As filed with the Commission on February 26, 1999
1933 Act File No. 33-45973
1940 Act File No. 811-6576
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
------
Pre-Effective Amendment No. .............................
Post-Effective Amendment No. 26 ................................ X
--- ------
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
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Amendment No. 27 ............................................... X
---- ------
BT PYRAMID MUTUAL FUNDS
(Exact Name of Registrant as Specified in Charter)
One South Street, Baltimore, Maryland 21202
(Address of Principal Executive Offices)
(410) 895-5000
(Registrant's Telephone Number)
Daniel O. Hirsch, Esq. Copies to: Burton M. Leibert, Esq.
BT Alex. Brown Willkie Farr & Gallagher
One South Street 787 Seventh Avenue
Baltimore, Maryland 21202 New York, New York 10019
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
(check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on _______ pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[X] on April 30, 1999 pursuant to paragraph (a)(1)
<PAGE>
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
BT Investment Portfolios has also executed this Registration Statement.
<PAGE>
BT Pyramid Mutual Funds
BT INVESTMENT EQUITY 500 INDEX FUND
With the goal of matching the performance of the Standard & Poor's 500
Composite Stock Price Index, which emphasizes stocks of large U.S.
companies.
Prospectus
April 30, 1999
Trust: BT Pyramid Mutual Funds
Investment Adviser: Bankers Trust Company
[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.]
1
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Overview of The BT Investment Equity 500 Index Fund
Goal...................................................................................
Core Strategy..........................................................................
Investment Policies and Strategies.....................................................
Principal Risks of Investing in the Fund...............................................
Who Should Consider Investing in the Fund..............................................
Total Returns, after Fees and Expenses.................................................
Annual Fund Operating Expenses.........................................................
A detailed look at the BT Investment Equity 500 Index Fund
Objective..............................................................................
Strategy...............................................................................
Principal Investments..................................................................
Investment Process.....................................................................
Turnover...............................................................................
Risks..................................................................................
Management of the Fund......................................................................
Calculating the Fund's Share Price..........................................................
Performance Information.....................................................................
Tax Considerations..........................................................................
Buying and Selling Fund Shares..............................................................
Financial Highlights........................................................................
</TABLE>
2
<PAGE>
Overview
OF THE INVESTMENT EQUITY 500 INDEX FUND
GOAL:
The Fund seeks to match, as closely as possible, before expenses, the
performance of the Standard & Poor's 500 Composite Stock Price Index (the "S&P
500 Index"), which emphasizes stocks of large U.S. companies.
[THE S&P 500 INDEX 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 STOCKS PUBLICLY TRADED IN THE
UNITED STATES, MOST OF WHICH ARE TRADED ON THE NEW YORK STOCK EXCHANGE. STOCKS
IN THE S&P 500 INDEX ARE WEIGHTED ACCORDING TO THEIR MARKET CAPITALIZATION (THE
NUMBER OF SHARES OUTSTANDING MULTIPLIED BY THE STOCK'S CURRENT PRICE).]
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CORE STRATEGY:
The Investment Adviser attempts to invest in stocks and other securities that
are representative of the S&P 500 Index as a whole.
4
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INVESTMENT POLICIES AND STRATEGIES
The Fund is a feeder fund that invests all of its assets in a master portfolio
with the same investment objective as the Fund. The Fund, through the master
portfolio, seeks to replicate, before expenses, the risk and return
characteristics of the S&P 500. The Fund will invest primarily in common stocks
of companies that compose the S&P 500, in approximately the same weightings as
the S&P 500.
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PRINCIPAL RISKS OF INVESTING IN THE FUND
An investment in the Fund could lose money, or the Fund's performance could
trail that of other investments. For example:
o Stocks could decline generally or could underperform other investments.
o Returns on large U.S. companies' stock could trail the returns from stocks
of medium or small companies. Each type of stock tends to go through
cycles of overperformance and underperformance in comparison to the
overall stock market.
o The Fund may not be able to mirror the S&P 500 Index closely enough to
track its performance for a number of reasons, including the Fund's cost
to buy and sell securities, the flow of money into and out of the Fund and
the underperformance of stocks selected by the Investment Adviser.
o The Fund could suffer losses on its futures and options positions if they
are not well correlated with the securities for which they are acting as a
proxy or if the Fund cannot close out its positions.
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WHO SHOULD CONSIDER INVESTING IN THE FUND
You should consider investing in the Fund if you are seeking the following:
o capital appreciation over the long term;
o exposure to the U.S. equity market as represented by larger companies; and
o investment returns that track the performance of the S&P 500 Index.
There is, of course, no guarantee that the Fund will realize its goal.
You should NOT consider investing in the Fund if you are:
o pursuing a short-term financial goal;
o seeking regular income and stability of principal;
o cannot tolerate fluctuations in the value of your investments; or
o seeking to outperform the S&P 500 Index.
The Fund by itself does not constitute a balanced investment program.
Diversifying your investments may improve your long-run investment return and
lower the volatility of your overall investment portfolio.
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF BANKERS TRUST COMPANY OR ANY OTHER
BANK AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
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TOTAL RETURNS, AFTER FEES AND EXPENSES
The bar chart and table on this page can help you evaluate the potential risk
and rewards of investing in the Fund by showing changes in the Fund's
performance year to year. The bar chart shows the Fund's actual return for the
full calendar years since the Fund began selling shares on December 31, 1992
(its inception date). The table compares the Fund's average annual return with
the S&P 500 Index over the last calendar year, the last five calendar years and
since its inception. The S&P 500 Index is a model, not an actual portfolio. An
index is a group of securities whose overall performance is used as a standard
to measure investment performance. It does not factor in the costs of buying,
selling and holding stock--costs which are reflected in the Fund's results.
Year-by-Year Returns for Each Full Calendar Year Since Inception
[bar chart]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1993 1994 1995 1996 1997 1998
</TABLE>
Since inception, the Fund's highest return in any calendar quarter was ____% and
its lowest quarterly return was ____%. Past performance offers no indication of
how the Fund will perform in the future.
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Average Annual Returns as of December 31, 1998
<TABLE>
<CAPTION>
1 year 5 year Since inception
(December 31,
1992)
<S> <C> <C> <C>
BT Investment Equity 500 Index Fund
S&P 500 Index
</TABLE>
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ANNUAL FUND OPERATING EXPENSES
(EXPENSES PAID FROM FUND ASSETS)
The Annual Fees and Expenses table to the right describes the fees and expenses
that you may pay if you buy and hold shares of the Fund.
ANNUAL FEES AND EXPENSES
PERCENTAGE OF AVERAGE
DAILY NET ASSETS1
Management Fees 0.075%
Distribution and Service (12b-1) Fees none
Other Fund Operating Expenses 0.355%
Total Fund Operating Expenses 0.43%
Less: Fee Waiver or Expense Reimbursement (0.18%)(2)
Net Expenses 0.25%
- ----------
1 Information on the annual operating expenses reflects the expenses of both the
Fund and the BT Investment Equity 500 Index Portfolio, the master fund in which
the Equity 500 Index Fund invests its assets. (A further discussion of the
relationship between the Fund and the Portfolio appears in the "Organizational
Structure" section of this prospectus.)
2 Bankers Trust has agreed, for the 16-month period from the end of the Fund's
fiscal year end of September 30, 1998, to waive its fees and reimburse expenses
so that total expenses will not exceed 0.25%.
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Expense Example. The example below illustrates the expenses incurred on a
$10,000 investment in the Fund. It assumes that the Fund earned an annual return
of 5% over the periods shown, the Fund's operating expenses remained the same
and you sold your shares at the end of the period.
Expense Example(3):
- -------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------
$26 $117 $225 $541
- -------------------------------------------------------
You may use this hypothetical example to compare the Fund's expense history with
other funds.1 The example does not represent an estimate of future returns or
expenses. Actual costs may be higher or lower.
- ----------
3 Based on expenses, after fee waivers and reimbursements for the first 16
months only.
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A detailed look
AT THE INVESTMENT EQUITY 500 INDEX FUND
OBJECTIVE
The Fund seeks to match, as closely as possible (before the deduction of
expenses), the performance of the S&P 500 Index, which emphasizes stocks of
large U.S. companies.
The Fund invests for capital appreciation, not income; any dividend and interest
income is incidental to the pursuit of its objective. While we give priority to
matching the Index's performance, we cannot offer any assurance of achieving
this objective. The Fund's objective is not a fundamental policy. We must notify
shareholders before we change it, but we do not require their approval to do so.
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 Index to track general stock market
performance. S&P does not guarantee the accuracy and/or completeness of the S&P
500 Index or any data included herein.
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.
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INDEX VERSUS ACTIVE MANAGEMENT
Active management involves the investment adviser buying and selling securities
based on research and analysis. Unlike a fund that is actively managed, an index
fund tries to match, as closely as possible, the performance of a target index
by holding either all, or a representative sample, of the securities in the
index. Indexing appeals to many investors for the following reasons:
o indexing provides simplicity because it is a straightforward
market-matching strategy; o index funds generally provide diversification
by investing in a wide variety of companies and industries;
o an index fund's performance is predictable in that the fund's value is
expected to move in the same direction, up or down, as the target index;
o index funds tend to have lower costs because they do not have many of the
expenses of actively managed funds such as research, and index funds
usually have relatively low trading activity and therefore brokerage
commissions tend to be lower; and
o index funds generally have low realization of capital gains.
13
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STRATEGY
To match the risk and return characteristics of the S&P 500 Index as closely as
possible, the Fund invests in a statistically selected sample of the securities
found in the S&P 500 Index, using a process known as "optimization." This
process selects stocks for the Fund so that industry weightings, market
capitalizations and fundamental characteristics (price to book ratios, price to
earnings ratios, debt to asset ratios and dividend yields), closely match those
of the securities in the S&P 500 Index. Over the long term, the Investment
Adviser seeks a correlation between the performance of the Fund, before
expenses, and the S&P 500 Index of 98% or better. (A figure of 100% would
indicate perfect correlation.)
14
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PRINCIPAL INVESTMENTS
The Fund will invest at least 80% of its assets in stocks of companies included
in the S&P 500 Index, except Bankers Trust Corporation. The Fund's securities
are weighted to make the Fund's total investment characteristics similar to
those of the S&P 500 Index as a whole. The Investment Adviser may exclude or may
remove any S&P stock from the Fund, if the Investment Adviser believes that the
stock is illiquid or has impaired financial conditions or other extraordinary
events.
The Fund may hold up to 20% of its assets in short-term debt securities, money
market instruments and stock index futures and options. Futures and options are
considered derivatives because they "derive" their value from a traditional
security (like a stock or bond), asset or index. The Fund intends to buy futures
in anticipation of buying stocks.
[Futures contracts and options on futures contracts are used as a low-cost
method of gaining exposure to a particular securities market without investing
directly in those securities. The Fund also invests in derivatives to keep cash
on hand to meet shareholder redemptions or other needs while maintaining
exposure to the stock market.]
15
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INVESTMENT PROCESS
The Fund normally does not hold every one of the 500 stocks in the S&P 500
Index. In an effort to run an efficient and effective strategy, the Fund uses
the process of "optimization, a statistical sampling technique. First, the Fund
buys the stocks that make up the larger portions of the Index's value in roughly
the same proportion as the Index. Second, the smaller stocks in the Index are
analyzed. In selecting smaller stocks, the Investment Adviser tries to match the
industry and risk characteristics of all of the smaller companies in the S&P 500
Index without buying all of those stocks. This approach attempts to maximize the
Fund's liquidity and returns while minimizing its costs.
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PORTFOLIO TURNOVER
The portfolio turnover rate measures the frequency that the Portfolio sells and
replaces the value of its securities within a given period. Historically, this
Fund has had a low portfolio turnover rate.
RISKS
Below we set forth some of the prominent risks associated with investing in
general, with index investing and with investing in large-cap stocks.
PRIMARY RISKS
Market Risk. Deteriorating market conditions might cause an overall weakness in
the market that reduces the absolute level of stock prices in that market.
Tracking Error. There are several reasons that the Fund's performance may not
track the Index exactly:
o Unlike the Index, the Fund incurs administrative expenses and transaction
costs in trading stocks.
o The composition of the Index and the stocks held by the Fund may
occasionally diverge.
o The timing and magnitude of cash inflows from investors buying shares
could create large balances of uninvested cash. Conversely, the timing and
magnitude of cash outflows to investors selling shares could require large
ready reserves of uninvested cash. Either situation would likely cause the
Fund's performance to deviate from the "fully invested" Index.
Futures and Options. The Fund may invest, to a limited extent, in stock index
futures or options, which are types of derivatives. The Fund will not use these
derivatives for speculative purposes or as leveraged investments that magnify
the gains or losses of an investment. The Fund invests
17
<PAGE>
in derivatives to keep cash on hand to meet shareholder redemptions or other
needs while maintaining exposure to the stock market. Risks associated with
derivatives include:
o the risk that the derivative will not fully offset the underlying
positions;
o derivatives used for risk management may not have the intended effects and
may result in losses or missed opportunities; and
o the risk that the Fund cannot sell the derivative because of an illiquid
secondary market.
If the Fund invests in futures contracts and options on futures contracts for
non-hedging purposes, the margin and premiums required to make those investments
will not exceed 5% of the Fund's net asset value after taking into account
unrealized profits and losses on the contracts. Futures contracts and options on
futures contracts used for non-hedging purposes involve greater risks than stock
investments.
SECONDARY RISKS
Pricing Risk. We value securities in the Fund at their stated market value if
price quotations are available and, if not, by the method that most accurately
reflects their current worth in the judgement of the Board of Trustees. This
procedure implies an unavoidable risk, the risk that our prices are higher or
lower than the prices that the securities might actually command if we sold
them. If we have valued the securities too highly, you may end up paying too
much for Fund shares when you buy. If we underestimate their price, you may not
receive the full market value for your Fund shares when you sell.
Year 2000 Risk. As with most businesses, the Fund faces the risk that the
computer systems of its Investment Adviser and other companies on which it
relies for service or in which it invests will not accommodate the changeovers
necessary from dates in the year 1999 to dates in the year 2000. These risks
could adversely affect:
o The companies in which the Fund invests, which could impact the value
of the Fund's investments;
o Our ability to service your Fund account, including our ability to
meet your requests
18
<PAGE>
to buy and sell Fund shares; and
o Our ability to trade securities held by the Fund or to accurately
price securities held by the Fund.
We are working both internally and with our business partners and service
providers to address this problem. If we - or our business partners, service
providers, government agencies or other market participants - do not succeed, it
could materially affect shareholder services or it could affect the value of the
Fund's shares.
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MANAGEMENT OF THE FUND
Board of Trustees
The Fund's shareholders, voting in proportion to the number of shares each owns,
elect a Board of Trustees, and the Trustees supervise all the Fund's activities
on their behalf.
Investment Adviser
Under the supervision of the Board of Trustees, Bankers Trust Company, with
headquarters at 130 Liberty Street, New York, NY 10006, acts as the Fund's
investment adviser. As investment adviser, Bankers Trust makes the Fund's
investment decisions and assumes responsibility for the securities the Fund
owns. It buys and sells securities for the Fund and conducts the research that
leads to the purchase and sale decisions. Bankers Trust received a fee of ____%
of the Fund's average daily net assets for its services in the last fiscal year.
As of December 31, 1998, Bankers Trust was the eighth largest bank holding
company in the United States with total assets of approximately $156 billion.
Bankers Trust is a worldwide merchant bank dedicated to servicing the needs of
corporations, governments, financial institutions and private clients through a
global network of over 96 offices in more than 43 countries.
Bankers Trust's officers bring wide experience to managing both the Fund and its
Portfolio. The firm's own record dates back to its founding as a trust company
in 1903. It has invested retirement assets on behalf of the nation's largest
corporations and institutions for more than 50 years. Today, the assets under
its global management total $338 billion. The scope of the firm's capability is
broad: It is a leader in both the active and passive quantitative investment
disciplines and maintains a major presence in stock and bond markets worldwide.
20
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The Investment Adviser is a wholly owned subsidiary of Bankers Trust
Corporation. Bankers Trust Corporation has entered into an Agreement and Plan of
Merger with Deutsche Bank AG, dated as of November 30, 1998, under which Bankers
Trust Corporation would merge with and into a subsidiary of Deutsche Bank AG.
Deutsche Bank AG is a major global banking institution that is engaged in a wide
range of financial services, including retail and commercial banking, investment
banking and insurance. The transaction is contingent upon various regulatory
approvals, as well as the approval of the Fund's Board of Trustees and the
Fund's shareholders. If the transaction is approved and completed, Deutsche Bank
AG, as the Investment Adviser's new parent company, will control the operations
of the Investment Adviser. Bankers Trust believes that, under this new
arrangement, the services provided to the Fund will be maintained at their
current level.
21
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Portfolio Manager
FRANK SALERNO, Managing Director of Bankers Trust, is responsible for the
day-to-day management of the Fund's investments:
o Joined Bankers Trust in 1981 and the Fund at its inception in 1992.
o 16 years of investment industry experience.
o Bachelor's degree from Syracuse University, MBA from New York
University.
22
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Other Services
Bankers Trust provides administrative services--such as portfolio accounting,
legal services and others--for the Fund. In addition, Bankers Trust--or your
broker or financial advisor--performs the functions necessary to establish and
maintain your account. In addition to setting up the account and processing your
purchase and sale orders, these functions include:
o keeping accurate, up-to-date records for your individual Fund account;
o implementing any changes you wish to make in your account information;
o processing your requests for cash dividends and distributions from the
Fund;
o answering your questions on the Fund's investment performance or
administration;
o sending proxy reports and updated prospectus information to you; and
o collecting your executed proxies.
Brokers and financial advisors may charge additional fees to investors only for
those services not otherwise included in the Bankers Trust servicing agreement,
such as cash management or special trust or retirement-investment reporting.
23
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Organizational Structure
BT Investment Equity 500 Index Fund is a "feeder fund" that invests all of its
assets in a "master portfolio," the Equity 500 Index Portfolio. The Fund and the
master portfolio have the same investment objective. The master portfolio is
advised by Bankers Trust. The master portfolio may accept investments from other
feeder funds. The feeders bear the master portfolio's expenses in proportion to
their assets. Each feeder can set its own transaction minimums, fund-specific
expenses, and other conditions. This arrangement allows the Fund's Trustees to
withdraw the Fund's assets from the master portfolio if they believe doing so is
in the shareholder's best interests. If the Trustees withdraw the Fund's assets,
they would then consider whether the Fund should hire its own investment
adviser, invest in a different master portfolio, or take other action.
24
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SHAREHOLDER INFORMATION
Calculating the Fund's Share Price
We calculate the daily price of the Fund's shares (also known as the "Net Asset
Value" or "NAV") in accordance with the standard formula for valuing mutual fund
shares at the close of regular trading on the New York Stock Exchange every day
the Exchange is open for business.
The formula calls for deducting all of the Fund's liabilities from the total
value of its assets--the market value of the securities it holds, plus its cash
reserves--and dividing the result by the number of shares outstanding.
We value the securities in the Fund at their stated market value if price
quotations are available. When price quotations for a particular security are
not readily available, we determine their value by the method that most
accurately reflects their current worth in the judgment of the Board of
Trustees. You can find the Fund's daily share price in the mutual fund listings
of most major newspapers.
[The Exchange is open every week, Monday through Friday, except when the
following holidays are celebrated: New Year's Day, Martin Luther King, Jr. Day
(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), Thanksgiving Day (the fourth Thursday in November)
and Christmas Day.]
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Dividends and Distributions
Dividends, if any, are paid quarterly. Capital gains will be distributed at
least annually. We automatically reinvest all dividends and any capital gains,
unless you elect to receive your distributions in cash.
Tax Considerations
The Fund does not ordinarily pay income taxes. You and other shareholders pay
taxes on the income or capital gains from the Funds' holdings. Your taxes will
vary from year to year, based on the amount of capital gains distributions and
dividends paid out by the Fund. You owe the taxes whether you receive cash or
choose to have distributions and dividends reinvested. Distributions and
dividends usually create the following tax liability:
Transaction Tax Status
- ----------- ----------
Income dividends Ordinary income
Short-term capital gains distributions Ordinary income
Long-term capital gains distributions Capital gains
Every year the Fund will send you information on the distributions for the
previous year. In addition, if you sell your Fund shares you may have a capital
gain or loss.
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Transaction Tax Status
Your sale of shares owned more than one year Capital gains or losses
Your sale of shares owned for one year or less Gains treated as
ordinary income; losses
subject to special
rules.
The tax considerations for tax deferred accounts or non-taxable entities will be
different.
Because each investor's tax circumstances are unique and because the tax laws
are subject to change, we recommend that you consult your tax advisor about your
investment.
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BUYING AND SELLING FUND SHARES
You can purchase or redeem shares in a Fund by mail, wire transfer or through an
authorized broker or financial advisor. Contact your broker or financial advisor
for details. You may also call the BT Service Center at 1-800-730-1313.
We may close your Fund account on 30 days' notice if it fails to meet minimum
balance requirements for any reason other than a change in market value. In
addition, if your sell order exceeds $250,000, we reserve the right to redeem it
"in kind" with a pro-rata distribution of stocks actually held by a Fund, rather
than in cash.
Your broker or financial advisor may charge transaction fees on the purchase and
sale of Fund shares.
Exchange Privileges. You can exchange all or part of your shares in another BT
Mutual Fund up to four times. Before buying shares through an exchange you
should be sure to get a copy of that fund's prospectus and read it carefully.
Please note also that you may have to pay taxes on the shares you sell in the
exchange.
Account minimums. A fund requires a minimum investment of $2,500 to open
accounts, $250 for subsequent investments, and a minimum balance of $1,000 to
maintain them. It requires a $500 minimum investment to open a retirement
account, $100 for subsequent investments, but imposes no minimum balance.
Automatic investment accounts, which credit money from your checking account to
the purchase of fund shares monthly, bi-monthly, quarterly, or every six months,
call for a minimum $1,000 opening investment and at least $100 for each
succeeding purchase of shares.
Each Fund's Shareholder Guide and the Statement of Additional Information
contain complete information on buying and selling Fund shares and maintaining a
Fund account. If you have not already received a copy of the Shareholder Guide
or wish to obtain a free copy of the Statement of Additional Information, please
call the BT Service Center at 1-800-730-1313.
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Financial Highlights
The table below provides a picture of the Fund's financial performance since
inception. The information selected reflects financial results for a single Fund
share. The total returns in the table represent the rate of return that an
investor would have earned on an investment in the Fund, assuming reinvestment
of all dividends and distributions. This information has been audited by
____________________, whose report, along with the Fund's financial statements,
is included in the Fund's annual report. The annual report is available free of
charge by calling the BT Service Center at 1-800-730-1313.
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BACK COVER
Additional information about the Fund's investments and performance is available
in the Fund's annual and semi-annual reports to shareholders. In the Fund's
annual report, you will find a discussion of the market conditions and
investment strategies that significantly affected the Fund's performance during
its last fiscal year. You can find more detailed information about the Fund in
the current Statement of Additional Information, dated April 30, 1999, which we
have filed electronically with the Securities and Exchange Commission (SEC) and
which is incorporated by reference into this Prospectus. To receive your free
copy of the Statement of Additional Information, the annual or semi-annual
report, or if you have questions about investing in the Fund, write to us at:
BT Service Center
P.O. Box 419210
Kansas City, MO 64141-6210
or call our toll-free number: 1-800-730-1313
You can find reports and other information about the Fund on the SEC website
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Fund, including its Statement
of Additional Information, can be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. For information on the Public Reference Room,
call the SEC at 1-800-SEC-0330.
BT Investment Equity 500 Index Fund
BT Pyramid Mutual Funds
[BT's Investment Company Act file number]
30
<PAGE>
simplify
Bankers Trust
Simplified Prospectus
February 11, 1999
PROSPECTUS: APRIL 30, 1999
BT Mutual Funds (logo)
BT INVESTMENT MONEY MARKET FUND
With the goal of achieving a high level of current income consistent with
liquidity and the preservation of capital
TRUST: BT PYRAMID MUTUAL FUNDS
INVESTMENT ADVISER: BANKERS TRUST COMPANY
[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
<PAGE>
Commission passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.]
2
<PAGE>
BT INVESTMENT MONEY MARKET FUND
OVERVIEW OF THE BT INVESTMENT MONEY MARKET FUND
00 Goal
00 Core Strategy
00 Investment Policies and Strategies
00 Principal Risks of Investing in the Fund
00 Who Should Consider Investing in the Fund
00 Total Returns, After Fees and Expenses
00 Annual Fund Operating Expenses
A DETAILED LOOK AT THE BT INVESTMENT MONEY MARKET FUND
00 Objective
00 Strategy
00 Principal Investments
00 Risks
00 Management of the Fund
00 Calculating the Fund's Share Price
00 Dividends and Distributions
00 Tax Considerations
00 Buying and Selling Fund Shares
00 Financial Highlights
3
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Overview
OF THE BT INVESTMENT MONEY MARKET FUND
GOAL: The Fund seeks a high level of current income consistent with liquidity
and the preservation of capital.
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CORE STRATEGY: The Fund invests in high quality money market instruments.
INVESTMENT POLICIES AND STRATEGIES
The Fund invests all of its assets in a master portfolio with the same
investment objective as the Fund. The Fund, through the master portfolio, seeks
to achieve that objective by investing in high quality money market instruments,
maintaining a dollar-weighted average maturity of 90 days or less. The Fund
attempts to maintain a stable share price by investing in securities that are
valued in U.S. dollars, have remaining maturities of 397 days or less and are of
the highest quality. The Fund invests more than 25% of its total assets in banks
and other financial institutions.
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PRINCIPAL RISKS OF INVESTING IN THE FUND
Although the Fund seeks to preserve the value of your investment at $1.00 a
share, there are risks associated with investing in the Fund. For example:
o A sharp rise in interest rates could cause the bond market and
individual securities in the Fund's portfolio to decline in value.
o An issuer's creditworthiness could decline, which in turn may cause the
value of a security in the Fund's portfolio to decline.
o Changes in interest rates or economic downturns could have a negative
effect on issuers in the financial services industry.
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WHO SHOULD CONSIDER INVESTING IN THE FUND
You should consider investing in the BT Investment Money Market Fund if you are
a conservative investor who is looking for an investment that offers income
approximating money market rates and that preserves the value of your
investment, yet can easily be converted into cash.
You should NOT consider investing in the BT Investment Money Market Fund if you
seek long-term capital growth. Although it provides a convenient means of
diversifying short-term investments, the Fund by itself does not constitute a
balanced investment program.
AN INVESTMENT IN THE BT INVESTMENT MONEY MARKET FUND IS NOT A DEPOSIT OF BANKERS
TRUST COMPANY OR ANY OTHER BANK, AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND
SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS
POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND.
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TOTAL RETURNS, AFTER FEES AND EXPENSES
The bar chart and table on this page can help you evaluate the potential risk
and reward of investing in the Fund by showing changes in the Fund's performance
year to year. The bar chart shows the Fund's actual return for each full
calendar year since the Fund began selling shares on July 15, 1992 (its
inception date). The table shows the Fund's average annual return.
YEAR-BY-YEAR RETURNS FOR EACH FULL CALENDAR YEAR SINCE INCEPTION
[BAR CHART]
<TABLE>
<S> <C> <C> <C> <C> <C>
- ----------------- ---------------- ---------------- ---------------- ---------------- --------------------
TK TK TK TK TK TK
- ----------------- ---------------- ---------------- ---------------- ---------------- --------------------
- ----------------- ---------------- ---------------- ---------------- ---------------- --------------------
1993 1994 1995 1996 1997 1998
- ----------------- ---------------- ---------------- ---------------- ---------------- --------------------
</TABLE>
Since inception, the Fund's highest return in any calendar quarter was TK% and
its lowest quarterly return was TK%. Past performance offers no indication of
how the Fund will perform in the future.
AVERAGE ANNUAL RETURNS
(AS OF DECEMBER 31, 1998)
<TABLE>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS (JULY 15, 1992)
- --------------------------------------------------------------------------------------------------------
BT Investment Money Market Fund TK TK TK
- --------------------------------------------------------------------------------------------------------
</TABLE>
As of December 31, 1998, the Fund's 7-day yield was TK. To learn the current
7-day yield, investors may call the Bankers Trust Service Center at
1-800-730-1313.
The 7-day yield, which is often referred to as the "current yield," is the
income generated by the Fund over a seven-day period. This amount is then
annualized, which means that we assume the Fund generates the same income every
week for a year. The "total return" of the Fund is the change in the value of an
investment in the Fund over a given period. Average annual returns are
calculated by averaging the year-by-year returns of the Fund over a given
period.
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ANNUAL FUND OPERATING EXPENSES
(EXPENSES PAID FROM FUND ASSETS)
The Annual Fees and Expenses table to the right describes the fees and expenses
that you may pay if you buy and hold shares of the BT Investment Money Market
Fund.
