BT PYRAMID MUTUAL FUNDS, 497, 1998-05-11

BT PYRAMID MUTUAL FUNDS
497, 1998-05-11

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(BULLET) BT PYRAMID MUTUAL FUNDS (BULLET)

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BT INVESTMENT EQUITY
500 INDEX FUND

PROSPECTUS
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APRIL 30, 1998

BT Pyramid Mutual Funds (the "Trust") is an open-end, management investment
company (mutual fund) which consists of a number of separate investment funds.
The BT Investment Equity 500 Index Fund (the "Fund") is a separate series of the
Trust. The Fund seeks to match the performance of the stock market as
represented by the Standard & Poor's Daily Stock Price Index of 500 Common
Stocks (the "S&P 500") before the deduction of expenses allocable to shares of
the Fund and the Equity 500 Index Portfolio (the "Portfolio") (the "Expenses").
There is no assurance, however, that the Fund will be able to achieve its stated
objective.

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

A Statement of Additional Information ("SAI") with the same date has been filed
with the Securities and Exchange Commission ("SEC"), and is incorporated herein
by reference. You may request a free copy of the SAI or a paper copy of this
prospectus, if you have received your prospectus electronically, free of charge
by calling the Fund's Service Agent at 1-800-730-1313. The SAI, material
incorporated by reference into this document, and other information regarding
the Trust is maintained electronically with the SEC at Internet Web site
(http://www.sec.gov).

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

BANKERS TRUST COMPANY ("BANKERS TRUST") IS THE INVESTMENT ADVISER (THE
"ADVISER") OF THE PORTFOLIO. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR GUARANTEED OR ENDORSED BY, BANKERS TRUST OR ANY OTHER BANKING OR
DEPOSITORY INSTITUTION. SHARES ARE NOT FEDERALLY GUARANTEED OR INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE U.S. GOVERNMENT, THE FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.

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

EDGEWOOD SERVICES, INC.
5800 Corporate Drive (Bullet) P.O. Box 897 (Bullet) Pittsburgh, Pennsylvania
(Bullet) 15237-5829

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TABLE OF CONTENTS
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PAGE
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The Fund...................................................................... 3

Who May 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.............................................10

Dividends, Distributions and Taxes............................................14

Performance Information and Reports...........................................15

Management of the Trust and Portfolio.........................................16

Additional Information........................................................19

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

The Trust seeks to achieve the investment objective of the Fund by investing all
the Assets of the Fund in the Portfolio, which has the same investment objective
as the Fund.

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WHO MAY INVEST

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By itself, the Fund does not constitute 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.

The Fund may be appropriate for investors who are willing to ride out stock
market fluctuations in pursuit of potentially higher long-term returns. The
Portfolio invests for growth and does not pursue income. Over time, stocks,
although more volatile, have shown greater growth potential than other types of
securities. In the shorter-term, however, stock prices can fluctuate
dramatically in response to market factors.

The 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.

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

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ANNUAL OPERATING EXPENSES
(as a percentage of the average daily net assets of the Fund)
<TABLE>
<S> <C> <C> <C> <C>
Investment advisory fee.................................................................................... 0.075%
12b-1 fees................................................................................................. None
Other expenses (after reimbursements or waivers)........................................................... 0.175
-----
Total operating expenses (after reimbursements or waivers)................................................. 0.25 %
----
EXAMPLE 1 year 3 years 5 years 10 years
------- -------- -------- --------
You would pay the following expenses for each Fund on a $1,000
investment, assuming: (1) 5% annual return
and (2) redemption at the end of each time period...................... $3 $8 $14 $32
</TABLE>

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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. The
expense table and the example reflect a voluntary undertaking, by Bankers Trust
to waive or reimburse expenses such that the total operating expenses will not
exceed 0.25% of the Fund's average net assets annually. In the absence of this
undertaking, for the fiscal year ended December 31, 1997, the total operating
expenses would have been equal to approximately 0.46% of the Fund's average net
assets annually. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
Moreover, while each example assumes a 5% annual return, actual performance will
vary and may result in a return greater or less than 5%.

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

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

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

<TABLE>
<CAPTION>
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DECEMBER 31, 1992
FOR THE YEAR ENDED DECEMBER 31, (COMMENCEMENT
1997 1996 1995 1994 1993 OF OPERATIONS)
<S> <C> <C> <C> <C> <C> <C>
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PER SHARE OPERATING PERFORMANCE:*
Net Asset Value, Beginning of Year................ $ 99.06 $ 82.92 $ 62.16 $ 63.42 $60.00 $ 60.00
-------- -------- -------- -------- ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income........................... 1.81 1.80 1.74 1.32 1.44 --
Net Realized and Unrealized Gain (Loss) on
Investments and Futures Transactions.......... 30.59 16.98 21.18 (0.60) 4.26 --
-------- -------- -------- -------- ------ ------
Total from Investment Operations.................. 32.40 18.78 22.92 0.72 5.70 --
-------- -------- -------- -------- ------ ------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income........................... (1.78) (1.80) (1.74) (1.32) (1.44) --
Net Realized Gain from Investments and Futures
Transactions.................................. (4.73) (0.84) (0.42) (0.66) (0.84) --
-------- -------- -------- -------- ------ ------
TOTAL DISTRIBUTIONS............................... (6.51) (2.64) (2.16) (1.98) (2.28) --
-------- -------- -------- -------- ------ ------
NET ASSET VALUE, END OF YEAR...................... $ 124.95 $ 99.06 $ 82.92 $ 62.16 $63.42 $ 60.00
-------- -------- -------- -------- ------ ------
-------- -------- -------- -------- ------ ------
Total Investment Return........................... 33.02% 22.83% 37.15% 1.15% 9.53% --
SUPPLEMENTAL DATA AND RATIOS:
Net Assets, End of Year (000s omitted).......... $637,401 $451,762 $277,140 $181,898 $1,835 $ 100
Net Investment Income........................... 1.59% 2.05% 2.38% 2.68% 2.53% --
Expenses, Including Expenses of the Equity 500
Index Portfolio............................... 0.25% 0.25% 0.25% 0.25% 0.25% --
Decrease Reflected in Above Expense Ratio Due to
Absorption of Expenses by Bankers Trust....... 0.21% 0.22% 0.23% 0.29% 1.82% --
</TABLE>

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*Per share amounts for all years have been restated to reflect 1:6 reverse stock
split effective September 4, 1997.

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated December 31, 1997, which can be obtained free of charge.

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

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

Since the investment characteristics of the Fund will correspond directly to
those of the Portfolio, the following is a discussion of the various investments
and investment policies of the Portfolio. Additional information about the
investment policies of the Portfolio appears in the SAI.

EQUITY 500 INDEX PORTFOLIO

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

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

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

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

Under normal conditions, Bankers Trust will attempt to invest as much of the
Portfolio's assets as is practical in common stocks included in the S&P 500.
However, the Portfolio may maintain up to 20% of its assets in short-term debt
securities and money market instruments

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hedged with stock index futures and options to meet redemption requests or to
facilitate the investment in common stocks. See "Additional Information" for
further information.

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

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

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

ADDITIONAL INVESTMENT LIMITATIONS

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

ABOUT THE S&P 500 INDEX

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

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trading activity of each stock and its adequacy as a representation of stocks in
a particular industry group, and may be changed from time to time.

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

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

For more complete information about the S&P 500, see the SAI.

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

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

PORTFOLIO TURNOVER

The frequency of portfolio transactions -- the Portfolio's turnover rate -- will
vary from year to year depending on market conditions and the Portfolio's cash
flows. The Portfolio's annual turnover rate is not expected to exceed 100%. The
Portfolio's turnover rates for the years ended December 31, 1997, and 1996, were
19% and 15%, respectively.

DERIVATIVES

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

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SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE

Unlike other open-end management investment companies (mutual funds) which
directly acquire and manage their own portfolio securities, the Fund seeks to
achieve its investment objective by investing all of its Assets in the
Portfolio, a separate registered investment company with the same investment
objective as the Fund. Therefore, an investor's interest in the Portfolio's
securities is indirect. In addition to selling a beneficial interest to the
Fund, the Portfolio may sell beneficial interests to other mutual funds or
institutional investors. Such investors will invest in the Portfolio on the same
terms and conditions and will pay a proportionate share of the Portfolio's
expenses. However, the other investors investing in the Portfolio are not
required to sell their shares at the same public offering price as the Fund due
to variations in sales commissions and other operating expenses. Therefore,
investors in the Fund should be aware that these differences may result in
differences in returns experienced by investors in the different funds that
invest in the Portfolio. Such differences in returns are also present in other
mutual fund structures. Information concerning other holders of interests in the
Portfolio is available from Bankers Trust at 1-800-730-1313.

The master-feeder fund structure is relatively complex, so shareholders should
carefully consider this investment approach.

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

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

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

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

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

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

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

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

- --------------------------------------------------------------------------------
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).

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

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

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

The Trust and Bankers Trust have authorized one or more brokers to accept on the
Trust's behalf purchase and redemption orders for the Fund. Such brokers are
authorized to designate other intermediaries to accept purchase and redemption
orders on the Trust's behalf. The Transfer Agent will be deemed to have received
a purchase or redemption order when an authorized broker or, if applicable, a
broker's authorized designee, accepts the order. Customer orders will be priced
at the Fund's NAV next computed after it is accepted by an authorized broker or
the broker's authorized designee.

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

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

<TABLE>
<S> <C>
- ---------------------------------------------------------
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
- ---------------------------------------------------------
</TABLE>

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:

(Bullet) Mail an account application with a check,

(Bullet) Wire money into your account,

(Bullet) Open an account by exchanging from another fund in the BT Family of
Funds, or

(Bullet) Contact your Service Agent or Investment Professional.

If you are investing through a tax-sheltered retirement plan, such as an IRA,
for the first time, you will need a special application. Contact your Investment
Professional or call BT Retirement Services Center at 1-800-730-1313 for more
information and a retirement account application.

- --------------------------------------------------------------------------------

ADDITIONAL INFORMATION ABOUT BUYING SHARES

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

- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
BY PHONE Contact your Service Agent, Contact your Service Agent,
Investment Professional, or call BT's Investment Professional, or call BT's
Service Center at 1-800-730- 1313. If Service Center at 1-800-730- 1313. If
you are an existing shareholder, you you are an existing shareholder, you
may exchange from another BT account may exchange from another BT account
with the same registration, with the same registration,
including, name, address, and including, name, address, and
taxpayer ID number. taxpayer ID number.

BY MAIL Complete and sign the account Make
your check payable to the application.
Make your check payable complete name of
the Fund of your to the complete name of
the Fund of choice. Indicate your Fund
account your choice. Mail to the
appropriate number on your check and mail
to the address indicated on the
application. address printed on your
account
statement.
</TABLE>

- --------------------------------------------------------------------------------

HOW TO SELL SHARES

You can arrange to take money out of your Fund account at any time by selling
(redeeming) some or all of your shares. Your shares shall be sold at the next
NAV calculated after an order is received by the Transfer Agent. 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:

(Bullet) Your account registration has changed within the last 30 days,

(Bullet) The check is being mailed to a different address than the one on your
account (record address),

(Bullet) The check is being made payable to someone other than the account
owner,

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

(Bullet) The redemption proceeds are being transferred to a BT account with a
different registration, or

(Bullet) You wish to have redemption proceeds wired to a non-predesignated bank
account.

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

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

ADDITIONAL INFORMATION ABOUT SELLING SHARES

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

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

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

Overnight mailings:

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

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

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

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

INVESTOR SERVICES

BT Pyramid Mutual Funds provides a variety of services to help you manage your
account. Information Services Statements and reports that your Investment
Professional or the Transfer Agent may send to you include the following:

(Bullet) Confirmation statements (after every transaction that affects your
account balance, including distributions or your account registration)

(Bullet) Account statements (monthly)

(Bullet) Financial reports (every six months)

To reduce expenses, only one copy of most financial reports will be mailed, even
if you have more than one account in the Fund. Call your Investment Professional
or the BT Service Center at 1-800-730-1313 if you need additional copies of
financial reports.

EXCHANGE PRIVILEGE

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

(Bullet) Call your Service Agent for information and a prospectus. Read the
prospectus for relevant information.

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

(Bullet) 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.

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

SYSTEMATIC PROGRAMS

TO MOVE MONEY FROM YOUR BANK ACCOUNT TO BT PYRAMID MUTUAL FUNDS

<TABLE>
<C> <C> <S> <C>
MINIMUM MINIMUM
INITIAL SUBSEQUENT FREQUENCY SETTING UP OR CHANGING
$1,000 $100 Monthly, bimonthly, For a new account, complete the appropriate section on the
quarterly or semi- application.
annually
For existing accounts, call
your Investment
Professional for an
application. To change the
amount or frequency of your
investment, contact your
Investment Professional
directly or call
1-800-730-1313. Call at
least 10 business days
prior to your next
scheduled investment date.
</TABLE>

SYSTEMATIC WITHDRAWAL PROGRAM lets you set up periodic redemptions from your
account.

<TABLE>
<C> <S> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$ 100 Monthly, quarterly, semi-annually or annually To establish, call your Investment Professional or
call 1-800-730-1313 after your account is open.
The accounts from which the withdrawals will be
processed must have a minimum balance of $10,000,
other than retirement accounts subject to required
minimum distributions.
</TABLE>

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.

(Bullet) 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.

(Bullet) ROLLOVER IRAS: tax-deferred retirement accounts that retain the special
tax advantages of lump sum distributions from qualified retirement
plans and transferred IRA accounts.

- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------

DISTRIBUTIONS. The Fund distributes substantially all of its net investment
income and capital gains to shareholders each year. Income dividends are
distributed quarterly. In addition, the Fund will distribute net capital gains,
if any, at least annually and potentially semi-annually, if required, to remain
in compliance with the applicable tax regulations. Unless a shareholder
instructs the Trust to pay such dividends and distributions in cash, they will
be automatically reinvested in additional shares of the Fund.

