BT PYRAMID MUTUAL FUNDS, 485APOS, 1999-11-30

BT PYRAMID MUTUAL FUNDS
485APOS, 1999-11-30

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<PAGE>

As filed with the Commission on November 30, 1999
1933 Act File No. 33-45973
1940 Act File No. 811-6576

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549c

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X

Post-Effective Amendment No. 30............... X

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X

Amendment No. 31.............................. 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) 895-3433
(Registrant's Telephone Number)

Daniel O. Hirsch, Esq. Copies to: Burton M. Leibert, Esq.
One South Street Willkie Farr & Gallagher
Baltimore, Maryland 21202 787 Seventh Ave
(Name and Address of Agent New York, New York 10019
for Service)

It is proposed that this filing will become effective (check appropriate
box):

[ ] Immediately upon filing pursuant to paragraph (b)
[ ] On July 31, 1999, pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[x] On January 31, 2000 pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] On (date) pursuant to paragraph (a)(2) of rule 485.

If appropriate, check the following box:

[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

BT Investment Portfolios, on behalf of BT PreservationPlus Portfolio, has
also executed this Registration Statement.
<PAGE>

PROSPECTUS: JANUARY 31, 2000

(logo)

[BT] PreservationPlus [Fund]
Investment Class

With the goal of achieving a high level of current income while seeking to
maintain a stable value per share

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.

Page 1
<PAGE>

BT PreservationPlus Fund
Overview of the BT PreservationPlus 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 Fees and Expenses of the Fund

A Detailed Look at the BT PreservationPlus Fund
00 Objective
00 Strategy
00 Principal Investments
00 Investment Process
00 Risks
00 Management of the Fund
00 Calculating the Fund's Share Price
00 Dividends and Distributions
00 Tax Considerations
00 Shareholder Information
00 Financial Highlights

Overview
of the BT PreservationPlus Fund

Goal: The Fund seeks a high level of current income while seeking to maintain a
stable value per share.

Core Strategy: The Fund invests primarily in fixed income securities. The Fund
also enters into contracts with financial institutions that are designed to
stabilize the Fund's share value.

INVESTMENT POLICIES AND STRATEGIES

The Fund invests all of its assets in a master portfolio with the same goal as
the Fund. The Fund, through the master portfolio, seeks to achieve its goal by
investing in fixed income securities of varying maturities, money market
instruments and futures and options. The Fund attempts to maintain a stable
share value by entering into contracts,

Page 2
<PAGE>

called Wrapper Agreements, with financial institutions, such as insurance
companies and banks.

PRINCIPAL RISKS OF INVESTING IN THE FUND

Although the Fund seeks to preserve a stable share value, there are risks
associated with fixed income investing. For example, the value of fixed income
securities could fluctuate or fall if:

. There is a sharp rise in interest rates.
. An issuer's creditworthiness declines.
. Changes in interest rates or economic downturns have a negative effect on
issuers in the financial services industry.

The Fund attempts to offset these risks by purchasing Wrapper Agreements.
Wrapper Agreements may have their own risks, including:

. The possibility of default by a financial institution providing a Wrapper
Agreement ("Wrapper Provider').
. The inability of the Fund to obtain Wrapper Agreements covering the Fund's
assets.

The Fund is also subject to the risk that the Investment Adviser incorrectly
judges the potential risks and rewards of derivative inesting.

WHO SHOULD CONSIDER INVESTING IN THE FUND

You should consider investing in the Fund if you are looking for an investment
that seeks to earn current income higher than money market mutual funds over
most time periods and to preserve the value of your investment. Investment
Class shares were formerly known as Service Class shares.

. upon the Plan participant's death, retirement, disability or termination;
. to fund Plan participant loans and other "in service" withdrawals made
pursuant to the terms of the Plan; and

Page 3
<PAGE>

. for transfers to other Plan investment options that are not competing
funds. Transfers between the Fund and a non-competing fund will be required
to remain in the non-competing fund for a period of at least three months
before transfer to a competing fund.

FOOTNOTE: Competing funds are any fixed income investment options with a
targeted average duration of three years or less, or any investment option that
seeks to maintain a stable value per unit or share, including money market
funds.

You should not consider investing in the BT PreservationPlus Fund if you seek
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 PreservationPlus Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve a stable share value, it
is possible to lose money by investing in the Fund.

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<PAGE>

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar chart and table on this page can help you evaluate the potential risks
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 each
full calendar year since it began selling shares to the public on September 23,
1998 (its inception date). The table compares the Fund's average annual return
with the Lehman 1-3 Year Government/Corporate Total Return Index, the IBC First
Tier Retail Money Market Universe, and Wrapped Lehman Intermediate Aggregate
Index, over the last calendar year and since the Fund's inception. 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 securities - costs that are reflected in the Fund's results.

FOOTNOTE: Lehman 1-3 Year Government/Corporate Total Return Index is a widely
accepted benchmark of short-term fixed income securities. It is a total return
index consisting of all U.S. Government agency securities, U.S. Government
Treasury securities and all investment grade corporate debt securities with
maturities of one to three years. We also compare the Fund's performance to two
other indices. The IBC First Tier Retail Money Market Universe is
[description]. The Wrapped Lehman Intermediate Aggregate Index is a custom
benchmark representing investment in a portfolio consisting of the Lehman
Intermediate Aggregate Index and a book value wrapper agreement. The benchmark
returns are calculated assuming a start date of September 23, 1998, which is the
same day that the BT PreservationPlus Fund - Investment Class commenced
operations. The assumed expense level for the book value wrapper agreement is
0.15%. This benchmark more closely reflects the market sector in which the Fund
invests.

Year-by-Year Returns
(each full calendar year since inception)
[bar chart]
[ ]%
-----
1999

Since inception, the Fund's highest return in any calendar quarter was [ ]% ([ ]
quarter 19[ ]) and its lowest quarterly return was [ ]% ([ ]quarter 19[ ]). 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, 1999)

Since Inception
1 year (September 23,
1998)
<S> <C> <C>
- -----------------------------------------------------------------------------
BT PreservationPlus Fund - Investment Class [ ]% [ ]%
- -----------------------------------------------------------------------------
Lehman 1-3 Year Government/Corporate [ ]% [ ]%
Total Return Index
- -----------------------------------------------------------------------------
IBC First Tier Retail Money Market [ ]% [ ]%
Universe
- -----------------------------------------------------------------------------
Wrapped Lehman Intermediate Aggregate [ ]% [ ]%
Index
- -----------------------------------------------------------------------------
</TABLE>

As of December 31, 1999, the Fund's 30-day yield was [ ]%.

FOOTNOTE: The 30-day yield is a measure of the income generated by the Fund over
a thirty-day period. This amount is then annualized, which means that we assume
the Fund generates the same income every month 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.

FEES AND EXPENSES OF THE FUND

The Shareholder Fees and Annual Fees and Expenses tables to the right describe
the fees and expenses that you may pay if you buy and hold shares of the BT
PreservationPlus Fund--Investment Class.

Shareholder Fees
(fees paid directly from your investment)

<TABLE>
<S> <C>
-------------------------------------------------------
Maximum Sales Charge Imposed on Purchases None
-------------------------------------------------------
Maximum Sales Charge on Reinvested Dividends None

-------------------------------------------------------
Maximum Redemption Fee (as a percentage of 2.0%
amount redeemed, as applicable)
-------------------------------------------------------
</TABLE>

Under normal circumstances, redemptions of shares that are directed by Plan
participants are not subject to a redemption fee. Redemptions of Shares that
are not directed by Plan

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participants and that are made on less than twelve months' prior written notice
to the Fund are subject to a redemption fee of 2% of the amount redeemed payable
to the Fund.

Annual Fees and Expenses
(expenses paid from fund assets)

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Percentage of Average
Daily Net Assets/1/
- ----------------------------------------------------------------------------------
<S> <C>
Management Fees 0.35%
- ----------------------------------------------------------------------------------
Distribution and Service (12b-1) Fees None
- ----------------------------------------------------------------------------------
Other Fund Operating Expenses [ ]%/2/
- ----------------------------------------------------------------------------------
Total Fund Operating Expenses [ ]%
- ----------------------------------------------------------------------------------
Less: Fee Waivers or Expense Reimbursements [ ]%/3/
- ----------------------------------------------------------------------------------
Net Expenses 0.65%
- ----------------------------------------------------------------------------------
</TABLE>

Investment Class shares are subject to shareholder servicing fees in the maximum
amount of 0.25% of the average daily net assets of the shares. The shareholder
services provided in exchange for these fees may include establishing and
maintaining shareholder and Plan participant accounts, processing purchase and
redemption transactions, arranging for bank wires, performing shareholder sub-
accounting, answering investor/shareholder's inquiries regarding the Fund and/or
its classes, providing periodic statements showing the investor/shareholder's
account balance and those of Plan participants, transmitting proxy statements,
periodic reports, updated prospectuses and other communications to shareholders
and, with respect to meetings of shareholders, collecting, tabulating and
forwarding to the Trust executed proxies and obtaining such other information
and performing such other services as may reasonably be required.

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 sold your shares at the end of the
period. The expense example does not include a redemption fee.

/1/ Information on the annual operating expenses reflects the expenses of both
the Fund and the BT PreservationPlus Portfolio, the master portfolio in which
the BT PreservationPlus 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/ "Other Expenses" include the annual premium rate the Fund paid for Wrapper
Agreements and a shareholder servicing fee of 0.25%.

/3/ Bankers Trust has agreed, for the 16-month period from the Fund's fiscal
year end of September 30, 1999, to waive its fees and reimburse expenses so
that total expenses will not exceed 0.65%.

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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.

Expense Example/4/

<TABLE>
<S> <C> <C> <C>
----------------------------------------------
1 year 3 years 5 years 10 years
----------------------------------------------
$[ ] $[ ] $[ ] $[ ]

</TABLE>

/4/ Based on expenses, after fee waivers and reimbursements for the first 16
months only.

Page 8
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A detailed look
at the BT PreservationPlus Fund

OBJECTIVE
The BT PreservationPlus Fund seeks a high level of current income while seeking
to maintain a stable value per share.

While we give priority to earning income and maintaining the value of the Fund's
principal, all fixed income securities, including U.S. government obligations,
can change in value when, for example, interest rates change or an issuer's
creditworthiness changes.

STRATEGY
The Fund seeks current income that is higher than that of money market funds by
investing in fixed income securities with varying maturities and maintaining an
average portfolio duration of 2.5 to 4.5 years. In addition, the Fund enters
into Wrapper Agreements designed to stabilize the Fund's share value. Wrapper
Agreements are provided by financial institutions, such as insurance companies
and banks.

FOOTNOTE: Duration measures the sensitivity of bond prices to changes in
interest rates. The longer the duration of a bond, the longer it will take to
repay the principal and interest obligations and the more sensitive it is to
changes in interest rates. Investors in longer-duration bonds face more risk as
interest rates rise--but also are more likely to receive more income from their
investment to compensate for the risk.

PRINCIPAL INVESTMENTS
Fixed Income Securities
The Fund invests at least 65% of its net assets in fixed income securities
including:
. U.S. government securities that are issued or guaranteed by the U.S. Treasury,
or by agencies or instrumentalities of the U.S. Government.
. U.S. dollar-denominated securities issued by domestic or foreign corporations,
foreign governments or supranational entities.
. U.S. dollar-denominated asset-backed securities issued by domestic or foreign
entities.
. Mortgage pass-through securities issued by governmental and non-governmental
issuers.
. Collateralized mortgage obligations and real estate mortgage investment
conduits.
. Obligations issued or guaranteed, or backed by securities issued or
guaranteed, by the U.S. government, or any of its agencies or
instrumentalities, including CATS, TIGRs,

Page 9
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TRs and zero coupon securities, which are securities consisting of either the
principal component or the interest component of a U.S. Treasury bond.

We employ the following policies to attempt to reduce the risks involved in
investing in fixed income securities:
. We allocate assets among a diversified group of issuers.
. We invest in fixed income securities that are rated, at the time of purchase,
within the top three rating categories as rated by Moody's Investors Service,
Inc., Standard & Poor's Ratings Services or Duff & Phelps Credit Rating Co.,
another nationally recognized statistical rating organization, or, if unrated,
determined by us to be of comparable quality.
. We target an average portfolio duration of 2.5 to 4.5 years by investing in
fixed income securities with short- to intermediate-term maturities.
Generally, rates of short-term investments fluctuate less than longer-term
investments.

FOOTNOTE: Maturity measures the time remaining until an issuer must repay a
bond's principal in full.

Wrapper Agreements
The Fund enters into Wrapper Agreements with insurance companies, banks and
other financial institutions. Unlike traditional fixed income portfolios, the
Fund's purchases of Wrapper Agreements should offset substantially the price
fluctuations typically associated with fixed income securities. In using Wrapper
Agreements, the Fund seeks to eliminate the effect of any gains or losses on the
value per share when the Fund sells securities. Normally, these agreements
require the Wrapper Provider to maintain the book value of a portion of the
Fund's assets (Covered Assets) if certain events occur. More than one Wrapper
Provider provides coverage with respect to the same securities and pays, when
applicable, based on the pro rata portion of the Fund's assets that it covers.

FOOTNOTE: Book value of the Covered Assets is their purchase price, plus
interest (as specified in the Wrapper Agreement), less an adjustment to reflect
any defaulted securities.

The Crediting Rate:
. Is the actual interest earned on the Covered Assets based on the formula
stated in the Wrapper Agreements and is generally adjusted monthly for price
movements in the Covered Assets and amounts payable to or receivable from the
Wrapper Provider; and
. Is a significant component of the Fund's yield.

Page 10
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In general, if the Fund sells securities and the market value (plus accrued
interest) of those securities is less than their book value, the Wrapper
Provider must pay the difference to the Fund. On the other hand, if the Fund
sells securities and the market value (plus accrued interest) is more than the
book value, the Fund must pay the difference to the Wrapper Provider.

We employ the following policies to attempt to reduce the risks involved in
using Wrapper Agreements:
. We purchase Wrapper Agreements from multiple issuers, each of which has
received a high quality rating from Moody's or Standard & Poor's.
. We monitor, on a continual basis, the financial well being of the issuers of
the securities in which the Fund invests and the Wrapper Providers providing
Wrapper Agreements to the Fund.

Generally, unless the Wrapper Agreement requires the sale of a security that has
been downgraded below a specified rating, the Fund is not required to dispose of
any security or Wrapper Agreement whose issuer's rating has been downgraded.

FOOTNOTE: A high quality rating means a security is rated in the top two long-
term ratings categories by a nationally recognized statistical rating
organization.

Short-Term Investments. The Fund will also invest in short-term investments,
including money market mutual funds, to meet shareholder withdrawals and other
liquidity needs. These short-term investments, such as commercial paper and
certificates of deposit, will be rated, at the time of purchase, in one of the
top two short-term rating categories by a nationally recognized statistical
rating organization, or if unrated, are determined to be of similar quality by
the Fund's Investment Adviser.

Derivative Instruments
The Fund may invest in various instruments commonly known as "derivatives" to
increase its exposure to certain groups of securities. The derivatives that the
Fund may use include futures contracts, options on futures contracts and forward
contracts. The Fund may use derivatives to keep cash on hand to meet
shareholder redemptions, as a hedging strategy to maintain a specific portfolio
duration, or to protect against market risk. When employing the global asset
allocation strategy, the Fund may use derivatives for leveraging, which is a way
to attempt to enhance returns.

Page 11
<PAGE>

management purposes as a low cost method of gaining exposure to a particular
securities market without investing directly in those securities.

Other Investments
The Fund may also invest in and utilize the following investments and investment
techniques and practices: Rule 144A securities, when-issued and delayed delivery
securities, repurchase agreements, reverse repurchase agreements and dollar
rolls.

FOOTNOTE: Portfolio Turnover. The portfolio turnover rate measures the
frequency that the Portfolio sells and replaces the securities it holds within a
given period. Historically, this Fund has had a high portfolio turnover rate.
High turnover can increase the Fund's transaction costs, thereby lowering its
returns.

INVESTMENT PROCESS

The Fund's investment strategy emphasizes a diversified exposure to higher
yielding mortgage, corporate and asset-backed sectors of the investment grade
fixed income markets. These "spread" sectors have historically offered higher
returns than U.S. government securities. The investment process focuses on a
top-down approach, first focused on the sector allocations, then using relative
value analysis to select the best securities within each sector. To select
securities, we analyze such factors as credit quality, interest rate sensitivity
and spread relationships between individual bonds.

The Fund also purchases Wrapper Agreements, which seek to offset price
fluctuations of the fixed income securities and, as a result, provide a stable
value per share for the Fund. A primary emphasis is placed on assessing the
credit quality of financial institutions that may provide a Wrapper Agreement to
the Fund. We perform proprietary credit analysis on a large universe of
issuers. We actively manage the negotiation and maintenance of these Wrapper
Agreements.

RISKS
Below we set forth some of the prominent risks associated with fixed income
investing, the use of Wrapper Agreements, and the risks of investing in general.
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.

Primary Risks

Page 12
<PAGE>

Interest Rate Risk. 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 fall.

Credit Risk. An investor purchasing a fixed income security faces the risk that
the value of the security may decline because the creditworthiness of the issuer
may decline or the issuer may fail to make timely payment of interest or
principal.

Wrapper Agreement Risk. Although the Wrapper Agreements attempt to maintain a
stable value per share, there are risks associated with the Wrapper Agreements,
including:
. A Wrapper Provider could default, which could cause the Fund's share value to
fluctuate or fall and could result in losses for Plan participants who sell
their shares.
. The Wrapper Agreements may require the Fund to maintain a certain percentage
of its assets in short-term investments. This could result in a lower return
than if the Fund invested those assets in longer-term securities. The Fund may
elect not to cover a fixed income security with a remaining maturity of 60
days or less, cash or short-term investments with Wrapper Agreements.
. The Wrapper Agreements generally do not protect the Fund from loss caused by a
fixed income security issuer's default on principal or interest payments.
. The Fund may not be able to obtain Wrapper Agreements to cover all of its
assets.
. If a Wrapper Provider is unable to make timely payments, the Fund's Board may
determine the fair value of that Wrapper Agreement to be less than the
difference between the book value and the market value, which could cause the
Fund's net asset value to fluctuate.
. There is no guarantee that a Fund shareholder or Plan participant will realize
the same investment return as they might if they had invested directly in the
Fund's assets (without use of the Wrapper Agreements).

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- to intermediate-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 money market funds.

Page 13
<PAGE>

illiquid. In an effort to minimize this risk, the Fund limits its investments in
illiquid securities, including Wrapper Agreements, to 15% of net assets.

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 judgment 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.

According to the procedures adopted by the Board of Trustees, the fair value of
the Wrapper Agreements generally will equal the difference between the book
value and the market value (plus accrued interest) of the Fund's assets. In
determining fair value, the Board will consider the creditworthiness and ability
of a Wrapper Provider to pay amounts due under the Wrapper Agreements. If the
Board of Trustees determines that a Wrapper Agreement should not be valued this
way, the net asset value of the Fund could fluctuate.

Derivative Risk. Derivatives are more volatile and less liquid than traditional
fixed income securities. Risks associated with derivatives include:
. the derivative may not fully offset the underlying positions;
. the derivatives used for risk management may not have the intended effects and
may result in losses or missed opportunities; and
. the possibility the Fund cannot sell the derivative because of an illiquid
secondary market.

The use of derivatives for leveraging purposes tends to magnify the effect of an
instrument's price changes as market conditions change.

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 other
investments.

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<PAGE>

Temporary Defensive Position. We may from time to time adopt a temporary
defensive position in response to extraordinary adverse political, economic or
market events. We could place up to 100% of the Fund's assets in short-term
obligations with one of the top two investment ratings. These short-term
obligations may not be covered by a Wrapper Agreement. To the extent we might
adopt such a position, the Fund may not meet its goal of a high level of current
income or a stable net asset value.

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
of the Fund's activities on their behalf.

Investment Adviser. Under the supervision of the Board of Trustees, Bankers
Trust Company (Bankers Trust) 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 0.35% of the Fund's average daily net assets for its services
in the last fiscal year.

As of December 31, 1999, Bankers Trust had total assets under management of
approximately $___ billion. Bankers Trust is dedicated to servicing the needs
of corporations, governments, financial institutions, and private clients and
has invested retirement assets on behalf of the nation's largest corporations
and institutions for more than 50 years. 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.
As of December 31, 1999, BT managed approximately $___ in stable value assets.

Page 15
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expense, upon approval of the Independent Trustees, within two years of the date
of the Special Meeting. Under the new investment advisory agreement and new sub-
advisory agreement, the compensation paid and the services provided would be the
same as those under the existing advisory agreement with Bankers Trust.

DAMI is located at 885 Third Avenue, 32nd Floor, New York, New York 10022. DAMI
provides a full range of investment advisory services to institutional clients.
DAMI serves as investment adviser to ten other investment companies and as sub-
adviser to five other investment companies.

On March 11, 1999, Bankers Trust announced that it had reached an agreement with
the United States Attorney's Office in the Southern District of New York to
resolve an investigation concerning inappropriate transfers of unclaimed funds
and related record-keeping problems that occurred between 1994 and early 1996.
Bankers Trust pleaded guilty to misstating entries in the bank's books and
records and agreed to pay a $63.5 million fine to state and federal authorities.
On July 26, 1999, the federal criminal proceedings were concluded with Bankers
Trust's formal sentencing. The events leading up to the guilty pleas did not
arise out of the investment advisory or mutual fund management activities of
Bankers Trust or its affiliates.