<TABLE>
<S> <C>
- --------------------------------------------------------- ---------------------------------
PERCENTAGE OF AVERAGE
DAILY NET ASSETS(1)
- --------------------------------------------------------- ---------------------------------
Management Fees 0.10%
- --------------------------------------------------------- ---------------------------------
Distribution and Service (12b-1) Fees none
- --------------------------------------------------------- ---------------------------------
Other Fund Operating Expenses 0.42%
- --------------------------------------------------------- ---------------------------------
Total Fund Operating Expenses 0.52%
- --------------------------------------------------------- ---------------------------------
Less: Fee Waivers or Expense Reimbursements (0.17)%(2)
- --------------------------------------------------------- ---------------------------------
NET EXPENSES 0.35%
- --------------------------------------------------------- ---------------------------------
</TABLE>
Expense Example. The example below illustrates the expenses you would have
incurred on a $10,000 investment in the Fund. The numbers assume that the Fund
earned an annual return of 5% over the periods shown, that the Fund's operating
expenses remained the same, and that you redeem your shares at the end of the
period.
Expense Example(3)
- --------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------
$36 $148 $278 $657
- --------------------------------------------------------
You may use this hypothetical example to compare the Fund's expense history with
other funds.(1) Your actual costs may be higher or lower.
1 Information on the annual operating expenses reflects the expenses of both
the Fund and the Cash Management Portfolio, the master portfolio in which
the BT Investment Money Market Fund invests its assets. (A further
discussion of the relationship between the Fund and the master portfolio
appears in the "Organizational Structure" section of this prospectus.)
2 (0.17)%2 Bankers Trust has agreed, for the 16-month period from the Fund's
fiscal year end of December 31, 1998, to waive its fees and reimburse
expenses so that total expenses will not exceed 0.35%.
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3 Based on expenses, after fee waivers and reimbursements for the first 16
months only.
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A detailed look
AT THE BT INVESTMENT MONEY MARKET FUND
OBJECTIVE
The BT Investment Money Market Fund seeks a high level of current income
consistent with liquidity and the preservation of capital by investing in high
quality short-term money market instruments.
While we give priority to earning income and maintaining the value of the Fund's
principal at $1.00 per share, all money market instruments, including U.S.
government obligations, can change in value when interest rates change or an
issuer's creditworthiness changes.
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STRATEGY
The Fund seeks current income, maintaining a dollar-weighted average maturity of
90 days or less, by investing in high quality money market securities. The Fund
follows two policies designed to maintain a stable share price:
o Generally, Fund securities are valued in U.S. dollars and have remaining
maturities of 397 days (about 13 months) or less at the time of purchase.
The Fund may also invest in securities that have features that reduce their
maturities to 397 days or less at the time of purchase.
o The Fund buys U.S. government debt obligations, money market instruments
and other debt obligations that at the time of purchase:
- have received the highest short-term rating from two nationally
recognized statistical rating organizations;
- have received the highest short-term rating from one rating
organization (if only one organization rates the security); or
- if unrated, are determined to be of similar quality by the Fund's
Investment Adviser.
- The Fund may also invest in securities that have no short-term rating,
but are rated in one of the top three highest long-term rating
categories, or are determined to be of similar quality by the Fund's
Investment Adviser.
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PRINCIPAL INVESTMENTS
The Fund may invest in high-quality, short-term, dollar-denominated money market
instruments paying a fixed, variable or floating interest rate. These include:
o Debt obligations issued by U.S. and foreign banks, financial institutions,
corporations, or other entities, including certificates of deposit,
euro-time deposits, commercial paper (including asset-backed commercial
paper), notes, funding agreements and U.S. government securities.
Securities that do not satisfy the maturity restrictions for a money market
fund may be specifically structured so that they are eligible investments
for money market funds. For example, some securities have features which
have the effect of shortening the security's maturity.
o U.S. government securities that are issued or guaranteed by the U.S.
Treasury, or by agencies or instrumentalities of the U.S. Government.
o Repurchase agreements, which are agreements to buy securities at one price,
with a simultaneous agreement to sell back the securities at a future date
at an agreed-upon price.
o Asset Backed Securities are generally participations in a pool of assets
whose payment is derived from the payments generated by the underlying
assets. Payments on the asset backed security generally consist of interest
and/or principal.
Because many of the Fund's principal investments are issued or credit-enhanced
by banks or other financial institutions, the Fund may invest more than 25% of
its total assets in the financial services industry.
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RISKS
BELOW WE SET FORTH SOME OF THE PROMINENT RISKS ASSOCIATED WITH MONEY MARKET
MUTUAL FUNDS, AND WE DETAIL OUR APPROACHES TO CONTAIN THEM. ALTHOUGH WE ATTEMPT
TO ASSESS THE LIKELIHOOD THAT THESE RISKS MAY ACTUALLY OCCUR AND TO LIMIT THEM,
WE MAKE NO GUARANTEE THAT WE WILL SUCCEED. IF A SECURITY NO LONGER MEETS THE
FUND'S REQUIREMENTS, WE WILL ATTEMPT TO SELL THAT SECURITY WITHIN A REASONABLE
TIME, UNLESS SELLING THE SECURITY WOULD NOT BE IN THE FUND'S BEST INTEREST.
PRIMARY RISKS
Interest Rate Risk. Money market instruments, like all debt securities, face the
risk that the securities will decline in value because of changes in interest
rates. Generally, investments subject to interest rate risk will decrease in
value when interest rates rise and increase when interest rates decline. To
minimize such price fluctuations, the Fund adheres to the following practices:
o We limit the dollar-weighted average maturity of the securities held by the
Fund to 90 days or less. Generally, rates of short-term investments
fluctuate less than longer-term bonds.
o We primarily buy securities with remaining maturities of 13 months or less.
This reduces the risk that the issuer's creditworthiness will change, or
that the issuer will default on the principal and interest payments of the
obligation.
Credit Risk. A money market instrument's credit quality depends on the issuer's
ability to pay interest on the security and repay the debt: the lower the credit
rating, the greater the risk that the security's issuer will default, or fail to
meet its payment obligations. The credit risk of a security may also depend on
the credit quality of any bank or financial
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institution that provides credit enhancement for it. The Fund only buys high
quality securities with minimal credit risk. Market Risk. Although individual
securities may outperform their market, the entire market may decline as a
result of rising interest rates, regulatory developments or deteriorating
economic conditions.
Security Selection Risk. While the Fund invests in short-term securities, which
by nature are relatively stable investments, the risk remains that the
securities we have selected will not perform as expected. This could cause the
Fund's returns to lag behind those of similar money market funds. We attempt to
limit this risk by diversifying the Fund's investments so that a single setback
need not undermine the pursuit of its objective and by investing in money market
instruments that receive the highest short-term debt ratings as described above.
Repurchase Agreement Risk. A repurchase agreement exposes the Fund to the risk
that the party that sells the securities defaults on its obligation to
repurchase them. In this circumstance, the Fund can lose money because:
o it cannot sell the securities at the agreed-upon time and price
o the securities lose value before they can be sold
The Fund seeks to reduce this risk by monitoring, under the supervision of the
Board of Trustees, the creditworthiness of the sellers with whom it enters into
repurchase agreements. The Fund also monitors the value of the securities to
ensure that they are at least equal to the total amount of the repurchase
obligations, including interest
Concentration Risk. Because the Fund may invest more than 25% of its total
assets in the financial services industry, it may be vulnerable to setbacks in
that industry. Banks and other financial service companies are highly dependent
on short-term interest rates and
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can be adversely affected by downturns in the U.S. and foreign economies or
changes in banking regulations.
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Prepayment Risk. When a bond issuer, such as an issuer of asset-backed
securities, retains the right to pay off a high yielding bond before it comes
due, the Fund may have no choice but to reinvest the proceeds at lower interest
rates. Thus, prepayment may reduce the Fund's income. It may also create a
capital gains tax liability, because bond issuers usually pay a premium for the
right to pay off bonds early.
SECONDARY RISK
Year 2000 Risk. As with most businesses, the Fund faces the risk that the
computer systems of its Investment Adviser and other companies on which it
relies for service or in which it invests will not accommodate the changeover
necessary from dates in the year 1999 to dates in the year 2000. These risks
could adversely affect:
o the companies in which the Fund invests, which could impact the value of
the Fund's investments
o our ability to service your Fund account, including our ability to meet
your requests to buy and sell Fund shares
o our ability to trade securities held by the Fund or to accurately price
securities held by the Fund
We are working both internally and with our business partners and service
providers to address this problem. If we--or our business partners, service
providers, government agencies or other market participants--do not succeed, it
could materially affect shareholder services or the value of the Fund's shares.
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MANAGEMENT OF THE FUND
Board of Trustees. The Fund's shareholders, voting in proportion to the number
of shares each owns, elect a Board of Trustees, and the Trustees supervise all
the Fund's activities on their behalf.
Investment Adviser. Under the supervision of the Board of Trustees, Bankers
Trust Company, with headquarters at 130 Liberty Street, New York, NY 10006, acts
as the Fund's Investment Adviser. As Investment Adviser, Bankers Trust makes the
Fund's investment decisions and assumes responsibility for the securities the
Fund owns. It buys and sells securities for the Fund and conducts the research
that leads to the purchase and sale decisions. Bankers Trust received a fee of
0.10% of the Fund's average daily net assets for its services in the last fiscal
year.
As of December 31, 1998, Bankers Trust was the eighth largest bank holding
company in the United States, with total assets of approximately $156 billion.
Bankers Trust is a worldwide merchant bank dedicated to servicing the needs of
corporations, governments, financial institutions and private clients through a
global network of over 96 offices in more than 43 countries.
Bankers Trust's officers bring wide experience to managing both the Fund and its
master portfolio. The firm's own record dates back to its founding as a trust
company in 1903. It has invested retirement assets on behalf of the nation's
largest corporations and institutions for more than 50 years. Today, the assets
under its global management exceed $338 billion. The scope of the firm's
capability is broad--it is a leader in both the active and passive quantitative
investment disciplines and maintains a major presence in stock and bond markets
worldwide.
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The Investment Adviser is a wholly owned subsidiary of Bankers Trust
Corporation. On November 30, 1998, Bankers Trust Corporation entered into an
Agreement and Plan of Merger with Deutsche Bank AG under which Bankers Trust
Corporation would merge with and into a subsidiary of Deutsche Bank AG. Deutsche
Bank AG is a major global banking institution that is engaged in a wide range of
financial services, including retail and commercial banking, investment banking
and insurance. The transaction is contingent upon various regulatory approvals,
as well as the approval of the Fund's shareholders. If the transaction is
approved and completed, Deutsche Bank AG, as the Investment Adviser's new parent
company, will control the operations of the Investment Adviser. Bankers Trust
believes that, under this new arrangement, the services provided to the Fund
will be maintained at their current level.
Other Services. Bankers Trust provides administrative services--such as
portfolio accounting, legal services and others--for the Fund. In addition,
Bankers Trust, or your broker or financial advisor, performs the functions
necessary to establish and maintain your account. Besides setting up the account
and processing your purchase and sale orders, these functions include:
o keeping accurate, up-to-date records for your individual Fund account
o implementing any changes you wish to make in your account information
o processing your requests for cash dividends and distributions from the Fund
o answering your questions on the Fund's investment performance or
administration
o sending proxy reports and updated prospectus information to you
o collecting your executed proxies
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Brokers and financial advisors may charge additional fees to investors only for
those services not otherwise included in the Bankers Trust servicing agreement,
such as cash management, or special trust or retirement-investment reporting.
Organizational Structure. The BT Investment Money Market Fund is a FEEDER FUND
that invests all of its assets in a MASTER PORTFOLIO, the Cash Management
Portfolio. The Fund and the master portfolio have the same investment objective.
The master portfolio is advised by Bankers Trust.
The master portfolio may accept investments from other feeder funds. The feeders
bear the master portfolio's expenses in proportion to their assets. Each feeder
can set its own transaction minimums, fund-specific expenses, and other
conditions. This arrangement allows the Fund's Trustees to withdraw the Fund's
assets from the master portfolio if they believe doing so is in the
shareholders' best interests. If the Trustees withdraw the Fund's assets, they
would then consider whether the Fund should hire its own investment adviser,
invest in a different master portfolio or take other action.
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CALCULATING THE FUND'S SHARE PRICE
We calculate the price of the Fund's shares (also known as the "Net Asset Value"
or "NAV") each day the Fund is open for business, as of 2:00 p.m. Eastern time,
and as of the close of regular trading on the New York Stock Exchange. If the
markets for the Fund's primary investments closes early, the Fund will cease
taking purchase orders at that time. In accordance with the standard formula for
valuing mutual fund shares, we deduct all of the Fund's liabilities from the
total value of its assets and divide the result by the number of shares
outstanding.
The Fund uses the amortized cost method to account for any premiums or discounts
above or below the face value of any securities it buys. This method writes down
the premium--or marks up the discount--at a constant rate until maturity. It
does not reflect daily fluctuations in market value. The Fund's Net Asset Value
will normally be $1.00 a share.
Open for business: The Fund is open every week, Monday through Friday, except
when the following holidays are celebrated: New Year's Day, Martin Luther King,
Jr. Day (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), Veterans' Day (November 11), Thanksgiving Day (the fourth Thursday in
November) and Christmas Day. The markets for the Fund's primary investments may
close early on the business day before each of these holidays. It may also close
early on the day after Thanksgiving and the day before Christmas Eve.
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DIVIDENDS AND DISTRIBUTIONS
The Fund declares dividends from its net income daily and pays the dividends on
a monthly basis.
The Fund reserves the right to include in the daily dividend any short-term
capital gains on securities that it sells. Also, the Fund will normally declare
and pay annually any long-term capital gains as well as any short-term capital
gains that it did not distribute during the year.
We automatically reinvest all dividends and capital gains, if any, unless you
tell us otherwise.
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TAX CONSIDERATIONS
The Fund does not ordinarily pay income taxes. You and other shareholders pay
taxes on the income or capital gains from the Fund's holdings. Your taxes will
vary from year to year, based on the amount of capital gain distributions and
dividends paid out by the Fund. You owe the taxes whether you receive cash or
choose to have distributions and dividends reinvested. Distributions and
dividends usually create the following tax liability:
<TABLE>
<S> <C>
- -------------------------------------------------- ---------------------------------------
TRANSACTION TAX STATUS
- -------------------------------------------------- ---------------------------------------
Income dividends Ordinary income
- -------------------------------------------------- ---------------------------------------
Short-term capital gains distributions Ordinary income
- -------------------------------------------------- ---------------------------------------
Long-term capital gains distributions Capital gains
- -------------------------------------------------- ---------------------------------------
</TABLE>
Every year, the Fund will send you information on the distributions for the
previous year.
The tax considerations for tax deferred accounts or nontaxable entities are
different.
BECAUSE EACH INVESTOR'S TAX CIRCUMSTANCES ARE UNIQUE AND BECAUSE THE TAX LAWS
ARE SUBJECT TO CHANGE, WE RECOMMEND THAT YOU CONSULT YOUR TAX ADVISOR ABOUT YOUR
INVESTMENT.
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BUYING AND SELLING FUND SHARES
CONTACTING THE BT MUTUAL FUNDS
BT SERVICE CENTER
By phone: 1-800-730-1313
Address: P.O. Box 419210
Kansas City, MO 64141-6210
Address for overnight mail: 210 West 10th Street, 8th floor
Kansas City, MO 64105-1716
BT RETIREMENT SERVICES CENTER
By phone: 1-800-677-7596
Address: P.O. Box 419210
Kansas City, MO 64141-6210
Address for overnight mail: 210 West 10th Street, 8th floor
Kansas City, MO 64105-1716
OUR REPRESENTATIVES ARE AVAILABLE TO ASSIST YOU PERSONALLY MONDAY THROUGH
FRIDAY, 9:00 A.M. TO 6:00 P.M., EASTERN TIME EACH DAY THE NEW YORK STOCK
EXCHANGE IS OPEN FOR BUSINESS. YOU CAN REACH THE BT SERVICE CENTER'S AUTOMATED
ASSISTANCE LINE 24 HOURS A DAY, 7 DAYS A WEEK.
HOW TO OPEN YOUR FUND ACCOUNT
If you are new to BT Mutual Funds, mail your completed application, along with
your check payable to the BT Investment Money Market Fund (or to "BT Funds" if
you are investing in more than one fund), to the BT Service Center.
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If this is your first BT Mutual Fund investment through a tax-sheltered
retirement plan, such as an IRA, you will need a special application form. This
form is available from your financial advisor, or by calling the BT Retirement
Services Center at 1-800-677-7596.
MINIMUM ACCOUNT INVESTMENTS
To open:
a standard investment account $2,500
a retirement account 500
an automatic investment plan account 1,000
To add to:
a standard investment account $250
a retirement account 100
an automatic investment plan account 100
Minimum account balances:
nonretirement accounts $1,000
retirement accounts none
TWO WAYS TO BUY AND SELL SHARES IN YOUR ACCOUNT
MAIL
BUYING:
Send your check, payable to the BT Investment Money Market Fund to the BT
Service Center. The addresses are shown under "Contacting the BT Mutual Funds."
Be sure to include your Fund number and account number (see your account
statement) on your check. Please note that we cannot accept starter checks or
third-party checks.
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SELLING:
Send a signed letter to the BT Service Center with your name, your fund number
and account number, the Fund's name and either the number of shares you wish to
sell or the dollar amount you wish to receive. You must leave at least $1,000
worth of shares in your account to keep it open. Unless exchanging into another
BT Fund, you must submit a written authorization to sell shares in a retirement
account.
WIRE
BUYING:
You may buy shares by wire if your account is authorized to do so. You or your
financial advisor must call the BT Service Center at 1-800-730-1313 to notify us
in advance of a wire transfer purchase. Inform the BT Representative of the
amount of your purchase and receive your trade confirmation number. Instruct
your bank to send payment by wire using the wire instructions noted below. All
wires must be received by 4:00 p.m. Eastern time the next business day.
Routing no.: 021001033
Attn: Bankers Trust/BT Funds
DDA no.: 00-226-296
FBO: (Account name)
(Account number)
Credit: BT Investment Money Market Fund-460
Refer to your account statement for the account name, number and fund number.
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SELLING:
You may sell shares by wire if your account is authorized to do so. For your
protection, you may not change the destination bank account over the phone. To
sell by wire, contact your financial advisor or the BT Service Center at
1-800-730-1313. Inform the BT Representative of the amount of your redemption
and receive your trade confirmation number. The minimum redemption by wire is
$1,000. We must receive your order by 4:00 p.m. Eastern time to wire your
account the next business day.
IMPORTANT INFORMATION ABOUT BUYING AND SELLING SHARES
o After receiving your order, we buy or sell your shares at the next price
calculated on a day the New York Stock Exchange is open for business.
o We accept payment for shares only in U.S. dollars by check, bank or Federal
Funds wire transfer, or by electronic bank transfer.
o We remit proceeds from the sale of shares in U.S. dollars (unless the
redemption is so large that it is made "in-kind").
o You may place orders to buy and sell over the phone by calling your
financial advisor or the BT Service Center at 1-800-730-1313. If you pay
for shares by check and the check fails to clear, or if you order shares by
phone and fail to pay for them by 4:00 p.m. Eastern time the next business
day, we have the right to cancel your order, hold you liable or charge you
or your account for any losses or fees the Fund or its agents have
incurred. Unless you request a wire, we will send you a check.
o You may buy and sell shares of the Fund through authorized brokers and
financial advisors as well as from BT Mutual Funds directly. The same terms
and conditions apply. Specifically, once you place your order with a broker
or financial advisor, it is considered received by the BT Service Center.
It is then your broker or financial advisor's responsibility to transmit
the order to the BT Service Center by the next business day. You should
contact your broker or financial advisor if you have a
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dispute as to when your order was placed with the Fund.
o If we receive your purchase order and payment before 2:00 p.m. Eastern time
you will receive the dividends declared that day. If we receive it after
2:00 p.m. Eastern time, you will not.
o If we receive your order to sell shares after 12 noon Eastern time you will
receive the dividends declared that day. If we receive it before 2:00 p.m.
Eastern time, you will not.
o We do not issue share certificates.
o We process all sales orders free of charge.
o Unless otherwise instructed, we normally mail a check for the proceeds from
the sale of your shares to your account address the next business day and
no later than seven days.
o We reserve the right to close your account on 30 days' notice if it fails
to meet minimum balance requirements.
o If you sell shares by mail or wire, you may be required to obtain a
signature guarantee. Please contact your financial advisor or the BT
Service Center for more information.
o Selling shares of trust accounts and business or organization accounts may
require additional documentation. Please contact your financial advisor or
the BT Service Center for more information.
o During periods of heavy market activity, you may have trouble reaching the
BT Service Center by telephone. If this occurs, you should make your
request by mail.
SPECIAL SHAREHOLDER SERVICES
To help make investing with us as easy as possible, and to help you build your
investment, we offer the following special services. You can obtain further
information about these programs by calling the BT Service Center at
1-800-730-1313.
o REGULAR INVESTMENTS: You can make regular investments of $100 or more
automatically from your checking account biweekly, monthly, quarterly, or
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semiannually.
o EXCHANGE PRIVILEGES: You can exchange all or part of your shares for shares
in another BT Mutual Fund. When you exchange shares, you are selling shares
in one fund to purchase shares in another. Before buying shares through an
exchange, you should be sure to get a copy of that fund's prospectus and
read it carefully. You may only order exchanges over the phone if your
account is authorized to do so. Please note that you may have to pay taxes
on the shares you sell in the exchange.
o REGULAR WITHDRAWALS: You can arrange regular monthly, quarterly, semiannual
and annual sales of shares in your account. The minimum transaction is
$100, and the account must have a balance of at least $10,000 to qualify.
o CHECKWRITING: We issue you a checkbook linked to your BT Investment Money
Market Fund account. You can sell shares by writing a check for the desired
amount free of charge, but you cannot close your account by check. You
continue to earn dividends on the shares you sell by check until the check
clears. We return canceled checks for your records, at the end of the
month.
o ACCOUNT STATEMENTS AND FUND REPORTS: We or your financial advisor will
furnish you with a written confirmation of every transaction that affects
your account balance. You will also receive monthly statements reflecting
the balances in your account. The Fund's Investment Adviser will send you a
report every six months on the Fund's overall performance, its current
holdings and its investing strategies.
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The table below provides a picture of the Fund's financial performance for the
past five years. The information selected reflects financial results for a
single Fund share. The total returns in the table represent the rates of return
that an investor would have earned on an investment in the Fund, assuming
reinvestment of all dividends and distributions. This information has been
audited by____________________, whose report, along with the Fund's financial
statements, is included in the Fund's annual report. The annual report is
available free of charge by calling the BT Service Center at 1-800-730-1313.
Financial Highlights
<TABLE>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------------
1998 1997 1996 1995 1994
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.05 0.05 0.06 0.04
Net Realized Gain (Loss) from
Investment Transactions (0.00)(1) 0.00(1) 0.00(1) (0.01)
------------- ------------ ------------ -------------
Total from Investment Operations 0.05 0.05 0.06 0.03
------------ ------------ ------------ ------------
CONTRIBUTIONS OF CAPITAL -- 0.00(1) -- 0.01
------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income (0.05) (0.05) (0.06) (0.04)
Net Realized Gain from
Investment Transactions -- -- -- --
------------ ------------ ------------ ------------
TOTAL DISTRIBUTIONS (0.05) (0.05) (0.06) (0.04)
------------- ------------- ------------- -------------
NET ASSET VALUE, END OF YEAR $ 1.00 $ 1.00 $ 1.00 $ 1.00
============= ============= ============= =============
TOTAL INVESTMENT RETURN 5.40% 5.24%(2) 5.76% 4.05%(2)
SUPPLEMENTAL DATA AND RATIOS:
Net Assets, End of Period
(000s omitted) $ 426,383 $ 416,161 $ 645,910 $ 976,472
Ratios to Average Net Assets:
Net Investment Income 5.27% 5.12% 5.62% 4.24%
Expenses, Including
Expenses of the Cash
Management Portfolio 0.35% 0.35% 0.35% 0.35%
Decrease Reflected in Above
Expense Ratio Due to
Absorption of Expenses by
Bankers Trust 0.17% 0.16% 0.16% 0.21%
------------------------------------------------------------------------------
1 Less than $0.01 per share.
2 Increased by approximately 0.10% and 0.81% due to Contributions of Capital for the years ended December 31,
1996 and 1994, respectively.
</TABLE>
31
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BACK COVER
Additional information about the Fund's investments is available in the Fund's
annual and semi-annual reports to shareholders.
You can find more detailed information about the Fund in the current Statement
of Additional Information, dated April 30, 1999, which we have filed
electronically with the Securities and Exchange Commission (SEC) and which is
incorporated by reference. To receive your free copy of the Statement of
Additional Information, the annual or semi-annual report, or if you have
questions about investing in the Fund, write to us at:
BT SERVICE CENTER
P.O. BOX 419210
KANSAS CITY, MO 64141-6210
OR CALL OUR TOLL-FREE NUMBER: 1-800-730-1313
You can find reports and other information about the Fund on the SEC website
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Fund, including its Statement
of Additional Information, can be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. For information on the Public Reference Room,
call the SEC at 1-800-SEC-0330.
BT INVESTMENT MONEY MARKET FUND
BT Pyramid Mutual Funds
811-6576
32
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
April 30, 1999
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 match, as closely as possible, before expenses, the
performance of the Standard & Poor's Composite Stock Price Index (the "S&P 500
Index"), which emphasizes stocks of large U.S. companies. 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 ICC Distributors, Inc. ("ICC Distributors"),
the Trust's distributor ("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 Fund's Prospectus dated April 30, 1999, which may be amended from time
to time provides the basic information investors should know before investing.
This 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 Bankers Trust service agent ("Service Agent"). Capitalized
terms not otherwise defined in this SAI have the meanings accorded to them in
the Fund's Prospectus. The financial statements for the Fund and the Portfolio
for the fiscal year ended December 31, 1998, are incorporated herein by
reference to the Annual Report to shareholders for the Fund and Portfolio dated
December 31, 1998. A copy of the Fund's and the Portfolio's Annual Report may be
obtained without charge by calling the Fund at the telephone number listed
below.
BANKERS TRUST COMPANY
Investment Adviser of the Portfolio and Administrator
ICC DISTRIBUTORS, INC.
Distributor
Two Portland Square Portland, Maine 04101 1-800-368-4031
[Redherring appears on left side of page with the following:]
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may any
offers to buy be accepted prior to the time the registration statement becomes
effective. This Statement of Additional Information does not constitute a
prospectus.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Page
----
INVESTMENT OBJECTIVE, POLICIES AND
RESTRICTIONS.......................................................1
Investment Objective...............................................1
Investment Policies................................................1
Additional Risk Factors............................................6
Investment Restrictions............................................7
Portfolio Transactions and Brokerage Commissions...................10
PERFORMANCE INFORMATION.....................................................11
Standard Performance Information...................................11
Comparison of Fund Performance.....................................12
Economic and Market Information....................................13
VALUATION OF SECURITIES, REDEMPTIONS AND PURCHASES IN KIND..................13
Valuation of Securities............................................13
Valuation of Securities............................................14
Redemption of Shares...............................................16
Redemptions and Purchases in Kind..................................18
MANAGEMENT OF THE TRUST AND PORTFOLIO.......................................19
Trustees of the Trust..............................................20
Trustees of the Portfolio...................................................20
Officer of the Trust and Portfolio.................................20
Investment Adviser.................................................21
Administrator......................................................22
Distributor........................................................23
Service Agent......................................................23
Custodian and Transfer Agent.......................................24
Expense............................................................24
Use of Name........................................................24
Banking Regulatory Matters.........................................25
Counsel and Independent Accountants................................25
ORGANIZATION OF THE TRUST...................................................25
TAXATION....................................................................26
Taxation of the Fund...............................................26
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Distributions......................................................26
Taxation of the Portfolio..........................................27
Backup Withholding.................................................27
Foreign Shareholders...............................................27
Other Taxation.....................................................27
FINANCIAL STATEMENTS........................................................27
APPENDIX....................................................................28
</TABLE>
ii
<PAGE>
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
Investment Objective
The Fund's investment objective is to match as closely as possible (before the
deduction of expenses) the total return of the S&P 500 Index which emphasizes
stocks of large U.S. Companies. There can, of course, be no assurance that the
Fund will achieve its investment objective.
Investment Policies
The Fund seeks to achieve its investment objective by investing all of its
assets in the Portfolio. The Trust may withdraw the Fund's investment from the
Portfolio at any time if the Board of Trustees of the Trust determines that it
is in the best interests of the Fund to do so.
Since the investment characteristics of the Fund will correspond directly to
those of the Portfolio, the following is a discussion of the various investments
of and techniques employed by the Portfolio.