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

Distributions from the Fund's income and short-term capital gains are taxed as
dividends, and long-term capital gain distributions are taxed as long-term
capital gains. The Fund's distributions are taxable when they are paid, whether
you take them in cash or reinvest them in additional shares. Distributions
declared to shareholders of record in November and December and paid in January
are taxable as if paid on December 31. The

<PAGE>
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- --------------------------------------------------------------------------------
Fund will send each shareholder a tax statement by January 31 showing the tax
status of the distributions received in the past year.

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

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

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

- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION AND REPORTS
- --------------------------------------------------------------------------------

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

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

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

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

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

<PAGE>
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MANAGEMENT OF THE TRUST AND PORTFOLIO
- --------------------------------------------------------------------------------

BOARD OF TRUSTEES

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

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

INVESTMENT ADVISER

The Trust has not retained the services of an investment adviser since the Trust
seeks to achieve the investment objective of the Fund by investing all the
Assets of the Fund in the Portfolio. The Portfolio has retained the services of
Bankers Trust, as investment adviser.

BANKERS TRUST COMPANY AND ITS AFFILIATES

Bankers Trust Company, a New York banking corporation with principal offices at
130 Liberty Street (One Bankers Trust Plaza), New York, New York 10006, is a
wholly owned subsidiary of Bankers Trust Corporation. Bankers Trust conducts a
variety of general banking and trust activities and is a major wholesale
supplier of financial services to the international and domestic institutional
markets. As of December 31, 1997, Bankers Trust Corporation was the seventh
largest bank holding company in the United States with total assets of over $100
billion. Bankers Trust is dedicated to servicing the needs of corporations,
governments, financial institutions and private clients through a global network
of over 90 offices in more than 50 countries. Investment management is a core
business of Bankers Trust, built on a tradition of excellence from its roots as
a trust bank founded in 1903. 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 over $300 billion in assets under
management globally. Of that total, approximately $148 billion are in U.S.
equity index assets alone.

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

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

Bankers Trust receives an investment advisory fee from the Portfolio, computed
daily and paid monthly, at the annual rate of 0.075% of the average daily net
assets of the Portfolio. Under certain circumstances Bankers Trust has agreed to
pay fees to certain securities brokers, dealers and other entities that
facilitate the sale of Fund

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

- --------------------------------------------------------------------------------

shares, and in connection therewith provide administrative, shareholder, or
distribution related services to the Fund or its shareholders. Fees paid to
entities that administer mutual fund "supermarkets" may be higher than fees paid
for other types of services.

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.

PORTFOLIO MANAGER

Mr. Frank Salerno, Managing Director of Bankers Trust, is responsible for the
day-to-day management of the Portfolio. Mr. Salerno has been employed at Bankers
Trust since 1981 and has managed the Portfolio's assets since the Portfolio
commenced operations.

ADMINISTRATOR

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

Under an Administration and Services Agreement with the Portfolio, Bankers Trust
calculates the value of the assets of the Portfolio and generally assists the
Board of Trustees of the Portfolio in all aspects of the administration and
operation of the Portfolio. For these services, the Portfolio pays Bankers Trust
a fee, computed daily and paid monthly, equal to the lesser of 0.05% of the
average daily net assets of the Portfolio or an amount that brings the total
operating expenses of the Portfolio to 0.08% 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 5800 Corporate Drive, Pittsburgh, Pennsylvania 15237-5829.

SERVICE AGENT

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

CUSTODIAN AND TRANSFER AGENT

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

<PAGE>
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ORGANIZATION OF THE TRUST

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

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

When matters are submitted for shareholder vote, shareholders of the Fund will
have one vote for each full share held and proportionate, fractional votes for
fractional shares held. A separate vote of the Fund is required on any matter
affecting the Fund on which shareholders are entitled to vote. Shareholders of
the Fund are not entitled to vote on Trust matters that do not affect the Fund.
There normally will be no meetings of shareholders for the purpose of electing
Trustees unless and until such time as less than a majority of Trustees holding
office have been elected by shareholders, at which time the Trustees then in
office will call a shareholders' meeting for the election of Trustees. Any
Trustee may be removed from office upon the vote of shareholders holding at
least two-thirds of the Trust's outstanding shares at a meeting called for that
purpose. The Trustees are required to call such a meeting upon the written
request of shareholders holding at least 10% of the Trust's outstanding shares.
As of April 1, 1998, Bankers Trust Company Customer 401(k), Columbus, Ohio,
acting in various capacities for numerous accounts owned approximately 36.95% 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 as presented for a
vote of shareholders.

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

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

EXPENSES OF THE FUND AND PORTFOLIO

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

<PAGE>
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ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------

REPURCHASE AGREEMENTS. In a repurchase agreement the Portfolio buys a security
and simultaneously agrees to sell it back at a higher price. In the event of the
bankruptcy of the other party to a repurchase agreement, the Portfolio could
experience delays in recovering either its cash or selling the securities
subject to the repurchase agreement. To the extent that, in the meantime, the
value of the securities repurchased had decreased or the value of the securities
had increased, the Portfolio could experience a loss. In all cases, Bankers
Trust must find the creditworthiness of the other party to the transaction
satisfactory.

SECURITIES LENDING. The Portfolio is permitted to lend up to 30% of the total
value of its securities. These loans must be secured continuously be cash or
securities issued or guaranteed by the United States government, its agencies or
instrumentalities 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 may 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, a 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
receiving additional collateral, in recovery should the borrower fail
financially and possible loss of the collateral. Upon receipt of appropriate
regulatory approval, cash collateral may be invested in a money market fund
managed by Bankers Trust (or its affiliate) and Bankers Trust may serve as the
Portfolio's lending agent and may share in revenue received from securities
lending transactions as compensation for this service.

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

OPTIONS ON STOCK INDICES. The Portfolio may purchase and write put and call
options on stock indices listed on stock exchanges. A stock index fluctuates
with changes in the market values of the stocks included in the index.

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

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

FUTURES CONTRACTS ON STOCK INDICES. The Portfolio may enter into contracts
providing for the making and acceptance of a cash settlement based upon changes
in the value of an index of securities ("Futures Contracts"). This investment
technique is designed only to hedge against anticipated future change in general
market prices which otherwise might either adversely affect the

<PAGE>
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- --------------------------------------------------------------------------------
value of securities held by the Portfolio or adversely affect the prices of
securities which are intended to be purchased at a later date for the Portfolio.
A Futures Contract may also be entered into to close out or offset an existing
futures position.

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

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

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

OPTIONS ON FUTURES CONTRACTS. The Portfolio may invest in options on such
Futures Contracts for similar purposes.

ASSET COVERAGE. The Portfolio will cover the Portfolio's transactions in futures
and related options, as well as in when-issued and delayed delivery, as required
under applicable interpretations of the SEC, either by owning the underlying
securities or segregating with the Portfolio's Custodian liquid securities in an
amount at all times equal to or exceeding the Portfolio's commitment with
respect to these instruments or contracts.

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<PAGE>
BT PYRAMID MUTUAL FUNDS
BT INVESTMENT EQUITY 500 INDEX FUND

INVESTMENT ADVISER OF THE PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY
130 Liberty Street
(One Bankers Trust Plaza)
New York, NY 10006

DISTRIBUTOR
EDGEWOOD SERVICES, INC.
5800 Corporate Drive
Pittsburgh, PA 15237-5829

CUSTODIAN AND TRANSFER AGENT BANKERS TRUST COMPANY 130 Liberty Street (One
Bankers Trust Plaza)
New York, NY 10006

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

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

................................................................................

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

Cusip #055847107
STA462300 (4/98)

STATEMENT OF ADDITIONAL INFORMATION

APRIL 30, 1998

BT PYRAMID MUTUAL FUNDS

O BT INVESTMENT EQUITY 500 INDEX 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 BT Investment Equity 500 Index Fund (the "Fund").

The Fund seeks to provide investment results that, before expenses, correspond
to the total return (i.e., the combination of capital changes and income) of
common stocks publicly traded in the United States, as represented by the
Standard & Poor's Daily Stock Price Index of 500 Common Stocks (the "S&P 500").

As described in the Prospectus, the Trust seeks to achieve the investment
objective of the Fund by investing all the investable assets of the Fund in the
Equity 500 Index Portfolio (the "Portfolio"), an open-end management investment
company having the same investment objective as the Fund.

Shares of the Fund are sold by Edgewood Services, Inc. ("Edgewood"), the Trust's
distributor, to clients and customers (including affiliates and correspondents)
of Bankers Trust Company ("Bankers Trust"), the Portfolio's investment adviser
("Adviser"), and to clients and customers of other organizations.

The Trust's Prospectus for the Fund is dated April 30, 1998. The Prospectus
provides the basic information investors should know before investing. This
Statement of Additional Information ("SAI"), 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.
You may request a copy of a Prospectus or a paper copy of this SAI if you have
received it electronically, free of charge by calling the Trust at the telephone
number listed below or by contacting any Service Agent. Capitalized terms not
otherwise defined in this SAI have the meanings accorded to them in the Fund's
Prospectus.

BANKERS TRUST COMPANY

INVESTMENT ADVISER OF THE PORTFOLIO AND ADMINISTRATOR

EDGEWOOD SERVICES, INC.

DISTRIBUTOR

5800 CORPORATE DRIVE PITTSBURGH, PENNSYLVANIA 15237-58291-800-730-1313

<PAGE>

I
I

TABLE OF CONTENTS

Investment Objective and Policies........................................1

Performance Information.................................................12

Valuation of Securities; Redemptions and Purchases in Kind..............14

Management of the Trust and Portfolio...................................15

Organization of the Trust...............................................20

Taxation................................................................20

Financial Statements....................................................21

Appendix................................................................22

<PAGE>

2122
i

INVESTMENT OBJECTIVE AND POLICIES

INVESTMENT OBJECTIVE

The investment objective of the Fund is described in the Fund's Prospectus.
There can, of course, be no assurance that the Fund will achieve its investment
objective.

INVESTMENT POLICIES

The Fund seeks to achieve its investment objective by investing all of its
Assets in the Portfolio. The Trust may withdraw a Fund's investment from the
Portfolio at any time if the Board of Trustees of the Trust determines that it
is in the best interests of the Fund to do so.

Since the investment characteristics of the Fund will correspond directly to
those of the Portfolio, the following is a discussion of the various investments
of and techniques employed by the Portfolio.

CERTIFICATES OF DEPOSIT AND BANKERS' ACCEPTANCES. The Portfolio may invest in
certificates of deposit which are receipts issued by a depository institution in
exchange for the deposit of funds. The issuer agrees to pay the amount deposited
plus interest to the bearer of the receipt on the date specified on the
certificate. The certificate usually can be traded in the secondary market prior
to maturity. Bankers' acceptances typically arise from short-term credit
arrangements designed to enable businesses to obtain funds to finance commercial
transactions. Generally, an acceptance is a time draft drawn on a bank by an
exporter or an importer to obtain a stated amount of funds to pay for specific
merchandise. The draft is then "accepted" by a bank that, in effect,
unconditionally guarantees to pay the face value of the instrument on its
maturity date. The acceptance may then be held by the accepting bank as an
earning asset or it may be sold in the secondary market at the going rate of
discount for a specific maturity. Although maturities for acceptances can be as
long as 270 days, most acceptances have maturities of six months or less.

COMMERCIAL PAPER. The Portfolio may invest in commercial paper which consists of
short-term (usually from 1 to 270 days) unsecured promissory notes issued by
corporations in order to finance their current operations. A variable amount
master demand note (which is a type of commercial paper) represents a direct
borrowing arrangement involving periodically fluctuating rates of interest under
a letter agreement between a commercial paper issuer and an institutional lender
pursuant to which the lender may determine to invest varying amounts.

For a description of commercial paper ratings, see the Appendix.

ILLIQUID SECURITIES. Historically, illiquid securities have included securities
subject to contractual or legal restrictions on resale because they have not
been registered under the Securities Act of 1933, as amended (the "1933 Act"),
or securities which are otherwise not readily marketable and repurchase
agreements having a remaining maturity of longer than seven calendar days.
Securities which have not been registered under the 1933 Act are referred to as
"private placements" or "restricted securities" and are purchased directly from
the issuer or in the secondary market. Mutual funds do not typically hold a
significant amount of these restricted or other illiquid securities because of
the potential for delays on resale and uncertainty in valuation. Limitations on
resale may have an adverse effect on the marketability of portfolio securities
and a mutual fund might be unable to dispose of restricted or other illiquid
securities promptly or at reasonable prices and might thereby experience
difficulty satisfying redemptions within seven calendar days. A mutual fund
might also have to register such restricted securities in order to dispose of
them resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities.

In recent years, however, a large institutional market has developed for certain
securities that are not registered under the 1933 Act, including repurchase
agreements, commercial paper, foreign securities, municipal securities and
corporate bonds and notes. Institutional investors depend on an efficient
institutional market in which the unregistered security can be readily resold or
on an issuer's ability to honor a demand for repayment. The fact that there are
contractual or legal restrictions on resale of such investments to the general
public or to certain institutions may not be indicative of their liquidity.

The Securities and Exchange Commission (the "SEC") has adopted Rule 144A, which
allows a broader institutional trading market for securities otherwise subject
to restriction on their resale to the general public. Rule 144A establishes a
"safe harbor" from the registration requirements of the 1933 Act of resales of
certain securities to qualified institutional buyers. The Adviser anticipates
that the market for certain restricted securities such as institutional
commercial paper will expand further as a result of this regulation and the
development of automated systems for the trading, clearance and settlement of
unregistered securities of domestic and foreign issuers, such as the PORTAL
System sponsored by the National Association of Securities Dealers, Inc.
("NASD").