As a result of the plea, absent an order from the SEC, Bankers Trust would not
be able to continue to provide investment advisory services to the Fund. The
SEC has granted a temporary order to permit Bankers Trust and its affiliates to
continue to provide investment advisory services to registered investment
companies. There is no assurance that the SEC will grant a permanent order.

Portfolio Managers. The following portfolio managers are responsible for the
day-to-day management of the master portfolio's investments:

Eric Kirsch, CFA
. Managing Director of Bankers Trust
. Portfolio Manager of the master portfolio since its inception
. Joined Bankers Trust in 1980
. Head of the Stable Value investment group
. __ years of investment industry experience

Louis R. D'Arienzo
. Principal of Bankers Trust
. Portfolio Manager of the fixed income portion of the master portfolio since
its inception

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. Joined Bankers Trust in 1981
. Portfolio Manager in the Structured Fixed Income investment group
. 17 years of trading and investment experience in structured portfolios and
quantitative analysis of fixed income and derivative securities

John D. Axtell
. Principal of Bankers Trust
. Portfolio Manager of the wrapper agreements in the master portfolio since its
inception
. Joined Bankers Trust in 1990
. Portfolio Manager in the Stable Value investment group
. __ years of investment industry experience

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:
. keeping accurate, up-to-date records for your individual Fund account;
. implementing any changes you wish to make in your account information;
. processing your requests for cash dividends and distributions from the Fund;
. answering your questions on the Fund's investment performance or
administration;
. sending proxy reports and updated prospectus information to you; and
. 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.

Organizational Structure. The BT PreservationPlus Fund is a "feeder fund" that
invests all of its assets in a "master portfolio," the BT PreservationPlus
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

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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.

CALCULATING THE FUND'S SHARE PRICE
We calculate the daily price of a 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 a
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.

FOOTNOTE: 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), Independence Day,
Labor Day (the first Monday in September), Thanksgiving Day (the fourth Thursday
in November) and Christmas Day.

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.

On occasion, the dividends the Fund distributes may differ from the income the
Fund earns. When the Fund's income exceeds the amount distributed to
shareholders, the Fund may make an additional distribution. When an additional
distribution is necessary, the Board of Trustees may declare a reverse stock
split to occur at the same time the additional distribution is made. Making the
additional distribution simultaneously with the reverse stock split will
minimize fluctuations in the net asset value of the Fund's shares.

Page 18
<PAGE>

We automatically reinvest all dividends and capital gains, if any, unless you
tell us otherwise.

FOOTNOTE: A reverse stock split reduces the number of total shares the Fund has
outstanding. The market value of the shares will be the same after the stock
split as before the split, but each share will be worth more.

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.

For Plan participants utilizing the Fund as an investment option under their
Plan, dividend and capital gain distributions from the Fund generally will not
be subject to current taxation, but will accumulate on a tax-deferred basis.

Because each participant's tax circumstances are unique and because the tax laws
governing Plans are complex and subject to change, we recommend that you consult
your Plan administrator, your plan's Summary Plan Description, and/or your tax
advisor about the tax consequences of your participation in your Plan and of any
Plan contributions or withdrawals.

SHAREHOLDER INFORMATION
The Fund does not sell its shares directly to the public. The Fund offers
shares only to certain participant-directed employee benefit plans. These
benefit plans may own the Fund's shares: 1) directly or 2) indirectly through
other investment vehicles such as an insurance company separate account or bank
collective fund, which offer the Fund as an investment option to its
participants.

Benefit Plans investing in the Fund must limit their participants' ability to
direct a withdrawal from the Fund to the following circumstances:
. upon the Plan participant's death, retirement, disability or termination;
. to fund Plan participant loans and other "in service" withdrawals made
pursuant to the terms of the Plan; and
. for transfers to other Plan investment options that are not competing funds.
Transfers between the Fund and a non-competing fund will be required to remain
in

Page 19
<PAGE>

the non-competing fund for a period of at least three months before
transfer to a competing fund.

How To Receive Account Information

. If you are a Plan participant, you should contact your Plan administrator or
the organization that provides record-keeping services for information about
your account.
. If you are a Plan administrator or fiduciary, you should call 1-800-677-7596
for information about the Plan's account with the Fund.

Transactions in Fund Shares
Each Plan has different provisions about how and when their participants may
buy, sell and exchange Fund shares. The Plan administrator is responsible for
communicating participants' instructions to the Fund. Plan participants should
contact their Plan administrator to effect transactions in the Fund.

Important Information About Buying and Selling Shares
. After receiving a Plan's order, the Fund buys or sells shares at the next
price calculated on a day the Fund is open for business.
. The Fund remits proceeds from the sale of shares in U.S. dollars for
redemption requests up to $500,000 or 1% of the Fund's NAV, whichever is less,
during any 90-day period for any one shareholder. The Fund may redeem "in
kind" if a redemption request is larger than the lesser of $500,000 or 1% of
the Fund's NAV. The Fund may also redeem "in kind" if a redemption request is
not directed by a Plan participant and is made on less than twelve months'
notice. In these situations, the Fund may require additional information.
. The Fund may request additional information about the Plan when an order to
redeem 5% or more of a Plan's assets is received.
. The Fund does not issue share certificates.
. Sales orders not directed by Plan participants and received on less than
twelve months prior written notice are subject to a 2% redemption fee.
. Unless otherwise instructed, the Fund normally makes payment of the proceeds
from the sale of Plan shares the next business day but always within seven
days.
. The Fund reserves the right to reject any purchase order or to suspend or
postpone redemptions at times when both the New York Stock Exchange and the
Fund's custodian are closed.

Page 20
<PAGE>

. The redemption fee does not apply to exchanges into another class of shares of
the Fund, into another investment company or other entity that invests
exclusively in the Portfolio.

Page 21
<PAGE>

The table below provides a picture of the Fund's financial performance since its
inception. 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 1-800-677-7596.

Financial Highlights

INVESTMENT CLASS SHARES

For the year For the period
ended September 23, 1998* through
September 30, 1999 September 30, 1998
------------------ ---------------------------
<S> <C> <C>
Per Share Operating Performance:
Net Asset Value, Beginning of Period..............

Income from Investment Operations
Net Investment Income.............................

Distributions to Shareholders
Net Investment Income.............................

Net Asset Value, End of Period....................
Total Investment Return...........................
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted)
Ratios to Average Net Assets:**
Net Investment Income.....................
Net Expenses, Including Expenses
of the PreservationPlus Portfolio
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses
by Bankers Trust
</TABLE>

- ---------------------------
* Commencement of operations
** Includes Fund share of Portfolio expenses

Page 22
<PAGE>

(logo)

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 January 31, 2000, 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 219210
Kansas City, MO 64121-9210

or call our toll-free number: 1-800-677-7596

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] PreservationPlus [Fund] CUSIP #055847834
BT Pyramid Mutual Funds PRODUCT CODE
811-6576

Distributed by:
ICC Distributors, Inc.
Two Portland Square
Portland, ME 04101

Page 23
<PAGE>

PROSPECTUS: JANUARY 31, 2000

(logo)

[BT] PreservationPlus [Fund]
Institutional Class

With the goal of achieving a high level of current income while seeking to
maintain a stable value per share

TRUST: BT PYRAMID MUTUAL FUNDS

INVESTMENT ADVISER: BANKERS TRUST COMPANY

Page 1
<PAGE>

Overview
of the BT PreservationPlus Fund

Goal: The Fund seeks a high level of current income while seeking to maintain a
stable value per share.

Core Strategy: The Fund invests primarily in fixed income securities. The Fund
also enters into contracts with financial institutions that are designed to
stabilize the Fund's share value.

INVESTMENT POLICIES AND STRATEGIES
The Fund invests all of its assets in a master portfolio with the same goal as
the Fund. The Fund, through the master portfolio, seeks to achieve its goal by
investing in fixed income securities of varying maturities, money market
instruments and futures and options. The Fund attempts to maintain a stable
share value by entering into contracts,

Page 2
<PAGE>

called Wrapper Agreements, with financial institutions, such as insurance
companies and banks.

PRINCIPAL RISKS OF INVESTING IN THE FUND
Although the Fund seeks to preserve a stable share value, there are risks
associated with fixed income investing. For example, the value of fixed income
securities could fluctuate or fall if:
. There is a sharp rise in interest rates.
. An issuer's creditworthiness declines.
. Changes in interest rates or economic downturns have a negative effect on
issuers in the financial services industry.

The Fund attempts to offset these risks by purchasing Wrapper Agreements.
Wrapper Agreements may have their own risks, including:
. The possibility of default by a financial institution providing a Wrapper
Agreement ("Wrapper Provider').
. The inability of the Fund to obtain Wrapper Agreements covering the Fund's
assets.

The Fund is also subject to the risk that the Investment Adviser incorrectly
judges the potential risks and rewards of derivative investing.

WHO SHOULD CONSIDER INVESTING IN THE FUND
You should consider investing in the Fund if you are looking for an investment
that seeks to earn current income higher than money market mutual funds over
most time periods and to preserve the value of your investment.

The BT PreservationPlus Fund offers shares only to participant-directed employee
benefit plans. Sales are made: 1) directly or 2) indirectly through vehicles
like insurance company separate accounts or bank collective fund. Plans
investing in the Fund are required to impose certain restrictions on their
participants' ability to exchange shares of the Fund. Benefit Plans investing in
the Fund must limit their participants' ability to direct a withdrawal from the
Fund to the following circumstances:
. upon the Plan participant's death, retirement, disability or termination;
. to fund Plan participant loans and other "in service" withdrawals made
pursuant to the terms of the Plan; and
. for transfers to other Plan investment options that are not competing
funds. Transfers between the Fund and a non-competing fund will be required
to remain in

Page 3
<PAGE>

the non-competing fund for a period of at least three months before
transfer to a competing fund.

Page 4
<PAGE>

TOTAL RETURNS, AFTER FEES AND EXPENSES

The bar chart and table on this page can help you evaluate the potential risks
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 each
full calendar year since it began selling shares to the public on December 14,
1997 (its inception date). The table compares the Fund's average annual return
with the Lehman 1-3 Year Government/Corporate Total Return Index, the IBC First
Tier Retail Money Market Universe, and Wrapped Lehman Intermediate Aggregate
Index, over the last calendar year and since the Fund's inception. 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 securities - costs that are reflected in the Fund's results.

FOOTNOTE: Lehman 1-3 Year Government/Corporate Total Return Index is a widely
accepted benchmark of short-term fixed income securities. It is a total return
index consisting of all U.S. Government agency securities, U.S. Government
Treasury securities and all investment grade corporate debt securities with
maturities of one to three years. We also compare the Fund's performance to two
other indices. The IBC First Tier Retail Money Market Universe is [description].
The Wrapped Lehman Intermediate Aggregate Index is a custom benchmark
representing investment in a portfolio consisting of the Lehman Intermediate
Aggregate Index and a book value wrapper agreement. The benchmark returns are
calculated assuming a start date of December 14, 1997, which is the same day
that the BT PreservationPlus Fund - Institiutional Class commenced operations.
The assumed expense level for the book value wrapper agreement is 0.15%. This
benchmark more closely reflects the market sector in which the Fund invests.

Year-by-Year Returns
(each full calendar year since inception)
[bar chart]

[ ]% [ ]%
-------------------
1998 1999
-------------------

Since inception, the Fund's highest return in any calendar quarter was [ ]% ([ ]
quarter 19[ ]) and its lowest quarterly return was [ ]% ([ ] quarter 19[ ]).
Past performance offers no indication of how the Fund will perform in the
future.

Page 5
<PAGE>

Average Annual Returns
(as of December 31, 1999)

<TABLE>
<CAPTION>
-------------------------------------------------------------------
Since Inception
1 year (December 14,
1997)
-------------------------------------------------------------------
<S> <C> <C>
BT PreservationPlus Fund - [ ]% [ ]%
Institutional Class
-------------------------------------------------------------------
Lehman 1-3 Year [ ]% [ ]%
Government/Corporate Total
Return Index
-------------------------------------------------------------------
IBC First Tier Retail Money [ ]% [ ]%
Market Universe
-------------------------------------------------------------------
Wrapped Lehman Intermediate [ ]% [ ]%
Aggregate Index
-------------------------------------------------------------------
</TABLE>

As of December 31, 1999, the Fund's 30-day yield was [ ]%.

FEES AND EXPENSES OF THE FUND

The Shareholder Fees and Annual Fees and Expenses tables to the right describe
the fees and expenses that you may pay if you buy and hold shares of the BT
PreservationPlus Fund--Institutional Class.

Shareholder Fees
(fees paid directly from your investment)

-----------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases None
-----------------------------------------------------------------
Maximum Sales Charge on Reinvested Dividends None
-----------------------------------------------------------------
Maximum Redemption Fee (as a percentage of amount 2.0%
redeemed, as applicable)
-----------------------------------------------------------------

Under normal circumstances, redemptions of shares that are directed by Plan
participants are not subject to a redemption fee. Redemptions of Shares that
are not directed by Plan

Page 6

<PAGE>

participants and that are made on less than twelve months' prior written notice
to the Fund are subject to a redemption fee of 2% of the amount redeemed payable
to the Fund.

Annual Fees and Expenses
(expenses paid from fund assets)

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
Percentage of Average
Daily Net Assets/1/
-------------------------------------------------------------------------------------------
<S> <C>
Management Fees 0.35%
-------------------------------------------------------------------------------------------
Distribution and Service (12b-1) Fees None
-------------------------------------------------------------------------------------------
Other Fund Operating Expenses [ ]%/2/
-------------------------------------------------------------------------------------------
Total Fund Operating Expenses [ ]%
-------------------------------------------------------------------------------------------
Less: Fee Waivers or Expense Reimbursements [ ]%/3/
-------------------------------------------------------------------------------------------
Net Expenses 0.40%
-------------------------------------------------------------------------------------------
</TABLE>

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.

Expense Example/4/

1 year 3 years 5 years 10 years
---------------------------------------------

$[ ] $[ ] $[ ] $[ ]
---------------------------------------------

/1/ Information on the annual operating expenses reflects the expenses of both
the Fund and the BT PreservationPlus Portfolio, the master portfolio in which
the BT PreservationPlus 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/ "Other Expenses" include the annual premium rate the Fund paid for Wrapper
Agreements.

/3/ Bankers Trust has agreed, for the 16-month period from the Fund's fiscal
year end of September 30, 1999, to waive its fees and reimburse expenses so that
total expenses will not exceed 0.40%.

/4/ Based on expenses, after fee waivers and reimbursements for the first 16
months only.

Page 7

<PAGE>

A detailed look
at the BT PreservationPlus Fund

OBJECTIVE
The BT PreservationPlus Fund seeks a high level of current income while seeking
to maintain a stable value per share.

PRINCIPAL INVESTMENTS
Fixed Income Securities
The Fund invests at least 65% of its net assets in fixed income securities
including:
. U.S. government securities that are issued or guaranteed by the U.S.
Treasury, or by agencies or instrumentalities of the U.S. Government.
. U.S. dollar-denominated securities issued by domestic or foreign
corporations, foreign governments or supranational entities.
. U.S. dollar-denominated asset-backed securities issued by domestic or
foreign entities.
. Mortgage pass-through securities issued by governmental and non-
governmental issuers.
. Collateralized mortgage obligations and real estate mortgage investment
conduits.
. Obligations issued or guaranteed, or backed by securities issued or
guaranteed, by the U.S. government, or any of its agencies or
instrumentalities, including CATS, TIGRs, TRs and zero coupon securities,
which are securities consisting of either the principal component or the
interest component of a U.S. Treasury bond.

Page 8
<PAGE>

We employ the following policies to attempt to reduce the risks involved in
investing in fixed income securities:
. We allocate assets among a diversified group of issuers.
. We invest in fixed income securities that are rated, at the time of
purchase, within the top three rating categories as rated by Moody's
Investors Service, Inc., Standard & Poor's Ratings Services or Duff &
Phelps Credit Rating Co., another nationally recognized statistical rating
organization, or, if unrated, determined by us to be of comparable quality.
. We target an average portfolio duration of 2.5 to 4.5 years by investing in
fixed income securities with short- to intermediate-term maturities.
Generally, rates of short-term investments fluctuate less than longer-term
investments.

FOOTNOTE: Maturity measures the time remaining until an issuer must repay a
bond's principal in full.

FOOTNOTE: Book value of the Covered Assets is their purchase price, plus
interest (as specified in the Wrapper Agreement), less an adjustment to reflect
any defaulted securities.

The Crediting Rate:
. Is the actual interest earned on the Covered Assets based on the formula
stated in the Wrapper Agreements and is generally adjusted monthly for
price movements in the Covered Assets and amounts payable to or receivable
from the Wrapper Provider; and
. Is a significant component of the Fund's yield.

In general, if the Fund sells securities and the market value (plus accrued
interest) of those securities is less than their book value, the Wrapper
Provider must pay the

Page 9
<PAGE>

difference to the Fund. On the other hand, if the Fund sells securities and the
market value (plus accrued interest) is more than the book value, the Fund must
pay the difference to the Wrapper Provider.

We employ the following policies to attempt to reduce the risks involved in
using Wrapper Agreements:
. We purchase Wrapper Agreements from multiple issuers, each of which has
received a high quality rating from Moody's or Standard & Poor's.
. We monitor, on a continual basis, the financial well being of the issuers
of the securities in which the Fund invests and the Wrapper Providers
providing Wrapper Agreements to the Fund.

FOOTNOTE: A high quality rating means a security is rated in the top two long-
term ratings categories by a nationally recognized statistical rating
organization.

FOOTNOTE: Futures contracts and options on futures contracts are commonly used
for traditional hedging purposes to attempt to protect an investor from the
risks of changing interest rates, securities prices or currency exchange rates
and for cash management purposes as a low cost method of gaining exposure to a
particular securities market without investing directly in those securities.

Page 10
<PAGE>

INVESTMENT PROCESS

Primary Risks

Page 11
<PAGE>

Wrapper Agreement Risk. Although the Wrapper Agreements attempt to maintain a
stable value per share, there are risks associated with the Wrapper Agreements,
including:
. A Wrapper Provider could default, which could cause the Fund's share value
to fluctuate or fall and could result in losses for Plan participants who
sell their shares.
. The Wrapper Agreements may require the Fund to maintain a certain
percentage of its assets in short-term investments. This could result in a
lower return than if the Fund invested those assets in longer-term
securities. The Fund may elect not to cover a fixed income security with a
remaining maturity of 60 days or less, cash or short-term investments with
Wrapper Agreements.
. The Wrapper Agreements generally do not protect the Fund from loss caused
by a fixed income security issuer's default on principal or interest
payments.
. The Fund may not be able to obtain Wrapper Agreements to cover all of its
assets.
. If a Wrapper Provider is unable to make timely payments, the Fund's Board
may determine the fair value of that Wrapper Agreement to be less than the
difference between the book value and the market value, which could cause
the Fund's net asset value to fluctuate.
. There is no guarantee that a Fund shareholder or Plan participant will
realize the same investment return as they might if they had invested
directly in the Fund's assets (without use of the Wrapper Agreements).

Liquidity Risk. Liquidity risk is the risk that a security cannot be sold
quickly at a price that reflects our estimate of its value. Because there is no
active trading market for Wrapper Agreements, the Fund's investments in the
Wrapper Agreements are considered illiquid. In an effort to minimize this risk,
the Fund limits its investments in illiquid securities, including Wrapper
Agreements, to 15% of net assets.

Page 12
<PAGE>

Derivative Risk. Derivatives are more volatile and less liquid than traditional
fixed income securities. Risks associated with derivatives include:
. the derivative may not fully offset the underlying positions;
. the derivatives used for risk management may not have the intended effects
and may result in losses or missed opportunities; and
. the possibility the Fund cannot sell the derivative because of an illiquid
secondary market.

The use of derivatives for leveraging purposes tends to magnify the effect of an
instrument's price changes as market conditions change.

Page 13
<PAGE>

Agreement. To the extent we might adopt such a position, the Fund may not meet
its goal of a high level of current income or a stable net asset value.

At a Special Meeting of Shareholders held on October 8, 1999, shareholders of
the Fund approved a new investment advisory agreement with Morgan Grenfell, Inc.
As of October 6, 1999, Morgan Grenfell, Inc. has been renamed Deutsche Asset
Management Inc. ("DAMI"). The new investment advisory agreement with DAMI may
be implemented within two years of the date of the Special Meeting upon approval
of a majority of the members of the Board of Trustees who are not "interested
persons", generally referred to as Independent Trustees. Shareholders of the
Fund also approved a new sub-investment advisory agreement among the Trust, DAMI
and Bankers Trust under which Bankers Trust may perform certain of DAMI's
responsibilities, at DAMI's expense, upon approval of the Independent Trustees,
within two years of the date of the Special Meeting. Under the new investment
advisory agreement and new sub-advisory agreement, the compensation paid and the
services provided would be the same as those under the existing advisory
agreement with Bankers Trust.

