automatic investment plans 1,000

To Add to an Account $250
For retirement accounts 100
Through automatic investment plan 100

Minimum Balance $1,000
For retirement accounts None
For further information on an account, please consult your Investment
Professional or refer to the account application.

13
To Open an Account To Add to an Account

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

Mail Complete and sign the account appli- Make your check
payable to the complete
cation. Make your check payable to name of the Fund of
your choice. Indicate
the complete name of the Fund of your Fund account number
on your check
your choice. Mail to the appropriate and mail to the
address printed on your
address indicated on the application. account statement.

Exchange by mail: Call your
Investment
Professional for instructions.

In Person Take your account application and Take your check to
your Investment
check to your Investment Professional. Professional.

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

Routing No.: 021001033
Attn: Bankers Trust/IFTC
Deposit
DDA No.: 00-226-296
FBO: (Account name)
(Account number)
Credit: Fund Number
BT Investment Equity
Appreciation Fund - 477

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

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

How to Sell Shares

If you are selling some but not all of your non-retirement account shares,
leave at least $1,000 worth of shares in the account to keep it open.

To sell shares by bank wire you will need to sign up for these services in
advance when completing your account application.

o You wish to redeem more than $100,000 worth of Shares
o Your account registration has changed within the last 30 days,
o The check is being mailed to a different address than the one on your
account (record address),
o The check is being made payable to someone other than the account
owner,
o The redemption proceeds are being transferred to a BT account with a
different registration, or
o You wish to have redemption proceeds wired to a non-predesignated bank
account.

Selling Shares in Writing
Write a `letter of instruction'' with:

o Your name.
o The Fund's name and Fund's number.
o Our Fund account number.
o The dollar amount or number of Shares to be redeemed and
o Any other applicable requirements listed in the following table.

Deliver your letter to your Investment Professional, or mail it to the
following address:

BT Service Center
P.O. Box 419210
Kansas City, MO 64141-6210

Overnight mailings:

BT Service Center
210 West 10th Street, 8th Floor
Kansas City, MO 64105-1716

Unless otherwise instructed, the Transfer Agent will send a check to the
record address;

Additional Information About Selling Shares

Account Type Special Requirements

Phone your
Investment Professional All account types except
retirement Maximum check request: $100,000
All account types You may exchange to another
BT Pyramid
Mutual Fund (or a fund in
the BT Family of
Funds) if both accounts are
registered with
the same name(s), address
and taxpayer ID
number.

Mail or in PersonIndividual, Joint Tenant, Sale The letter of instruction
(with signature
Proprietorship, UGMA, UTMA guaranteed, if required)
must be signed by
all persons required to sign
for transactions,
exactly as their names
appear on the account
and sent to your Investment
Professional or
the Transfer Agent.

Retirement account The account owner should
complete a
retirement distribution
form. Contact your
Investment Professional or
call
1-800-677-7596.

Trust The trustee must sign the
letter indicating
capacity as trustee. If the
trustee's name is
not on the account
registration, provide a
copy of the trust document
certified within
the last 60 days.

Business or Organization At least one person
authorized by corporate
resolution to set on the
account must sign
the letter.
Executor, Administrator, For instructions, contact
your Investment
Conservator Guardian Professional or call 1-800-
730-1313.

Exchange by mail: Call your
Investment
Professional for
instructions.

Wire All account types except retirement You must sign for
the wire feature before
using it. To verify that it
is in place, contact
your Investment Professional
or call
1-800-730-1313. Minimum
wire: $1,000.
Your wire redemption request
must be
received by the Transfer
Agent before
4:00 p.m. Eastern time for
money to be
wired on the next business
day.

Investor Services
BT Pyramid Mutual Funds provide a variety of services to help you manage
your account.

Information Services
Statements and reports that your Investment Professional or the Transfer
Agent may send to you include the following:

To reduce expenses, only one copy of most financial reports will be mailed,
even if you have more than one account in the Fund. Call your Investment
Professional if you need additional copies of financial reports.

Transaction Services
Exchange Privilege. You may sell your Shares and buy Shares of other funds
in the BT Family of Funds by telephone or writing. The shares you exchange
will carry credit for any front-end sales charge you previously paid in
connection with their purchase. If you are exchanging from the BT
Investment Equity Appreciation Fund to another Fund, no incremental sales
charge will be assessed.

Note that exchanges out of a Fund may be limited to four per calendar year
and that they may have tax consequences for you. For detail on policies and
restrictions governing exchanges, including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see
`Exchange Limitations'' herein.

Regular Investment Plans
Systematic Investment Program
To move money from your bank account to BT Pyramid Mutual Funds

Minimum Minimum Frequency Setting up or changing
Initial Subsequent

$1,000 $100 Monthly, bimonthly, For a new account, complete
the appropriate section
quarterly or semi- on the application.
annually
For existing accounts, call your
Investment
Professional for an application. To
change the
amount or frequency of your
investment, contact
your Investment Professional directly
or call
1-800-730-1313. Call at least 10
business days prior
to your next scheduled investment
date.

Systematic Withdrawal Program lets you set up periodic redemptions from
your account.

Minimum Frequency Setting up or changing

$100 Monthly, quarterly, semi-annually or To establish, call your
Investment Professional or call
annually 1-800-730-1313 after your account is
open. The accounts
from which the withdrawals will be
processed must have a
minimum balance of $10,000.

One easy way to pursue your financial goals is to invest money regularly.
BT Pyramid Mutual Funds offer convenient services that let you transfer
money into your fund account, or between fund accounts automatically. While
regular investment plans do not guarantee a profit and will not protect you
against loss in a declining market, they can be an excellent way to invest
for retirement, a home, educational expenses, and other long-term financial
goals. Certain restrictions apply for retirement accounts. Call your
Investment Professional for more information.

Systematic Exchange Program
To move money from one fund in the BT Family of Funds to another

Minimum Frequency Setting up or changing

$100 Monthly, quarterly, semi-annually or To establish, call your
Investment Professional after
annually both accounts are open. To change the
amount or
frequency of your investment, contact
your Investment
Professional directly or call 1-800-
730-1313. Call at
least two business days prior to your
next scheduled
exchange date.

The account for which the exchanges
are to be
processed must have a minimum balance
of $10,000.
The account into which the exchange is
being
processed must have a minimum balance
of $10,000.

Sales Charge Reductions and Waivers

The front-end sales charge will be reduced for purchases of shares
according to the Sales Charge Schedule shown herein if your purchase
qualifies for one of the following reduction plans.

The following programs are available for front-end sales charge reduction.

Quantity Discounts apply to purchases of Shares of a single Fund or to
combined purchases of Shares of other BT Funds' prospectus. (Minimum
investment is $50,000).

To qualify for a Quantity Discount, investing in a Fund's Shares for
several accounts at the same time will be considered a single transaction
(Combined Purchase) as long as Shares are purchased through one Investment
Professional and the total is at least $50,000.
Rights of Accumulation let you determine your front-end sales charge on a
Fund's Shares by adding to your new purchase the value of all of BT Fund
Shares with a front-end sales charge held by you, your spouse, and your
children under age 21.

A Letter of Intent lets you receive the same reduced front-end sales charge
on purchases of Shares made during a 13-month period as if the total amount
invested during the period in a Fund had been invested in a single lump sum
(see `Quantity Discounts''). You must file your non-binding Letter within
90 days of the start of your purchases. Your initial investment must be at
least 5% of the amount you plan to invest. Out of the initial investment,
5% of the dollar amount specified in the Letter will be registered in your
name and held in escrow. You will earn income dividends and capital gain
distributions on escrowed Shares. Neither income dividends nor capital
gain distributions reinvested in additional Shares will apply toward
completion of the Letter. The escrow will be released when your purchase
of the total amount has been completed. You are not obligated to complete
the Letter, and in such a case, sufficient escrowed Shares will be redeemed
to pay any applicable front-end sales charges.

A front-end sales charge will not apply to the following Shares:

1. Purchased by an existing Bankers Trust investment management client;

2. Purchased by a bank trust officer, registered representative, or other
employee (or a member of one of their immediate families) of Investment
Professionals having agreements with Edgewood or Bankers Trust;
3. Purchased by a current or former trustee or officer of a BT Fund or a
current or retired officer, director or regular employee of Bankers Trust
or its direct or indirect subsidiaries (a Bankers Trust trustee or
employee), the spouse of a Bankers Trust trustee or employee, a Bankers
Trust trustee or employee acting as custodian for a minor child, or a
person acting as trustee of a trust for the sole benefit of the minor child
of a Bankers Trust trustee or employee;

4. Purchased by a charitable organization (as defined in Section
501(c)(3) of the Internal Revenue Code) investing $100,000 or more;

5. Purchased for a charitable remainder trust or life income pool
established for the benefit of a charitable organization (as defined in
Section 501 (c)(3) of the Internal Revenue Code);

6. Purchased by a trust institution or bank trust department investing on
its own behalf or on behalf of its clients;

7. Purchased in an account for which an Investment Professional, bank,
broker-dealer or financial advisor charges an asset management fee,
provided the Investment Professional's bank, broker-dealer or financial
advisor has an agreement with Edgewood or Bankers Trust;

8. Purchased as part of an employee benefit plan having more than 200
eligible employees or a minimum of $1 million of plan assets;

9. Purchased for any state, county, or city, or any governmental
instrumentality, department, authority or agency;

10. Purchased with redemption proceeds from other mutual fund complexes on
which you have previously paid a front-end sales charge; or

11. Purchased as an exchange from any Fund in this Prospectus or in any
other BT Funds' prospectus.

Distributions from the Fund's income and short-term capital gains are taxed
as dividends, and long-term capital gain distributions are taxed as long-
term capital gains. The Fund's distributions are taxable when they are
paid, whether you take them in cash or reinvest them in additional shares.
Distributions declared in December and paid in January are taxable as if
paid on December 31. The Fund will send each shareholder a tax statement
by January 31 showing the tax status of the distributions received in the
past year.
Capital Gains. You may realize a capital gain or loss when you redeem
(sell) or exchange Shares. Because the tax treatment also depends on your
purchase price and your personal tax position, you should keep your regular
account statements to use in determining your tax.

Other Tax Information. In addition to Federal taxes, you may be subject to
state or local taxes on your investment, depending on the laws in your
area. Income received by the Fund from sources within foreign countries may
be subject to withholding and other taxes imposed by such countries. You
should consult with your own tax adviser concerning the application of
federal, state and local taxes to your distributions from the Fund.

The Shares' performance may be used from time to time in advertisements,
shareholder reports or other communications to shareholders or prospective
shareholders. Performance information may include the Shares' investment
results and/or comparisons of its investment results to the Russell Mid-Cap
Index, the Standard and Poor's 500 Composite Stock Price Index, the
Standard and Poor's Mid-Cap 400 Index, the Lipper General Equity Averages,
the Lipper Mid Cap Average, the Lipper Growth Fund Average or other various
unmanaged indices or results of other mutual funds or investment or savings
vehicles. The Shares' investment results as used in such communications
will be calculated on a yield or total return basis in the manner set forth
herein. From time to time, fund rankings may be quoted from various
sources, such as Lipper Analytical Services, Inc., Value Line and
Morningstar, Inc.

Unlike some bank deposits or other investments which pay a fixed yield for
a stated period of time, the total return of the Fund will vary depending
upon interest

rates, the current market value of the securities held by the Fund and
changes in the Shares' expenses. In addition, during certain periods for
which total return or yield quotations may be provided, Bankers Trust, as
Adviser, Service Agent or Administrator, may have voluntarily agreed to
waive portions of their fees on a month-to-month basis. Such waivers will
have the effect of increasing the Shares' net income (and therefore its
total rate of return or yield) during the period such waivers are in
effect.

MANAGEMENT OF THE TRUST
Board of Trustees

The affairs of the Trust are managed under the supervision of its Board of
Trustees. By virtue of the responsibilities assumed by Bankers Trust, as
the Administrator of the Trust, the Trust does not require employees other
than its officers. None of the Trust's officers devote full time to the
affairs of the Trust. For more information with respect to the Trustees of
the Trust, see `Management of the Trust'' in the SAI.

Investment Adviser

The Trust has retained the services of Bankers Trust, as investment
adviser. Mr. Anthony Takazawa, CFA, Vice President of Bankers Trust, has
senior portfolio management responsibilities for the Fund. Mr. Takazawa
joined Bankers Trust in 1996. He has eight years of investment and
financial analysis experience. Previously, he worked at Phoenix Mutual Life
Insurance Company as an investment analyst, portfolio manager and director
of research.
Bankers Trust, a New York banking corporation with principal offices at 280
Park Avenue, New York, New York 10017, is a wholly owned subsidiary of
Bankers Trust New York Corporation. Bankers Trust conducts a variety of
general banking and trust activities and is a major wholesale supplier of
financial services to the international and domestic institutional market.
As of June 30, 1996, Bankers Trust New York Corporation was the seventh
largest bank holding company in the United States with total assets of
approximately $115 billion. Bankers Trust is a worldwide merchant bank
dedicated to servicing the needs of corporations, governments, financial
institutions and private clients through a global network of over 120
offices in more than 40 countries. Investment management is a core business
of Bankers Trust, built on a tradition of excellence from its roots as a
trust bank founded in 1903. The scope of Bankers Trust's investment
management capability is unique due to its leadership positions in both
active and passive quantitative management and its presence in major equity
and fixed income markets around the world. Bankers Trust is one of the
nation's largest and most experienced investment managers with
approximately $215 billion in assets under management globally.

Bankers Trust's officers have had extensive experience in managing
investment portfolios having objectives similar to those of the Fund.
Bankers Trust, subject to the supervision and direction of the Board of
Trustees of the Trust, manages the Fund, in accordance with the Fund's
investment objective and stated investment policies, makes investment
decisions for the Fund, places orders to purchase and sell securities and
other financial instruments on behalf of the Fund and employs professional
investment managers and securities analysts who provide research services
to the Fund. 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
Fund 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 Fund only if Bankers Trust believes that
the affiliate's charge for the transaction does not exceed usual and cus-

tomary levels. The Fund will not invest in obligations for which Bankers
Trust or any of its affiliates is the ultimate obligor or accepting bank.
The Fund may, however, invest in the obligations of correspondents or
customers of Bankers Trust.

Prior to September 27, 1996, Bankers Trust received an identical fee
pursuant to its Investment Advisory Agreement with the Portfolio. For the
Portfolio's fiscal year ended September 30, 1996, Bankers Trust, after a
partial waiver, paid investment advisory fees by the Portfolio equal to
0.58% of the average daily net assets of the Portfolio.

Administrator

Under its Administration and Services Agreement with the Trust, Bankers
Trust calculates the NAV of the Fund and generally assists the Board of
Trustees of the Trust in all aspects of the administration and operation of
the Trust. The Administration and Services Agreement provides for the Trust
to pay Bankers Trust a fee computed daily and paid monthly at the annual
rate of 0.50% of the average daily net assets of the Fund. For the fiscal
years of each the Fund and the Portfolio ended September 30, 1996, after
partial waivers, Bankers Trust received administrative service fees of
0.25% of the average daily net assets of the Fund and 0.05% of the average
daily net assets of the Portfolio, respectively.

Under the Administration and Services Agreement, Bankers Trust may delegate
one or more of its responsibilities to others, including Edgewood and its
affiliates, at Bankers Trust's expense. For more information, see the SAI.

Distributor

Pursuant to the terms of the Trust's Plan of Distribution pursuant to Rule
12b-1 under the 1940 Act (the `Plan''), Edgewood may seek reimbursement in
an amount not exceeding 0.50% of the Fund's average daily net assets
annually for expenses incurred in connection with any activities primarily
intended to result in the sale of the Fund's shares, including, but not
limited to: compensation to and expenses (including overhead and telephone
expenses) of account executives or other employees of Edgewood who, as
their primary activity, engage in or support the distribution of Shares;
printing of prospectuses, statements of additional information and reports
for other than existing Fund shareholders in amounts in excess of that
typically used in connection with the distribution of Shares; costs of
placing advertising in various media; services of parties other than
Edgewood or its affiliates in formulating sales literature; and
typesetting, printing and distribution of sales literature. All costs and
expenses in connection with implementing and operating the Plan will be
paid by the Fund, subject to the 0.50% of net assets limitation. All costs
and expenses associated with preparing the prospectus and statement of
additional information and in connection with printing them for and
distributing them to existing shareholders and regulatory authorities,
which costs and expenses would not be considered distribution expenses for
purposes of the Plan, will also be paid by the Fund. Expenses incurred in
connection with distribution activities will be identified to the Fund or
the other series of the Trust involved, although it is anticipated that
some activities may be conducted on a Trust-wide basis, with the result
that those activities will not be identifiable to any particular series. In
the latter case, expenses will be allocated among the series of the Trust
on the basis of their relative net assets. It is not expected that any
payments will be made under the Plan in the foreseeable future.

Service Agent

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

Custodian and Transfer Agent

Bankers Trust acts as Custodian of the assets of the Trust and serves as
the Transfer Agent for the Trust under the Administration and Services
Agreement with the Trust.

Organization of the Trust

BT PYRAMID MUTUAL FUNDS
BT Investment Equity Appreciation Fund

Investment Adviser and Administrator
BANKERS TRUST COMPANY
280 Park Avenue
New York, NY 10017

Distributor
Edgewood Services, Inc.
Clearing Operations
P.O. Box 897
Pittsburgh, PA 15230-0897

Custodian and Transfer Agent
BANKERS TRUST COMPANY
280 Park Avenue
New York, NY 10017

Independent Accountants
COOPERS & LYBRAND L.L.P.
1100 Main Street, Suite 900
Kansas City, MO 64105

Counsel
WILLKIE FARR & GALLAGHER
153 East 53rd Street
New York, NY 10022

Cusip #055922751
(1/97)

STATEMENT OF
ADDITIONAL INFORMATION
JANUARY 31, 1997

BT PYRAMID MUTUAL FUNDS
u BT INVESTMENT EQUITY APPRECIATION FUND
INVESTMENT CLASS
ADVISOR CLASS

BT Pyramid Mutual Funds (the "Trust") is an open-end management investment
company that offers investors a selection of investment portfolios, each
having distinct investment objectives and policies. This Statement of
Additional Information relates to BT Investment Equity Appreciation Fund
(the "Fund") which seeks capital growth over the long-term through
investment primarily in companies with a strong profit growth orientation.
Current income is a secondary goal.
The Fund has two classes of shares, the Investment Class and the Advisor
Class (each a `Class'' and collectively the ``Classes''). The Classes are
sold by Edgewood Services, Inc. ("Edgewood"), the Trust's Distributor, to
clients and customers (including affiliates and correspondents) of Bankers
Trust Company ("Bankers Trust"), the Fund's investment adviser
(`Adviser''), and to clients and customers of other organizations.
This Statement of Additional Information is not a Prospectus and is only
authorized for distribution when preceded or accompanied by either the
Investment Class' or Advisor Class' Prospectus both dated January 31, 1997.
This Statement of Additional Information is intended to provide additional
information regarding the activities and operations of the Trust and should
be read in conjunction with either Prospectus. Each Prospectus provides
the basic information investors should know before investing, and may be
obtained without charge by calling the Trust at the telephone number listed
below or by contacting any Service Agent. Capitalized terms not otherwise
defined in this Statement of Additional Information have the meanings
accorded to them in the Fund's Prospectuses.

INVESTMENT ADVISER AND ADMINISTRATOR
BANKERS TRUST COMPANY
DISTRIBUTOR
EDGEWOOD SERVICES, INC.