LENDING OF PORTFOLIO SECURITIES. The Portfolio has the authority to lend
portfolio securities to brokers, dealers and other financial organizations. By
lending its securities, the Portfolio may increase its income by continuing to
receive payments in respect of dividends and 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 a fee paid by the borrower when irrevocable
letters of credit and U.S. Government Obligations are used as collateral. The
Portfolio will adhere to the following conditions whenever its securities are
loaned: (i) the Portfolio must receive at least 100% collateral 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 substitute payments in respect of all dividends,
interest or other distributions on the loaned securities; and (v) 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 retain the right to terminate the loan and recall and vote the securities.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

GENERAL. The successful use of such instruments draws upon the Adviser's skill
and experience with respect to such instruments and usually depends on the
Adviser's ability to forecast interest rate and currency exchange rate movements
correctly. Should interest or exchange rates move in an unexpected manner, a
Portfolio may not achieve the anticipated benefits of futures contracts or
options on futures contracts or may realize losses and thus will be in a worse
position than if such strategies had not been used. In addition, the correlation
between movements in the price of futures contracts or options on futures
contracts and movements in the price of the securities and currencies hedged or
used for cover will not be perfect and could produce unanticipated losses.

FUTURES CONTRACTS. The Portfolio may enter into contracts for the purchase or
sale for future delivery of fixed-income securities, foreign currencies, or
contracts based on financial indices including any index of U.S. government
securities, foreign government securities or corporate debt securities. U.S.
futures contracts have been designed by exchanges which have been designated
"contracts markets" by the Commodity Futures Trading Commission ("CFTC"), and
must be executed through a futures commission merchant, or brokerage firm, which
is a member of the relevant contract market. Futures contracts trade on a number
of exchange markets, and, through their clearing corporations, the exchanges
guarantee performance of the contracts as between the clearing members of the
exchange. The Portfolio may enter into futures contracts which are based on debt
securities that are backed by the full faith and credit of the U.S. government,
such as long-term U.S. Treasury Bonds, Treasury Notes, Government National
Mortgage Association modified pass-through mortgage-backed securities and
three-month U.S. Treasury Bills. The Portfolio may also enter into futures
contracts which are based on bonds issued by entities other than the U.S.
government.

At the same time a futures contract is purchased or sold, the Portfolio must
allocate cash or securities as a deposit payment ("initial deposit"). It is
expected that the initial deposit would be approximately 1 1/2% to 5% of a
contract's face value. Daily thereafter, the futures contract is valued and the
payment of "variation margin" may be required, since each day the Portfolio
would provide or receive cash that reflects any decline or increase in the
contract's value.

At the time of delivery of securities pursuant to such a contract, adjustments
are made to recognize differences in value arising from the delivery of
securities with a different interest rate from that specified in the contract.
In some (but not many) cases, securities called for by a futures contract may
not have been issued when the contract was written.

Although futures contracts by their terms call for the actual delivery or
acquisition of securities, in most cases the contractual obligation is fulfilled
before the date of the contract without having to make or take delivery of the
securities. The offsetting of a contractual obligation is accomplished by buying
(or selling, as the case may be) on a commodities exchange an identical futures
contract calling for delivery in the same month. Such a transaction, which is
effected through a member of an exchange, cancels the obligation to make or take
delivery of the securities. Since all transactions in the futures market are
made, offset or fulfilled through a clearinghouse associated with the exchange
on which the contracts are traded, the Portfolio will incur brokerage fees when
it purchases or sells futures contracts.

The purpose of the acquisition or sale of a futures contract, in the case of a
Portfolio which holds or intends to acquire fixed-income securities, is to
attempt to protect the Portfolio from fluctuations in interest or foreign
exchange rates without actually buying or selling fixed-income securities or
foreign currencies. For example, if interest rates were expected to increase,
the Portfolio might enter into futures contracts for the sale of debt
securities. Such a sale would have much the same effect as selling an equivalent
value of the debt securities owned by the Portfolio. If interest rates did
increase, the value of the debt security in the Portfolio would decline, but the
value of the futures contracts to the Portfolio would increase at approximately
the same rate, thereby keeping the net asset value of the Portfolio from
declining as much as it otherwise would have. The Portfolio could accomplish
similar results by selling debt securities and investing in bonds with short
maturities when interest rates are expected to increase. However, since the
futures market is more liquid than the cash market, the use of futures contracts
as an investment technique allows the Portfolio to maintain a defensive position
without having to sell its portfolio securities.

Similarly, when it is expected that interest rates may decline, futures
contracts may be purchased to attempt to hedge against anticipated purchases of
debt securities at higher prices. Since the fluctuations in the value of futures
contracts should be similar to those of debt securities, a Portfolio could take
advantage of the anticipated rise in the value of debt securities without
actually buying them until the market had stabilized. At that time, the futures
contracts could be liquidated and the Portfolio could then buy debt securities
on the cash market. To the extent a Portfolio enters into futures contracts for
this purpose, the assets in the segregated asset account maintained to cover the
Portfolio's obligations with respect to such futures contracts will consist of
cash, cash equivalents or high quality liquid debt securities from its portfolio
in an amount equal to the difference between the fluctuating market value of
such futures contracts and the aggregate value of the initial and variation
margin payments made by the Portfolio with respect to such futures contracts.

The ordinary spreads between prices in the cash and futures market, due to
differences in the nature of those markets, are subject to distortions. First,
all participants in the futures market are subject to initial deposit and
variation margin requirements. Rather than meeting additional variation margin
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the margin deposit requirements in the futures
market are less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market may
cause temporary price distortions. Due to the possibility of distortion, a
correct forecast of general interest rate trends by the Adviser may still not
result in a successful transaction.

In addition, futures contracts entail risks. Although the Adviser believes that
use of such contracts will benefit the Portfolio, if the Adviser's investment
judgment about the general direction of interest rates is incorrect, the
Portfolio's overall performance would be poorer than if it had not entered into
any such contract. For example, if the Portfolio has hedged against the
possibility of an increase in interest rates which would adversely affect the
price of debt securities held in its portfolio and interest rates decrease
instead, the Portfolio will lose part or all of the benefit of the increased
value of its debt securities which it has hedged because it will have offsetting
losses in its futures positions. In addition, in such situations, if the
Portfolio has insufficient cash, it may have to sell debt securities from its
portfolio to meet daily variation margin requirements. Such sales of bonds may
be, but will not necessarily be, at increased prices which reflect the rising
market. The Portfolio may have to sell securities at a time when it may be
disadvantageous to do so.

OPTIONS ON FUTURES CONTRACTS. The Portfolio may purchase and write options on
futures contracts for hedging purposes. The purchase of a call option on a
futures contract is similar in some respects to the purchase of a call option on
an individual security. Depending on the pricing of the option compared to
either the price of the futures contract upon which it is based or the price of
the underlying debt securities, it may or may not be less risky than ownership
of the futures contract or underlying debt securities. As with the purchase of
futures contracts, when the Portfolio is not fully invested it may purchase a
call option on a futures contract to hedge against a market advance due to
declining interest rates.

The writing of a call option on a futures contract constitutes a partial hedge
against declining prices of the security or foreign currency which is
deliverable upon exercise of the futures contract. If the futures price at
expiration of the option is below the exercise price, a Portfolio will retain
the full amount of the option premium which provides a partial hedge against any
decline that may have occurred in the Portfolio's portfolio holdings. The
writing of a put option on a futures contract constitutes a partial hedge
against increasing prices of the security or foreign currency which is
deliverable upon exercise of the futures contract. If the futures price at
expiration of the option is higher than the exercise price, the Portfolio will
retain the full amount of the option premium which provides a partial hedge
against any increase in the price of securities which the Portfolio intends to
purchase. If a put or call option the Portfolio has written is exercised, the
Portfolio will incur a loss which will be reduced by the amount of the premium
it receives. Depending on the degree of correlation between changes in the value
of its portfolio securities and changes in the value of its futures positions,
the Portfolio's losses from existing options on futures may to some extent be
reduced or increased by changes in the value of portfolio securities.

The purchase of a put option on a futures contract is similar in some respects
to the purchase of protective put options on portfolio securities. For example,
the Portfolio may purchase a put option on a futures contract to hedge its
portfolio against the risk of rising interest rates.

The amount of risk the Portfolio assumes when it purchases an option on a
futures contract is the premium paid for the option plus related transaction
costs. In addition to the correlation risks discussed above, the purchase of an
option also entails the risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the option purchased.

ADDITIONAL RISKS OF OPTIONS ON FUTURES CONTRACTS, FORWARD CONTRACTS AND OPTIONS
ON FOREIGN CURRENCIES. Unlike transactions entered into by the Portfolio in
futures contracts, options on foreign currencies and forward contracts are not
traded on contract markets regulated by the CFTC or (with the exception of
certain foreign currency options) by the SEC. To the contrary, such instruments
are traded through financial institutions acting as market-makers, although
foreign currency options are also traded on certain national securities
exchanges, such as the Philadelphia Stock Exchange and the Chicago Board Options
Exchange, subject to SEC regulation. Similarly, options on currencies may be
traded over-the-counter. In an over-the-counter trading environment, many of the
protections afforded to exchange participants will not be available. For
example, there are no daily price fluctuation limits, and adverse market
movements could therefore continue to an unlimited extent over a period of time.
Although the purchaser of an option cannot lose more than the amount of the
premium plus related transaction costs, this entire amount could be lost.
Moreover, the option writer and a trader of forward contracts could lose amounts
substantially in excess of their initial investments, due to the margin and
collateral requirements associated with such positions.

Options on foreign currencies traded on national securities exchanges are within
the jurisdiction of the SEC, as are other securities traded on such exchanges.
As a result, many of the protections provided to traders on organized exchanges
will be available with respect to such transactions. In particular, all foreign
currency option positions entered into on a national securities exchange are
cleared and guaranteed by the Options Clearing Corporation ("OCC"), thereby
reducing the risk of counterparty default. Further, a liquid secondary market in
options traded on a national securities exchange may be more readily available
than in the over-the-counter market, potentially permitting a Portfolio to
liquidate open positions at a profit prior to exercise or expiration, or to
limit losses in the event of adverse market movements.

The purchase and sale of exchange-traded foreign currency options, however, is
subject to the risks of the availability of a liquid secondary market described
above, as well as the risks regarding adverse market movements, margining of
options written, the nature of the foreign currency market, possible
intervention by governmental authorities and the effects of other political and
economic events. In addition, exchange-traded options on foreign currencies
involve certain risks not presented by the over-the-counter market. For example,
exercise and settlement of such options must be made exclusively through the
OCC, which has established banking relationships in applicable foreign countries
for this purpose. As a result, the OCC may, if it determines that foreign
governmental restrictions or taxes would prevent the orderly settlement of
foreign currency option exercises, or would result in undue burdens on the OCC
or its clearing member, impose special procedures on exercise and settlement,
such as technical changes in the mechanics of delivery of currency, the fixing
of dollar settlement prices or prohibitions on exercise.

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

In addition, futures contracts, options on futures contracts, forward contracts
and options on foreign currencies may be traded on foreign exchanges. Such
transactions are subject to the risk of governmental actions affecting trading
in or the prices of foreign currencies or securities. The value of such
positions also could be adversely affected by: (i) other complex foreign
political and economic factors; (ii) lesser availability than in the United
States of data on which to make trading decisions; (iii) delays in the
Portfolio's ability to act upon economic events occurring in foreign markets
during nonbusiness hours in the United States; (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States; and (v) lesser trading volume.

OPTIONS ON SECURITIES. When the Portfolio writes a covered call option, it gives
the purchaser of the option the right to buy the underlying security at the
price specified in the option (the "exercise price") by exercising the option at
any time during the option period. If the option expires unexercised, the
Portfolio will realize income in an amount equal to the premium received for
writing the option. If the option is exercised, a decision over which the
Portfolio has no control, the Portfolio must sell the underlying security to the
option holder at the exercise price. By writing a covered call option, the
Portfolio forgoes, in exchange for the premium less the commission ("net
premium"), the opportunity to profit during the option period from an increase
in the market value of the underlying security above the exercise price.

When the Portfolio writes a covered put option, it gives the purchaser of the
option the right to sell the underlying security to the Portfolio at the
specified exercise price at any time during the option period. If the option
expires unexercised, the Portfolio will realize income in the amount of the
premium received for writing the option. If the put option is exercised, a
decision over which the Portfolio has no control, the Portfolio must purchase
the underlying security from the option holder at the exercise price. By writing
a covered put option, the Portfolio, in exchange for the net premium received,
accepts the risk of a decline in the market value of the underlying security
below the exercise price. The Portfolio will only write put options involving
securities for which a determination is made at the time the option is written
that the Portfolio wishes to acquire the securities at the exercise price.

The Portfolio may terminate its obligation as the writer of a call or put option
by purchasing an option with the same exercise price and expiration date as the
option previously written. This transaction is called a "closing purchase
transaction." Where the Portfolio cannot effect a closing purchase transaction,
it may be forced to incur brokerage commissions or dealer spreads in selling
securities it receives or it may be forced to hold underlying securities until
an option is exercised or expires.

When the Portfolio writes an option, an amount equal to the net premium received
by the Portfolio is included in the liability section of the Portfolio's
Statement of Assets and Liabilities as a deferred credit. The amount of the
deferred credit will be subsequently marked to market to reflect the current
market value of the option written. The current market value of a traded option
is the last sale price or, in the absence of a sale, the mean between the
closing bid and asked price. If an option expires on its stipulated expiration
date or if the Portfolio enters into a closing purchase transaction, the
Portfolio will realize a gain (or loss if the cost of a closing purchase
transaction exceeds the premium received when the option was sold), and the
deferred credit related to such option will be eliminated. If a call option is
exercised, the Portfolio will realize a gain or loss from the sale of the
underlying security and the proceeds of the sale will be increased by the
premium originally received. The writing of covered call options may be deemed
to involve the pledge of the securities against which the option is being
written. Securities against which call options are written will be segregated on
the books of the custodian for the Portfolio.

The Portfolio may purchase call and put options on any securities in which it
may invest. The Portfolio would normally purchase a call option in anticipation
of an increase in the market value of such securities. The purchase of a call
option would entitle the Portfolio, in exchange for the premium paid, to
purchase a security at a specified price during the option period. The Portfolio
would ordinarily have a gain if the value of the securities increased above the
exercise price sufficiently to cover the premium and would have a loss if the
value of the securities remained at or below the exercise price during the
option period.