Page 14
<PAGE>

Portfolio Managers. The following portfolio managers are responsible for the
day-to-day management of the master portfolio's investments:

Louis R. D'Arienzo
. Principal of Bankers Trust
. Portfolio Manager of the fixed income portion of the master portfolio since
its inception
. Joined Bankers Trust in 1981
. Portfolio Manager in the Structured Fixed Income investment group
. 17 years of trading and investment experience in structured portfolios and
quantitative analysis of fixed income and derivative securities

Page 15
<PAGE>

John D. Axtell
. Principal of Bankers Trust
. Portfolio Manager of the wrapper agreements in the master portfolio since
its inception
. Joined Bankers Trust in 1990
. Portfolio Manager in the Stable Value investment group
. __ years of investment industry experience

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:
. keeping accurate, up-to-date records for your individual Fund account;
. implementing any changes you wish to make in your account information;
. processing your requests for cash dividends and distributions from the
Fund;
. answering your questions on the Fund's investment performance or
administration;
. sending proxy reports and updated prospectus information to you; and
. collecting your executed proxies.

CALCULATING THE FUND'S SHARE PRICE

Page 16
<PAGE>

We calculate the daily price of a 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 a
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.

DIVIDENDS AND DISTRIBUTIONS
The Fund declares dividends from its net income daily and pays the dividends on
a monthly basis.

We automatically reinvest all dividends and capital gains, if any, unless you
tell us otherwise.

Page 17
<PAGE>

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.

SHAREHOLDER INFORMATION
The Fund does not sell its shares directly to the public. The Fund offers shares
only to certain participant-directed employee benefit plans. These benefit plans
may own the Fund's shares: 1) directly or 2) indirectly through other investment
vehicles such as an insurance company separate account or bank collective fund,
which offer the Fund as an investment option to its participants.

Benefit Plans investing in the Fund must limit their participants' ability to
direct a withdrawal from the Fund to the following circumstances:
. upon the Plan participant's death, retirement, disability or termination;
. to fund Plan participant loans and other "in service" withdrawals made
pursuant to the terms of the Plan; and
. for transfers to other Plan investment options that are not competing
funds. Transfers between the Fund and a non-competing fund will be required
to remain in the non-competing fund for a period of at least three months
before transfer to a competing fund.

How To Receive Account Information

Page 18
<PAGE>

. If you are a Plan participant, you should contact your Plan administrator
or the organization that provides record-keeping services for information
about your account.
. If you are a Plan administrator or fiduciary, you should call
1-800-677-7596 for information about the Plan's account with the Fund.

Important Information About Buying and Selling Shares
. After receiving a Plan's order, the Fund buys or sells shares at the next
price calculated on a day the Fund is open for business. The Fund remits
proceeds from the sale of shares in U.S. dollars for redemption requests up
to $500,000 or 1% of the Fund's NAV, whichever is less, during any 90-day
period for any one shareholder. The Fund may redeem "in kind" if a
redemption request is larger than the lesser of $500,000 or 1% of the
Fund's NAV. The Fund may also redeem "in kind" if a redemption request is
not directed by a Plan participant and is made on less than twelve months'
notice. In these situations, the Fund may require additional information.
. The Fund may request additional information about the Plan when an order to
redeem 5% or more of a Plan's assets is received. The Fund does not issue
share certificates.
. Sales orders not directed by Plan participants and received on less than
twelve months prior written notice are subject to a 2% redemption fee.
. Unless otherwise instructed, the Fund normally makes payment of the
proceeds from the sale of Plan shares the next business day but always
within seven days.
. The Fund reserves the right to reject any purchase order or to suspend or
postpone redemptions at times when both the New York Stock Exchange and
the Fund's custodian are closed.
. The redemption fee does not apply to exchanges into another class of shares
of the Fund, into another investment company or other entity that invests
exclusively in the Portfolio.

page 19
<PAGE>

Financial Highlights

INSTITUTIONAL CLASS SHARES
- ----------------------------------------------------------------------------
Per Share Operating Performance:
Net Asset Value, Beginning of Period.......

Income from Investment Operations
Net Investment Income......................

Distributions to Shareholders
Net Investment Income......................

Net Asset Value, End of Period.............
Total Investment Return....................
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted).
Ratios to Average Net Assets:**
Net Investment Income..................
Net Expenses, Including Expenses
of the PreservationPlus Portfolio...
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses
by Bankers Trust

___________________________
* Commencement of operations
** Includes Fund share of Portfolio expenses

Page 20

<PAGE>

(logo)

Additional information about the Fund's investments is available in the Fund's
annual and semi-annual reports to shareholders.

[BT Service Center]
P.O. Box 219210
Kansas City, MO 64121-9210
or call our toll-free number: 1-800-677-7596

[BT] PreservationPlus [Fund] CUSIP #055847834
BT Pyramid Mutual Funds PRODUCT CODE
811-6576

Distributed by:
ICC Distributors, Inc.
Two Portland Square
Portland, ME 04101

Page 21
<PAGE>

PROSPECTUS: JANUARY 31, 2000

(logo)

[BT] PreservationPlus [Fund]
Institutional Service Class

With the goal of achieving a high level of current income while seeking to
maintain a stable value per share

TRUST: BT PYRAMID MUTUAL FUNDS

INVESTMENT ADVISER: BANKERS TRUST COMPANY

BT PreservationPlus Fund - Institutional Service Page 1
<PAGE>

Overview
of the BT PreservationPlus Fund

Goal: The Fund seeks a high level of current income while seeking to maintain a
stable value per share.

Core Strategy: The Fund invests primarily in fixed income securities. The Fund
also enters into contracts with financial institutions that are designed to
stabilize the Fund's share value.

BT PreservationPlus Fund - Institutional Service Page 2
<PAGE>

called Wrapper Agreements, with financial institutions, such as insurance
companies and banks.

The Fund is also subject to the risk that the Investment Adviser incorrectly
judges the potential risks and rewards of derivative investing.

WHO SHOULD CONSIDER INVESTING IN THE FUND
While the Fund continues to offer other classes of shares, effective October 18,
1999, the Institutional Service Class of the BT PreservationPlus Fund ceased
establishing new accounts. The Fund offers two other classes - Investment Class
and Institutional Class - that are open to new shareholders. There are different
fees associated with investing in the Investment Class and the Institutional
Class. For a free copy of the prospectuses for the Investment Class and the
Institutional Class, please call 1-800-677-7596. Read the prospectus carefully
before investing.

BT PreservationPlus Fund - Institutional Service Page 3
<PAGE>

the Fund. Benefit Plans investing in the Fund must limit their participants'
ability to direct a withdrawal from the Fund to the following circumstances:
. upon the Plan participant's death, retirement, disability or termination;
. to fund Plan participant loans and other "in service" withdrawals made
pursuant to the terms of the Plan; and
. for transfers to other Plan investment options that are not competing funds.
Transfers between the Fund and a non-competing fund will be required to
remain in the non-competing fund for a period of at least three months before
transfer to a competing fund.

BT PreservationPlus Fund - Institutional Service Page 4
<PAGE>

TOTAL RETURNS, AFTER FEES AND EXPENSES
The bar chart and table on this page can help you evaluate the potential risks
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 each
full calendar year since it began selling shares to the public on April 1, 1998
(its inception date). The table compares the Fund's average annual return with
the Lehman 1-3 Year Government/Corporate Total Return Index, the IBC First Tier
Retail Money Market Universe, and wrapped Lehman Intermediate Aggregate Index,
over the last calendar year and since the Fund's inception. 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 securities - costs that are reflected in the Fund's results.

FOOTNOTE: Lehman 1-3 Year Government/Corporate Total Return Index is a widely
accepted benchmark of short-term fixed income securities. It is a total return
index consisting of all U.S. Government agency securities, U.S. Government
Treasury securities and all investment grade corporate debt securities with
maturities of one to three years. We also compare the Fund's performance to two
other indices. The IBC First Tier Retail Money Market Universe is [description].
The Wrapped Lehman Intermediate Aggregate Index is a custom benchmark
representing investment in a portfolio consisting of the Lehman Intermediate
Aggregate Index and a book value wrapper agreement. The benchmark returns are
calculated assuming a start date of April 1, 1998, which is the same day that
the BT PreservationPlus Fund - Institutional Service Class commenced operations.
The assumed expense level for the book value wrapper agreement is 0.15%. This
benchmark more closely reflects the market sector in which the Fund invests.

Year-by-Year Returns
(each full calendar year since inception)
[bar chart] ------
[ ]%
------
1999
------

Since inception, the Fund's highest return in any calendar quarter was [ ]%
([ ] quarter 19[ ]) and its lowest quarterly return was [ ]% ([ ] quarter
19[ ]). Past performance offers no indication of how the Fund will perform in
the future.

BT PreservationPlus Fund - Institutional Service Page 5
<PAGE>

Average Annual Returns
(as of December 31, 1999)

<TABLE>
<CAPTION>
-------------------------------------------------------------------
Since Inception
1 year (April 1, 1998)
-------------------------------------------------------------------
<S> <C> <C>
BT PreservationPlus Fund - [ ]% [ ]%
Institutional Service Class
-------------------------------------------------------------------
Lehman 1-3 Year [ ]% [ ]%
Government/Corporate Total
Return Index
-------------------------------------------------------------------
IBC First Tier Retail Money [ ]% [ ]%
Market Universe
-------------------------------------------------------------------
Wrapped Lehman Intermediate [ ]% [ ]%
Aggregate Index
-------------------------------------------------------------------
</TABLE>

As of December 31, 1999, the Fund's 30-day yield was [ ]%.

FEES AND EXPENSES OF THE FUND
The Shareholder Fees and Annual Fees and Expenses tables to the right describe
the fees and expenses that you may pay if you buy and hold shares of the BT
PreservationPlus Fund -- Institutional Service Class.

Shareholder Fees
(fees paid directly from your investment)

<TABLE>
<S> <C>
-------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases None
-------------------------------------------------------------------
Maximum Sales Charge on Reinvested Dividends None

-------------------------------------------------------------------
Maximum Redemption Fee (as a percentage of amount 2.0%
redeemed, as applicable)
-------------------------------------------------------------------
</TABLE>

Under normal circumstances, redemptions of shares that are directed by Plan
participants are not subject to a redemption fee. Redemptions of Shares that are
not directed by Plan

BT PreservationPlus Fund - Institutional Service Page 6
<PAGE>

participants and that are made on less than twelve months' prior written notice
to the Fund are subject to a redemption fee of 2% of the amount redeemed payable
to the Fund.

Annual Fees and Expenses
(expenses paid from fund assets)

<TABLE>
<CAPTION>
Percentage of Average
Daily Net Assets/1/
-------------------------------------------------------------------------
<S> <C>
Management Fees 0.35%
-------------------------------------------------------------------------
Distribution and Service (12b-1) Fees None
-------------------------------------------------------------------------
Other Fund Operating Expenses [ ]%/2/
-------------------------------------------------------------------------
Total Fund Operating Expenses [ ]%
------------------------------------------------------------------------
Less: Fee Waivers or Expense Reimbursements [ ]%/3/
------------------------------------------------------------------------
Net Expenses 0.55%
------------------------------------------------------------------------
</TABLE>

Institutional Service Class shares are subject to shareholder servicing fees in
the maximum amount of 0.15% of the average daily net assets of the shares. The
shareholder services provided in exchange for these fees may include
establishing and maintaining shareholder and Plan participant accounts,
processing purchase and redemption transactions, arranging for bank wires,
performing shareholder sub-accounting, answering investor/shareholder's
inquiries regarding the Fund and/or its classes, providing periodic statements
showing the investor/shareholder's account balance and those of Plan
participants, transmitting proxy statements, periodic reports, updated
prospectuses and other communications to shareholders and, with respect to
meetings of shareholders, collecting, tabulating and forwarding to the Trust
executed proxies and obtaining such other information and performing such other
services as may reasonably be required.

/1/ Information on the annual operating expenses reflects the expenses of both
the Fund and the BT PreservationPlus Portfolio, the master portfolio in which
the BT PreservationPlus 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/ "Other Expenses" include the annual premium rate the Fund paid for Wrapper
Agreements and a shareholder servicing fee of 0.15%.

/3/ Bankers Trust has agreed, for the 16-month period from the Fund's fiscal
year end of September 30, 1999, to waive its fees and reimburse expenses so that
total expenses will not exceed 0.55%.

BT PreservationPlus Fund - Institutional Service Page 7
<PAGE>

the same, and that you sold your shares at the end of the period. The expense
example does not include a redemption fee.

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.

Expense Example/4/
---------------------------------------------
1 year 3 years 5 years 10 years
---------------------------------------------
$[ ] $[ ] $[ ] $[ ]
---------------------------------------------

/4/ Based on expenses, after fee waivers and reimbursements for the first 16
months only.

BT PreservationPlus Fund - Institutional Service Page 8
<PAGE>

A detailed look
at the BT PreservationPlus Fund

OBJECTIVE
The BT PreservationPlus Fund seeks a high level of current income while seeking
to maintain a stable value per share.

STRATEGY
The Fund seeks current income that is higher than that of money market funds by
investing in fixed income securities with varying maturities and maintaining an
average portfolio duration of 2.5 to 4.5 years. In addition, the Fund enters
into Wrapper Agreements designed to stabilize the Fund's share value (Wrapper
Agreements). Wrapper Agreements are provided by financial institutions, such as
insurance companies and banks.

PRINCIPAL INVESTMENTS
Fixed Income Securities
The Fund invests at least 65% of its net assets in fixed income securities
including:
. U.S. government securities that are issued or guaranteed by the U.S.
Treasury, or by agencies or instrumentalities of the U.S. Government.
. U.S. dollar-denominated securities issued by domestic or foreign
corporations, foreign governments or supranational entities.
. U.S. dollar-denominated asset-backed securities issued by domestic or foreign
entities.
. Mortgage pass-through securities issued by governmental and non-governmental
issuers.
. Collateralized mortgage obligations and real estate mortgage investment
conduits.
. Obligations issued or guaranteed, or backed by securities issued or
guaranteed, by the U.S. government, or any of its agencies or
instrumentalities, including CATS, TIGRs,

BT PreservationPlus Fund - Institutional Service Page 9
<PAGE>

TRs and zero coupon securities, which are securities consisting of either the
principal component or the interest component of a U.S. Treasury bond.

We employ the following policies to attempt to reduce the risks involved in
investing in fixed income securities:
. We allocate assets among a diversified group of issuers.
. We invest in fixed income securities that are rated, at the time of purchase,
within the top three rating categories as rated by Moody's Investors Service,
Inc., Standard & Poor's Ratings Services or Duff & Phelps Credit Rating Co.,
another nationally recognized statistical rating organization, or, if
unrated, determined by us to be of comparable quality.
. We target an average portfolio duration of 2.5 to 4.5 years by investing in
fixed income securities with short- to intermediate-term maturities.
Generally, rates of short-term investments fluctuate less than longer-term
investments.

FOOTNOTE: Maturity measures the time remaining until an issuer must repay a
bond's principal in full.

FOOTNOTE: Book value of the Covered Assets is their purchase price, plus
interest (as specified in the Wrapper Agreement), less an adjustment to reflect
any defaulted securities.

BT PreservationPlus Fund - Institutional Service Page 10
<PAGE>

FOOTNOTE: A high quality rating means a security is rated in the top two
long-term ratings categories by a nationally recognized statistical rating
organization.

BT PreservationPlus Fund - Institutional Service Page 11
<PAGE>

management purposes as a low cost method of gaining exposure to a particular
securities market without investing directly in those securities.

INVESTMENT PROCESS

Primary Risks

BT PreservationPlus Fund - Institutional Service Page 12
<PAGE>

Wrapper Agreement Risk. Although the Wrapper Agreements attempt to maintain a
stable value per share, there are risks associated with the Wrapper Agreements,
including:
. A Wrapper Provider could default, which could cause the Fund's share value to
fluctuate or fall and could result in losses for Plan participants who sell
their shares.
. The Wrapper Agreements may require the Fund to maintain a certain percentage
of its assets in short-term investments. This could result in a lower return
than if the Fund invested those assets in longer-term securities. The Fund
may elect not to cover a fixed income security with a remaining maturity of
60 days or less, cash or short-term investments with Wrapper Agreements.
. The Wrapper Agreements generally do not protect the Fund from loss caused by
a fixed income security issuer's default on principal or interest payments.
. The Fund may not be able to obtain Wrapper Agreements to cover all of its
assets.
. If a Wrapper Provider is unable to make timely payments, the Fund's Board may
determine the fair value of that Wrapper Agreement to be less than the
difference between the book value and the market value, which could cause the
Fund's net asset value to fluctuate.
. There is no guarantee that a Fund shareholder or Plan participant will
realize the same investment return as they might if they had invested
directly in the Fund's assets (without use of the Wrapper Agreements).

BT PreservationPlus Fund - Institutional Service Page 13
<PAGE>

illiquid. In an effort to minimize this risk, the Fund limits its investments
in illiquid securities, including Wrapper Agreements, to 15% of net assets.

Derivative Risk. Derivatives are more volatile and less liquid than traditional
fixed income securities. Risks associated with derivatives include:
. the derivative may not fully offset the underlying positions;
. the derivatives used for risk management may not have the intended effects
and may result in losses or missed opportunities; and
. the possibility the Fund cannot sell the derivative because of an illiquid
secondary market.

The use of derivatives for leveraging purposes tends to magnify the effect of an
instrument's price changes as market conditions change.

BT PreservationPlus Fund - Institutional Service Page 14
<PAGE>

BT PreservationPlus Fund - Institutional Service Page 15
<PAGE>

Portfolio Managers. The following portfolio managers are responsible for the
day-to-day management of the master portfolio's investments:

Louis R. D'Arienzo
. Principal of Bankers Trust
. Portfolio Manager of the fixed income portion of the master portfolio since
its inception

BT PreservationPlus Fund - Institutional Service Page 16
<PAGE>

John D. Axtell
. Principal of Bankers Trust
. Portfolio Manager of the wrapper agreements in the master portfolio since
its inception
. Joined Bankers Trust in 1990
. Portfolio Manager in the Stable Value investment group
. __ years of investment industry experience

BT PreservationPlus Fund - Institutional Service Page 17
<PAGE>

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.

DIVIDENDS AND DISTRIBUTIONS
The Fund declares dividends from its net income daily and pays the dividends on
a monthly basis.

BT PreservationPlus Fund - Institutional Service Page 18
<PAGE>

We automatically reinvest all dividends and capital gains, if any, unless you
tell us otherwise.

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.

SHAREHOLDER INFORMATION
The Fund does not sell its shares directly to the public. The Fund offers shares
only to certain participant-directed employee benefit plans. These benefit plans
may own the Fund's shares: 1) directly or 2) indirectly through other investment
vehicles such as an insurance company separate account or bank collective fund,
which offer the Fund as an investment option to its participants.

Benefit Plans investing in the Fund must limit their participants' ability to
direct a withdrawal from the Fund to the following circumstances:

. upon the Plan participant's death, retirement, disability or termination;
. to fund Plan participant loans and other "in service" withdrawals made
pursuant to the terms of the Plan; and
. for transfers to other Plan investment options that are not competing funds.
Transfers between the Fund and a non-competing fund will be required to
remain

BT PreservationPlus Fund - Institutional Service Page 19
<PAGE>

in the non-competing fund for a period of at least three months before
transfer to a competing fund.

How To Receive Account Information
. If you are a Plan participant, you should contact your Plan administrator or
the organization that provides record-keeping services for information about
your account.
. If you are a Plan administrator or fiduciary, you should call 1-800-677-7596
for information about the Plan's account with the Fund.

Important Information About Buying and Selling Shares
. After receiving a Plan's order, the Fund buys or sells shares at the next
price calculated on a day the Fund is open for business.
. The Fund remits proceeds from the sale of shares in U.S. dollars for
redemption requests up to $500,000 or 1% of the Fund's NAV, whichever is
less, during any 90-day period for any one shareholder. The Fund may redeem
"in kind" if a redemption request is larger than the lesser of $500,000 or 1%
of the Fund's NAV. The Fund may also redeem "in kind" if a redemption request
is not directed by a Plan participant and is made on less than twelve months'
notice. In these situations, the Fund may require additional information.
. The Fund may request additional information about the Plan when an order to
redeem 5% or more of a Plan's assets is received.
. The Fund does not issue share certificates.
. Sales orders not directed by Plan participants and received on less than
twelve months prior written notice are subject to a 2% redemption fee.
. Unless otherwise instructed, the Fund normally makes payment of the proceeds
from the sale of Plan shares the next business day but always within seven
days.
. The Fund reserves the right to reject any purchase order or to suspend or
postpone redemptions at times when both the New York Stock Exchange and the
Fund's custodian are closed.

BT PreservationPlus Fund - Institutional Service Page 20
<PAGE>

. The redemption fee does not apply to exchanges into another class of shares
of the Fund, into another investment company or other entity that invests
exclusively in the Portfolio.

BT PreservationPlus Fund - Institutional Service Page 21
<PAGE>

Financial Highlights

<TABLE>
<CAPTION>
INSTITUTIONAL SERVICE CLASS SHARES

For the year For the period
ended April 1, 1998* through
September 30, 1999 September 30, 1998
------------------ ------------------
<S> <C> <C>
Per Share Operating Performance:
Net Asset Value, Beginning of Period..........
Income from Investment Operations
Net Investment Income........................
Income from Investment Operations
Net Investment Income........................
Distributions to Shareholders
Net Investment Income........................
Distributions to Shareholders
Net Investment Income........................
Net Asset Value, End of Period................
Total Investment Return.......................
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted)....
Ratios to Average Net Assets:**
Net Investment Income.....................
Net Expenses, Including Expenses
of the PreservationPlus Portfolio......
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses
by Bankers Trust
</TABLE>

___________________________
* Commencement of operations
** Includes Fund share of Portfolio expenses

BT PreservationPlus Fund - Institutional Service Page 22
<PAGE>

(logo)

Additional information about the Fund's investments is available in the Fund's
annual and semi-annual reports to shareholders.