CLEARING OPERATIONS PITTSBURGH, PENNSYLVANIA 15230-0897 (800) 730-
1313
P.O. BOX 897
TABLE OF CONTENTS

Investment Objectives, Policies and Restrictions.................1
Performance Information..........................................15
Valuation of Securities; Redemptions and Purchases in Kind.......17
Management of the Trust..........................................18
Organization of the Trust........................................22
Taxation.........................................................23
Financial Statements.............................................23
Appendix: Commercial Paper Ratings..............................A-1

INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVES
The investment objective of the Fund is described in the Fund's Prospectus.
There can, of course, be no assurance that the Fund will achieve its
investment objective.
INVESTMENT POLICIES
The following is a discussion of the various investments of and techniques
employed by the Fund:
CERTIFICATES OF DEPOSIT AND BANKERS' ACCEPTANCES. Certificates of deposit
are receipts issued by a depository institution in exchange for the deposit
of funds. The issuer agrees to pay the amount deposited plus interest to
the bearer of the receipt on the date specified on the certificate. The
certificate usually can be traded in the secondary market prior to
maturity. Bankers' acceptances typically arise from short-term credit
arrangements designed to enable businesses to obtain funds to finance
commercial transactions. Generally, an acceptance is a time draft drawn on
a bank by an exporter or an importer to obtain a stated amount of funds to
pay for specific merchandise. The draft is then "accepted" by a bank that,
in effect, unconditionally guarantees to pay the face value of the
instrument on its maturity date. The acceptance may then be held by the
accepting bank as an earning asset or it may be sold in the secondary
market at the going rate of discount for a specific maturity. Although
maturities for acceptances can be as long as 270 days, most acceptances
have maturities of six months or less.
COMMERCIAL PAPER. Commercial paper consists of short-term (usually from 1
to 270 days) unsecured promissory notes issued by corporations in order to
finance their current operations. A variable amount master demand note
(which is a type of commercial paper) represents a direct borrowing
arrangement involving periodically fluctuating rates of interest under a

letter agreement between a commercial paper issuer and an institutional
lender pursuant to which the lender may determine to invest varying
amounts.
For a description of commercial paper ratings, see the Appendix to this
Statement of Additional Information.
SHORT-TERM INSTRUMENTS. When the Fund experiences large cash inflows
through the sale of securities and desirable equity securities, that are
consistent with the Fund's investment objective, which are unavailable in
sufficient quantities or at attractive prices, the Fund may hold short-term
investments for a limited time pending availability of such equity
securities. Short-term instruments consist of foreign and domestic: (i)
short-term obligations of sovereign governments, their agencies,
instrumentalities, authorities or political subdivisions; (ii) other
short-term debt securities rated AA or higher by S&P or Aa or higher by
Moody's or, if unrated, of comparable quality in the opinion of Bankers
Trust; (iii) commercial paper; (iv) bank obligations, including negotiable
certificates of deposit, time deposits and banker's acceptances; and (v)
repurchase agreements. At the time the Fund invests in commercial paper,
bank obligations or repurchase agreements, the issuer of the issuer's
parent must have outstanding debt rated AA or higher by S&P or Aa or higher
by Moody's or outstanding commercial paper or bank obligations rated A-1 by
S&P or Prime-1 by Moody's; or, if no such ratings are available, the
instrument must be of comparable quality in the opinion of Bankers Trust.
These instruments may be denominated in U.S. dollars or in foreign
currencies.
ILLIQUID SECURITIES. Historically, Illiquid securities have included
securities subject to contractual or legal restrictions on resale because
they have not been registered under the Securities Act of 1933, as amended
(the "1933 Act"), securities which are otherwise not readily marketable and

repurchase agreements having a remaining maturity of longer than seven
days. Securities which have not been registered under the 1933 Act are
referred to as private placements or restricted securities and are
purchased directly from the issuer or in the secondary market. Mutual
funds do not typically hold a significant amount of these restricted or
other illiquid securities because of the potential for delays on resale and
uncertainty in valuation. Limitations on resale may have an adverse effect
on the marketability of portfolio securities and a mutual fund might be
unable to dispose of restricted or other illiquid securities promptly or at
reasonable prices and might thereby experience difficulty satisfying
redemptions within seven days. A mutual fund might also have to register
such restricted securities in order to dispose of them resulting in
additional expense and delay. Adverse market conditions could impede such
a public offering of securities.
In recent years, however, a large institutional market has developed for
certain securities that are not registered under the 1933 Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend
on an efficient institutional market in which the unregistered security can
be readily resold or on an issuer's ability to honor a demand for
repayment. The fact that there are contractual or legal restrictions on
resale of such investments to the general public or to certain institutions
may not be indicative of their liquidity.
The Securities and Exchange Commission (the "SEC") has adopted Rule 144A,
which allows a broader institutional trading market for securities
otherwise subject to restriction on their resale to the general public.
Rule 144A establishes a "safe harbor" from the registration requirements of
the 1933 Act of resales of certain securities to qualified institutional
buyers. The Adviser anticipates that the market for certain restricted

securities such as institutional commercial paper will expand further as a
result of this regulation and the development of automated systems for the
trading, clearance and settlement of unregistered securities of domestic
and foreign issuers, such as the PORTAL System sponsored by the National
Association of Securities Dealers, Inc. (`NASD'').
The Adviser will monitor the liquidity of Rule 144A securities in the
Fund's holdings under the supervision of the Trust's Board of Trustees. In
reaching liquidity decisions, the Adviser will consider, among other
things, the following factors: (i) the frequency of trades and quotes for
the security; (ii) the number of dealers and other potential purchasers or
sellers of the security; (iii) dealer undertakings to make a market in the
security; and (iv) the nature of the security and of the marketplace trades
(e.g., the time needed to dispose of the security, the method of soliciting
offers and the mechanics of the transfer).
LENDING OF PORTFOLIO SECURITIES. The Fund has the authority to lend
portfolio securities to brokers, dealers and other financial organizations.
The Fund will not lend securities to Bankers Trust, Edgewood or their
affiliates. By lending its securities, the Fund can increase its income by
continuing to receive interest on the loaned securities as well as by
either investing the cash collateral in short-term securities or obtaining
yield in the form of interest paid by the borrower when U.S. government
obligations are used as collateral. There may be risks of delay in
receiving additional collateral or risks of delay in recovery of the
securities or even loss of rights in the collateral should the borrower of
the securities fail financially. The Fund will adhere to the following
conditions whenever its securities are loaned: (i) the Fund must receive
at least 100 percent cash collateral or equivalent securities from the
borrower; (ii) the borrower must increase this collateral whenever the
market value of the securities including accrued interest rises above the

level of the collateral; (iii) the Fund must be able to terminate the loan
at any time; (iv) the Fund must receive reasonable interest on the loan, as
well as any dividends, interest or other distributions on the loaned
securities, and any increase in market value; (v) the Fund may pay only
reasonable custodian fees in connection with the loan; and (vi) voting
rights on the loaned securities may pass to the borrower; provided,
however, that if a material event adversely affecting the investment
occurs, the Board of Trustees must terminate the loan and regain the right
to vote the securities.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
GENERAL. The successful use of such instruments draws upon the Adviser's
skill and experience with respect to such instruments and usually depends
on the Adviser's ability to forecast interest rate and currency exchange
rate movements correctly. Should interest or exchange rates move in an
unexpected manner, the Fund may not achieve the anticipated benefits of
futures contracts or options on futures contracts or may realize losses and
thus will be in a worse position than if such strategies had not been used.
In addition, the correlation between movements in the price of futures
contracts or options on futures contracts and movements in the price of the
securities and currencies hedged or used for cover will not be perfect and
could produce unanticipated losses.
FUTURES CONTRACTS. The Fund 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 which have been designated
"contracts markets" by the Commodity Futures Trading Commission ("CFTC"),
and must be executed through a futures commission merchant, or brokerage
firm, which is a member of the relevant contract market. Futures contracts

trade on a number of exchange markets, and, through their clearing
corporations, the exchanges guarantee performance of the contracts as
between the clearing members of the exchange. The Fund may enter into
futures contracts which are based on debt securities that are backed by the
full faith and credit of the U.S. government, such as long-term U.S.
Treasury Bonds, Treasury Notes, government National Mortgage Association
modified pass-through mortgage-backed securities and three-month U.S.
Treasury Bills. The Fund may also enter into futures contracts which are
based on bonds issued by entities other than the U.S. government.
At the same time a futures contract is purchased or sold, the Fund must
allocate cash or securities as a deposit payment ("initial deposit"). It
is expected that the initial deposit would be approximately 1 1/2% to 5% of
a contract's face value. Daily thereafter, the futures contract is valued
and the payment of "variation margin" may be required, since each day the
Fund would provide or receive cash that reflects any decline or increase in
the contract's value.
At the time of delivery of securities pursuant to such a contract,
adjustments are made to recognize differences in value arising from the
delivery of securities with a different interest rate from that specified
in the contract. In some (but not many) cases, securities called for by a
futures contract may not have been issued when the contract was written.
Although futures contracts by their terms call for the actual delivery or
acquisition of securities, in most cases the contractual obligation is
fulfilled before the date of the contract without having to make or take
delivery of the securities. The offsetting of a contractual obligation is
accomplished by buying (or selling, as the case may be) on a commodities
exchange an identical futures contract calling for delivery in the same
month. Such a transaction, which is effected through a member of an
exchange, cancels the obligation to make or take delivery of the

securities. Since all transactions in the futures market are made, offset
or fulfilled through a clearinghouse associated with the exchange on which
the contracts are traded, the Fund will incur brokerage fees when it
purchases or sells futures contracts.
The purpose of the acquisition or sale of a futures contract, in cases
where the Fund holds or intends to acquire fixed-income securities, is to
attempt to protect the Fund from fluctuations in interest or foreign
exchange rates without actually buying or selling fixed-income securities
or foreign currencies. For example, if interest rates were expected to
increase, the Fund 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 Fund. If interest
rates did increase, the value of the debt security in the Fund would
decline, but the value of the futures contracts to the Fund would increase
at approximately the same rate, thereby keeping the net asset value of the
Fund from declining as much as it otherwise would have. The Fund 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 Fund to
maintain a defensive position without having to sell its portfolio
securities.
Similarly, when it is expected that interest rates may decline, futures
contracts may be purchased to attempt to hedge against anticipated
purchases of debt securities at higher prices. Since the fluctuations in
the value of futures contracts should be similar to those of debt
securities, the Fund 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 Fund could then buy debt securities on the cash market. To the extent
the Fund enters into futures contracts for this purpose, the assets in the
segregated asset account maintained to cover the Fund'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 Fund with respect to such futures contracts.
The ordinary spreads between prices in the cash and futures market, due to
differences in the nature of those markets, are subject to distortions.
First, all participants in the futures market are subject to initial
deposit and variation margin requirements. Rather than meeting additional
variation margin requirements, investors may close futures contracts
through offsetting transactions which could distort the normal relationship
between the cash and futures markets. Second, the liquidity of the futures
market depends on participants entering into offsetting transactions rather
than making or taking delivery. To the extent participants decide to make
or take delivery, liquidity in the futures market could be reduced, thus
producing distortion. Third, from the point of view of speculators, the
margin deposit requirements in the futures market are less onerous than
margin requirements in the securities market. Therefore, increased
participation by speculators in the futures market may cause temporary
price distortions. Due to the possibility of distortion, a correct
forecast of general interest rate trends by the Adviser may still not
result in a successful transaction.
In addition, futures contracts entail risks. Although the Adviser believes
that use of such contracts will benefit the Fund, if the Adviser's
investment judgment about the general direction of interest rates is
incorrect, the Fund's overall performance would be poorer than if it had

not entered into any such contract. For example, if the Fund has hedged
against the possibility of an increase in interest rates which would
adversely affect the price of debt securities held in its portfolio and
interest rates decrease instead, the Fund will lose part or all of the
benefit of the increased value of its debt securities which it has hedged
because it will have offsetting losses in its futures positions. In
addition, in such situations, if the Fund has insufficient cash, it may
have to sell debt securities from its portfolio to meet daily variation
margin requirements. Such sales of bonds may be, but will not necessarily
be, at increased prices which reflect the rising market. The Fund may have
to sell securities at a time when it may be disadvantageous to do so.
OPTIONS ON FUTURES CONTRACTS. The Fund may purchase and write options on
futures contracts for hedging purposes. The purchase of a call option on a
futures contract is similar in some respects to the purchase of a call
option on an individual security. Depending on the pricing of the option
compared to either the price of the futures contract upon which it is based
or the price of the underlying debt securities, it may or may not be less
risky than ownership of the futures contract or underlying debt securities.
As with the purchase of futures contracts, when the Fund is not fully
invested it may purchase a call option on a futures contract to hedge
against a market advance due to declining interest rates.
The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the underlying security or foreign
currency which is deliverable upon exercise of the futures contract. If
the futures price at expiration of the option is below the exercise price,
the Fund will retain the full amount of the option premium which provides a
partial hedge against any decline that may have occurred in the Fund's
holdings. The writing of a put option on a futures contract constitutes a
partial hedge against increasing prices of the underlying security or

foreign currency which is deliverable upon exercise of the futures
contract. If the futures price at expiration of the option is higher than
the exercise price, the Fund will retain the full amount of the option
premium which provides a partial hedge against any increase in the price of
securities which the Fund intends to purchase. If a put or call option the
Fund has written is exercised, the Fund will incur a loss which will be
reduced by the amount of the premium it receives. Depending on the degree
of correlation between changes in the value of its portfolio securities and
changes in the value of its futures positions, the Fund's losses from
existing options on futures may to some extent be reduced or increased by
changes in the value of portfolio securities.
The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities.
For example, the Fund 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 Fund assumes when it purchases an option on a
futures contract is the premium paid for the option plus related
transaction costs. In addition to the correlation risks discussed above,
the purchase of an option also entails the risk that changes in the value
of the underlying futures contract will not be fully reflected in the value
of the option purchased.
The Board of Trustees has adopted the requirement that futures contracts
and options on futures contracts be used as a hedge and may also use stock
index futures on a continual basis to equitize cash so that the fund may
maintain 100% equity exposure. In addition to this requirement, the Board
of Trustees has also adopted a restriction that the Fund will not enter
into any futures contracts or options on futures contracts if immediately
thereafter the amount of margin deposits on all the futures contracts of
the Fund and premiums paid on outstanding options on futures contracts

owned by the Fund (other than those entered into for bona fide hedging
purposes) would exceed 5% of the market value of the total assets of the
Fund.
OPTIONS ON FOREIGN CURRENCIES. The Fund may purchase and write options on
foreign currencies for hedging purposes in a manner similar to that in
which futures contracts on foreign currencies, or forward contracts, will
be utilized. For example, a decline in the dollar value of a foreign
currency in which portfolio securities are denominated will reduce the
dollar value of such securities, even if their value in the foreign
currency remains constant. In order to protect against such diminutions in
the value of portfolio securities, the Fund may purchase put options on the
foreign currency. If the value of the currency does decline, the Fund will
have the right to sell such currency for a fixed amount in dollars and will
thereby offset, in whole or in part, the adverse effect on its portfolio
which otherwise would have resulted.
Conversely, where a rise in the dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing
the cost of such securities, the Fund may purchase call options thereon.
The purchase of such options could offset, at least partially, the effects
of the adverse movements in exchange rates. As in the case of other types
of options, however, the benefit to the Fund deriving from purchases of
foreign currency options will be reduced by the amount of the premium and
related transaction costs. In addition, where currency exchange rates do
not move in the direction or to the extent anticipated, the Fund could
sustain losses on transactions in foreign currency options which would
require it to forego a portion or all of the benefits of advantageous
changes in such rates.
The Fund may write options on foreign currencies for the same types of
hedging purposes. For example, where the Fund anticipates a decline in the

dollar value of foreign currency denominated securities due to adverse
fluctuations in exchange rates it could, instead of purchasing a put
option, write a call option on the relevant currency. If the expected
decline occurs, the options will most likely not be exercised, and the
diminution in value of portfolio securities will be offset by the amount of
the premium received.
Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar cost of securities to be acquired, the
Fund could write a put option on the relevant currency which, if rates move
in the manner projected, will expire unexercised and allow the Fund to
hedge such increased cost up to the amount of the premium. As in the case
of other types of options, however, the writing of a foreign currency
option will constitute only a partial hedge up to the amount of the
premium, and only if rates move in the expected direction. If this does
not occur, the option may be exercised and the Fund would be required to
purchase or sell the underlying currency at a loss which may not be offset
by the amount of the premium. Through the writing of options on foreign
currencies, the Fund also may be required to forego all or a portion of the
benefits which might otherwise have been obtained from favorable movements
in exchange rates.
The Fund may write covered call options on foreign currencies. A call
option written on a foreign currency by the Fund is "covered" if the Fund
owns the underlying foreign currency covered by the call or has an absolute
and immediate right to acquire that foreign currency without additional
cash consideration (or for additional cash consideration held in a
segregated account by its Custodian) upon conversion or exchange of other
foreign currency held in its portfolio. A call option is also covered if
the Fund has a call on the same foreign currency and in the same principal
amount as the call written where the exercise price of the call held (a) is

equal to or less than the exercise price of the call written or (b) is
greater than the exercise price of the call written if the difference is
maintained by the Fund in cash, U.S. government securities and other high
quality liquid debt securities in a segregated account with its custodian.
The Fund also may write call options on foreign currencies that are not
covered for cross-hedging purposes. A call option on a foreign currency is
for cross-hedging purposes if it is not covered, but is designed to provide
a hedge against a decline in the U.S. dollar value of a security which the
Fund owns or has the right to acquire and which is denominated in the
currency underlying the option due to an adverse change in the exchange
rate. In such circumstances, the Fund collateralizes the option by
maintaining in a segregated account with its custodian, cash or U.S.
government securities or other high quality liquid debt securities in an
amount not less than the value of the underlying foreign currency in U.S.
dollars marked to market daily.
ADDITIONAL RISKS OF OPTIONS ON FUTURES CONTRACTS, FORWARD CONTRACTS AND
OPTIONS ON FOREIGN CURRENCIES. Unlike transactions entered into by the
Fund in futures contracts, options on foreign currencies and forward
contracts are not traded on contract markets regulated by the CFTC or (with
the exception of certain foreign currency options) by the SEC. To the
contrary, such instruments are traded through financial institutions acting
as market-makers, although foreign currency options are also traded on
certain national securities exchanges, such as the Philadelphia Stock
Exchange and the Chicago Board Options Exchange, subject to SEC regulation.
Similarly, options on currencies may be traded over-the-counter. In an
over-the-counter trading environment, many of the protections afforded to
exchange participants will not be available. For example, there are no
daily price fluctuation limits, and adverse market movements could
therefore continue to an unlimited extent over a period of time. Although

the purchaser of an option cannot lose more than the amount of the premium
plus related transaction costs, this entire amount could be lost.
Moreover, the option writer and a trader of forward contracts could lose
amounts substantially in excess of their initial investments, due to the
margin and collateral requirements associated with such positions.
Options on foreign currencies traded on national securities exchanges are
within the jurisdiction of the SEC, as are other securities traded on such
exchanges. As a result, many of the protections provided to traders on
organized exchanges will be available with respect to such transactions.
In particular, all foreign currency option positions entered into on a
national securities exchange are cleared and guaranteed by the Options
Clearing Corporation (the "OCC"), thereby reducing the risk of counterparty
default. Further, a liquid secondary market in options traded on a
national securities exchange may be more readily available than in the
over-the-counter market, potentially permitting the Fund to liquidate open
positions at a profit prior to exercise or expiration, or to limit losses
in the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency options, however,
is subject to the risks of the availability of a liquid secondary market
described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
political and economic events. In addition, exchange-traded options on
foreign currencies involve certain risks not presented by the over-the-
counter market. For example, exercise and settlement of such options must
be made exclusively through the OCC, which has established banking
relationships in applicable foreign countries for this purpose. As a
result, the OCC may, if it determines that foreign governmental
restrictions or taxes would prevent the orderly settlement of foreign

currency option exercises, or would result in undue burdens on the OCC or
its clearing member, impose special procedures on exercise and settlement,
such as technical changes in the mechanics of delivery of currency, the
fixing of dollar settlement prices or prohibitions on exercise.
As in the case of forward contracts, certain options on foreign currencies
are traded over-the-counter and involve liquidity and credit risks which
may not be present in the case of exchange-traded currency options. The
Fund's ability to terminate over-the-counter options will be more limited
than with exchange-traded options. It is also possible that broker-dealers
participating in over-the-counter options transactions will not fulfill
their obligations. Until such time as the staff of the SEC changes its
position, the Fund will treat purchased over-the-counter options and assets
used to cover written over-the-counter options as illiquid securities.
With respect to options written with primary dealers in U.S. government
securities pursuant to an agreement requiring a closing purchase
transaction at a formula price, the amount of illiquid securities may be
calculated with reference to the repurchase formula.
In addition, futures contracts, options on futures contracts, forward
contracts and options on foreign currencies may be traded on foreign
exchanges. Such transactions are subject to the risk of governmental
actions affecting trading in or the prices of foreign currencies or
securities. The value of such positions also could be adversely affected
by: (i) other complex foreign political and economic factors; (ii) lesser
availability than in the United States of data on which to make trading
decisions; (iii) delays in the Portfolio's ability to act upon economic
events occurring in foreign markets during nonbusiness hours in the United
States; (iv) the imposition of different exercise and settlement terms and
procedures and margin requirements than in the United States; and
(v) lesser trading volume.

OPTIONS ON SECURITIES. The Fund may write (sell) covered call and put
options to a limited extent on its portfolio securities ("covered options")
in an attempt to increase income. However, the Fund may forgo the benefits
of appreciation on securities sold or may pay more than the market price on
securities acquired pursuant to call and put options written by the Fund.
When the Fund writes a covered call option, it gives the purchaser of the
option the right to buy the underlying security at the price specified in
the option (the "exercise price") by exercising the option at any time
during the option period. If the option expires unexercised, the Fund 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 Fund has no
control, the Fund must sell the underlying security to the option holder at
the exercise price. By writing a covered call option, the Fund forgoes, in
exchange for the premium less the commission ("net premium"), the
opportunity to profit during the option period from an increase in the
market value of the underlying security above the exercise price.
When the Fund writes a covered put option, it gives the purchaser of the
option the right to sell the underlying security to the Fund at the
specified exercise price at any time during the option period. If the
option expires unexercised, the Fund will realize income in the amount of
the premium received for writing the option. If the put option is
exercised, a decision over which the Fund has no control, the Fund must
purchase the underlying security from the option holder at the exercise
price. By writing a covered put option, the Fund, in exchange for the net
premium received, accepts the risk of a decline in the market value of the
underlying security below the exercise price. The Fund will only write put
options involving securities for which a determination is made at the time
the option is written that the Fund wishes to acquire the securities at the
exercise price.

The Fund 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 Fund will realize a profit or loss from a
closing purchase transaction if the amount paid to purchase an option is
less or more, as the case may be, than the amount received from the sale
thereof. To close out a position as a purchaser of an option, the Fund,
may make a "closing sale transaction" which involves liquidating the Fund's
position by selling the option previously purchased. Where the Fund 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 Fund writes an option, an amount equal to the net premium received
by the Fund is included in the liability section of the Fund's Statement of
Assets and Liabilities as a deferred credit. The amount of the deferred
credit will be subsequently marked to market to reflect the current market
value of the option written. The current market value of a traded option
is the last sale price or, in the absence of a sale, the mean between the
closing bid and asked price. If an option expires on its stipulated
expiration date or if the Fund enters into a closing purchase transaction,
the Fund will realize a gain (or loss if the cost of a closing purchase
transaction exceeds the premium received when the option was sold), and the
deferred credit related to such option will be eliminated. If a call
option is exercised, the Fund will realize a gain or loss from the sale of
the underlying security and the proceeds of the sale will be increased by
the premium originally received. The writing of covered call options may
be deemed to involve the pledge of the securities against which the option

is being written. Securities against which call options are written will
be segregated on the books of the custodian for the Fund.
The Fund may purchase call and put options on any securities in which it
may invest. The Fund 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 Fund, in exchange for the premium paid, to
purchase a security at a specified price during the option period. The
Fund 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 Fund 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 Fund, in exchange for the premium paid, to
sell a security, which may or may not be held in the Fund'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 Fund's holdings. Put options also may be purchased by the Fund for
the purpose of affirmatively benefiting from a decline in the price of
securities which the Fund does not own. The Fund 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 Fund has adopted certain other nonfundamental policies concerning
option transactions which are discussed below. The Fund's activities in

options may also be restricted by the requirements of the Internal Revenue
Code of 1986, as amended (the "Code"), for qualification as a regulated
investment company.
The hours of trading for options on securities may not conform to the hours
during which the underlying securities are traded. To the extent that the
option markets close before the markets for the underlying securities,
significant price and rate movements can take place in the underlying
securities markets that cannot be reflected in the option markets. It is
impossible to predict the volume of trading that may exist in such options,
and there can be no assurance that viable exchange markets will develop or
continue.
The Fund may engage in over-the-counter options transactions with
broker-dealers who make markets in these options. At present,
approximately ten broker-dealers, including several of the largest primary
dealers in U.S. government securities, make these markets. The ability to
terminate over-the-counter option positions is more limited than with
exchange-traded option positions because the predominant market is the
issuing broker rather than an exchange, and may involve the risk that
broker-dealers participating in such transactions will not fulfill their
obligations. To reduce this risk, the Fund will purchase such options only
from broker-dealers who are primary government securities dealers
recognized by the Federal Reserve Bank of New York and who agree to (and
are expected to be capable of) entering into closing transactions, although
there can be no guarantee that any such option will be liquidated at a
favorable price prior to expiration. The Adviser will monitor the
creditworthiness of dealers with whom the Fund enters into such options
transactions under the general supervision of the Trust's Board of
Trustees.