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

The Portfolio has adopted certain other nonfundamental policies concerning
option transactions which are discussed below. The Portfolio's activities in
options may also be restricted by the requirements of the Internal Revenue Code
of 1986, as amended (the "Code"), for qualification as a regulated investment
company.

The hours of trading for options on securities may not conform to the hours
during which the underlying securities are traded. To the extent that the option
markets close before the markets for the underlying securities, significant
price and rate movements can take place in the underlying securities markets
that cannot be reflected in the option markets. It is impossible to predict the
volume of trading that may exist in such options, and there can be no assurance
that viable exchange markets will develop or continue.

The Portfolio may engage in over-the-counter options transactions with
broker-dealers who make markets in these options. At present, approximately ten
broker-dealers, including several of the largest primary dealers in U.S.
Government securities, make these markets. The ability to terminate
over-the-counter option positions is more limited than with exchange-traded
option positions because the predominant market is the issuing broker rather
than an exchange, and may involve the risk that broker-dealers participating in
such transactions will not fulfill their obligations. To reduce this risk, the
Portfolio will purchase such options only from broker-dealers who are primary
government securities dealers recognized by the Federal Reserve Bank of New York
and who agree to (and are expected to be capable of) entering into closing
transactions, although there can be no guarantee that any such option will be
liquidated at a favorable price prior to expiration. The Adviser will monitor
the creditworthiness of dealers with whom the Portfolio enters into such options
transactions under the general supervision of the Portfolio's Trustees.

OPTIONS ON SECURITIES INDICES. The Portfolio may also purchase and write (sell)
call and put options on securities indices. Such options give the holder the
right to receive a cash settlement during the term of the option based upon the
difference between the exercise price and the value of the index. Such options
will be used for the purposes described above under "Options on Securities."

Options on securities indices entail risks in addition to the risks of options
on securities. The absence of a liquid secondary market to close out options
positions on securities indices is more likely to occur, although the Portfolio
generally will only purchase or write such an option if the Adviser believes the
option can be closed out.

Use of options on securities indices also entails the risk that trading in such
options may be interrupted if trading in certain securities included in the
index is interrupted. The Portfolio will not purchase such options unless the
Adviser believes the market is sufficiently developed such that the risk of
trading in such options is no greater than the risk of trading in options on
securities.

Price movements in the Portfolio's portfolio securities may not correlate
precisely with movements in the level of an index and, therefore, the use of
options on indices cannot serve as a complete hedge. Because options on
securities indices require settlement in cash, the Adviser may be forced to
liquidate portfolio securities to meet settlement obligations.

YEAR 2000 MATTERS

Like other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by Bankers Trust and other service providers do not properly process and
calculate date-related information and data from and after January 1, 2000. This
is commonly known as the "Year 2000 Problem." Bankers Trust is taking steps that
it believes are reasonably designed to address the Year 2000 Problem with
respect to computer systems that it uses and to obtain reasonable assurances
that comparable steps are being taken by the Fund's other major service
providers. At this time, however, there can be no assurance that these steps
will be sufficient to avoid any adverse impact to the Fund nor can there be any
assurance that the Year 2000 Problem will not have an adverse effect on the
companies whose securities are held by the Fund or on global markets or
economies, generally.

RATING SERVICES

The ratings of rating services represent their opinions as to the quality of the
securities that they undertake to rate. It should be emphasized, however, that
ratings are relative and subjective and are not absolute standards of quality.
Although these ratings are an initial criterion for selection of portfolio
investments, Bankers Trust also makes its own evaluation of these securities,
subject to review by the Board of Trustees. After purchase by the Portfolio, an
obligation may cease to be rated or its rating may be reduced below the minimum
required for purchase by the Portfolio. Neither event would require the
Portfolio to eliminate the obligation from its portfolio, but Bankers Trust will
consider such an event in its determination of whether the Portfolio should
continue to hold the obligation. A description of the ratings used herein and in
the Fund's Prospectus is set forth in the Appendix to this SAI.

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 SAI and the Prospectus, means, with respect to the
Fund (or the Portfolio), the lesser of (i) 67% or more of the outstanding voting
securities of the Fund (or of the total beneficial interests of the Portfolio)
present at a meeting, if the holders of more than 50% of the outstanding voting
securities of the Fund or of the total beneficial interests of the Portfolio)
are present or represented by proxy or (ii) more than 50% of the outstanding
voting securities of the Fund (or of the total beneficial interests of the
Portfolio). Whenever the Trust is requested to vote on a fundamental policy of
the Portfolio, the Trust will hold a meeting of the Fund's shareholders and will
cast its vote as instructed by the Fund's shareholders. Fund shareholders who do
not vote will not affect the Trust's votes at the Portfolio meeting. The
percentage of the Trust's votes representing Fund shareholders not voting will
be voted by the Trustees of the Trust in the same proportion as the Fund
shareholders who do, in fact, vote.

As a matter of fundamental policy, the Portfolio (or Fund) may not (except that
no investment restriction of the Fund shall prevent the Fund from investing all
of its Assets in an open-end investment company with substantially the same
investment objective):

(1) borrow money or mortgage or hypothecate assets of the Portfolio (Fund),
except that in an amount not to exceed 1/3 of the current value of the
Portfolio's (Fund's) assets, it may borrow money as a temporary measure for
extraordinary or emergency purposes and enter into reverse repurchase agreements
or dollar roll transactions, and except that it may pledge, mortgage or
hypothecate not more than 1/3 of such assets to secure such borrowings (it is
intended that money would be borrowed only from banks and only either to
accommodate requests for the withdrawal of beneficial interests (redemption of
shares) while effecting an orderly liquidation of portfolio securities or to
maintain liquidity in the event of an unanticipated failure to complete a
portfolio security transaction or other similar situations) or reverse
repurchase agreements, provided that collateral arrangements with respect to
options and futures, including deposits of initial deposit and variation margin,
are not considered a pledge of assets for purposes of this restriction and
except that assets may be pledged to secure letters of credit solely for the
purpose of participating in a captive insurance company sponsored by the
Investment Company Institute; for additional related restrictions, see clause
(i) under the caption "Additional Restrictions" below. (As an operating policy,
the Portfolios may not engage in dollar roll transactions);

(2) underwrite securities issued by other persons except insofar as the
Portfolio (Trust or the Fund) may technically be deemed an underwriter under the
1933 Act in selling a portfolio security;

(3) make loans to other persons except: (a) through the lending of the
Portfolio's (Fund's) portfolio securities and provided that any such loans not
exceed 30% of the Portfolio's (Fund's) net assets (taken at market value); (b)
through the use of repurchase agreements or the purchase of short-term
obligations; or (c) by purchasing a portion of an issue of debt securities of
types distributed publicly or privately;

(4) purchase or sell real estate (including limited partnership interests but
excluding securities secured by real estate or interests therein), interests in
oil, gas or mineral leases, commodities or commodity contracts (except futures
and option contracts) in the ordinary course of business (except that the
Portfolio (Trust) may hold and sell, for the Portfolio's (Fund's) portfolio,
real estate acquired as a result of the Portfolio's (Fund's) ownership of
securities);

(5) concentrate its investments in any particular industry (excluding U.S.
government securities), but if it is deemed appropriate for the achievement of a
Portfolio's (Fund's) investment objective, up to 25% of its total assets may be
invested in any one industry; and

(6) issue any senior security (as that term is defined in the 1940 Act) if such
issuance is specifically prohibited by the 1940 Act or the rules and regulations
promulgated thereunder, provided that collateral arrangements with respect to
options and futures, including deposits of initial deposit and variation margin,
are not considered to be the issuance of a senior security for purposes of this
restriction.

Additional Restrictions. In order to comply with certain statutes and policies
each Portfolio (or the Trust, on behalf of each Fund) will not as a matter of
non-fundamental operating policy (except that no operating policy shall prevent
the Fund from investing all of its Assets in an open-end investment company with
substantially the same investment objective):

(i) borrow money (including through dollar roll transactions) for any purpose
in excess of 10% of the Portfolio's (Fund's) total assets (taken at cost),
except that the Portfolio (Fund) may borrow for temporary or emergency
purposes up to 1/3 of its total assets;

(ii) pledge, mortgage or hypothecate for any purpose in excess of 10% of the
Portfolio's (Fund's) total assets (taken at market value), provided that
collateral arrangements with respect to options and futures, including
deposits of initial deposit and variation margin, and reverse repurchase
agreements are not considered a pledge of assets for purposes of this
restriction;

(iii) purchase any security or evidence of interest therein on margin, except
that such short-term credit as may be necessary for the clearance of
purchases and sales of securities may be obtained and except that deposits
of initial deposit and variation margin may be made in connection with the
purchase, ownership, holding or sale of futures;

(iv) sell any security which it does not own unless by virtue of its ownership
of other securities it has at the time of sale a right to obtain
securities, without payment of further consideration, equivalent in kind
and amount to the securities sold and provided that if such right is
conditional the sale is made upon the same conditions;

(v) invest for the purpose of exercising control or management;

(vi) purchase securities issued by any investment company except by purchase in
the open market where no commission or profit to a sponsor or dealer
results from such purchase other than the customary broker's commission, or
except when such purchase, though not made in the open market, is part of a
plan of merger or consolidation; provided, however, that securities of any
investment company will not be purchased for the Portfolio (Fund) if such
purchase at the time thereof would cause (a) more than 10% of the
Portfolio's (Fund's) total assets (taken at the greater of cost or market
value) to be invested in the securities of such issuers; (b) more than 5%
of the Portfolio's (Fund's) total assets (taken at the greater of cost or
market value) to be invested in any one investment company; or (c) more
than 3% of the outstanding voting securities of any such issuer to be held
for the Portfolio (Fund), unless permitted to exceed these limitations by
an exemptive order of the SEC; 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;

(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)

<PAGE>

(ix) no more than 5% of the Portfolio's (Fund's) total assets are invested in
securities issued by issuers which (including predecessors) have been in
operation less than three years;

(x) with respect to 75% of the Portfolio's (Fund's) total assets, purchase
securities of any issuer if such purchase at the time thereof would cause
the Portfolio (Fund) to hold more than 10% of any class of securities of
such issuer, for which purposes all indebtedness of an issuer shall be
deemed a single class and all preferred stock of an issuer shall be deemed
a single class, except that futures or option contracts shall not be
subject to this restriction;

(xi) if the Portfolio (Fund) is a "diversified" fund with respect to 75% of its
assets, invest more than 5% of its total assets in the securities
(excluding U.S. government securities) of any one issuer;

(xii) purchase or retain in the Portfolio's (Fund's) portfolio securities any
securities issued by an issuer of whose officers, directors, trustees or
security holders is an officer or Trustee of the Portfolio (Trust), or is
an officer or partner of the Adviser, if after the purchase of the
securities of such issuer for the Portfolio (Fund) one or more of such
persons owns beneficially more than 1/2 of 1% of the shares or securities,
or both, all taken at market value, of such issuer, and such persons
owning more than 1/2 of 1% of such shares or securities together own
beneficially more than 5% of such shares or securities, or both, all taken
at market value;

(xiii)invest more than 5% of the Portfolio's (Fund's) net assets in warrants
(valued at the lower of cost or market) (other than warrants acquired by
the Portfolio (Fund) as part of a unit or attached to securities at the
time of purchase), but not more than 2% of the Portfolio's (Fund's) net
assets may be invested in warrants not listed on the New York Stock
Exchange Inc. (the "NYSE") or the American Stock Exchange;

(xiv) make short sales of securities or maintain a short position, unless at all
times when a short position is open it owns an equal amount of such
securities or securities convertible into or exchangeable, without payment
of any further consideration, for securities of the same issue and equal
in amount to, the securities sold short, and unless not more than 10% of
the Portfolio's (Fund's) net assets (taken at market value) is represented
by such securities, or securities convertible into or exchangeable for
such securities, at any one time (the Portfolios (Funds) have no current
intention to engage in short selling);

(xv) write puts and calls on securities unless each of the following conditions
are met: (a) the security underlying the put or call is within the
investment policies of the Portfolio (Fund) and the option is issued by the
Options Clearing Corporation, except for put and call options issued by
non-U.S. entities or listed on non-U.S. securities or commodities
exchanges; (b) the aggregate value of the obligations underlying the puts
determined as of the date the options are sold shall not exceed 50% of the
Portfolio's (Fund's) net assets; (c) the securities subject to the exercise
of the call written by the Portfolio (Fund) must be owned by the Portfolio
(Fund) at the time the call is sold and must continue to be owned by the
Portfolio (Fund) until the call has been exercised, has lapsed, or the
Portfolio (Fund) has purchased a closing call, and such purchase has been
confirmed, thereby extinguishing the Portfolio's (Fund's) obligation to
deliver securities pursuant to the call it has sold; and (d) at the time a
put is written, the Portfolio (Fund) establishes a segregated account with
its custodian consisting of cash or short-term U.S. government securities
equal in value to the amount the Fund will be obligated to pay upon
exercise of the put (this account must be maintained until the put is
exercised, has expired, or the Portfolio (Fund) has purchased a closing
put, which is a put of the same series as the one previously written); and

(xvi) buy and sell puts and calls on securities, stock index futures or options
on stock index futures, or financial futures or options on financial
futures unless such options are written by other persons and: (a) the
options or futures are offered through the facilities of a national
securities association or are listed on a national securities or
commodities exchange, except for put and call options issued by non-U.S.
entities or listed on non-U.S. securities or commodities exchanges; (b)
the aggregate premiums paid on all such options which are held at any time
do not exceed 20% of the Portfolio's (Fund's) total net assets; and (c)
the aggregate margin deposits required on all such futures or options
thereon held at any time do not exceed 5% of the Portfolio's (Fund's)
total assets.

PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS

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

The Adviser seeks to evaluate the overall reasonableness of the brokerage
commissions paid (to the extent applicable) in placing orders for the purchase
and sale of securities for a Portfolio taking into account such factors as
price, commission (negotiable in the case of national securities exchange
transactions), if any, size of order, difficulty of execution and skill required
of the executing broker-dealer through familiarity with commissions charged on
comparable transactions, as well as by comparing commissions paid by the
Portfolio to reported commissions paid by others. The Adviser reviews on a
routine basis commission rates, execution and settlement services performed,
making internal and external comparisons.

The Adviser is authorized, consistent with Section 28(e) of the Securities
Exchange Act of 1934, as amended, when placing portfolio transactions for a
Portfolio with a broker to pay a brokerage commission (to the extent applicable)
in excess of that which another broker might have charged for effecting the same
transaction on account of the receipt of research, market or statistical
information. The term "research, market or statistical information" includes
advice as to the value of securities; the advisability of investing in,
purchasing or selling securities; the availability of securities or purchasers
or sellers of securities; and furnishing analyses and reports concerning
issuers, industries, securities, economic factors and trends, portfolio strategy
and the performance of accounts.

Consistent with the policy stated above, the Rules of Fair Practice of the NASD
and such other policies as the Trustees of the Portfolio may determine, the
Adviser may consider sales of shares of the Fund as a factor in the selection of
broker-dealers to execute portfolio transactions. Bankers Trust will make such
allocations if commissions are comparable to those charged by nonaffiliated,
qualified broker-dealers for similar services.

Higher commissions may be paid to firms that provide research services to the
extent permitted by law. Bankers Trust may use this research information in
managing the Portfolio's assets, as well as the assets of other clients.

Except for implementing the policies stated above, there is no intention to
place portfolio transactions with particular brokers or dealers or groups
thereof. In effecting transactions in over-the-counter securities, orders are
placed with the principal market-makers for the security being traded unless,
after exercising care, it appears that more favorable results are available
otherwise.

Although certain research, market and statistical information from brokers and
dealers can be useful to the Portfolio and to the Adviser, it is the opinion of
the management of the Portfolio that such information is only supplementary to
the Adviser's own research effort, since the information must still be analyzed,
weighed and reviewed by the Adviser's staff. Such information may be useful to
the Adviser in providing services to clients other than the Portfolios, and not
all such information is used by the Adviser in connection with the Portfolio.
Conversely, such information provided to the Adviser by brokers and dealers
through whom other clients of the Adviser effect securities transactions may be
useful to the Adviser in providing services to the Portfolio.

<PAGE>

In certain instances there may be securities which are suitable for the
Portfolio as well as for one or more of the Adviser's other clients. Investment
decisions for the Portfolio and for the Adviser's other clients are made with a
view to achieving their respective investment objectives. It may develop that a
particular security is bought or sold for only one client even though it might
be held by, or bought or sold for, other clients. Likewise, a particular
security may be bought for one or more clients when one or more clients are
selling that same security. Some simultaneous transactions are inevitable when
several clients receive investment advice from the same investment adviser,
particularly when the same security is suitable for the investment objectives of
more than one client. When two or more clients are simultaneously engaged in the
purchase or sale of the same security, the securities are allocated among
clients in a manner believed to be equitable to each. It is recognized that in
some cases this system could have a detrimental effect on the price or volume of
the security as far as a Portfolio in concerned. However, it is believed that
the ability of the Portfolio to participate in volume transactions will produce
better executions for the Portfolio.

For the years ended December 31, 1997, 1996, and 1995, Equity 500 Index
Portfolio incurred brokerage commissions in the amount of $341,058, $289,791,
and $172,924, respectively.

PERFORMANCE INFORMATION

STANDARD PERFORMANCE INFORMATION

From time to time, quotations of the Fund's performance may be included in
advertisements, sales literature or shareholder reports. These performance
figures are calculated in the following manner:

YIELD: Yields for the Fund used in advertising are computed by dividing
the Fund's interest and dividend income for a given 30-day or one-month
period, net of expenses, by the average number of shares entitled to
receive distributions during the period, dividing this figure by the
Fund's net asset value per share at the end of the period, and annualizing
the result (assuming compounding of income) in order to arrive at an
annual percentage rate. Income is calculated for purpose of yield
quotations in accordance with standardized methods applicable to all stock
and bond mutual funds. Dividends from equity investments are treated as if
they were accrued on a daily basis, solely for the purpose of yield
calculations. In general, interest income is reduced with respect to bonds
trading at a premium over their par value by subtracting a portion of the
premium from income on a daily basis, and is increased with respect to
bonds trading at a discount by adding a portion of the discount to daily
income. Capital gains and losses generally are excluded from the
calculation.

Income calculated for the purposes of calculating the Fund's yield differs
from income as determined for other accounting purposes. Because of the
different accounting methods used, and because of the compounding assumed
in yield calculations, the yield quoted for the Fund may differ from the
rate of distributions of the Fund paid over the same period or the rate of
income reported in the Fund's financial statements.

The Fund's 30-day SEC yield for the period ended December 31, 1997 was
1.45%.

TOTAL RETURN: The Fund's average annual total return will be calculated
for certain periods by determining the average annual compounded rates of
return over those periods that would cause an investment of $1,000 (made
at the maximum public offering price with all distributions reinvested) to
reach the value of that investment at the end of the periods. The Fund may
also calculate total return figures which represent aggregate performance
over a period or year-by-year performance.

The Fund's total return for the one-year period ended December 31, 1997
was 33.02%. The Fund's cumulative total return for the five-year period
from December 31, 1992 (commencement of operations) to December 31, 1997
was 148.25%. The Fund's average annualized total return for the five-year
period from December 31, 1992 (commencement of operations) to December 31,
1996, was 19.95%.

<PAGE>

PERFORMANCE RESULTS: Any total return quotation provided for the Fund
should not be considered as representative of the performance of the Fund
in the future since the net asset value and public offering price of
shares of the Fund will vary based not only on the type, quality and
maturities of the securities held in the corresponding Portfolio, but also
on changes in the current value of such securities and on changes in the
expenses of the Fund and the Portfolio. These factors and possible
differences in the methods used to calculate total return should be
considered when comparing the total return of the Fund to total returns
published for other investment companies or other investment vehicles.
Total return reflects the performance of both principal and income.

COMPARISON OF FUND PERFORMANCE

Comparison of the quoted nonstandardized performance of various investments is
valid only if performance is calculated in the same manner. Since there are
different methods of calculating performance, investors should consider the
effect of the methods used to calculate performance when comparing performance
of a Fund with performance quoted with respect to other investment companies or
types of investments.

In connection with communicating its performance to current or prospective
shareholders, the Fund also may compare these figures to the performance of
other mutual funds tracked by mutual fund rating services or to unmanaged
indices which may assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs. Evaluations of the Fund's
performance made by independent sources may also be used in advertisements
concerning the Fund. Sources for a Fund's performance information could include
the following:

Asian Wall Street Journal, a weekly Asian newspaper that often reviews U.S.
mutual funds investing internationally.

Barron's, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance data.

Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds investing abroad.

Changing Times, The Kiplinger Magazine, a monthly investment advisory
publication that periodically features the performance of a variety of
securities.

Consumer Digest, a monthly business/financial magazine that includes a "Money
Watch" section featuring financial news.

Financial Times, Europe's business newspaper, which features from time to time
articles on international or country-specific funds.

Financial World, a general business/financial magazine that includes a "Market
Watch" department reporting on activities in the mutual fund industry.

Forbes, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.

Fortune, a national business publication that periodically rates the performance
of a variety of mutual funds.

Global Investor, a European publication that periodically reviews the
performance of U.S. mutual funds investing internationally.

Investor's Daily, a daily newspaper that features financial, economic and
business news.

Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis, a weekly
publication of industry-wide mutual fund averages by type of fund.

Money, a monthly magazine that from time to time features both specific funds
and the mutual fund industry as a whole.

Morningstar Inc., a publisher of financial information and mutual fund research.

New York Times, a nationally distributed newspaper which regularly covers
financial news.

Personal Investing News, a monthly news publication that often reports on
investment opportunities and market conditions.

Personal Investor, a monthly investment advisory publication that includes a
"Mutual Funds Outlook" section reporting on mutual fund performance measures,
yields, indices and portfolio holdings.

Success, a monthly magazine targeted to the world of entrepreneurs and growing
business, often featuring mutual fund performance data.

U.S. News and World Report, a national business weekly that periodically
reports mutual fund performance data. Value Line, a biweekly publication that
reports on the largest 15,000 mutual funds.

Wall Street Journal, a Dow Jones and Company, Inc. newspaper which
regularly covers financial news.

Weisenberger Investment Companies Services, an annual compendium of information
about mutual funds and other investment companies, including comparative data on
funds' backgrounds, management policies, salient features, management results,
income and dividend records, and price ranges.

Working Women, a monthly publication that features a "Financial Workshop"
section reporting on the mutual fund/financial industry.

ECONOMIC AND MARKET INFORMATION

Advertising and sales literature of a Fund may include discussions of economic,
financial and political developments and their effect on the securities market.
Such discussions may take the form of commentary on these developments by Fund
portfolio managers and their views and analysis on how such developments could
affect the Funds. In addition, advertising and sales literature may quote
statistics and give general information about the mutual fund industry,
including the growth of the industry, from sources such as the Investment
Company Institute ("ICI"). For example, according to the ICI, thirty-seven
percent of American households are pursuing their financial goals through mutual
funds. These investors, as well as businesses and institutions, have entrusted
over $4.4 trillion to the more than 6,700 funds available.

VALUATION OF SECURITIES; REDEMPTIONS AND PURCHASES IN KIND

Equity and debt securities (other than short-term debt obligations maturing in
60 days or less), including listed securities and securities for which price
quotations are available, will normally be valued on the basis of market
valuations furnished by a pricing service. Short-term debt obligations and money
market securities maturing in 60 days or less are valued at amortized cost,
which approximates market. Other assets are valued at fair value using methods
determined in good faith by the Portfolio's Board of Trustees.

The Trust, on behalf of the Fund, and the Portfolio reserves the right, if
conditions exist which make cash payments undesirable, to honor any request for
redemption or repurchase order by making payment in whole or in part in readily
marketable securities chosen by the Trust, or the Portfolio, as the case may be,
and valued as they are for purposes of computing the Fund's or the Portfolio's
net asset value, as the case may be (a redemption in kind). If payment is made
to a Fund shareholder in securities, an investor, including the Fund, the
shareholder may incur transaction expenses in converting these securities into
cash. The Trust, on behalf of each Fund, and each Portfolio has elected,
however, to be governed by Rule 18f-1 under the 1940 Act as a result of which
each Fund and each Portfolio are obligated to redeem shares or beneficial
interests, as the case may be, with respect to any one investor during any
90-day period, solely in cash up to the lesser of $250,000 or 1% of the net
asset value of the Fund or the Portfolio, as the case may be, at the beginning
of the period.

<PAGE>

The Portfolio has agreed to make a redemption in kind to the Fund whenever the
Fund wishes to make a redemption in kind and therefore shareholders of the Fund
that receive redemptions in kind will receive portfolio securities of the
Portfolio and in no case will they receive a security issued by the Portfolio.
The Portfolio has advised the Trust that the Portfolio will not redeem in kind
except in circumstances in which the Fund is permitted to redeem in kind or
unless requested by the Fund.

Each investor in the Portfolio, including the Fund, may add to or reduce its
investment in the Portfolio on each day that the NYSE is open for business and
New York charter banks are not closed owing to customary or local holidays. As
of the close of the NYSE, currently 4:00 p.m. (Eastern time or earlier if the
NYSE closes earlier) on each such day, the value of each investor's interest in
a Portfolio will be determined by multiplying the net asset value of the
Portfolio by the percentage representing that investor's share of the aggregate
beneficial interests in the Portfolio. Any additions or reductions which are to
be effected on that day will then be effected. The investor's percentage of the
aggregate beneficial interests in the Portfolio will then be recomputed as the
percentage equal to the fraction (i) the numerator of which is the value of such
investor's investment in the Portfolio as of the close of the NYSE on such day
plus or minus, as the case may be, the amount of net additions to or reductions
in the investor's investment in the Portfolio effected on such day and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of
4:00 p.m. or the close of the NYSE on such day plus or minus, as the case may
be, the amount of net additions to or reductions in the aggregate investments in
the Portfolio by all investors in the Portfolio. The percentage so determined
will then be applied to determine the value of the investor's interest in the
Portfolio as of 4:00 p.m. or the close of the NYSE on the following day the NYSE
is open for trading.

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

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 birthdate 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 5800 Corporate Drive, Pittsburgh, Pennsylvania,
15237-5829.

TRUSTEES OF THE TRUST

MARTIN J. GRUBER (birthdate: July 15, 1937) -- Trustee; Chairman of the
Finance Department and Nomura Professor of Finance, Leonard N. Stern School of
Business, New York University (since 1964). His address is 229 S. Irving Street,
Ridgewood, New Jersey 07450.

KELVIN J. LANCASTER (birthdate: December 10, 1924)-- Trustee; Professor,
Department of Economics, Columbia University. His address is 35 Claremont
Avenue, New York, New York 10027.

HARRY VAN BENSCHOTEN (birthdate: February 18, 1928) -- Trustee; Director, Canada
Life Insurance Company of New York; Director, Competitive Technologies, Inc., a
public company listed on the American Stock Exchange; Retired (since 1987);
Corporate Vice President, Newmont Mining Corporation (prior to 1987). His
address is 6581 Ridgewood Drive, Naples, FL 33963.

TRUSTEES OF THE PORTFOLIOS

CHARLES P. BIGGAR (birthdate: October 13, 1930) -- Trustee; Retired; Director of
Chase/NBW Bank Advisory Board; Director, Batemen, Eichler, Hill Richards Inc.;
formerly Vice President of International Business Machines and President of the
National Services and the Field Engineering Divisions of IBM. His address is 12
Hitching Post Lane, Chappaqua, New York 10514.