[BT Service Center]
P.O. Box 219210
Kansas City, MO 64121-9210
or call our toll-free number: 1-800-677-7596

[BT] PreservationPlus [Fund] CUSIP #055847826
BT Pyramid Mutual Funds PRODUCT CODE
811-6576

Distributed by:
ICC Distributors, Inc.
Two Portland Square
Portland, ME 04101

BT PreservationPlus Fund - Institutional Service Page 23
<PAGE>

STATEMENT OF
ADDITIONAL INFORMATION

January 31, 2000

BT Pyramid Mutual Funds:

BT PreservationPlus Fund

Investment Class
Institutional Class
Institutional Service Class

BT PreservationPlus Fund (the "Fund") is a separate series of BT Pyramid Mutual
Funds (the "Trust"), an open-end, management investment company (mutual fund).
The Investment Class, Institutional Class, and Institutional Service Class of
shares (individually and collectively referred to as "Shares" as the context may
require) of the Fund are described herein.

As described in the Shares' respective Prospectuses, the Fund seeks to achieve
its investment objective by investing all its net investable assets in BT
PreservationPlus Portfolio (the "Portfolio"), a diversified open-end management
investment company having the same investment objective as the Fund. The
Portfolio is a separate subtrust of BT Investment Portfolios, a New York master
trust fund (the "Portfolio Trust").

Because the investment characteristics of the Fund correspond directly to those
of the Portfolio (in which the Fund invests all of its assets), the following is
a discussion of the various investments of and techniques employed by the
Portfolio. The Fund is designed as an alternative investment to guaranteed
investment contracts ("GICs"), collective GIC funds, bank investment contracts
("BICS"), and so-called "synthetic GICs."

Shares are sold by ICC Distributors, Inc., the Trust's distributor (the
"Distributor"), to participant-directed employee benefit plans meeting specified
criteria ("Plans"). Shares are offered to Plans either directly or through
vehicles such as bank collective funds or insurance company separate accounts
consisting solely of such Plans (collectively, "Plan Pools"). Bankers Trust
Company ("Bankers Trust") is the Portfolio's investment adviser ("Adviser").
Effective October 18, 1999, the Investment Class of the BT PreservationPlus Fund
ceased establishing new accounts.

The Fund's Prospectuses (individually and collectively referred to as the
"Prospectus" as the context may require) are dated January 31, 2000. The
Prospectus provides the basic information investors should know before
investing. This Statement of Additional Information ("SAI"), which is not a
prospectus, is intended to provide additional information regarding the
activities and operations of the Fund and the Portfolio and should be read in
conjunction with the Prospectus. You may request a copy of a prospectus or a
paper copy of this SAI, if you have received it electronically, free of charge
by calling the Trust at the telephone number listed below or by contacting any
Service Agent. This SAI is not an offer by the Fund to an investor that has not
received a Prospectus. Capitalized terms not otherwise defined in this SAI have
the meanings accorded to them in the Prospectus. The Fund's and Portfolio's
financial
<PAGE>

statements for the year ended September 30, 1999, are incorporated herein by
reference to the Annual Report to shareholders dated September 30, 1999. A copy
of the Fund's and 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
<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
Investment Objective, Policies and Restrictions......................... 1
Performance Information................................................. 13
Valuation of Assets; Redemptions in Kind................................ 14
Management of the Trusts................................................ 16
Organization of the Trust............................................... 20
Taxation................................................................ 21
Appendix................................................................ 24
</TABLE>
<PAGE>

INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS

Investment Objective

The investment objective of the Fund is a high level of current income while
seeking to maintain a stable value per share. There can, of course, be no
assurance that the Fund will achieve its investment objective.

Investment Policies

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

The Portfolio's investment objective is a high level of current income while
seeking to maintain a stable value per Share. The Portfolio expects to invest at
least 65% of its net assets in fixed income securities ("Fixed Income
Securities") of varying maturities rated, at the time of purchase, in one of the
top three long-term rating categories by Standard & Poor's ("S&P"), Moody's
Investors Service, Inc. ("Moody's"), or Duff & Phelps Credit Rating Co., or
comparably rated by another nationally recognized statistical rating
organization ("NRSRO"), or, if not rated by a NRSRO, of comparable quality as
determined by Bankers Trust in its sole discretion.

In addition, the Portfolio will enter into contracts ("Wrapper Agreements") with
insurance companies, banks or other financial institutions ("Wrapper Providers")
that are rated, at the time of purchase, in one of the top two long-term rating
categories by Moody's or S&P. There is no active trading market for Wrapper
Agreements, and none is expected to develop; therefore, they will be considered
illiquid. At the time of purchase, the value of all of the Wrapper Agreements
and any other illiquid securities will not exceed 15% of the Portfolio's net
assets.

The following is a discussion of the various investments of and techniques
employed by the Portfolio.

Short-Term Instruments. Up to 35% of the Portfolio's total assets may be
- ----------------------
invested in high quality short-term investments with remaining maturities of 397
days or less to maintain the Liquidity Reserve (as defined below), to meet
anticipated redemptions and expenses for day-to-day operating purposes and when,
in the opinion of Bankers Trust Company, the Portfolio's investment adviser (the
"Adviser" or "Bankers Trust"), it is advisable to adopt a temporary defensive
position because of unusual and adverse conditions affecting the respective
markets. The Portfolio may hold short-term investments consisting of foreign and
domestic (i) short-term obligations of sovereign governments, their agencies,
instrumentalities, authorities or political subdivisions; (ii) other short-term
debt securities rated in one of the top two short-term rating categories by an
NRSRO or, if unrated, of comparable quality in the opinion of the Adviser; (iii)
commercial paper; (iv) bank obligations, including negotiable certificates of
deposit, time deposits and bankers' acceptances; (v) shares of money market
mutual funds; and (vi) repurchase agreements. At the time the Portfolio invests
in commercial paper, bank obligations or repurchase agreements, the issuer or
the issuer's parent must have an outstanding long-term debt rating of A or
higher by Standard & Poor's ("S&P") or A-2 or higher by Moody's Investors
Service, Inc. ("Moody's") or outstanding commercial paper or bank obligations
rated A-1 by S&P or Prime-1 by

1
<PAGE>

Moody's; or, if no such ratings are available, the instrument must be of
comparable quality in the opinion of the Adviser.

It is important to note the distinction between the Portfolio and short-term
investments such as money market funds. The securities held by the Portfolio
have a longer average maturity than those of money market funds. Because a money
market fund has a shorter average maturity, its yield will track the direction
of current market rates of return more closely than the Portfolio. For example,
in a rising interest rate environment, money market yields may rise more quickly
than will the Portfolio's. In a falling interest rate environment, money market
yields may fall more quickly than the Portfolio's. Over the long-term, however,
intermediate and long-term Fixed Income Securities such as those purchased by
the Portfolio have historically offered higher yields than short-term
investments (i.e., money market funds).

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

TBA Purchase Commitments. The Fund may enter into TBA purchase commitments to
purchase securities for a fixed price at a future date, typically not exceeding
45 days. TBA purchase commitments may be considered securities in themselves,
and involve a risk of loss if the value of the security to be purchased declines
prior to settlement date, which risk is in addition to the risk of decline in
the value of a Portfolio's other assets. Unsettled TBA purchase commitments are
valued at the current market value of the underlying securities.

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

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

U.S. Dollar-Denominated Fixed Income Securities. Bonds and other debt
- -----------------------------------------------
instruments are used by issuers to borrow money from investors. The issuer pays
the investor a fixed or variable rate of interest and must repay the amount
borrowed at maturity. Some debt securities, such as zero coupon bonds, do not
pay current interest but are purchased at a discount from their face values.
Debt securities, loans and

2
<PAGE>

other direct debt have varying degrees of quality and varying levels of
sensitivity to changes in interest rates. Longer-term bonds are generally more
sensitive to interest rate changes than short-term bonds.

U.S. Dollar-Denominated Foreign Securities. The Portfolio may invest a portion
- ------------------------------------------
of its assets in the dollar-denominated debt securities of foreign companies.
Investing in the securities of foreign companies involves more risks than
investing in securities of U.S. companies. Their value is subject to economic
and political developments in the countries where the companies operate and to
changes in foreign currency values. Values may also be affected by foreign tax
laws, changes in foreign economic or monetary policies, exchange control
regulations and regulations involving prohibitions on the repatriation of
foreign currencies.

In general, less information may be available about foreign companies than about
U.S. companies, and foreign companies are generally not subject to the same
accounting, auditing and financial reporting standards as are U.S. companies.
Foreign securities markets may be less liquid and subject to less regulation
than the U.S. securities markets. The costs of investing outside the United
States frequently are higher than those in the United States. These costs
include relatively higher brokerage commissions and foreign custody expenses.

U.S. Dollar-Denominated Sovereign and Supranational Fixed Income Securities.
- ---------------------------------------------------------------------------
Debt instruments issued or guaranteed by foreign governments, agencies and
supranational organizations ("sovereign debt obligations"), especially sovereign
debt obligations of developing countries, may involve a high degree of risk. The
issuer of the obligation or the governmental authorities that control the
repayment of the debt may be unable or unwilling to repay principal and interest
when due and may require renegotiation or rescheduling of debt payments. In
addition, prospects for repayment of principal and interest may depend on
political as well as economic factors.

Mortgage- and Asset-Backed Securities. The Portfolio may purchase mortgage-
- -------------------------------------
backed securities issued by the U.S. government, its agencies or
instrumentalities and non-governmental entities such as banks, mortgage lenders
or other financial institutions. Mortgage-backed securities include mortgage
pass-through securities, mortgage-backed bonds and mortgage pay-through
securities. A mortgage pass-through security is a pro rata interest in a pool of
mortgages where the cash flow generated from the mortgage collateral is passed
through to the security holder. A mortgage-backed bond is a general obligation
of the issuer, payable out of the issuer's general funds and additionally
secured by a first lien on a pool of mortgages. Collateralized mortgage
obligations ("CMOs") and other mortgage pay-through securities exhibit
characteristics of both pass-through and mortgage-backed bonds. CMOs are issued
in classes and series that have different maturities and often are retired in
sequence. The issuer of a series of CMOs may elect to be treated as a REMIC. The
mortgage pass-through securities issued by non-governmental entities such as
banks, mortgage lenders or other financial institutions in which the Portfolio
may invest include private label mortgage pass-through securities and whole
loans. Mortgage-backed securities also include other debt obligations secured by
mortgages on commercial real estate or residential properties. Other types of
mortgage-backed securities will likely be developed in the future, and the
Portfolio may invest in them if Bankers Trust determines they are consistent
with the Portfolio's investment objective and policies.

3
<PAGE>

Asset-backed securities have structural characteristics similar to mortgage-
backed securities. However, the underlying assets are not first lien mortgage
loans or interests therein but include assets such as motor vehicle installment
sale contracts, other installment sale contracts, home equity loans, leases of
various types of real and personal property, and receivables from revolving
credit (credit card) agreements. Such assets are securitized through the use of
trusts or special purpose corporations. Payments or distributions of principal
and interest on asset-backed securities may be guaranteed up to certain amounts
and for a certain time period by a letter of credit or a pool insurance policy
issued by a financial institution unaffiliated with the issuer, or other credit
enhancements may be present.

The yield characteristics of the mortgage- and asset-backed securities in which
the Portfolio may invest differ from those of traditional debt securities. Among
the major differences are that interest and principal payments are made more
frequently on mortgage- and asset-backed securities (usually monthly) and that
principal may be prepaid at any time because the underlying mortgage loans or
other assets generally may be prepaid at any time. As a result, if the Portfolio
purchases these securities at a premium, a prepayment rate that is faster than
expected will reduce their yield, while a prepayment rate that is slower than
expected will have the opposite effect of increasing yield. Conversely, if the
Portfolio purchases these securities at a discount, faster than expected
prepayments will increase, while slower than expected prepayments will reduce,
their yield. Amounts available for reinvestment by the Portfolio are likely to
be greater during a period of declining interest rates and, as a result, are
likely to be reinvested at lower interest rates than during a period of rising
interest rates.

Unlike ordinary Fixed Income Securities, which generally pay a fixed rate of
interest and return principal upon maturity, mortgage-backed securities repay
both interest income and principal as part of their periodic payments. Because
the mortgages underlying mortgage-backed certificates can be prepaid at any time
by homeowners or corporate borrowers, mortgage-backed securities give rise to
certain unique "pre-payment" risks. Prepayment risk or call risk is the
likelihood that, during periods of falling interest rates, securities with high
stated interest rates will be prepaid (or "called") prior to maturity, requiring
the Portfolio to invest the proceeds at generally lower interest rates.

In general, the prepayment rate for mortgage-backed securities decreases as
interest rates rise and increases as interest rates fall. However, rising
interest rates will tend to decrease the value of these securities. In addition,
an increase in interest rates may affect the volatility of these securities by
effectively changing a security that was considered a short-term security at the
time of purchase into a long-term security. Long-term securities generally
fluctuate more widely in response to changes in interest rates than short- or
intermediate-term securities.

The market for privately issued mortgage- and asset-backed securities is smaller
and less liquid than the market for U.S. government mortgage-backed securities.
Collateralized mortgage obligation ("CMO") classes may be specially structured
in a manner that provides any of a wide variety of investment characteristics,
such as yield, effective maturity and interest rate sensitivity. As market
conditions change, however, and particularly during periods of rapid or
unanticipated changes in market interest rates, the attractiveness of the CMO
classes and the ability of the structure to provide the anticipated investment
characteristics may be significantly reduced. These changes can result in
volatility in the market value, and in some instances reduced liquidity, of the
CMO class.

4
<PAGE>

Asset-backed securities present certain risks that are not presented by
mortgage-backed securities. Primarily, these securities do not have the benefit
of the same type of security interest in the related collateral. Credit card
receivables are generally unsecured, and the debtors are entitled to the
protection of a number of state and federal consumer credit laws, many of which
give such debtors the right to avoid payment of certain amounts owed on the
credit cards, thereby reducing the balance due. There is the risk in connection
with automobile receivables that recoveries on repossessed collateral may not,
in some cases, be available to support payments on those securities.

Zero-Coupon Securities. The Portfolio may invest in certain zero coupon
- ----------------------
securities that are "stripped" U.S. Treasury notes and bonds. Zero Coupon
Securities including CATS, TIGRs and TRs, are the separate income or principal
components of a debt instrument. Zero coupon securities usually trade at a
substantial discount from their face or par value. Zero coupon securities are
subject to greater fluctuations of market value in response to changing interest
rates than debt obligations of comparable maturities that make current
distributions of interest in cash. Zero coupon securities involve risks that are
similar to those of other debt securities, although they may be more volatile,
and the value of certain zero coupon securities moves in the same direction as
interest rates. Zero coupon bonds do not make regular interest payments.

Wrapper Agreements. Each Wrapper Agreement obligates the Wrapper Provider to
- ------------------
maintain the "Book Value" of a portion of the Portfolio's assets ("Covered
Assets") up to a specified maximum dollar amount, upon the occurrence of certain
specified events. The Book Value of the Covered Assets is their purchase price
(i) plus interest on the Covered Assets at a rate specified in the Wrapper
Agreement ("Crediting Rate"), and (ii) less an adjustment to reflect any
defaulted securities. The Crediting Rate used in computing Book Value is
calculated by a formula specified in the Wrapper Agreement and is adjusted
periodically. In the case of Wrapper Agreements purchased by the Portfolio, the
Crediting Rate is the actual interest earned on the Covered Assets, or an index-
based approximation thereof, plus or minus an adjustment for an amount
receivable from or payable to the Wrapper Provider based on fluctuations in the
market value of the Covered Assets. As a result, while the Crediting Rate will
generally reflect movements in the market rates of interest, it may at any time
be more or less than these rates or the actual interest income earned on the
Covered Assets. The Crediting Rate may also be impacted by defaulted securities
and by increases and decreases of the amount of Covered Assets as a result of
contributions and withdrawals tied to the sale and redemption of Shares.
Furthermore, the premiums due Wrapper Providers in connection with the
Portfolio's investments in Wrapper Agreements are offset against and thus reduce
the Crediting Rate. These premiums are generally paid quarterly. In no event
will the Crediting Rate fall below zero percent under the Wrapper Agreements
entered into by the Portfolio.

Under the terms of a typical Wrapper Agreement, if the market value (plus
accrued interest on the underlying securities) of the Covered Assets is less
than their Book Value at the time the Covered Assets are liquidated in order to
provide proceeds for withdrawals of Portfolio interests resulting from
redemptions of Shares by Plan participants, the Wrapper Provider becomes
obligated to pay to the Portfolio the difference. Conversely, the Portfolio
becomes obligated to make a payment to the Wrapper Provider if it is necessary
for the Portfolio to liquidate Covered Assets at a price above their Book Value
in order to make withdrawal payments. (Withdrawals generally will arise when the
Fund must pay

5
<PAGE>

shareholders who redeem their Shares.) Because it is anticipated that each
Wrapper Agreement will cover all Covered Assets up to a specified dollar amount,
if more than one Wrapper Provider becomes obligated to pay to the Portfolio the
difference between Book Value and market value (plus accrued interest on the
underlying securities), each Wrapper Provider will be obligated to pay a pro-
rata amount in proportion to the maximum dollar amount of coverage provided.
Thus, the Portfolio will not have the option of choosing which Wrapper Agreement
to draw upon in any such payment situation.

Wrapper Agreements are structured with a number of different features. Wrapper
Agreements purchased by the Portfolio are of three basic types: (1) non-
participating, (2) participating and (3) "hybrid." In addition, the Wrapper
Agreements will either be of fixed-maturity or open-end maturity ("evergreen").
The Portfolio enters into particular types of Wrapper Agreements depending upon
their respective cost to the Portfolio and the Wrapper Provider's
creditworthiness, as well as upon other factors. Under most circumstances, it is
anticipated that the Portfolio will enter into participating Wrapper Agreements
of open-end maturity and hybrid Wrapper Agreements.

Under a non-participating Wrapper Agreement, the Wrapper Provider becomes
obligated to make a payment to the Portfolio whenever the Portfolio sells
Covered Assets at a price below Book Value to meet withdrawals of a type covered
by the Wrapper Agreement (a "Benefit Event"). Conversely, the Portfolio becomes
obligated to make a payment to the Wrapper Provider whenever the Portfolio sells
Covered Assets at a price above their Book Value in response to a Benefit Event.
In neither case is the Crediting Rate adjusted at the time of the Benefit Event.
Accordingly, under this type of Wrapper Agreement, while the Portfolio is
protected against decreases in the market value of the Covered Assets below Book
Value, it does not realize increases in the market value of the Covered Assets
above Book Value; those increases are realized by the Wrapper Providers.

Under a participating Wrapper Agreement, the obligation of the Wrapper Provider
or the Portfolio to make payments to each other typically does not arise until
all of the Covered Assets have been liquidated. Instead of payments being made
on the occurrence of each Benefit Event, these obligations are a factor in the
periodic adjustment of the Crediting Rate.

Under a hybrid Wrapper Agreement, the obligation of the Wrapper Provider or the
Portfolio to make payments does not arise until withdrawals exceed a specified
percentage of the Covered Assets, after which time payment covering the
difference between market value and Book Value will occur.

A fixed-maturity Wrapper Agreement terminates at a specified date, at which time
settlement of any difference between Book Value and market value of the Covered
Assets occurs. A fixed-maturity Wrapper Agreement tends to ensure that the
Covered Assets provide a relatively fixed rate of return over a specified period
of time through bond immunization, which targets the duration of the Covered
Assets to the remaining life of the Wrapper Agreement.

An evergreen Wrapper Agreement has no fixed maturity date on which payment must
be made, and the rate of return on the Covered Assets accordingly tends to vary.
Unlike the rate of return under a fixed-maturity Wrapper Agreement, the rate of
return on assets covered by an evergreen Wrapper Agreement tends to more closely
track prevailing market interest rates and thus tends to rise when interest
rates rise and fall when interest rates fall. An evergreen Wrapper Agreement may
be converted into a fixed-

6
<PAGE>

maturity Wrapper Agreement that will mature in the number of years equal to the
duration of the Covered Assets.

Wrapper Providers are banks, insurance companies and other financial
institutions. The number of Wrapper Providers has been increasing in recent
years. As of November 1996, there were approximately fifteen Wrapper Providers
rated in the top two long-term rating categories by Moody's, S&P or another
NRSRO. The cost of Wrapper Agreements is typically 0.10% to 0.25% per dollar of
Covered Assets per annum.