OPTIONS ON SECURITIES INDICES. In addition to options on securities, the
Fund may also purchase and write (sell) call and put options on securities
indices. Such options give the holder the right to receive a cash
settlement during the term of the option based upon the difference between
the exercise price and the value of the index. Such options will be used
for the purposes described above under "Options on Securities."
Options on securities indices entail risks in addition to the risks of
options on securities. The absence of a liquid secondary market to close
out options positions on securities indices is more likely to occur,
although the Fund generally will only purchase or write such an option if
the Adviser believes the option can be closed out.
Use of options on securities indices also entails the risk that trading in
such options may be interrupted if trading in certain securities included
in the index is interrupted. The Fund will not purchase such options
unless the Adviser believes the market is sufficiently developed such that
the risk of trading in such options is no greater than the risk of trading
in options on securities.
Price movements in the Fund's holdings may not correlate precisely with
movements in the level of an index and, therefore, the use of options on
indices cannot serve as a complete hedge. Because options on securities
indices require settlement in cash, the Adviser may be forced to liquidate
portfolio securities to meet settlement obligations.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. Because the Fund may buy and
sell securities denominated in currencies other than the U.S. dollar and
receives interest, dividends and sale proceeds in currencies other than the
U.S. dollar, the Portfolio from time to time may enter into foreign
currency exchange transactions to convert to and from different foreign
currencies and to convert foreign currencies to and from the U.S. dollar.
The Fund either enters into these transactions on a spot (i.e., cash) basis

at the spot rate prevailing in the foreign currency exchange market or uses
forward contracts to purchase or sell foreign currencies.
A forward foreign currency exchange contract is an obligation by the Fund
to purchase or sell a specific currency at a future date, which may be any
fixed number of days from the date of the contract. Forward foreign
currency exchange contracts establish an exchange rate at a future date.
These contracts are transferable in the interbank market conducted directly
between currency traders (usually large commercial banks) and their
customers. A forward foreign currency exchange contract generally has no
deposit requirement and is traded at a net price without commission. The
Fund maintains with its custodian a segregated account of high grade liquid
assets in an amount at least equal to its obligations under each forward
foreign currency exchange contract. Neither spot transactions nor forward
foreign currency exchange contracts eliminate fluctuations in the prices of
the Fund's securities or in foreign exchange rates, or prevent loss if the
prices of these securities should decline.
The Fund may enter into foreign currency hedging transactions in an attempt
to protect against changes in foreign currency exchange rates between the
trade and settlement dates of specific securities transactions or changes
in foreign currency exchange rates that would adversely affect the
portfolio position or an anticipated investment position. Since
consideration of the prospect for currency parities will be incorporated
into Bankers Trust's long-term investment decisions, the Fund will not
routinely enter into foreign currency hedging transactions with respect to
security transactions; however, Bankers Trust believes that it is important
to have the flexibility to enter into foreign currency hedging transactions
when it determines that the transactions would be in the Fund's best
interest. Although these transactions tend to minimize the risk of loss
due to a decline in the value of the hedged currency, at the same time they

tend to limit any potential gain that might be realized should the value of
the hedged currency increase. The precise matching of the forward contract
amounts and the value of the securities involved will not generally be
possible because the future value of such securities in foreign currencies
will change as a consequence of market movements in the value of such
securities between the date the forward contract is entered into and the
date it matures. The projection of currency market movements is extremely
difficult, and the successful execution of a hedging strategy is highly
uncertain.
While these contracts are not presently regulated by the CFTC, the CFTC may
in the future assert authority to regulate forward contracts. In such
event, the Fund's ability to utilize forward contracts in the manner set
forth in the Prospectus may be restricted. Forward contracts may reduce
the potential gain from a positive change in the relationship between the
U.S. dollar and foreign currencies. Unanticipated changes in currency
prices may result in poorer overall performance for the Fund than if it had
not entered into such contracts. The use of foreign currency forward
contracts may not eliminate fluctuations in the underlying U.S. dollar
equivalent value of the prices or rates of return on the Fund's foreign
currency denominated portfolio securities and the use of such techniques
will subject the Fund to certain risks.

The matching of the increase in value of a forward contract and the decline
in the U.S. dollar equivalent value of the foreign currency denominated
asset that is the subject of the hedge generally will not be precise. In
addition, the Fund may not always be able to enter into foreign currency
forward contracts at attractive prices and this will limit the Fund's
ability to use such contract to hedge or cross-hedge its assets. Also,
with regard to the Fund's use of cross-hedges, there can be no assurance
that historical correlations between the movement of certain foreign
currencies relative to the U.S. dollar will continue. Thus, at any time
poor correlation may exist between movements in the exchange rates of the
foreign currencies underlying the Fund's cross-hedges and the movements in
the exchange rates of the foreign currencies in which the Fund's assets
that are the subject of such cross-hedges are denominated.
RATING SERVICES
The ratings of rating services represent their opinions as to the quality
of the securities that they undertake to rate. It should be emphasized,
however, that ratings are relative and subjective and are not absolute
standards of quality. Although these ratings are an initial criterion for
selection of portfolio investments, Bankers Trust also makes its own
evaluation of these securities, subject to review by the Board of Trustees.
After purchase by the Fund, an obligation may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund.
Neither event would require the Fund to eliminate the obligation from its
portfolio, but Bankers Trust will consider such an event in its
determination of whether the Fund should continue to hold the obligation.
A description of the ratings used herein and in the Prospectus is set forth
in the Appendix to this Statement of Additional Information.

INVESTMENT RESTRICTIONS
The following investment restrictions are "fundamental policies" of the
Fund and may not be changed without the approval of a "vote of a majority
of the outstanding voting securities" of the Fund. "A vote of a majority
of the outstanding voting securities" under the Investment Company Act of
1940, as amended (the "1940 Act"), and as used in this Statement of
Additional Information and the Prospectus, means, the lesser of (i) 67% or
more of the outstanding shares of the Fund present at a meeting, if the
holders of more than 50% of the outstanding shares of the Fund are present
or represented by proxy or (ii) more than 50% of the outstanding shares of
the Fund.
As a matter of fundamental policy, the Trust, with respect to the Fund, may
not (except that no investment restriction of the Fund shall prevent the
Fund from investing all of its investable assets in an open-end investment
company with substantially the same investment objective):
(1) borrow money or mortgage or hypothecate assets of the Fund, except
that in an amount not to exceed 1/3 of the current value of the Fund's
assets, it may borrow money as a temporary measure for extraordinary or
emergency purposes and enter into reverse repurchase agreements or dollar
roll transactions, and except that it may pledge, mortgage or hypothecate
not more than 1/3 of such assets to secure such borrowings (it is intended
that money would be borrowed only from banks and only either to accommodate
requests for the withdrawal of beneficial interests (redemption of shares)
while effecting an orderly liquidation of portfolio securities or to
maintain liquidity in the event of an unanticipated failure to complete the
portfolio security transaction or other similar situations) or reverse
repurchase agreements, provided that collateral arrangements with respect
to options and futures, including deposits of initial deposit and variation
margin, are not considered a pledge of assets for purposes of this

restriction and except that assets may be pledged to secure letters of
credit solely for the purpose of participating in a captive insurance
company sponsored by the Investment Company Institute; for additional
related restrictions, see clause (i) under the caption "Additional
Restrictions" below;
(2) underwrite securities issued by other persons except insofar as
the Trust or the Fund may technically be deemed an underwriter under the
1933 Act in selling the portfolio security;
(3) make loans to other persons except: (a) through the lending of the
Fund's portfolio securities and provided that any such loans not exceed 30%
of the Fund's net assets (taken at market value); (b) through the use of
repurchase agreements or the purchase of short-term obligations; or (c) by
purchasing a portion of an issue of debt securities of types distributed
publicly or privately (under current regulations, the Fund's fundamental
policy with respect to 20% risk weighing for financial institutions prevent
the Fund from engaging in securities lending);
(4) purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests
therein), interests in oil, gas or mineral leases, commodities or commodity
contracts (except futures and option contracts) in the ordinary course of
business (except that the Trust may hold and sell, for the Fund's
portfolio, real estate acquired as a result of the Fund's ownership of
securities);
(5) concentrate its investments in any particular industry (excluding
U.S. government securities), but if it is deemed appropriate for the
achievement of the Fund's investment objective, up to 25% of its total
assets may be invested in any one industry; and
(6) issue any senior security (as that term is defined in the
1940 Act) if such issuance is specifically prohibited by the 1940 Act or

the rules and regulations promulgated thereunder, provided that collateral
arrangements with respect to options and futures, including deposits of
initial deposit and variation margin, are not considered to be the issuance
of a senior security for purposes of this restriction.

ADDITIONAL RESTRICTIONS. In order to comply with certain statutes and
policies, the Trust, on behalf of the Fund will not as a matter of
operating policy:
(i) borrow money (including through reverse repurchase or
forward roll transactions) for any purpose in excess of 5% of the
Fund's total assets (taken at cost), except that the Fund may
borrow for temporary or emergency purposes up to 1/3 of its total
assets;
(ii) pledge, mortgage or hypothecate for any purpose in
excess of 10% of the Fund's total assets (taken at market value),
provided that collateral arrangements with respect to options and
futures, including deposits of initial deposit and variation
margin, and reverse repurchase agreements are not considered a
pledge of assets for purposes of this restriction;
(iii) purchase any security or evidence of interest therein
on margin, except that such short-term credit as may be necessary
for the clearance of purchases and sales of securities may be
obtained and except that deposits of initial deposit and
variation margin may be made in connection with the purchase,
ownership, holding or sale of futures;
(iv) sell securities it does not own (short sells) such that
the dollar amount of such short sales at any one time exceeds 25%
of the net equity of the Fund, and the value of securities of any

one issuer in which the Fund is short exceeds the lesser of 2.0%
of the value of the Fund's net assets or 2.0% of the securities
of any class of any U.S. issuer and, provided that short sales
may be made only in those securities which are fully listed on a
national securities exchange or a foreign exchange (This
provision does not include the sale of securities that the Fund
contemporaneously owns or where the Fund has the right to obtain
securities equivalent in kind and amount to those sold, i.e.,
short sales against the box.) (The Fund currently does not
engage in short selling.);
(v) invest for the purpose of exercising control or management
of another company;
(vi) purchase securities issued by any investment company
except by purchase in the open market where no commission or
profit to a sponsor or dealer results from such purchase other
than the customary broker's commission, or except when such
purchase, though not made in the open market, is part of a plan
of merger or consolidation; provided, however, that securities of
any investment company will not be purchased for the Fund if such
purchase at the time thereof would cause: (a) more than 10% of
the Fund's total assets (taken at the greater of cost or market
value) to be invested in the securities of such issuers; (b) more
than 5% of the Fund's total assets (taken at the greater of cost
or market value) to be invested in any one investment company; or
(c) more than 3% of the outstanding voting securities of any such
issuer to be held for the Fund; provided further that, except in
the case of a merger or consolidation, the Fund shall not
purchase any securities of any open-end investment company unless
(1) the investment adviser waives the investment advisory fee

with respect to assets invested in other open-end investment
companies and (2) the Fund incurs no sales charge in connection
with the investment;
(vii) invest more than 10% of the Fund's total assets (taken
at the greater of cost or market value) in securities (excluding
Rule 144A securities) that are restricted as to resale under the
1933 Act;
(viii) invest more than 5% in securities that are issued by
issuers which (including predecessors) have been in operation
less than three years (other than U.S. government securities);
(ix) invest more than 15% of the Fund's net assets (taken at
the greater of cost or market value) in securities that are
illiquid or not readily marketable excluding (a) Rule 144A
securities that have been determined to be liquid by the Board of
Trustees; and (b) commercial paper that is sold under section
4(2) of the 1933 Act which: (i) is not traded flat or in default
as to interest or principal; and (ii) is rated in one of the two
highest categories by at least two nationally recognized
statistical rating organizations and the Trust's Board of
Trustees have determined the commercial paper to be liquid; or
(iii) is rated in one of the two highest categories by one
nationally recognized statistical rating agency and the Trust's
Board of Trustees has determined that the commercial paper is of
equivalent quality and is liquid;
(x) invest in securities issued by an issuer any of whose
officers, directors, trustees or security holders is an officer
or Trustee of the Trust, or is an officer or director of the
Adviser, if after the purchase of the securities of such issuer
for the Fund one or more of such persons owns beneficially more

than 1/2 of 1% of the shares or securities, or both, all taken at
market value, of such issuer, and such persons owning more than
1/2 of 1% of such shares or securities together own beneficially
more than 5% of such shares or securities, or both, all taken at
market value;
(xi) invest in warrants (other than warrants acquired by the
Fund as part of a unit or attached to securities at the time of
purchase) if, as a result, the investments (valued at the lower
of cost or market) would exceed 5% of the value of the Fund's net
assets or if, as a result, more than 2% of the Fund's net assets
would be invested in warrants not listed on a recognized United
States or foreign stock exchange, to the extent permitted by
applicable state securities laws;
(xii) write puts and calls on securities unless each of the
following conditions are met: (a) the security underlying the
put or call is within the investment practices of the Fund and
the option is issued by the OCC, except for put and call options
issued by non-U.S. entities or listed on non-U.S. securities or
commodities exchanges; (b) the aggregate value of the obligations
underlying the puts determined as of the date the options are
sold shall not exceed 5% of the Fund's net assets; (c) the
securities subject to the exercise of the call written by the
Fund must be owned by the Fund at the time the call is sold and
must continue to be owned by the Fund until the call has been
exercised, has lapsed, or the Fund has purchased a closing call,
and such purchase has been confirmed, thereby extinguishing the
Fund's obligation to deliver securities pursuant to the call it
has sold; and (d) at the time a put is written, the Fund
establishes a segregated account with its custodian consisting of

cash or short-term U.S. government securities equal in value to
the amount the Fund will be obligated to pay upon exercise of the
put (this account must be maintained until the put is exercised,
has expired, or the Fund has purchased a closing put, which is a
put of the same series as the one previously written); and
(xiii) buy and sell puts and calls on securities, stock index
futures or options on stock index futures, or financial futures
or options on financial futures unless such options are written
by other persons and: (a) the options or futures are offered
through the facilities of a national securities association or
are listed on a national securities or commodities exchange,
except for put and call options issued by non-U.S. entities or
listed on non-U.S. securities or commodities exchanges; (b) the
aggregate premiums paid on all such options which are held at any
time do not exceed 20% of the Fund's total net assets; and (c)
the aggregate margin deposits required on all such futures or
options thereon held at any time do not exceed 5% of the Fund's
total assets.
There will be no violation of any investment restrictions or policies
(except with respect to illiquid securities) 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.

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

Adviser reviews on a routine basis commission rates, execution and
settlement services performed, making internal and external comparisons.
The Adviser is authorized, consistent with Section 28(e) of the Securities
Exchange Act of 1934, as amended, when placing portfolio transactions for
the Fund with a broker to pay a brokerage commission (to the extent
applicable) in excess of that which another broker might have charged for
effecting the same transaction on account of the receipt of research,
market or statistical information. The term "research, market or
statistical information" includes advice as to the value of securities; the
advisability of investing in, purchasing or selling securities; the
availability of securities or purchasers or sellers of securities; and
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of
accounts.
Consistent with the policy stated above, the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. and such other policies as
the Trustees of the Trust may determine, the Adviser may consider sales of
shares of the Trust and of other investment company clients of Bankers
Trust as a factor in the selection of broker-dealers to execute portfolio
transactions. Bankers Trust will make such allocations if commissions are
comparable to those charged by nonaffiliated, qualified broker-dealers for
similar services.
Higher commissions may be paid to firms that provide research services to
the extent permitted by law. Bankers Trust may use this research
information in managing the Fund's assets, as well as the assets of other
clients.
Except for implementing the policies stated above, there is no intention to
place portfolio transactions with particular brokers or dealers or groups
thereof. In effecting transactions in over-the-counter securities, orders

are placed with the principal market-makers for the security being traded
unless, after exercising care, it appears that more favorable results are
available otherwise.
Although certain research, market and statistical information from brokers
and dealers can be useful to the Fund and to the Adviser, it is the opinion
of the management of the Fund that such information is only supplementary
to the Adviser's own research effort, since the information must still be
analyzed, weighed and reviewed by the Adviser's staff. Such information
may be useful to the Adviser in providing services to clients other than
the Fund, and not all such information is used by the Adviser in connection
with the Fund. Conversely, such information provided to the Adviser by
brokers and dealers through whom other clients of the Adviser effect
securities transactions may be useful to the Adviser in providing services
to the Fund.
In certain instances there may be securities which are suitable for the
Fund as well as for one or more of the Adviser's other clients. Investment
decisions for the Fund and for the Adviser's other clients are made with a
view to achieving their respective investment objectives. It may develop
that a particular security is bought or sold for only one client even
though it might be held by, or bought or sold for, other clients.
Likewise, a particular security may be bought for one or more clients when
one or more clients are selling that same security. Some simultaneous
transactions are inevitable when several clients receive investment advice
from the same investment adviser, particularly when the same security is
suitable for the investment objectives of more than one client. When two
or more clients are simultaneously engaged in the purchase or sale of the
same security, the securities are allocated among clients in a manner
believed to be equitable to each. It is recognized that in some cases this
system could have a detrimental effect on the price or volume of the

security as far as the Fund in concerned. However, it is believed that the
ability of the Fund to participate in volume transactions will produce
better executions for the Fund.
Prior to September 27, 1996, the Fund sought to achieve the investment
objective by investing all of its investable assets in the Capital
Appreciation Portfolio (the "Portfolio"), which is a separate registered
investment company with an identical investment objective. The Fund's
fiscal year end is September 30. Formerly, both the Fund's and the
Portfolio's fiscal year end was December 31. For the fiscal year ended
September 30, 1996, the period from January 1, 1995 to September 30, 1995,
and the fiscal year ended December 31, 1994, the Portfolio paid brokerage
commissions in the amount of $648,897, $247,868, and $162,941
respectively.
PERFORMANCE INFORMATION
STANDARD PERFORMANCE INFORMATION
From time to time, quotations of the Class' performance may be included in
advertisements, sales literature or shareholder reports. These performance
figures are calculated in the following manner:
TOTAL RETURN: A Class' average annual total return is calculated for
certain periods by determining the average annual compounded rates of
return over those periods that would cause an investment of $1,000 (made at
the maximum public offering price with all distributions reinvested) to
reach the value of that investment at the end of the periods. A Class may
also calculate total return figures which represent aggregate performance
over a period or year-by-year performance.
Prior to September 27, 1996, the Fund did not offer classes of shares and
the performance of the Investment Class was that of the Fund's.
The Fund's average annual total returns for Investment Class shares for the
one-year period ended September 30, 1996, and for the period from October

12, 1993, (commencement of operations), through September 30, 1996, were
12.45%, and 16.91%, respectively.
PERFORMANCE RESULTS: Any total return quotation provided for the Fund
should not be considered as representative of the performance of the Fund
in the future since the net asset value and public offering price of shares
of the Fund will vary based not only on the type, quality and maturities of
the securities held in its portfolio, but also on changes in the current
value of such securities and on changes in the expenses of the Fund. These
factors and possible differences in the methods used to calculate total
return should be considered when comparing the total return of the Fund to
total returns published for other investment companies or other investment
vehicles. Total return reflects the performance of both principal and
income.
COMPARISON OF FUND PERFORMANCE
Comparison of the quoted nonstandardized performance of various investments
is valid only if performance is calculated in the same manner. Since there
are different methods of calculating performance, investors should consider
the effect of the methods used to calculate performance when comparing
performance of 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 which may assume reinvestment of dividends but generally do not
reflect deductions for administrative and management costs. Evaluations of
the Fund's performance made by independent sources may also be used in
advertisements concerning the Fund. Sources for the Fund's performance
information could include the following:

Asian Wall Street Journal, a weekly Asian newspaper that often reviews U.S.
mutual funds investing internationally.
Barron's, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance data.
Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds investing
abroad.
Changing Times, The Kiplinger Magazine, a monthly investment advisory
publication that periodically features the performance of a variety of
securities.
Consumer Digest, a monthly business/financial magazine that includes a
"Money Watch" section featuring financial news.
Financial Times, Europe's business newspaper, which features from time to
time articles on international or country-specific funds.
Financial World, a general business/financial magazine that includes a
"Market Watch" department reporting on activities in the mutual fund
industry.
Forbes, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.
Fortune, a national business publication that periodically rates the
performance of a variety of mutual funds.
Global Investor, a European publication that periodically reviews the
performance of U.S. mutual funds investing internationally.
Investor's Daily, a daily newspaper that features financial, economic and
business news.
Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis, a
weekly publication of industry-wide mutual fund averages by type of fund.
Money, a monthly magazine that from time to time features both specific
funds and the mutual fund industry as a whole.

Morningstar Inc., a publisher of financial information and mutual fund
research.
New York Times, a nationally distributed newspaper which regularly covers
financial news.
Personal Investing News, a monthly news publication that often reports on
investment opportunities and market conditions.
Personal Investor, a monthly investment advisory publication that includes
a "Mutual Funds Outlook" section reporting on mutual fund performance
measures, yields, indices and portfolio holdings.
Success, a monthly magazine targeted to the world of entrepreneurs and
growing business, often featuring mutual fund performance data.
U.S. News and World Report, a national business weekly that periodically
reports mutual fund performance data.
Value Line, a biweekly publication that reports on the largest 15,000
mutual funds.
Wall Street Journal, a Dow Jones and Company, Inc. newspaper which
regularly covers financial news.
Weisenberger Investment Companies Services, an annual compendium of
information about mutual funds and other investment companies, including
comparative data on funds' backgrounds, management policies, salient
features, management results, income and dividend records, and price
ranges.
Working Women, a monthly publication that features a "Financial Workshop"
section reporting on the mutual fund/financial industry.