EQUITY SECURITIES. The Portfolio may invest in equity securities listed on any
domestic or foreign securities exchange or traded in the over-the-counter market
as well as certain restricted or unlisted securities. As used herein, "equity
securities" are defined as common stock, preferred stock, trust or limited
partnership interests, rights and warrants to subscribe to or purchase such
securities, sponsored or unsponsored ADRs, EDRs, GDRs, and convertible
securities, consisting of debt securities or preferred stock that may be
converted into common stock or that carry the right to purchase common stock.
Common stocks, the most familiar type, represent an equity (ownership) interest
in a corporation. They may or may not pay dividends or carry voting rights.
Common stock occupies the most junior position in a company's capital structure.
Although equity securities have a history of long-term growth in value, their
prices fluctuate based on changes in a company's financial condition and on
overall market and economic conditions. Smaller companies are especially
sensitive to these factors.
SHORT-TERM INSTRUMENTS. When the Portfolio experiences large cash inflows
through the sale of securities and desirable equity securities, that are
consistent with the Portfolio's investment objective, which are unavailable in
sufficient quantities or at attractive prices, the Portfolio may hold short-term
investments (or shares of money market mutual funds) for a limited time pending
availability of such equity securities. Short-term instruments consist of
foreign and domestic: (i) short-term obligations of sovereign governments, their
agencies, instrumentalities, authorities or political subdivisions; (ii) other
short-term debt securities rated AA or higher by Standard & Poor's Ratings Group
("S&P") or Aa or higher by Moody's Investors Service, Inc. ("Moody's") or, if
unrated, of comparable quality in the opinion of Bankers Trust; (iii) commercial
paper; (iv) bank obligations, including negotiable certificates of deposit, time
deposits and banker's acceptances; and (v) repurchase agreements. At the time
the Portfolio invests in commercial paper, bank obligations or repurchase
agreements, the issuer of the issuer's parent must have outstanding debt rated
AA or higher by S&P or Aa or higher by Moody's or outstanding commercial paper
or bank obligations rated A-1 by S&P or Prime-1 by Moody's; or, if no such
ratings are available, the instrument must be of comparable quality in the
opinion of Bankers Trust.
CERTIFICATES OF DEPOSIT AND BANKERS' ACCEPTANCES. Certificates of deposit
are receipts issued by a depository institution in exchange for the deposit of
funds. The issuer agrees to pay the amount deposited plus interest to the bearer
of the receipt on the date specified on the certificate. The certificate usually
can be traded in the secondary market prior to maturity. Bankers' acceptances
typically arise from short-term credit arrangements designed to enable
businesses to obtain funds to finance commercial transactions. Generally, an
acceptance is a time draft drawn on a bank by an exporter or an importer to
obtain a stated amount of funds to pay for specific merchandise. The draft is
then "accepted" by a bank that, in effect, unconditionally guarantees to pay the
face value of the instrument on its maturity date. The acceptance may then be
held by the accepting bank as an earning asset or it may be sold in the
secondary market at the going rate of discount for a specific maturity.
1
<PAGE>
Although maturities for acceptances can be as long as 270 days, most acceptances
have maturities of six months or less.
COMMERCIAL PAPER. Commercial paper consists of short-term (usually from 1 to
270 days) unsecured promissory notes issued by corporations in order to finance
their current operations. A variable amount master demand note (which is a type
of commercial paper) represents a direct borrowing arrangement involving
periodically fluctuating rates of interest under a letter agreement between a
commercial paper issuer and an institutional lender pursuant to which the lender
may determine to invest varying amounts.
For a description of commercial paper ratings, see Appendix.
DERIVATIVES. The Portfolio may invest in various instruments that are commonly
known as "derivatives." Generally, a derivative is a financial arrangement, the
value of which is based on, or "derived" from, a traditional security, asset, or
market index. Some derivatives such as mortgage-related and other asset-backed
securities are in many respects like any other investment, although they may be
more volatile or less liquid than more traditional debt securities. There are,
in fact, many different types of derivatives and many different ways to use
them. There are a range of risks associated with those uses. Futures and options
are commonly used for traditional hedging purposes to attempt to protect a fund
from exposure to changing interest rates, securities prices, or currency
exchange rates and as a low cost method of gaining exposure to a particular
securities market without investing directly in those securities. However, some
derivatives are used for leverage, which tends to magnify the effects of an
instrument's price changes as market conditions change. Leverage involves the
use of a small amount of money to control a large amount of financial assets,
and can in some circumstances, lead to significant losses. The Adviser will use
derivatives only in circumstances where they offer the most efficient means of
improving the risk/reward profile of the Portfolio and when consistent with the
Portfolio's investment objective and policies. The use of derivatives for
non-hedging purposes may be considered speculative.
ILLIQUID SECURITIES. Historically, illiquid securities have included securities
subject to contractual or legal restrictions on resale because they have not
been registered under the Securities Act of 1933, as amended (the "1933 Act"),
securities which are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven days. Securities which have not been
registered under the 1933 Act are referred to as private placements or
restricted securities and are purchased directly from the issuer or in the
secondary market. Mutual funds do not typically hold a significant amount of
these restricted or other illiquid securities because of the potential for
delays on resale and uncertainty in valuation. Limitations on resale may have an
adverse effect on the marketability of portfolio securities and a mutual fund
might be unable to dispose of restricted or other illiquid securities promptly
or at reasonable prices and might thereby experience difficulty satisfying
redemptions within seven days. A mutual fund might also have to register such
restricted securities in order to dispose of them resulting in additional
expense and delay. Adverse market conditions could impede such a public offering
of securities.
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
2
<PAGE>
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.
Rule 144A Securities are securities in the United States that are not
registered for sale under federal securities laws but which can be resold to
institutions under SEC Rule 144A. Provided that a dealer or institutional
trading market in such securities exists, these restricted securities are
treated as exempt from the 15% limit on illiquid securities. Under the
supervision of the Board of Trustees of the Portfolio, the Adviser determines
the liquidity of restricted securities and, through reports from the Adviser,
the Board will monitor trading activity in restricted securities. If
institutional trading in restricted securities were to decline, the liquidity of
the Portfolio could be adversely affected.
In reaching liquidity decisions, the Adviser will consider, among other things,
the following factors: (i) the frequency of trades and quotes for the security;
(ii) the number of dealers and other potential purchasers wishing to purchase or
sell the security; (iii) dealer undertakings to make a market in the security
and (iv) the nature of the security and of the marketplace trades (e.g., the
time needed to dispose of the security, the method of soliciting offers and the
mechanics of the transfer).
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase
securities on a when-issued or delayed delivery basis. Delivery of and payment
for these securities can take place a month or more after the date of the
purchase commitment. The purchase price and the interest rate payable, if any,
on the securities are fixed on the purchase commitment date or at the time the
settlement date is fixed. The value of such securities is subject to market
fluctuation and no interest accrues to the Portfolio until settlement takes
place. At the time the Portfolio makes the commitment to purchase securities on
a when-issued or delayed delivery basis, it will record the transaction, reflect
the value each day of such securities in determining its net asset value and, if
applicable, calculate the maturity for the purposes of average maturity from
that date. At the time of settlement a when-issued security may be valued at
less than the purchase price. To facilitate such acquisitions, the Portfolio
identifies, as part of a segregated account, cash or liquid securities, in an
amount at least equal to such commitments. On delivery dates for such
transactions, the Portfolio will meet its obligations from maturities or sales
of the securities held in the segregated account and/or from cash flow. If the
Portfolio chooses to dispose of the right to acquire a when-issued security
prior to its acquisition, it could, as with the disposition of any other
portfolio obligation, incur a gain or loss due to market fluctuation. It is the
current policy of the Portfolio not to enter into when-issued commitments
exceeding in the aggregate 15% of the market value of the Portfolio's total
assets, less liabilities other than the obligations created by when-issued
commitments.
LENDING OF PORTFOLIO SECURITIES. The Portfolio has the authority to lend up to
30% of the total value of its 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. Cash collateral may be invested in
a money market fund managed by Bankers Trust (or its affiliates) 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.
3
<PAGE>
REPURCHASE AGREEMENTS. In a repurchase agreement, the Portfolio buys a security
at one price and simultaneously agrees to sell it back at a higher price at a
future date. In the event of the bankruptcy of the other party to a repurchase
agreement, the Portfolio could experience delays in recovering either its cash
or selling 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, the Adviser must find the creditworthiness of the other party to the
transaction satisfactory.
Index Futures Contracts and Options on Index Futures Contracts
FUTURES CONTRACTS. Futures contracts are contracts to purchase or sell a fixed
amount of an underlying instrument, commodity or index at a fixed time and place
in the future. 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 exchanges and clear through their clearing
corporations. The Portfolio may enter into contracts for the purchase or sale
for future delivery of the Index.
At the same time a futures contract on the Index is entered into, the
Portfolio must allocate cash or securities as a deposit payment ("initial
margin"). Initial margin deposits are set by exchanges and may range between 1%
and 10% 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.
Although futures contracts (other than those that settle in cash) by their
terms call for the actual delivery or acquisition of the instrument underlying
the contract, in most cases the contractual obligation is fulfilled by offset
before the date of the contract without having to make or take delivery of the
instrument underlying the contract. The offsetting of a contractual obligation
is accomplished by entering into an opposite position in the identical futures
contract on the commodities exchange on which the futures contract was entered
into (or a linked exchange). Such a transaction, which is effected through a
member of an exchange, cancels the obligation to make or take delivery of the
instrument underlying the contract. 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 enters into 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 most
participants entering into offsetting transactions rather than making or taking
delivery. To the extent that many 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 securities price 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 the Index 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 a decrease in the Index which would adversely affect the
value of securities held in its portfolio and securities prices increase
instead, the Portfolio will lose part or all of the benefit of the increased
value of its securities which it has hedged because it will have offsetting
losses in
4
<PAGE>
its futures positions. In addition, in such situations, if the Portfolio has
insufficient cash, it may have to sell securities from its portfolio to meet
daily variation margin requirements. Such sales of securities 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 INDEX FUTURES CONTRACTS. The Portfolio may purchase and write options
on futures contracts with respect to the Index. The purchase of a call option
on an index futures contract is similar in some respects to the purchase of a
call option on such an index. For example, when the Portfolio is not fully
invested it may purchase a call option on an index futures contract to hedge
against a market advance.
The writing of a call option on a futures contract with respect to the Index
may constitute a partial hedge against declining prices of the underlying
securities which are deliverable upon exercise of the futures contract. If the
futures price at expiration of the option is below the exercise price, the
Portfolio will retain the full amount of the option premium which provides a
partial hedge against any decline that may have occurred in the Portfolio's
holdings. The writing of a put option on an index futures contract may
constitute a partial hedge against increasing prices of the underlying
securities which are 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 with respect to the Index is
similar in some respects to the purchase of protective put options on the
Index. For example, the Portfolio may purchase a put option on an index
futures contract to hedge against the risk of lowering securities values.
The amount of risk the Portfolio assumes when it purchases an option on a
futures contract with respect to the Index is the premium paid for the option
plus related transaction costs. In addition to the correlation risks discussed
above, the purchase of such an option also entails the risk that changes in the
value of the underlying futures contract will not be fully reflected in the
value of the option purchased.
The Board of Trustees of the Portfolio has adopted the requirement that index
futures contracts and options on index futures contracts be used only for cash
management purposes. In compliance with current CFTC regulations, the Portfolio
will not enter into any futures contracts or options on futures contracts if
immediately thereafter the amount of margin deposits on all the futures
contracts of the Portfolio and premiums paid on outstanding options on futures
contracts owned by the Portfolio would exceed 5% of the Portfolio's net asset
value, after taking into account unrealized profits and unrealized losses on any
such contracts.
OPTIONS ON SECURITIES INDEXES. The Portfolio may write (sell) covered call and
put options to a limited extent on the Index ("covered options") in an attempt
to increase income. 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. The Portfolio may forgo the benefits
of appreciation on the Index or may pay more than the market price of the Index
pursuant to call and put options written by the Portfolio.
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 Index above 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 Index below 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.
5
<PAGE>
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 the Index. The Portfolio
would normally purchase a call option in anticipation of an increase in the
market value of the Index. The purchase of a call option would entitle the
Portfolio, in exchange for the premium paid, to purchase the underlying
securities 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 the Index ("protective puts"). The purchase of a put
option would entitle the Portfolio, in exchange for the premium paid, to sell
the underlying 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 Index. The Portfolio would ordinarily
recognize a gain if the value of the Index decreased below the exercise price
sufficiently to cover the premium and would recognize a loss if the value of the
Index 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 the Index.
The Portfolio has adopted certain other nonfundamental policies concerning index
option transactions which are discussed below. The Portfolio's activities in
index options may also be restricted by the requirements of the Code, for
qualification as a regulated investment company.
The hours of trading for options on the Index 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.
Because options on securities indices require settlement in cash, the Adviser
may be forced to liquidate portfolio securities to meet settlement obligations.
ASSET COVERAGE. To assure that the Portfolio's use of futures and related
options, as well as when-issued and delayed-delivery securities and foreign
currency exchange transactions, are not used to achieve investment leverage, the
Portfolio will cover such transactions, as required under applicable
interpretations of the SEC, either by owning the underlying securities or by
segregating with the Portfolio's Custodian or futures commission merchant liquid
securities in an amount at all times equal to or exceeding the Portfolio's
commitment with respect to these instruments or contracts.
Additional Risk Factors
In addition to the risks discussed above, the Portfolio's investments may be
subject to the following risk factors:
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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.
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, investment vehicles 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.
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 objectives, policies or
restrictions may require the Fund to withdraw its interest in the Portfolio. Any
such withdrawal could result in a distribution "in kind" of portfolio securities
(as opposed to a cash distribution from the Portfolio). If securities are
distributed, the Fund could incur brokerage, tax or other charges in converting
the securities to cash. In addition, the distrubution 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 herein with respect to the Portfolio.
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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.
RATING SERVICES. The ratings of Moody's and S&P represent their opinions as to
the quality of the Municipal Obligations and other 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, the Adviser
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 the Adviser will consider such an event in
its determination of whether the Portfolio should continue to hold the
obligation. A description of the ratings categories of Moody's and S&P is set
forth in the Appendix to this SAI.
Investment Restrictions
FUNDAMENTAL POLICIES. 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 Portfolio may not engage in dollar roll transactions);
(2) underwrite securities issued by other persons except insofar as the
Portfolio (Trust or the Fund) may technically be deemed an underwriter under the
1933 Act in selling a portfolio security;
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(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
the Portfolio's (Fund's) investment objective, up to 25% of its total assets may
be invested in any one industry; and
(6) issue any senior security (as that term is defined in the 1940 Act) if such
issuance is specifically prohibited by the 1940 Act or the rules and regulations
promulgated thereunder, provided that collateral arrangements with respect to
options and futures, including deposits of initial deposit and variation margin,
are not considered to be the issuance of a senior security for purposes of this
restriction.
(7) with respect to 75% of the Fund's (Portfolio's) total assets, invest more
than 5% of its total assets in the securities of any one issuer (excluding cash
and cash-equivalents, U.S. government securities and the securities of other
investment companies) or own more than 10% of the voting securities of any
issuer.
ADDITIONAL RESTRICTIONS. In order to comply with certain statutes and policies
the Portfolio (or the Trust, on behalf of the Fund) will not as a matter of
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)
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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) make short sales of securities or maintain a short position, unless at
all times when a short position is open it owns an equal amount of such
securities or securities convertible into or exchangeable, without
payment of any further consideration, for securities of the same issue
and equal in amount to, the securities sold short, and unless not more
than 10% of the Portfolio's (Fund's) net assets (taken at market value)
is represented by such securities, or securities convertible into or
exchangeable for such securities, at any one time (the Portfolio
(Fund) have no current intention to engage in short selling);
(ix) 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 5% of the Portfolio's (Fund's) net assets; (c) the
securities subject to the exercise of the call written by the Portfolio
(Fund) must be owned by the Portfolio (Fund) at the time the call is
sold and must continue to be owned by the Portfolio (Fund) until the
call has been exercised, has lapsed, or the Portfolio (Fund) has
purchased a closing call, and such purchase has been confirmed, thereby
extinguishing the Portfolio's (Fund's) obligation to deliver securities
pursuant to the call it has sold; and (d) at the time a put is written,
the Portfolio (Fund) establishes a segregated account with its
custodian consisting of cash or short-term U.S. government securities
equal in value to the amount the 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
(x) 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.
There will be no violation of any investment restrictions or policies (except
with respect to fundamental investment restriction (1) above) if that
restriction is complied with at the time the relevant action is taken,
notwithstanding a later change in the market value of an investment, in net or
total assets, or in the change of securities rating of the investment, or any
other later change.
Portfolio Transactions and Brokerage Commissions
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The Adviser is responsible for decisions to buy and sell securities, futures
contracts and options on such securities and futures for the Portfolio, the
selection of brokers, dealers and futures commission merchants to effect
transactions and the negotiation of brokerage commissions, if any.
Broker-dealers may receive brokerage commissions on portfolio transactions,
including options, futures and options on futures transactions and the purchase
and sale of underlying securities upon the exercise of options. Orders may be
directed to any broker-dealer or futures commission merchant, including to the
extent and in the manner permitted by applicable law, Bankers Trust or its
subsidiaries or affiliates. Purchases and sales of certain portfolio securities
on behalf of the Portfolio are frequently placed by the Adviser with the issuer
or a primary or secondary market-maker for these securities on a net basis,
without any brokerage commission being paid by the Portfolio. Trading does,
however, involve transaction costs. Transactions with dealers serving as
market-makers reflect the spread between the bid and asked prices. Transaction
costs may also include fees paid to third parties for information as to
potential purchasers or sellers of securities. Purchases of underwritten issues
may be made which will include an underwriting fee paid to the underwriter.
The Adviser seeks to evaluate the overall reasonableness of the brokerage
commissions paid (to the extent applicable) in placing orders for the purchase
and sale of securities for the Portfolio taking into account such factors as
price, commission (negotiable in the case of national securities exchange
transactions), if any, size of order, difficulty of execution and skill required
of the executing broker-dealer through familiarity with commissions charged on
comparable transactions, as well as by comparing commissions paid by the
Portfolio to reported commissions paid by others. The Adviser reviews on a
routine basis commission rates, execution and settlement services performed,
making internal and external comparisons.
The Adviser is authorized, consistent with Section 28(e) of the Securities
Exchange Act of 1934, as amended, when placing portfolio transactions for the
Portfolio with a broker to pay a brokerage commission (to the extent applicable)
in excess of that which another broker might have charged for effecting the same
transaction on account of the receipt of research, market or statistical
information. The term "research, market or statistical information" includes
advice as to the value of securities; the advisability of investing in,
purchasing or selling securities; the availability of securities or purchasers
or sellers of securities; and furnishing analyses and reports concerning
issuers, industries, securities, economic factors and trends, portfolio strategy
and the performance of accounts.
Consistent with the policy stated above, the Conduct Rules of the National
Association of Securities Dealers, Inc. and such other policies as the Trustees
of the Portfolio may determine, the Adviser may consider sales of shares of the
Fund as a factor in the selection of broker-dealers to execute portfolio
transactions. Bankers Trust will make such allocations if commissions are
comparable to those charged by nonaffiliated, qualified broker-dealers for
similar services.
Higher commissions may be paid to firms that provide research services to the
extent permitted by law. Bankers Trust may use this research information in
managing 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 Portfolio, and not
all such information is used by the Adviser in connection with the Portfolio.
Conversely, such information provided to the Adviser by brokers and dealers
through whom other clients of the Adviser effect securities transactions may be
useful to the Adviser in providing services to the Portfolio.
In certain instances there may be securities which are suitable for the
Portfolio as well as for one or more of the Adviser's other clients. Investment
decisions for the Portfolio and for the Adviser's other clients are made with a
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view to achieving their respective investment objectives. It may develop that a
particular security is bought or sold for only one client even though it might
be held by, or bought or sold for, other clients. Likewise, a particular
security may be bought for one or more clients when one or more clients are
selling that same security. Some simultaneous transactions are inevitable when
several clients receive investment advice from the same investment adviser,
particularly when the same security is suitable for the investment objectives of
more than one client. When two or more clients are simultaneously engaged in the
purchase or sale of the same security, the securities are allocated among
clients in a manner believed to be equitable to each. It is recognized that in
some cases this system could have a detrimental effect on the price or volume of
the security as far as the Portfolio in concerned. However, it is believed
that the ability of the Portfolio to participate in volume transactions will
produce better executions for the Portfolio.
For the years ended December 31, 1998, 1997 and 1996, Equity 500 Index
Portfolio incurred brokerage commissions in the amount of $_____, $341,058 and
$289,791, 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. Mutual fund performance
is commonly measured as total return and/or yield. The Fund's performance is
affected by its expenses. These performance figures are calculated in the
following manner:
Yield: Yield refers to the income generated by an investment in a Fund over a
given period of time, expressed as an annual percentage rate. Yields 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 ("NAV") 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 30-day SEC yield for the period ended December 31, 1998 was ___%.
Total return: Total return is the change in value of an investment in the Fund
over a given period, assuming reinvestment of any dividends and capital gains. A
cumulative total return reflects actual performance over a stated period of
time. An average annual total return is a hypothetical rate of return that, if
achieved annually, would have produced the same cumulative total return if
performance had been constant over the entire period. Average annual total
return calculations smooth out variations in performance; they are not the same
as actual year-by-year results. Average annual total returns covering periods of
less than one year assume that performance will remain constant for the rest of
the year. 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.
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The Fund's total return for the one-year period ended December 31, 1998 was
_____%. The Fund's cumulative total return for the five-year period ended
December 31, 1998 was _____%. The Fund's average annualized total return for the
from December 31, 1992 (commencement of operations) to December 31, 1998 was
_____%.
Performance Results: Total returns and yields are based on past results and are
not an indication of future performance. 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 NAV and public offering price of shares of the
Fund will vary based not only on the type, quality and maturities of the
securities held in the Portfolio, but also on changes in the current value of
such securities and on changes in the expenses of the Fund and the Portfolio.
These factors and possible differences in the methods used to calculate total
return should be considered when comparing the total return of the Fund to total
returns published for other investment companies or other investment vehicles.
Total return reflects the performance of both principal and income.
Comparison of Fund Performance
Comparison of the quoted nonstandardized performance of various investments is
valid only if performance is calculated in the same manner. Since there are
different methods of calculating performance, investors should consider the
effect of the methods used to calculate performance when comparing performance
of 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.
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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 Fund. 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
Valuation of Securities
The net asset value ("NAV") per share 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 Fund's net asset value ("NAV") per share is calculated as of the close of
regular trading on the NYSE, which is currently 4:00 p.m., Eastern time (the
"Valuation Time"). The NAV per share is computed by dividing the value of the
Fund's assets (i.e., the value of its investment in the Portfolio and other
assets), less
14
<PAGE>
all liabilities attributable to the shares, by the total number of 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.
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.
Valuation of Securities
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. Shares may be
available through Investment Professionals, such as broker/dealers and
investment advisers (including Service Agents).
Purchase orders for shares (including those purchased through a Service Agent)
that are transmitted to the Trust's Transfer Agent (the "Transfer Agent"), prior
to the Valuation Time on any Valuation Day will be effective at that day's
Valuation Time. The Trust and Transfer Agent reserve the right to reject any
purchase order.
Shares must be purchased in accordance with procedures established by the
Transfer Agent and each Service Agent. It is the responsibility of each Service
Agent to transmit to the Transfer Agent purchase and redemption orders and to
transmit to 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.
Certificates for shares will not be issued. Each shareholder's account will be
maintained by a Service Agent or Transfer Agent.
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. 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 they are accepted by an authorized broker or the
broker's authorized designee.
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
15
<PAGE>
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. For
an account application, call the BT Service Center at 1-800-730-1313.
BT Service Center
P.O. Box 419210
Kansas City, MO 64141-6210
Overnight mailings:
BT Service Center
210 West 10th Street, 8th Floor
Kansas City, MO 64105-1716
If you already have money invested in a fund in the BT Family of Funds, you can:
o Mail an account application with a check,
o Wire money into your account,
o Open an account by exchanging from another fund in the BT Family of
Funds, or
o Contact your Service Agent or Investment Professional.
If you are investing through a tax-sheltered retirement plan, such as an IRA,
for the first time, you will need a special application. Contact your Investment
Professional for more information and a retirement account application.
Additional Information About Buying Shares
<TABLE>
<CAPTION>
<S> <C>
To Open an Account To Add to an Account
By Wire Call the BT Service Center at 1-800-730-1313 to Call your Investment Professional or wire additional
receive wire instructions for account establishment. investment to:
Routing No.: 021001033
Attn: Bankers Trust/IFTC Deposit
DDA No.: 00-226-296
FBO: (Account name)
(Account Number)
Credit: BT Investment Equity 500
Index Fund - 462
Specify the complete name of
the Fund, including your
account number and your name.
By Phone Contact your Service Agent, Investment Contact your Service Agent, Investment
Professional, or call BT's Service Center at Professional, or call BT's Service Center
1-800-730-1313. If you are an existing at 1-800-730-1313. If you are an existing
shareholder, you may exchange from another BT shareholder, you may exchange from another
account with the same registration, including BT account with the same registration,
name, address, and taxpayer ID number. including name, address, and taxpayer ID number.
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
To Open an Account To Add to an Account
By Mail Complete and sign the account application. Make Make your check payable to the complete name of
your check payable to the complete name of Fund of your choice. Indicate your Fund account
the Fund of your choice. Mail to the appropriate number on your check and mail to the address
address indicated on the application. printed on your account statement.
</TABLE>
Redemption of 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 received by the Service Agent and transmitted to
the Transfer Agent prior to the Valuation Time on each Valuation Day will be
effective at the 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 Service Agent does not do so, it may be liable for
any losses due to unauthorized or fraudulent instructions. Such procedures may
include, among others, requiring some form of personal identification prior to
acting upon instructions received by telephone, providing written confirmation
of such transactions and/or tape recording of telephone instructions.
Redemption orders are processed without charge by the Trust. A Service Agent may
on at least 30 days' notice involuntarily redeem a shareholder's account with
the Fund having a balance below the minimum, but not if an account is below the
minimum due to change in market value. See "Minimum Investments" above for
minimum balance amounts.
To sell Shares in a retirement account, your request must be made in writing,
except for exchanges to other eligible funds in the BT Family of Funds, which
can be requested by phone or in writing. For information on retirement
distributions, contact your Service Agent or call the BT Service Center at
1-800-730-1313.
If you are selling some but not all of your non-retirement account shares, leave
at least $1,000 worth of shares in the account to keep it open.
To sell shares by bank wire you will need to sign up for these services in
advance when completing your account application.
Certain requests must include a signature guarantee to protect you and Bankers
Trust from fraud. Redemption requests in writing must include a signature
guarantee if any of the following situations apply:
o Your account registration has changed within the last 30 days,
o The check is being mailed to a different address than the one on your
account (record address),
o The check is being made payable to someone other than the account owner,
o The redemption proceeds are being transferred to a BT account with a
different registration, or
o You wish to have redemption proceeds wired to a non-predesignated bank
account.
A signature guarantee is also required if you change the pre-designated bank
information for receiving redemption proceeds on your account.
17
<PAGE>
You should be able to obtain a signature guarantee from a bank, broker, dealer,
credit union (if authorized under state law), securities exchange or
association, clearing agency, or savings association. A notary public cannot
provide a signature guarantee.
Additional Information About Selling Shares
By Wire - You must sign up for the wire feature before using it. To verify that
it is in place, call 1-800-730-1313. Minimum wire: $1,000. Your wire redemption
request must be received by the Transfer Agent before 4:00 p.m. Eastern time for
money to be wired on the next business day.
In Writing - Write a signed "letter of instruction" with your name, the Fund's
name and Fund's number, your Fund account number, the dollar amount or number of
shares to be redeemed, and mail to one of the following addresses:
BT Service Center
P.O. Box 419210
Kansas City, MO 64141-6210
Overnight mailings:
BT Service Center
210 West 10th Street, 8th Floor
Kansas City, MO 64105-1716
For Trust accounts, the trustee must sign the letter indicating capacity as
trustee. If the trustee's name is not on the account registration, provide a
copy of the trust document certified within the last 60 days.
For a Business or Organization account, at least one person authorized by
corporate resolution to act on the account must sign the letter.
Unless otherwise instructed, the Transfer Agent will send a check to the account
address of record. The Trust reserves the right to close investor accounts via
30 day notice in writing if the Fund account balance falls below the Fund
minimums.
Investor Services
BT Pyramid Mutual Funds provide a variety of services to help you manage your
account.
Information Services
Statements and reports that your Investment Professional or the Transfer Agent
may send to you include the following:
o Confirmation statements (after every transaction that affects your
account balance, including distributions or your account registration)
o Account statements (monthly)
o Financial reports (every six months)
To reduce expenses, only one copy of most financial reports will be mailed, even
if you have more than one account in the Fund. Call your Investment Professional
or the BT Service Center at 1-800-730-1313 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. To make an exchange, follow the
procedures indicated in "Purchase of Shares" and "Redemption of Shares" herein.