In the event of the default of a Wrapper Provider, the Portfolio could
potentially lose the Book Value protections provided by the Wrapper Agreements
with that Wrapper Provider. However, the impact of such a default on the
Portfolio as a whole may be minimal or non-existent if the market value of the
Covered Assets thereunder is greater than their Book Value at the time of the
default, because the Wrapper Provider would have no obligation to make payments
to the Portfolio under those circumstances. In addition, the Portfolio may be
able to obtain another Wrapper Agreement from another Wrapper Provider to
provide Book Value protections with respect to those Covered Assets. The cost of
the replacement Wrapper Agreement might be higher than the initial Wrapper
Agreement due to market conditions or if the market value (plus accrued interest
on the underlying securities) of those Covered Assets is less than their Book
Value at the time of entering into the replacement agreement. Such cost would
also be in addition to any premiums previously paid to the defaulting Wrapper
Provider. If the Portfolio were unable to obtain a replacement Wrapper
Agreement, participants redeeming Shares might experience losses if the market
value of the Portfolio's assets no longer covered by the Wrapper Agreement is
below Book Value. The combination of the default of a Wrapper Provider and an
inability to obtain a replacement agreement could render the Portfolio and the
Fund unable to achieve their investment objective of seeking to maintain a
stable value per Share.

The terms of the Wrapper Agreements vary concerning when these payments must
actually be made between the Portfolio and the Wrapper Provider. In some cases,
payments may be due upon disposition of the Covered Assets; other Wrapper
Agreements provide for settlement only upon termination of the Wrapper Agreement
or total liquidation of the Covered Assets. A Wrapper Provider's obligation to
make payments to the Portfolio may be subject to prior notice requirements for
certain types of withdrawals from the Portfolio. For example, the Wrapper
Agreement may require that one year's notice be provided to obtain Book Value
payments with respect to withdrawals to provide liquidity for Fund redemptions
that are not directed by Plan participants. The Portfolio does not anticipate
that it will be required to liquidate Covered Assets for the purpose of paying
such withdrawals before any such notice period has expired. However, in the
unlikely event that this occurs, the NAV of the Portfolio, and hence of the
Shares, may be reduced. Additionally, a Wrapper Provider's obligation to make
payments for Plan withdrawals after twelve months' prior notice (as opposed to
those directed by Plan participants) may require adjustments to the Crediting
Rate and increases in the Portfolio's holdings of short term investments, which
might adversely affect the return of the Portfolio and the Fund. Please see
discussion of "Liquidity Reserve" herein.

With respect to payments made under the Wrapper Agreements between the Portfolio
and the Wrapper Provider, some Wrapper Agreements, as noted above, provide that
payments may be due upon disposition of the Covered Assets, while others provide
for payment only upon the total liquidation of

7
<PAGE>

the Covered Assets or upon termination of the Wrapper Agreement. In none of
these cases, however, would the terms of the Wrapper Agreements specify which
Portfolio Securities are to be disposed of or liquidated. Moreover, because it
is anticipated that each Wrapper Agreement will cover all Covered Assets up to a
specified dollar amount, if more than one Wrapper Provider becomes obligated to
pay to the Portfolio the difference between Book Value and market value (plus
accrued interest on the underlying securities), each Wrapper Provider will pay a
pro-rata amount in proportion to the maximum dollar amount of coverage provided.
Thus, the Portfolio will not have the option of choosing which Wrapper Agreement
to draw upon in any such payment situation. Under the terms of most Wrapper
Agreements, the Wrapper Provider will have the right to terminate the Wrapper
Agreement in the event that material changes are made to the Portfolio's
investment objective, limitations or operations. In such event, the Portfolio
may be obligated to pay the Wrapper Provider termination fees equal in amount to
the premiums that would have been due had the Wrapper Agreement continued
through the predetermined period. The Portfolio will have the right to terminate
a Wrapper Agreement for any reason. Such right, however, may also be subject to
the payment of termination fees. In the event of termination of a Wrapper
Agreement or conversion of an evergreen Wrapper Agreement to a fixed maturity,
some Wrapper Agreements may require that the duration of some portion of the
Fund's portfolio securities be reduced to correspond to the fixed maturity or
termination date and that such securities maintain a higher credit rating than
is normally required, either of which requirements might adversely affect the
return of the Portfolio and the Fund.

Some Wrapper Agreements require that the Portfolio maintain a specified
percentage of its total assets in short-term investments ("Liquidity Reserve").
These short-term investments must be used for the payment of withdrawals from
the Portfolio and Portfolio expenses. To the extent the Liquidity Reserve falls
below the specified percentage of total assets, the Portfolio is obligated to
direct all net cash flow to the replenishment of the Liquidity Reserve. The
obligation to maintain a Liquidity Reserve may result in a lower return for the
Portfolio and the Fund than if these funds were invested in longer-term Fixed
Income Securities. The Liquidity Reserve required by all Wrapper Agreements is
not expected to exceed 20% of the Portfolio's total assets. However, the
Liquidity Reserve amount may be required to be increased above this limit as a
result of anticipated Plan redemptions within one year.

Wrapper Agreements also require that the Covered Assets have a specified
duration or maturity, consist of specified types of securities or be of a
specified investment quality. The Portfolio will purchase Wrapper Agreements
whose criteria in this regard are consistent with the Portfolio's (and the
Fund's) investment objective and policies as described in this Prospectus.
Wrapper Agreements may also require the disposition of securities whose ratings
are downgraded below a certain level. This may limit the Portfolio's ability to
hold such downgraded securities. For a description of Wrapper Provider ratings,
see the Appendix.

Illiquid Securities. Mutual funds do not typically hold a significant amount of
- -------------------
illiquid securities because of the potential for delays on resale and
uncertainty in valuation. Limitations on resale may have an adverse effect on
the marketability of portfolio securities, and a mutual fund might be unable to
dispose of illiquid securities promptly or at reasonable prices and might
thereby experience difficulty satisfying

8
<PAGE>

redemptions within seven days. A mutual fund might also have to register
restricted securities in order to dispose of them, resulting in additional
expense and delay. Adverse market conditions could impede such a public offering
of securities.

In recent years, however, a large institutional market has developed for certain
securities that are not registered under the 1933 Act, including repurchase
agreements, commercial paper, foreign securities, municipal securities and
corporate bonds and notes. Rule 144A Securities are securities that are not
registered for sale under the federal securities laws but can be resold to
institutions pursuant to Rule 144A under the Securities Act of 1933.
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 under
the 1933 Act, which allows a broader institutional trading market for securities
otherwise subject to restriction on their resale to the general public. Rule
144A establishes a "safe harbor" from the registration requirements of the 1933
Act for resales of certain securities to qualified institutional buyers. The
Adviser anticipates that the market for certain restricted securities such as
institutional commercial paper will expand further as a result of this rule and
the development of automated systems for the trading, clearance and settlement
of unregistered securities of domestic and foreign issuers, such as the PORTAL
System sponsored by the National Association of Securities Dealers, Inc.

The Adviser will monitor the liquidity of Rule 144A securities held by the
Portfolio under the supervision of the Portfolio Trust Board. In reaching
liquidity decisions, the Adviser will consider, among other things, the
following factors: (1) the frequency of trades and quotes for the security; (2)
the number of dealers and other potential purchasers or sellers of the security;
(3) dealer undertakings to make a market in the security; and (4) the nature of
the security and of the marketplace trades (e.g., the time needed to dispose of
the security, the method of soliciting offers and the mechanics of the
transfer).

Provided that a dealer or institutional trading market in such securities
exists, these restricted securities are treated as exempt from the Portfolio's
15% limit on illiquid securities. Under the supervision of the Portfolio Trust
Board, Bankers Trust determines the liquidity of restricted securities; and
through reports from Bankers Trust, the Portfolio Trust Board monitors trading
activity in restricted securities. If institutional trading in restricted
securities were to decline, the liquidity of the Portfolio could be adversely
affected.

When-Issued and Delayed Delivery Securities. The Portfolio may purchase
- -------------------------------------------
securities on a when-issued or delayed delivery basis. Delivery of and payment
for these securities can take place a month or more after the date of the
purchase commitment. The purchase price and the interest rate payable, if any,
on the securities are fixed on the purchase commitment date or at the time the
settlement date is fixed. The value of such securities is subject to market
fluctuation, and no interest accrues to the Portfolio until settlement takes
place. At the time the Portfolio makes the commitment to purchase securities on
a when-issued or delayed delivery basis, it will record the transaction, reflect
the value each day of such securities in determining its NAV and, if applicable,
calculate the maturity for the purposes of average maturity from that date. At
the time of settlement, a when-issued security may be valued at less than the

9
<PAGE>

purchase price. To facilitate such acquisitions, the Portfolio will maintain
with its custodian (Bankers Trust) a segregated account with liquid assets,
consisting of cash, U.S. government securities or other appropriate securities,
in an amount at least equal to such commitments. On delivery dates for such
transactions, the Portfolio will meet its obligations from maturities or sales
of the securities held in the segregated account and/or from cash flow. If the
Portfolio chooses to dispose of the right to acquire a when-issued security
prior to its acquisition, it could, as with the disposition of any other
portfolio obligation, realize a gain or loss due to market fluctuation. It is
the current policy of the Portfolio not to enter into when-issued commitments
exceeding in the aggregate 15% of the market value of its total assets, less
liabilities other than the obligations created by when-issued commitments.

Additional U.S. Government Obligations. The Portfolio may invest in obligations
- --------------------------------------
issued or guaranteed by U.S. government agencies or instrumentalities. U.S.
government securities are high-quality debt securities issued or guaranteed by
the U.S. Treasury or by an agency or instrumentality of the U.S. government.
These obligations may or may not be backed by the "full faith and credit" of the
United States. In the case of securities not backed by the full faith and credit
of the United States, the Portfolio must look principally to the federal agency
issuing or guaranteeing the obligation for ultimate repayment and may not be
able to assert a claim against the United States itself in the event the agency
or instrumentality does not meet its commitments. Securities in which the
Portfolio may invest that are not backed by the full faith and credit of the
United States include obligations of the Tennessee Valley Authority, the Federal
Home Loan Mortgage Corporation and the U.S. Postal Service, each of which has
the right to borrow from the U.S. Treasury to meet its obligations, and
obligations of the Federal Farm Credit System and the Federal Home Loan Banks,
both of whose obligations may be satisfied only by the individual credit of the
issuing agency. Securities that are backed by the full faith and credit of the
United States include obligations of the Government National Mortgage
Association (the "GNMA"), the Farmers Home Administration and the Export-Import
Bank.

Derivatives. The Portfolio may invest in various instruments, including the
- -----------
Wrapper Agreements, that are commonly known as "derivatives." Generally, a
derivative is a financial arrangement the value of which is based on, or
"derived" from, a traditional security, asset or market index. Some derivatives
such as mortgage-related and other asset-backed securities are in many respects
like any other investments, although they may be more volatile or less liquid
than more traditional debt securities. There are, in fact, many different types
of derivatives and many different ways to use them. There are a range of risks
associated with those uses. Futures contracts and options are commonly used for
traditional hedging purposes to attempt to protect an investor from exposure to
changing interest rates, securities prices or currency exchange rates and for
cash management purposes as a low cost method of gaining exposure to a
particular securities market without investing directly in those securities.
However, some derivatives are used for leverage, which tends to magnify the
effect of an instrument's price changes as market conditions change. Leverage
involves the use of a small amount of money to control a large amount of
financial assets and can, in some circumstances, lead to significant losses.
Bankers Trust uses derivatives only in circumstances where it believes they
offer the most economic means of improving the risk/reward profile of the
Portfolio. Derivatives will not be used to increase portfolio risk above the
level that could be achieved using only traditional investment securities or to
acquire exposure to changes in the value of assets or indexes that by themselves
would not be purchased for the Portfolio. The use of derivatives for non-hedging
purposes may be considered speculative.

10
<PAGE>

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

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

At the same time a futures contract is purchased or sold, the Portfolio must
allocate cash or securities as a deposit payment. Daily thereafter, the futures
contract is valued and "variation margin" may be required (that is, the
Portfolio may have to provide or may receive cash that reflects any decline or
increase in the contract's value).

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

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

The purpose of the Portfolio's acquisition or sale of a futures contract is to
attempt to protect the Portfolio from fluctuations in interest rates without
actually buying or selling fixed-income securities. For example, if interest
rates were expected to increase (which thus would cause the prices of debt
securities to decline), the Portfolio might enter into futures contracts for the
sale of debt securities. Such

11
<PAGE>

a sale would have much the same effect as selling an equivalent value of the
debt securities owned by the Portfolio. If interest rates did increase, the
value of the debt securities held by the Portfolio would decline, but the value
of the futures contracts to the Portfolio would increase at approximately the
same rate, thereby keeping the Portfolio's NAV from declining as much as it
otherwise would have. The Portfolio could accomplish similar results by selling
debt securities and investing in bonds with short maturities when interest rates
are expected to increase. However, since the futures market is more liquid than
the cash market, the use of futures contracts as an investment technique allows
the Portfolio to maintain a defensive position without having to sell its
portfolio securities.

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

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

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

12
<PAGE>

prices that reflect the rising market. The Portfolio may have to sell securities
at a time when it may be disadvantageous to do so.

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

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

The purchase of a put option on a futures contract is similar in some respects
to the purchase of put options on portfolio securities. For example, the
Portfolio may purchase a put option on a futures contract to hedge its portfolio
against the risk of rising interest rates. The amount of risk the Portfolio
assumes when it purchases an option on a futures contract is the premium paid
for the option plus related transaction costs. In addition to the correlation
risks discussed above, the purchase of an option also entails the risk that
changes in the value of the underlying futures contract will not be fully
reflected in the value of the option purchased.

The Portfolio Trust Board has adopted a restriction that the Portfolio will not
enter into any futures contract or option on a futures contract if immediately
thereafter the amount of margin deposits on all the futures contracts held by
the Portfolio and premiums paid on outstanding options on its futures contracts
(other than those entered into for bona fide hedging purposes) would exceed 5%
of the market value of the Portfolio's net assets.

Options on Securities. The Portfolio may write (sell) covered call and put
- ---------------------
options on its portfolio securities ("covered options") to a limited extent in
an attempt to increase income. However, the Portfolio may forgo the benefits of
appreciation on securities sold or may pay more than the market price on
securities acquired pursuant to call and put options it writes. A call option
written by a

13
<PAGE>

Portfolio is "covered" if the Portfolio owns the underlying security covered by
the call or has an absolute and immediate right to acquire that security without
additional cash consideration (or for additional cash consideration held in a
segregated account by its custodian) upon conversion or exchange of other
securities held in its portfolio. A call option is also covered if the Portfolio
holds a call option on the same security and in the same principal amount as the
written call option where the exercise price of the call option so held (a) is
equal to or less than the exercise price of the written call option or (b) is
greater than the exercise price of the written call option if the difference is
maintained by the Portfolio in cash, U.S. government securities and other high
quality liquid securities in a segregated account with its custodian.

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

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

The Portfolio may terminate its obligation as the writer of a call or put option
by purchasing an option with the same exercise price and expiration date as the
option previously written. This transaction is called a "closing purchase
transaction." The Portfolio will realize a profit or loss on a closing purchase
transaction if the amount paid to purchase the option is less or more, as the
case may be, than the amount received from the sale thereof. To close out a
position as a purchaser of an option, the Portfolio may enter into a "closing
sale transaction," which involves liquidating the Portfolio's position by
selling the option previously purchased. Where the Portfolio cannot effect a
closing purchase transaction, it may be forced to incur brokerage commissions or
dealer spreads in selling securities it receives or it may be forced to hold
underlying securities until an option is exercised or expires.

When the Portfolio writes an option, an amount equal to the net premium received
is included in the liability section of its Statement of Assets and Liabilities
as a deferred credit. The amount of the deferred credit will be subsequently
marked to market to reflect the current market value of the option. The current
market value of a traded option is the last sale price or, in the absence of a
sale, the mean between the closing bid and asked prices. If an option expires or
if the Portfolio enters into a closing purchase transaction, the Portfolio will
realize a gain (or loss if the cost of the closing purchase

14
<PAGE>

transaction exceeds the net premium received when the option was sold), and the
deferred credit related to such option will be eliminated. If a call option is
exercised, the Portfolio will realize a gain or loss from the sale of the
underlying security and the proceeds of the sale will be increased by the
premium originally received. The writing of covered call options may be deemed
to involve the pledge of the securities against which the option is being
written. Securities against which call options are written will be segregated on
the books of the custodian for the Portfolio.

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

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

The Portfolio has adopted certain non-fundamental policies concerning option
transactions that are discussed below.

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

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

15
<PAGE>

such option will be liquidated at a favorable price prior to expiration. Bankers
Trust will monitor the creditworthiness of dealers with whom the Portfolio
enters into such options transactions under the general supervision of the
Portfolio Trust Board.

Options on Securities Indices. In addition to options on securities, the
- ------------------------------
Portfolio may also purchase and write (sell) call and put options on securities
indices. Such options give the holder the right to receive a cash settlement on
expiration of the option based upon the difference between the exercise price
and the value of the index.

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

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

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

Repurchase Agreements. In a repurchase agreement, the Portfolio buys a security
- ----------------------
at one price and simultaneously agrees to sell it back to the seller on a
specific date and at a higher price reflecting a market rate of interest
unrelated to the coupon rate or maturity of the underlying security. Delays or
losses could result if the other party to the agreement defaults or becomes
insolvent.

Reverse Repurchase Agreements And Dollar Rolls. In a reverse repurchase
- -----------------------------------------------
agreement, the Portfolio temporarily transfers possession of a portfolio
instrument to another party in return for cash. This could increase the risk of
fluctuation in the Fund's yield or in the market value of its interest in the
Portfolio. In a dollar roll, the Portfolio sells mortgage-backed or other
securities for delivery in the current month and simultaneously contracts to
purchase substantially similar securities on a specified future date. Reverse
repurchase agreements and dollar rolls are forms of borrowing and will be
counted towards the Portfolio's borrowing restrictions. See "Borrowing" herein.
Wrapper Agreements would cover the cash proceeds of such transactions but not
the portfolio instruments transferred to another party until possession of such
instruments is returned to the Portfolio.

Borrowing. The Portfolio will not borrow money (including through reverse
- ----------
repurchase agreements or dollar roll transactions) for any purpose in excess of
5% of its total assets, except that it may borrow for temporary or emergency
purposes up to 1/3 of its net assets. Under the 1940 Act, the Portfolio is
required to maintain continuous asset coverage of 300% with respect to such
borrowings and to sell (within three days) sufficient portfolio holdings to
restore such coverage if it should decline to less than 300% due to market
fluctuations or otherwise, even if such liquidation of the Portfolio's holdings
may be disadvantageous from an investment standpoint.

16
<PAGE>

Leveraging by means of borrowing may exaggerate the effect of any increase or
decrease in the value of the Portfolio's securities and the Fund's NAV per
Share, and money borrowed by the Portfolio will be subject to interest and other
costs (which may include commitment fees and/or the cost of maintaining minimum
average balances) that may exceed the income received from the securities
purchased with the borrowed funds. It is not the intention of Bankers Trust to
use leverage as a normal practice in the investment of the Portfolio's assets.

Hedging Strategies. The Portfolio may use certain strategies designed to adjust
- -------------------
the overall risk of its investment portfolio. These "hedging" strategies involve
derivative contracts, including U.S. Treasury and Eurodollar futures contracts
and exchange-traded put and call options on such futures contracts. New
financial products and risk management techniques continue to be developed and
may be used if consistent with the Portfolio's investment objective and
policies. Among other purposes, these hedging strategies may be used to
effectively maintain a desired portfolio duration or to protect against market
risk should the Portfolio change its investments among different types of Fixed
Income Securities. In this respect, these hedging strategies are designed for
different purposes than the investments in Wrapper Agreements.

The Portfolio might not use any hedging strategies, and there can be no
assurance that any strategy used will succeed. If the Adviser is incorrect in
its judgment on market values, interest rates or other economic factors in using
a hedging strategy, the Portfolio may have lower net income and a net loss on
the investment. Each of these strategies involves certain risks, which include:

. the fact that the skills needed to use hedging instruments are different from
those needed to select securities for the Portfolio;

. the possibility of imperfect correlation, or even no correlation, between the
price movements of hedging instruments and price movements of the securities
or currencies being hedged;

. possible constraints placed on the Portfolio's ability to purchase or sell
portfolio investments at advantageous times due to the need for the Portfolio
to maintain "cover" or to segregate securities; and

. the possibility that the Portfolio is unable to close out or liquidate its
hedged position.

Asset Coverage. To assure that the Portfolio's use of futures contracts and
- ---------------
related options, as well as when-issued and delayed-delivery securities, are not
used to achieve investment leverage, the Portfolio will cover such transactions,
as required under applicable interpretations of the SEC, either by owning the
underlying securities or by segregating liquid securities with the Portfolio's
custodian (Bankers Trust) in an amount at all times equal to or exceeding the
Portfolio's commitment with respect to these instruments or contracts. Assets
that are segregated for purposes of providing cover need not be physically
segregated in a separate account provided that the custodian notes on its books
that such assets are segregated. The Portfolio will also cover its use of
Wrapper Agreements to the extent required

17
<PAGE>

to avoid the creation of a "senior security" (as defined in the 1940 Act) in
connection with its use of such agreements.

Rating Services

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

Investment Restrictions

The following investment restrictions are "fundamental policies" of the Fund and
the Portfolio and may not be changed without the approval of a "majority of the
outstanding voting securities" of the Fund or the Portfolio, as the case may be.
"Majority of the outstanding voting securities" under the 1940 Act, and as used
in this SAI and the Prospectus, means, with respect to the Fund (or the
Portfolio), the lesser of (1) 67% or more of the outstanding voting securities
of the Fund (or of the total beneficial interests of the Portfolio) present at a
meeting, if the holders of more than 50% of the outstanding voting securities of
the Fund (or of the total beneficial interests of the Portfolio) are present or
represented by proxy or (2) more than 50% of the outstanding voting securities
of the Fund (or of the total beneficial interests of the Portfolio). Whenever
the Trust is requested to vote on a fundamental policy of the Portfolio, the
Trust will hold a meeting of the Fund's shareholders and will cast its vote as
instructed by them. Fund shareholders who do not vote will not affect the
Trust's votes at the Portfolio meeting. The Trust's votes representing Fund
shareholders not voting will be voted by the Trustees of the Trust in the same
proportion as the Fund shareholders who do, in fact, vote.