VALUATION OF SECURITIES; REDEMPTIONS AND PURCHASES IN KIND
Equity and debt securities (other than short-term debt obligations maturing
in 60 days or less), including listed securities and securities for which
price quotations are available, will normally be valued on the basis of
market valuations furnished by a pricing service. Short-term debt
obligations and money market securities maturing in 60 days or less are
valued at amortized cost, which approximates market.
Securities for which market quotations are not readily available are valued
by Bankers Trust pursuant to procedures adopted by the Trust's Board of
Trustees. It is generally agreed that securities for which market
quotations are not readily available should not be valued at the same value
as that carried by an equivalent security which is readily marketable.
The problems inherent in making a good faith determination of value are
recognized in the codification effected by SEC Financial Reporting Release
No. 1 ("FRR 1" (formerly Accounting Series Release No. 113)) which
concludes that there is "no automatic formula" for calculating the value of
restricted securities. It recommends that the best method simply is to
consider all relevant factors before making any calculation. According to
FRR 1 such factors would include consideration of the:
type of security involved, financial statements, cost at date of
purchase, size of holding, discount from market value of unrestricted
securities of the same class at the time of purchase, special reports
prepared by analysts, information as to any transactions or offers
with respect to the security, existence of merger proposals or tender
offers affecting the security, price and extent of public trading in
similar securities of the issuer or comparable companies, and other
relevant matters.
To the extent that the Fund purchases securities which are restricted as to
resale or for which current market quotations are not readily available,

the Adviser will value such securities based upon all relevant factors as
outlined in FRR 1.
The Trust, on behalf of the Fund, reserves the right, if conditions exist
which make cash payments undesirable, to honor any request for redemption
or withdrawal by making payment in whole or in part in readily marketable
securities chosen by the Trust, and valued as they are for purposes of
computing the Class' net asset values (a redemption in kind). If payment
is made to a Fund shareholder in securities, an investor, including the
Fund, may incur transaction expenses in converting these securities into
cash. The Trust, on behalf of the Fund, has elected, however, to be
governed by Rule 18f-1 under the 1940 Act as a result of which the Fund is
obligated to redeem shares with respect to any one investor during any
90-day period, solely in cash up to the lesser of $250,000 or 1% of the net
asset value of the Fund's Classes at the beginning of the period.
The Fund may, at its own option, accept securities in payment for shares of
a class. The securities delivered in payment for shares are valued by the
method described under "Net Asset Value" as of the day the Fund receives
the securities. This may be a taxable transaction to the shareholder.
(Consult your tax adviser for future tax guidance.) Securities may be
accepted in payment for shares only if they are, in the judgment of Bankers
Trust, appropriate investments for the Fund. In addition, securities
accepted in payment for shares must: (i) meet the investment objective and
policies of the acquiring Fund; (ii) be acquired by the applicable Fund for
investment and not for resale (other than for resale to the Fund); (iii) be
liquid securities which are not restricted as to transfer either by law or
liquidity of the market; and (iv) if stock, have a value which is readily
ascertainable as evidenced by a listing on a stock exchange, over-the-
counter market or by readily available market quotations from a dealer in

such securities. The Fund reserves the right to accept or reject at its
own option any and all securities offered in payment for its shares.
{PRIVATE }MANAGEMENT OF THE TRUST{TC "MANAGEMENT OF THE TRUST"}
The Board of Trustees is composed of persons experienced in financial
matters who meet throughout the year to oversee the activities of the Fund.
In addition, the Trustees review contractual arrangements with companies
that provide services to the Fund and review the Fund's performance.
The Trustees and officers of the Trust, their birthdates and their
principal occupations during the past five years are set forth below.
Their titles may have varied during that period. Unless otherwise
indicated, the address of each officer is Clearing Operations, P.O. Box
897, Pittsburgh, Pennsylvania 15230-0897.
TRUSTEES OF THE TRUST
HARRY VAN BENSCHOTEN (birthdate: February 18, 1928) -- Trustee; retired
(since 1987); Director, Canada Life Insurance Corporation of New York and
Competitive Technologies, Inc., a public company listed on the American
Stock Exchange; Corporate Vice President, Newmont Mining Corporation (prior
to 1987). His address is 6581 Ridgewood Drive, Naples, Florida 33963.
MARTIN J. GRUBER (birthdate: July 15, 1937) -- Trustee; Chairman of the
Finance Department and Nomura Professor of Finance, Leonard N. Stern School
of Business, New York University (since 1964). His address is 229 S.
Irving Street, Ridgewood, New Jersey 07450.
KELVIN J. LANCASTER (birthdate: December 10, 1924) -- Trustee; Professor,
Department of Economics, Columbia University. His address is 35 Claremont
Avenue, New York, New York 10027.
PHILIP W. COOLIDGE* (birthdate: September 2, 1951) -- President and
Trustee; Chairman, Chief Executive Officer and President, Signature
Financial Group, Inc. ("SFG") (since December, 1988) and Signature (since

April, 1989). His address is 6 St. James Avenue, Boston, Massachusetts
02116.
*Indicates an `interested person'' (as defined by the 1940 Act) of the
Trust.
OFFICERS OF THE 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, Federated Investors
(`FI'').
CHARLES L. DAVIS, JR. (birthdate: March 23, 1960)-- Vice President and
Assistant Treasurer; Vice President, FAS.
JAY S. NEUMAN (birthdate: April 22, 1950) -- Secretary; Corporate Counsel,
FI.
Messrs. Coolidge, Petnuch, Davis, and Neuman also hold similar positions
for other investment companies for which Signature or Edgewood,
respectively, serves as the principal underwriter.
For the fiscal year ended September 30, 1996, the Fund incurred Trustees
fees equal to $7,716 and during the same period the Portfolio incurred
Trustees fees equal to $2,628.
The following table reflects fees paid to the Trustees for the year ended
September 30, 1996.
TRUSTEE COMPENSATION TABLE
Name, Aggregate Total
Position With Compensation Compensation
Trust/Portfolio From Trust From Fund Complex**

Harry Van Benschoten $13,000 $23.000

Trustee of Trust
Philip W. Coolidge none none
Trustee of Trust
and Portfolio
Martin J. Gruber $13,000 $23,000
Trustee of Trust
Kelvin J. Lancaster $13,000 $23,000
Trustee of Trust
Charles P. Biggar none none
Trustee of Portfolio
S. Leland Dill none none
Trustee of Portfolio
Philip Saunders, Jr. none none
Trustee of Portfolio
** Aggregated information is furnished for the BT Family of Funds which
consists of the following: BT Investment Funds, BT Institutional
Funds, BT Pyramid Funds, BT Advisor Funds, BT Investment Portfolios,
Cash Management Portfolio, Treasury Money Portfolio, Tax Free Money
Portfolio, NY Tax Free Money Portfolio, International Equity
Portfolio, Utility Portfolio, Short Intermediate US Government
Securities Portfolio, Intermediate Tax Free Portfolio, Asset
Management Portfolio, Equity 500 Index Portfolio, and Capital
Appreciation Portfolio.
Bankers Trust reimbursed the Fund and Portfolio for a portion of their
Trustees fees for the period above. See "Investment Adviser" and
"Administrator" below.
As of December 31, 1996, the Trustees and officers of the Trust owned in
the aggregate less than 1% of the shares of the Fund or Trust (all series
taken together).

As of December 31, 1996, the following Shareholders of record owned 5% or
more of the outstanding Shares of the Fund: Northern Telecom Omnibus ACCO,
Jersey City, New Jersey, owned approximately 5,330,866 shares (48.42%);
Bankers Trust Company as Trustee for Hanson Industries Plan 401(k), Jersey
City, New Jersey, owned approximately 1,560,045 shares (14.17%); Bankers
Trust Company as Trustee for Westinghouse Savannah River/BE Savannah River,
Inc., Jersey City New Jersey, owned approximately 1,555,193 shares
(14.13%); Bankers Trust Company as Trustee for Millennium Chemicals 401(k),
Jersey City, New Jersey, owned approximately 992,921 shares (9.02%); and
Bankers Trust Company as Trustee for U.S. Industries Plan 401(k), Jersey
City, New Jersey, owned approximately 779,482 shares (7.08%).
INVESTMENT ADVISER
Under the terms of the investment advisory agreement with Bankers Trust
(the "Advisory Agreement"), Bankers Trust manages the Fund subject to the
supervision and direction of the Board of Trustees of the Trust. Bankers
Trust will: (i) act in strict conformity with the Trust'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 Fund in accordance with
the Fund's investment objective, restrictions and policies; (iii) make
investment decisions for the Fund; and (iv) place purchase and sale orders
for securities and other financial instruments on behalf of the Fund.
Bankers Trust bears all expenses in connection with the performance of
services under the Advisory Agreement. The Trust bears certain other
expenses incurred in its operation, including: taxes, interest, brokerage
fees and commissions, if any; fees of Trustees of the Trust who are not
officers, directors or employees of Bankers Trust, Edgewood or any of their
affiliates; SEC fees and state Blue Sky qualification fees; certain
insurance premiums; outside auditing and legal expenses; costs of
maintenance of corporate existence; costs attributable to investor

services, including, without limitation, telephone and personnel expenses;
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; and any extraordinary expenses.
For the fiscal year ended September 30, 1996, the period from January 1,
1995, to September 30, 1995, and the year ended December 31, 1994, Bankers
Trust earned $1,225,764, $482,453, and $329,399, respectively, as
compensation for investment advisory services provided to the Portfolio.
During the same periods, Bankers Trust reimbursed $319,524, $131,702, and
$114,930, respectively, to the Portfolio to cover expenses.
Bankers Trust may have deposit, loan and other commercial banking
relationships with the issuers of obligations which may be purchased on
behalf of the Fund, including outstanding loans to such issuers which could
be repaid in whole or in part with the proceeds of securities so purchased.
Such affiliates deal, trade and invest for their own accounts in such
obligations and are among the leading dealers of various types of such
obligations. Bankers Trust has informed the Fund that, in making its
investment decisions, it does not obtain or use material inside information
in its possession or in the possession of any of its affiliates. In making
investment recommendations for the Fund, Bankers Trust will not inquire or
take into consideration whether an issuer of securities proposed for
purchase or sale by the Fund is a customer of Bankers Trust, its parent or
its subsidiaries or affiliates and, in dealing with its customers, Bankers
Trust, its parent, subsidiaries and affiliates will not inquire or take
into consideration whether securities of such customers are held by any
fund managed by Bankers Trust or any such affiliate.
Each Class' prospectus contains disclosure as to the amount of Bankers
Trust's investment advisory and administration and services fees, including

waivers thereof. Bankers Trust may not recoup any of its waived investment
advisory or administration and services fees. Such waivers by Bankers
Trust shall stay in effect for at least 12 months.
ADMINISTRATOR
Under the administration and services agreements, Bankers Trust is
obligated on a continuous basis to provide such administrative services as
the Board of Trustees of the Trust reasonably deem necessary for the proper
administration of the Trust. Bankers Trust will: generally assist in all
aspects of the Fund's operations; supply and maintain office facilities
(which may be in Bankers Trust's own offices), statistical and research
data, data processing services, clerical, accounting, bookkeeping and
recordkeeping services (including without limitation the maintenance of
such books and records as are required under the 1940 Act and the rules
thereunder, except as maintained by other agents), custodial and transfer
agency services, executive and administrative services, and stationery and
office supplies; prepare reports to shareholders or investors; 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 as
from time to time may be agreed upon by Bankers Trust and FSC. The Sub-
Administration Agreement provides that FSC will receive such compensation

as from time to time may be agreed upon by FSC and Bankers Trust. All such
compensation will be paid by Bankers Trust.
For the fiscal year ended September 30, 1996, the period from January 1,
1995 to September 30, 1995, and the fiscal year ended December 31, 1994,
Bankers Trust earned $502,895, $155,327, and $101,002, respectively, as
compensation for administrative and other services provided to the Fund.
During the same periods, Bankers Trust reimbursed $94,051, $57,346, and
$59,973, respectively, to the Fund to cover expenses.
For the fiscal year ended September 30, 1996,, the period from January 1,
1995 to September 30, 1995, and the year ended December 31, 1994, Bankers
Trust earned $188,579, $74,224, and $50,677, respectively, as compensation
for administrative and other services provided to the Portfolio.
Bankers Trust has agreed that if in any fiscal year the aggregate expenses
of the Fund (including fees pursuant to the Advisory Agreement, but
excluding interest, taxes, brokerage and, if permitted by the relevant
state securities commissions, extraordinary expenses) exceed the expense
limitation of any state having jurisdiction over the Fund, Bankers Trust
will reimburse the Fund for the excess expense to the extent required by
state law. As of the date of this Statement of Additional Information, the
most restrictive annual expense limitation applicable to any Fund or Class
is 2.50% of the Fund's or Class' first $30 million of average annual net
assets, 2.00% of the next $70 million of average annual net assets and
1.50% of the remaining average annual net assets.

CUSTODIAN AND TRANSFER AGENT
Bankers Trust, 280 Park Avenue, New York, New York 10017, serves as
Custodian for the Trust pursuant to the administration and services
agreements. As Custodian, it holds the Fund's assets. Bankers Trust also
serves as transfer agent of the Trust pursuant to the respective
administration and services agreement. Under its transfer agency agreement
with the Trust, Bankers Trust maintains the shareholder account records for
each Class of Shares of 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 for its out-of-pocket expenses. Bankers Trust will comply with the
self-custodian provisions of Rule 17f-2 under the 1940 Act.
USE OF NAME
The Trust and Bankers Trust have agreed that the Trust may use "BT" as
part of its name for so long as Bankers Trust serves as investment adviser
to the Portfolio. The Trust has acknowledged that the term "BT" is used by
and is a property right of certain subsidiaries of Bankers Trust and that
those subsidiaries and/or Bankers Trust may at any time permit others to
use that term.
The Trust may be required, on 60 days' notice from Bankers Trust at any
time, to abandon use of the acronym "BT" as part of its name. If this were
to occur, the Trustees would select an appropriate new name for the Trust,
but there would be no other material effect on the Trust, its shareholders
or activities.

BANKING REGULATORY MATTERS
Bankers Trust has been advised by its counsel that in its opinion Bankers
Trust may perform the services for the Fund contemplated by the Advisory
Agreement and other activities for the Fund 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. 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
Board of Trustees would review the relationship with Bankers Trust and
consider taking all actions necessary in the circumstances.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New
York, New York 10022-4669, serves as Counsel to the Trust. Coopers &
Lybrand L.L.P., 1100 Main Street, Suite 900, Kansas City, Missouri 64105
acts as Independent Accountants of the Trust.
ORGANIZATION OF THE TRUST
Shares of the Trust do not have cumulative voting rights, which means that
holders of more than 50% of the shares voting for the election of Trustees
can elect all Trustees. Shares are transferable but have no preemptive,
conversion or subscription rights. Shareholders generally vote by Fund,
except with respect to the election of Trustees and the ratification of the
selection of independent accountants.

Massachusetts law provides that shareholders could under certain
circumstances be held personally liable for the obligations of the Trust.
However, the Trust's Declaration of Trust disclaims shareholder liability
for acts or obligations of the Trust and requires that notice of this
disclaimer be given in each agreement, obligation or instrument entered
into or executed by the Trust or a Trustee. The Declaration of Trust
provides for indemnification from the Trust's property for all losses and
expenses of any shareholder held personally liable for the obligations of
the Trust. Thus, the risk of a shareholder's incurring financial loss on
account of shareholder liability is limited to circumstances in which the
Trust itself would be unable to meet its obligations, a possibility that
the Trust believes is remote. Upon payment of any liability incurred by
the Trust, the shareholder paying the liability will be entitled to
reimbursement from the general assets of the Trust. The Trustees intend to
conduct the operations of the Trust in a manner so as to avoid, as far as
possible, ultimate liability of the shareholders for liabilities of the
Trust.
The Trust was organized on February 28, 1992.
TAXATION
TAXATION OF THE FUND
The Trust intends to qualify annually and to elect the Fund to be treated
as a regulated investment company under the Code.
As a regulated investment company, the Fund will not be subject to U.S.
Federal income tax on its investment company taxable income and net capital
gains (the excess of net long-term capital gains over net short-term
capital losses), if any, that it distributes to shareholders. The Fund
intends to distribute to its shareholders, at least annually, substantially
all of its investment company taxable income and net capital gains, and
therefore does not anticipate incurring a Federal income tax liability.

OTHER TAXATION
The Trust is organized as a Massachusetts business trust and, under current
law, neither the Trust nor the Fund is liable for any income or franchise
tax in the Commonwealth of Massachusetts, provided that the Fund continues
to qualify as a regulated investment company under Subchapter M of the
Code.
Fund shareholders may be subject to state and local taxes on the Fund
distributions. Shareholders are advised to consult their own tax advisers
with respect to the particular tax consequences to them of an investment in
the Fund.
FINANCIAL STATEMENTS
The financial statements for the Fund for the period ended September 30,
1996, are incorporated herein by reference to the Fund's Annual Report
dated September 30, 1996 (File Nos. 33-45973 and 811-06576). A copy of the
Annual Report may be obtained without charge by contacting the Fund.

APPENDIX
COMMERCIAL PAPER RATINGS
S&P'S COMMERCIAL PAPER RATINGS
A is the highest commercial paper rating category utilized by S&P, which
uses the numbers 1+, 1, 2 and 3 to denote relative strength within its A
classification. Commercial paper issues rated A by S&P have the following
characteristics: Liquidity ratios are better than industry average. Long-
term debt rating is A or better. The issuer has access to at least two
additional channels of borrowing. Basic earnings and cash flow are in an
upward trend. Typically, the issuer is a strong company in a well-
established industry and has superior management.
MOODY'S COMMERCIAL PAPER RATINGS
Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following
characteristics: leading market positions in well-established industries;
high rates of return on funds employed; conservative capitalization
structures with moderate reliance on debt and ample asset protection; broad
margins in earnings coverage of fixed financial charges and high internal
cash generation; well-established access to a range of financial markets
and assured sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be
more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.

Issuers rated Prime-3 (or related supporting institutions) have an
acceptable capacity for repayment of short-term promissory obligations.
The effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements and the requirement
for relatively high financial leverage. Adequate alternate liquidity is
maintained.
FITCH INVESTORS SERVICE AND DUFF & PHELPS COMMERCIAL PAPER RATINGS
Commercial paper rated "Fitch-1" is considered to be the highest grade
paper and is regarded as having the strongest degree of assurance for
timely payment. "Fitch-2" is considered very good grade paper and reflects
an assurance of timely payment only slightly less in degree than the
strangest issue.
Commercial paper issues rated "Duff 1" by Duff & Phelps, Inc. have the
following characteristics: very high certainty of timely payment,
excellent liquidity factors supported by strong fundamental protection
factors, and risk factors which are very small. Issues rated "Duff 2" have
a good certainty of timely payment, sound liquidity factors and company
fundamentals, small risk factors, and good access to capital markets.

INVESTMENT ADVISER AND ADMINISTRATOR
BANKERS TRUST COMPANY
DISTRIBUTOR
EDGEWOOD SERVICES, INC.
CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY
INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.
COUNSEL
WILLKIE FARR & GALLAGHER
No person has been authorized to give any information or to make any
representations other than those contained in the Trust's Prospectus, its
Statement of Additional Information or the Trust's official sales
literature in connection with the offering of the Trust's shares and, if
given or made, such other information or representations must not be relied
on as having been authorized by the Trust. Neither the Prospectus nor this
Statement of Additional Information constitutes an offer in any state in
which, or to any person to whom, such offer may not lawfully be made.
o BT PYRAMID MUTUAL FUNDS o
BT Investment
Limited Term U.S. Government Securities Fund
CUSIP # 055922751
STA518400 (1/97)

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

JANUARY 31, 1997

BT Pyramid Mutual Funds (the `Trust'') is an open-end, management
investment company (mutual fund) which consists of a number of separate
investment funds.

Please read this Prospectus carefully before investing and retain it for
future reference. It contains important information about the BT Investment
Limited U.S. Government Securities Fund (the `Fund'') that you should know
and can refer to in deciding whether the Fund's goals match your own.

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

Unlike other mutual funds, the Fund seeks to achieve its investment
objective by investing all of its investable assets (`Assets'') in the
Short/Intermediate U.S. Government Securities Portfolio (the
`Portfolio''), a separate investment company with an identical investment
objective. The investment performance of the Fund will correspond directly
to the investment performance of the Portfolio. See `Special Information
Concerning Master-Feeder Fund Structure''herein.

Bankers Trust Company (`Bankers Trust'') is the investment adviser (the
`Adviser'') of the Portfolio. Shares of the Fund are not deposits or
obligations of, or guaranteed or endorsed by, Bankers Trust or any other
banking or depository institution. Shares are not Federally guaranteed or
insured by the Federal Deposit Insurance Corporation (`FDIC''), the U.S.
government, the Federal Reserve Board or any other agency and are subject
to investment risk, including the possible loss of principal amount
invested.

Edgewood Services, Inc.
Clearing Operations o P.O. Box 897 o Pittsburgh, Pennsylvania o 15230-0897

TABLE OF CONTENTS

PAGE

The Fund 3
Who May Want to Invest 3
Summary of Fund Expenses 4
Financial Highlights 5
Investment Objective and Policies 6
Risk Factors: Matching the Fund to Your Investment
Needs 8
Net Asset Value 10

Purchase and Redemption of Shares 11
Dividends, Distributions and Taxes 15
Performance Information and Reports 16
Management of the Trust and Portfolio 17

THE FUND
The Fund seeks a high level of current income consistent with preservation
of capital. The Trust seeks to achieve the investment objective of the
Fund by investing all of the Assets of the Fund in the Short/Intermediate
U.S. Government Securities Portfolio, which has the same investment
objective as the Fund. The Portfolio invests 100% of its assets in U.S.
Government Securities including repurchase agreements secured by U.S.
Government Securities.

WHO MAY WANT TO INVEST
The Fund is designed for conservative investors looking for a relatively
stable, high quality investment.

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

SUMMARY OF FUND EXPENSES
The following table provides (i) a summary of expenses relating to
purchases and sales of the shares of the Fund and the annual operating
expenses of the Fund and the expenses of the Portfolio, as a percentage of
average net assets of the Fund and (ii) an example illustrating the dollar
cost of such expenses on a $1,000 investment in the Fund. The Trustees of
the BT Pyramid Mutual Funds believe that the aggregate per share expenses
of the Fund and the Portfolio will be less than or approximately equal to
the expenses which that Fund would incur if the Trust retained the services
of an investment adviser and the Assets of that Fund were invested directly
in the type of securities being held by the corresponding Portfolio.