Before making an exchange, please note the following:
18
<PAGE>
o Call your Service Agent for information and a prospectus. Read the
prospectus for relevant information.
o Complete and sign an application, taking care to register your new
account in the same name, address and taxpayer identification number as
your existing account(s).
o Each exchange represents the sale of shares of one fund and the
purchase of shares of another, which may produce a gain or loss for tax
purposes. Your Service Agent will receive a written confirmation of
each exchange transaction.
o The Fund reserves the right to terminate or modify the exchange
privilege in the future.
Note that exchanges out of the Fund may be limited to four per calendar year.
Systematic Programs
To move money from your bank account to BT Pyramid Mutual Funds
<TABLE>
<CAPTION>
<S> <C>
Minimum Minimum
Initial Subsequent Frequency Setting up or changing
------- ---------- --------- ----------------------
$1,000 $100 Monthly, bimonthly, For a new account, complete the appropriate
quarterly or semi-annually section on the application.
For existing accounts, call your Investment
Professional for an application. To change the
amount or frequency of your investment, contact
your Investment Professional directly or call
1-800-730-1313. Call at least 10 business days
prior to your next scheduled investment date.
Systematic Withdrawal Program lets you set up periodic redemptions from your
account.
Minimum Frequency Setting up or changing
------- --------- ----------------------
$100 Monthly, quarterly, To establish, call your Investment Professional or
semi-annually or annually 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 your Service Agent or Bankers Trust for further
information. Bankers Trust can set up your new account in the Fund under a
number of several tax-savings or tax-deferred plans. Minimums may differ from
those listed elsewhere in this SAI.
o INDIVIDUAL RETIREMENT ACCOUNTS (IRAS): personal savings plans that
offer tax advantages for individuals to set aside money for retirement
and allow new contributions of $2,000 per tax year.
o ROLLOVER IRAS: tax-deferred retirement accounts that retain the special
tax advantages of lump sum distributions from qualified retirement
plans and transferred IRA accounts.
Redemptions and Purchases in Kind
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
19
<PAGE>
readily marketable securities chosen by the Trust, or the Portfolio, as the case
may be, and valued as they are for purposes of computing the Fund's or the
Portfolio's net asset value, as the case may be (a redemption in kind). If
payment is made to a Fund shareholder in securities, an investor, including the
Fund, the shareholder may incur transaction expenses in converting these
securities into cash. The Trust, on behalf of the Fund, and the Portfolio
has elected, however, to be governed by Rule 18f-1 under the 1940 Act as a
result of which the Fund and the Portfolio are obligated to redeem shares or
beneficial interests, as the case may be, with respect to any one investor
during any 90-day period, solely in cash up to the lesser of $250,000 or 1% of
the net asset value of the Fund or the Portfolio, as the case may be, at the
beginning of the period.
The Portfolio has agreed to make a redemption in kind to the Fund whenever the
Fund wishes to make a redemption in kind and therefore shareholders of the Fund
that receive redemptions in kind will receive portfolio securities of the
Portfolio and in no case will they receive a security issued by the Portfolio.
The Portfolio has advised the Trust that the Portfolio will not redeem in kind
except in circumstances in which the Fund is permitted to redeem in kind or
unless requested by the Fund.
Each investor in the Portfolio, including the Fund, may add to or reduce its
investment in the Portfolio on each day that the NYSE is open for business and
New York charter banks are not closed owing to customary or local holidays. As
of the close of the NYSE, currently 4:00 p.m. (Eastern time or earlier if the
NYSE closes earlier) on each such day, the value of each investor's interest in
the Portfolio will be determined by multiplying the net asset value of the
Portfolio by the percentage representing that investor's share of the aggregate
beneficial interests in the Portfolio. Any additions or reductions which are to
be effected on that day will then be effected. The investor's percentage of the
aggregate beneficial interests in the Portfolio will then be recomputed as the
percentage equal to the fraction (i) the numerator of which is the value of such
investor's investment in the Portfolio as of the close of the NYSE on such day
plus or minus, as the case may be, the amount of net additions to or reductions
in the investor's investment in the Portfolio effected on such day and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of
4:00 p.m. 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.
20
<PAGE>
MANAGEMENT OF THE TRUST AND PORTFOLIO
The Trust and the Portfolio are governed by a Board of Trustees which is
responsible for protecting the interests of investors. By virtue of the
responsibilities assumed by Bankers Trust, the administrator of the Trust and
the Portfolio, neither the Trust nor the Portfolio require 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.
A majority of the Trustees who are not "interested persons" (as defined in the
1940 Act) of the Trust or the Portfolio, as the case may be, have adopted
written procedures reasonably appropriate to deal with potential conflicts of
interest arising from the fact that some of the same individuals are Trustees of
the Trust and the Portfolio, up to and including creating separate boards of
trustees.
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 Portfolio, 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
HARRY VAN BENSCHOTEN (birthdate: February 18, 1928) -- Trustee; Retired (since
1987); Corporate Vice President, Newmont Mining Corporation (prior to 1987);
Director, Canada Life Insurance Company of New York. His address is 6581
Ridgewood Drive, Naples, Florida 34108.
MARTIN J. GRUBER (birthdate: July 15, 1937) -- Trustee; 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; John Bates Clark
Professor of Economics, Columbia University; Distinguished Fellow, American
Economics Association; Fellow, American Academy of Arts and Sciences; Fellow,
Econometric Society; Former Chairman, Columbia University Department of
Economics; Former Director, National Bureau of Economic Research. His address is
35 Claremont Avenue, New York, New York 10027.
Trustees of the Portfolio
CHARLES P. BIGGAR (birthdate: October 13, 1930) -- Trustee; Retired; formerly
Vice President of International Business Machines ("IBM") 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 Portfolio
Unless otherwise specified, each officer listed below holds the same position
with the Trust and the Portfolio.
21
<PAGE>
JOHN Y. KEFFER (birthdate: July 14, 1942) -- President and Chief Executive
Officer; President, Forum Financial Group. His address is 2 Portland Square,
Portland, Maine 04101.
JOSEPH A. FINELLI (birthdate: January 24, 1957) -- Treasurer; Vice President,
BT Alex. Brown Incorporated and Vice President, Investment Company Capital
Corp. (registered investment adviser), September 1995 to present; formerly, Vice
President and Treasurer, The Delaware Group of Funds (registered investment
companies) and Vice President, Delaware Management Company Inc. (investments),
1980 to August 1995. His address is One South Street, Baltimore, Maryland 21202.
DANIEL O. HIRSCH (birthdate: March 27, 1954) -- Secretary; Principal, BT Alex.
Brown since July 1998; Assistant General Counsel in the Office of the General
Counsel at the United States Securities and Exchange Commission from 1993 to
1998. His address is 2901 Dorset Avenue, Chevy Chase, Maryland 20815.
Messrs. Keffer, Finelli and Hirsch also hold similar positions for other
investment companies for which ICC Distributors, or an affiliate serves as the
principal underwriter.
No person who is an officer or director of Bankers Trust is an officer or
Trustee of the Trust or the Portfolio. No director, officer or employee of
ICC Distributors or any of its affiliates will receive any compensation from the
Trust or the Portfolio for serving as an officer or Trustee of the Trust or
the Portfolio.
22
<PAGE>
Trustee Compensation Table
<TABLE>
<CAPTION>
<S> <C>
Name, Aggregate Aggregate Total
Position With Compensation Compensation Compensation from
Trust/Portfolio from Trust* from Portfolio** Fund Complex+
- --------------- ----------- ---------------- -------------
Harry Van Benschoten,
Trustee of Trust $ N/A $27,500
------
Martin J. Gruber,
Trustee of Trust $ N/A $27,500
------
Kelvin J. Lancaster,
Trustee of Trust $ N/A $35,000
------ -------
Charles P. Biggar,
Trustee of Portfolio N/A $ $35,000
S. Leland Dill,
Trustee of Portfolio N/A $ $35,000
Philip Saunders, Jr.,
Trustee of Portfolio N/A $ $35,000
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The information provided is for the BT Pyramid Mutual Funds which is
comprised of 6 funds. Information provided is for the ended December 31,
1998.
** The information provided is for the year ended December 31, 1998.
+ Aggregated information is furnished for the BT Family of Funds which consists
of the following: BT Investment Funds, BT Institutional Funds, BT Pyramid
Mutual 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, Intermediate Tax Free
Portfolio, Asset Management Portfolio, Equity 500 Index Portfolio, and
Capital Appreciation Portfolio. The compensation provided is the calendar
year ended December 31, 1998.
As of________, 1999, the Trustees and officers of the Trust and the
Portfolio owned in the aggregate less than 1% of the shares of the Fund or the
Trust (all series taken together).
As of_______, 1999, the following shareholders of record owned 5% or more of
the outstanding shares of the Fund: [TO BE PROVIDED]
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 Adviser.
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 New York Corporation. Bankers Trust
conducts a variety of general banking and trust activities and is a major
wholesale supplier of financial services to the international and domestic
institutional market. [As of March 31, 1998, Bankers Trust New York Corporation
was the seventh largest bank holding company in the United States with total
assets of over $150 billion.] [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.]
23
<PAGE>
Bankers Trust has more than 50 years of experience managing retirement assets
for the nation's largest corporations and institutions. In the past, these
clients have been serviced through separate account and commingled fund
structures. Now, the BT Family of Funds brings Bankers Trust's extensive
investment management expertise--once available to only the largest institutions
in the U.S.--to individual investors. Bankers Trust's officers have had
extensive experience in managing investment portfolios having objectives similar
to those of the Portfolio.
Bankers Trust, subject to the supervision and direction of the Board of Trustees
of the Portfolio, manages the Portfolio in accordance with the Portfolio's
investment objective and stated investment policies, makes investment decisions
for the Portfolio, places orders to purchase and sell securities and other
financial instruments on behalf of the Portfolio and employs professional
investment managers and securities analysts who provide research services to the
Portfolio. Bankers Trust may utilize the expertise of any of its world wide
subsidiaries and affiliates to assist it in its role as investment adviser. All
orders for investment transactions on behalf of the Portfolio are placed by the
Adviser with broker-dealers and other financial intermediaries that it selects,
including those affiliated with Bankers Trust. A Bankers Trust affiliate will be
used in connection with a purchase or sale of an investment for the Portfolio
only if Bankers Trust believes that the affiliate's charge for the transaction
does not exceed usual and customary levels. The Portfolio will not invest in
obligations for which Bankers Trust or any of its affiliates is the ultimate
obligor or accepting bank. The Portfolio may, however, invest in the obligations
of correspondents and customers of Bankers Trust.
The Adviser is a wholly owned subsidiary of Bankers Trust Corporation. On
November 30, 1998, Bankers Trust Corporation entered into an Agreement and Plan
of Merger with Deutsche Bank AG under which Bankers Trust Company would merge
with and into a subsidiary of Deutsche Bank AG. Deutsche Bank AG is a major
global banking institution that is engaged in a wide range of financial
services, including retail and commercial banking, investment banking and
insurance. The transaction is contingent upon various regulatory approvals, as
well as the approval of the Fund's shareholders. If the transaction is approved
and completed, Deutsche Bank AG, as the Adviser's new parent company, will
control the operations of the Adviser. Bankers Trust believes that, under this
new arrangement, the services provided to the Fund will be maintained at their
current level.
Under the terms of the Portfolio's investment advisory agreement with Bankers
Trust (the "Advisory Agreement"), Bankers Trust manages the Portfolio subject to
the supervision and direction of the Board of Trustees of the Portfolio. Bankers
Trust will: (i) act in strict conformity with the Portfolio's Declaration of
Trust, the 1940 Act and the Investment Advisers Act of 1940, as the same may
from time to time be amended; (ii) manage the Portfolio in accordance with the
Portfolio's investment objective, restrictions and policies; (iii) make
investment decisions for the Portfolio; and (iv) place purchase and sale
orders for securities and other financial instruments on behalf of the
Portfolio.
Bankers Trust bears all expenses in connection with the performance of services
under 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, ICC Distributors 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.
Under the Advisory Agreement, Bankers Trust receives a 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. For the fiscal years ended December 31, 1998,
1997 and 1996, Bankers Trust earned $_____, $2,430,147 and $1,505,963,
respectively, as compensation for investment advisory services provided to the
Portfolio. During the same periods, Bankers Trust reimbursed $_____, $1,739,490
and $870,024, respectively, to the Portfolio to cover expenses.
24
<PAGE>
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 Portfolio that, in making its investment decisions, it does not
obtain or use material inside information in its possession or in the possession
of any of its affiliates. In making investment recommendations for the
Portfolio, Bankers Trust will not inquire or take into consideration whether an
issuer of securities proposed for purchase or sale by the Portfolio is a
customer of Bankers Trust, its parent or its subsidiaries or affiliates and, in
dealing with its customers, Bankers Trust, its parent, subsidiaries and
affiliates will not inquire or take into consideration whether securities of
such customers are held by any fund managed by Bankers Trust or any such
affiliate.
Administrator
Under its Administration and Services Agreement with the Trust, the Adviser
calculates the net asset value of the Fund and generally assists the Board of
Trustees of the Trust in all aspects of the administration and operation of the
Trust. The Administration and Services Agreement provides for the Trust to pay
the Adviser a fee, computed daily and paid monthly, equal on an annual basis to
0.30% of the average daily net assets of the Fund.
Under Administration and Services Agreement with the Portfolio, the Adviser
calculates the value of the assets of the Portfolio and generally assists the
Board of Trustees of the Portfolio in all aspects of the administration and
operation of the Portfolio. The Administration and Services Agreement provides
for the Portfolio to pay the Adviser a fee, computed daily and paid monthly,
equal on an annual basis to the lesser of 0.05% of the Portfolio's average daily
net assets 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 the
Administration and Services Agreement, the Adviser may delegate one or more of
its responsibilities to others, including affiliates of ICC Distributors, at the
Adviser's expense.
Under the Administration and Services Agreement, 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 Portfolio as
from time to time may be agreed upon by Bankers Trust and FSC. The
Sub-Administration Agreement provides that FSC will receive such compensation as
from time to time may be agreed upon by FSC and Bankers Trust. All such
compensation will be paid by Bankers Trust.
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For the years ended December 31, 1998, 1997 and 1996, Bankers Trust earned
$_____, $1,666,151 and $1,049,314, respectively, in compensation for
administrative and other services provided to the Fund. During the same periods,
Bankers Trust reimbursed $_____, $774,879 and $595,135, respectively, to the
Fund to cover expenses.
For the years ended December 31, 1998, 1997 and 1996, Bankers Trust earned
$_____, $1,215,073 and $752,981, 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.
Distributor
ICC Distributors is the principal Distributor for shares of the Fund. ICC
Distributors is a registered broker/dealer and is unaffiliated with Bankers
Trust. The principal business address of ICC Distributors is Two Portland
Square, Portland, Maine 04101. In addition to ICC Distributors's duties as
Distributor, ICC Distributors and its affiliates may, in their discretion,
perform additional functions in connection with transactions in the shares of
the Fund.
Service Agent
All shareholders must be represented by a Service Agent. The Adviser 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 the Adviser from its fees. The services provided
by a Service Agent may include establishing and maintaining shareholder
accounts, processing purchase and redemption transactions, performing
shareholder sub-accounting, answering client inquiries regarding the Trust,
investing client cash account balances automatically in Fund shares and
processing redemption transactions at the request of clients, assisting clients
in changing dividend options, account designations and addresses, providing
periodic statements showing the client's account balance and integrating these
statements with those of other transactions and balances in the client's other
accounts serviced by the Service Agent, 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, arranging for bank wires 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 the Adviser, 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, 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.
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Expenses
The Fund bears its own expenses. Operating expenses for the Fund generally
consist of all costs not specifically borne by the Adviser or ICC Distributors,
including administration and services fees, fees for necessary professional
services, amortization of organizational expenses and costs associated with
regulatory compliance and maintaining legal existence and shareholder relations.
The Portfolio bears its own expenses. Operating expenses for the Portfolio
generally consist of all costs not specifically borne by the Adviser or ICC
Distributors, including investment advisory and administration and service fees,
fees for necessary professional services, amortization of organizational
expenses, the costs associated with regulatory compliance and maintaining legal
existence and investor relations.
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, 787 Seventh Avenue, New York, New York 10019-6099,
serves as Counsel to the Trust and from time to time provides certain legal
services to Bankers Trust. PricewaterhouseCoopers LLP, 1100 Main Street, Suite
900, Kansas City, Missouri 64105 has been selected as Independent Accountants
for the Trust.
ORGANIZATION OF THE TRUST
* 1 moved from here; text not shownThe 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. The shares of each series participate
equally in the earnings, dividends and assets of the particular series. The
Trust may create and issue additional series of shares. The Trust's Declaration
of Trust permits the Trustees to divide or combine the shares into a greater or
lesser number of shares without thereby changing the proportionate beneficial
interest in a series. Each share represents an equal proportionate interest in a
series with each other share. Shares when issued are fully paid and
non-assessable, except as set forth below. Shareholders are entitled to one vote
for each share held.
The Trust is an entity commonly known as a "Massachusetts business trust."
Massachusetts law provides that shareholders could under certain circumstances
be held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims shareholder liability for acts or obligations of
the Trust and requires that notice of this disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or a
Trustee. The
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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 shareholders 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, 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 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. In addition, whenever the Trust is requested to vote on matters
pertaining to the fundamental policies 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.
** 1 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.
The Trust is not required to hold annual meetings of shareholders but will hold
special meetings of shareholders when in the judgment of the Trustees it is
necessary or desirable to submit matters for a shareholder vote. Shareholders
have under certain circumstances the right to communicate with other
shareholders in connection with requesting a meeting of shareholders for the
purpose of removing one or more Trustees without a meeting. Upon liquidation of
the Fund, shareholders of that Fund would be entitled to share pro rata in the
net assets of the Fund available for distribution to shareholders.
Whenever the Trust is requested to vote on a matter pertaining to the Portfolio,
the Trust will vote its shares without a meeting of shareholders of the Fund if
the proposal is one, if which made with respect to the Fund, would not require
the vote of shareholders of the Fund as long as such action is permissible under
applicable statutory and regulatory requirements. For all other matters
requiring a vote, the Trust will hold a meeting of shareholders of the Fund and,
at the meeting of investors in the Portfolio, the Trust will cast all of its
votes in the same proportion as the votes all its shares at the Portfolio
meeting, other investors with a greater pro rata ownership of the Portfolio
could have effective voting control of the operations of the Portfolio.
As of December 31, 1998, the following shareholders of record owned 25% or more
of the voting securities of the Fund, and, therefore, may, for certain purposes,
be deemed to control the Fund and be able to affect the outcome of certain
matters presented for a vote of its shareholders: [TO BE PROVIDED]
TAXATION
Taxation of the Fund
The Trust intends to qualify annually and to elect for the Fund to be treated as
a regulated investment company under the Code. As a regulated investment
company, the Fund will not be subject to U.S. Federal income tax on its
investment company taxable income and net capital gains (the excess of net
long-term capital gains over net short-term capital losses), if any, that it
distributes to shareholders. The Fund intends to distribute to its
shareholders, at least annually, substantially all of its investment company
taxable income and net capital gains, and therefore does not anticipate
incurring a Federal income tax liability. The Fund also does not anticipate
paying any excise taxes. The Fund's dividends and distributions will not qualify
for the dividends-received deduction for corporations.
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If for any taxable year the Fund does not qualify for the special federal income
tax treatment afforded regulated investment companies, all of its taxable income
will be subject to federal income tax at regular corporate rates (without any
deduction for distributions to its shareholders). In such event, dividend
distributions would be taxable to shareholders to the extent of current
accumulated earnings and profits, and would be eligible for the dividends
received deduction for corporations in the case of corporate shareholders.
The Fund's investment in Section 1256 contracts, such as regulated futures
contracts and options on most stock indices, is subject to special tax rules.
All section 1256 contracts held by the Fund at the end of its taxable year are
required to be marked to their market value, and any unrealized gain or loss on
those positions will be included in the Fund's income as if each position had
been sold for its fair market value at the end of the taxable year. The
resulting gain or loss will be combined with any gain or loss realized by the
Fund from positions in section 1256 contracts closed during the taxable year.
Provided such positions were held as capital assets and were not part of a
"hedging transaction" nor part of a "straddle," 60% of the resulting net gain or
loss will be treated as long-term capital gain or loss, and 40% of such net gain
or loss will be treated as short-term capital gain or loss, regardless of the
period of time the positions were actually held by the Fund.
Distributions
The Fund distributes substantially all of its net 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.
Dividends paid out of the Fund's investment company taxable income and
short-term capital gains 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. 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 October, November or
December and paid in January are taxable as if paid on December 31. Shareholders
receiving distributions in the form of additional shares, rather than cash,
generally will have a taxable amount, and 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 income 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.
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.
On the ex-date for a distribution from capital gains, the Fund's share value is
reduced by the amount of the distribution. If you buy shares just before the
ex-date ("buying a dividend"), you will pay the full price for the shares and
then receive a portion of the price back as a taxable distribution.
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.
29
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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, 1998, are incorporated herein by reference to the Annual Report to
shareholders for the Fund dated December 31, 1998. A copy of the Fund's Annual
Report may be obtained without charge by contacting the Fund.
30
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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.
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Investment Adviser of the Portfolio and Administrator
BANKERS TRUST COMPANY
Distributor
ICC DISTRIBUTORS, INC.
Custodian and Transfer Agent
BANKERS TRUST COMPANY
Independent Accountants
PRICEWATERHOUSECOOPERS LLP
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.
--------------------
<PAGE>
[INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY ANY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE
PROSPECTUS.]
STATEMENT OF ADDITIONAL INFORMATION
APRIL 30, 1999
BT PYRAMID MUTUAL FUNDS
o BT INVESTMENT MONEY MARKET FUND
BT Pyramid Mutual Funds (THE "TRUST") is an open-end management investment
COMPANY that offer investors a selection of investment portfolios, each having
distinct investment objectives and policies. This Statement of Additional
Information ("SAI") relates to the BT INVESTMENT MONEY MARKET FUND (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
a portfolio of high quality money market instruments. THE TRUST SEEKS to achieve
the investment OBJECTIVE of THE Fund by investing all the investable assets of
the Fund in THE CASH MANAGEMENT PORTFOLIO (THE "PORTFOLIO"), a diversified
open-end management investment company having the same investment OBJECTIVE AS
THE FUND. THE PORTFOLIO IS A SERIES OF BT INVESTMENT Portfolios.
Shares of the FUND ARE SOLD BY ICC DISTRIBUTORS, INC. ("ICC DISTRIBUTORS"), THE
TRUST'S distributor ("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 FUND'S PROSPECTUS DATED APRIL 30, 1999, which may be amended from time to
time PROVIDES the basic information investors should know before investing. This
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
BANKERS TRUST SERVICE AGENT ("SERVICE AGENT"). Capitalized terms not otherwise
defined in this SAI have the meanings accorded to them in the FUND'S PROSPECTUS.
THE FINANCIAL STATEMENTS FOR THE FUND AND THE PORTFOLIO FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1998, ARE INCORPORATED HEREIN BY REFERENCE TO THE ANNUAL
REPORT TO SHAREHOLDERS FOR THE FUND AND PORTFOLIO DATED DECEMBER 31, 1998. A
COPY OF THE FUND'S AND THE PORTFOLIO'S ANNUAL REPORT MAY BE OBTAINED WITHOUT
CHARGE BY CALLING THE FUND AT THE TELEPHONE NUMBER LISTED BELOW.
BANKERS TRUST COMPANY
INVESTMENT ADVISER OF THE PORTFOLIO AND ADMINISTRATOR
ICC DISTRIBUTORS, INC.
DISTRIBUTOR
TWO PORTLAND SQUARE PORTLAND, MAINE 04101 1-800-368-4031
- --------------------------------------------------
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<TABLE>
<S> <C>
TABLE OF CONTENTS
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS..........................................................................1
INVESTMENT OBJECTIVE.................................................................................................1
INVESTMENT POLICIES..................................................................................................1
OBLIGATIONS OF BANKS AND OTHER FINANCIAL INSTITUTIONS............................................................1
* 2 MOVED FROM HERE; TEXT NOT SHOWNCOMMERCIAL PAPER..............................................................1
VARIABLE RATE MASTER DEMAND NOTES................................................................................1
U.S. GOVERNMENT OBLIGATIONS......................................................................................2
* 3 MOVED FROM HERE; TEXT NOT SHOWN* 4 MOVED FROM HERE; TEXT NOT SHOWNOTHER DEBT OBLIGATIONS.....................2
ASSET-BACKED SECURITIES..........................................................................................2
REPURCHASE AGREEMENTS............................................................................................2
** 1REVERSE REPURCHASE AGREEMENTS................................................................................2
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES......................................................................3
INVESTMENT IN OTHER INVESTMENT COMPANIES.........................................................................3
CREDIT ENHANCEMENT...............................................................................................3
LENDING OF PORTFOLIO SECURITIES..................................................................................3
QUALITY AND MATURITY OF THE PORTFOLIO'S SECURITIES...............................................................4
ADDITIONAL RISK FACTORS..............................................................................................4
YEAR 2000 MATTERS................................................................................................4
SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE......................................................4
RATING SERVICES..................................................................................................5
INVESTMENT RESTRICTIONS..............................................................................................5
FUNDAMENTAL POLICIES.............................................................................................5
ADDITIONAL RESTRICTIONS..........................................................................................7
PORTFOLIO TURNOVER...................................................................................................8
PORTFOLIO TRANSACTIONS...............................................................................................8
NET ASSET VALUE...........................................................................................................9
PURCHASE AND REDEMPTION INFORMATION......................................................................................10
PURCHASE OF SHARES..................................................................................................10
MINIMUM INVESTMENTS.................................................................................................11
REDEMPTION OF SHARES................................................................................................12
CHECKWRITING....................................................................................................12
ADDITIONAL INFORMATION ABOUT SELLING SHARES.........................................................................13
INVESTOR SERVICES...................................................................................................13
INFORMATION SERVICES................................................................................................13
EXCHANGE PRIVILEGE..................................................................................................14
SYSTEMATIC PROGRAMS.................................................................................................14
MANAGEMENT OF THE TRUST AND PORTFOLIO....................................................................................15
TRUSTEES OF BT PYRAMID MUTUAL FUNDS.................................................................................15
TRUSTEES OF THE PORTFOLIO...........................................................................................15
OFFICERS OF THE TRUST AND PORTFOLIO.................................................................................15
TRUSTEE COMPENSATION TABLE..........................................................................................16
INVESTMENT ADVISER..................................................................................................17
ADMINISTRATOR.......................................................................................................18
DISTRIBUTOR.........................................................................................................19
SERVICE AGENT.......................................................................................................19
CUSTODIAN AND TRANSFER AGENT........................................................................................19
EXPENSES............................................................................................................19
USE OF NAME.........................................................................................................20
BANKING REGULATORY MATTERS..........................................................................................20
COUNSEL AND INDEPENDENT ACCOUNTANTS.................................................................................20
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ORGANIZATION OF THE TRUSTS...............................................................................................20
TAXES....................................................................................................................21
PERFORMANCE INFORMATION..................................................................................................22
ECONOMIC AND MARKET INFORMATION.....................................................................................23
FINANCIAL STATEMENTS.....................................................................................................23
APPENDIX.................................................................................................................24
DESCRIPTION OF SECURITIES RATINGS...................................................................................24
</TABLE>
II
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INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVE
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
A PORTFOLIO OF HIGH QUALITY MONEY MARKET INSTRUMENTS. THERE CAN, OF COURSE, BE
NO ASSURANCE THAT THE FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE.
INVESTMENT POLICIES
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. THE PORTFOLIO, IN PURSUING ITS
INVESTMENT OBJECTIVE, WILL COMPLY WITH RULE 2A-7 ("RULE 2A-7") UNDER THE
INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE "1940 ACT"). THUS, DESCRIPTIONS
OF INVESTMENT TECHNIQUES AND PORTFOLIO INSTRUMENTS ARE QUALIFIED BY THE
PROVISIONS AND LIMITATIONS OF RULE 2A-7.
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.
* 1 moved from here; text not shown** 2 For purposes of the PORTFOLIO'S
investment policies with respect to bank obligations, the assets of a bank will
be deemed to include the assets of its domestic and foreign branches.