None of the fundamental and non-fundamental policies described below shall
prevent the Fund from investing all of its assets in an open-end investment
company with substantially the same investment objective. Because the Fund and
the Portfolio have the same fundamental policies and the Fund invests all of its
net investable assets in the Portfolio, the following discussion (though
speaking only of the Portfolio) applies to the Fund as well.

Fundamental Restrictions. As a matter of fundamental policy, the Portfolio may
- ------------------------
not:

(1) Borrow money (including through reverse repurchase or dollar roll
transactions) in excess of 5% of the Portfolio's total assets (taken
at cost), except that the Portfolio may borrow for temporary or
emergency purposes up to 1/3 of its net assets. The Portfolio may
pledge, mortgage or hypothecate not more than 1/3 of such assets to
secure such borrowings provided that collateral arrangements with
respect to options and futures, including deposits of initial and
variation margin, are not considered a pledge of assets for purposes
of this restriction and except that assets may be pledged to secure
letters of credit solely for the

18
<PAGE>

purpose of participating in a captive insurance company sponsored by
the Investment Company Institute;

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

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

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

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

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

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

(8) Invest, with respect to 75% of the Portfolio's total assets, more than
5% of its total assets in the securities (excluding U.S. government
securities) of any one issuer.

Non-Fundamental Restrictions. In order to comply with certain statutes and
- ----------------------------
policies and for other reasons, the Portfolio will not, as a matter of operating
policy (these restrictions may be changed by a vote of the Trustees or the
Portfolio Trust or the Trust as applicable without shareholder approval):

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

(ii) sell securities it does not own (short sales). (This restriction
does not preclude short sales "against the box" (that is, sales of
securities (a) the Portfolio contemporaneously owns or

19
<PAGE>

(b) where the Portfolio has the right to obtain securities
equivalent in kind and amount to those sold). The Portfolio has no
current intention to engage in short selling);

(iii) purchase securities issued by any investment company except to the
extent permitted by the 1940 Act (including any exemptions or
exclusions therefrom), except that this limitation does not apply to
securities received or acquired as dividends, through offers of
exchange, or as a result of reorganization, consolidation or merger;
and

(iv) invest more than 15% of the Portfolio's net assets (taken at the
greater of cost or market value) in securities that are illiquid or
not readily marketable (excluding Rule 144A securities deemed by the
Portfolio Trust Board to be liquid).

An investment restriction will not be considered violated if that restriction is
complied with at the time the relevant action is taken, notwithstanding a later
change in the market value of an investment, in net or total assets or in the
change of securities rating of the investment or any other later change.

The Portfolio will comply with the permitted investments and investment
limitations in the securities laws and regulations of all states in which the
corresponding Fund, or any other registered investment company investing in the
Portfolio, is registered.

Portfolio Transactions and Brokerage Commissions

The Adviser is responsible for decisions to buy and sell securities, futures
contracts and options thereon for the Portfolio, the selection of brokers,
dealers and futures commission merchants to effect transactions and the
negotiation of brokerage commissions, if any. Broker-dealers may receive
brokerage commissions on portfolio transactions, including options, futures
contracts and options on futures transactions and the purchase and sale of
underlying securities upon the exercise of options. Orders may be directed to
any broker-dealer or futures commission merchant, including, to the extent and
in the manner permitted by applicable law, the Adviser 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 that 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.

20
<PAGE>

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 (a)
advice as to (i) the value of securities, (ii) the advisability of investing in,
purchasing or selling securities, and (iii) the availability of securities or
purchasers or sellers of securities and (b) furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts. Higher commissions may be
paid to firms that provide research services to the extent permitted by law. The
Adviser may use this research information in managing the Portfolio's assets, as
well as the assets of other clients.

Consistent with the policy stated above, the Conduct Rules of the National
Association of Securities Dealers, Inc. and such other policies as the Portfolio
Trust Board may determine, the Adviser may consider sales of shares of the Fund
and of other investment company clients of the Adviser as a factor in the
selection of broker-dealers to execute portfolio transactions. The Adviser will
make such allocations if commissions are comparable to those charged by
nonaffiliated, qualified broker-dealers for similar services.

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

Although certain research, market or statistical information from brokers and
dealers can be useful to the Portfolio and to the Adviser, it is the opinion of
the Portfolio's management 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 that are suitable for the
Portfolio, as well as for one or more of the Adviser's other clients. Investment
decisions for the Portfolio and for the Adviser's other clients are made with a
view to achieving their respective investment objectives. It may develop that a
particular security is bought or sold for only one client even though it might
be held by, or bought or sold for, other clients. Likewise, a particular
security may be bought for one or more clients when one or more clients are
selling that same security. Some simultaneous transactions are inevitable when
several clients receive investment advice from the same investment adviser,
particularly when the same security is suitable for the investment objectives of
more than one client. When two or more clients are simultaneously engaged in the
purchase or sale of the same security, the securities are allocated between
(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 is

21
<PAGE>

concerned. However, it is believed that the ability of the Portfolio to
participate in volume transactions will produce better executions for the
Portfolio.

PERFORMANCE INFORMATION

Standard Performance Information

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

Yield: Yield refers to the income generated by an investment over a given
period of time, expressed as an annual percentage rate. Yields are
calculated according to a standard that is required for all stock and bond
mutual funds. Because this differs from other accounting methods, the
quoted yield may not equal the income actually paid to shareholders.The 30-
day yield for the Shares for the period ending September 30, 19989 was
___%. [BT to provide]

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

The total returns for the Investment Class Shares (commencing operations
September 23, 1998), Institutional Class Shares (commencing operations
December 14, 1997), and Institutional Service Class Shares (commencing
operations April 1, 1998) for the period ending September 30, 1999 were
[ ]%, [ ]%, [ ]%, and [ ]%, respectively.

Performance Results: Any performance information provided for the Shares'
should not be considered as representative of its performance in the
future, because the NAV and public offering price of Shares will vary based
not only on the type, quality and maturities of the securities held by the
Portfolio but also on changes in the current value of such securities and
on changes in the expenses of the Fund and the Portfolio. Total return
reflects the performance of both principal and income.

Performance information or advertisements may include comparisons of the
Shares' investment results to various unmanaged indices or results of other
mutual funds or investment or savings vehicles. From time to time, the
Shares' ranking may be quoted from various sources, such as Lipper
Analytical Services, Inc., Value Line, Inc. and Morningstar, Inc.

Unlike some bank deposits or other investments that pay a fixed yield for a
stated period of time, the total return of the Shares will vary depending
upon interest rates, the current market value of the securities held by the
Portfolio and the Wrapper Agreements and changes in the expenses of the
Shares and the Portfolio. In addition, during certain periods for which
total return may be provided, Bankers Trust may have voluntarily agreed to
waive portions of its fees, or to reimburse certain operating expenses of
the Fund or the Portfolio. Such waivers will have the effect of increasing
the Shares' net income (and therefore its yield and total return) during
the period such waivers are in effect.

22
<PAGE>

Comparison of Fund Performance

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

In connection with communicating its performance to current or prospective
shareholders, the Fund also may compare these figures to the performance of
other mutual funds tracked by mutual fund rating services or to unmanaged
indices that may assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs. Evaluations of the Fund's
performance made by independent sources may also be used in advertisements
concerning the Fund. Sources for the Fund's performance information could
include the following: Asian Wall Street Journal, Barron's, Business Week,
------------------------- -------- -------------
Changing Times, The Kiplinger Magazine, Consumer Digest, Financial Times,
- -------------------------------------- --------------- ---------------
Financial World, Forbes, Fortune, Global Investor, Investor's Daily, Lipper
- --------------- ------ ------- --------------- ---------------- ------
Analytical Services, Inc.'s Mutual Fund Performance Analysis, Money, Morningstar
- ------------------------------------------------------------ ----- -----------
Inc., New York Times, Personal Investing News, Personal Investor, Success, U.S.
- ---- -------------- ----------------------- ----------------- ------- ----
News and World Report, ValueLine, Wall Street Journal, Weisenberger Investment
- --------------------- --------- ------------------- -----------------------
Companies Services, Working Women and Worth.
- ------------------ ------------- -----

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 $4.43.5 trillion to the more than 6,7006,000 funds available.

VALUATION OF ASSETS; REDEMPTIONS IN KIND

Debt securities (other than short-term debt obligations maturing in 60 days or
less), including listed securities and securities for which price quotations are
available, will normally be valued on the basis of market valuations furnished
by a pricing service. Such market valuations may represent the last quoted price
on the securities' major trading exchange or quotes received from dealers or
market makers in the relevant securities or may be determined through the use of
matrix pricing. In matrix pricing, pricing services may use various pricing
models, involving comparable securities, historic relative price movements,
economic factors and dealer quotations. Over-the-counter securities will
normally be valued at the bid price. Short-term debt obligations and money
market securities maturing in 60 days or less are valued at amortized cost.

Securities for which market quotations are not readily available are valued by
Bankers Trust pursuant to procedures adopted by the Portfolio's Trust Board.

23
<PAGE>

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

Pursuant to procedures adopted by the Portfolio Trust Board, the Wrapper Value
generally will be equal to the difference between the Book Value and the market
value (plus accrued interest on the underlying securities) of the applicable
Covered Assets. If the market value (plus accrued interest on the underlying
securities) of the Covered Assets is greater than their Book Value, the Wrapper
Value will be reflected as a liability of the Portfolio in the amount of the
difference, i.e., a negative value, reflecting the potential liability of the
Portfolio to the Wrapper Provider. If the market value (plus accrued interest
on the underlying securities) of the Covered Assets is less than their Book
Value, the Wrapper Value will be reflected as an asset of the Portfolio in the
amount of the difference, i.e., a positive value, reflecting the potential
liability of the Wrapper Provider to the Portfolio. In performing its fair
value determination, the Portfolio Trust Board expects to consider the
creditworthiness and ability of a Wrapper Provider to pay amounts due under the
Wrapper Agreement. If the Portfolio Trust Board determines that a Wrapper
Provider is unable to make such payments, that Board may assign a fair value to
the Wrapper Agreement that is less than the difference between the Book Value
and the market value (plus accrued interest on the underlying securities) of the
applicable Covered Assets and the Portfolio might be unable to maintain NAV
stability.

24
<PAGE>

The problems inherent in making a good faith determination of value are
recognized in the codification effected by SEC Financial Reporting Release No. 1
(formerly Accounting Series Release No. 113) ("FRR 1"), which concludes that
there is "no automatic formula" for calculating the value of restricted
securities. It recommends that the best method simply is to consider all
relevant factors before making any calculation. According to FRR 1, such
factors would include consideration of the --

type of security involved, financial statements, cost at date of
purchase, size of holding, discount from market value of unrestricted
securities of the same class at the time of purchase, special reports
prepared by analysts, information as to any transactions or offers
with respect to the security, existence of merger proposals or tender
offers affecting the security, price and extent of public trading in
similar securities of the issuer or comparable companies, and other
relevant matters.

The Adviser will value securities purchased by the Portfolio that are restricted
as to resale or for which current market quotations are not readily available,
including Wrapper Agreements, based upon all relevant factors as outlined in FRR
1.

The Fund and the Portfolio each reserves the right, if conditions exist that
make cash payments undesirable, or for other reasons, to honor any request for
redemption or withdrawal, respectively, by making payment wholly or partly in
Portfolio Securities and in Wrapper Agreements, as the same may be chosen by the
Adviser in its sole discretion (a "redemption in kind"). Such securities and
Wrapper Agreements shall be valued as they are for purposes of computing the
Fund's or the Portfolio's NAV, as the case may be. If payment is made to a Fund
shareholder in securities, the shareholder may incur transaction expenses in
converting those securities into cash. To the extent that a redemption in kind
includes Wrapper Agreements, the Fund will obtain and assign to the redeeming
Plan or Plan Pool one or more Wrapper Agreements issued by the Wrapper Providers
covering the portfolio securities distributed in kind. The terms and conditions
of Wrapper Agreements provided to a redeeming shareholder will be the same or
substantially similar to the terms and conditions of the Wrapper Agreements held
by the Portfolio. The redeeming Plan or Plan Pool must execute the assigned
Wrapper Agreement(s) in order to obtain the benefits provided thereunder.
Wrapper Agreements are not liquid securities and may impose restrictions on
termination or withdrawal, including notice periods of one year (or more for
non-participant directed withdrawals). The maintenance of Wrapper Agreements
distributed in kind may also require that a withdrawing Plan or Plan Pool pay
fees to the Wrapper Provider. Such fees are anticipated to be comparable to the
fees paid by the Portfolio with respect to Covered Assets (typically 0.10% to
0.25% annually per dollar of Covered Assets). Wrapper Agreements distributed in
kind will also require the portfolio securities covered be of a specified
duration or maturity, consist of specified types of securities or be of a
specified investment quality. Accordingly, although a redeeming Plan or Plan
Pool may freely sell portfolio securities covered by a Wrapper Agreement, its
management of the portfolio securities must be consistent with Wrapper Agreement
requirements in order for it to obtain the benefits of the agreements.
Moreover, a Plan or Plan Pool may be required to obtain at its own expense the
services of a qualified investment manager to manage the securities distributed
in kind in conformity with the Wrapper Agreement provisions and may incur
additional administrative expenses in managing this portfolio. In some cases,
however, a

25
<PAGE>

Plan or Plan Pool may be able to further assign the Wrapper Agreements and
covered securities to other commingled investment vehicles, such as a bank
collective fund, and thereby avoid the imposition of these additional expenses.

The Trust, on behalf of the Fund, and the Portfolio have to redeem Shares or
beneficial interests, respectively, with respect to any one investor during any
90-day period solely in cash up to the lesser of $500,000 or 1% of the NAV of
the Fund or the Portfolio, as the case may be, at the beginning of the period.
The Trust, on behalf of the Fund, is also seeking an exemptive order from the
SEC with respect to redemptions in kind made to 5% or greater shareholders of
the Fund.

26
<PAGE>

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

Each investor in the Portfolio, including the Fund, may add to or reduce its
investment in the Portfolio on each business day the Portfolio determines its
NAV. At the close of business on each such day, the value of each investor's
beneficial interest in the Portfolio will be determined by multiplying the NAV
of the Portfolio by the percentage effective for that day that represents that
investor's share of the aggregate beneficial interests in the Portfolio. Any
additions or withdrawals that are to be effected as of the close of business on
that day will then be effected. The investor's percentage of the aggregate
beneficial interests in the Portfolio will then be recomputed as the percentage
equal to a fraction (a) the numerator of which is the value of the investor's
investment in the Portfolio as of the close of business on that day plus or
minus, as the case may be, the amount of net additions to or withdrawals from
the investor's investment in the Portfolio effected as of the close of business
on that day, and (b) the denominator of which is the aggregate NAV of the
Portfolio as of the close of business on that day plus or minus, as the case may
be, the amount of net additions to or withdrawals from the aggregate investments
in the Portfolio by all investors therein. The percentage so determined will
then be applied to determine the value of the investor's interest in the
Portfolio at the close of business on the following business day.

The Fund and the Portfolio each reserves the right to redeem all of its shares,
if the Board of Trustees votes to liquidate the Fund and/or Portfolio.

MANAGEMENT OF THE TRUSTS

Each Board of Trustees is composed of persons experienced in financial matters
who meet throughout the year to oversee the activities of the Fund or the
Portfolio, as the case may be. In addition, the Trustees review contractual
arrangements with companies that provide services to the Fund/Portfolio and
review the Fund's performance.

The Trustees and officers of the Trusts, their birthdates, and their principal
occupations during the past five years are set forth below. Their titles may
have varied during that period.

Trustees of the Trusts and Portfolio

CHARLES P. BIGGAR (birth date: October 13, 1930) -- Trustee of the Trusts and
Portfolio; Trustee of each of the other investment companies in the BT Fund
Complex/1/; Retired; former Vice President,

________________________

/1/ The "BT Fund Complex" consists of BT Investment Funds, BT Institutional
Funds, BT Pyramid Mutual Funds, BT Advisor Funds, Cash Management Portfolio,
Intermediate Tax Free Portfolio, Tax Free Money Portfolio, NY Tax Free Money
Portfolio, Treasury Money Portfolio, International Equity Portfolio, Equity 500
Index Portfolio, Capital Appreciation Portfolio, Asset Management Portfolio and
BT Investment Portfolios.

27
<PAGE>

International Business Machines ("IBM") and President, National Services and the
Field Engineering Divisions of IBM. His address is 12 Hitching Post Lane,
Chappaqua, New York 10514.

S. LELAND DILL (birth date: March 28, 1930) -- Trustee of the Trusts and
Portfolio; Trustee of each of the other investment companies in the BT Fund
Complex; Retired; Director, Coutts (U.S.A.) International; Trustee, Phoenix-
Zweig Trust/2/ and Phoenix-Euclid Market Neutral Fund/2/; former Partner, KPMG
Peat Marwick; Director, Vintners International Company Inc.; Director, Coutts
Trust Holdings Ltd., Director, Coutts Group; General Partner, Pemco/2/. His
address is 5070 North Ocean Drive, Singer Island, Florida 33404.

MARTIN J. GRUBER (birth date: July 15, 1937) -- Trustee of the Trusts and
Portfolio; Trustee of each of the other investment companies in the BT Fund
Complex; Nomura Professor of Finance, Leonard N. Stern School of Business, New
York University (since 1964); Trustee, TIAA/2/; Trustee, SG Cowen Mutual
Funds/2/; Trustee, Japan Equity Fund2; Trustee, Taiwan Equity Fund/2/. His
address is 229 South Irving Street, Ridgewood, New Jersey 07450.

RICHARD HALE* (birth date: July 17, 1945) -- Trustee of the Trusts and
Portfolio; Trustee of each of the other investment companies in the BT Fund
Complex; Managing Director, Deutsche Asset Management; Director, Flag Investors
Funds/2/; Managing Director, Deutsche Banc Alex. Brown Incorporated; Director
and President, Investment Company Capital Corp. His address is 205 Woodbrook
Lane, Baltimore, Maryland 21212.

RICHARD J. HERRING (birth date: February 18, 1946) -- Trustee of the Trusts and
Portfolio; Trustee of each of the other investment companies in the BT Fund
Complex; Jacob Safra Professor of International Banking, Professor of Finance
and Vice Dean, The Wharton School, University of Pennsylvania (since 1972). His
address is 325 South Roberts Road, Bryn Mawr, Pennsylvania 19010.

BRUCE E. LANGTON (birth date: May 10, 1931) -- Trustee of the Trusts and
Portfolio; Trustee of each of the other investment companies in the BT Fund
Complex; Retired; Trustee, Allmerica Financial Mutual Funds (1992-present);
Member, Pension and Thrift Plans and Investment Committee, Unilever U.S.
Corporation (1989 to present)/3/; Director, TWA Pilots Directed Account Plan and
401(k) Plan (1988 to present)/2/. His address is 99 Jordan Lane, Stamford,
Connecticut 06903.

PHILIP SAUNDERS, JR. (birth date: October 11, 1935) -- Trustee of the Trusts and
Portfolio; Trustee of each of the other investment companies in the BT Fund
Complex; Principal, Philip Saunders Associates (Economic and Financial
Analysis); former Director, Financial Industry Consulting, Wolf &

______________________________

/2/An investment company registered under the Investment Company Act of 1940, as
amended (the "Act").

/3/A publicly held company with securities registered pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended.

28
<PAGE>

Company; President, John Hancock Home Mortgage Corporation; Senior Vice
President of Treasury and Financial Services, John Hancock Mutual Life Insurance
Company, Inc. His address is 445 Glen Road, Weston, Massachusetts 02193.

HARRY VAN BENSCHOTEN (birth date: February 18, 1928) -- Trustee of the Trusts
and Portfolio; Trustee of each of the other investment companies in the BT Fund
Complex; Retired; Director, Canada Life Insurance Corporation of New York. His
address is 6581 Ridgewood Drive, Naples, Florida 34108.

. "Interested Person" within the meaning of Section 2(a)(19) of the Act. Mr.
Hale is a Managing Director of Deutsche Asset Management, the U.S. asset
management unit of Deutsche Bank and its affiliates.

The Board has an Audit Committee that meets with the Trusts' and Portfolio's
independent accountants to review the financial statements of the Trust, the
adequacy of internal controls and the accounting procedures and policies of the
Trust. Each member of the Board except Mr. Hale also is a member of the Audit
Committee.

Officers of the Trusts and Portfolio

DANIEL O. HIRSCH (birth date: March 27, 1954) -- Secretary of the Trusts and
Portfolio; Director, Deutsche Banc Alex. Brown Incorporated and Investment
Company Capital Corp. since July 1998; Assistant General Counsel, Office of the
General Counsel, United States Securities and Exchange Commission from 1993 to
1998. His address is One South Street, Baltimore, Maryland 21202.