Annual Operating Expenses
(as a percentage of the average daily net assets of the Fund)

Investment advisory fee 0.25%
12b-1 fees 0.00
Other expenses (after reimbursements or waivers) 0.35

Total operating expenses (after reimbursements or waivers) 0.60%

Example 1 year 3 Years 5 years 10 years

You would pay the following expenses on a $1,000
investment, assuming: (1) 5% annual return and
(2) redemption at the end of each time period $6 $19 $33 $75

The expense table and the example above show the costs and expenses that an
investor will bear directly or indirectly as a shareholder of the Fund.
While reimbursement of distribution expenses in amounts up to 0.20% of
average net assets are authorized to be made pursuant to the Plan of
Distribution under Rule 12b-1 of the Investment Company Act of 1940, as
amended (the `1940 Act''), it is not expected that any payments will
actually be made under that plan in the foreseeable future. Bankers Trust
has voluntarily agreed to waive a portion of its investment advisory fee.
The expense table and the example reflect a voluntary undertaking by
Bankers Trust to waive or reimburse expenses such that the total operating
expenses will not exceed 0.60% of the Fund's average net assets annually.
In the absence of this undertaking, for the fiscal year ended September 30,
1996, the total operating expenses would have been equal to approximately
1.00% of the Fund's average net assets annually. The example should not be
considered a representation of past or future expenses and actual expenses
may be greater or less than those shown. Moreover, while each example
assumes a 5% annual return, actual performance will vary and may result in
a return greater or less than 5%.

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

The Fund is distributed by Edgewood Services, Inc. (`Edgewood'') (the
`Distributor'') to investors including customers of Bankers Trust or to
customers of another bank, dealer or other financial intermediary that has
a sub-shareholder servicing agreement with Bankers Trust (along with
Bankers Trust, a `Service Agent''). Some Service Agents may impose
certain conditions on their customers in addition to or different from
those imposed by the Fund and may charge their customers a direct fee for

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

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

<TABLE>
<CAPTION>
For
the period

August 24, 1992
For the period
(Commencement
January 1, 1996 to For the Year Ended
December 31, of Operations) to
to September 30, 1996+ 1995 1994 1993
December 31, 1992

<S> <C> <C> <C> <C>
<C>
SELECTED PER SHARE DATA
Net Asset Value, Beginning of Period $9.96 $9.61 $10.06 $
9.93 $10.00

Income from Investment Operations
Net Investment Income 0.38 0.57 0.44 0.41
0.14
Net Realized and Unrealized Gain (Loss)
on Investment Transactions (0.14) 0.35 (0.45) 0.20
(0.07)

Total from Investment Operations 0.24 0.92 (0.01)
0.61 0.07

Distributions to Shareholders from:
Net Investment Income (0.38) (0.57) (0.44) (0.41)
(0.14)
Net Realized Gain from Investment
Transactions (0.02) - - (0.07) -

Total Distributions (0.40) (0.57) (0.44) (0.48)
(0.14)

Net Asset Value, End of Period $9.80 $9.96 $9.61
$10.06 $9.93

Total Investment Return 2.50% 9.81% (0.08)% 6.21%
2.02%
Ratios and Supplemental Data
Ratios to Average Net Assets:
Net Investment Income 5.22%* 5.81% 4.69% 4.35%
4.08%*
Expenses, including Expenses of the
Short/Intermediate U.S. Government
Securities Portfolio 0.60%* 0.60% 0.60% 0.60%
0.60%*
Decrease Reflected in Above Expense Ratio
Due to Absorption of Expenses by
Bankers Trust 0.40%* 0.24% 0.34% 1.43%
5.60%*

Net Assets, End of Period (000s omitted) $51,737 $29,870 $31,302
$3,462 $3,188

</TABLE>

* Annualized
+ On February 9, 1996, the Board of Trustees voted to approve the change of
the fiscal year end from December 31 to September 30.

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

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

Short/Intermediate U.S. Government Securities Portfolio

U.S. Government Securities. The Portfolio seeks to achieve its objective by
investing 100% of its assets in U.S. Government Securities, including
repurchase agreements secured by U.S. Government Securities.

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

"U.S. Government Securities" as used herein means securities issued or
guaranteed by the U.S. government or its agencies or instrumentalities.
U.S. Government Securities have varying degrees of government backing. They
may be backed by the credit of the government as a whole or only by the
issuing agency. Securities issued by certain agencies are supported only by
the credit of the agency that issued them, and not by the U.S. government.
Securities issued by the Federal Home Loan Mortgage Corporation and the
Federal National Mortgage Association are supported by the agency's right
to borrow money from the U.S. Treasury under certain circumstances. There

is no assurance that the U.S. government will support the obligations of
its agencies or instrumentalities if it is not required to do so by law.
U.S. Treasury bonds, notes and bills, and some agency securities, such as
those issued by the Government National Mortgage Association, are backed by
the full faith and credit of the U.S. government as to payment of principal
and interest and are the highest quality government securities. The Fund
itself, and its share price and yield, are not guaranteed by the U.S.
government. For additional information on U.S. Government Securities, see
below.

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

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

satisfactory. A repurchase agreement is considered a collateralized loan
under the 1940 Act.

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

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

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

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

Trust determines they are consistent with the Portfolio's investment
objective and policies.

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

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

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

Options and Futures Contracts. The Portfolio may buy and sell options and
futures contracts to manage its exposure to changing interest rates and
security prices. Some options and futures strategies, including selling
futures, buying puts, and writing calls, hedge the Portfolio's investments
against price fluctuations. Other strategies, including buying futures,
writing puts and buying calls, tend to increase market exposure. The
Portfolio may invest in options (including over-the-

counter options) and futures contracts with respect to any type of security
which the Portfolio could hold directly or indexes composed only of such
securities.

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

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

Additional Investment Limitations

As a diversified fund, no more than 5% of the assets of the Portfolio may
be invested in the securities of one issuer (other than U.S. government
securities), except that up to 25% of the Portfolio's assets may be

invested without regard to this limitation. The Portfolio will not invest
more than 25% of its assets in the securities of issuers in any one
industry. These are fundamental investment policies of the Portfolio which
may not be changed without investor approval. No more than 15% of the
Portfolio's net assets may be invested in illiquid or not readily
marketable securities (including repurchase agreements and time deposits
with remaining maturities of more than seven calendar days). Additional
investment policies of the Portfolio are contained in the SAI.

RISK FACTORS: MATCHING THE FUND TO YOUR INVESTMENT NEEDS
The Fund is designed for conservative investors looking for a relatively
stable, high quality investment. Because the Portfolio invests in high
quality instruments with short to intermediate maturities, its share price
should be more stable than that of a long-term bond fund, although it may
be less stable than that of a short-term bond fund. Generally, short to
intermediate-term instruments are less sensitive to interest rate
fluctuations or changes in an issuer's credit standing than longer-term
bonds. At the same time, the Fund may not offer the same yield or growth

potential as a long-term bond fund. The Fund should provide higher yields
than mutual funds that maintain shorter average maturities, but will not
provide the same stability of principal. Bond funds generally offer greater
price stability than stock funds, although the potential rewards of bonds
are not as great. By itself, the Fund does not constitute a balanced
investment plan; the Fund and the Portfolio stress income and preservation
of capital rather than capital growth. The Fund's share price, yield and
total return fluctuate based on many factors, and the value of Fund shares
when redeemed may be more or less than their original cost.

The value of Fund shares will tend to decrease when interest rates rise,
and increase when interest rates fall. The Fund's share price and yield
also depend on the quality of the Portfolio's investments. While U.S.
government securities generally are of high quality, government securities
that are not backed by the full faith and credit of the United States may
be affected by changes in

the creditworthiness of the agency that issued them. Many securities can
provide higher yields than U.S. government securities, although they may
not provide the same high quality.

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

Portfolio Turnover

Bankers Trust may engage in short-term trading when it believes it is
consistent with the Portfolio's investment objective. Also, a security may
be sold and another of comparable quality simultaneously purchased to take
advantage of what Bankers Trust believes to be a temporary disparity in the
normal yield relationship between the two securities. The frequency of
portfolio transactions -- the Portfolio's turnover rate -- will vary from
year to year depending on market conditions. Because a high turnover rate
increases transaction costs and may increase taxable capital gains, Bankers
Trust carefully weighs the anticipated benefits of short-term investment
against these consequences. The Portfolio's turnover rates for the period
from January 1, 1996, to September 30, 1996, and the fiscal year ended
December 31, 1995, were 314% and 246%, respectively. On February 9, 1996
the Board of Trustees approved the change of fiscal year end from December
31 to September 30.

Derivatives

The Portfolio may invest in various instruments that are commonly known as
derivatives. Generally, a derivative is a financial arrangement, the value
of which is based on, or "derived" from, a traditional security, asset or
market index. Some "derivatives" such as mortgage-related and other asset-
backed securities are in many respects like any other investment, although
they may be more volatile or less liquid than more traditional debt
securities. There are, in fact, many different types of derivatives and
many different ways to use them. There are a range of risks associated with
those uses. Futures and options are commonly used for traditional hedging

purposes to attempt to protect a fund from exposure to changing interest
rates, securities prices or currency exchange rates and for cash management
purposes as a low cost method of gaining exposure to a particular
securities market without investing directly in those securities. However,
some derivatives are used for leverage, which tends to magnify the effects
of an instrument's price changes as market conditions change. Leverage
involves the use of a small amount of money to control a large amount of
financial assets and can, in some circumstances, lead to significant
losses. The Adviser will use derivatives only in circumstances where the
Adviser believes they offer the most economic means of improving the
risk/reward profile of the Portfolio. Derivatives will not be used to
increase portfolio risk above the level that could be achieved using only
traditional investment securities or to acquire exposure to changes in the
value of assets or indices that by themselves would not be purchased for
the Portfolio. The use of derivatives for non-hedging purposes may be
considered speculative. A description of the derivatives that the Portfolio
may use and some of their associated risks is found above and "Investment
Objective and Policies" herein.

Special Information Concerning Master-Feeder Fund Structure

Unlike other open-end management investment companies (mutual funds) which
directly acquire and manage their own portfolio securities, the Fund seeks
to achieve its investment objective by investing all of its Assets in the
Portfolio, a separate registered investment company with the same
investment objective as the Fund. Therefore, an investor's interest in the
Portfolio's securities is indirect. In addition to selling a beneficial
interest to the Fund, the Portfolio may sell beneficial interests to other
mutual funds or institutional investors. Such investors will invest in the

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

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

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

not affect the Trust's votes at the Portfolio meeting. The percentage of
the Trust's votes representing Fund shareholders not voting will be voted
by the Trustees or officers of the Trust in the same proportion as the Fund
shareholders who do, in fact, vote.

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

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

NET ASSET VALUE

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

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

PURCHASE AND REDEMPTION OF SHARES
How To Buy Shares

Purchase orders for shares of the Fund (including those purchased through a
Service Agent) that are transmitted to the Trust's Transfer Agent (the
`Transfer Agent''), prior to the Valuation Time on any Valuation Day will
be effective at that day's Valuation Time. The Trust and Transfer Agent
reserve the right to reject any purchase order.

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

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

Minimum Investments

To Open an Account $2,500
For retirement accounts 500
Through automatic investment plans 1,000

To Add to an Account $250
For retirement accounts 100
Through automatic investment plan 100

Minimum Balance $1,000
For retirement accounts None

BT Service Center
P.O. Box 419210
Kansas City, MO 64141-6210

Overnight mailings:

BT Service Center
210 West 10th Street, 8th Floor
Kansas City, MO 64105-1716

If you already have money invested in a fund in the BT Family of Funds, you
can:

If you are investing through a tax-sheltered retirement plan, such as an
IRA, for the first time, you will need a special application. Contact your
Investment Professional or call BT Retirement Services Center at 1-800-
677-7596 for more information and a retirement account application.

Additional Information About Buying Shares

To Open an Account To Add to an Account

Specify the complete name of
the Fund of
your choice, and include your
account num-
ber and your name.

By Phone Contact your Service Agent, Contact your Service Agent,
Investment Professional, or call Investment Professional,
or call
BT's Service Center at 1-800-730-1313. BT's Service Center
at 1-800-730-1313.

If you are an existing shareholder, If you are an existing
shareholder,
you may exchange from another BT you may exchange from
another
account with the same registration, BT account with the same
registration,
including, name, address, and taxpayer including, name,
address, and taxpayer
ID number. ID number.

By Mail Complete and sign the account appli- Make your check payable
to the complete
cation. Make your check payable to name of the Fund of your
choice. Indicate
the complete name of the Fund of your Fund account number
on your check
your choice. Mail to the appropriate and mail to the
address printed on your
address indicated on the application. account statement.

How to Sell Shares

Time on each Valuation Day will be effective at that day's Valuation Time
and the redemption proceeds normally will be delivered to the shareholder's
account the next day, but in any event within seven calendar days following
receipt of the request.

If you are selling some but not all of your non-retirement account shares,
leave at least $1,000 worth of shares in the account to keep it open.

To sell shares by bank wire you will need to sign up for these services in
advance when completing your account application.

A signature guarantee is also required if you change the pre-designated
bank information for receiving redemption proceeds on your account.

Additional Information About Selling Shares

By Wire - You must sign up for the wire feature before using it. To verify
that it is in place, call 1-800-730-1313. Minimum wire: $1,000. Your wire
redemption request must be received by the Transfer Agent before 4:00 p.m.
Eastern time for money to be wired on the next business day.

BT Service Center
P.O. Box 419210
Kansas City, MO 64141-6210

Overnight mailings:

BT Service Center
210 West 10th Street, 8th Floor
Kansas City, MO 64105-1716

For a Business or Organization account, at least one person authorized by
corporate resolution to act on the account must sign the letter.

Investor Services

BT Pyramid Mutual Funds provide a variety of services to help you manage
your account.

Information Services
Statements and reports that your Investment Professional or the Transfer
Agent may send to you include the following:

Exchange Privilege

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

o Your new account will have the identical account registration
including the same name, address and taxpayer identification number as your
existing account(s).

Note that exchanges out of a Fund may be limited to four per calendar year
and that they may have tax consequences for you.

Systematic Programs
To move money from your bank account to BT Pyramid Mutual Funds

Minimum Minimum Frequency Setting up or changing
Initial Subsequent

$1,000 $100 Monthly, bimonthly, For a new account, complete
the appropriate section
quarterly or semi- on the application.
annually
For existing accounts, call your
Investment
Professional for an application. To
change the amount
or frequency of your investment,
contact your
Investment Professional directly or
call
1-800-730-1313. Call at least 10
business days
prior to your next scheduled
investment date.

Systematic Withdrawal Program lets you set up periodic redemptions from
your account.

Minimum Frequency Setting up or changing

$100 Monthly, quarterly, semi-annually or To establish, call your
Investment Professional or call
annually 1-800-730-1313 after your account is
open. The
accounts from which the withdrawals
will be
processed must have a minimum balance
of $10,000.

Tax-Saving Retirement Plans

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

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

o 403(b) Custodian Accounts: defined contribution plans open to
employees of most non-profit organizations and educational institutions.

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

DIVIDENDS, DISTRIBUTIONS AND TAXES

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

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

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

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

"Buying a Dividend." On the ex-date for a distribution from capital gains,
the Fund's share value is reduced by the amount of the distribution. If you
buy shares just

before the ex-date ("buying a dividend"), you will pay the full price for
the shares and then receive a portion of the price back as a taxable
distribution.

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

PERFORMANCE AND INFORMATION REPORTS
The Fund's performance may be used from time to time in advertisements,
shareholder reports or other communications to shareholders or prospective
shareholders. Performance information may include the Fund's investment
results and/or comparisons of its investment results to various unmanaged
indices such as the Lehman Brothers 1-3 Year Government Index, the Lehman
Brothers Government Bond Index, the Lehman Brothers Intermediate Term Bond
Index, IBC Financial Data Averages, Lipper Short/Intermediate U.S.
Government Average or results of other mutual funds or investment or
savings vehicles. In addition, the Fund may compare various Portfolio
characteristics such as sector diversification, yield to maturity,
duration, adjusted duration and average maturity. The Fund's investment
results as used in such communications will be calculated on a yield or

total rate of return basis in the manner set forth herein. From time to
time, fund rankings may be quoted from various sources, such as Lipper
Analytical Services, Inc., Value Line and Morningstar, Inc.

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

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

Bankers Trust, as Adviser, Service Agent or Administrator, may have
voluntarily agreed to waive portions of their fees on a month-to-month
basis. Such waivers will have the effect of increasing the Fund's net
income (and therefore its total return or yield) during the period such
waivers are in effect.

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

MANAGEMENT OF THE TRUST AND PORTFOLIO
Board of Trustees

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

The Trustees of the Trust who are not "interested persons" (as defined in
the 1940 Act) (the "Independent Trustees") of the Trust or of the
Portfolio, as the case may be, have adopted written procedures reasonably
appropriate to deal with potential conflicts of interest, up to and
including creating separate boards of trustees, arising from the fact that

several of the same individuals are Trustees of the Trust and the
Portfolio. For more information with respect to the Trustees of both the
Trust and the Portfolio, see "Management of the Trust and Portfolio" in the
SAI.

Investment Adviser

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

Bankers Trust, a New York banking corporation with principal offices at 280
Park Avenue, New York, New York 10017, is a wholly owned subsidiary of
Bankers Trust New York Corporation. Bankers Trust conducts a variety of
general banking and trust activities and is a major wholesale supplier of
financial services to the international and domestic institutional markets.
As of June 30, 1996, Bankers Trust New York Corporation was the seventh
largest bank holding company in the United States with total assets of
approximately $115 billion. Bankers Trust is a worldwide merchant bank
dedicated to servicing the needs of corporations, governments, financial
institutions and private clients through a global network of over 120
offices in more than 40 countries. Investment management is a core business
of Bankers Trust, built on a tradition of excellence from its roots as a
trust bank founded in 1903. The scope of Bankers Trust's investment
management capability is unique due to its leadership positions in both

active and passive quantitative management and its presence in major equity
and fixed income markets around the world. Bankers Trust is one of the
nation's largest and most experienced investment managers, with
approximately $215 billion in assets under management globally. Of that
total, approximately $69 billion are in actively managed fixed income
funds. This makes Bankers Trust one of the nation's leading managers of
fixed income funds.

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

Bankers Trust, subject to the supervision and direction of the Board of
Trustees of the Portfolio, manages the Portfolio in accordance with the
Portfolio's investment objective and stated investment policies, makes
investment decisions for the Portfolio, places orders to purchase and sell
securities and other financial instruments on behalf of the Portfolio and
employs professional investment managers and securities analysts who
provide research services to the Portfolio. All orders for investment
transactions on behalf of the Portfolio are placed by Bankers Trust with
broker-dealers and other financial intermediaries that it selects,
including those affiliated with Bankers Trust. A Bankers Trust affiliate
will be used in connection with a purchase or sale of an investment for the
Portfolio only if Bankers Trust believes that the affiliate's charge for

the transaction does not exceed usual and customary levels. The Portfolio
will not invest in obligations for which Bankers Trust or any of its
affiliates is the ultimate obligor or accepting bank. The Portfolio may,
however, invest in the obligations of correspondents or customers of
Bankers Trust.

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

Bankers Trust has been advised by its counsel that, in counsel's opinion,
Bankers Trust currently may perform

the services for the Trust and the Portfolio described in this Prospectus
and the SAI without violation of the Glass-Steagall Act or other applicable
banking laws or regulations.

Administrator

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

Distributor

Edgewood Services, Inc. is the principal distributor for shares of the
Fund. In addition, Edgewood and its affiliates provide the Trust with
office facilities and currently provide administration and distribution
services for other registered investment companies. The principal business
address of Edgewood and its affiliates is Clearing Operations, P.O. Box
897, Pittsburgh, Pennsylvania, 15230-0897.

Pursuant to the terms of the Trust's Plan of Distribution pursuant to Rule
12b-1 under the 1940 Act (the "Plan"), Edgewood, as Distributor, may seek
reimbursement in an amount not exceeding 0.20% of the Fund's average daily
net assets annually for expenses incurred in connection with any activities
primarily intended to result in the sale of the Fund's shares, including,
but not limited to: compensation to and expenses (including overhead and
telephone expenses) of account executives or other employees of Edgewood
who, as their primary activity, engage in or support the distribution of
shares; printing of prospectuses, SAIs and reports for other than existing

Fund shareholders in amounts in excess of that typically used in connection
with the distribution of shares of the Fund; costs of placing advertising
in various media; services of parties other than Edgewood or its affiliates
in formulating sales literature; and typesetting, printing and distribution
of sales literature. All costs and expenses in connection with implementing
and operating the Plan will be paid by the Fund, subject to the 0.20% of
net assets limitation. All costs and expenses associated with preparing the
prospectuses and statements of additional information and in connection
with printing them for and distributing them to existing shareholders and
regulatory authorities, which costs and expenses would not be considered
distribution expenses for purposes of the Plan, will also be paid by the
Fund. To the extent expenses of Edgewood under the Plan in any fiscal year
of the Trust exceed amounts payable under the Plan during that year, those
expenses will not be reimbursed in any succeeding fiscal year. Expenses
incurred in connection with distribution activities will be identified to
the Fund or the other series of the Trust involved, although it is
anticipated that some activities may be conducted on a Trust-wide basis,
with the result that those activities will not be identifiable to any
particular series. In the latter case, expenses will be allocated among the
series of the Trust on the basis of their relative net assets. It is not
expected that any payments will be made under the Plan in the foreseeable
future.

Service Agent

including broker-dealers, will be paid by Bankers Trust from its fees. The
services provided by a Service Agent may include establishing and
maintaining shareholder accounts, processing purchase and redemption
transactions, arranging for bank wires, performing shareholder sub-
accounting, answering client inquiries regarding the Trust, assisting
clients in changing dividend options, account designations and addresses,
providing periodic statements showing the client's account balance,
transmitting proxy statements, periodic reports, updated prospectuses and
other communications to shareholders and, with respect to meetings of
shareholders, collecting, tabulating and forwarding to the Trust executed
proxies and obtaining such other information and performing such other
services as

the Administrator or the Service Agent's clients may reasonably request and
agree upon with the Service Agent. Service Agents may separately charge
their clients additional fees only to cover provision of additional or more
comprehensive services not already provided under the Administration and
Services Agreement with Bankers Trust, or of the type or scope not
generally offered by a mutual fund, such as cash management services or
enhanced retirement or trust reporting. In addition, investors may be
charged a transaction fee if they effect transactions in Fund shares
through a broker or agent. Each Service Agent has agreed to transmit to
shareholders, who are its customers, appropriate disclosures of any fees
that it may charge them directly.