S. LELAND DILL (birthdate: March 28, 1930) -- Trustee; Retired; Director, Coutts
Group; Coutts (U.S.A.) International; Coutts Trust Holdings, Ltd; Director,
Zweig Series Trust; formerly Partner of KPMG Peat Marwick; Director, Vinters
International Company Inc.; General Partner of Pemco (an investment company
registered under the 1940 Act). His address is 5070 North Ocean Drive, Singer
Island, Florida 33404.

PHILIP SAUNDERS, JR. (birthdate: October 11, 1935) -- Trustee; Principal, Philip
Saunders Associates (Consulting); former Director of Financial Industry
Consulting, Wolf & Company; President, John Hancock Home Mortgage Corporation;
and Senior Vice President of Treasury and Financial Services, John Hancock
Mutual Life Insurance Company, Inc. His address is 445 Glen Road, Weston,
Massachusetts 02193.

OFFICERS OF THE TRUST AND PORTFOLIOS

Unless otherwise specified, each officer listed below holds the same position
with the Trust and each Portfolio.

RONALD M. PETNUCH (birthdate: February 27, 1960) -- President and Treasurer;
Senior Vice President; Federated Services Company ("FSC"); formerly, Director of
Proprietary Client Services, Federated Administrative Services ("FAS"), and
Associate Corporate Counsel, Federated Investors ("FI").

CHARLES L. DAVIS, JR. (birthdate: March 23, 1960) -- Vice President and
Assistant Treasurer; Vice President, FAS.

JAY S. NEUMAN (birthdate: April 22, 1950) -- Secretary; Corporate Counsel, FI.

Messrs. Petnuch, Davis, and Neuman also hold similar positions for other
investment companies for which Edgewood, or an affiliate serves as the principal
underwriter.

No person who is an officer or director of Bankers Trust is an officer or
Trustee of the Trust or the Portfolios. No director, officer or employee of
Edgewood or any of its affiliates will receive any compensation from the Trust
or the Portfolios for serving as an officer or Trustee of the Trust or the
Portfolios.

<PAGE>

TRUSTEE COMPENSATION TABLE

NAME, AGGREGATE AGGREGATE TOTAL
POSITION WITH COMPENSATION COMPENSATION COMPENSATION FROM
TRUST/PORTFOLIO FROM TRUST* FROM PORTFOLIO** FUND COMPLEX+

Harry Van Benschoten,
Trustee of Trust $13,125 N/A $27,500

Martin J. Gruber,
Trustee of Trust $13,125 N/A $27,500

Kelvin J. Lancaster,
Trustee of Trust $13,125 N/A $27,500

Charles P. Biggar,
Trustee of Portfolio N/A $641 $27,500

S. Leland Dill,
Trustee of Portfolio N/A $641 $27,500

Philip Saunders, Jr.,
Trustee of Portfolio N/A $641 $27,500

* The aggregate compensation is provided for the BT Pyramid Mutual Funds which
is comprised of 6 funds. Information is furnished for the Trust's fiscal year
ended December 31, 1997.

** The aggregate compensation is provided for the Equity 500 Index Portfolio for
the Trust's fiscal year ended December 31, 1997.

+ 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, Short Intermediate U.S. Government
Securities Portfolio, Intermediate Tax Free Portfolio, Asset Management
Portfolio, Equity 500 Index Portfolio, and Capital Appreciation Portfolio. The
compensation is provided for the calendar year ended December 31, 1997.

As of April 1, 1998, the Trustees and officers of the Trust and the Portfolios
owned in the aggregate less than 1% of the shares of the Fund or the Trust (all
series taken together).

As of April 1, 1998, the following shareholders of record owned 5% or more of
the outstanding shares of the Fund: Bankers Trust Company as custodian for
401(k) Westinghouse Personal Investment, Jersey City, NJ, owned approximately
1,919,811 Shares (36.95%); Bankers Trust Company as trustee for Northrop Grumman
Essd Savings, Jersey City, NJ, owned approximately 533,460 Shares (10.27%);
Bankers Trust Company as custodian for Collins & Aikman Corp. 401(k), Jersey
City, NJ, owned approximately 352,808 Shares (6.79%); Bankers Trust Company as
custodian for 401(k) Framatome Technologies, Nashville, TN, owned approximately
340,181 Shares (6.55%); and Bankers Trust Company, custodian for Matsushita
Electric Corp. of America, Jersey City, NJ, owned approximately 286,894 Shares
(5.52%).

INVESTMENT ADVISER

Under the terms of each Portfolio's investment advisory agreement with Bankers
Trust (the "Advisory Agreement"), Bankers Trust manages the Portfolio subject to
the supervision and direction of the Board of Trustees of the Portfolio. Bankers
Trust will: (i) act in strict conformity with each Portfolio's Declaration of
Trust, the 1940 Act and the Investment Advisers Act of 1940, as the same may
from time to time be amended; (ii) manage each Portfolio in accordance with the
Portfolio's investment objective, restrictions and policies; (iii) make
investment decisions for each Portfolio; and (iv) place purchase and sale orders
for securities and other financial instruments on behalf of the Portfolio.

Bankers Trust bears all expenses in connection with the performance of services
under each Advisory Agreement. The Trust and the Portfolio bear certain other
expenses incurred in its operation, including: taxes, interest, brokerage fees
and commissions, if any; fees of Trustees of the Trust or the Portfolio who are
not officers, directors or employees of Bankers Trust, Edgewood or any of their
affiliates; SEC fees and state Blue Sky qualification fees; charges of
custodians and transfer and dividend disbursing agents; certain insurance
premiums; outside auditing and legal expenses; costs of maintenance of corporate
existence; costs attributable to investor services, including, without
limitation, telephone and personnel expenses; costs of preparing and printing
prospectuses and statements of additional information for regulatory purposes
and for distribution to existing shareholders; costs of shareholders' reports
and meetings of shareholders, officers and Trustees of the Trust or the
Portfolio; and any extraordinary expenses.

For the fiscal years ended December 31, 1997, 1996, and 1995, Bankers Trust
earned $2,430,147, $1,505,963, and $770,530, respectively, as compensation for
investment advisory services provided to the Portfolio. During the same periods,
Bankers Trust reimbursed $1,739,490, $870,024, and $418,814, respectively, to
the Portfolio to cover expenses.

The Fund's prospectus contains disclosure as to the amount of Bankers Trust's
investment advisory and administration and services fees, including waivers
thereof. Bankers Trust may not recoup any of its waived investment advisory or
administration and services fees. Such waivers by Bankers Trust shall stay in
effect for at least 12 months.

Bankers Trust may deposit, loan and have other commercial banking relationships
with the issuers of obligations which may be purchased on behalf of the
Portfolio, including outstanding loans to such issuers which could be repaid in
whole or in part with the proceeds of securities so purchased. Such affiliates
deal, trade and invest for their own accounts in such obligations and are among
the leading dealers of various types of such obligations. Bankers Trust has
informed the Portfolios that, in making its investment decisions, it does not
obtain or use material inside information in its possession or in the possession
of any of its affiliates. In making investment recommendations for the
Portfolio, Bankers Trust will not inquire or take into consideration whether an
issuer of securities proposed for purchase or sale by the Portfolio is a
customer of Bankers Trust, its parent or its subsidiaries or affiliates and, in
dealing with its customers, Bankers Trust, its parent, subsidiaries and
affiliates will not inquire or take into consideration whether securities of
such customers are held by any fund managed by Bankers Trust or any such
affiliate.

ADMINISTRATOR

Under the Administration and Services Agreements, Bankers Trust is obligated on
a continuous basis to provide such administrative services as the Board of
Trustees of the Trust and the Portfolio reasonably deem necessary for the proper
administration of the Trust or the Portfolio. Bankers Trust will generally
assist in all aspects of the Fund's and Portfolio's operations; supply and
maintain office facilities (which may be in Bankers Trust's own offices),
statistical and research data, data processing services, clerical, accounting,
bookkeeping and recordkeeping services (including without limitation the
maintenance of such books and records as are required under the 1940 Act and the
rules thereunder, except as maintained by other agents), internal auditing,
executive and administrative services, and stationery and office supplies;
prepare reports to shareholders or investors; prepare and file tax returns;
supply financial information and supporting data for reports to and filings with
the SEC and various state Blue Sky authorities; supply supporting documentation
for meetings of the Board of Trustees; provide monitoring reports and assistance
regarding compliance with Declarations of Trust, by-laws, investment objectives
and policies and with Federal and state securities laws; arrange for appropriate
insurance coverage; calculate net asset values, net income and realized capital
gains or losses; and negotiate arrangements with, and supervise and coordinate
the activities of, agents and others to supply services.

Pursuant to a sub-administration agreement, (the "Sub-Administration Agreement")
FSC performs such sub-administration duties for the Trust and the Portfolios as
from time to time may be agreed upon by Bankers Trust and FSC. The
Sub-Administration Agreement provides that FSC will receive such compensation as
from time to time may be agreed upon by FSC and Bankers Trust. All such
compensation will be paid by Bankers Trust.

For the years ended December 31, 1997, 1996, and 1995, Bankers Trust earned
$1,666,151, $1,049,314, and $686,078, respectively, in compensation for
administrative and other services provided to the Fund. During the same periods,
Bankers Trust reimbursed $774,879, $595,135, and $412,383, respectively, to the
Fund to cover expenses.

For the years ended December 31, 1997, 1996, and 1995, Bankers Trust earned
$1,215,073, $752,981, and $385,265, respectively, in compensation for
administrative and other services provided to the Portfolio.

Bankers Trust has agreed that if in any year the aggregate expenses of the Fund
and its Portfolio (including fees pursuant to the investment advisory agreement,
but excluding interest, taxes, brokerage and, if permitted by the relevant state
securities commissions, extraordinary expenses) exceed the expense limitation of
any state having jurisdiction over the Fund, Bankers Trust will reimburse the
Fund for the excess expense to the extent required by state law. As of the date
of this SAI, the most restrictive annual expense limitation applicable to the
Fund is 2.5% of the Fund's first $30 million of average annual net assets, 2.0%
of the next $70 million of average annual net assets and 1.5% of the remaining
average annual net assets.

CUSTODIAN AND TRANSFER AGENT

Bankers Trust, 130 Liberty Street (One Bankers Trust Plaza), New York, New York
10006, serves as Custodian for the Trust and for the Portfolio pursuant to the
administration and services agreements. As Custodian, it holds the Fund's and
the Portfolio's assets. Bankers Trust also serves as transfer agent of the Trust
and of the Portfolio pursuant to the respective administration and services
agreement. Under its transfer agency agreement with the Trust, Bankers Trust
maintains the shareholder account records for the Fund, handles certain
communications between shareholders and the Trust and causes to be distributed
any dividends and distributions payable by the Trust. Bankers Trust may be
reimbursed by the Fund or the Portfolio for its out-of-pocket expenses. Bankers
Trust will comply with the self-custodian provisions of Rule 17f-2 under the
1940 Act.

USE OF NAME

The Trust and Bankers Trust have agreed that the Trust may use "BT" as part of
its name for so long as Bankers Trust serves as investment adviser to the
Portfolio. The Trust has acknowledged that the term "BT" is used by and is a
property right of certain subsidiaries of Bankers Trust and that those
subsidiaries and/or Bankers Trust may at any time permit others to use that
term. The Trust may be required, on 60 days' notice from Bankers Trust at any
time, to abandon use of the acronym "BT" as part of its name. If this were to
occur, the Trustees would select an appropriate new name for the Trust, but
there would be no other material effect on the Trust, its shareholders or
activities.

BANKING REGULATORY MATTERS

Bankers Trust has been advised by its counsel that, in counsel's opinion,
Bankers Trust currently may perform the services for the Trust and the Portfolio
contemplated by the investment advisory agreements and other activities for the
Fund and the Portfolio described in the Prospectus and this SAI without
violation of the Glass-Steagall Act or other applicable banking laws or
regulations. However, counsel has pointed out that future changes in either
Federal or state statutes and regulations concerning the permissible activities
of banks or trust companies, as well as future judicial or administrative
decisions or interpretations of present and future statutes and regulations,
might prevent Bankers Trust from continuing to perform those services for the
Trust and the Portfolio. State laws on this issue may differ from the
interpretations of relevant Federal law and banks and financial institutions may
be required to register as dealers pursuant to state securities law. If the
circumstances described above should change, the Boards of Trustees would review
the relationships with Bankers Trust and consider taking all actions necessary
in the circumstances.

COUNSEL AND INDEPENDENT ACCOUNTANTS

Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New York,
New York 10022-4669, serves as Counsel to the Trust and the Portfolio. Coopers &
Lybrand L.L.P., 1100 Main Street, Suite 900, Kansas City, Missouri 64105 has
been selected as Independent Accountants for the Trust and the Portfolio.

ORGANIZATION OF THE TRUST

Shares of the Trust do not have cumulative voting rights, which means that
holders of more than 50% of the shares voting for the election of Trustees can
elect all Trustees. Shares are transferable but have no preemptive, conversion
or subscription rights. Shareholders generally vote by Fund, except with respect
to the election of Trustees and the ratification of the selection of independent
accountants.

Massachusetts law provides that shareholders could under certain circumstances
be held personally liable for the obligations of the Trust. However, the Trust's
Declaration of Trust disclaims shareholder liability for acts or obligations of
the Trust and requires that notice of this disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or a
Trustee. The Declaration of Trust provides for indemnification from the Trust's
property for all losses and expenses of any shareholder held personally liable
for the obligations of the Trust. Thus, the risk of a shareholder's incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Trust itself would be unable to meet its obligations, a possibility
that the Trust believes is remote. Upon payment of any liability incurred by the
Trust, the shareholder paying the liability will be entitled to reimbursement
from the general assets of the Trust. The Trustees intend to conduct the
operations of the Trust in a manner so as to avoid, as far as possible, ultimate
liability of the shareholders for liabilities of the Trust.

The Trust was organized on February 28, 1992.

TAXATION

TAXATION OF THE FUNDS

The Trust intends to qualify annually and to elect the Fund to be treated as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(the "Code").