JOHN A. KEFFER (birth date: July 14, 1942) -- President and Chief Executive
Officer of the Trusts and Portfolio; President, Forum Financial Group L.L.C. and
its affiliates; President, ICC Distributors, Inc./4/. His address is ICC
Distributors, Inc., Two Portland Square, Portland, Maine 04101.

CHARLES A. RIZZO (birth date: August 5, 1958) Treasurer of the Trusts and
Portfolio; Vice President and Department Head, Deutsche Asset Management since
1998; Senior Manager, PricewaterhouseCoopers LLP from 1993 to 1998. His address
is One South Street, Baltimore, MD 21202.

Messrs. Hirsch, Keffer and Rizzo also hold similar positions for other
investment companies for which ICC Distributors, or an affiliate serves as the
principal underwriter.

_______________________

/4/Underwriter/distributor for the Trust. Mr. Keffer owns 100% of the shares of
ICC Distributors, Inc.

29
<PAGE>

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

Trustee Compensation Table/5/
<TABLE>
<CAPTION>
Aggregate Aggregate Total Compensation
Name of Person, Compensation Compensation from Fund Complex
Position, from Trust*+ from Portfolio+ Paid to Trustees*
- --------- ---------- -----------------
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Martin J. Gruber $[ ] N/A $[ ]
Kelvin J. Lancaster $[ ] N/A $[ ]
Charles P. Biggar N/A $[ ] $[ ]
S. Leland Dill N/A $[ ] $[ ]
Philip Saunders, Jr. N/A $[ ] $[ ]
Harry Van Benschoten $[ ] N/A $[ ]
</TABLE>

* The aggregate compensation is provided for the BT Pyramid Mutual Funds which
is comprised of 6 funds.

+ Information is provided for the Trust's fiscal year ended September 30, 1999.

** 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, Short Intermediate US
Government Securities Portfolio, Intermediate Tax Free Portfolio, Asset
Management Portfolio, Equity 500 Index Portfolio, and Capital Appreciation
Portfolio. The compensation is provided for the fiscal year ended September
30, 1998.

As of [ ], 1999, the Trustees and officers of the Trusts and the Fund owned
in the aggregate less than 1% of the shares of any fund or the Trust (all series
taken together).

As of [ ], 1999, the following shareholders owned 5% or more of the
outstanding Institutional Class Shares of the Fund: [UPDATE]Chase Manhattan
Bank, Trustee, FBO Avon Employees Savings & Stock Ownership Plan, Brooklyn, New
York, owned approximately 8,276,337 shares (48.05%); Bankers Trust Co. of CA,
Trustee, Futura 401K Savings Plan, Los Angeles, California, owned approximately
4,071,042 shares (23.63%); Boston Safe Deposit & Trust Co., Thermo Electron
Corp. Moneywat Plus Plan, Medford, Massachusetts, owned approximately 2,747,598
shares (15.95%); and Partnershare Plan of Bankers Trust Corporation and
Affiliates, Jersey City, New Jersey, owned approximately 1,178,464 shares
(6.84%).

______________________________

/5/Mssrs. Herring and Langton were elected to the Board of Trustees on
October 8, 1999; therefore, they did not receive any compensation from the Trust
in the last fiscal year.

30
<PAGE>

As [ ], 1999, the following shareholders owned 5% or more of the outstanding
Institutional Service Class Shares of the Fund: [UPDATE]Collins & Aikman
Retirement Income Plan c/o Bankers Trust, Jersey City, New Jersey, owned
approximately 3,913,626 shares (69.30%); and Bankers Trust Co., Trustee, Grove
US LLC Retirement Savings, Jersey City, New Jersey, owned approximately
1,759,815 shares (31.16%).

As of [ ], 1999, the following shareholders owned 5% or more of the
outstanding Investment Class Shares of the Fund: [UPDATE]Robert E. Rich, Robert
E. Rich, Jr., David A. Rich, Trustee, Rich Products Retirement & Savings Plan,
Buffalo, New York, owned approximately 1,518,974 shares (93.06%); and Bankers
Trust Co., Trustee, Powell Goldstein Frazer & Murphy Retirement Plan, New York,
New York, owned approximately 110,214 shares (6.75%).

As of [ ], 1999, the following shareholders owned 5% or more of the
outstanding Service Class Shares of the Fund: [UPDATE]National Plus 401K Plan
FBO Textile Workers Pension Fund, Lincoln, Rhode Island, owned approximately
104,962 shares (73.51%); and Eide Bailly EBS, Eden Prairie, Minnesota, owned
approximately 32,244 shares (26.78%).

Code of Ethics

The Board of Trustees of the Fund has adopted a Code of Ethics pursuant to
Rule 17j-1 under the 1940 Act. The Fund's Code of Ethics permits Fund personnel
to invest in securities for their own accounts, but requires compliance with the
Code's pre-clearance requirements (with certain exceptions). In addition, the
Fund's Code of Ethics provides for trading "blackout periods" that prohibit
trading by personnel within periods of trading by the Fund in the same security.
The Fund's Code of Ethics also prohibits short term trading profits and personal
investment in initial public offerings. The Code requires prior approval with
respect to purchases of securities in private placements.

The Fund's adviser, Bankers Trust Company, has also adopted a Code of
Ethics. The Code of Ethics allows personnel to invest in securities for their
own accounts, but require compliance with the Code's pre-clearance requirements
and other restrictions including "blackout periods" and minimum holding periods,
subject to limited exceptions. The Code prohibits purchases of securities in
initial public offerings (the prohibition is limited to U.S. public offerings)
and requires prior approval for purchases of securities in private placements.

The Fund's principal underwriter, ICC Distributors, Inc., has adopted a Code of
Ethics applicable to ICC's distribution services to registered investment
companies such as the Fund. The ICC Code of Ethics prohibits directors and
officers of ICC from executing trades on a day during which the individual knows
or should have known that a Fund in the individual's complex has a pending "buy"
or "sell" order in the same security, subject to certain exceptions. The ICC
Code of Ethics also requires pre-clearance for purchases of securities in an
initial public offering or private placement.

Investment Adviser

Bankers Trust is the Portfolio's investment adviser. Bankers Trust is a wholly
owned subsidiary of Deutsche Bank. Deutsche Bank is a banking company with
limited liability organized under the laws of the Federal Republic of Germany.
Deutsche Bank is the parent company of a group consisting of banks, capital
markets companies, fund management companies, mortgage banks, a property finance
company, installment financing and leasing companies, insurance companies,
research and consultancy companies and other domestic and foreign companies.

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. Also,
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.

31
<PAGE>

For the years ended September 30, 1999 and September 30, 1998, Bankers Trust
earned $[ ] and $435,257, respectively in compensation for investment
advisory services. During the same period, Bankers Trust reimbursed $__________
and $244,398 to cover Portfolio expenses.

At a Special Meeting held on October 8, 1999, shareholders of the Portfolio also
approved a new investment advisory agreement with Morgan Grenfell, Inc. As of
October 5, 1999, Morgan Grenfell, Inc. has been renamed Deutsche Asset
Management Inc. ("DAMI"). The new investment advisory agreement with DAMI may be
implemented within two years of the date of the Special Meeting upon approval of
a majority of the members of the Board of Trustees who are not "interested
persons" ("Independent Trustees"). Shareholders of the Portfolio also approved a
new sub-investment advisory agreement among the Portfolio, DAMI and Bankers
Trust under which Bankers Trust may perform certain of DAMI's responsibilities,
at DAMI's expense, upon approval of the Independent Trustees, within two years
of the date of the Special Meeting. DAMI is a subsidiary of Deutsche Asset
Management Ltd., a wholly owned subsidiary of Deutsche Morgan Grenfell Group
PLC, an investment holding company which is, in turn, a wholly owned subsidiary
of Deutsche Bank.

Administrator

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

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

For the periods ended September 30, 1999 and September 30, 1998, Bankers Trust
earned $[ ] and $17, respectively from the Investment Class,

32
<PAGE>

$[ ] and $211,798, respectively from the Institutional Class, and $[ ] and
$20,080, respectively from the Institutional Service Class in compensation for
administrative and other services provided to the Fund. For the periods ended
September 30, 1999 and September 30, 1998, Bankers Trust earned $[ ] and
$64,560, respectively for administrative and other services provided to the
Portfolio.

Custodian and Transfer Agent

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

Use of Name

The Trust and Bankers Trust have agreed that the Trust may use the letters "BT"
as part of its name for so long as Bankers Trust serves as investment adviser to
the Portfolio. The Trust has acknowledged that the letters "BT" is used by and
is a property right of certain subsidiaries of Bankers Trust and that those
subsidiaries and/or Bankers Trust may at any time permit others to use that
term.

The Trust may be required, on 60 days' notice from Bankers Trust at any time, to
abandon use of the letters "BT" as part of its name. If this were to occur, the
Trustees would select an appropriate new name for the Trust, but there would be
no other material effect on the Trust, its shareholders or activities.

Banking Regulatory Matters

Bankers Trust has been advised by its counsel that in its opinion Bankers Trust
may perform the services for the Portfolio contemplated by the Advisory
Agreement and other activities for the Fund and the Portfolio described in the
Prospectus and this 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 Auditors

Willkie Farr & Gallagher, 787 Seventh Avenue, New York, New York 10019, serves
as counsel to the Trusts. Ernst & Young LLP, Two Commerce Square, 2001 Market
Street, Philadelphia, Pennsylvania, 19103, acts as independent auditors of the
Fund and the Portfolio.

33
<PAGE>

ORGANIZATION OF THE TRUST

The Trust was organized on February 28, 1992. 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.

Massachusetts law provides that shareholders could under certain circumstances
be held personally liable for the obligations of the Trust. However, the Trust's
Declaration of Trust disclaims shareholder liability for acts or obligations of
the Trust and requires that notice of this disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or a
Trustee. The Declaration of Trust provides that liabilities of each series of
the Trust (including the Fund) are chargeable only against assets of that series
and that a creditor of one series may not seek satisfaction from the assets of
another series. The Declaration of Trust also provides for indemnification from
the Fund's property for all losses and expenses of any shareholder held
personally liable for the obligations of the Fund. Thus, the risk of a
shareholder's incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations, a possibility that the Trust believes is remote. Upon payment of
any liability incurred by the Fund, the shareholder paying the liability would
be entitled to reimbursement from the general assets of the Fund. The Trustees
intend to conduct the operations of the Fund in a manner so as to avoid, as far
as possible, ultimate liability of the shareholders for liabilities of the Fund.

Except as described below, whenever the Fund is requested to vote on matters
pertaining to the Portfolio, the Fund will hold a meeting of its shareholders
and will cast its votes proportionately as instructed by Fund shareholders.
However, subject to applicable statutory and regulatory requirements, the Fund
will not request a vote of its shareholders with respect to any proposal
relating to the Portfolio that (a) if made with respect to the Fund, would not
require the vote of the shareholders of the Fund, or (b) is identical in all
material respects to a proposal that has previously been approved by the Fund's
shareholders. Any proposal submitted to holders in the Portfolio, and that is
not required to be voted on by the Fund's shareholders, will nonetheless be
voted on by the Trust Board.

TAXATION

Taxation of the Fund

The Fund intends to qualify annually to be treated as a regulated investment
company under the Code. To qualify for that treatment, the Fund must, among
other things, (a) derive at least 90% of its gross income each taxable year from
dividends, interest, payments with respect to securities loans and gains from
the sale or other disposition of securities, or other income (including gains
from options or futures contracts) derived with respect to its business of
investing in securities (the "Income Requirement"), (b) diversify its holdings
so that, at the end of each quarter of its taxable year, (i) at least 50% of the
value of its assets is represented by cash and cash items (including
receivables), U.S. government securities, securities of other regulated
investment companies and other securities, with such other securities of any one
issuer limited to an amount not greater than 5% of the value of the Fund's total
assets and not greater than 10% of the issuer's outstanding voting securities
and (ii) not more than 25%

34
<PAGE>

of the value of its total assets is invested in the securities of any one issuer
(other than U.S. government securities or the securities of other regulated
investment companies), and (c) distribute for each taxable year at least 90% of
its investment company taxable income (generally consisting of interest,
dividends and the excess of net short-term capital gain over net long-term
capital loss).

The Fund will be subject to a nondeductible 4% excise tax to the extent it fails
to distribute by the end of any calendar year substantially all of its ordinary
income for that year and capital gain net income for the one-year period ending
on October 31 of that year, plus any undistributed amount from the prior year.

35
<PAGE>

The Fund, as an investor in the Portfolio, will be deemed to own a proportionate
share of the Portfolio's assets, and to earn a proportionate share of the
Portfolio's income, for purposes of determining whether the Fund satisfies all
the requirements described above to qualify as a regulated investment company.
See the next section for a discussion of the tax consequences to the Fund of
hedging transactions engaged in by the Portfolio.

The Trust is organized as a Massachusetts business trust, and neither the Trust
nor the Fund is liable for any income or franchise tax in the Commonwealth of
Massachusetts, provided the Fund continues to qualify as a regulated investment
company under Subchapter M of the Code. The investment by the Fund in the
Portfolio will not cause the Fund to be liable for any income or franchise tax
in the State of New York.

If the Fund fails to qualify as a RIC for any taxable year, all of its taxable
income will be subject to tax at regular corporate income tax rates without any
deduction for distributions to shareholders and such distributions generally
will be taxable to shareholders as ordinary dividends to the extent of the
Fund's current and accumulated earnings and profits. In this event,
distributions generally will be eligible for the dividends-received deduction
for corporate shareholders.

Taxation of the Portfolio

The Portfolio will be treated as a separate partnership for federal income tax
purposes and will not be a "publicly traded partnership." As a result, the
Portfolio will not be subject to federal income tax. Instead, the Fund and
other investors in the Portfolio will be required to take into account, in
computing their federal income tax liability, their respective shares of the
Portfolio's income, gains, losses, deductions and credits, without regard to
whether they have received any cash distributions from the Portfolio. The
Portfolio also will not be subject to state income or franchise tax.

Because, as noted above, the Fund will be deemed to own a proportionate share of
the Portfolio's assets, and to earn a proportionate share of the Portfolio's
income, for purposes of determining whether the Fund satisfies the requirements
to qualify as a regulated investment company, the Portfolio intends to conduct
its operations so that the Fund will be able to satisfy all those requirements.

Distributions received by the Fund from the Portfolio (whether pursuant to a
partial or complete withdrawal or otherwise) generally will not result in the
Fund's recognizing any gain or loss for federal income tax purposes, except that
(a) gain will be recognized to the extent any cash that is distributed exceeds
the Fund's basis for its interest in the Portfolio prior to the distribution,
(b) income or gain will be realized if the distribution is in liquidation of the
Fund's entire interest in the Portfolio and includes a disproportionate share of
any unrealized receivables held by the Portfolio, and (c) loss will be
recognized if a liquidation distribution consists solely of cash and/or
unrealized receivables. The Fund's basis for its interest in the Portfolio
generally will equal the amount of cash and the basis of any property the Fund
invests in the Portfolio, increased by the Fund's share of the Portfolio's net
income and gains and decreased by (i) the amount of any cash and the basis of
any property distributed from the Portfolio to the Fund and (ii) the Fund's
share of the Portfolio's losses, if any.

The Portfolio's use of hedging strategies, such as writing (selling) and
purchasing options and futures contracts, involves complex rules that will
determine for income tax purposes the character and timing

36
<PAGE>

of recognition of the gains and losses it realizes in connection therewith.
Gains from options and futures contracts derived by the Portfolio with respect
to its business of investing in securities will qualify as permissible income
for the Fund under the Income Requirement.

Sale of Shares

Any gain or loss realized by a shareholder on the sale or other disposition of
Shares, or on receipt of a distribution in complete liquidation of the Fund,
generally will be a capital gain or loss that will be long-term or short-term,
depending upon the shareholder's holding period for the Shares. Any loss
realized on a sale or exchange will be disallowed to the extent the Shares
disposed of are replaced within a period of 61 days beginning 30 days before and
ending 30 days after disposition of the Shares. In such a case, the basis of
the Shares acquired will be adjusted to reflect the disallowed loss. Any loss
realized by a shareholder on a disposition of Shares held for six months or less
will be treated as a long-term capital loss to the extent of any distributions
of net capital gains received by the shareholder with respect to those Shares.

37
<PAGE>

Foreign Withholding Taxes

Income received by the Portfolio from sources within foreign countries may be
subject to withholding and other taxes imposed by those countries that would
reduce the yield on its securities. Tax conventions between certain countries
and the United States may reduce or eliminate these foreign taxes, however, and
many foreign countries do not impose taxes on capital gains in respect of
investments by foreign investors.

FINANCIAL STATEMENTS

The financial statements for the Fund and the Portfolio for the fiscal year
ended September 30, 1999 are incorporated herein by reference to the Annual
Report to shareholders of the Fund dated September 30, 1999. A copy of the
Annual Report may be obtained without charge by contacting the Fund.

38
<PAGE>

APPENDIX

DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS:
- ---------------------------------------------

Aaa- Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Aa - Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the long-
term risks appear somewhat larger than in Aaa securities.

A - Bonds rated A possess many favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

Baa - Bonds rated Baa are considered as medium-grade obligations, i.e. they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such, bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.

Ba - Bonds rated Ba are judged to have speculative elements. Their future cannot
be considered as well assured. Often the protection of interest and principal
payments may be very moderate and thereby not well safeguarded during both (good
and bad times over the future). Uncertainty of position characterizes bonds in
this class.

B - Bonds rated B generally lack characteristics of a desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.

Caa - Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.

Ca - Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked short-comings.

C - Bonds rated C are the lowest-rated class of bonds and issued so rated can be
regarded as having extremely poor prospects of ever attaining any real
investment standing.

Moody's applies numerical modifiers, 1, 2, and 3, in each generic rating
classification from Aa through B in its corporate bond system. The modifier 1
indicates that the security ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end of its generic rating category.

39
<PAGE>

DESCRIPTION OF S&P'S CORPORATE BOND RATINGS:
- -------------------------------------------

AAA- Debt rated AAA has the highest rating assigned by Standard & Poor's to a
debt obligation. Capacity to pay interest and repay principal is extremely
strong.

AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher-rated issues only in small degree.

A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.

40
<PAGE>

BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to weakened capacity to pay interest and repay principal for debt
in this category than in higher-rated categories.

BB - Debt rate BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments.

B - Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB- rating.

CCC - Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal.

CC - Debt rated CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.

C - The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed but debt service
payments are continued.

CI - The rating CI is reserved for income bonds on which no interest is being
paid.

D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating will also be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.

Plus (+) or minus (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

DUFF & PHELPS' LONG-TERM DEBT RATINGS:
- -------------------------------------

================================================================================

- --------------------------------------------------------------------------------
AAA Highest credit quality. The risk factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
- --------------------------------------------------------------------------------
AA+ High credit quality. Protection factors are strong. Risk is
modest but may vary slightly from time to time because of
economic conditions.
AA

41
<PAGE>

---------------------------------------------------------------------------
AA-
---------------------------------------------------------------------------
A+ Protection factors are average but adequate. However, risk
factors are more variable and greater in periods of economic
stress.
A
A-

---------------------------------------------------------------------------
BBB+ Below-average protection factors but still considered
BBB sufficient for prudent investment. Considerable variability in
risk during economic cycles.
BBB-

---------------------------------------------------------------------------
BB+ Below investment grade but deemed likely to meet obligation
BB when due. Present or prospective financial protection factors
BB- fluctuate according to industry conditions or company fortunes.
Overall quality may move up or down frequently within this
category.

---------------------------------------------------------------------------
B+ Below investment grade and possessing risk that obligations
B will not be met when due. Financial protection factors will
B- fluctuate widely according to economic cycles, industry
conditions and/or company fortunes. Potential exists for
frequent changes in the rating within this category or into a
higher or lower rating grade.

---------------------------------------------------------------------------
CCC Well below investment-grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred
dividends. Protection factors are narrow and risk can be
substantial with unfavorable economic/industry conditions, and/or
with unfavorable company developments.

---------------------------------------------------------------------------
DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or interest payments.

---------------------------------------------------------------------------
DP Preferred stock with dividend arrearages.

===========================================================================

DESCRIPTION OF MOODY'S SHORT-TERM DEBT RATINGS:
- ----------------------------------------------

Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics: leasing
market positions in well-established industries; high rates of return on

42
<PAGE>

funds employed; conservative capitalization structures with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; well-established access to
a range of financial markets and assured sources of alternate liquidity.

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

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

DESCRIPTION OF S&P SHORT-TERM ISSUER CREDIT RATINGS:
- ---------------------------------------------------

A-1 An obligor rated 'A-1' has STRONG capacity to meet its financial
commitments. It is rated in the highest category by Standard & Poor's. Within
this category, certain obligors are designated with a plus sign (+). This
indicates that the obligor's capacity to meet its financial commitments is
EXTREMELY STRONG.

A-2 An obligor rated 'A-2' has SATISFACTORY capacity to meet its financial
commitments. However, it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligors in the highest
rating category.

A-3 An obligor rated 'A-3' has ADEQUATE capacity to meet its financial
obligations. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitments.

DESCRIPTION OF DUFF & PHELPS' COMMERCIAL PAPER RATINGS:
- ------------------------------------------------------

D-1+ Highest certainty of timely payment. Short term liquidity, including
internal operating factors and/or access to alternative sources of funds, is
outstanding, and safety is just below risk free U.S. Treasury short term
obligations.