Custodian and Transfer Agent

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

Organization of the Trust

The Trust was organized on February 28, 1992, under the laws of the
Commonwealth of Massachusetts. The Fund is a separate series of the Trust.
The Trust offers shares of beneficial interest of separate series, par
value $0.001 per share. The shares of the other series of the Trust are
offered through separate prospectuses. No series of shares has any
preference over any other series.

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

When matters are submitted for shareholder vote, shareholders of the Fund
will have one vote for each full share held and proportionate, fractional
votes for fractional shares held. A separate vote of the Fund is required
on any matter affecting the Fund on which shareholders are entitled to
vote. Shareholders of the Fund are not entitled to vote on Trust matters
that do not affect the Fund. There normally will be no meetings of
shareholders for the purpose of electing Trustees unless and until such

time as less than a majority of Trustees holding office have been elected
by shareholders, at which time the Trustees then in office will call a
shareholders' meeting for the election of Trustees. Any Trustee may be
removed from office upon the vote of shareholders holding at least two-
thirds of the Trust's outstanding shares at a meeting called for that
purpose. The Trustees are required to call such a meeting upon the written
request of shareholders holding at least 10% of the Trust's outstanding
shares.

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

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

Expenses of the Trust

The Fund bears its own expenses. Operating expenses for the Fund generally
consist of all costs not specifically borne by Bankers Trust or Edgewood,
including administration and services fees, fees for necessary professional
services, amortization of organizational expenses, and costs associated
with regulatory compliance and maintaining legal existence and shareholder
relations. The Portfolio bears its own expenses. Operating expenses for the
Portfolio generally consist of all costs not specifically borne by Bankers
Trust or Edgewood, including investment advisory and administration and
services fees, fees for necessary professional services, amortization of
organization expenses, the costs associated with regulatory compliance and
maintaining legal existence and investor relations.

BT PYRAMID MUTUAL FUNDS
BT Investment Limited Term U.S. Government Securities Fund

Investment Adviser of the Portfolio and Administrator
BANKERS TRUST COMPANY
280 Park Avenue
New York, NY 10017

Custodian and Transfer Agent
BANKERS TRUST COMPANY
280 Park Avenue
New York, NY 10017

Independent Accountants

COOPERS & LYBRAND L.L.P.
1100 Main Street, Suite 900
Kansas City, MO 64105

Counsel
WILLKIE FARR & GALLAGHER
153 East 53rd Street
New York, NY 10022

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

Cusip #055847305
STA461300 (1/97)

STATEMENT OF
ADDITIONAL INFORMATION
JANUARY 31, 1997

BT PYRAMID MUTUAL FUNDS{PRIVATE }
u BT INVESTMENT LIMITED TERM U.S. GOVERNMENT SECURITIES FUND

BT Pyramid Mutual Funds (the "Trust") is an open-end management investment
company that offers investors a selection of investment portfolios, each
having distinct investment objectives and policies. This Statement of
Additional Information relates only to the BT Investment Limited Term U.S.
Government Securities Fund (the `Fund'').
The Fund seeks a high level of current income through investment in short-
term and intermediate-term U.S. government securities.
As described in the Prospectus, the Trust seeks to achieve the investment
objective of the Fund by investing all the investable assets of the Fund
in the Short/Intermediate U.S. Government Securities Portfolio (the
`Portfolio''), an open-end management investment company having the same
investment objective as the Fund.
Shares of the Fund are sold by Edgewood Services, Inc. (`Edgewood'') , the
Trust's Distributor, to clients and customers (including affiliates and
correspondents) of Bankers Trust Company ("Bankers Trust"), the Portfolio's
investment adviser (`Adviser'') , and to clients and customers of other
organizations.
The Trust's Prospectus relating to the Fund is dated January 31, 1997,
and provides the basic information investors should know before investing.
The Prospectus may be obtained without charge by calling the Trust at the
telephone number listed below or by contacting any Service Agent. This
Statement of Additional Information, which is not a Prospectus, is intended
to provide additional information regarding the activities and operations
of the Trust and should be read in conjunction with the Prospectus.
Capitalized terms not otherwise defined in this Statement of Additional
Information have the meanings accorded to them in the Trust's Prospectus.

INVESTMENT ADVISER OF THE PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY

DISTRIBUTOR
EDGEWOOD SERVICES, INC.

CLEARING OPERATIONS PITTSBURGH, PENNSYLVANIA
15230-0897 (800) 730-1313
P.O BOX 897

TABLE OF CONTENTS

Investment Objectives, Policies and Restrictions.................1
Performance Information..........................................13
Valuation of Securities; Redemptions and Purchases in Kind.......16
Management of the Trust and Portfolio............................17
Organization of the Trust........................................22
Taxation.........................................................23
Financial Statements.............................................24
Appendix.........................................................A-1

INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVES
The investment objective of the Fund is described in the Fund's Prospectus.
There can, of course, be no assurance that the Fund will achieve its
investment objective.
INVESTMENT POLICIES
The Fund seeks to achieve its investment objective by investing all of its
Assets in the Portfolio. The Trust may withdraw the Fund's investment from
the Portfolio at any time if the Board of Trustees of the Trust determines
that it is in the best interests of the Fund to do so.
Since the investment characteristics of the Fund will correspond directly
to those of the Portfolio, the following is a discussion of the various
investments of and techniques employed by the Portfolio.
ILLIQUID SECURITIES. Historically, illiquid securities have included
securities subject to contractual or legal restrictions on resale because
they have not been registered under the Securities Act of 1933, as amended
(the "1933 Act"), securities which are otherwise not readily marketable and
repurchase agreements having a remaining maturity of longer than seven
calendar days. Securities which have not been registered under the 1933 Act
are referred to as private placements or restricted securities and are
purchased directly from the issuer or in the secondary market. Mutual funds
do not typically hold a significant amount of these restricted or other
illiquid securities because of the potential for delays on resale and
uncertainty in valuation. Limitations on resale may have an adverse effect
on the marketability of portfolio securities and a mutual fund might be
unable to dispose of restricted or other illiquid securities promptly or at
reasonable prices and might thereby experience difficulty satisfying
redemptions within seven calendar days. A mutual fund might also have to
register such restricted securities in order to dispose of them resulting

in additional expense and delay. Adverse market conditions could impede
such a public offering of securities.
In recent years, however, a large institutional market has developed for
certain securities that are not registered under the 1933 Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on
an efficient institutional market in which the unregistered security can be
readily resold or on an issuer's ability to honor a demand for repayment.
The fact that there are contractual or legal restrictions on resale of such
investments to the general public or to certain institutions may not be
indicative of their liquidity.
The Securities and Exchange Commission (the "SEC") has adopted Rule 144A,
which allows a broader institutional trading market for securities
otherwise subject to restriction on their resale to the general public.
Rule 144A establishes a "safe harbor" from the registration requirements of
the 1933 Act of resales of certain securities to qualified institutional
buyers. The Adviser anticipates that the market for certain restricted
securities such as institutional commercial paper will expand further as a
result of this regulation and the development of automated systems for the
trading, clearance and settlement of unregistered securities of domestic
and foreign issuers, such as the PORTAL System sponsored by the National
Association of Securities Dealers, Inc. (`NASD'').
The Adviser will monitor the liquidity of Rule 144A securities in the
Portfolio's portfolio holdings under the supervision of the Portfolio's
Board of Trustees. In reaching liquidity decisions, the Adviser will
consider, among other things, the following factors: (1) the frequency of
trades and quotes for the security; (2) the number of dealers and other
potential purchasers wishing to purchase or sell the security; (3) dealer
undertakings to make a market in the security; and (4) the nature of the

security and of the marketplace trades (e.g., the time needed to dispose of
the security, the method of soliciting offers and the mechanics of the
transfer).
LENDING OF PORTFOLIO SECURITIES. The Portfolio has the authority to lend
portfolio securities to brokers, dealers and other financial organizations.
The Portfolio will not lend securities to Bankers Trust, Edgewood or their
affiliates. By lending its securities, the Fund can increase its income by
continuing to receive interest on the loaned securities as well as by
either investing the cash collateral in short-term securities or obtaining
yield in the form of interest paid by the borrower when U.S. government
obligations are used as collateral. There may be risks of delay in
receiving additional collateral or risks of delay in recovery of the
securities or even loss of rights in the collateral should the borrower of
the securities fail financially. The Portfolio will adhere to the
following conditions whenever its securities are loaned: (i) the Portfolio
must receive at least 100 percent cash collateral or equivalent securities
from the borrower; (ii) the borrower must increase this collateral whenever
the market value of the securities including accrued interest rises above
the level of the collateral; (iii) the Portfolio must be able to terminate
the loan at any time; (iv) the Portfolio must receive reasonable interest
on the loan, as well as any dividends, interest or other distributions on
the loaned securities, and any increase in market value; (v) the Portfolio
may pay only reasonable custodian fees in connection with the loan; and
(vi) voting rights on the loaned securities may pass to the borrower;
provided, however, that if a material event adversely affecting the
investment occurs, the Board of Trustees must terminate the loan and regain
the right to vote the securities.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
GENERAL. The successful use of such instruments draws upon the Adviser's
skill and experience with respect to such instruments and usually depends
on the Adviser's ability to forecast interest rate and currency exchange
rate movements correctly. Should interest or exchange rates move in an
unexpected manner, the Portfolio may not achieve the anticipated benefits
of futures contracts or options on futures contracts or may realize losses
and thus will be in a worse position than if such strategies had not been
used. In addition, the correlation between movements in the price of
futures contracts or options on futures contracts and movements in the
price of the securities and currencies hedged or used for cover will not be
perfect and could produce unanticipated losses.
FUTURES CONTRACTS. The Portfolio may enter into contracts for the purchase
or sale for future delivery of fixed-income securities, or contracts based
on financial indices including any index of U.S. Government Securities, and
foreign government debt securities. U.S. futures contracts have been
designed by exchanges which have been designated "contracts markets" by the
Commodity Futures Trading Commission ("CFTC"), and must be executed through
a futures commission merchant, or brokerage firm, which is a member of the
relevant contract market. Futures contracts trade on a number of exchange
markets, and, through their clearing corporations, the exchanges guarantee
performance of the contracts as between the clearing members of the
exchange. The Portfolio may enter into futures contracts which are based on
debt securities that are backed by the full faith and credit of the U.S.
government, such as which are based on debt securities that are backed by
the full faith and credit of the U.S. governemtn, such as long-term U.S.
Treasury Bonds, Treasury Notes, Government National Mortgage Association
(`GNMA'') modified pass-through mortgage-backed securities and three-month

U.S. Treasury Bills. The Portfolio may also enter into futures contracts
which are based on bonds issued by entities other than the U.S. government.
At the same time a futures contract is purchased or sold, the Portfolio
must allocate cash or securities as a deposit payment ("initial deposit").
It is expected that the initial deposit would be approximately 1 1/2% to 5%
of a contract's face value. Daily thereafter, the futures contract is
valued and the payment of "variation margin" may be required, since each
day the Portfolio would provide or receive cash that reflects any decline
or increase in the contract's value.
At the time of delivery of securities pursuant to such a contract,
adjustments are made to recognize differences in value arising from the
delivery of securities with a different interest rate from that specified
in the contract. In some (but not many) cases, securities called for by a
futures contract may not have been issued when the contract was written.
Although futures contracts by their terms call for the actual delivery or
acquisition of securities, in most cases the contractual obligation is
fulfilled before the date of the contract without having to make or take
delivery of the securities. The offsetting of a contractual obligation is
accomplished by buying (or selling, as the case may be) on a commodities
exchange an identical futures contract calling for delivery in the same
month. Such a transaction, which is effected through a member of an
exchange, cancels the obligation to make or take delivery of the
securities. Since all transactions in the futures market are made, offset
or fulfilled through a clearinghouse associated with the exchange on which
the contracts are traded, the Portfolio will incur brokerage fees when it
purchases or sells futures contracts.
The ordinary spreads between prices in the cash and futures market, due to
differences in the nature of those markets, are subject to distortions.
First, all participants in the futures market are subject to initial

deposit and variation margin requirements. Rather than meeting additional
variation margin requirements, investors may close futures contracts
through offsetting transactions which could distort the normal relationship
between the cash and futures markets. Second, the liquidity of the futures
market depends on participants entering into offsetting transactions rather
than making or taking delivery. To the extent participants decide to make
or take delivery, liquidity in the futures market could be reduced, thus
producing distortion. Third, from the point of view of speculators, the
margin deposit requirements in the futures market are less onerous than
margin requirements in the securities market. Therefore, increased
participation by speculators in the futures market may cause temporary
price distortions. Due to the possibility of distortion, a correct forecast
of general interest rate trends by the Adviser may still not result in a
successful transaction.
In addition, futures contracts entail risks. Although the Adviser believes
that use of such contracts will benefit the Portfolio, if the Adviser's
investment judgment about the general direction of interest rates is
incorrect, the Portfolio's overall performance would be poorer than if it
had not entered into any such contract. For example, if the Portfolio has
hedged against the possibility of an increase in interest rates which would
adversely affect the price of debt securities held in its portfolio and
interest rates decrease instead, the Portfolio will lose part or all of the
benefit of the increased value of its debt securities which it has hedged
because it will have offsetting losses in its futures positions. In
addition, in such situations, if the Portfolio has insufficient cash, it
may have to sell debt securities from its portfolio to meet daily variation
margin requirements. Such sales of bonds may be, but will not necessarily
be, at increased prices which reflect the rising market. The Portfolio may
have to sell securities at a time when it may be disadvantageous to do so.

OPTIONS ON FUTURES CONTRACTS. The Portfolio may purchase and write options
on futures contracts for hedging purposes. The purchase of a call option on
a futures contract is similar in some respects to the purchase of a call
option on an individual security. Depending on the pricing of the option
compared to either the price of the futures contract upon which it is based
or the price of the underlying debt securities, it may or may not be less
risky than ownership of the futures contract or underlying debt securities.
As with the purchase of futures contracts, when the Portfolio is not fully
invested it may purchase a call option on a futures contract to hedge
against a market advance due to declining interest rates.
The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the security or foreign currency which is
deliverable upon exercise of the futures contract. If the futures price at
expiration of the option is below the exercise price, the Portfolio will
retain the full amount of the option premium which provides a partial hedge
against any decline that may have occurred in the Portfolio's portfolio
holdings. The writing of a put option on a futures contract constitutes a
partial hedge against increasing prices of the security or foreign currency
which is deliverable upon exercise of the futures contract. If the futures
price at expiration of the option is higher than the exercise price, the
Portfolio will retain the full amount of the option premium which provides
a partial hedge against any increase in the price of securities which the
Portfolio intends to purchase. If a put or call option the Portfolio has
written is exercised, the Portfolio will incur a loss which will be reduced
by the amount of the premium it receives. Depending on the degree of
correlation between changes in the value of its portfolio securities and
changes in the value of its futures positions, the Portfolio's losses from
existing options on futures may to some extent be reduced or increased by
changes in the value of portfolio securities.

The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities.
For example, the Portfolio may purchase a put option on a futures contract
to hedge its portfolio against the risk of rising interest rates.
The amount of risk the Portfolio assumes when it purchases an option on a
futures contract is the premium paid for the option plus related
transaction costs. In addition to the correlation risks discussed above,
the purchase of an option also entails the risk that changes in the value
of the underlying futures contract will not be fully reflected in the value
of the option purchased.
The Board of Trustees of the has adopted the requirement that futures
contracts and options on futures contracts be used only as a hedge and not
for speculation. In addition, the Portfolio will not enter into any futures
contracts or options on futures contracts if immediately thereafter the
amount of margin deposits on all the futures contracts of the Portfolio and
premiums paid on outstanding options on futures contracts owned by the
Portfolio would exceed 5% of the market value of the total assets of the
Portfolio.
ADDITIONAL RISKS OF OPTIONS ON FUTURES CONTRACTS, FORWARD CONTRACTS AND
OPTIONS ON FOREIGN CURRENCIES. Unlike transactions entered into by the
Portfolio in futures contracts, options on foreign currencies and forward
contracts are not traded on contract markets regulated by the CFTC or (with
the exception of certain foreign currency options) by the SEC. To the
contrary, such instruments are traded through financial institutions acting
as market-makers, although foreign currency options are also traded on
certain national securities exchanges, such as the Philadelphia Stock
Exchange and the Chicago Board Options Exchange, subject to SEC regulation.
Similarly, options on currencies may be traded over-the-counter. In an
over-the-counter trading environment, many of the protections afforded to

exchange participants will not be available. For example, there are no
daily price fluctuation limits, and adverse market movements could
therefore continue to an unlimited extent over a period of time. Although
the purchaser of an option cannot lose more than the amount of the premium
plus related transaction costs, this entire amount could be lost. Moreover,
the option writer and a trader of forward contracts could lose amounts
substantially in excess of their initial investments, due to the margin and
collateral requirements associated with such positions.
Options on foreign currencies traded on national securities exchanges are
within the jurisdiction of the SEC, as are other securities traded on such
exchanges. As a result, many of the protections provided to traders on
organized exchanges will be available with respect to such transactions. In
particular, all foreign currency option positions entered into on a
national securities exchange are cleared and guaranteed by the Options
Clearing Corporation ("OCC"), thereby reducing the risk of counterparty
default. Further, a liquid secondary market in options traded on a national
securities exchange may be more readily available than in the over-the-
counter market, potentially permitting a Portfolio to liquidate open
positions at a profit prior to exercise or expiration, or to limit losses
in the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency options, however,
is subject to the risks of the availability of a liquid secondary market
described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
political and economic events. In addition, exchange-traded options on
foreign currencies involve certain risks not presented by the over-the-
counter market. For example, exercise and settlement of such options must
be made exclusively through the OCC, which has established banking

relationships in applicable foreign countries for this purpose. As a
result, the OCC may, if it determines that foreign governmental
restrictions or taxes would prevent the orderly settlement of foreign
currency option exercises, or would result in undue burdens on the OCC or
its clearing member, impose special procedures on exercise and settlement,
such as technical changes in the mechanics of delivery of currency, the
fixing of dollar settlement prices or prohibitions on exercise.
As in the case of forward contracts, certain options on foreign currencies
are traded over-the-counter and involve liquidity and credit risks which
may not be present in the case of exchange-traded currency options. A
Portfolio's ability to terminate over-the-counter options will be more
limited than with exchange-traded options. It is also possible that broker-
dealers participating in over-the-counter options transactions will not
fulfill their obligations. Until such time as the staff of the SEC changes
its position, each Portfolio will treat purchased over-the-counter options
and assets used to cover written over-the-counter options as illiquid
securities. With respect to options written with primary dealers in U.S.
government securities pursuant to an agreement requiring a closing purchase
transaction at a formula price, the amount of illiquid securities may be
calculated with reference to the repurchase formula.
In addition, futures contracts, options on futures contracts, forward
contracts and options on foreign currencies may be traded on foreign
exchanges. Such transactions are subject to the risk of governmental
actions affecting trading in or the prices of foreign currencies or
securities. The value of such positions also could be adversely affected
by: (i) other complex foreign political and economic factors; (ii) lesser
availability than in the United States of data on which to make trading
decisions; (iii) delays in the Portfolio's ability to act upon economic
events occurring in foreign markets during nonbusiness hours in the United

States; (iv) the imposition of different exercise and settlement terms and
procedures and margin requirements than in the United States; and
(v) lesser trading volume.
OPTIONS ON SECURITIES. The Portfolio may write (sell) covered call and put
options to a limited extent on its portfolio securities ("covered options")
in an attempt to increase income. However, the Portfolio may forgo the
benefits of appreciation on securities sold or may pay more than the market
price on securities acquired pursuant to call and put options written by
the Portfolio.
When the Portfolio writes a covered call option, it gives the purchaser of
the option the right to buy the underlying security at the price specified
in the option (the "exercise price") by exercising the option at any time
during the option period. If the option expires unexercised, the Portfolio
will realize income in an amount equal to the premium received for writing
the option. If the option is exercised, a decision over which the Portfolio
has no control, the Portfolio must sell the underlying security to the
option holder at the exercise price. By writing a covered call option, the
Portfolio forgoes, in exchange for the premium less the commission ("net
premium"), the opportunity to profit during the option period from an
increase in the market value of the underlying security above the exercise
price.
When the Portfolio writes a covered put option, it gives the purchaser of
the option the right to sell the underlying security to the Portfolio at
the specified exercise price at any time during the option period. If the
option expires unexercised, the Portfolio will realize income in the amount
of the premium received for writing the option. If the put option is
exercised, a decision over which the Portfolio has no control, the
Portfolio must purchase the underlying security from the option holder at
the exercise price. By writing a covered put option, the Portfolio, in

exchange for the net premium received, accepts the risk of a decline in the
market value of the underlying security below the exercise price. The
Portfolio will only write put options involving securities for which a
determination is made at the time the option is written that the Portfolio
wishes to acquire the securities at the exercise price.
The Portfolio may terminate its obligation as the writer of a call or put
option by purchasing an option with the same exercise price and expiration
date as the option previously written. This transaction is called a
"closing purchase transaction." Where the Portfolio cannot effect a closing
purchase transaction, it may be forced to incur brokerage commissions or
dealer spreads in selling securities it receives or it may be forced to
hold underlying securities until an option is exercised or expires.
When the Portfolio writes an option, an amount equal to the net premium
received by the Portfolio is included in the liability section of the
Portfolio's Statement of Assets and Liabilities as a deferred credit. The
amount of the deferred credit will be subsequently marked to market to
reflect the current market value of the option written. The current market
value of a traded option is the last sale price or, in the absence of a
sale, the mean between the closing bid and asked price. If an option
expires on its stipulated expiration date or if the Portfolio enters into a
closing purchase transaction, the Portfolio will realize a gain (or loss if
the cost of a closing purchase transaction exceeds the premium received
when the option was sold), and the deferred credit related to such option
will be eliminated. If a call option is exercised, the Portfolio will
realize a gain or loss from the sale of the underlying security and the
proceeds of the sale will be increased by the premium originally received.
The writing of covered call options may be deemed to involve the pledge of
the securities against which the option is being written. Securities

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

The Portfolio has adopted certain other nonfundamental policies concerning
option transactions which are discussed below. The Portfolio's activities
in options may also be restricted by the requirements of the Internal
Revenue Code of 1986, as amended (the "Code"), for qualification as a
regulated investment company.
The hours of trading for options on securities may not conform to the hours
during which the underlying securities are traded. To the extent that the
option markets close before the markets for the underlying securities,
significant price and rate movements can take place in the underlying
securities markets that cannot be reflected in the option markets. It is
impossible to predict the volume of trading that may exist in such options,
and there can be no assurance that viable exchange markets will develop or
continue.
The Portfolio may engage in over-the-counter options transactions with
broker-dealers who make markets in these options. At present, approximately
ten broker-dealers, including several of the largest primary dealers in
U.S. government securities, make these markets. The ability to terminate
over-the-counter option positions is more limited than with exchange-traded
option positions because the predominant market is the issuing broker
rather than an exchange, and may involve the risk that broker-dealers
participating in such transactions will not fulfill their obligations. To
reduce this risk, the Portfolio will purchase such options only from
broker-dealers who are primary government securities dealers recognized by
the Federal Reserve Bank of New York and who agree to (and are expected to
be capable of) entering into closing transactions, although there can be no
guarantee that any such option will be liquidated at a favorable price
prior to expiration. The Adviser will monitor the creditworthiness of
dealers with whom the Portfolio enters into such options transactions under
the general supervision of the Portfolio's Trustees.

