<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 1, 1996
File Nos. 33-62103 and 811-7347
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-lA
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 3
AND
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 6
BT ADVISOR FUNDS
(FORMERLY, BT GLOBAL INVESTORS)
(Exact Name of Registrant as Specified in Charter)
6 ST. JAMES AVENUE, BOSTON, MASSACHUSETTS 02116
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: 617-423-0800
Copies to:
Thomas M. Lenz Burton M. Leibert, Esq.
Signature Broker-Dealer Services, Inc. Willkie Farr & Gallagher
6 St. James Avenue One Citicorp Center
Boston, Massachusetts 02116 153 East 53rd Street
New York, New York 10022
(Name and Address of Agent for Service)
It is
proposed that this filing will become effective
(check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[x] 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.
<PAGE>
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DECLARATION PURSUANT TO RULE 24f-2
Registrant has registered an indefinite number of its shares of beneficial
interest pursuant to Rule 24f-2 under the Investment Company Act of 1940.
Registrant will file the Notice required by Rule 24f-2 on or about November
30, 1996 for Registrant's fiscal year ended September 30, 1996 and on or about
February 28, 1997 for Registrant's fiscal year ended December 31, 1996.
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<PAGE>
BT ADVISOR FUNDS
FORM N-lA
CROSS REFERENCE SHEET
Part A
ITEM NO. HEADINGS IN PROSPECTUS
-------- ----------------------
1. Cover Page............................ Cover Page
2. Synopsis.............................. The Funds -- Expense Summary
3. Condensed Financial
Information........................... Not applicable
4. General Description of Registrant..... Cover Page; The Funds -- Who May
Want to Invest; The Funds in
Detail -- Risk Factors and
Certain Securities and Investment
Practices
5. Management of the Fund................ The Funds -- Expense Summary; The
Funds in Detail -- Management of
the Funds
6. Capital Stock and Other Securities.... Cover Page; The Funds in Detail
-- Performance; Account
Information -- Types of Accounts,
How to Buy Shares, How to Sell
Shares; Shareholder and Account
Policies -- Dividends, Capital
Gains and Taxes, Exchange
Limitations, Sales Charge
Reductions and Waivers,
Additional Information About the
Funds
7. Purchase of Securities Being
Offered.............................. Account Information -- How to Buy
Shares; Shareholder and Account
Policies -- Valuation Details,
Exchange Restrictions, Sales
Charge Reductions and Waivers
8. Redemption or Repurchase............. Account Information -- How to
Sell Shares; Shareholder and
Account Policies -- Valuation
Details, Exchange Limitations
9. Pending Legal Proceedings............ Not applicable
<PAGE>
Part B HEADINGS IN STATEMENT OF
ITEM NO. ADDITIONAL INFORMATION
- -------- ------------------------
10. Cover Page.............................. Cover Page
11. Table of Contents....................... Table of Contents
12. General Information and History......... Not applicable
13. Investment Objectives and Policies...... Risk Factors and Certain
Securities and Investment
Practices
14. Management of the Fund.................. Management of the Trust
15. Control Persons and Principal
Holders of Securities................... Management of the Trust (See also
Prospectus-- "Additional
Information About the Funds")
16. Investment Advisory and
Other Services.......................... Management of the Trust
17. Brokerage Allocation
and Other Practices..................... Risk Factors and Certain
Securities and Investment
Practices
18. Capital Stock and Other
Securities.............................. Organization of the Trust; (see
also Prospectus--"Dividends,
Capital Gains and Taxes")
19. Purchase, Redemption and Pricing
of Securities Being Offered............ Valuation of Securities;
Redemptions and Purchases in
Kind
20. Tax Status............................. Taxation (see also
Prospectus--"Dividends, Capital
Gains and Taxes")
21. Underwriters........................... See Prospectus-- "Management of
the Funds"
22. Calculation of Performance Data........ Performance Information
23. Financial Statements................... Financial Statements
Part C
Information required to be included in Part C is set forth
after the appropriate item, so numbered, in Part C to this registration
statement amendment.