Obligations of foreign branches of U.S. banks and foreign banks may be general
obligations of the parent bank in addition to the issuing bank or may be limited
by the terms of a specific obligation and by government regulation. If Bankers
Trust, acting under the supervision of the Board of Trustees, deems the
instruments to present minimal credit risk, THE Portfolio may invest in
obligations of foreign banks or foreign branches of U.S. banks which include
banks located in the United Kingdom, Grand Cayman Island, Nassau, Japan and
Canada. Investments in these obligations may entail risks that are different
from those of investments in obligations of U.S. domestic banks because of
differences in political, regulatory and economic systems and conditions. These
risks include future political and economic developments, currency blockage, the
possible imposition of withholding taxes on interest payments, possible seizure
or nationalization of foreign deposits, difficulty or inability of pursuing
legal remedies and obtaining judgments in foreign courts, possible establishment
of exchange controls or the adoption of other foreign governmental restrictions
that might affect adversely the payment of principal and interest on bank
obligations. Foreign branches of U.S. banks and foreign banks may also be
subject to less stringent reserve requirements and to different accounting,
auditing, reporting and recordkeeping standards that those applicable to
domestic branches of U.S. banks.
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
CORPORATION AND PURCHASED BY THE PORTFOLIO MUST BE U.S. DOLLAR-DENOMINATED AND
MUST NOT BE SUBJECT TO FOREIGN WITHHOLDING TAX AT THE TIME OF PURCHASE.
INVESTING IN FOREIGN COMMERCIAL PAPER GENERALLY INVOLVES RISKS SIMILAR TO THOSE
DESCRIBED ABOVE RELATING TO OBLIGATIONS OF FOREIGN BANKS OR FOREIGN BRANCHES 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
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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 FUND'S
SECURITIES" HEREIN.)
** 3 U.S. GOVERNMENT OBLIGATIONS. THE PORTFOLIO may invest in direct obligations
issued by the U.S. Treasury or in obligations issued or guaranteed by the U.S.
Treasury or by agencies or instrumentalities of the U.S. government ("U.S.
Government Obligations"). Certain short-term U.S. Government Obligations, such
as those issued by the Government National Mortgage Association, are supported
by the "full faith and credit" of the U.S. government; others, such as those of
the Export-Import Bank of the United States, are supported by the right of the
issuer to borrow from the U.S. Treasury; others, such as those of the Federal
National Mortgage Association are solely the obligations of the issuing entity
but are supported by the discretionary authority of the U.S. government to
purchase the agency's obligations; and still others, such as those of the
Student Loan Marketing Association, are supported by the credit of the
instrumentality. No assurance can be given that the U.S. government would
provide financial support to U.S. government-sponsored instrumentalities if it
is not obligated to do so by law.
** 4 Examples of the types of U.S. Government Obligations that the PORTFOLIO may
hold include, but are not limited to, in addition to those described above and
direct U.S. Treasury obligations, the obligations of the Federal Housing
Administration, Farmers Home Administration, Small Business Administration,
General Services Administration, Central Bank for Cooperatives, Farm Credit
Banks, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation, Federal
Intermediate Credit Banks, Federal Land Banks and Maritime Administration.
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.
** 5 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 may provide periodic payments
that 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 MATURITY 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 SUBJECT TO REPURCHASE AGREEMENTS
TO ENSURE THAT IT IS MAINTAINED AT THE REQUIRED LEVEL.
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REVERSE REPURCHASE AGREEMENTS. THE PORTFOLIO may borrow funds for temporary or
emergency purposes, such as meeting larger than anticipated redemption requests,
and not for leverage, by among other things, agreeing to sell portfolio
securities to financial institutions such as banks and broker-dealers and to
repurchase them at a mutually agreed date and price (a "reverse repurchase
agreement"). At the time THE Portfolio enters into a reverse repurchase
agreement it will place in a segregated custodial account cash, U.S. Government
Obligations or high-grade debt obligations having a value equal to the
repurchase price, including accrued interest. Reverse repurchase agreements
involve the risk that the market value of the securities sold by THE Portfolio
may decline below the repurchase price of those securities. Reverse repurchase
agreements are considered to be borrowings by THE Portfolio.
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 at the same time as the reciprocal delivery or payment
by the other party to the transaction. A 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 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. A 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 segregate with the Portfolio's custodian liquid instruments in an amount at
least equal to the when-issued or delayed delivery commitment.
* 5 moved from here; text not shown 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 THAN 10% OF ITS ASSETS IN OTHER MONEY MARKET FUNDS
UNLESS PERMITTED TO EXCEED THESE LIMITATIONS BY AN EXEMPTIVE ORDER OF THE
SECURITIES AND EXCHANGE COMMISSION (THE "SEC").
CREDIT ENHANCEMENT. CERTAIN OF THE PORTFOLIO'S ACCEPTABLE INVESTMENTS MAY BE
CREDIT-ENHANCED BY A GUARANTY, LETTER OF CREDIT, OR INSURANCE FROM A THIRD
PARTY. ANY BANKRUPTCY, RECEIVERSHIP, DEFAULT, OR CHANGE IN THE CREDIT QUALITY OF
THE THIRD PARTY PROVIDING THE CREDIT ENHANCEMENT COULD 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 ISSUED BY OR CREDIT-ENHANCED BY
BANKS OR OTHER FINANCIAL INSTITUTIONS.
LENDING OF PORTFOLIO SECURITIES. THE PORTFOLIO IS PERMITTED TO LEND UP TO 33
1/3% OF THE TOTAL VALUE OF ITS SECURITIES TO BROKERS, DEALERS AND OTHER
FINANCIAL ORGANIZATIONS. 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 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. CASH COLLATERAL MAY BE
INVESTED IN A MONEY MARKET FUND MANAGED BY BANKERS TRUST (OR ITS AFFILIATES) 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.
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DURING THE TERM OF THE LOAN, THE PORTFOLIO CONTINUES TO BEAR THE RISK OF
FLUCTUATIONS IN THE PRICE OF THE LOANED SECURITIES. IN LENDING SECURITIES TO
BROKERS, DEALERS AND OTHER ORGANIZATIONS, THE PORTFOLIO IS SUBJECT TO RISKS
WHICH, LIKE THOSE ASSOCIATED WITH OTHER EXTENSIONS OF CREDIT, INCLUDE DELAYS IN
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 AFFILIATES) 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 UNRATED, 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 A NRSRO. THESE ORGANIZATIONS AND THEIR HIGHEST SHORT-TERM RATING CATEGORY
(WHICH MAY ALSO BE MODIFIED BY A "+") ARE: DUFF AND PHELPS CREDIT RATING CO.,
D-1; FITCH IBCA, INC. F1; MOODY'S INVESTORS SERVICE INC. ("MOODY'S"), PRIME-1;
STANDARD & POOR'S, A-1; AND THOMSON BANKWATCH, INC., T-1. A DESCRIPTION OF SUCH
RATINGS IS PROVIDED IN THE APPENDIX. 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 RISK FACTORS
IN ADDITION TO THE RISKS DISCUSSED ABOVE, THE PORTFOLIO'S INVESTMENTS MAY BE
SUBJECT TO THE FOLLOWING RISK FACTORS:
YEAR 2000 MATTERS. Like other mutual funds, financial and business organizations
and individuals around the world, the Funds 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.
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, INVESTMENT VEHICLES 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.
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
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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 OBJECTIVES, POLICIES OR
RESTRICTIONS MAY REQUIRE THE FUND TO WITHDRAW ITS INTEREST IN THE PORTFOLIO. ANY
SUCH WITHDRAWAL COULD RESULT IN A DISTRIBUTION "IN KIND" OF PORTFOLIO SECURITIES
(AS OPPOSED TO A CASH DISTRIBUTION FROM THE PORTFOLIO). IF SECURITIES ARE
DISTRIBUTED, THE FUND COULD INCUR BROKERAGE, TAX OR OTHER CHARGES IN CONVERTING
THE SECURITIES TO CASH. IN ADDITION, THE DISTRUBUTION 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 HEREIN WITH RESPECT TO THE PORTFOLIO.
THE FUND'S INVESTMENT OBJECTIVE IS NOT A FUNDAMENTAL POLICY AND MAY BE CHANGED
UPON NOTICE TO, BUT WITHOUT THE 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.
RATING SERVICES. The ratings of Moody's and Standard & Poor's Ratings Group
("S&P") represent their opinions as to the quality of the securities that they
undertake to rate. It should be emphasized, however, that ratings are relative
and subjective and are not absolute standards of quality. Although these ratings
are an initial criterion for selection of portfolio investments, THE ADVISER
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 THE ADVISER 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 Prospectus is
set forth in the Appendix to this SAI.
INVESTMENT RESTRICTIONS
FUNDAMENTAL POLICIES. THE FOLLOWING investment restrictions have been adopted by
the TRUST with respect to the FUND and by the PORTFOLIO as fundamental policies.
Under the 1940 ACT, a "fundamental" policy may not be changed without the vote
of a majority of the outstanding voting securities of the Fund or Portfolio,
respectively, which is defined in the 1940 Act as the lesser of (a) 67% or more
of the shares present at a shareholder meeting if the holders of more than 50%
of the outstanding shares are present or represented by proxy, or (b) more than
50% of the outstanding shares. WHENEVER THE Fund is requested to vote on a
change in the investment restrictions of THE Portfolio, THE Trust will hold a
meeting of Fund shareholders and will cast its votes as instructed by the
shareholders. Fund shareholders who do not vote will not affect THE Trust's
votes at the Portfolio meeting. The percentage of THE Trust's votes representing
Fund shareholders not voting will be voted by the Trustees of the Trust in the
same proportion as the Fund shareholders who do, in fact, vote.
Under investment policies adopted by the TRUST, on behalf of THE Fund, and by
the PORTFOLIO, THE Fund and the Portfolio may not:
1. Borrow money, except for temporary or emergency (not leveraging)
purposes in an amount not exceeding 5% of the value of the Fund's or
the Portfolio's total assets (including the amount borrowed), as the
case may be, calculated in each case at the lower of cost or market.
5
<PAGE>
2. Pledge, hypothecate, mortgage or otherwise encumber more than 5% of the
total assets of the Fund or the Portfolio, as the case may be, and only
to secure borrowings for temporary or emergency purposes.
3. Invest more than 5% of the total assets of the Fund or the Portfolio,
as the case may be, in any one issuer (other than U.S. Government
Obligations) or purchase more than 10% of any class of securities of
any one issuer; provided, however, that (i) up to 25% of the assets of
the Fund and the Portfolio may be invested without regard to this
restriction; provided, however, that nothing in this investment
restriction shall prevent THE Trust from investing all or part of THE
Fund's assets in an open-end management investment company with
substantially the same investment objectives as THE Fund.
4. Invest more than 25% of the total assets of the Fund or the Portfolio,
as the case may be, in the securities of issuers in any single
industry; provided that: (i) this limitation shall not apply to the
purchase of U.S. Government Obligations; (ii) under normal market
conditions more than 25% of the total assets of THE FUND (AND
Portfolio) will be invested in obligations of foreign and U.S. Banks
provided, however, that nothing in this investment restriction shall
prevent THE Trust from investing all or part of THE Fund's ASSETS
in an open-end management investment company with substantially the
same investment objectives as THE Fund.
5. Make short sales of securities, maintain a short position or purchase
any securities on margin, except for such short-term credits as are
necessary for the clearance of transactions.
6. Underwrite the securities issued by others (except to the extent the
Fund or Portfolio may be deemed to be an underwriter under the Federal
securities laws in connection with the disposition of its portfolio
securities) or knowingly purchase restricted securities, provided,
however, that nothing in this investment restriction shall prevent
THE Trust from investing all of THE Fund's ASSETS in an open-end
management investment company with substantially the same investment
objectives as THE Fund.
7. Purchase or sell real estate, real estate investment trust securities,
commodities or commodity contracts, or oil, gas or mineral interests,
but this shall not prevent the Fund or the Portfolio from investing in
obligations secured by real estate or interests therein.
8. Make loans to others, except through the purchase of qualified debt
obligations, the entry into repurchase agreements and, the lending of
portfolio securities.
9. Invest more than an aggregate of 10% of the net assets of the Fund or
the Portfolio's, respectively, (taken, in each case, at current value)
in (i) securities that cannot be readily resold to the public because
of legal or contractual restrictions or because there are no market
quotations readily available or (ii) other "illiquid" securities
(including time deposits and repurchase agreements maturing in more
than seven calendar days); provided, however, that nothing in this
investment restriction shall prevent THE Trust from investing all or
part of THE Fund's assets in an open-end management investment
company with substantially the same investment objectives as THE
Fund.
10. Purchase more than 10% of the voting securities of any issuer or invest
in companies for the purpose of exercising control or management;
provided, however, that nothing in this investment restriction shall
prevent THE Trust from investing all or part of THE Fund's ASSETS
in an open-end management investment company with substantially the
same investment objectives as THE Fund.
11. Purchase securities of other investment companies, except to the extent
permitted under the 1940 Act or in connection with a merger,
consolidation, reorganization, acquisition of assets or an offer of
exchange; provided, however, that nothing in this investment
restriction shall prevent THE Trust from investing all or part of
THE Fund's ASSETS in an open-end management investment company with
substantially the same investment objectives as THE Fund.
12. Issue any senior securities, except insofar as it may be deemed to have
issued a senior security by reason of (i) entering into a reverse
repurchase agreement or (ii) borrowing in accordance with terms
described in the Prospectus and this SAI.
13. Purchase or retain the securities of any issuer if any of the officers
or trustees of the Fund or the Portfolio or its Adviser owns
individually more than 1/2 of 1% of the securities of such issuer, and
together such officers and directors own more than 5% of the securities
of such issuer.
6
<PAGE>
14. Invest in warrants, except that the Fund or the Portfolio may invest in
warrants if, as a result, the investments (valued in each case at the
lower of cost or market) would not exceed 5% of the value of the net
assets of the Fund or the Portfolio, as the case may be, of which not
more than 2% of the net assets of the Fund or the Portfolio, as the
case may be, may be invested in warrants not listed on a recognized
domestic stock exchange. Warrants acquired by the Fund or the Portfolio
as part of a unit or attached to securities at the time of acquisition
are not subject to this limitation.
15. WITH RESPECT TO 75% OF THE FUND'S (PORTFOLIO'S) TOTAL ASSETS, INVEST
MORE THAN 5% of its total assets IN THE SECURITIES OF ANY ONE ISSUER
(EXCLUDING CASH AND CASH-EQUIVALENTS, U.S. GOVERNMENT SECURITIES AND
THE SECURITIES OF OTHER INVESTMENT COMPANIES) OR OWN MORE THAN 10% OF
THE VOTING SECURITIES OF ANY ISSUER.
ADDITIONAL RESTRICTIONS. In order to comply with certain statutes and policies,
THE Portfolio (or Trust, on behalf of the Fund) will not as a matter of
operating policy (except that no operating policy shall prevent THE Fund from
investing all of its ASSETS in an open-end investment company with
substantially the same investment objectives):
(i) borrow money (including through dollar roll transactions) for any
purpose in excess of 10% of the Portfolio's (Fund's) total assets
(taken at cost), except that the Portfolio (Fund) may borrow for
temporary or emergency purposes up to 1/3 of its total assets;
(ii) pledge, mortgage or hypothecate for any purpose in excess of 10% of the
Portfolio's (Fund's) total assets (taken at market value), provided
that collateral arrangements with respect to options and futures,
including deposits of initial deposit and variation margin, are not
considered a pledge of assets for purposes of this restriction;
(iii) purchase any security or evidence of interest therein on margin, except
that such short-term credit as may be necessary for the clearance of
purchases and sales of securities may be obtained and except that
deposits of initial deposit and variation margin may be made in
connection with the purchase, ownership, holding or sale of futures;
(iv) sell any security which it does not own unless by virtue of its
ownership of other securities it has at the time of sale a right to
obtain securities, without payment of further consideration, equivalent
in kind and amount to the securities sold and provided that if such
right is conditional the sale is made upon the same conditions;
(v) invest for the purpose of exercising control or management;
(vi) purchase securities issued by any investment company except by
purchase in the open market where no commission or profit to a sponsor
or dealer results from such purchase other than the customary broker's
commission, or except when such purchase, though not made in the open
market, is part of a plan of merger or consolidation; provided,
however, that securities of any investment company will not be
purchased for the Portfolio (Fund) if such purchase at the time
thereof would cause (a) more than 10% of the Portfolio's (Fund's)
total assets (taken at the greater of cost or market value) to be
invested in the securities of such issuers; (b) more than 5% of the
Portfolio's (Fund's) total assets (taken at the greater of cost or
market value) to be invested in any one investment company; or (c)
more than 3% of the outstanding voting securities of any such issuer
to be held for the Portfolio (Fund) (unless permitted to do so by an
exemptive order of the SEC); and, provided further, that the Portfolio
shall not invest in any other open-end investment company unless the
Portfolio (Fund) (1) waives the investment advisory fee with respect
to assets invested in other open-end investment companies and (2)
incurs no sales charge in connection with the investment (as an
operating policy, THE Portfolio will not invest in another open-end
registered investment company);
(vii) make short sales of securities or maintain a short position, unless at
all times when a short position is open it owns an equal amount of such
securities or securities convertible into or exchangeable, without
payment of any further consideration, for securities of the same issue
and equal in amount to, the securities sold short, and unless not more
than 10% of the Portfolio's (Fund's) net assets (taken at market value)
is represented by such securities, or securities convertible into or
exchangeable for such securities, at any one time (the Portfolio (Fund)
has no current intention to engage in short selling).
THERE WILL BE NO VIOLATION OF ANY INVESTMENT RESTRICTIONS OR POLICIES (EXCEPT
WITH RESPECT TO FUNDAMENTAL INVESTMENT RESTRICTION (1) ABOVE) IF THAT
RESTRICTION IS COMPLIED WITH AT THE TIME THE RELEVANT ACTION IS TAKEN,
NOTWITHSTANDING A LATER CHANGE IN THE MARKET VALUE OF AN INVESTMENT, IN NET OR
TOTAL ASSETS, OR IN THE CHANGE OF SECURITIES RATING OF THE INVESTMENT, OR ANY
OTHER LATER CHANGE.
7
<PAGE>
Each Fund will comply with the state securities laws and regulations of all
states in which it is registered. Each Portfolio will comply with the permitted
investments and investment limitations in the securities laws and regulations of
all states in which the Fund, or any other registered investment company
investing in the Portfolio, is registered.
PORTFOLIO TURNOVER
THE Portfolio may attempt to increase yields by trading to take advantage of
short-term market variations, which results in higher portfolio turnover.
However, this policy does not result in higher brokerage commissions to the THE
PORTFOLIO as the purchases and sales of portfolio securities are usually
effected as principal transactions. The PORTFOLIO'S turnover rates are not
expected to have a material effect on their income and have been and are
expected to be zero for regulatory reporting purposes.
PORTFOLIO TRANSACTIONS
Decisions to buy and sell securities and other financial instruments for THE
Portfolio are made by Bankers Trust, which also is responsible for placing these
transactions, subject to the overall review of the Board of Trustees. Although
investment requirements for THE Portfolio are reviewed independently from those
of the other accounts managed by Bankers Trust, investments of the type the
PORTFOLIO may make may also be made by these other accounts. When THE Portfolio
and one or more accounts managed by Bankers Trust are prepared to invest in, or
desire to dispose of, the same security or other financial instrument, available
investments or opportunities for sales will be allocated in a manner believed by
Bankers Trust to be equitable to each. In some cases, this procedure may affect
adversely the price paid or received by THE Portfolio or the size of the
position obtained or disposed of by THE Portfolio.
Purchases and sales of securities on behalf of the PORTFOLIO usually are
principal transactions. These securities are normally purchased directly from
the issuer or from an underwriter or market maker for the securities. The cost
of securities purchased from underwriters includes an underwriting commission or
concession and the prices at which securities are purchased from and sold to
dealers include a dealer's mark-up or mark-down. U.S. Government Obligations are
generally purchased from underwriters or dealers, although certain newly issued
U.S. Government Obligations may be purchased directly from the U.S. Treasury or
from the issuing agency or instrumentality.
Over-the-counter purchases and sales are transacted directly with principal
market makers except in those cases in which better prices and executions may be
obtained elsewhere and principal transactions are not entered into with persons
affiliated with the PORTFOLIO except pursuant to exemptive rules or orders
adopted by the Securities and Exchange Commission. Under rules adopted by the
SEC, broker-dealers may not execute transactions on the floor of any national
securities exchange for the accounts of affiliated persons, but may effect
transactions by transmitting orders for execution.
In selecting brokers or dealers to execute portfolio transactions on behalf of
THE Portfolio, Bankers Trust seeks the best overall terms available. In
assessing the best overall terms available for any transaction, Bankers Trust
will consider the factors it deems relevant, including the breadth of the market
in the investment, the price of the investment, the financial condition and
execution capability of the broker or dealer and the reasonableness of the
commission, if any, for the specific transaction and on a continuing basis. In
addition, Bankers Trust is authorized, in selecting parties to execute a
particular transaction and in evaluating the best overall terms available, to
consider the brokerage, but not research, services (as those terms are defined
in Section 28(e) of the Securities Exchange Act of 1934, as amended) provided to
the Portfolio and/or other accounts over which Bankers Trust or its affiliates
exercise investment discretion. Bankers Trust's fees under its agreements with
the PORTFOLIO are not reduced by reason of its receiving brokerage services.
8
<PAGE>
NET ASSET VALUE
The NET ASSET VALUE ("NAV") PER SHARE 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 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 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 SHARES OUTSTANDING. THE FUND'S NAV PER SHARE WILL NORMALLY BE
$1.00.
THE VALUATION OF THE Portfolio's securities is based on their amortized cost,
which does not take into account unrealized capital gains or losses. Amortized
cost valuation involves initially valuing an instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium, generally without regard to the impact of fluctuating interest rates on
the market value of the instrument. Although this method provides certainty in
valuation, it may result in periods during which value, as determined by
amortized cost, is higher or lower than the price THE Portfolio would receive if
it sold the instrument.
The PORTFOLIO'S use of the amortized cost method of valuing ITS securities is
permitted by a rule adopted by the SEC. Under this rule, the PORTFOLIO must
maintain a dollar-weighted average portfolio maturity of 90 days or less,
purchase only instruments having remaining maturities of 397 DAYS OR LESS and
invest only in securities determined by or under the supervision of the Board of
Trustees to be of high quality with minimal credit risks.
Pursuant to the rule, the Board of Trustees of THE Portfolio also has
established procedures designed to allow investors in the Portfolio, such as the
TRUST, to stabilize, to the extent reasonably possible, the investors' price per
share as computed for the purpose of sales and redemptions at $1.00. These
procedures include review of THE Portfolio's holdings by the Portfolio's Board
of Trustees, at such intervals as it deems appropriate, to determine whether the
value of the Portfolio's assets calculated by using available market quotations
or market equivalents deviates from such valuation based on amortized cost.
The rule also provides that the extent of any deviation between the value of THE
Portfolio's assets based on available market quotations or market equivalents
and such valuation based on amortized cost must be examined by the Portfolio's
Board of Trustees. In the event the Portfolio's Board of Trustees determines
that a deviation exists that may result in material dilution or other unfair
results to investors or existing shareholders, pursuant to the rule, the
Portfolio's Board of Trustees must cause the Portfolio to take such corrective
action as such Board of Trustees regards as necessary and appropriate,
including: selling portfolio instruments prior to maturity to realize capital
gains or losses or to shorten average portfolio maturity; withholding dividends
or paying distributions from capital or capital gains; redeeming shares in kind;
or valuing the Portfolio's assets by using available market quotations.
Each investor in THE Portfolio, including the Fund, may add to or reduce its
investment in the Portfolio on each day the Portfolio determines its NAV. At the
close of each such business day, the value of each investor's beneficial
interest in the Portfolio will be determined by multiplying the NAV of the
Portfolio by the percentage, effective for that day, which represents that
investor's share of the aggregate beneficial interests in the Portfolio. Any
additions or withdrawals, which are to be effected as of the close of business
on that day, will then be effected. The investor's percentage of the aggregate
beneficial interests in the Portfolio will then be recomputed as the percentage
equal to the fraction (i) the numerator of which is the value of such investor's
investment in the Portfolio as of the close of business on such day plus or
minus, as the case may be, the amount of net additions to or withdrawals from
the investor's investment in the Portfolio effected as of the close of business
on such day, and (ii) the denominator of which is the aggregate NAV of the
Portfolio as of the close of business on such day plus or minus, as the case may
be, the amount of net additions to or withdrawals from the aggregate investments
in the Portfolio by all investors in the Portfolio. The percentage so determined
will then be applied to determine the value of the investor's interest in the
Portfolio as of the close of the following business day.
9
<PAGE>
PURCHASE AND REDEMPTION INFORMATION
PURCHASE OF 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. SHARES MAY BE
AVAILABLE THROUGH INVESTMENT PROFESSIONALS, SUCH AS BROKER/DEALERS AND
INVESTMENT ADVISERS (INCLUDING SERVICE AGENTS).
PURCHASE ORDERS FOR SHARES (INCLUDING THOSE PURCHASED THROUGH A SERVICE AGENT)
THAT ARE TRANSMITTED TO THE TRUST'S TRANSFER AGENT (THE "TRANSFER AGENT"), PRIOR
TO THE VALUATION TIME ON ANY VALUATION DAY WILL BE EFFECTIVE AT THAT DAY'S
VALUATION TIME. 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. IF THE MARKET
FOR THE PRIMARY INVESTMENTS IN THE FUND CLOSES EARLY, THE FUND WILL CEASE TAKING
PURCHASE ORDERS AT THAT TIME.
ANOTHER MUTUAL FUND INVESTING IN THE PORTFOLIO MAY ACCEPT PURCHASE ORDERS UP
UNTIL A TIME LATER THAN 2:00 P.M., EASTERN TIME. SUCH ORDERS, WHEN TRANSMITTED
TO AND EXECUTED BY THE PORTFOLIO, MAY HAVE AN IMPACT ON THE FUND'S PERFORMANCE.
SHARES MUST BE PURCHASED IN ACCORDANCE WITH PROCEDURES ESTABLISHED BY THE
TRANSFER AGENT AND EACH SERVICE AGENT. IT IS THE RESPONSIBILITY OF EACH SERVICE
AGENT TO TRANSMIT TO THE TRANSFER AGENT PURCHASE AND REDEMPTION ORDERS AND TO
TRANSMIT TO THE CUSTODIAN PURCHASE PAYMENTS BY THE FOLLOWING BUSINESS DAY (TRADE
DATE + 1) AFTER AN ORDER FOR SHARES IS PLACED. A SHAREHOLDER MUST SETTLE WITH
THE SERVICE AGENT FOR HIS OR HER ENTITLEMENT TO AN EFFECTIVE PURCHASE OR
REDEMPTION ORDER AS OF A PARTICULAR TIME. BECAUSE BANKERS TRUST IS THE CUSTODIAN
AND TRANSFER AGENT OF THE TRUST, FUNDS MAY BE TRANSFERRED DIRECTLY FROM OR TO A
CUSTOMER'S ACCOUNT HELD WITH BANKERS TRUST TO SETTLE TRANSACTIONS WITH THE FUND
WITHOUT INCURRING THE ADDITIONAL COSTS OR DELAYS ASSOCIATED WITH THE WIRING OF
FEDERAL FUNDS.
IF ORDERS ARE PLACED THROUGH A SERVICE AGENT, IT IS THE RESPONSIBILITY OF THE
INVESTMENT PROFESSIONAL TO TRANSMIT THE ORDER TO BUY SHARES TO THE TRANSFER
AGENT BEFORE 2:00 P.M. OR 4:00 P.M. EASTERN TIME, AS APPLICABLE.
CERTIFICATES FOR SHARES WILL NOT BE ISSUED. EACH SHAREHOLDER'S ACCOUNT WILL BE
MAINTAINED BY A SERVICE AGENT OR TRANSFER AGENT.
10
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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. FOR
AN ACCOUNT APPLICATION, 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 HAVE MONEY INVESTED IN A FUND IN THE BT FAMILY OF FUNDS, YOU CAN:
o MAIL AN ACCOUNT APPLICATION WITH A CHECK,
o WIRE MONEY INTO YOUR ACCOUNT,
o OPEN AN ACCOUNT BY EXCHANGING FROM ANOTHER FUND IN THE BT FAMILY OF
FUNDS, OR
o CONTACT YOUR SERVICE AGENT OR INVESTMENT PROFESSIONAL.
IF YOU ARE INVESTING THROUGH A TAX-SHELTERED RETIREMENT PLAN, SUCH AS AN IRA,
FOR THE FIRST TIME, YOU WILL NEED A SPECIAL APPLICATION. CONTACT YOUR INVESTMENT
PROFESSIONAL FOR MORE INFORMATION AND A RETIREMENT ACCOUNT APPLICATION.
ADDITIONAL INFORMATION ABOUT BUYING SHARES
<TABLE>
<S> <C> <C>
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
BY WIRE CALL THE BT SERVICE CENTER AT 1-800-730-1313 TO CALL YOUR INVESTMENT PROFESSIONAL OR WIRE ADDITIONAL
- ------- ------------------------------------------------ ----------------------------------------------------
RECEIVE WIRE INSTRUCTIONS FOR ACCOUNT ESTABLISHMENT. INVESTMENT TO:
--------------------------------------------------- -------------
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
SPECIFY THE COMPLETE NAME OF THE
FUND, INCLUDING YOUR ACCOUNT NUMBER
AND YOUR NAME.