OPTIONS ON SECURITIES INDICES. The Portfolio may also purchase and write
(sell) call and put options on securities indices. Such options give the
holder the right to receive a cash settlement during the term of the option
based upon the difference between the exercise price and the value of the
index. Such options will be used for the purposes described above under
"Options on Securities."
Options on securities indices entail risks in addition to the risks of
options on securities. The absence of a liquid secondary market to close
out options positions on securities indices is more likely to occur,
although the Portfolio generally will only purchase or write such an option
if the Adviser believes the option can be closed out.
Use of options on securities indices also entails the risk that trading in
such options may be interrupted if trading in certain securities included
in the index is interrupted. The Portfolio will not purchase such options
unless the Adviser believes the market is sufficiently developed such that
the risk of trading in such options is no greater than the risk of trading
in options on securities.
Price movements in the Portfolio's portfolio securities may not correlate
precisely with movements in the level of an index and, therefore, the use
of options on indices cannot serve as a complete hedge. Because options on
securities indices require settlement in cash, the Adviser may be forced to
liquidate portfolio securities to meet settlement obligations.
RATING SERVICES
The ratings of rating services represent their opinions as to the quality
of the securities that they undertake to rate. It should be emphasized,
however, that ratings are relative and subjective and are not absolute
standards of quality. Although these ratings are an initial criterion for
selection of portfolio investments, Bankers Trust also makes its own
evaluation of these securities, subject to review by the Board of Trustees.

After purchase by the Portfolio, an obligation may cease to be rated or
its rating may be reduced below the minimum required for purchase by the
Portfolio. Neither event would require the Portfolio to eliminate the
obligation from its portfolio, but Bankers Trust will consider such an
event in its determination of whether the Portfolio should continue to
hold the obligation. A description of the ratings used herein and in the
Funds' Prospectus is set forth in the Appendix to this Statement of
Additional Information.

INVESTMENT RESTRICTIONS
The following investment restrictions are "fundamental policies" of the
Fund and the Portfolio and may not be changed with respect to the Fund or
the Portfolio without the approval of a "majority of the outstanding voting
securities" of the Fund or the Portfolio, as the case may be. "Majority of
the outstanding voting securities" under the Investment Company Act of
1940, as amended (the "1940 Act"), and as used in this Statement of
Additional Information and the Prospectus, means, with respect to the Fund
(or the Portfolio), the lesser of (i) 67% or more of the outstanding voting
securities of the Fund (or of the total beneficial interests of the
Portfolio) present at a meeting, if the holders of more than 50% of the
outstanding voting securities of the Fund (or of the total beneficial
interests of the Portfolio) are present or represented by proxy or (ii)
more than 50% of the outstanding voting securities of the Fund (or of the
total beneficial interests of the Portfolio). Whenever the Trust is
requested to vote on a fundamental policy of a Portfolio, the Trust will
hold a meeting of the corresponding Fund's shareholders and will cast its
vote as instructed by that Fund's shareholders. Fund shareholders who do
not vote will not affect the Trust's votes at the Portfolio meeting. The
percentage of the Trust's votes representing Fund shareholders not voting
will be voted by the Trustees of the Trust in the same proportion as the
Fund shareholders who do, in fact, vote.
As a matter of fundamental policy, the Portfolio (or Fund) may not (except
that no investment restriction of a Fund shall prevent a Fund from
investing all of its Assets in an open-end investment company with
substantially the same investment objective):
(1) borrow money or mortgage or hypothecate assets of the Portfolio
(Fund), except that in an amount not to exceed 1/3 of the current
value of the Portfolio's (Fund's) assets, it may borrow money as a

temporary measure for extraordinary or emergency purposes and enter
into reverse repurchase agreements or dollar roll transactions, and
except that it may pledge, mortgage or hypothecate not more than 1/3
of such assets to secure such borrowings (it is intended that money
would be borrowed only from banks and only either to accommodate
requests for the withdrawal of beneficial interests (redemption of
shares) while effecting an orderly liquidation of portfolio securities
or to maintain liquidity in the event of an unanticipated failure to
complete a portfolio security transaction or other similar situations)
or reverse repurchase agreements, provided that collateral
arrangements with respect to options and futures, including deposits
of initial deposit and variation margin, are not considered a pledge
of assets for purposes of this restriction and except that assets may
be pledged to secure letters of credit solely for the purpose of
participating in a captive insurance company sponsored by the
Investment Company Institute; for additional related restrictions, see
clause (i) under the caption "Additional Restrictions" below. (As an
operating policy, the Portfolios may not engage in dollar roll
transactions);
(2) underwrite securities issued by other persons except insofar as
the Portfolio (Trust or the Fund) may technically be deemed an
underwriter under the 1933 Act in selling a portfolio security;
(3) make loans to other persons except: (a) through the lending of
the Portfolio's (Fund's) portfolio securities and provided that any
such loans not exceed 30% of the Portfolio's (Fund's) net assets
(taken at market value); (b) through the use of repurchase agreements
or the purchase of short-term obligations; or (c) by purchasing a
portion of an issue of debt securities of types distributed publicly
or privately (under current regulations, the Portfolio's (Fund's)

fundamental policy with respect to 20% risk weighing for financial
institutions prevent the Portfolio (Fund) from engaging in securities
lending);
(4) purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests
therein), interests in oil, gas or mineral leases, commodities or
commodity contracts (except futures and option contracts) in the
ordinary course of business (except that the Portfolio (Trust) may
hold and sell, for the Portfolio's (Fund's) portfolio, real estate
acquired as a result of the Portfolio's (Fund's) ownership of
securities);
(5) concentrate its investments in any particular industry (excluding
U.S. government securities), but if it is deemed appropriate for the
achievement of a Portfolio's (Fund's) investment objective, up to 25%
of its total assets may be invested in any one industry; and
(6) issue any senior security (as that term is defined in the
1940 Act) if such issuance is specifically prohibited by the 1940 Act
or the rules and regulations promulgated thereunder, provided that
collateral arrangements with respect to options and futures, including
deposits of initial deposit and variation margin, are not considered
to be the issuance of a senior security for purposes of this
restriction.
ADDITIONAL RESTRICTIONS. In order to comply with certain statutes and
policies the Portfolio (or the Trust, on behalf of the Fund) will not as
a matter of operating policy (except that no operating policy shall prevent
the Fund from investing all of its Assets in an open-end investment
company with substantially the same investment objective):
(i) borrow money (including through dollar roll transactions) for any
purpose in excess of 10% of the Portfolio's (Fund's) total assets

(taken at cost), except that the Portfolio (Fund) may borrow for
temporary or emergency purposes up to 1/3 of its total assets;
(ii) pledge, mortgage or hypothecate for any purpose in excess of 10% of
the Portfolio's (Fund's) total assets (taken at market value),
provided that collateral arrangements with respect to options and
futures, including deposits of initial deposit and variation margin,
and reverse repurchase agreements are not considered a pledge of
assets for purposes of this restriction;
(iii) purchase any security or evidence of interest therein on margin,
except that such short-term credit as may be necessary for the
clearance of purchases and sales of securities may be obtained and
except that deposits of initial deposit and variation margin may be
made in connection with the purchase, ownership, holding or sale of
futures;
(iv) sell any security which it does not own unless by virtue of its
ownership of other securities it has at the time of sale a right to
obtain securities, without payment of further consideration,
equivalent in kind and amount to the securities sold and provided that
if such right is conditional the sale is made upon the same
conditions;
(v) invest for the purpose of exercising control or management;
(vi) purchase securities issued by any investment company except by
purchase in the open market where no commission or profit to a sponsor
or dealer results from such purchase other than the customary broker's
commission, or except when such purchase, though not made in the open
market, is part of a plan of merger or consolidation; provided,
however, that securities of any investment company will not be
purchased for the Portfolio (Fund) if such purchase at the time
thereof would cause (a) more than 10% of the Portfolio's (Fund's)

total assets (taken at the greater of cost or market value) to be
invested in the securities of such issuers; (b) more than 5% of the
Portfolio's (Fund's) total assets (taken at the greater of cost or
market value) to be invested in any one investment company; or (c)
more than 3% of the outstanding voting securities of any such issuer
to be held for the Portfolio (Fund); provided further that, except in
the case of merger or consolidation, the Portfolio (Fund) shall not
purchase any securities of any open-end investment company unless the
Portfolio (Fund) (1) waives the investment advisory fee with respect
to assets invested in other open-end investment companies and (2)
incurs no sales charge in connection with the investment (as an
operating policy each Portfolio will not invest in another open-end
registered investment company);
(vii) invest more than 15% of the Portfolio's (Fund's) net assets
(taken at the greater of cost or market value) in securities that are
illiquid or not readily marketable not including (a) Rule 144A
securities that have been determined to be liquid by the Board of
Trustees; and (b) commercial paper that is sold under section 4(2) of
the 1933 Act which: (i) is not traded flat or in default as to
interest or principal; and (ii) is rated in one of the two highest
categories by at least two nationally recognized statistical rating
organizations and the Portfolio's (Fund's) Board of Trustees have
determined the commercial paper to be liquid; or (iii) is rated in one
of the two highest categories by one nationally recognized statistical
rating agency and the Portfolio's (Fund's) Board of Trustees have
determined that the commercial paper is equivalent quality and is
liquid;
(viii) invest more than 10% of the Portfolio's (Fund's) total assets
(taken at the greater of cost or market value) in securities that

are restricted as to resale under the 1933 Act (other than Rule 144A
securities deemed liquid by the Portfolio's (Fund's) Board of
Trustees)
(ix) no more than 5% of the Portfolio's (Fund's) total assets are invested
in securities issued by issuers which (including predecessors) have
been in operation less than three years;
(x) with respect to 75% of the Portfolio's (Fund's) total assets, purchase
securities of any issuer if such purchase at the time thereof would
cause the Portfolio (Fund) to hold more than 10% of any class of
securities of such issuer, for which purposes all indebtedness of an
issuer shall be deemed a single class and all preferred stock of an
issuer shall be deemed a single class, except that futures or option
contracts shall not be subject to this restriction;
(xi) if the Portfolio (Fund) is a "diversified" fund with respect to 75% of
its assets, invest more than 5% of its total assets in the securities
(excluding U.S. government securities) of any one issuer;
(xii) purchase or retain in the Portfolio's (Fund's) portfolio
securities any securities issued by an issuer any of whose officers,
directors, trustees or security holders is an officer or Trustee of
the Portfolio (Trust), or is an officer or partner of the Adviser, if
after the purchase of the securities of such issuer for the Portfolio
(Fund) one or more of such persons owns beneficially more than 1/2 of
1% of the shares or securities, or both, all taken at market value, of
such issuer, and such persons owning more than 1/2 of 1% of such
shares or securities together own beneficially more than 5% of such
shares or securities, or both, all taken at market value;
(xiii) invest more than 5% of the Portfolio's (Fund's) net assets in
warrants (valued at the lower of cost or market) (other than warrants
acquired by the Portfolio (Fund) as part of a unit or attached to

securities at the time of purchase), but not more than 2% of the
Portfolio's (Fund's) net assets may be invested in warrants not listed
on the New York Stock Exchange, Inc. (the `NYSE'') or the American
Stock Exchange;
(xiv) make short sales of securities or maintain a short position,
unless at all times when a short position is open it owns an equal
amount of such securities or securities convertible into or
exchangeable, without payment of any further consideration, for
securities of the same issue and equal in amount to, the securities
sold short, and unless not more than 10% of the Portfolio's (Fund's)
net assets (taken at market value) is represented by such securities,
or securities convertible into or exchangeable for such securities, at
any one time (the Portfolios (Funds) have no current intention to
engage in short selling);
(xv) write puts and calls on securities unless each of the following
conditions are met: (a) the security underlying the put or call is
within the investment policies of the Portfolio (Fund) and the option
is issued by the Options Clearing Corporation, except for put and call
options issued by non-U.S. entities or listed on non-U.S. securities
or commodities exchanges; (b) the aggregate value of the obligations
underlying the puts determined as of the date the options are sold
shall not exceed 50% of the Portfolio's (Fund's) net assets; (c) the
securities subject to the exercise of the call written by the
Portfolio (Fund) must be owned by the Portfolio (Fund) at the time the
call is sold and must continue to be owned by the Portfolio (Fund)
until the call has been exercised, has lapsed, or the Portfolio (Fund)
has purchased a closing call, and such purchase has been confirmed,
thereby extinguishing the Portfolio's (Fund's) obligation to deliver
securities pursuant to the call it has sold; and (d) at the time a put

is written, the Portfolio (Fund) establishes a segregated account with
its custodian consisting of cash or short-term U.S. government
securities equal in value to the amount the Fund will be obligated to
pay upon exercise of the put (this account must be maintained until
the put is exercised, has expired, or the Portfolio (Fund) has
purchased a closing put, which is a put of the same series as the one
previously written); and
(xvi) buy and sell puts and calls on securities, stock index futures or
options on stock index futures, or financial futures or options on
financial futures unless such options are written by other persons
and: (a) the options or futures are offered through the facilities of
a national securities association or are listed on a national
securities or commodities exchange, except for put and call options
issued by non-U.S. entities or listed on non-U.S. securities or
commodities exchanges; (b) the aggregate premiums paid on all such
options which are held at any time do not exceed 20% of the
Portfolio's (Fund's) total net assets; and (c) the aggregate margin
deposits required on all such futures or options thereon held at any
time do not exceed 5% of the Portfolio's (Fund's) total assets.

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

The Adviser reviews on a routine basis commission rates, execution and
settlement services performed, making internal and external comparisons.
The Adviser is authorized, consistent with Section 28(e) of the Securities
Exchange Act of 1934, as amended, when placing portfolio transactions for
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 statistical information. The term "research, market or
statistical information" includes advice as to the value of securities; the
advisability of investing in, purchasing or selling securities; the
availability of securities or purchasers or sellers of securities; and
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of
accounts.
Consistent with the policy stated above, the Rules of Fair Practice of the
NASD and such other policies as the Trustees of the Portfolio may
determine, the Adviser may consider sales of shares of the Fund as a factor
in the selection of broker-dealers to execute portfolio transactions.
Bankers Trust will make such allocations if commissions are comparable to
those charged by nonaffiliated, qualified broker-dealers for similar
services.
Higher commissions may be paid to firms that provide research services to
the extent permitted by law. Bankers Trust may use this research
information in managing the Portfolio's assets, as well as the assets of
other clients.
Except for implementing the policies stated above, there is no intention to
place portfolio transactions with particular brokers or dealers or groups
thereof. In effecting transactions in over-the-counter securities, orders
are placed with the principal market-makers for the security being traded

unless, after exercising care, it appears that more favorable results are
available otherwise.
Although certain research, market and statistical information from brokers
and dealers can be useful to the Portfolio and to the Adviser, it is the
opinion of the management of the Portfolio that such information is only
supplementary to the Adviser's own research effort, since the information
must still be analyzed, weighed and reviewed by the Adviser's staff. Such
information may be useful to the Adviser in providing services to clients
other than the Portfolios, and not all such information is used by the
Adviser in connection with the Portfolio. Conversely, such information
provided to the Adviser by brokers and dealers through whom other clients
of the Adviser effect securities transactions may be useful to the Adviser
in providing services to the Portfolio.
In certain instances there may be securities which are suitable for a
Portfolio as well as for one or more of the Adviser's other clients.
Investment decisions for the Portfolio and for the Adviser's other clients
are made with a view to achieving their respective investment objectives.
It may develop that a particular security is bought or sold for only one
client even though it might be held by, or bought or sold for, other
clients. Likewise, a particular security may be bought for one or more
clients when one or more clients are selling that same security. Some
simultaneous transactions are inevitable when several clients receive
investment advice from the same investment adviser, particularly when the
same security is suitable for the investment objectives of more than one
client. When two or more clients are simultaneously engaged in the purchase
or sale of the same security, the securities are allocated among clients in
a manner believed to be equitable to each. It is recognized that in some
cases this system could have a detrimental effect on the price or volume of
the security as far as the Portfolio in concerned. However, it is believed

that the ability of the Portfolio to participate in volume transactions
will produce better executions for the Portfolio.
For the period from January 1, 1996 through September 30, 1996, and for the
fiscal years ended December 31, 1995, and 1994, the Portfolio did not
incur brokerage commissions.
{PRIVATE }PERFORMANCE INFORMATION{TC "PERFORMANCE INFORMATION"}
STANDARD PERFORMANCE INFORMATION
From time to time, quotations of the Fund's performance may be included in
advertisements, sales literature or shareholder reports. These performance
figures are calculated in the following manner:
YIELD: Yield for the Fund used in advertising are computed by dividing the
Fund's interest and dividend income for a given 30-day or one-month period,
net of expenses, by the average number of shares entitled to receive
distributions during the period, dividing this figure by the Fund's net
asset value per share at the end of the period, and annualizing the result
(assuming compounding of income) in order to arrive at an annual percentage
rate. Income is calculated for purpose of yield quotations in accordance
with standardized methods applicable to all stock and bond mutual funds.
Dividends from equity investments are treated as if they were accrued on a
daily basis, solely for the purpose of yield calculations. In general,
interest income is reduced with respect to bonds trading at a premium over
their par value by subtracting a portion of the premium from income on a
daily basis, and is increased with respect to bonds trading at a discount
by adding a portion of the discount to daily income. Capital gains and
losses generally are excluded from the calculation.
Income calculated for the purposes of calculating the Fund's yield differs
from income as determined for other accounting purposes. Because of the
different accounting methods used, and because of the compounding assumed
in yield calculations, the yield quoted for the Fund may differ from the

rate of distributions of the Fund paid over the same period or the rate of
income reported in the Fund's financial statements.
The Fund's yield for the 30-day period ended September 30, 1996, was 5.45%.
TOTAL RETURN: A Fund's average annual total return will be calculated for
certain periods by determining the average annual compounded rates of
return over those periods that would cause an investment of $1,000 (made at
the maximum public offering price with all distributions reinvested) to
reach the value of that investment at the end of the periods. The Fund may
also calculate total return figures which represent aggregate performance
over a period or year-by-year performance.
The Fund's average annual total returns for the one-year period ended
September 30, 1996, and for the period from August 24, 1992 (commencement
of operations) to September 30, 1996, were 4.86%, and 4.61%, respectively.
PERFORMANCE RESULTS: Any total return quotation provided for the Fund
should not be considered as representative of the performance of the Fund
in the future since the net asset value and public offering price of shares
of the Fund will vary based not only on the type, quality and maturities of
the securities held in the Portfolio, but also on changes in the current
value of such securities and on changes in the expenses of the Fund and the
Portfolio. These factors and possible differences in the methods used to
calculate total return should be considered when comparing the total return
of the Fund to total returns published for other investment companies or
other investment vehicles. Total return reflects the performance of both
principal and income.

COMPARISON OF FUND PERFORMANCE
Comparison of the quoted nonstandardized performance of various investments
is valid only if performance is calculated in the same manner. Since there
are different methods of calculating performance, investors should consider
the effect of the methods used to calculate performance when comparing
performance of 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 which may assume reinvestment of dividends but generally
do not reflect deductions for administrative and management costs.
Evaluations of the Fund's performance made by independent sources may also
be used in advertisements concerning the Fund. Sources for the Fund's
performance information could include the following:
Asian Wall Street Journal, a weekly Asian newspaper that often reviews U.S.
mutual funds investing internationally.
Barron's, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance data.
Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds investing
abroad.
Changing Times, The Kiplinger Magazine, a monthly investment advisory
publication that periodically features the performance of a variety of
securities.
Consumer Digest, a monthly business/financial magazine that includes a
"Money Watch" section featuring financial news.
Financial Times, Europe's business newspaper, which features from time to
time articles on international or country-specific funds.

Financial World, a general business/financial magazine that includes a
"Market Watch" department reporting on activities in the mutual fund
industry.
Forbes, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.
Fortune, a national business publication that periodically rates the
performance of a variety of mutual funds.
Global Investor, a European publication that periodically reviews the
performance of U.S. mutual funds investing internationally.
Investor's Daily, a daily newspaper that features financial, economic and
business news.
Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis, a
weekly publication of industry-wide mutual fund averages by type of fund.
Money, a monthly magazine that from time to time features both specific
funds and the mutual fund industry as a whole.
Morningstar Inc., a publisher of financial information and mutual fund
research.
New York Times, a nationally distributed newspaper which regularly covers
financial news.
Personal Investing News, a monthly news publication that often reports on
investment opportunities and market conditions.
Personal Investor, a monthly investment advisory publication that includes
a "Mutual Funds Outlook" section reporting on mutual fund performance
measures, yields, indices and portfolio holdings.
Success, a monthly magazine targeted to the world of entrepreneurs and
growing business, often featuring mutual fund performance data.
U.S. News and World Report, a national business weekly that periodically
reports mutual fund performance data.