As a regulated investment company, the Fund will not be subject to U.S. Federal
income tax on its investment company taxable income and net capital gains (the
excess of net long-term capital gains over net short-term capital losses), if
any, that it distributes to shareholders. The fund intends to distribute to its
shareholders, at least annually, substantially all of its investment company
taxable income and net capital gains, and therefore does not anticipate
incurring a Federal income tax liability.

DISTRIBUTIONS

Dividends paid out of the Fund's investment company taxable income will be
taxable to a U.S. shareholder as ordinary income. Distributions of net capital
gains, if any, designated as capital gain dividends are taxable as long-term
capital gains, regardless of how long the shareholder has held the Fund's
shares, and are not eligible for the dividends-received deduction. Shareholders
receiving distributions in the form of additional shares, rather than cash,
generally will have a cost basis in each such share equal to the net asset value
of a share of the Fund on the reinvestment date. Shareholders will be notified
annually as to the U.S. Federal tax status of distributions. Shareholders should
consult their own tax adviser concerning the application of federal, state and
local taxes to the distributions they receive from the Fund.

TAXATION OF THE PORTFOLIO

The Portfolio is not subject to Federal income taxation. Instead, the Fund and
other investors investing in the Portfolio must take into account, in computing
their Federal income tax liability, their share of the Portfolio's income,
gains, losses, deductions, credits and tax preference items, without regard to
whether they have received any cash distributions from the Portfolio.

BACKUP WITHHOLDING

The Fund may be required to withhold U.S. Federal income tax at the rate of 31%
of all taxable distributions payable to shareholders who fail to provide the
Fund with their correct taxpayer identification number or to make required
certifications, or who have been notified by the Internal Revenue Service that
they are subject to backup withholding. Corporate shareholders and certain other
shareholders specified in the Code generally are exempt from such backup
withholding. Backup withholding is not an additional tax. Any amounts withheld
may be credited against the shareholder's U.S. Federal income tax liability.

FOREIGN SHAREHOLDERS

The tax consequences to a foreign shareholder of an investment in a Fund may be
different from those described herein. Foreign shareholders are advised to
consult their own tax advisers with respect to the particular tax consequences
to them of an investment in the Fund.

OTHER TAXATION

The Trust is organized as a Massachusetts business trust and, under current law,
neither the Trust nor any Fund is liable for any income or franchise tax in the
Commonwealth of Massachusetts, provided that the Fund continues to qualify as a
regulated investment company under Subchapter M of the Code.

The Portfolio is organized as a New York trust. The Portfolio is not subject to
any income or franchise tax in the State of New York or the Commonwealth of
Massachusetts.

FINANCIAL STATEMENTS

The financial statements for the Fund or Portfolio for the period ended December
31, 1997, are incorporated herein by reference to the Annual Report to
shareholders for the Fund dated December 31, 1997. A copy of the Fund's Annual
Report may be obtained without charge by contacting the Fund.

<PAGE>

APPENDIX

BOND AND COMMERCIAL PAPER RATINGS

Set forth below are descriptions of the ratings of Moody's and S&P, which
represent their opinions as to the quality of the securities which they
undertake to rate. It should be emphasized, however, that ratings are relative
and subjective and are not absolute standards of quality.

S&P'S BOND RATINGS

An S&P corporate debt rating is a current assessment of the creditworthiness of
an obligor with respect to a specific obligation. Debt rated "AAA" has the
highest rating assigned by S&P. Capacity to pay interest and repay principal is
extremely strong. Debt rated "AA" has a very strong capacity to pay interest and
to repay principal and differs from the highest rated issues only in small
degree.

The rating "AA" may be modified by the addition of a plus or minus sign to show
relative standing within such category.

MOODY'S BOND RATINGS

Excerpts from Moody's description of its corporate bond ratings: Aaa judged to
be the best quality, carry the smallest degree of investment risk; Aa judged to
be of high quality by all standards.

S&P'S COMMERCIAL PAPER RATINGS

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

MOODY'S COMMERCIAL PAPER RATINGS

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

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

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

<PAGE>

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 SAI constitutes an
offer in any state in which, or to any person to whom, such offer may not
lawfully be made.

--------------------

Cusip #055847107

BT0371B (4/98)

<PAGE>
(BULLET) BT PYRAMID MUTUAL FUNDS (BULLET)

- --------------------------------------------------------------------------------

BT INVESTMENT MONEY MARKET FUND

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

PROSPECTUS
- --------------------------------------------------------------------------------
APRIL 30, 1998

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

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

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

EDGEWOOD SERVICES, INC.
5800 Corporate Drive (Bullet) P.O. Box 897 (Bullet) Pittsburgh, Pennsylvania
(Bullet) 15237-5829

<PAGE>
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TABLE OF CONTENTS
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PAGE

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The Fund...................................................................... 3

Who May Invest................................................................ 3

Summary of Fund Expenses...................................................... 4

Financial Highlights.......................................................... 5

Investment Objective and Policies............................................. 6

Risk Factors: Matching the Fund to Your Investment Needs......................10

Net Asset Value...............................................................11

Purchase and Redemption of Shares.............................................11

Dividends, Distributions and Taxes............................................16

Performance and Information Reports...........................................16

Management of the Trust and Portfolio.........................................17

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<PAGE>
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THE FUND
- --------------------------------------------------------------------------------

The Fund's investment objective is to seek a high level of current income
consistent with liquidity and the preservation of capital through investment in
high quality money market instruments. The Fund intends to maintain a $1.00 per
share NAV although there can be no assurance that it will be able to do so.

The Trust seeks to achieve the investment objective of the Fund by investing all
the Assets of the Fund in the Portfolio, which has the same investment objective
as the Fund.

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WHO MAY INVEST

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The Fund is designed for conservative investors looking for high current income
approximating money market rates while remaining conveniently liquid with a
stable NAV.

While the Portfolio invests in high quality money market securities, you should
be aware that your investment is not without risk. All money-market instruments,
including U.S. government securities, can change in value when interest rates or
an issuer's creditworthiness changes. When investors sell their Fund shares,
they may be worth more or less than what they originally paid for them. See
"Risk Factors: Matching the Fund to Your Investment Needs" herein.

<PAGE>
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SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------

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

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ANNUAL OPERATING EXPENSES
(as a percentage of the average daily net assets of the Fund)
<TABLE>
<S> <C> <C> <C> <C>
Investment advisory fee.................................................................................... 0.10%
12b-1 fees................................................................................................. None
Other expenses (after reimbursements or waivers)........................................................... 0.25
Total operating expenses (after reimbursements or waivers)................................................. 0.35%
EXAMPLE: 1 year 3 years 5 years 10 years
------- -------- -------- --------
You would pay the following expenses for each Fund
on a $1,000 investment, assuming: (1) 5% annual return
and (2) redemption at the end of each time period:..................... $4 $11 $20 $44
</TABLE>

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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. The
expense table and the example reflect a voluntary undertaking, by Bankers Trust
to waive or reimburse expenses such that the total operating expenses will not
exceed 0.35% of the Fund's average net assets annually. In the absence of this
undertaking, for the fiscal year ended December 31, 1997, the total operating
expenses would have been equal to approximately 0.52% of the Fund's average net
assets annually. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
Moreover, while each example assumes a 5% annual return, actual performance will
vary and may result in a return greater or less than 5%.

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

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

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

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<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 15, 1992
(COMMENCEMENT OF
FOR THE YEARS ENDED DECEMBER 31, OPERATIONS) TO
------------------------------------------------------ DECEMBER 31,
1997 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, Beginning of Period.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income........................... 0.05 0.05 0.06 0.04 0.03 0.01
Net Realized Gain (Loss) from Investment
Transactions.................................. (0.00)+ 0.00+ 0.00+ (0.01) 0.00+ 0.00+
-------- -------- -------- -------- ------ ------
Total from Investment Operations.................. 0.05 0.05 0.06 0.03 0.03 0.01
-------- -------- -------- -------- ------ ------
CONTRIBUTIONS OF CAPITAL.......................... -- 0.00+ -- 0.01 -- --
-------- -------- -------- -------- ------ ------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income........................... (0.05) (0.05) (0.06) (0.04) (0.03) (0.01)
Net Realized Gain from Investment
Transactions.................................. -- -- -- -- (0.00)+ (0.00)+
-------- -------- -------- -------- ------ ------
Total Distributions............................... (0.05) (0.05) (0.06) (0.04) (0.03) (0.01)
-------- -------- -------- -------- ------ ------
NET ASSET VALUE, END OF PERIOD.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- ------ ------
-------- -------- -------- -------- ------ ------
TOTAL INVESTMENT RETURN........................... 5.40% 5.24%++ 5.76% 4.05%++ 2.91% 3.12%*
SUPPLEMENTAL DATA AND RATIOS:
Net Assets, End of Period (000s omitted)........ $426,383 $416,161 $645,910 $976,472 $1,953 $ 789
Ratios to Average Net Assets:
Net Investment Income......................... 5.27% 5.12% 5.62% 4.24% 2.87% 3.06%*
Expenses, Including Expenses of the
Cash Management Portfolio................... 0.35% 0.35% 0.35% 0.35% 0.35% 0.35%*
Decrease Reflected in Above Expense Ratio Due
to Absorption of
Expenses by Bankers Trust................... 0.17% 0.16% 0.16% 0.21% 2.91% 3.56%*
</TABLE>

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+ Less than $0.01 per share.

++ Increased by approximately 0.10% and 0.81% due to Contributions of Capital
for the years ended December 31, 1996 and 1994, respectively.

Further information about the Fund is contained in the Fund's Annual Report
dated December 31, 1997, which can be obtained free of charge.

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

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

CASH MANAGEMENT PORTFOLIO

The Portfolio, in pursuing its investment objective, will comply with Rule 2a-7
under the 1940 Act ("Rule 2a-7"). Thus, descriptions of investment techniques
and portfolio instruments are qualified by the provisions and limitations of
Rule 2a-7.

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

OBLIGATIONS OF BANKS AND OTHER FINANCIAL INSTITUTIONS. The Portfolio may invest
in U.S. dollar-denominated fixed rate or variable rate obligations of U.S. or
foreign financial institutions, including banks, which are rated in the highest
short-term rating category by any two nationally recognized statistical rating
organizations ("NRSROs") (or one NRSRO if that NRSRO is the only such NRSRO
which rates such obligations) or, if not so rated, are believed by Bankers
Trust, acting under the supervision of the Board of Trustees of the Portfolio,
to be of comparable quality. Obligations of domestic and foreign financial
institutions in which the Portfolio may invest include, but are not limited to,
certificates of deposit, bankers' acceptances, bank time deposits, commercial
paper, and other U.S. dollar-denominated instruments issued or supported by the
credit of U.S. or foreign financial institutions, including banks.

If Bankers Trust, acting under the supervision of the Board of Trustees of the
Portfolio, deems the instruments to present minimal credit risk, the Portfolio
may invest in obligations of foreign banks or foreign branches and subsidiaries
of U.S. and foreign financial institutions, including banks. Investments in
these obligations may entail risks that are different from those of investments
in obligations of U.S. financial institutions, including banks, because of
differences in political, regulatory and economic systems and conditions. These
risks include future political and economic developments, currency blockage, the
possible imposition of withholding taxes on interest payments, differing reserve
requirements, reporting and recordkeeping requirements and accounting standards,
possible seizure or nationalization of deposits, difficulty or inability of
pursuing legal remedies and obtaining judgments in foreign courts, possible
establishment of exchange controls or the adoption of other foreign governmental
restrictions that might affect adversely the payment of principal and interest
on financial institution obligations. Under normal market conditions, the
Portfolio will invest more than 25% of its assets in the bank and other
financial institution obligations described above. The Portfolio's concentration
of its investments in the obligations of banks and other financial institutions
will cause the Portfolio to be subject to the risks peculiar to these industries
to a greater extent than if its investments were not so concentrated.

COMMERCIAL PAPER. The Portfolio may invest in fixed rate or variable rate
commercial paper, issued by U.S. or foreign entities. Commercial paper when
purchased by the Portfolio must be rated in the highest short-term rating
category by any two NRSROs (or one NRSRO if that NRSRO is the only such NRSRO
which rates such security) or, if not so rated, must be believed by Bankers
Trust, acting under the supervision of the Board of Trustees of the Portfolio,
to be of comparable quality. Any commercial paper issued by a foreign entity and
purchased by the Portfolio must be U.S. dollar-denominated and must not be
subject to foreign withholding tax

<PAGE>
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at the time of purchase. Investing in foreign commercial paper generally
involves risks similar to those described above relating to obligations of
foreign banks or foreign branches and subsidiaries of U.S. and foreign banks.

VARIABLE RATE MASTER DEMAND NOTES. Variable rate master demand notes are
unsecured instruments that permit the indebtedness thereunder to vary and
provide for periodic adjustments in the interest rate. Because variable rate
master demand notes are direct lending arrangements between the Portfolio and
the issuer, they are not ordinarily traded. Although no active secondary market
may exist for these notes, the Portfolio will purchase only those notes under
which it may demand and receive payment of principal and accrued interest daily
or may resell the note to a third party. While the notes are not typically rated
by credit rating agencies, issuers of variable rate master demand notes must
satisfy Bankers Trust, acting under the supervision of the Board of Trustees of
the Portfolio, that the same criteria as set forth above for issuers of
commercial paper are met. In the event an issuer of a variable rate master
demand note defaulted on its payment obligation, the Portfolio might be unable
to dispose of the note because of the absence of a secondary market and could,
for this or other reasons, suffer a loss to the extent of the default. The face
maturities of variable rate notes subject to a demand feature may exceed 397
days in certain circumstances. (See "Quality and Maturity of the Portfolio's
Securities" herein.)