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
BY PHONE CONTACT YOUR SERVICE AGENT, INVESTMENT PROFESSIONAL, CONTACT YOUR SERVICE AGENT, INVESTMENT PROFESSIONAL,
OR CALL BT'S SERVICE CENTER AT 1-800-730-1313. IF OR CALL BT'S SERVICE CENTER AT 1-800-730-1313. IF
YOU ARE AN EXISTING SHAREHOLDER, YOU MAY EXCHANGE YOU ARE AN EXISTING SHAREHOLDER, YOU MAY EXCHANGE
FROM ANOTHER BT ACCOUNT WITH THE SAME REGISTRATION, FROM ANOTHER BT ACCOUNT WITH THE SAME REGISTRATION,
INCLUDING NAME, ADDRESS, AND TAXPAYER ID NUMBER. INCLUDING NAME, ADDRESS, AND TAXPAYER ID NUMBER.
BY MAIL COMPLETE AND SIGN THE ACCOUNT APPLICATION. MAKE YOUR CHECK PAYABLE TO THE COMPLETE NAME
MAKE YOUR CHECK PAYABLE TO THE COMPLETE NAME OF THE FUND OF YOUR CHOICE. INDICATE YOUR FUND
OF THE FUND OF YOUR CHOICE. MAIL TO THE ACCOUNT NUMBER ON YOUR CHECK AND MAIL TO THE
APPROPRIATE ADDRESS INDICATED ON THE APPLICATION. ADDRESSS PRINTED ON YOUR ACCOUNT STATEMENT.
</TABLE>
REDEMPTION OF 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 2:00 P.M. (EASTERN TIME) ON A
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 A
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 THE
REDEMPTION.
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 SERVICE AGENT DOES NOT DO SO, IT MAY BE LIABLE FOR
ANY LOSSES DUE TO UNAUTHORIZED OR FRAUDULENT INSTRUCTIONS. SUCH PROCEDURES MAY
INCLUDE, AMONG OTHERS, REQUIRING SOME FORM OF PERSONAL IDENTIFICATION PRIOR TO
ACTING UPON INSTRUCTIONS RECEIVED BY TELEPHONE, PROVIDING WRITTEN CONFIRMATION
OF SUCH TRANSACTIONS AND/OR TAPE RECORDING OF TELEPHONE INSTRUCTIONS.
REDEMPTION ORDERS ARE PROCESSED WITHOUT CHARGE BY THE TRUST. THE 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 CHANGE IN MARKET VALUE. SEE "MINIMUM INVESTMENTS" ABOVE FOR
MINIMUM BALANCE AMOUNTS.
CHECKWRITING. SHAREHOLDERS OF THE FUND MAY REDEEM SHARES BY CHECK. CHECKS MAY
NOT BE USED TO CLOSE AN ACCOUNT. SHAREHOLDERS WILL CONTINUE TO EARN DIVIDENDS ON
SHARES TO BE REDEEMED UNTIL THE CHECK CLEARS. CHECKS WILL BE RETURNED TO
SHAREHOLDERS AT THE END OF THE MONTH. THERE IS NO CHARGE FOR REDEMPTION OF
SHARES BY CHECK. ADDITIONAL INFORMATION REGARDING THE CHECKWRITING PRIVILEGE MAY
BE OBTAINED FROM A SERVICE AGENT.
TO SELL SHARES IN A RETIREMENT ACCOUNT, YOUR REQUEST MUST BE MADE IN WRITING,
EXCEPT FOR EXCHANGES TO OTHER ELIGIBLE FUNDS IN THE BT FAMILY OF FUNDS, WHICH
CAN BE REQUESTED BY PHONE OR IN WRITING. FOR INFORMATION ON RETIREMENT
DISTRIBUTIONS, CONTACT YOUR SERVICE AGENT OR CALL THE BT SERVICE CENTER AT
1-800-730-1313.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR NON-RETIREMENT ACCOUNT SHARES, LEAVE
AT LEAST $1,000 WORTH OF SHARES IN THE ACCOUNT TO KEEP IT OPEN.
TO SELL SHARES BY BANK WIRE YOU WILL NEED TO SIGN UP FOR THESE SERVICES IN
ADVANCE WHEN COMPLETING YOUR ACCOUNT APPLICATION.
12
<PAGE>
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE TO PROTECT YOU AND BANKERS
TRUST FROM FRAUD. REDEMPTION REQUESTS IN WRITING MUST INCLUDE A SIGNATURE
GUARANTEE IF ANY OF THE FOLLOWING SITUATIONS APPLY:
o YOUR ACCOUNT REGISTRATION HAS CHANGED WITHIN THE LAST 30 DAYS,
o THE CHECK IS BEING MAILED TO A DIFFERENT ADDRESS THAN THE ONE ON YOUR
ACCOUNT (RECORD ADDRESS),
o THE CHECK IS BEING MADE PAYABLE TO SOMEONE OTHER THAN THE ACCOUNT
OWNER,
o THE REDEMPTION PROCEEDS ARE BEING TRANSFERRED TO A BT ACCOUNT WITH A
DIFFERENT REGISTRATION, OR
o YOU WISH TO HAVE REDEMPTION PROCEEDS WIRED TO A NON-PREDESIGNATED BANK
ACCOUNT.
A SIGNATURE GUARANTEE IS ALSO REQUIRED IF YOU CHANGE THE PRE-DESIGNATED BANK
INFORMATION FOR RECEIVING REDEMPTION PROCEEDS ON YOUR ACCOUNT.
YOU SHOULD BE ABLE TO OBTAIN A SIGNATURE GUARANTEE FROM A BANK, BROKER, DEALER,
CREDIT UNION (IF AUTHORIZED UNDER STATE LAW), SECURITIES EXCHANGE OR
ASSOCIATION, CLEARING AGENCY, OR SAVINGS ASSOCIATION. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.
ADDITIONAL INFORMATION ABOUT SELLING SHARES
BY WIRE - YOU MUST SIGN UP FOR THE WIRE FEATURE BEFORE USING IT. TO VERIFY THAT
IT IS IN PLACE, CALL 1-800-730-1313. MINIMUM WIRE: $1,000. YOUR WIRE REDEMPTION
REQUEST MUST BE RECEIVED BY THE TRANSFER AGENT BEFORE 4:00 P.M. EASTERN TIME FOR
MONEY TO BE WIRED ON THE NEXT BUSINESS DAY.
IN WRITING - WRITE A SIGNED "LETTER OF INSTRUCTION" WITH YOUR NAME, THE FUND'S
NAME AND FUND'S NUMBER, YOUR FUND ACCOUNT NUMBER, THE DOLLAR AMOUNT OR NUMBER OF
SHARES TO BE REDEEMED, AND MAIL TO ONE OF THE FOLLOWING ADDRESSES:
BT SERVICE CENTER
P.O. BOX 419210
KANSAS CITY, MO 64141-6210
OVERNIGHT MAILINGS:
BT SERVICE CENTER
210 WEST 10TH STREET, 8TH FLOOR
KANSAS CITY, MO 64105-1716
FOR TRUST ACCOUNTS, THE TRUSTEE MUST SIGN THE LETTER INDICATING CAPACITY AS
TRUSTEE. IF THE TRUSTEE'S NAME IS NOT ON THE ACCOUNT REGISTRATION, PROVIDE A
COPY OF THE TRUST DOCUMENT CERTIFIED WITHIN THE LAST 60 DAYS.
FOR A BUSINESS OR ORGANIZATION ACCOUNT, AT LEAST ONE PERSON AUTHORIZED BY
CORPORATE RESOLUTION TO ACT ON THE ACCOUNT MUST SIGN THE LETTER.
UNLESS OTHERWISE INSTRUCTED, THE TRANSFER AGENT WILL SEND A CHECK TO THE ACCOUNT
ADDRESS OF RECORD. THE TRUST RESERVES THE RIGHT TO CLOSE INVESTOR ACCOUNTS VIA
30 DAY NOTICE IN WRITING IF THE FUND ACCOUNT BALANCE FALLS BELOW THE FUND
MINIMUMS.
INVESTOR SERVICES
BT PYRAMID MUTUAL FUNDS PROVIDE A VARIETY OF SERVICES TO HELP YOU MANAGE YOUR
ACCOUNT.
INFORMATION SERVICES
STATEMENTS AND REPORTS THAT YOUR INVESTMENT PROFESSIONAL OR THE TRANSFER AGENT
MAY SEND TO YOU INCLUDE THE FOLLOWING:
o CONFIRMATION STATEMENTS (AFTER EVERY TRANSACTION THAT AFFECTS YOUR
ACCOUNT BALANCE, INCLUDING DISTRIBUTIONS OR YOUR ACCOUNT REGISTRATION)
o ACCOUNT STATEMENTS (MONTHLY)
o FINANCIAL REPORTS (EVERY SIX MONTHS)
13
<PAGE>
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. TO MAKE AN EXCHANGE, FOLLOW THE
PROCEDURES INDICATED IN "PURCHASE OF SHARES" AND "REDEMPTION OF SHARES" HEREIN.
BEFORE MAKING AN EXCHANGE, PLEASE NOTE THE FOLLOWING:
o CALL YOUR SERVICE AGENT FOR INFORMATION AND A PROSPECTUS. READ THE
PROSPECTUS FOR RELEVANT INFORMATION.
o COMPLETE AND SIGN AN APPLICATION, TAKING CARE TO REGISTER YOUR NEW
ACCOUNT IN THE SAME NAME, ADDRESS AND TAXPAYER IDENTIFICATION NUMBER AS
YOUR EXISTING ACCOUNT(S).
o EACH EXCHANGE REPRESENTS THE SALE OF SHARES OF ONE FUND AND THE
PURCHASE OF SHARES OF ANOTHER, WHICH MAY PRODUCE A GAIN OR LOSS FOR TAX
PURPOSES. YOUR SERVICE AGENT WILL RECEIVE A WRITTEN CONFIRMATION OF
EACH EXCHANGE TRANSACTION.
o THE FUND RESERVES THE RIGHT TO TERMINATE OR MODIFY THE EXCHANGE
PRIVILEGE IN THE FUTURE.
SYSTEMATIC PROGRAMS
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO BT PYRAMID MUTUAL FUNDS
<TABLE>
<S> <C> <C> <C>
MINIMUM MINIMUM
INITIAL SUBSEQUENT FREQUENCY SETTING UP OR CHANGING
$1,000 $100 MONTHLY, BIMONTHLY, FOR A NEW ACCOUNT, COMPLETE THE APPROPRIATE SECTION
QUARTERLY OR SEMI-ANNUALLY ON THE APPLICATION.
FOR EXISTING ACCOUNTS, CALL YOUR INVESTMENT
PROFESSIONAL FOR AN APPLICATION. TO CHANGE THE
AMOUNT OR FREQUENCY OF YOUR INVESTMENT,
CONTACT YOUR INVESTMENT PROFESSIONAL DIRECTLY OR
CALL
1-800-730-1313. CALL AT LEAST 10 BUSINESS DAYS
PRIOR TO YOUR NEXT SCHEDULED INVESTMENT DATE.
<CAPTION>
SYSTEMATIC WITHDRAWAL PROGRAM LETS YOU SET UP PERIODIC REDEMPTIONS FROM YOUR ACCOUNT.
<S> <C> <C>
MINIMUM FREQUENCY SETTING UP OR CHANGING
$100 MONTHLY, QUARTERLY, TO ESTABLISH, CALL YOUR INVESTMENT PROFESSIONAL OR CALL
SEMI-ANNUALLY OR ANNUALLY 1-800-730-1313 AFTER YOUR ACCOUNT IS OPEN. THE ACCOUNTS FROM
WHICH THE WITHDRAWALS WILL BE PROCESSED MUST HAVE A MINIMUM
BALANCE OF $10,000, 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 YOUR SERVICE AGENT OR BANKERS TRUST FOR FURTHER
INFORMATION. BANKERS TRUST CAN SET UP YOUR NEW ACCOUNT IN THE FUND UNDER A
NUMBER OF SEVERAL TAX-SAVINGS OR TAX-DEFERRED PLANS. MINIMUMS MAY DIFFER FROM
THOSE LISTED ELSEWHERE IN THIS SAI.
o INDIVIDUAL RETIREMENT ACCOUNTS (IRAS): PERSONAL SAVINGS PLANS THAT
OFFER TAX ADVANTAGES FOR INDIVIDUALS TO SET ASIDE MONEY FOR RETIREMENT
AND ALLOW NEW CONTRIBUTIONS OF $2,000 PER TAX YEAR.
14
<PAGE>
o ROLLOVER IRAS: TAX-DEFERRED RETIREMENT ACCOUNTS THAT RETAIN THE SPECIAL
TAX ADVANTAGES OF LUMP SUM DISTRIBUTIONS FROM QUALIFIED RETIREMENT
PLANS AND TRANSFERRED IRA ACCOUNTS.
THE TRUST may suspend the right of redemption or postpone the date of payment
for shares of the FUND during any period when: (a) trading on the NYSE is
restricted by applicable rules and regulations of the SEC; (b) the NYSE is
closed for other than customary weekend and holiday closings; (c) the SEC has by
order permitted such suspension; or (d) an emergency exists as determined by the
SEC.
MANAGEMENT OF THE TRUST AND PORTFOLIO
THE TRUST AND THE PORTFOLIO ARE GOVERNED BY A BOARD OF TRUSTEES WHICH IS
RESPONSIBLE FOR PROTECTING THE INTERESTS OF INVESTORS. BY VIRTUE OF THE
RESPONSIBILITIES ASSUMED BY BANKERS TRUST, THE ADMINISTRATOR OF THE TRUST AND
THE PORTFOLIO, NEITHER THE TRUST NOR THE PORTFOLIO REQUIRE 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.
A MAJORITY OF THE TRUSTEES WHO ARE NOT "INTERESTED PERSONS" (AS DEFINED IN THE
1940 ACT) OF THE TRUST OR THE PORTFOLIO, AS THE CASE MAY BE, HAVE ADOPTED
WRITTEN PROCEDURES REASONABLY APPROPRIATE TO DEAL WITH POTENTIAL CONFLICTS OF
INTEREST ARISING FROM THE FACT THAT SOME OF THE SAME INDIVIDUALS ARE TRUSTEES OF
THE TRUST AND THE PORTFOLIO, UP TO AND INCLUDING CREATING SEPARATE BOARDS OF
TRUSTEES.
Each Board of Trustees is composed of persons experienced in financial matters
who meet throughout the year to oversee the activities of the FUND or PORTFOLIO
they represent. In addition, the Trustees review contractual arrangements with
companies that provide services to the FUND/PORTFOLIO and review the FUND'S
performance.
The Trustees and officers of the TRUST and the PORTFOLIO, their birthdates and
their principal occupations during the past five years are set forth below.
Their titles may have varied during that period. Unless otherwise indicated, the
address of each officer is 5800 Corporate Drive, Pittsburgh, Pennsylvania
15237-5829.
TRUSTEES OF BT PYRAMID MUTUAL FUNDS
HARRY VAN BENSCHOTEN (birthdate: February 18, 1928) -- Trustee; RETIRED (since
1987); Corporate Vice President, Newmont Mining Corporation (prior to 1987);
Director, Canada Life Insurance Company of New York . His address is 6581
Ridgewood Drive, Naples, Florida 34108.
MARTIN J. GRUBER (birthdate: July 15, 1937) -- Trustee; 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; JOHN BATES CLARK
PROFESSOR OF ECONOMICS, COLUMBIA UNIVERSITY; DISTINGUISHED FELLOW, AMERICAN
ECONOMICS ASSOCIATION; FELLOW, AMERICAN ACADEMY OF ARTS AND SCIENCES; FELLOW,
ECONOMETRIC SOCIETY; FORMER CHAIRMAN, COLUMBIA UNIVERSITY DEPARTMENT OF
ECONOMICS; FORMER DIRECTOR, NATIONAL BUREAU OF ECONOMIC RESEARCH. HIS ADDRESS IS
35 CLAREMONT AVENUE, NEW YORK, NEW YORK 10027.
TRUSTEES OF THE PORTFOLIO
CHARLES P. BIGGAR (BIRTHDATE: OCTOBER 13, 1930) -- TRUSTEE; RETIRED; FORMERLY
VICE PRESIDENT OF INTERNATIONAL BUSINESS MACHINES ("IBM") AND PRESIDENT OF THE
NATIONAL SERVICES AND THE FIELD ENGINEERING DIVISIONS OF IBM. HIS ADDRESS IS 12
HITCHING POST LANE, CHAPPAQUA, NEW YORK 10514.
* 6 moved from here; text not shown 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.
** 6 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.
15
<PAGE>
OFFICERS OF THE TRUST AND PORTFOLIO
Unless otherwise specified, each officer listed below holds the same position
with THE TRUST AND THE PORTFOLIO.
JOHN Y. KEFFER (BIRTHDATE: JULY 14, 1942) -- PRESIDENT AND CHIEF EXECUTIVE
OFFICER; PRESIDENT, FORUM FINANCIAL GROUP. HIS ADDRESS IS 2 PORTLAND SQUARE,
PORTLAND, MAINE 04101.
JOSEPH A. FINELLI (BIRTHDATE: JANUARY 24, 1957) -- Treasurer; Vice President, BT
ALEX. BROWN INCORPORATED AND VICE PRESIDENT, INVESTMENT COMPANY CAPITAL CORP.
(REGISTERED INVESTMENT ADVISER), SEPTEMBER 1995 TO PRESENT; FORMERLY, VICE
PRESIDENT AND TREASURER, THE DELAWARE GROUP OF FUNDS (REGISTERED INVESTMENT
COMPANIES) AND VICE PRESIDENT, DELAWARE MANAGEMENT COMPANY INC. (INVESTMENTS),
1980 TO AUGUST 1995. HIS ADDRESS IS ONE SOUTH STREET, BALTIMORE, MARYLAND 21202.
DANIEL O. HIRSCH (BIRTHDATE: MARCH 27, 1954) -- SECRETARY; PRINCIPAL, BT ALEX.
BROWN SINCE JULY 1998; ASSISTANT GENERAL COUNSEL IN THE OFFICE OF THE GENERAL
COUNSEL AT THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION FROM 1993 TO
1998. HIS ADDRESS IS 2901 DORSET AVENUE, CHEVY CHASE, MARYLAND 20815.
MESSRS. KEFFER, FINELLI AND HIRSCH also hold similar positions for other
investment companies for which ICC DISTRIBUTORS, or an affiliate serves as the
principal underwriter.
No person who is an officer or director of Bankers Trust is an officer or
Trustee of the TRUST or the PORTFOLIO. No director, officer or employee of ICC
DISTRIBUTORS or any of its affiliates will receive any compensation from the
TRUST or any Portfolio for serving as an officer or Trustee of the TRUST or the
PORTFOLIO.
<TABLE>
TRUSTEE COMPENSATION TABLE
<S> <C> <C> <C>
AGGREGATE
COMPENSATION AGGREGATE TOTAL COMPENSATION
NAME OF PERSON, FROM BT PYRAMID COMPENSATION FROM FUND COMPLEX
POSITION MUTUAL FUNDS* FROM PORTFOLIO+ PAID TO TRUSTEES++
** 7 Harry Van Benschoten,
TRUSTEE OF BT PYRAMID $_____ N/A $_____
** 8 Mutual Funds
Martin J. Gruber,
Trustee of BT Pyramid $_____ N/A $_____
Mutual Funds
Kelvin J. Lancaster,
Trustee of BT Pyramid $_____ N/A $_____
* 8 moved from here; text not shown* 7 moved from here; text not shown MUTUAL FUNDS
Charles P. Biggar,
Trustee of PORTFOLIO N/A $_____ $_____
S. Leland Dill,
Trustee of PORTFOLIO N/A $_____ $_____
Philip Saunders, Jr.,
Trustee of PORTFOLIO N/A $_____ $_____
</TABLE>
* THE INFORMATION PROVIDED IS FOR THE BT PYRAMID MUTUAL Funds which is
comprised of 6 funds. Information is PROVIDED IS for the year ended
December 31, 1998.
+ THE INFORMATION PROVIDED IS FOR THE year ended December 31, 1998.
++ Aggregated information is furnished for the BT Family of Funds which consists
of the following: BT Investment Funds, BT Institutional Funds, BT Pyramid
MUTUAL Funds, BT Advisor Funds, BT Investment Portfolios, Cash Management
Portfolio, Treasury Money Portfolio, Tax Free Money Portfolio, NY Tax Free
Money Portfolio,
16
<PAGE>
International Equity Portfolio, Intermediate Tax Free
Portfolio, Asset Management Portfolio, Equity 500 Index Portfolio, and
Capital Appreciation Portfolio. The compensation provided IS for the
calendar year ended December 31, 1998.
As of April 1, 1999, the following shareholders of record owned 5% or more of
the outstanding SHARES OF THE FUND:
[TO BE PROVIDED]
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 ADVISER.
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 NEW YORK CORPORATION. BANKERS TRUST
CONDUCTS A VARIETY OF GENERAL BANKING AND TRUST ACTIVITIES AND IS A MAJOR
WHOLESALE SUPPLIER OF FINANCIAL SERVICES TO THE INTERNATIONAL AND DOMESTIC
INSTITUTIONAL MARKET. [AS OF MARCH 31, 1998, BANKERS TRUST NEW YORK CORPORATION
WAS THE SEVENTH LARGEST BANK HOLDING COMPANY IN THE UNITED STATES WITH TOTAL
ASSETS OF OVER $150 BILLION.] [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.]
BANKERS TRUST HAS MORE THAN 50 YEARS OF EXPERIENCE MANAGING RETIREMENT ASSETS
FOR THE NATION'S LARGEST CORPORATIONS AND INSTITUTIONS. IN THE PAST, THESE
CLIENTS HAVE BEEN SERVICED THROUGH SEPARATE ACCOUNT AND COMMINGLED FUND
STRUCTURES. NOW, THE BT FAMILY OF FUNDS BRINGS BANKERS TRUST'S EXTENSIVE
INVESTMENT MANAGEMENT EXPERTISE--ONCE AVAILABLE TO ONLY THE LARGEST INSTITUTIONS
IN THE U.S.--TO INDIVIDUAL INVESTORS. BANKERS TRUST'S OFFICERS HAVE HAD
EXTENSIVE EXPERIENCE IN MANAGING INVESTMENT PORTFOLIOS HAVING OBJECTIVES SIMILAR
TO THOSE OF THE PORTFOLIO.
BANKERS TRUST, SUBJECT TO THE SUPERVISION AND DIRECTION OF THE BOARD OF TRUSTEES
OF THE PORTFOLIO, MANAGES THE PORTFOLIO IN ACCORDANCE WITH THE PORTFOLIO'S
INVESTMENT OBJECTIVE AND STATED INVESTMENT POLICIES, MAKES INVESTMENT DECISIONS
FOR THE PORTFOLIO, PLACES ORDERS TO PURCHASE AND SELL SECURITIES AND OTHER
FINANCIAL INSTRUMENTS ON BEHALF OF THE PORTFOLIO AND EMPLOYS PROFESSIONAL
INVESTMENT MANAGERS AND SECURITIES ANALYSTS WHO PROVIDE RESEARCH SERVICES TO THE
PORTFOLIO. BANKERS TRUST MAY UTILIZE THE EXPERTISE OF ANY OF ITS WORLD WIDE
SUBSIDIARIES AND AFFILIATES TO ASSIST IT IN ITS ROLE AS INVESTMENT ADVISER. ALL
ORDERS FOR INVESTMENT TRANSACTIONS ON BEHALF OF THE PORTFOLIO ARE PLACED BY THE
ADVISER WITH BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES THAT IT SELECTS,
INCLUDING THOSE AFFILIATED WITH BANKERS TRUST. A BANKERS TRUST AFFILIATE WILL BE
USED IN CONNECTION WITH A PURCHASE OR SALE OF AN INVESTMENT FOR THE PORTFOLIO
ONLY IF BANKERS TRUST BELIEVES THAT THE AFFILIATE'S CHARGE FOR THE TRANSACTION
DOES NOT EXCEED USUAL AND CUSTOMARY LEVELS. THE PORTFOLIO WILL NOT INVEST IN
OBLIGATIONS FOR WHICH BANKERS TRUST OR ANY OF ITS AFFILIATES IS THE ULTIMATE
OBLIGOR OR ACCEPTING BANK. THE PORTFOLIO MAY, HOWEVER, INVEST IN THE OBLIGATIONS
OF CORRESPONDENTS AND CUSTOMERS OF BANKERS TRUST.
THE ADVISER IS A WHOLLY OWNED SUBSIDIARY OF BANKERS TRUST CORPORATION. ON
NOVEMBER 30, 1998, BANKERS TRUST CORPORATION ENTERED INTO AN AGREEMENT AND PLAN
OF MERGER WITH DEUTSCHE BANK AG UNDER WHICH BANKERS TRUST COMPANY WOULD MERGE
WITH AND INTO A SUBSIDIARY OF DEUTSCHE BANK AG. DEUTSCHE BANK AG IS A MAJOR
GLOBAL BANKING INSTITUTION THAT IS ENGAGED IN A WIDE RANGE OF FINANCIAL
SERVICES, INCLUDING RETAIL AND COMMERCIAL BANKING, INVESTMENT BANKING AND
INSURANCE. THE TRANSACTION IS CONTINGENT UPON VARIOUS REGULATORY APPROVALS, AS
WELL AS THE APPROVAL OF THE FUND'S SHAREHOLDERS. IF THE TRANSACTION IS APPROVED
AND COMPLETED, DEUTSCHE BANK AG, AS THE ADVISER'S NEW PARENT COMPANY, WILL
CONTROL THE OPERATIONS OF THE ADVISER. BANKERS TRUST BELIEVES THAT, UNDER THIS
NEW ARRANGEMENT, THE SERVICES PROVIDED TO THE FUND WILL BE MAINTAINED AT THEIR
CURRENT LEVEL.
17
<PAGE>
Under the terms of an investment advisory agreement (the "Advisory Agreement")
between THE Portfolio and Bankers Trust, the adviser manages THE Portfolio
subject to the supervision and direction of the Board of Trustees of the
Portfolio. Bankers Trust will: (i) act in strict conformity with THE Portfolio's
Declaration of Trust, the 1940 Act and the Investment Advisors Act of 1940, as
the same may from time to time be amended; (ii) manage THE Portfolio in
accordance with the Portfolio's and/or Fund's investment objectives,
restrictions and policies, as stated herein and in the Prospectus; (iii) make
investment decisions for THE Portfolio; and (iv) place purchase and sale orders
for securities and other financial instruments on behalf of THE Portfolio.
Bankers Trust bears all expenses in connection with the performance of services
under the Advisory Agreement. The TRUST and THE Portfolio bear certain other
expenses incurred in their operation, including: taxes, interest, brokerage fees
and commissions, if any; fees of Trustees of each Trust or Portfolio who are not
officers, directors or employees of Bankers Trust, ICC DISTRIBUTORS or any of
their affiliates; SEC fees and state Blue Sky qualification fees, if any;
administrative and services fees; certain insurance premiums; outside auditing
and legal expenses; costs of maintenance of corporate existence; costs
attributable to investor services, including, without limitation, telephone and
personnel expenses; and printing prospectuses and statements of additional
information for regulatory purposes and for distribution to existing
shareholders; costs of shareholders' reports and meetings of shareholders,
officers and Trustees of the TRUST or the PORTFOLIO; and any extraordinary
expenses.
UNDER THE ADVISORY AGREEMENT, BANKERS TRUST RECEIVES A FEE FROM THE PORTFOLIO,
COMPUTED DAILY AND PAID MONTHLY, AT THE ANNUAL RATE OF 0.15 OF THE AVERAGE DAILY
NET ASSETS OF THE PORTFOLIO. For the fiscal years ended December 31, 1998, 1997
AND 1996, Bankers Trust earned $_____, $6,544,181 AND $4,935,288, respectively,
in compensation for investment advisory services provided to THE Portfolio.
During the same periods, Bankers Trust reimbursed $_____, $940,530 AND $761,230,
RESPECTIVELY, TO THE ^ Portfolio to cover expenses.
Bankers Trust may have deposit, loan and other commercial banking relationships
with the issuers of obligations which may be purchased on behalf of the
PORTFOLIO, including outstanding loans to such issuers which could be repaid in
whole or in part with the proceeds of securities so purchased. Such affiliates
deal, trade and invest for their own accounts in such obligations and are among
the leading dealers of various types of such obligations. Bankers Trust has
informed the PORTFOLIO that, in making its investment decisions, it does not
obtain or use material inside information in its possession or in the possession
of any of its affiliates. In making investment recommendations for the
PORTFOLIO, Bankers Trust will not inquire or take into consideration whether an
issuer of securities proposed for purchase or sale by THE Portfolio is a
customer of Bankers Trust, its parent or its subsidiaries or affiliates and, in
dealing with its customers, Bankers Trust, its parent, subsidiaries, and
affiliates will not inquire or take into consideration whether securities of
such customers are held by any fund managed by Bankers Trust or any such
affiliate.