Value Line, a biweekly publication that reports on the largest 15,000
mutual funds.
Wall Street Journal, a Dow Jones and Company, Inc. newspaper which
regularly covers financial news.
Weisenberger Investment Companies Services, an annual compendium of
information about mutual funds and other investment companies, including
comparative data on funds' backgrounds, management policies, salient
features, management results, income and dividend records, and price
ranges.
Working Women, a monthly publication that features a "Financial Workshop"
section reporting on the mutual fund/financial industry.
VALUATION OF SECURITIES; REDEMPTIONS AND PURCHASES IN KIND
Equity and debt securities (other than short-term debt obligations maturing
in 60 days or less), including listed securities and securities for which
price quotations are available, will normally be valued on the basis of
market valuations furnished by a pricing service. Short-term debt
obligations and money market securities maturing in 60 days or less are
valued at amortized cost, which approximates market. Other assets are
valued at fair value using methods determined in good faith by the
Portfolio's Board of Trustees.
The Trust, on behalf of the Fund, and the Portfolio reserves the right,
if conditions exist which make cash payments undesirable, to honor any
request for redemption or repurchase order by making payment in whole or in
part in readily marketable securities chosen by the Trust, or the
Portfolio, as the case may be, and valued as they are for purposes of
computing the Fund's or the Portfolio's net asset value, as the case may be
(a redemption in kind). If payment is made to a Fund shareholder in
securities, an investor, including the Fund, the shareholder may incur
transaction expenses in converting these securities into cash. The Trust,

on behalf of the Fund, and the Portfolio has elected, however, to be
governed by Rule 18f-1 under the 1940 Act as a result of which the Fund
and the Portfolio are obligated to redeem shares of beneficial interests,
as the case may be, with respect to any one investor during any 90-day
period, solely in cash up to the lesser of $250,000 or 1% of the net asset
value of the Fund or the Portfolio, as the case may be, at the beginning of
the period.
The Portfolio has agreed to make a redemption in kind to the Fund whenever
the Fund wishes to make a redemption in kind and therefore shareholders of
the Fund that receive redemptions in kind will receive portfolio securities
of the Portfolio and in no case will they receive a security issued by the
Portfolio. The Portfolio has advised the Trust that the Portfolio will not
redeem in kind except in circumstances in which the Fund is permitted to
redeem in kind or unless requested by the Fund.
Each investor in the Portfolio, including the Fund, may add to or reduce
its investment in the Portfolio on each day that the NYSE is open for
business and New York charter banks are not closed owing to customary or
local holidays. As of the close of the NYSE, currently 4:00 p.m. Eastern
time (or such earlier time as the NYSE closes) on each such day, the value
of each investor's interest in the Portfolio will be determined by
multiplying the net asset value of the Portfolio by the percentage
representing that investor's share of the aggregate beneficial interests in
the Portfolio. Any additions or reductions which are to be effected on that
day will then be effected. The investor's percentage of the aggregate
beneficial interests in the Portfolio will then be recomputed as the
percentage equal to the fraction (i) the numerator of which is the value of
such investor's investment in the Portfolio as of the close of the NYSE on
such day plus or minus, as the case may be, the amount of net additions to
or reductions in the investor's investment in the Portfolio effected on

such day and (ii) the denominator of which is the aggregate net asset value
of the Portfolio as of 4:00 p.m. Eastern time or the close of the NYSE on
such day plus or minus, as the case may be, the amount of net additions to
or reductions in the aggregate investments in the Portfolio by all
investors in the Portfolio. The percentage so determined will then be
applied to determine the value of the investor's interest in the Portfolio
as of 4:00 p.m. Eastern time or the close of the NYSE on the following day
the NYSE is open for trading.
The Fund may, at its own option, accept securities in payment for shares.
The securities delivered in payment for shares are valued by the method
described under "Net Asset Value" as of the day the Fund receives the
securities. This is a taxable transaction to the shareholder. Securities
may be accepted in payment for shares only if they are, in the judgment of
Bankers Trust, appropriate investments for the Fund's Portfolio. In
addition, securities accepted in payment for shares must: (i) meet the
investment objective and policies of the acquiring Fund's Portfolio;
(ii) be acquired by the applicable Fund for investment and not for resale
(other than for resale to the Fund's Portfolio); (iii) be liquid securities
which are not restricted as to transfer either by law or liquidity of
market; and (iv) if stock, have a value which is readily ascertainable as
evidenced by a listing on a stock exchange, over-the-counter market or by
readily available market quotations from a dealer in such securities. When
securities are used as payment for shares or as a redemption in kind from
the Fund, the transaction fee will not be assessed. However, the
shareholder will be charged the costs associated with receiving or
delivering the securities. These costs include security movement costs and
taxes and registration costs. The Fund reserves the right to accept or
reject at its own option any and all securities offered in payment for its
shares.

MANAGEMENT OF THE TRUST AND PORTFOLIO
The Board of Trustees is composed of persons experienced in financial
matters who meet throughout the year to oversee the activities of the Fund
or Portfolio they represent. In addition, the Trustees review contractual
arrangements with companies that provide services to the Fund and/or
Portfolio and review the Fund's performance.
The Trustees and officers of the Trust and Portfolios, their birthdates,
and their principal occupations during the past five years are set forth
below. Their titles may have varied during that period. Unless otherwise
indicated, the address of each officer is Clearing Operations, P.O. Box 897
Pittsburgh, Pennsylvania 15230-0897.
TRUSTEES OF THE TRUST
PHILIP W. COOLIDGE* (birthdate: September 2, 1951) Trustee; Chairman, Chief
Executive Officer and President, Signature Financial Group, Inc. ("SFG")
(since December, 1988) and Signature (since April, 1989). His address is 6
St. James Avenue, Boston, Massachusetts 02116.
MARTIN J. GRUBER (birthdate: July 15, 1937) Trustee; Chairman of the
Finance Department and Nomura Professor of Finance, Leonard N. Stern School
of Business, New York University (since 1964).
KELVIN J. LANCASTER (birthdate: December 10, 1924) Trustee; Professor,
Department of Economics, Columbia University. His address is 35 Claremont
Avenue, New York, New York 10027.
HARRY VAN BENSCHOTEN (birthdate: February 18, 1928) Trustee; Director,
Canada Life Insurance Company of New York; Director, Competitive
Technologies, Inc., a public company listed on the American Stock Exchange;
Retired (since 1987); Corporate Vice President, Newmont Mining Corporation
(prior to 1987). His address is 6581 Ridgewood Drive, Naples, FL 33963.
* Indicates an `interested person'' (as defined by the 1940 Act) of the
Trust.

TRUSTEES OF THE PORTFOLIO
CHARLES P. BIGGAR (birthdate: October 13, 1930) Trustee; Retired; Director
of Chase/NBW Bank Advisory Board; Director, Batemen, Eichler, Hill Richards
Inc.; formerly Vice President of International Business Machines and
President of the National Services and the Field Engineering Divisions of
IBM. His address is 12 Hitching Post Lane, Chappaqua, New York 10514.
PHILIP W. COOLIDGE* (birthdate: September 2, 1951) Trustee; Chairman, Chief
Executive Officer and President, SFG (since December, 1988) and Signature
(since April, 1989).
S. LELAND DILL (birthdate: March 28, 1930) Trustee: Retired; Director,
Coutts Group; Coutts (U.S.A.) International; Coutts Trust Holdings Ltd.;
Director, Zweig Series Trust; formerly, Partner of KPMG Peat Marwick,
Mitchell & Co.; Director, Vintners International Company, Inc.; General
Partner of Pemco (an investment company registered under the 1940 Act). His
address is 5070 North Ocean Drive, Singer Island, Florida 33404.
PHILIP SAUNDERS, JR. (birthdate: October 11, 1935) Trustee; Principal,
Philip Saunders Associates (Consulting); former Director of Financial
Industry Consulting, Wolf & Company; President, John Hancock Home Mortgage
Corporation; and Senior Vice President of Treasury and Financial Services,
John Hancock Mutual Life Insurance Company, Inc. His address is 445 Glen
Road, Weston, Massachusetts 02193.
* Indicates an `interested person'' (as defined by the 1940 Act) of the
Trust.
OFFICERS OF THE TRUST AND PORTFOLIO
Unless otherwise specified, each officer listed below holds the same
position with the Trust and the Portfolio.
RONALD M. PETNUCH-- (birthdate: February 27, 1960)-- President and
Treasurer; Senior Vice President; Federated Services Company (`FSC'');
formerly, Director of Proprietary Client Services, Federated Administrative

Services (`FAS''), and Associate Corporate Counsel, Federated Investors
(`FI'').
CHARLES L. DAVIS, JR.-- (birthdate: March 23, 1960)-- Vice President and
Assistant Treasurer; Vice President, FAS.
JAY S. NEUMAN-- (birthdate: April 22, 1950)-- Secretary; Corporate Counsel,
FI.
Messrs. Coolidge, Petnuch, Davis and Neuman also hold similar positions
for other investment companies for which Signature or Edgewood,
respectively an affiliate serves as the principal underwriter.
For the period from January 1, 1996, through September 30, 1996, the Fund
incurred Trustees fees equal to $5,162.

The following table reflects fees paid to the Trustees of the Trust and
Portfolio for the year ended September 30, 1996.
TRUSTEE COMPENSATION TABLE
Name, Aggregate Total
Position With Compensation Compensation From
Trust/Portfolio From Trust Fund Complex*

Harry Van Benschoten $13,000 $23,000
Trustee of Trust
Philip W. Coolidge none none
Trustee of Trust
and Portfolio
Martin J. Gruber $13,000 $23,000
Trustee of Trust
Kelvin J. Lancaster $10,000 $23,000

Trustee of Trust
Charles P. Biggar none none
Trustee of Portfolio
S. Leland Dill none none
Trustee of Portfolio
Philip Saunders, Jr. none none
Trustee of the Portfolio
* Aggregated information is furnished for the BT Family of Funds which
consists of the following: BT Investment Funds, BT Institutional
Funds, BT Pyramid Funds, BT Advisor Funds, BT Investment Portfolios,
Cash Management Portfolio, Treasury Money Portfolio, Tax Free Money
Portfolio, NY Tax Free Money Portfolio, International Equity
Portfolio, Utility Portfolio, Short Intermediate US Government
Securities Portfolio, Intermediate Tax Free Portfolio, Asset
Management Portfolio, Equity 500 Index Portfolio, and Capital
Appreciation Portfolio.
Bankers Trust reimbursed the Funds and Portfolios for a portion of their
Trustees fees for the period above. See "Investment Adviser" and
"Administrator" below.
As of December 31, 1996, the Trustees and officers of the Trust and the
Portfolio owned in the aggregate less than 1% of the shares of the Fund or
the Trust (all series taken together).

As of December 31, 1996, the following shareholders of record owned 5% or
more of the outstanding Shares of the Fund: Bankers Trust Company, Trustee
for Mapco, Inc. Profit Sharing and Savings Program 401(k), Nashville,
Tennessee, owned approximately 1,004,888 shares (20.60%); Bankers Trust
Company, Trustee for Alliance Coal Corp. Profit Sharing and Savings Plan
401(k) owned approximately 961,519 shares (19.71%); Batrus & Co., New York,
New York, owned approximately 342,666 shares (7.03%); and BCBS Association
VEBA, Chicago, Illinois, owned approximately 253,807 shares (5.20%).

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 objective,
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 each Portfolio bears
certain other expenses incurred in their 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 certain insurance premiums; outside
auditing and legal expenses; costs of maintenance of corporate existence;
costs attributable to investor services, including, without limitation,

telephone and personnel expenses; costs of preparing and printing
prospectuses and statements of additional information for regulatory
purposes and for distribution to existing shareholders; costs of
shareholders' reports and meetings of shareholders, officers and Trustees
of the Trust or the Portfolio; and any extraordinary expenses.
For the period from January 1, 1996 through September 30, 1996, and, the
fiscal years ended December 31, 1995, and 1994, Bankers Trust earned
$100,786, $130,819, and $90,050, respectively, as compensation for
investment advisory services provided to the Portfolio. During the same
periods, Bankers Trust reimbursed $20,932, $25,406, and $31,730,
respectively, to the Portfolio to cover expenses.
The Fund's prospectus contains disclosure as to the amount of Bankers
Trust's investment advisory and administration and services fees, including
waivers thereof. Bankers Trust may not recoup any of its waived investment
advisory or administration and services fees. Such waivers by Bankers Trust
shall stay in effect for at least 12 months.

Bankers Trust may 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.
ADMINISTRATOR
Under the administration and services agreements, Bankers Trust is
obligated on a continuous basis to provide such administrative services as
the Board of Trustees of the Trust and the Portfolio reasonably deem
necessary for the proper administration of the Trust or the Portfolio.
Bankers Trust will generally assist in all aspects of the Fund's and
Portfolio's operations; supply and maintain office facilities (which may be
in Bankers Trust's own offices), statistical and research data, data
processing services, clerical, accounting, bookkeeping and recordkeeping
services (including without limitation the maintenance of such books and
records as are required under the 1940 Act and the rules thereunder, except
as maintained by other agents), internal auditing, custodial and trasfer
agency services, executive and administrative services, and stationery and

office supplies; prepare reports to shareholders or investors; 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
FSC. The Sub-Administration Agreement provides that FSC will receive such
compensation as from time to time may be agreed upon by FSC and Bankers
Trust. All such compensation will be paid by Bankers Trust.
For the period from January 1, 1996, through September 30, 1996, and the
fiscal years ended December 31, 1995, and 1994, Bankers Trust earned
$87,048, $91,142, and $60,306, respectively, as compensation for
administrative and other services provided to the Fund. During the same
periods, Bankers Trust reimbursed $100,231 , $58,676, and $49,475,
respectively, to the Fund to cover expenses.
For the period from January 1, 1996, through September 30, 1996 and for
the fiscal years ended December 31, 1995, and 1994, Bankers Trust earned
$20,157, $26,164, and $18,010, respectively, as compensation for
administrative and other services provided to the Portfolio.
Bankers Trust has agreed that if in any year the aggregate expenses of the
Fund and its Portfolio (including fees pursuant to the investment advisory
agreement, but excluding interest, taxes, brokerage and, if permitted by

the relevant state securities commissions, extraordinary expenses) exceed
the expense limitation of any state having jurisdiction over the Fund,
Bankers Trust will reimburse the Fund for the excess expense to the extent
required by state law. As of the date of this Statement of Additional
Information, the most restrictive annual expense limitation applicable to
any Fund is 2.5% of the Fund's first $30 million of average annual net
assets, 2.0% of the next $70 million of average annual net assets and 1.5%
of the remaining average annual net assets.
CUSTODIAN AND TRANSFER AGENT
Bankers Trust, 280 Park Avenue, New York, New York 10017, serves as
Custodian for the Trust and for the Portfolio pursuant to the
administration and services agreements. As Custodian, it holds the Fund's
and the Portfolio's assets. Bankers Trust also serves as transfer agent of
the Trust and of the Portfolio pursuant to the respective administration
and services agreement. Under its transfer agency agreement with the Trust,
Bankers Trust maintains the shareholder account records for the Fund,
handles certain communications between shareholders and the Trust and
causes to be distributed any dividends and distributions payable by the
Trust. Bankers Trust may be reimbursed by the Fund or the Portfolio for its
out-of-pocket expenses. Bankers Trust will comply with the self-custodian
provisions of Rule 17f-2 under the 1940 Act.

USE OF NAME
The Trust and Bankers Trust have agreed that the Trust may use "BT" as
part of its name for so long as Bankers Trust serves as investment adviser
to the Portfolio. The Trust has acknowledged that the term "BT" is used by
and is a property right of certain subsidiaries of Bankers Trust and that
those subsidiaries and/or Bankers Trust may at any time permit others to
use that term. The Trust may be required, on 60 days' notice from Bankers
Trust at any time, to abandon use of the acronym "BT" as part of its name.
If this were to occur, the Trustees would select an appropriate new name
for the Trust, but there would be no other material effect on the Trust,
its shareholders or activities.
BANKING REGULATORY MATTERS
Bankers Trust has been advised by its counsel that, in counsel's opinion,
Bankers Trust currently may perform the services for the Trust and the
Portfolio contemplated by the investment advisory 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 Trust and the
Portfolio. Coopers & Lybrand L.L.P., 1100 Main Street, Suite 900, Kansas
City, Missouri 64105 has been selected as Independent Accountants for the
Trust and the Portfolio.
ORGANIZATION OF THE TRUST
Shares of the Trust do not have cumulative voting rights, which means that
holders of more than 50% of the shares voting for the election of Trustees
can elect all Trustees. Shares are transferable but have no preemptive,
conversion or subscription rights. Shareholders generally vote by Fund,
except with respect to the election of Trustees and the ratification of the
selection of independent accountants.
Massachusetts law provides that shareholders could under certain
circumstances be held personally liable for the obligations of the Trust.
However, the Trust's Declaration of Trust disclaims shareholder liability
for acts or obligations of the Trust and requires that notice of this
disclaimer be given in each agreement, obligation or instrument entered
into or executed by the Trust or a Trustee. The Declaration of Trust
provides for indemnification from the Trust's property for all losses and
expenses of any shareholder held personally liable for the obligations of
the Trust. Thus, the risk of a shareholder's incurring financial loss on
account of shareholder liability is limited to circumstances in which the
Trust itself would be unable to meet its obligations, a possibility that
the Trust believes is remote. Upon payment of any liability incurred by the
Trust, the shareholder paying the liability will be entitled to
reimbursement from the general assets of the Trust. The Trustees intend to
conduct the operations of the Trust in a manner so as to avoid, as far as

possible, ultimate liability of the shareholders for liabilities of the
Trust.
The Trust was organized on February 28, 1992.
TAXATION
TAXATION OF THE FUND
The Fund intends to qualify annually and to elect the Fund to be treated
as a regulated investment company under the Internal Revenue Code of 1986,
as amended (the `Code'').
As a regulated investment company, the Fund will not be subject to U.S.
Federal income tax on its investment company taxable income and net capital
gains (the excess of net long-term capital gains over net short-term
capital losses), if any, that it distributes to shareholders. The Fund
intends to distribute to its shareholders, at least annually, substantially
all of its investment company taxable income and net capital gains, and
therefore does not anticipate incurring a Federal income tax liability.
TAXATION OF THE PORTFOLIO
The Portfolio is not subject to the Federal income taxation. Instead, the
Fund and other investors investing in the Portfolio must take into
account, in computing their Federal income tax liability, their share of
the Portfolio's income, gains, losses, deductions, credits and tax
preference items, without regard to whether they have received any cash
distributions from the Portfolio.
OTHER TAXATION
The Trust is organized as a Massachusetts business trust and, under current
law, neither the Trust nor the Fund is liable for any income or franchise
tax in the Commonwealth of Massachusetts, provided that the Fund continues
to qualify as a regulated investment company under Subchapter M of the
Code. The Portfolio is organized as a New York trust. The Portfolio is

not subject to any income or franchise tax in the State of New York or the
Commonwealth of Massachusetts.
FINANCIAL STATEMENTS
The financial statements for the Fund for the period ended September 30,
1996, are incorporated herein by reference to the Fund's Annual Report
dated September 30, 1996 (File Nos. 33-45973 and 811-06576). A copy of the
Annual Report may be obtained without change by contacting the Fund.

APPENDIX
BOND AND COMMERCIAL PAPER RATINGS
Set forth below are descriptions of the ratings of Moody's and S&P, which
represent their opinions as to the quality of the securities which they
undertake to rate. It should be emphasized, however, that ratings are
relative and subjective and are not absolute standards of quality.
S&P BOND RATINGS
An S&P corporate debt rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. Debt
rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong. Debt rated "AA" has a
very strong capacity to pay interest and to repay principal and differs
from the highest rated issues only in small degree.
The rating "AA" may be modified by the addition of a plus or minus sign to
show relative standing within such category.
MOODY'S BOND RATINGS
Excerpts from Moody's description of its corporate bond ratings: Aaa judged
to be the best quality, carry the smallest degree of investment risk; Aa
judged to be of high quality by all standards.

A-1

FITCH INVESTORS SERVICE BOND RATINGS
AAA. Securities of this rating are regarded as strictly high-grade, broadly
marketable, suitable for investment by trustees and fiduciary institutions,
and liable to but slight market fluctuation other than through changes in
the money rate. The factor last named is of importance varying with the
length of maturity. Such securities are mainly senior issues of strong
companies, and are most numerous in the railway and public utility fields,
though some industrial obligations have this rating. The prime feature of
an AAA rating is showing of earnings several times or many times interest
requirements with such stability of applicable earnings that safety is
beyond reasonable question whatever changes occur in conditions. Other
features may enter in, such as a wide margin of protection through
collateral security or direct lien on specific property as in the case of
high class equipment certificates or bonds that are first mortgages on
valuable real estate. Sinking funds or voluntary reduction of the debt by
call or purchase are often factors, while guarantee or assumption by
parties other than the original debtor may also influence the rating.
AA. Securities in this group are of safety virtually beyond question, and
as a class are readily salable while many are highly active. Their merits
are not greatly unlike those of the AAA class, but a security so rated may
be of junior though strong lien in many cases directly following an AAA
security or the margin of safety is less strikingly broad. The issue may be
the obligation of a small company, strongly secured but influenced as to
ratings by the lesser financial power of the enterprise and more local type
of market.

A-2

FITCH INVESTORS SERVICE AND DUFF & PHELPS COMMERCIAL PAPER RATINGS
Commercial paper rated "Fitch-1" is considered to be the highest grade
paper and is regarded as having the strongest degree of assurance for
timely payment. "Fitch-2" is considered very good grade paper and reflects
an assurance of timely payment only slightly less in degree than the
strangest issue.
Commercial paper issues rated "Duff 1" by Duff & Phelps, Inc. have the
following characteristics: very high certainty of timely payment, excellent
liquidity factors supported by strong fundamental protection factors, and
risk factors which are very small. Issues rated "Duff 2" have a good
certainty of timely payment, sound liquidity factors and company
fundamentals, small risk factors, and good access to capital markets.

A-3

INVESTMENT ADVISER OF THE PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY
DISTRIBUTOR
EDGEWOOD SERVICES, INC.
CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY
INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.
COUNSEL
WILLKIE FARR & GALLAGHER
No person has been authorized to give any information or to make any
representations other than those contained in the Trust's Prospectuses, its
Statements of Additional Information or the Trust's official sales
literature in connection with the offering of the Trust's shares and, if
given or made, such other information or representations must not be relied
on as having been authorized by the Trust. Neither the Prospectuses nor
this Statement of Additional Information constitutes an offer in any state
in which, or to any person to whom, such offer may not lawfully be made.

CUSIP: 055847305
STA519400 (1/97)