D-1 Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are minor.

D-1- High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very small.

D-2 Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.

43
<PAGE>

D-3 Satisfactory liquidity and other protection factors qualify issues as
to investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected.

DESCRIPTION OF MOODY'S INSURANCE FINANCIAL STRENGTH RATINGS:
- -----------------------------------------------------------

Aaa

Insurance companies rated Aaa offer exceptional financial security. While the
financial strength of these companies is likely to change, such changes as can
be visualized are most unlikely to impair their fundamentally strong position.

Insurance companies rated Aa offer excellent financial security. Together with
the Aaa group they constitute what are generally known as high grade companies.
They are rated lower than Aaa companies because long-term risks appear somewhat
larger.

Insurance companies rated A offer good financial security. However, elements
may be present which suggest a susceptibility to impairment sometime in the
future.

Baa

Insurance companies rated Baa offer adequate financial security. However,
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time.

Insurance companies rated Ba offer questionable financial security. Often the
ability of these companies to meet policyholder obligations maybe very moderate
and thereby not well safeguarded in the future.

Insurance companies rated B offer poor financial security. Assurance of
punctual payment of policyholder obligations over any long period of time is
small.

Caa

Insurance companies rated Caa offer very poor financial security. They may be
in default on their policyholder obligations or there may be present elements of
danger with respect to punctual payment of policyholder obligations and claims.

Insurance companies rated Ca offer extremely poor financial security. Such
companies are often in default on their policyholder obligations or have other
marked shortcomings.

44
<PAGE>

Insurance companies rated C are the lowest rated class of insurance company and
can be regarded as having extremely poor prospects of ever offering financial
security.

Numeric modifiers: Numeric modifiers are used to refer to the ranking within the
group -- one being the highest and three being the lowest. However, the
financial strength of companies within a generic rating symbol (Aa, for example)
is broadly the same.

DESCRIPTION OF S&P CLAIMS PAYING ABILITY RATING DEFINITIONS:
- -----------------------------------------------------------

Secure Range: AAA to BBB

"AAA" Superior financial security on an absolute and relative basis. Capacity
to meet policyholder obligations is overwhelming under a variety of economic and
underwriting conditions.

"AA" Excellent financial security. Capacity to meet policyholder obligations
is strong under a variety of economic and underwriting conditions.

"A" Good financial security, but capacity to meet policyholder obligations is
somewhat susceptible to adverse economic and underwriting conditions.

"BBB" Adequate financial security, but capacity to meet policyholder
obligations is susceptible to adverse economic and underwriting conditions.

Vulnerable Range: BB to CCC

"BB" Financial security may be adequate, but capacity to meet policyholder
obligations, particularly with respect to long-term or "long-tail" policies, is
vulnerable to adverse economic and underwriting conditions.

"B" Vulnerable financial security. Currently able to meet policyholder
obligations, but capacity to meet policyholder obligations is particularly
vulnerable to adverse economic and underwriting conditions.

"CCC" Extremely vulnerable financial security. Continued capacity to meet
policyholder obligations is highly questionable unless favorable economic and
underwriting conditions prevail.

"R" Regulatory action. As of the date indicated, the insurer is under
supervision of insurance regulators following rehabilitation, receivership,
liquidation, or any other action that reflects regulatory concern about the
insurer's financial condition. Information on this status is provided by the
National Association of Insurance Commissioners and other regulatory bodies.
Although believed to be accurate, this information is not guaranteed. The "R"
rating does not apply to insurers subject only to nonfinancial actions such as
market conduct violations.

Plus (+) or minus (-) Ratings from "AA" to "B" may be modified by the addition
of a plus or minus sign to show relative standing within the major rating
categories.

DUFF & PHELPS' CLAIMS PAYING ABILITY RATINGS:
- --------------------------------------------
===========================================================================
AAA Highest claims paying ability. Risk factors are negligible.
---------------------------------------------------------------------------
AA+ Very high claims paying ability. Protection factors are strong.
Risk is modest,

45
<PAGE>

---------------------------------------------------------------------------
AA but may vary slightly over time due to economic and/or
underwriting conditions.
AA-

---------------------------------------------------------------------------
A+ High claims paying ability. Protection factors are average and
A there is an expectation of variability in risk over time due to
economic and/or underwriting conditions.
A-

---------------------------------------------------------------------------
BBB+ Adequate claims paying ability. Protection factors are
BBB adequate. There is considerable variability in risk over time
due to economic and/or underwriting conditions.
BBB-
---------------------------------------------------------------------------
BB+ Uncertain claims paying ability and less than investment grade
BB quality. However, the company is deemed likely to meet these
obligations when due. Protection factors will vary widely with
changes in economic and/or underwriting conditions.

BB-

---------------------------------------------------------------------------
B+ Possessing risk that policyholder and contractholder obligations
B will not be paid when due. Protection factors will vary widely
with changes in economic and underwriting conditions or company
fortunes.

B-

---------------------------------------------------------------------------
CCC There is substantial risk that policyholder and contractholder
obligations will not be paid when due. Company has been or is
likely to be placed under state insurance department supervision.

---------------------------------------------------------------------------
DD Company is under an order of liquidation.

===========================================================================

46
<PAGE>

Distributor

ICC Distributors, Inc. BT Pyramid Mutual Funds
-----------------------
Two Portland Square
Portland, ME 04101

Investment Adviser BT PreservationPlus Fund

Bankers Trust Company Investment Class
130 Liberty Street Institutional Class
(One Bankers Trust Plaza) Institutional Service Class
New York, New York 10006

Transfer Agent

Bankers Trust Company
130 Liberty Street
(One Bankers Trust Plaza)
New York, New York 10006

Custodian

Bankers Trust Company STATEMENT OF
130 Liberty Street ADDITIONAL INFORMATION
(One Bankers Trust Plaza) January 31, 2000
New York, New York 10006

Independent Auditors

Ernst & Young LLP
Two Commerce Square
2001 Market Street
Philadelphia, Pennsylvania 19103

Legal Counsel

Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019

Cusips:
055847842
055847834
055847818
055847826
[STAPRVPLUS (11/98)]
<PAGE>

PART C - OTHER INFORMATION

ITEM 23. Exhibits.

(a) Declaration of Trust of the Trust; 1
(i) Eighth Amended and Restated Establishment and Designation of Series;
2
(b) By-Laws of the Trust; 1
(c) Instruments Defining Rights of Security Holders; 3
(d) Investment Advisory Agreement; 2
(i) Exhibit A to Investment Advisory Agreement; 2
(e) Distribution Agreement; 4
(f) Bonus/Profit Sharing Contracts - Not Applicable;
(g) Custodian Agreement between Registrant and Bankers Trust Company; 5
(i) Amendment #1 to Exhibit A to the Custodian Agreement between the
Registrant and Bankers Trust Company; 6
(ii) Cash Services Agreement between the Registrant and Bankers Trust Company; 7
(h) Administration and Services Agreement; 8
(i) Exhibit D to Administration and Services Agreement; 4
(ii) Amended and Restated Shareholder Services Plan for BT
PreservationPlus Fund; 4
(iii) Agreement to Provide Shareholder Services for BT PreservationPlus
Fund; 4
(iv) Expense Limitation Agreement on behalf of BT Equity Appreciation
Fund; 10
(v) Expense Limitation Agreement on behalf of BT Investment Money Market
and BT Investment Equity 500 Index Funds; 11
(vi) Expense Limitation Agreement on behalf of BT Institutional Asset
Management Fund; 12
(i) Other Opinions -- Not applicable;
(j) Consent of Independent Accountants - Not Applicable;
(k) Omitted Financial Statements - Not Applicable;
(l) Investment representation letters of initial shareholders of the Trust; 9
(m) Rule 12b-1 Plans - Not applicable;
(n) Financial Data Schedules - Not Applicable;
(o) Rule 18f-3 Plan (Multiple Class Expense Allocation); 2
(i) Revised Multiple Class Expense Allocation Plan; 6
___________________________________
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 Section 6.2 of Registrant's Declaration of
Trust.
4. Incorporated by reference to Post-Effective Amendment No. 22 to
Registrant's Registration Statement as filed with the Commission on
November 24, 1998.
5. Incorporated by reference to Post-Effective Amendment No. 18 to
Registrant's Registration Statement as filed with the Commission July 1,
1997.
6. Incorporated by reference to Post-Effective Amendment No. 19 to
Registrant's Registration Statement as filed with the Commission on January
28, 1998.
7. Incorporated by reference to Post-Effective Amendment No. 21 to
Registrant's Registration Statement as filed with the Commission on June
30, 1998.
8. Incorporated by reference to Post-Effective Amendment No. 3 to Registrant's
Registration Statement as filed with the Commission on April 30, 1993.
9. Incorporated by reference herein to Pre-Effective Amendment No. 1 to
Registrant's Registration Statement as filed with the Commission on June 9,
1992.
10. Incorporated by reference to Post-Effective Amendment No. 25 to
Registrant's Registration Statement as filed with the Commission on January
28, 1999.
11. Incorporated by reference to Post-Effective Amendment No. 27 to
Registrant's Registration Statement as filed with the Commission on April
30, 1999.
12. Incorporated by reference to Post-Effective Amendment No. 28 to
Registrant's Registration Statement as filed with the Commission on May 28,
1999.

ITEM 24. Persons Controlled by or Under Common Control with Registrant.

Not applicable.

ITEM 25. Indemnification.

Incorporated by reference to Post-Effective Amendment No. 8 to Registrant's
Registration Statement as filed with the Commission on April 30, 1996.

ITEM 26. Business and Other Connections of Investment Adviser.

Bankers Trust Company ("Bankers Trust") serves as investment adviser to the
Portfolio. Bankers Trust, a New York banking corporation, is a wholly owned
subsidiary of Deutsche Bank A.G. Bankers Trust conducts a variety of commercial
banking and trust
<PAGE>

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 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 Deutsche Bank A.G. Set forth below are the names and principal businesses of
the directors and officers of Bankers Trust who to our knowledge as of November
30, 1999, are engaged in any other business, profession, vocation or employment
of a substantial nature.

Josef Ackermann

Chairman of the Board, Chief Executive Officer and President, Bankers Trust;
Member, Board of Managing Directors, Deutsche Bank AG. Address: Deutsche Bank
AG, Taunusanlage 12, D-60262 Frankfurt am Main, Federal Republic of Germany.

Hans Angermueller

Director, Bankers Trust; Director of various corporations; Shearman and
Sterling, of counsel. Address: Shearman & Sterling, 599 Lexington Avenue, New
York, New York 10022

George B. Beitzel

Director, Bankers Trust and Bankers Trust Corporation since 1977; Director of
various corporations. Address: 29 King Street, Chappaqua, New York 10514-3432.

William R. Howell

Director, Bankers Trust; Chairman Emeritus, J.C. Penney Company, Inc.; Director
of various corporations. Address: J.C. Penney Company, Inc., P.O. Box 10001,
Dallas, Texas 74301-1109.

Hermann-Josef Lamberti

Director, Bankers Trust; Member, Board of Managing Directors, Deutsche Bank AG.
Address: Deutsche Bank AG, Taunusanlage 12, D-60262 Frankfurt am Main, Federal
Republic of Germany.

John A. Ross

Director, Bankers Trust; Regional Chief Executive Officer, Deutsche Bank
Americas Holding Corp. Address: Deutsche Bank, 31 West 52/nd/ Street, New York,
New York 10019.

Ronaldo H. Schmitz
<PAGE>

Director, Bankers Trust; Member, Board of Managing Directors, Deutsche Bank AG.
Address: Deutsche Bank AG, Taunusanlage 12, D-60262 Frankfurt am Main, Federal
Republic of Germany.

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, Asset
Management Portfolio, BT Investment Portfolio, BT Alex. Brown Cash Reserve
Fund, Flag Investors Communications Fund, Inc., Flag Investors
International Fund, Inc., Flag Investors emerging Growth Fund, Inc., Total
Return U.S. Treasury Fund, Inc., Managed Municipal Fund, Inc., Flag
Investors Short-Intermediate Income Fund, Inc., Flag Investors Value
Builder Fund, Inc., Flag Investors Real Estate Securities Fund, Inc. Flag
Investors Equity Partners Fund, Inc., Morgan Grenfell Investment Trust, The
Glenmede Funds, Inc. and The Glenmede Portfolios.

(b) Unless otherwise stated, the principal business address for the following
persons is Two Portland Square, Portland, Maine 04101.

Name and Positions and Positions and
Principal Business Offices with Offices with
Address Distributor Registrant
<S> <C> <C>
John Y. Keffer President None
Sara M. Morris Treasurer None
David I. Goldstein Secretary None
Benjamin L. Niles Vice President None
Dana L. Lukens Assistant Secretary None
Nanette K. Chern Chief Compliance Officer None
</TABLE>

ITEM 28. Location of Accounts and Records.

BT Investment Funds: Deutsche Asset Management
(Registrant) One South Street
Baltimore, MD 21202
<PAGE>

Bankers Trust Company: 130 Liberty Street
(Custodian, Investment Adviser New York, NY 10006
and Administrator)

Investors Fiduciary 127 West 10th Street,
Trust Company: Kansas City, MO 64105.

ICC Distributors, Inc.: Two Portland Square
(Distributor) Portland, ME 04101

ITEM 29. Management Services.

Not Applicable

ITEM 30. Undertakings.

Not Applicable
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, the Registrant, BT PYRAMID
MUTUAL FUNDS, has duly caused this Amendment to its Registration Statement to be
signed on its behalf by the undersigned, duly authorized, in the City of
Baltimore and the State of Maryland on this 30th day of November, 1999.

BT PYRAMID MUTUAL FUNDS

By: /s/ Daniel O. Hirsch
Daniel O. Hirsch, Secretary
November 30, 1999

Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registrant's Registration Statement has been signed below by the
following persons in the capacity and on the date indicated:

NAME TITLE DATE

By: /s/ DANIEL O. HIRSCH Secretary November 30, 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/ CHARLES A. RIZZO* Treasurer (Principal
Charles A. Rizzo Financial and Accounting Officer)

/s/ CHARLES P. BIGGAR * Trustee
Charles P. Biggar

/s/ S. LELAND DILL* Trustee
S. Leland Dill

/s/ MARTIN J. GRUBER* Trustee
Martin J. Gruber

/s/ RICHARD T. HALE* Trustee
Richard T. Hale

/s/ RICHARD R. HERRING* Trustee
Richard R. Herring
<PAGE>

/s/ BRUCE E. LANGTON* Trustee
Bruce E. Langton

/s/ PHILIP SAUNDERS, JR.* Trustee
Kelvin J. Lancaster

/s/ HARRY VAN BENSCHOTEN* Trustee
Harry Van Benschoten

*By Power of Attorney - Incorporated by reference to Post-Effective Amendment
No. 64 of BT Investment Funds as filed with the Commission on October 22, 1999.
<PAGE>

BT INVESTMENT PORTFOLIOS has duly caused this Post-Effective Amendment No.
30 to the Registration Statement on Form N-1A of BT Pyramid Mutual Funds to be
signed on its behalf by the undersigned authorized in the City of Baltimore and
the State of Maryland on the 30/th/ day of November, 1999.

BT INVESTMENT PORTFOLIOS

By: /s/ Daniel O. Hirsch
Daniel O. Hirsch, Secretary
November 30, 1999

This Post-Effective Amendment No. 30 to the Registration Statement of BT Pyramid
Mutual Funds has been signed below by the following persons in the capacities
indicated with respect to BT INVESTMENT PORTFOLIOS.

NAME TITLE DATE

By: /s/ DANIEL O. HIRSCH Secretary November 30, 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/ CHARLES A. RIZZO* Treasurer (Principal
Charles A. Rizzo Financial and Accounting Officer)

/s/ CHARLES P. BIGGAR * Trustee
Charles P. Biggar

/s/ S. LELAND DILL* Trustee
S. Leland Dill

/s/ MARTIN J. GRUBER* Trustee
Martin J. Gruber

/s/ RICHARD T. HALE* Trustee
Richard T. Hale

/s/ RICHARD R. HERRING* Trustee
Richard R. Herring

/s/ BRUCE E. LANGTON* Trustee
Bruce E. Langton
<PAGE>

/s/ PHILIP SAUNDERS, JR.* Trustee
Kelvin J. Lancaster

/s/ HARRY VAN BENSCHOTEN* Trustee
Harry Van Benschoten

*By Power of Attorney - Incorporated by reference to Post-Effective Amendment
No. 64 of BT Investment Funds as filed with the Commission on October 22, 1999.
<PAGE>

RESOLUTION RELATING TO
RATIFICATION OF REGISTRATION STATEMENTS

(Approved by the Boards of
BT Investment Funds,
BT Pyramid Mutual Funds,
BT Institutional Funds, (the "Trust" or "Trusts")
Quantitative Equity Portfolio,
Capital Appreciation Portfolio,
Pacific Basin Equity Portfolio,
Latin American Equity Portfolio,
Small Cap Portfolio,
BT PreservationPlus Portfolio, and
BT PreservationPlus Income Portfolio
(the "Portfolio Trust "or "Portfolio Trusts"))

RESOLVED, That the proper officers of the Trusts be, and they hereby are,
authorized and directed to execute, in the name and on behalf of the
Trust, a Post-Effective Amendment under the Securities Act of 1933
(the "1933 Act") and an Amendment under the Investment Company Act of
1940, as amended, (the "1940 Act") to the Trust's Registration
Statement on Form N-1A, and all necessary exhibits and other
instruments relating thereto (collectively, the "Registration
Statement"), to procure all other necessary signatures thereon, and to
file the appropriate exhibits thereto, with the Securities and
Exchange Commission (the "Commission"), under the 1933 Act and the
1940 Act and to appear, together with legal counsel, on behalf of the
Trust before the Commission in connection with any matter relating to
the Registration Statement; and further

RESOLVED, That any officer of the Trusts be, and he or she hereby is,
authorized and directed in the name and on behalf of the Trust to take
any and all action which the officer so acting may deem necessary or
advisable in order to obtain a permit to register or qualify shares of
common stock of the Trust for issuance and sale or to request an
exemption from registration of shares of common stock of the Trust
under the securities laws of such of the states of the United States
of America or other jurisdictions, including Canada, as such officer
may deem advisable, and in connection with such registration, permits,
licenses, qualifications and exemptions to execute,
<PAGE>

acknowledge, verify, deliver, file and publish all such applications,
reports, issuer's covenants, resolutions, irrevocable consents to
service of process, powers of attorney and other papers and
instruments as may be required under such laws or may be deemed by
such officer to be useful or advisable to be filed thereunder, and
that the form of any and all resolutions required by any such state
authority in connection with such registration, licensing, permitting,
qualification or exemption is hereby adopted if (1) in the opinion of
the officer of the Trust so acting the adoption of such resolutions is
necessary or advisable, and (2) the Secretary of the Trust evidences
such adoption by filing herewith copies of such resolutions which
shall thereupon be deemed to be adopted by the Board of Directors and
incorporated in the minutes as a part of this resolution and with the
same force and effect as if attached hereto and that the proper
officers of the Trust are hereby authorized to take any and all action
that they may deem necessary or advisable in order to maintain such
registration in effect for as long as they may deem to be in the best
interests of the Trust; and further

RESOLVED, That any and all actions heretofore or hereafter taken by such
officer or officers within the terms of the foregoing resolutions be,
and they hereby are, ratified and confirmed as the authorized act and
deed of the Trust; and further

RESOLVED, That the proper officers of the Portfolio Trusts be, and they
hereby are, authorized and directed to execute, in the name and on
behalf of the Portfolio Trust, an Amendment under the 1940 Act to the
Portfolio Trust's Registration Statement, to procure all other
necessary signatures thereon, and to file the appropriate exhibits
thereto, with the Commission, the 1940 Act and to appear, together
with legal counsel, on behalf of the Portfolio Trust before the
Commission in connection with any matter relating to the Registration
Statement; and further

RESOLVED, That any officer of the Portfolio Trusts be, and he or she hereby
is, authorized and directed in the name and on behalf of the Portfolio
Trust to
<PAGE>

take any and all action which the officer so acting may deem necessary
or advisable in order to obtain a permit to register or qualify shares
of common stock of the Portfolio Trust for issuance and sale or to
request an exemption from registration of shares of common stock of
the Portfolio Trust under the securities laws of such of the states of
the United States of America or other jurisdictions, including Canada,
as such officer may deem advisable, and in connection with such
registration, permits, licenses, qualifications and exemptions to
execute, acknowledge, verify, deliver, file and publish all such
applications, reports, issuer's covenants, resolutions, irrevocable
consents to service of process, powers of attorney and other papers
and instruments as may be required under such laws or may be deemed by
such officer to be useful or advisable to be filed thereunder, and
that the form of any and all resolutions required by any such state
authority in connection with such registration, licensing, permitting,
qualification or exemption is hereby adopted if (1) in the opinion of
the officer of the Portfolio Trust so acting the adoption of such
resolutions is necessary or advisable, and (2) the Secretary of the
Portfolio Trust evidences such adoption by filing herewith copies of
such resolutions which shall thereupon be deemed to be adopted by the
Board of Directors and incorporated in the minutes as a part of this
resolution and with the same force and effect as if attached hereto
and that the proper officers of the Portfolio Trust are hereby
authorized to take any and all action that they may deem necessary or
advisable in order to maintain such registration in effect for as long
as they may deem to be in the best interests of the Portfolio Trust;
and further