ADMINISTRATOR
Under ITS ADMINISTRATION AND SERVICES AGREEMENT WITH THE TRUST, THE ADVISER
CALCULATES THE NET ASSET VALUE OF THE FUND AND GENERALLY ASSISTS THE BOARD OF
TRUSTEES OF THE TRUST IN ALL ASPECTS OF THE ADMINISTRATION AND OPERATION OF THE
TRUST. THE ADMINISTRATION AND SERVICES AGREEMENT PROVIDES FOR THE TRUST TO PAY
THE ADVISER A FEE, COMPUTED DAILY AND PAID MONTHLY, EQUAL ON AN ANNUAL BASIS TO
0.30% OF THE AVERAGE DAILY NET ASSETS OF THE FUND.
UNDER ADMINISTRATION AND SERVICES AGREEMENT WITH THE PORTFOLIO, THE ADVISER
CALCULATES THE VALUE OF THE ASSETS OF THE PORTFOLIO AND GENERALLY ASSISTS THE
BOARD OF TRUSTEES OF THE PORTFOLIO IN ALL ASPECTS OF THE ADMINISTRATION AND
OPERATION OF THE PORTFOLIO. THE ADMINISTRATION AND SERVICES AGREEMENT PROVIDE
FOR THE PORTFOLIO TO PAY THE ADVISER A FEE, COMPUTED DAILY AND PAID MONTHLY,
EQUAL ON AN ANNUAL BASIS TO 0.05% OF THE PORTFOLIO'S AVERAGE DAILY NET ASSETS.
UNDER THE ADMINISTRATION AND SERVICES AGREEMENT, THE ADVISER MAY DELEGATE ONE OR
MORE OF ITS RESPONSIBILITIES TO OTHERS, INCLUDING AFFILIATES OF ICC
DISTRIBUTORS, AT THE ADVISER'S EXPENSE.
18
<PAGE>
UNDER THE ADMINISTRATION AND SERVICES AGREEMENT, Bankers Trust is obligated on a
continuous basis to provide such administrative services as the Board of
Trustees of each Trust and THE Portfolio reasonably deems necessary for the
proper administration of each Trust and THE Portfolio. Bankers Trust will
generally assist in all aspects of the FUND'S and PORTFOLIO'S operations; supply
and maintain office facilities (which may be in Bankers Trust's own offices),
statistical and research data, data processing services, clerical, accounting,
bookkeeping and recordkeeping services (including without limitation the
maintenance of such books and records as are required under the 1940 Act and the
rules thereunder, except as maintained by other agents of the TRUST or the
PORTFOLIO), internal auditing, executive and administrative services, and
stationery and office supplies; prepare reports to shareholders or investors;
prepare and file tax returns; supply financial information and supporting data
for reports to and filings with the SEC and various state Blue Sky authorities;
supply supporting documentation for meetings of the Board of Trustees; provide
monitoring reports and assistance regarding compliance with each Trust's and THE
Portfolio's Declaration of Trust, by-laws, investment objectives and policies
and with Federal and state securities laws; arrange for appropriate insurance
coverage; calculate the NAV, net income and realized capital gains or losses of
THE Trust; and negotiate arrangements with, and supervise and coordinate the
activities of, agents and others retained to supply services.
Pursuant to a sub-administration agreement (the "Sub-Administration Agreement")
FSC performs such sub-administration duties for the TRUST and THE Portfolio as
from time to time may be agreed upon by Bankers Trust and FSC. The
Sub-Administration Agreement provides that FSC will receive such compensation as
from time to time may be agreed upon by FSC and Bankers Trust. All such
compensation will be paid by Bankers Trust.
Bankers Trust has agreed that if in any fiscal year the aggregate expenses of
any Fund and THE Portfolio (including fees pursuant to the Advisory Agreement,
but excluding interest, taxes, brokerage and, if permitted by the relevant state
securities commissions, extraordinary expenses) exceed the expense limitation of
any state having jurisdiction over the Fund, Bankers Trust will reimburse the
Fund for the excess expense to the extent required by state law. As of the date
of this SAI, the most restrictive annual expense limitation applicable to any
Fund is 2.50% of the Fund's first $30 million of average annual net assets,
2.00% of the next $70 million of average annual net assets and 1.50% of the
remaining average annual net assets.
For the fiscal years ended December 31, 1998, 1997 AND 1996, Bankers Trust
earned $_____, $1,315,340 AND $1,648,203, respectively for administrative and
other services provided to THE Fund. During the same periods, Bankers Trust
reimbursed $_____, $656,718 and $782,979, respectively, to the Fund to cover
expenses.
For the fiscal years ended December 31, 1998, 1997 AND 1996, Bankers Trust
earned compensation of $_____, $2,181,394 AND $1,645,096, respectively, for
administrative and other services provided to the PORTFOLIO.
DISTRIBUTOR
ICC DISTRIBUTORS IS THE PRINCIPAL DISTRIBUTOR FOR SHARES OF THE FUND. ICC
DISTRIBUTORS IS A REGISTERED BROKER/DEALER AND IS UNAFFILIATED WITH BANKERS
TRUST. THE PRINCIPAL BUSINESS ADDRESS OF ICC DISTRIBUTORS IS TWO PORTLAND
SQUARE, PORTLAND, MAINE 04101. IN ADDITION TO ICC DISTRIBUTORS'S DUTIES AS
DISTRIBUTOR, ICC DISTRIBUTORS AND ITS AFFILIATES MAY, IN THEIR DISCRETION,
PERFORM ADDITIONAL FUNCTIONS IN CONNECTION WITH TRANSACTIONS IN THE SHARES OF
THE FUND.
SERVICE AGENT
ALL SHAREHOLDERS MUST BE REPRESENTED BY A SERVICE AGENT. THE ADVISER 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 THE ADVISER FROM ITS FEES. THE SERVICES PROVIDED
BY A SERVICE AGENT MAY INCLUDE ESTABLISHING AND MAINTAINING SHAREHOLDER
ACCOUNTS, PROCESSING PURCHASE AND REDEMPTION TRANSACTIONS, PERFORMING
SHAREHOLDER SUB-ACCOUNTING, ANSWERING CLIENT INQUIRIES REGARDING THE TRUST,
INVESTING CLIENT CASH ACCOUNT BALANCES AUTOMATICALLY IN FUND SHARES AND
PROCESSING REDEMPTION TRANSACTIONS AT THE REQUEST OF CLIENTS, ASSISTING CLIENTS
IN CHANGING DIVIDEND OPTIONS, ACCOUNT DESIGNATIONS AND ADDRESSES, PROVIDING
PERIODIC STATEMENTS SHOWING THE CLIENT'S ACCOUNT BALANCE AND INTEGRATING THESE
STATEMENTS WITH THOSE OF OTHER TRANSACTIONS AND BALANCES IN THE CLIENT'S OTHER
ACCOUNTS SERVICED BY THE SERVICE AGENT, 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, ARRANGING FOR BANK WIRES 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
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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 THE ADVISER, 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, 130 Liberty Street (One Bankers Trust Plaza), New York, New York
10006, serves as custodian and transfer agent for the TRUST and as custodian for
THE Portfolio pursuant to the administration and services agreements discussed
above. As custodian, Bankers Trust holds the FUND'S and THE Portfolio's assets.
For such services, Bankers Trust receives monthly fees from THE Fund and
Portfolio, which are included in the administrative services fees discussed
above. As transfer agent for each Trust, Bankers Trust maintains the shareholder
account records for THE Fund, handles certain communications between
shareholders and each Trust and causes to be distributed any dividends and
distributions payable by each Trust. Bankers Trust is also reimbursed by the
FUND for its out-of-pocket expenses. Bankers Trust will comply with the
self-custodian provisions of Rule 17f-2 under the 1940 Act.
EXPENSES
THE FUND BEARS ITS OWN EXPENSES. OPERATING EXPENSES FOR THE FUND GENERALLY
CONSIST OF ALL COSTS NOT SPECIFICALLY BORNE BY THE ADVISER OR ICC DISTRIBUTORS,
INCLUDING ADMINISTRATION AND SERVICES FEES, FEES FOR NECESSARY PROFESSIONAL
SERVICES, AMORTIZATION OF ORGANIZATIONAL EXPENSES AND COSTS ASSOCIATED WITH
REGULATORY COMPLIANCE AND MAINTAINING LEGAL EXISTENCE AND SHAREHOLDER RELATIONS.
THE PORTFOLIO BEARS ITS OWN EXPENSES. OPERATING EXPENSES FOR THE PORTFOLIO
GENERALLY CONSIST OF ALL COSTS NOT SPECIFICALLY BORNE BY THE ADVISER OR ICC
DISTRIBUTORS, INCLUDING INVESTMENT ADVISORY AND ADMINISTRATION AND SERVICE FEES,
FEES FOR NECESSARY PROFESSIONAL SERVICES, AMORTIZATION OF ORGANIZATIONAL
EXPENSES, THE COSTS ASSOCIATED WITH REGULATORY COMPLIANCE AND MAINTAINING LEGAL
EXISTENCE AND INVESTOR RELATIONS.
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 Adviser. The TRUST HAS
acknowledged that the term "BT" is used by and is a property right of certain
subsidiaries of Bankers Trust and that those subsidiaries and/or Bankers Trust
may at any time permit others to use that term.
The TRUST may be required, on 60 days' notice from Bankers Trust at any time, to
abandon use of the acronym "BT" as part of ITS name. If this were to occur, the
Trustees would select an appropriate new name for the TRUST, but there would be
no other material effect on the TRUST, ITS shareholders or activities.
BANKING REGULATORY MATTERS
Bankers Trust has been advised by its counsel that in its opinion Bankers Trust
may perform the services for the PORTFOLIO contemplated by the Advisory
Agreements and other activities for the TRUST and the PORTFOLIO described in the
Prospectuses and this SAI without violation of the Glass-Steagall Act or other
applicable banking laws or regulations. However, counsel has pointed out that
future changes in either Federal or state statutes and regulations concerning
the permissible activities of banks or trust companies, as well as future
judicial or administrative decisions or interpretations of present and future
statutes and regulations, might prevent Bankers Trust from continuing to perform
those services for the TRUST or the PORTFOLIO. If the circumstances described
above should change, the Boards of Trustees would review each Trust's
relationship with Bankers Trust and consider taking all actions necessary in the
circumstances.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Willkie Farr & Gallagher, 787 SEVENTH AVENUE, New York, New York 10019-6099,
SERVES as Counsel to the TRUST and from time to time provides certain legal
services to Bankers Trust. PRICEWATERHOUSECOOPERS LLP, 1100 Main Street, Suite
900, Kansas City, Missouri 64105 has been selected as Independent Accountants
for the TRUST.
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ORGANIZATION OF THE TRUSTS
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. The shares of each series participate equally in the earnings,
dividends and assets of the particular series. The TRUST may create and issue
additional series of shares. THE Trust's Declaration of Trust permits the
Trustees to divide or combine the shares into a greater or lesser number of
shares without thereby changing the proportionate beneficial interest in a
series. Each share represents an equal proportionate interest in a series with
each other share. Shares when issued are fully paid and non-assessable, except
as set forth below. Shareholders are entitled to one vote for each share held.
** 9 THE TRUST IS AN ENTITY COMMONLY KNOWN AS A "MASSACHUSETTS BUSINESS TRUST."
Massachusetts law provides that shareholders could under certain circumstances
be held personally liable for the obligations of the TRUST. However, the
DECLARATION of Trust DISCLAIMS shareholder liability for acts or obligations of
the TRUST and REQUIRES that notice of this disclaimer be given in each
agreement, obligation or instrument entered into or executed by THE Trust or a
Trustee. The DECLARATION of Trust PROVIDES for indemnification from THE TRUST'S
property for all losses and expenses of any shareholder held personally liable
for the obligations of the Trust. Thus, the risk of shareholders incurring
financial loss on account of shareholder liability is limited to circumstances
in which BOTH INADEQUATE INSURANCE EXISTED AND the Trust itself WAS 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 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. IN ADDITION, WHENEVER THE TRUST IS REQUESTED TO VOTE ON MATTERS
PERTAINING TO THE FUNDAMENTAL POLICIES 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.
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.
The TRUST IS not required to hold annual meetings of shareholders but will hold
special meetings of shareholders when in the judgment of the Trustees it is
necessary or desirable to submit matters for a shareholder vote. Shareholders
have under certain circumstances the right to communicate with other
shareholders in connection with requesting a meeting of shareholders for the
purpose of removing one or more Trustees without a meeting. Upon liquidation of
THE Fund, shareholders of that Fund would be entitled to share pro rata in the
net assets of the Fund available for distribution to shareholders.
* 9 moved from here; text not shownWhenever THE Trust is requested to vote on a
matter pertaining to THE Portfolio, the Trust will vote its shares without a
meeting of shareholders of the Fund if the proposal is one, if which made with
respect to THE Fund, would not require the vote of shareholders of THE Fund as
long as such action is permissible under applicable statutory and regulatory
requirements. For all other matters requiring a vote, THE Trust will hold a
meeting of shareholders of the FUND and, at the meeting of investors in THE
Portfolio, the Trust will cast all of its votes in the same proportion as the
votes all its shares at the Portfolio meeting, other investors with a greater
pro rata ownership of the Portfolio could have effective voting control of the
operations of the Portfolio.
AS OF DECEMBER 31, 1998, THE FOLLOWING SHAREHOLDERS OF RECORD OWNED 25% OR MORE
OF THE VOTING SECURITIES OF THE FUND, AND, THEREFORE, MAY, FOR CERTAIN PURPOSES,
BE DEEMED TO CONTROL THE FUND AND BE ABLE TO AFFECT THE OUTCOME OF CERTAIN
MATTERS PRESENTED FOR A VOTE OF ITS SHAREHOLDERS: [TO BE PROVIDED]
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TAXES
The following is only a summary of certain tax considerations generally
affecting the FUND and ITS shareholders, and is not intended as a substitute for
careful tax planning. Shareholders are urged to consult their tax advisers with
specific reference to their own tax situations.
THE Fund is designed to provide investors with current income. The FUND IS not
intended to constitute A balanced investment PROGRAM and IS not designed for
investors seeking capital gains or maximum income irrespective of fluctuations
in principal.
THE Fund intends TO CONTINUE to qualify as a separate regulated investment
company under the Internal Revenue Code of 1986, as amended (the "Code").
Provided that THE Fund is a regulated investment company, THE Fund will not be
liable for Federal income taxes to the extent all of its taxable net investment
income and net realized long- and short-term capital gains, if any, are
distributed to its shareholders. Although THE Trust expects the FUND to be
relieved of all or substantially all Federal income taxes, depending upon the
extent of ITS activities in states and localities in which ITS offices are
maintained, in which ITS agents or independent contractors are located or in
which IT IS otherwise deemed to be conducting business, that portion of THE
Fund's income which is treated as earned in any such state or locality could be
subject to state and local tax. Any such taxes paid by THE Fund would reduce the
amount of income and gains available for distribution to its shareholders.
IF FOR ANY TAXABLE YEAR THE FUND DOES NOT QUALIFY FOR THE SPECIAL FEDERAL INCOME
TAX TREATMENT AFFORDED REGULATED INVESTMENT COMPANIES, ALL OF ITS TAXABLE INCOME
WILL BE SUBJECT TO FEDERAL INCOME TAX AT REGULAR CORPORATE RATES (WITHOUT ANY
DEDUCTION FOR DISTRIBUTIONS TO ITS SHAREHOLDERS). IN SUCH EVENT, DIVIDEND
DISTRIBUTIONS WOULD BE TAXABLE TO SHAREHOLDERS TO THE EXTENT OF CURRENT
ACCUMULATED EARNINGS AND PROFITS, AND WOULD BE ELIGIBLE FOR THE DIVIDENDS
RECEIVED DEDUCTION FOR CORPORATIONS IN THE CASE OF CORPORATE SHAREHOLDERS.
THE PORTFOLIO IS NOT SUBJECT TO THE FEDERAL INCOME TAXATION. INSTEAD, THE FUND
AND OTHER INVESTORS INVESTING IN THE PORTFOLIO MUST TAKE INTO ACCOUNT, IN
COMPUTING THEIR FEDERAL INCOME TAX LIABILITY, THEIR SHARE OF THE PORTFOLIO'S
INCOME, GAINS, LOSSES, DEDUCTIONS, CREDITS AND TAX PREFERENCE ITEMS, WITHOUT
REGARD TO WHETHER THEY HAVE RECEIVED ANY CASH DISTRIBUTIONS FROM THE PORTFOLIO.
THE PORTFOLIO DETERMINES ITS NET INCOME AND REALIZED CAPITAL GAINS, IF ANY, ON
EACH VALUATION DAY AND ALLOCATES ALL SUCH INCOME AND GAIN PRO RATA AMONG THE
FUND AND THE OTHER INVESTORS IN THE PORTFOLIO AT THE TIME OF SUCH DETERMINATION.
THE FUND DECLARES DIVIDENDS FROM ITS NET INCOME DAILY AND PAYS THE DIVIDENDS
MONTHLY. THE FUND RESERVES THE RIGHT TO INCLUDE REALIZED SHORT-TERM GAINS, IF
ANY, IN SUCH DAILY DIVIDENDS. DISTRIBUTIONS OF THE FUND'S PRO RATA SHARE OF THE
PORTFOLIO'S NET REALIZED long-term capital gains, IF ANY, AND ANY UNDISTRIBUTED
NET REALIZED SHORT-TERM CAPITAL GAINS ARE NORMALLY DECLARED AND PAID ANNUALLY AT
THE END OF THE FISCAL YEAR IN WHICH THEY WERE EARNED TO THE EXTENT THEY ARE NOT
OFFSET BY ANY CAPITAL LOSS CARRYFORWARDS. UNLESS A SHAREHOLDER INSTRUCTS THE
TRUST TO PAY DIVIDENDS OR CAPITAL GAINS DISTRIBUTIONS IN CASH, DIVIDENDS AND
DISTRIBUTIONS WILL AUTOMATICALLY BE REINVESTED AT NAV IN ADDITIONAL SHARES OF
THE FUND.
DISTRIBUTIONS OF NET REALIZED LONG-TERM CAPITAL GAINS ("capital gain
dividends"), if any, will be taxable to shareholders as long-term capital gains,
regardless of how long a shareholder has held Fund shares, and will be
designated as capital gain dividends in a written notice mailed by the Fund to
shareholders after the close of the FUND'S prior taxable year. DIVIDENDS PAID BY
THE FUND FROM ITS TAXABLE NET INVESTMENT INCOME AND DISTRIBUTIONS BY THE FUND OF
ITS NET REALIZED SHORT-TERM CAPITAL GAINS ARE TAXABLE TO SHAREHOLDERS AS
ORDINARY INCOME, WHETHER RECEIVED IN CASH OR REINVESTED IN ADDITIONAL SHARES OF
THE FUND. THE FUND'S DIVIDENDS AND DISTRIBUTIONS WILL NOT QUALIFY FOR THE
DIVIDENDS-RECEIVED DEDUCTION FOR CORPORATIONS.
STATEMENTS AS TO THE TAX STATUS OF EACH SHAREHOLDER'S DIVIDENDS AND
DISTRIBUTIONS, IF ANY, ARE MAILED ANNUALLY. EACH SHAREHOLDER WILL ALSO RECEIVE,
IF APPROPRIATE, VARIOUS WRITTEN NOTICES AFTER THE END OF THE FUND'S PRIOR
TAXABLE YEAR AS TO THE FEDERAL INCOME TAX STATUS OF HIS OR HER DIVIDENDS AND
DISTRIBUTIONS WHICH WERE RECEIVED FROM THE FUND DURING THAT YEAR. SHAREHOLDERS
SHOULD CONSULT THEIR TAX ADVISERS TO ASSESS THE CONSEQUENCES OF INVESTING IN THE
FUND UNDER STATE AND LOCAL LAWS AND TO DETERMINE WHETHER DIVIDENDS PAID BY THE
FUND THAT REPRESENT INTEREST DERIVED FROM U.S. GOVERNMENT OBLIGATIONS ARE EXEMPT
FROM ANY APPLICABLE STATE OR LOCAL INCOME TAXES.
If a shareholder fails to furnish a correct taxpayer identification number,
fails to report fully dividend or interest income or fails to certify that he or
she has provided a correct taxpayer identification number and that he or she is
not subject to
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"backup withholding," then the shareholder may be subject to a 31% backup
withholding tax with respect to any taxable dividends and distributions. An
individual's taxpayer identification number is his or her social security
number. The 31% backup withholding tax is not an additional tax and may be
credited against a taxpayer's regular Federal income tax liability.
PERFORMANCE INFORMATION
From time to time, THE TRUST MAY ADVERTISE "CURRENT YIELD," AND/OR "EFFECTIVE
YIELD" FOR THE FUND. ALL YIELD FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE
NOT INTENDED TO INDICATE FUTURE PERFORMANCE. THE "CURRENT YIELD" OF THE FUND
REFERS TO THE INCOME GENERATED BY AN INVESTMENT IN THE FUND OVER A SEVEN-DAY
PERIOD (WHICH PERIOD WILL BE STATED IN THE ADVERTISEMENT). THIS INCOME IS THEN
"ANNUALIZED;" THAT IS, THE AMOUNT OF INCOME GENERATED BY THE INVESTMENT DURING
THAT WEEK IS ASSUMED TO BE GENERATED EACH WEEK OVER A 52-WEEK PERIOD AND IS
SHOWN AS A PERCENTAGE OF THE INVESTMENT. THE "EFFECTIVE YIELD" IS CALCULATED
SIMILARLY BUT, WHEN ANNUALIZED, THE INCOME EARNED BY AN INVESTMENT IN THE FUND
IS ASSUMED TO BE REINVESTED. THE "EFFECTIVE YIELD" WILL BE SLIGHTLY HIGHER THAN
THE "CURRENT YIELD" BECAUSE OF THE COMPOUNDING EFFECT OF THIS ASSUMED
REINVESTMENT. THE TRUST MAY INCLUDE THIS INFORMATION IN SALES MATERIAL AND
ADVERTISEMENTS FOR THE FUND.
YIELD IS A FUNCTION OF THE QUALITY, COMPOSITION AND MATURITY OF THE SECURITIES
HELD BY THE PORTFOLIO AND OPERATING EXPENSES OF THE FUND AND THE PORTFOLIO. IN
PARTICULAR, THE FUND'S YIELD WILL RISE AND FALL WITH SHORT-TERM INTEREST RATES,
WHICH CAN CHANGE FREQUENTLY AND SHARPLY. IN PERIODS OF RISING INTEREST RATES,
THE YIELD OF THE FUND WILL TEND TO BE SOMEWHAT LOWER THAN THE PREVAILING MARKET
RATES, AND IN PERIODS OF DECLINING INTEREST RATES, THE YIELD WILL TEND TO BE
SOMEWHAT HIGHER. IN ADDITION, WHEN INTEREST RATES ARE RISING, THE INFLOW OF NET
NEW MONEY TO THE FUND FROM THE CONTINUOUS SALE OF ITS SHARES WILL LIKELY BE
INVESTED BY THE PORTFOLIO IN INSTRUMENTS PRODUCING HIGHER YIELDS THAN THE
BALANCE OF THE PORTFOLIO'S SECURITIES, THEREBY INCREASING THE CURRENT YIELD OF
THE FUND. IN PERIODS OF FALLING INTEREST RATES, THE OPPOSITE CAN BE EXPECTED TO
OCCUR. ACCORDINGLY, YIELDS WILL FLUCTUATE AND DO NOT NECESSARILY INDICATE FUTURE
RESULTS. WHILE YIELD INFORMATION MAY BE USEFUL IN REVIEWING THE PERFORMANCE OF
THE FUND, IT MAY NOT PROVIDE A BASIS FOR COMPARISON WITH BANK DEPOSITS, OTHER
FIXED RATE INVESTMENTS, OR OTHER INVESTMENT COMPANIES THAT MAY USE A DIFFERENT
METHOD OF CALCULATING YIELD. ANY FEES CHARGED BY SERVICE AGENTS FOR PROCESSING
PURCHASE AND/OR REDEMPTION TRANSACTIONS WILL EFFECTIVELY REDUCE THE YIELD FOR
THOSE SHAREHOLDERS.
FROM TIME TO TIME, ADVERTISEMENTS OR REPORTS TO SHAREHOLDERS MAY COMPARE THE
YIELD OF THE FUND TO THAT OF OTHER MUTUAL FUNDS WITH SIMILAR INVESTMENT
OBJECTIVES OR TO THAT OF A PARTICULAR INDEX. THE YIELD OF THE FUND MIGHT BE
COMPARED WITH, FOR EXAMPLE, THE IBC FIRST TIER ALL TAXABLE MONEY FUND AVERAGE,
WHICH IS AN AVERAGE COMPILED BY IBC MONEY FUND REPORT, A WIDELY RECOGNIZED,
INDEPENDENT PUBLICATION THAT MONITORS THE PERFORMANCE OF MONEY MARKET MUTUAL
FUNDS. SIMILARLY, THE YIELD OF THE FUND MIGHT BE COMPARED WITH RANKINGS PREPARED
BY MICROPAL LIMITED AND/OR LIPPER ANALYTICAL SERVICES, INC., WHICH ARE WIDELY
RECOGNIZED, INDEPENDENT SERVICES THAT MONITOR THE INVESTMENT PERFORMANCE OF
MUTUAL FUNDS. THE YIELD OF THE FUND MIGHT ALSO BE COMPARED WITHOUT THE AVERAGE
YIELD REPORTED BY THE BANK RATE MONITOR FOR MONEY MARKET DEPOSIT ACCOUNTS
OFFERED BY THE 50 LEADING BANKS AND THRIFT INSTITUTIONS IN THE TOP FIVE STANDARD
METROPOLITAN AREAS. SHAREHOLDERS MAY MAKE INQUIRIES REGARDING THE FUND,
INCLUDING CURRENT YIELD QUOTATIONS AND PERFORMANCE INFORMATION, BY CONTACTING
ANY SERVICE AGENT.
SHAREHOLDERS WILL RECEIVE FINANCIAL REPORTS SEMI-ANNUALLY THAT INCLUDE LISTINGS
OF INVESTMENT SECURITIES HELD BY THE PORTFOLIO AT THOSE DATES. ANNUAL REPORTS
ARE AUDITED BY INDEPENDENT ACCOUNTANTS.
The effective yield is an annualized yield based on a compounding of the
unannualized base period return. These yields are each computed in accordance
with a standard method prescribed by the rules of the SEC, by first determining
the "net change in account value" for a hypothetical account having a share
balance of one share at the beginning of a seven-day period (the "beginning
account value"). The net change in account value equals the value of additional
shares purchased with dividends from the original share and dividends declared
on both the original share and any such additional shares. The unannualized
"base period return" equals the net change in account value divided by the
beginning account value. Realized gains or losses or changes in unrealized
appreciation or depreciation are not taken into account in determining the net
change in account value.
The yields are then calculated as follows:
Base Period Return = Net Change in Account Value
Beginning Account Value
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Current Yield = Base Period Return x 365/7
Effective Yield = [(1 + Base Period Return)365/7] - 1
Tax Equivalent Yield = Current Yield
(1 - Tax Rate)
FOR the seven days ended December 31, 1998, THE FUND'S CURRENT YIELD WAS ____%
AND THE FUND'S EFFECTIVE YIELD WAS ____%.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature of THE 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 Fund. 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.
FINANCIAL STATEMENTS
The financial statements for THE Fund and THE Portfolio for the period ended
December 31, 1998, are incorporated herein by reference to the Annual Report to
shareholders for THE Fund dated December 31, 1998. A copy of THE Fund's Annual
Report may be obtained without charge by contacting the Fund.
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APPENDIX
DESCRIPTION OF SECURITIES RATINGS
DESCRIPTION OF S&P'S CORPORATE BOND RATINGS:
AAA--Bonds rated AAA have the highest rating assigned by S&P to a debt
obligation. Capacity to pay interest and repay principal is extremely strong.
AA--Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
S&P's letter ratings may be modified by the addition of a plus or a minus sign,
which is used to show relative standing within the major categories, except in
the AAA rating category.
DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS:
Aaa--Bonds which are rated Aaa are judged to be the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt-edge."