U.S. GOVERNMENT OBLIGATIONS. The Portfolio may invest in fixed or variable rate
obligations issued or guaranteed by the U.S. Treasury or by agencies or
instrumentalities of the U.S. government ("U.S. Government Obligations").
Obligations of certain agencies and instrumentalities of the U.S. government,
such as the Government National Mortgage Association, are supported by the "full
faith and credit" of the U.S. government; others, such as those of the
Export-Import Bank of the U.S., are supported by the right of the issuer to
borrow from the U.S. Treasury; others, such as those of the Federal National
Mortgage Association, are supported by the discretionary authority of the U.S.
government to purchase the agency's obligations; and still others, such as those
of the Student Loan Marketing Association, are supported only by the credit of
the instrumentality. No assurance can be given that the U.S. government would
provide financial support to U.S. government-sponsored instrumentalities if it
is not obligated to do so by law.

OTHER DEBT OBLIGATIONS. The Portfolio may invest in deposits, bonds, notes and
debentures and other debt obligations that at the time of purchase have, or are
comparable in priority and security to other securities of such issuer which
have, outstanding short-term obligations meeting the above short-term rating
requirements, or if there are no such short-term ratings, are determined by
Bankers Trust, acting under the supervision of the Board of Trustees of the
Portfolio, to be of comparable quality and are rated in the top three highest
long-term rating categories by the NRSROs rating such security.

ASSET-BACKED SECURITIES. The Portfolio may also invest in securities generally
referred to as asset-backed securities, which directly or indirectly represent a
participation interest in, or are secured by and payable from, a stream of
payments generated by particular assets such as motor vehicle or credit card
receivables. Asset-backed securities provide periodic payments that generally
consist of interest and/or principal payments. Consequently, the life of an
asset-backed security varies with the prepayment and loss experience of the
underlying assets.

REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement
transactions with banks and governmental securities dealers approved by the
Portfolio's Board of Trustees. Under the terms of a typical repurchase
agreement, the Portfolio would acquire U.S. Government Obligations (or any other
securities permitted by Rule 2a-7) regardless of any remaining maturity for a
relatively short period (usually not more than one week), subject to an
obligation of the seller to repurchase, and the Portfolio to resell, the
obligation at an agreed price and time, thereby determining the yield during the
Portfolio's holding period. This arrangement results in a fixed rate of return
that is not subject to market fluctuations during the Portfolio's holding
period. The value of the underlying securities will be at least equal at all
times to the total amount of the repurchase obligations, including interest. The
Portfolio bears a risk of loss in the event that the other party to a repurchase
agreement defaults on its obligations and the Portfolio is delayed in or
prevented from exercising its rights to dispose of the collateralized
securities, including the risk of a possible decline in the value of the
underlying securities during the period in which the Portfolio seeks to assert
these rights. Bankers Trust, acting under the supervision of the Board of
Trustees of the Portfolio, reviews the creditworthiness of those banks and
dealers with which the Portfolio enters into repurchase agreements and monitors
on an ongoing basis the value of the securities

<PAGE>
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subject to repurchase agreements to ensure that it is maintained at the required
level.

REVERSE REPURCHASE AGREEMENTS. The Portfolio may enter into reverse repurchase
agreements. In a reverse repurchase agreement the Portfolio agrees to sell
portfolio securities to financial institutions such as banks and broker-dealers
and to repurchase them at a mutually agreed date and price. At the time the
Portfolio enters into a reverse repurchase agreement it will earmark cash, U.S.
Government Obligations or other high grade, liquid debt instruments having a
value equal to the repurchase price, including accrued interest. Reverse
repurchase agreements involve the risk that the market value of the securities
sold by the Portfolio may decline below the repurchase price of the securities.
Reverse repurchase agreements are considered to be borrowings by the Portfolio
for purposes of the limitations described in "Additional Investment Limitations"
below and in the SAI. The Portfolio may only enter into reverse repurchase
agreements for temporary purposes and not for leverage.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. To secure prices deemed
advantageous at a particular time, the Portfolio may purchase securities on a
when-issued or delayed delivery basis, in which case delivery of the securities
occurs beyond the normal settlement period; payment for or delivery of the
securities would be made prior to the reciprocal delivery or payment by the
other party to the transaction. The Portfolio will enter into when-issued or
delayed delivery transactions for the purpose of acquiring securities and not
for the purpose of leverage. When-issued securities purchased by the Portfolio
may include securities purchased on a "when, as and if issued" basis under which
the issuance of the securities depends on the occurrence of a subsequent event.

Securities purchased on a when-issued or delayed delivery basis may expose the
Portfolio to risk because the securities may experience fluctuations in value
prior to their actual delivery. The Portfolio does not accrue income with
respect to a when-issued or delayed delivery security prior to its stated
delivery date. Purchasing securities on a when-issued or delayed-delivery basis
can involve the additional risk that the yield available in the market when the
delivery takes place may be higher than that obtained in the transaction itself.
Upon purchasing a security on a when-issued or delayed delivery basis, the
Portfolio will earmark cash, U.S. Government Obligations or other liquid debt
instruments in an amount at least equal to the when-issued or delayed delivery
commitment.

INVESTMENT IN OTHER INVESTMENT COMPANIES. In accordance with applicable law, the
Portfolio may invest its assets in other money market funds with comparable
investment objectives. In general, the Portfolio may not (1) purchase more than
3% of any other money market fund's voting stock; (2) invest more than 5% of its
assets in any single money market fund; and (3) invest more that 10% of its
assets in other money market funds unless permitted to exceed these limitations
by an exemptive order of the SEC.

ILLIQUID SECURITIES. The Portfolio may not invest more than 10% of its net
assets in securities which are illiquid or otherwise not readily marketable
(such securities may include securities which are subject to legal or
contractual restrictions or repurchase agreements with maturities over seven
days). If a security becomes illiquid after purchase by the Portfolio, the
Portfolio will normally sell the security as soon as is reasonably practicable
unless if to do so would not be in the best interests of shareholders.

CREDIT ENHANCEMENT. Certain of the Portfolio's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. Any bankruptcy,
receivership, default, or change in the credit quality of the party providing
the credit enhancement will adversely affect the quality and marketability of
the underlying security and could cause losses to the Portfolio and affect the
Portfolio's share price. Subject to the diversification limits contained in Rule
2a-7, the Portfolio may have more than 25% of its total assets invested in
securities credit-enhanced by banks.

SECURITIES LENDING. The Portfolio is permitted to lend up to 33 1/3% of the
total value of its securities. These loans must be secured continuously by cash
or securities issued or guaranteed by the United States government, its agencies
or instrumentalities 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 may 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, a 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

<PAGE>
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receiving additional collateral, in recovery should the borrower fail
financially and possible loss of the collateral. Upon receipt of appropriate
regulatory approval, cash collateral may be invested in a money market fund
managed by Bankers Trust (or its affiliate) and Bankers Trust may serve as the
Portfolio's lending agent and may share in revenue received from securities
lending transactions as compensation for this service.

QUALITY AND MATURITY OF THE PORTFOLIO'S SECURITIES

The Portfolio will maintain a dollar-weighted average maturity of 90 days or
less. All securities in which the Portfolio invests will have, or be deemed to
have, remaining maturities of 397 days or less on the date of their purchase,
will be denominated in U.S. dollars and will have been granted the required
ratings established herein by two NRSROs (or one such NRSRO if that NRSRO is the
only such NRSRO which rates the security), or if not so rated, are believed by
Bankers Trust, under the supervision of the Portfolio's Board of Trustees, to be
of comparable quality. Currently, there are five rating agencies which have been
designated by the SEC as an NRSRO. These organizations and their highest
short-term rating category (which also may be modified by a "+") are: Duff and
Phelps Credit Rating Co., D-1; Fitch IBCA Inc., F1; Moody's Investors Service
Inc., Prime-1; Standard & Poor's, A-1; and Thomson BankWatch, Inc., T-1. A
description of all short and long-term ratings is provided in the Appendix to
the SAI. Bankers Trust, acting under the supervision of and procedures adopted
by the Board of Trustees of the Portfolio, will also determine that all
securities purchased by the Portfolio present minimal credit risks. Bankers
Trust will cause the Portfolio to dispose of any security as soon as practicable
if the security is no longer of the requisite quality, unless such action would
not be in the best interest of the Portfolio. High-quality, short-term
instruments may result in a lower yield than instruments with a lower quality or
longer term.

ADDITIONAL INVESTMENT LIMITATIONS

The Fund has the same investment restrictions as the Portfolio, except that the
Fund may invest all of its assets in another open-end investment company with
the same investment objective, such as the Portfolio. The Portfolio may not
invest more than 25% of its total assets in the securities of issuers in any
single industry (excluding U.S. Government Obligations and repurchase agreements
collateralized by U.S. Government Obligations), except that, under normal market
conditions, more than 25% of the total assets of the Portfolio will be invested
in obligations of banks and other financial institutions. As an operating
policy, the Portfolio may not invest more than 5% of its total assets in the
obligations of any one issuer except: (1) as may be permitted by Rule 2a-7 under
the 1940 Act; and (2) for U.S. Government Obligations and repurchase agreements
collateralized fully thereby, which may be purchased without limitation. The
Portfolio is also authorized to borrow for temporary purposes to meet
redemptions, including entering into reverse repurchase transactions, in an
amount up to 5% of its total assets and to pledge its assets to the same extent
in connection with these borrowings. At the time of an investment, the
Portfolio's aggregate holdings of repurchase agreements having a remaining
maturity of more than seven calendar days (or which may not be terminated within
seven calendar days upon notice by the Portfolio), time deposits having
remaining maturities of more than seven calendar days, and other illiquid
securities will not exceed 10% of the Portfolio's net assets. If changes in the
liquidity of certain securities cause the Portfolio to exceed such 10% limit,
the Portfolio will take steps to bring the aggregate amount of its illiquid
securities back below 10% of its net assets as soon as practicable, unless such
action would not be in the best interest of the Portfolio. The Fund's and the
Portfolio's limitations on investment in a single industry and on borrowing may
not be changed without the approval of the shareholders of the Fund or the
investors in the Portfolio, as the case may be. All other investment policies
and limitations described in this prospectus may be changed by a vote of the
Trustees of the Trust or Portfolio Trust, as applicable.

The SAI contains further information on the Fund's and the Portfolio's
investment restrictions.

<PAGE>
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RISK FACTORS: MATCHING THE FUND TO YOUR INVESTMENT NEEDS
- --------------------------------------------------------------------------------

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

SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE

The master-feeder fund structure is relatively complex, so shareholders should
carefully consider this investment approach.

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

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

the Assets of the Fund in another pooled investment entity having the same
investment objective as the Fund or the retaining of an investment adviser to
manage the Fund's assets in accordance with the investment policies described
below with respect to the Portfolio. For descriptions of the investment
objective, policies and restrictions of the Portfolio, see "Investment Objective
and Policies" herein and in the SAI. For descriptions of the management and
expenses of the Portfolio, see "Management of the Trust and Portfolio" herein
and in the SAI.

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NET ASSET VALUE
- --------------------------------------------------------------------------------

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

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

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

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PURCHASE AND REDEMPTION OF SHARES
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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 applicable Valuation Time. If the purchase order is received by the
Service Agent and transmitted to the Transfer Agent after 2:00 p.m., (Eastern
time) and prior to the close of the NYSE, the shareholder will receive the
dividend declared on the following day even if Bankers Trust as the Trust's
custodian (the "Custodian") receives federal funds on that day. If the purchase
order is received prior to 2:00 p.m., the shareholder will receive that
Valuation Day's dividend. The Trust and Transfer Agent reserve the right to
reject any purchase order.

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

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

If orders are placed through a Service Agent, it is the responsibility of the
Investment Professional to transmit the order to buy shares to the Transfer
Agent before 2:00 p.m. or 4:00 p.m. Eastern time, as applicable.

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

(Bullet) Mail an account application with a check,

(Bullet) Wire money into your account,

(Bullet) Open an account by exchanging from another fund in the BT Family of
Funds, or

(Bullet) Contact your Service Agent or Investment Professional.

<PAGE>
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ADDITIONAL INFORMATION ABOUT BUYING SHARES

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<S> <C> <C>
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
BY WIRE Call the BT Service Center at Call your Investment Professional or
1-800-730-1313 to receive wire wire additional investment to:
instructions for account
establishment. ROUTING NO.: 021001033
ATTN: Bankers Trust/IFTC Deposit
DDA NO.: 00-226-296
FBO: (Account name)
(Account number)
CREDIT: BT Investment Money Market
Fund - 460
BY PHONE Contact your Service Agent, Contact your Service Agent,
Investment Professional, or call BT's Investment Professional, or call BT's
Service Center at 1-800-730-1313. If Service Center at 1-800-730- 1313. If
you are an existing shareholder, you you are an existing shareholder, you
may exchange from another BT account may exchange from another BT account
with the same registration, with the same registration,
including, name, address, and including, name, address, and
taxpayer ID number. taxpayer ID number.
BY MAIL Complete and sign the account Make
your check payable to the application.
Make your check payable complete name of
the Fund of your to the complete name of
the Fund of choice. Indicate your Fund
account your choice. Mail to the
appropriate number on your check and mail
to the address indicated on the
application. address printed on your
account
statement.
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HOW TO SELL SHARES

You can arrange to take money out of your Fund account at any time by selling
(redeeming) some or all of your shares. Your shares shall be sold at the next
NAV per share calculated after an order is received by the Transfer Agent.
Redemption requests should be transmitted by customers in accordance with
procedures established by the Transfer Agent and the Shareholder's Service
Agent. Redemption requests for shares of the Fund received by the Service Agent
and transmitted to the Transfer Agent prior to 2:00 p.m. (Eastern time) on each
Valuation Day will be redeemed at the NAV per share as of 2:00 p.m. (Eastern
time) and the redemption proceeds normally will be delivered to the
shareholder's account with the Service Agent on that day; no dividend will be
paid on the day of redemption. Redemption requests received by the Service Agent
and transmitted to the Transfer Agent after 2:00 p.m. (Eastern time) on each
Valuation Day and prior to the close of the NYSE will be redeemed at the NAV per
share at the close of the NYSE and the redemption proceeds normally will be
delivered to the shareholder's account with the Service Agent the next day, but
in any event within seven calendar days following receipt of the request. Shares
redeemed in this manner will receive the dividend declared on the day of
redemption.

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

<PAGE>
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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.

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