Interest payments are protected by a large or exceptionally stable margin and
principal is secure. While the various protective elements are likely to change,
such changes as can be visualized are most unlikely to impair the fundamentally
strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
Moody's applies the numerical modifiers 1, 2 and 3 to each generic rating
classification from Aa through B. The modifier 1 indicates that the security
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
DESCRIPTION OF FITCH INVESTORS SERVICE'S CORPORATE BOND RATINGS:
AAA--Securities of this rating are regarded as strictly high-grade, broadly
marketable, suitable for investment by trustees and fiduciary institutions, and
liable to but slight market fluctuation other than through changes in the money
rate. The factor last named is of importance varying with the length of
maturity. Such securities are mainly senior issues of strong companies, and are
most numerous in the railway and public utility fields, though some industrial
obligations have this rating. The prime feature of an AAA rating is showing of
earnings several times or many times interest requirements with such stability
of applicable earnings that safety is beyond reasonable question whatever
changes occur in conditions. Other features may enter in, such as a wide margin
of protection through collateral security or direct lien on specific property as
in the case of high class equipment certificates or bonds that are first
mortgages on valuable real estate. Sinking funds or voluntary reduction of the
debt by call or purchase are often factors, while guarantee or assumption by
parties other than the original debtor may also influence the rating.
AA--Securities in this group are of safety virtually beyond question, and as a
class are readily salable while many are highly active. Their merits are not
greatly unlike those of the AAA class, but a security so rated may be of junior
though strong lien in many cases directly following an AAA security or the
margin of safety is less strikingly broad. The issue may be the obligation of a
small company, strongly secured but influenced as to ratings by the lesser
financial power of the enterprise and more local type of market.
DESCRIPTION OF DUFF & PHELPS' CORPORATE BOND RATINGS:
AAA--Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury Funds.
AA+, AA, AA--High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.
DESCRIPTION OF S&P'S MUNICIPAL BOND RATINGS:
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AAA--Prime--These are obligations of the highest quality. They have the
strongest capacity for timely payment of debt service.
General Obligation Bonds--In a period of economic stress, the issuers will
suffer the smallest declines in income and will be least susceptible to
autonomous decline. Debt burden is moderate. A strong revenue structure appears
more than adequate to meet future expenditure requirements. Quality of
management appears superior.
Revenue Bonds--Debt service coverage has been, and is expected to remain,
substantial; stability of the pledged revenues is also exceptionally strong due
to the competitive position of the municipal enterprise or to the nature of the
revenues. Basic security provisions (including rate covenant, earnings test for
issuance of additional bonds and debt service reserve requirements) are
rigorous. There is evidence of superior management.
AA--High Grade--The investment characteristics of bonds in this group are only
slightly less marked than those of the prime quality issues. Bonds rated AA have
the second strongest capacity for payment of debt service.
S&P's letter ratings may be modified by the addition of a plus or a minus sign,
which is used to show relative standing within the major rating categories,
except in the AAA rating category.
DESCRIPTION OF MOODY'S MUNICIPAL BOND RATINGS:
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities, or fluctuation of protective elements
may be of greater amplitude, or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
Moody's may apply the numerical modifier in each generic rating classification
from Aa through B. The modifier 1 indicates that the security within its generic
rating classification possesses the strongest investment attributes.
DESCRIPTION OF S&P'S MUNICIPAL NOTE RATINGS:
Municipal notes with maturities of three years or less are usually given note
ratings (designated SP-1 or SP-2) to distinguish more clearly the credit quality
of notes as compared to bonds. Notes rated SP-1 have a very strong or strong
capacity to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics are given the designation of SP-1+. Notes
rated SP-2 have a satisfactory capacity to pay principal and interest.
26
<PAGE>
DESCRIPTION OF MOODY'S MUNICIPAL NOTE RATINGS:
Moody's ratings for state and municipal notes and other short-term loans are
designated Moody's Investment Grade (MIG) and for variable rate demand
obligations are designated Variable Moody's Investment Grade (VMIG). This
distinction recognizes the differences between short-term credit risk and
long-term risk. Loans bearing the designation MIG-1/VMIG-1 are of the best
quality, enjoying strong protection from established cash flows of funds for
their servicing or from established and broad-based access to the market for
refinancing, or both. Loans bearing the designation MIG-2/VMIG-2 are of high
quality, with ample margins of protection, although not as large as the
preceding group.
DESCRIPTION OF S&P COMMERCIAL PAPER RATINGS:
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted A-1+.
DESCRIPTION OF MOODY'S COMMERCIAL PAPER RATINGS:
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered to
have a superior capacity for repayment of short-term promissory obligations.
DESCRIPTION OF FITCH INVESTORS SERVICE'S COMMERCIAL PAPER RATINGS:
F1+--Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F1--Very Strong Credit Quality. Issues assigned this rating reflect an assurance
of timely payment only slightly less in degree than the strongest issue.
DESCRIPTION OF DUFF & PHELPS' COMMERCIAL PAPER RATINGS:
Duff 1+--Highest certainty of timely payment. Short term liquidity, including
internal operating factors and/or access to alternative sources of funds, is
outstanding, and safety is just below risk free U.S. Treasury short term
obligations.
Duff 1--Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are minor.
DESCRIPTION OF THOMSON BANK WATCH SHORT-TERM RATINGS:
T-1--The highest category; indicates a very high likelihood that principal and
interest will be paid on a timely basis.
T-2--The second-highest category; while the degree of safety regarding timely
repayment of principal and interest is strong, the relative degree of safety is
not as high as for issues rated "TBW-1".
T-3--The lowest investment-grade category; indicates that while the obligation
is more susceptible to adverse developments (both internal and external) than
those with higher ratings, the capacity to service principal and interest in a
timely fashion is considered adequate.
T-4--The lowest rating category; this rating is regarded as non-investment grade
and therefore speculative.
DESCRIPTION OF THOMSON BANKWATCH LONG-TERM RATINGS:
AAA--The highest category; indicates that the ability to repay principal and
interest on a timely basis is extremely high.
AA--The second-highest category; indicates a very strong ability to repay
principal and interest on a timely basis, with limited incremental risk compared
to issues rated in the highest category.
A--The third-highest category; indicates the ability to repay principal and
interest is strong. Issues rated "a" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.
BBB--The lowest investment-grade category; indicates an acceptable capacity to
repay principal and interest. Issues rated "BBB" are, however, more vulnerable
to adverse developments (both internal and external) than obligations with
higher ratings.
NON-INVESTMENT GRADE
(ISSUES REGARDED AS HAVING SPECULATIVE CHARACTERISTICS IN THE LIKELIHOOD OF
TIMELY REPAYMENT OF PRINCIPAL AND INTEREST.)
27
<PAGE>
BB--While not investment grade, the "BB" rating suggests that the likelihood of
default is considerably less than for lower-rated issues. However, there are
significant uncertainties that could affect the ability to adequately service
debt obligations.
B--Issues rated "B" show a higher degree of uncertainty and therefore greater
likelihood of default than higher-rated issues. Adverse development could well
negatively affect the payment of interest and principal on a timely basis.
CCC--Issues rated "CCC" clearly have a high likelihood of default, with little
capacity to address further adverse changes in financial circumstances.
CC--"CC" is applied to issues that are subordinate to other obligations rated
"CCC" and are afforded less protection in the event of bankruptcy or
reorganization.
D--Default
These long-term debt ratings can also be applied to local currency debt. In such
cases the ratings defined above will be preceded by the designation "local
currency".
RATINGS IN THE LONG-TERM DEBT CATEGORIES MAY INCLUDE A PLUS (+) OR MINUS (-)
DESIGNATION, WHICH INDICATES WHERE WITHIN THE RESPECTIVE CATEGORY THE ISSUE IS
PLACED.
28
<PAGE>
INVESTMENT ADVISER OF EACH PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY
DISTRIBUTOR
ICC DISTRIBUTORS, INC.
CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY
INDEPENDENT ACCOUNTANTS
PRICEWATERHOUSECOOPERS LLP
COUNSEL
WILLKIE FARR & GALLAGHER
--------------------
No person has been authorized to give any information or to make any
representations other than those contained in the Fund's Prospectus, its SAI or
the Fund's official sales literature in connection with the offering of the
Fund's shares and, if given or made, such other information or representations
must not be relied on as having been authorized by the Trust. This Prospectus
does not constitute an offer in any state in which, or to any person to whom,
such offer may not lawfully be made.
--------------------
Cusip #055847206
COMINSTMM400 (4/98)
<PAGE>
PART C OTHER INFORMATION
ITEM 23.
(a) (i) Declaration of Trust of the Trust; 1
(ii) Eighth Amended and Restated Establishment and Designation of
Series; 2
(b) By-Laws of the Trust; 1
(c) Not Applicable;
(d) (i) Conformed Copy of Investment Advisory Agreement; 2
(ii) Copy of Exhibit A to Investment Advisory Agreement; 2
(e) Conformed Copy of Distribution Agreement; 3
(f) Not Applicable;
(g) (i) Conformed copy of Custodian Agreement between the Registrant and
Bankers Trust Company; 4
(ii) Conformed copy of Amendment #1 to Exhibit A to the Custodian
Agreement between the Registrant and Bankers Trust Company; 5
(iii) Conformed copy of Cash Services Agreement between the Registrant
and Bankers Trust Company; 6
(h) (i) Administration and Services Agreement; 7
(ii) Exhibit D to the Administration and Services Agreement; 3
(iii) Conformed Copy of Amended and Restated Shareholder Services Plan
for BT PreservationPlus Fund; 3
(iv) Conformed copy of Agreement to Provide Shareholder Services for
BT PreservationPlus Fund; 3
(v) Conformed Copy of Expense Limitation Agreement; 9
(i) Not applicable;
(j) Consent of Independent Accountants - to be filed;
(k) Not Applicable;
(l) Investment representation letters of initial shareholders of the
Trust; 8
(m) Not Applicable;
(n) Financial Data Schedules - to be filed;
(o) (i) Multiple Class Expense Allocation Plan Adopted Pursuant of Rule
18f-3; 2
(ii) Revised Multiple Class Expense Allocation Plan Adopted Pursuant
to Rule 18f-3. 5
- -----------------------------------
+ All exhibits have been filed electronically.
1. Incorporated by reference to Post-Effective Amendment No. 5 to
Registrant's Registration Statement as filed with the Commission on
July 31, 1995.
2. Incorporated by reference to Post-Effective Amendment No. 14 to
Registrant's Registration Statement as filed with the Commission on
February 25, 1997.
<PAGE>
3. Incorporated by reference to Post-Effective Amendment No. 22 to
Registrant's Registration Statement as filed with the Commission on
November 24, 1998.
4. Incorporated by reference to Post-Effective Amendment No. 18 to
Registrant's Registration Statement as filed with the Commission July
1, 1997.
5. Incorporated by reference to Post-Effective Amendment No. 19 to
Registrant's Registration Statement as filed with the Commission on
January 28, 1998.
6. Incorporated by reference to Post-Effective Amendment No. 21 to
Registrant's Registration Statement as filed with the Commission on
June 30, 1998.
7. Incorporated by reference to Post-Effective Amendment No. 3 to
Registrant's Registration Statement as filed with the Commission on
April 30, 1993.
8. Incorporated by reference herein to Pre-Effective Amendment No. 1 to
Registrant's Registration Statement as filed with the Commission on
June 9, 1992.
9. Incorporated by reference to Post-Effective Amendment No. 25 to
Registrant's Registration Statement as filed with the Commission on
January 28, 1999.
<PAGE>
ITEM 24. Persons Controlled by or Under Common Control with Registrant:
Not Applicable
ITEM 25. Indemnification:
Incorporated by reference to Post-Effective Amendment No. 14 to Registrant's
Registration Statement as filed with the Commission on February 25, 1997.
ITEM 26. Business and Other Connections of Investment Adviser:
Bankers Trust serves as investment adviser to the Fund's Portfolio. Bankers
Trust, a New York banking corporation, is a wholly owned subsidiary of Bankers
Trust Corporation. Bankers Trust conducts a variety of commercial banking and
trust activities and is a major wholesale supplier of financial services to the
international institutional market. To the knowledge of the Trust, none of the
directors or officers of Bankers Trust, except those set forth below, is or has
been at anytime during the past two fiscal years engaged in any other business,
profession, vocation or employment of a substantial nature, except that certain
directors and officers also hold various positions with and engage in business
for Bankers Trust Corporation. Set forth below are the names and principal
businesses of the directors and officers of Bankers Trust who are or during the
past two fiscal years have been engaged in any other business, profession,
vocation or employment of a substantial nature. These persons may be contacted
c/o Bankers Trust Company, 130 Liberty Street, New York, New York 10006.
George B. Beitzel, International Business Machines Corporation, Old Orchard
Road, Armonk, NY 10504. Director, Bankers Trust Company; Retired Senior Vice
President and Director, International Business Machines Corporation; Director,
Computer Task Group; Director, Phillips Petroleum Company; Director, Caliber
Systems, Inc. (formerly, Roadway Services Inc.); Director, Rohm and Haas
Company; Director, TIG Holdings; Chairman Emeritus of Amherst College; and
Chairman of the Colonial Williamsburg Foundation.
Richard H. Daniel, Bankers Trust Company, 130 Liberty Street, New York, New York
10006. Vice Chairman and Chief Financial Officer, Bankers Trust Company and
Bankers Trust Corporation; Beneficial owner, General Partner, Daniel Brothers,
Daniel Lingo & Assoc., Daniel Pelt & Assoc.; Beneficial owner, Rhea C. Daniel
Trust.
Philip A. Griffiths, Bankers Trust Company, 130 Liberty Street, New York, New
York 10006. Director, Institute for Advanced Study; Director, Bankers Trust
Company; Chairman, Committee on Science, Engineering and Public Policy of the
National Academies of Sciences and Engineering & the Institute of Medicine;
Chairman and member, Nominations Committee and Committee on Science and
Engineering Indicators, National Science Board; and Trustee, North Carolina
School of Science and Mathematics and the Woodward Academy.
<PAGE>
William R. Howell, J.C. Penney Company, Inc., P.O. Box 10001, Plano, TX
75301-0001. Chairman Emeritus, J.C. Penney Company, Inc.; Director, Bankers
Trust Company; Director, Exxon Corporation; Director, Halliburton Company;
Director, Warner-Lambert Corporation; Director, The Williams Companies, Inc.;
and Director, National Retail Federation.
Vernon E. Jordan, Jr., Akin, Gump, Strauss, Hauer & Feld, LLP, 1333 New
Hampshire Ave., N.W., Washington, DC 20036. Senior Partner, Akin, Gump, Strauss,
Hauer & Feld, LLP; Director, Bankers Trust Company; Director, American Express
Company; Director, Dow-Jones, Inc.; Director, J.C. Penney Company, Inc.;
Director, Revlon Group Incorporated; Director, Ryder System, Inc.; Director,
Sara Lee Corporation; Director, Union Carbide Corporation; Director, Xerox
Corporation; Trustee, Brookings Institution; Trustee, The Ford Foundation; and
Trustee, Howard University.
David Marshall, 130 Liberty Street, New York, New York 10006. Chief Information
Officer and Executive Vice President, Bankers Trust Corporation; Senior Managing
Director, Bankers Trust Company.
Hamish Maxwell, Philip Morris Companies Inc., 120 Park Avenue, New York, NY
10006. Retired Chairman and Chief Executive Officer, Philip Morris Companies
Inc.; Director, Bankers Trust Company; Director, The News Corporation Limited;
Director, Sola International Inc.; and Chairman, WWP Group plc.
Frank N. Newman, Bankers Trust Company, 130 Liberty Street, New York, New York
10006. Chairman of the Board, Chief Executive Officer and President, Bankers
Trust Corporation and Bankers Trust Company; Director, Bankers Trust Company;
Director, Dow-Jones, Inc.; and Director, Carnegie Hall.
N.J. Nicholas Jr., 745 Fifth Avenue, New York, NY 10020. Director, Bankers Trust
Company; Director, Boston Scientific Corporation; and Director, Xerox
Corporation.
Russell E. Palmer, The Palmer Group, 3600 Market Street, Suite 530,
Philadelphia, PA 19104. Chairman and Chief Executive Officer of The Palmer
Group; Director, Bankers Trust Company; Director, Allied-Signal Inc.; Director,
Federal Home Loan Mortgage Corporation; Director, GTE Corporation; Director, The
May Department Stores Company; Director, Safeguard Scientifics, Inc.; and
Trustee, University of Pennsylvania.
Donald L. Staheli, Bankers Trust Company, 130 Liberty Street, New York, New York
10006. Chairman of the Board and Chief Executive Officer, Continental Grain
Company; Director, Bankers Trust Company; Director, ContiFinancial Corporation;
Director, Prudential Life Insurance Company of America; Director, Fresenius
Medical Care, A.g.; Director, America-China Society; Director, National
Committee on United States-China Relations; Director, New York City Partnership;
Chairman, U.S.-China Business Council; Chairman, Council on Foreign Relations;
Chairman, National Advisor Council of Brigham Young University's Marriott School
of Management; Vice Chairman, The
<PAGE>
Points of Light Foundation; and Trustee, American Graduate School of
International Management.
Patricia Carry Stewart, c/o Office of the Secretary, 130 Liberty Street, New
York, NY 10006. Director, Bankers Trust Company; Director, CVS Corporation;
Director, Community Foundation for Palm Beach and Martin Counties; Trustee
Emeritus, Cornell University.
George J. Vojta, Bankers Trust Company, 130 Liberty Street, New York, NY 10006.
Vice Chairman, Bankers Trust Corporation and Bankers Trust Company; Director,
Bankers Trust Company; Director; Alicorp S.A.; Director; Northwest Airlines;
Director, Private Export Funding Corp.; Director, New York State Banking Board;
Director, St. Lukes-Roosevelt Hospital Center; Partner, New York City
Partnership; and Chairman, Wharton Financial Services Center.
Paul A. Volcker, Bankers Trust Company, 130 Liberty Street, New York, New York
10006. Director, Bankers Trust Company; Director, American Stock Exchange;
Director, Nestle S.A.; Director, Prudential Insurance Company; Director, UAL
Corporation; Chairman, Group of 30; North American Chairman, Trilateral
Commission; Co-Chairman, Bretton Woods Committee; Co-Chairman, U.S./Hong Kong
Economic Cooperation Committee; Director, American Council on Germany; Director,
Aspen Institute; Director, Council on Foreign Relations; Director, The Japan
Society; and Trustee, The American Assembly.
Melvin A. Yellin, Bankers Trust Company, 130 Liberty Street, New York, New York
10006. Senior Managing Director and General Counsel of Bankers Trust Corporation
and Bankers Trust Company; Director, 1136 Tenants Corporation; and Director, ABA
Securities Association.
Item 27. Principal Underwriters:
(a) ICC Distributors, Inc., the Distributor for shares of the Registrant, also
acts as principal underwriter for the following open-end investment
companies: BT Advisor Funds, BT Institutional Funds, BT Investment Funds,
Cash Management Portfolio, Intermediate Tax Free Portfolio, NY Tax Free
Money Portfolio, Treasury Money Portfolio, International Equity Portfolio,
Equity 500 Index Portfolio, Capital Appreciation Portfolio and Asset
Management Portfolio.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
---------------- ---------------- ---------------
John Y. Keffer President None
<PAGE>
Two Portland Square
Portland, ME 04101
Sara M. Morris Treasurer None
Two Portland Square
Portland, ME 04101
David I. Goldstein Secretary None
Two Portland Square
Portland, ME 04101
Benjamin L. Niles Vice President None
Two Portland Square
Portland, ME 04101
Margaret J. Fenderson Assistant Treasurer None
Two Portland Square
Portland, ME 04101
Dana L. Lukens Assistant Secretary None
Two Portland Square
Portland, ME 04101
Nanette K. Chern Chief Compliance Officer None
Two Portland Square
Portland, ME 04101
(c) None
ITEM 28. Location of Accounts and Records:
BT Pyramid Mutual Funds: BT Alex.Brown
(Registrant) One South Street
Baltimore, MD 21202
Bankers Trust Company: 130 Liberty Street
(Custodian, Investment Adviser New York, NY 10006
and Administrator)
ICC Distributors, Inc.: Two Portland Square
(Distributor) Portland, ME 04101
ITEM 29. Management Services:
Not Applicable
<PAGE>
ITEM 30. Undertakings
The Registrant undertakes to comply with Section 16(c) of the 1940 Act as though
such provisions of the Act were applicable to the Registrant except that the
request referred to in the third full paragraph thereof may only be made by
shareholders who hold in the aggregate at least 10% of the outstanding shares of
the Registrant, regardless of the net asset value or values of shares held by
such requesting shareholders.
Registrant hereby undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, the Registrant, BT PYRAMID MUTUAL FUNDS,
has duly caused this Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Baltimore and
the State of Maryland on this 26th day of February, 1999.
BT PYRAMID MUTUAL FUNDS
By: /s/ Daniel O. Hirsch
Daniel O. Hirsch, Secretary
February 26, 1999
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the following
person in the capacity and on the date indicated:
NAME TITLE DATE
- ---- --------- ----
By: /s/ Daniel O. Hirsch Secretary February 26, 1999
Daniel O. Hirsch (Attorney in Fact
For the Persons
Listed Below)
/s/ JOHN Y. KEFFER* President and
John Y. Keffer Chief Executive Officer
/s/ JOSEPH A. FINELLI* Treasurer (Principal
Joseph A. Finelli Financial and Accounting
Officer)
/s/ HARRY VAN BENSCHOTEN** Trustee
Harry Van Benschoten
/s/ MARTIN J. GRUBER** Trustee
Martin J. Gruber
/s/ KELVIN J. LANCASTER** Trustee
Kelvin J. Lancaster
* By Power of Attorney - Filed herewith.
** By Power of Attorney - Incorporated by reference to Post-Effective Amendment
No. 15 to Registrant's Registration Statement as filed with the Commission on
March 17, 1997.
<PAGE>
SIGNATURES
CASH MANAGEMENT PORTFOLIO has duly caused this Post Effective Amendment No. 26
to the Registration Statement on Form N-1A of BT Pyramid Mutual Funds to be
signed on their behalf by the undersigned, thereto duly authorized, in the City
of Baltimore and the State of Maryland on the 26th day of February, 1999.
CASH MANAGEMENT PORTFOLIO
By: /s/ Daniel O. Hirsch
Daniel O. Hirsch, Secretary
February 26, 1999
This Post Effective Amendment No. 26 to the Registration Statement of
BT Pyramid Mutual Funds has been signed below by the following persons in the
capacities indicated with respect to CASH MANAGEMENT PORTFOLIO.
NAME TITLE DATE
- ---- ----- ----
By: /s/ Daniel O. Hirsch Secretary February 26, 1999
Daniel O. Hirsch (Attorney in Fact
For the Persons
Listed Below)
/s/ John Y. Keffer* President and
John Y Keffer Chief Executive Officer
/s/ Joseph A. Finelli* Treasurer (Princpal
Joseph A. Finelli Financial and
Accounting Officer)
/s/ CHARLES P. BIGGAR** Trustee
Charles P. Biggar
/s/ S. LELAND DILL** Trustee
S. Leland Dill
/s/ PHILIP SAUNDERS, JR.** Trustee
Philip Saunders, Jr.
* By Power of Attorney - Filed herewith.
** By Power of Attorney - Incorporated by reference to Post-Effective Amendment
No. 6 to Registrant's Registration Statement as filed with the Commission on
February 5, 1997.
<PAGE>
SIGNATURES
EQUITY 500 PORTFOLIO has duly caused this Post Effective Amendment No. 26 to
the Registration Statement on Form N-1A of BT Pyramid Mutual Funds to be signed
on their behalf by the undersigned, thereto duly authorized, in the City of
Baltimore and the State of Maryland on the 26th day of February, 1999.
EQUITY 500 PORTFOLIO
By: /s/ Daniel O. Hirsch
Daniel O. Hirsch, Secretary
February 26, 1999
This Post Effective Amendment No. 26 to the Registration Statement of
BT Pyramid Mutual Funds has been signed below by the following persons in the
capacities indicated with respect to EQUITY 500 PORTFOLIO.
NAME TITLE DATE
- ---- ----- ----
By: /s/ Daniel O. Hirsch Secretary February 26, 1999
Daniel O. Hirsch (Attorney in Fact
For the Persons
Listed Below)
/s/ John Y. Keffer* President and
John Y Keffer Chief Executive Officer
/s/ Joseph A. Finelli* Treasurer (Princpal
Joseph A. Finelli Financial and
Accounting Officer)
/s/ CHARLES P. BIGGAR** Trustee
Charles P. Biggar
/s/ S. LELAND DILL** Trustee
S. Leland Dill
/s/ PHILIP SAUNDERS, JR.** Trustee
Philip Saunders, Jr.
* By Power of Attorney - Filed herewith.
** By Power of Attorney - Incorporated by reference to Post-Effective Amendment
No. 6 to Registrant's Registration Statement as filed with the Commission on
February 5, 1997.
<PAGE>
Power of Attorney
The undersigned Trustees and officers, as indicated respectively below,
of BT Investment Funds, BT Institutional Funds, BT Pyramid Mutual Funds, and BT
Advisor Funds (each, a "Trust") and, Cash Management Portfolio, Treasury Money
Portfolio, Tax Free Money Portfolio, NY Tax Free Money Portfolio, International
Equity Portfolio, Utility Portfolio, Short/Intermediate U.S. Government
Securities Portfolio, Equity 500 Index Portfolio, Asset Management Portfolio,
Capital Appreciation Portfolio, Intermediate Tax Free Portfolio, and BT
Investment Portfolios (each, a "Portfolio Trust") each hereby constitutes and
appoints the Secretary, each Assistant Secretary and each authorized signatory
of each Trust and each Portfolio Trust, each of them with full powers of
substitution, as his true and lawful attorney-in-fact and agent to execute in
his name and on his behalf in any and all capacities the Registration Statements
on Form N-1A, and any and all amendments thereto, and all other documents, filed
by a Trust or a Portfolio Trust with the Securities and Exchange Commission (the
"SEC") under the Investment Company Act of 1940, as amended, and (as applicable)
the Securities Act of 1933, as amended, and any and all instruments which such
attorneys and agents, or any of them, deem necessary or advisable to enable the
Trust or Portfolio Trust to comply with such Acts, the rules, regulations and
requirements of the SEC, and the securities or Blue Sky laws of any state or
other jurisdiction and to file the same, with all exhibits thereto and other
documents in connection therewith, with the SEC and such other jurisdictions,
and the undersigned each hereby ratifies and confirms as his own act and deed
any and all acts that such attorneys and agents, or any of them, shall do or
cause to be done by virtue hereof. Any one of such attorneys and agents has, and
may exercise, all of the powers hereby conferred. The undersigned each hereby
revokes any Powers of Attorney previously granted with respect to any Trust or
Portfolio Trust concerning the filings and actions described herein.
IN WITNESS WHEREOF, each of the undersigned has hereunto set his hand
as of the 31st day of December, 1998.
SIGNATURES TITLE
- ---------- -----
/s/ JOHN Y. KEFFER President and Chief Executive Officer of each Trust
John Y. Keffer and Portfolio Trust
/s/ JOSEPH A. FINELLI Treasurer (Principal Financial and Accounting
Joseph A. Finelli Officer) of each Trust and Portfolio Trust
<PAGE>
BT PYRAMID MUTUAL FUNDS
One South Street
Baltimore, Maryland 21202
February 26, 1999
EDGAR Operations Branch
Securities and Exchange Commission
Division of Investment Management
450 Fifth Street, Northwest
Washington, DC 20549
Re: BT PYRAMID MUTUAL FUNDS (the "Trust")
1933 Act File No. 33-45973
1940 Act File No. 811-7774
Dear Sir or Madam:
Post-Effective No. 26 under the Securities Act of 1933, as amended (the
"1933 Act") and Amendment No. 27 under the Investment Company Act of 1940 to the
Registration Statement of the above-referenced Trust is hereby electronically
transmitted. This filing is being made pursuant to paragraph (a) of Rule 485
under the 1933 Act.
Pursuant to Securities Act release No. 6510 and Investment Company
Release No. 13768 (February 15, 1984), we request selective review of the above
referenced Post-Effective Amendment.
The disclosure, design and format contained in this Post-Effective
Amendment is substantially similar to disclosure provided pursuant to new Form
N-1A for BT International Equity Fund in the BT Mutual Funds family previously
reviewed by the Staff (BT Investment Funds (File no. 33-06071) filed on November
24, 1998).
The following sections of the Funds' prospectuses and statement of
additional information differ from those of the International Equity Fund only
so far as necessary to include Fund-specific disclosure:
The Prospectuses:
1. Cover page
2. Overview
3. Who Should Consider Investing in the Fund
4. Annual Fund Operating Expenses
5. Objective
6. Strategy
<PAGE>
7. Principal Investments
8. Investment Process
9. Portfolio Managers
The Statement of Additional Information:
1. Investment Objectives
2. Investment Policies
3. Purchase of Shares
4. Redemption of Shares
If you have any questions regarding this filing, please call me at
(410) 895-3776.
Very truly yours,
/s/ Daniel O. Hirsch
--------------------
Daniel O. Hirsch
Secretary
Enclosures