<PAGE>
REGISTRANT'S PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION FOR U.S. BOND
INDEX FUND, SMALL CAP INDEX FUND, EAFE(R) EQUITY INDEX FUND AND BT INVESTMENT
EQUITY 500 INDEX FUND ARE INCORPORATED BY REFERENCE TO POST-EFFECTIVE
AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT ON FORM N-1A, FILED ON APRIL 29,
1996
<PAGE>
REGISTRANT'S PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION FOR GLOBAL
HIGH YIELD SECURITIES FUND, CAPITAL APPRECIATION FUND, SMALL CAP FUND,
INTERNATIONAL EQUITY FUND, PACIFIC BASIN EQUITY FUND AND LATIN AMERICAN EQUITY
FUND ARE INCORPORATED BY REFERENCE TO PRE-EFFECTIVE AMENDMENT NO. 3 TO THE
REGISTRATION STATEMENT ON FORM N-1A, FILED ON JANUARY 16, 1996
<PAGE>
REGISTRANT'S PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION FOR SMALL CAP
INDEX FUND (INSTITUTIONAL CLASS SHARES) ARE INCORPORATED BY REFERENCE TO
PRE-EFFECTIVE AMENDMENT NO. 3 TO THE REGISTRATION STATEMENT ON FORM N-1A,
FILED ON JANUARY 16, 1996
<PAGE>
REGISTRANT'S PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION FOR U.S. BOND
INDEX FUND (INSTITUTIONAL CLASS SHARES) ARE INCORPORATED BY REFERENCE TO
PRE-EFFECTIVE AMENDMENT NO. 3 TO THE REGISTRATION STATEMENT ON FORM N-1A,
FILED ON JANUARY 16, 1996
<PAGE>
REGISTRANT'S PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION FOR EAFE(R)
EQUITY INDEX FUND (INSTITUTIONAL CLASS SHARES) ARE INCORPORATED BY REFERENCE
TO PRE-EFFECTIVE AMENDMENT NO. 3 TO THE REGISTRATION STATEMENT ON FORM N-1A,
FILED ON JANUARY 16, 1996
<PAGE>
REGISTRANT'S PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION FOR U.S. BOND
INDEX FUND, EQUITY 500 EQUAL WEIGHTED INDEX FUND, SMALL CAP FUND, EAFE(R)
EQUITY INDEX FUND AND INSTITUTIONAL EQUITY 500 INDEX FUND (INSTITUTIONAL CLASS
SHARES) ARE INCORPORATED BY REFERENCE TO PRE-EFFECTIVE AMENDMENT NO. 3 TO THE
REGISTRATION STATEMENT ON FORM N-1A, FILED ON JANUARY 16, 1996
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>1
Subject to Completion, dated August 1, 1996
BT ADVISOR FUNDS
Growth Fund
Growth and Income Fund
(Investment Class of Shares)
PROSPECTUS: ___________, 1996
BT Advisor Funds (the "Trust") is an open-end, management investment company
(mutual fund) which currently consists of twelve funds. Shares of the two
funds listed above (each, a "Fund") are offered by this prospectus.
Bankers Trust Company ("Bankers Trust") is the investment adviser (the
"Adviser") of each Fund.
Please read this Prospectus before investing, and keep it on file for future
reference. It contains important information, including how each Fund invests
and the services available to shareholders.
To learn more about each Fund and its investments, investors can obtain a copy
of the Funds' Statement of Additional Information (the "SAI"), dated
__________, 1996, which contains each Fund's most recently published financial
report and portfolio listing. The SAI has been filed with the Securities and
Exchange Commission (the "SEC") and is incorporated herein by reference. For a
free copy of this document, call the Trust's Service Agent at (800) 730-1313.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
BANKERS TRUST OR ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE
FDIC, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
LIKE SHARES OF ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>2
TABLE OF CONTENTS
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Page
----
THE FUNDS..................................................................3
WHO MAY WANT TO INVEST..................................................3
EXPENSE SUMMARY.........................................................3
THE FUNDS IN DETAIL........................................................5
INVESTMENT OBJECTIVES AND POLICIES......................................5
INVESTMENT PRINCIPLES AND RISKS.........................................5
ADDITIONAL INVESTMENT LIMITATIONS.......................................6
RISK FACTORS AND CERTAIN SECURITIES AND
INVESTMENT PRACTICES.................................................6
SECURITIES AND INVESTMENT PRACTICES.....................................7
PERFORMANCE............................................................13
MANAGEMENT OF THE FUNDS................................................14
NET ASSET VALUE........................................................16
PURCHASE AND REDEMPTION OF SHARES.........................................17
PURCHASE OF SHARES.....................................................17
MINIMUM INVESTMENTS....................................................17
REDEMPTION OF SHARES...................................................17
EXCHANGE PRIVILEGE.....................................................18
TAX-SAVING RETIREMENT PLANS............................................18
SHAREHOLDER AND ACCOUNT POLICIES..........................................20
DIVIDENDS, CAPITAL GAINS, AND TAXES....................................20
ADDITIONAL INFORMATION ABOUT THE FUNDS.................................20
<PAGE>3
THE FUNDS
Growth Fund's investment objective is long-term capital growth. The Fund seeks
to achieve this objective through investment primarily in the equity
securities of companies with large market capitalizations, although a smaller
portion of the Fund may be held in smaller capitalized equities or non-U.S.
equities. See "Risk Factors and Certain Securities and Investment Practices."
Growth and Income Fund's investment objective is capital growth and current
income. The Fund seeks to achieve this objective through investment primarily
in the equity securities of companies with large market capitalizations and in
various income producing securities, including, but not limited to, dividend
paying equity securities, corporate bonds, notes, convertible securities,
debentures and money market instruments, although a smaller portion of the
Fund may be held in smaller capitalized equities or non-U.S. equities. See
"Risk Factors and Certain Securities and Investment Practices."
WHO MAY WANT TO INVEST
Each Fund currently offers two classes of shares, one of which, the
[Investment] shares (the "Shares"), are offered through this Prospectus. See
"Additional Information about the Funds."
The Funds are designed for investors who are willing to accept short-term
domestic and/or foreign stock market fluctuations in pursuit of potentially
high long-term returns. The Growth Fund invests for growth. The Growth and
Income Fund invests for growth and income.
Each Fund is not in itself a balanced investment plan. Investors should
consider their investment objective and tolerance for risk when making an
investment decision. When investors sell their Fund Shares, they may be worth
more or less than they originally paid for them.
EXPENSE SUMMARY
Annual operating expenses are paid out of the assets of each Fund. Each Fund
pays an investment advisory fee and an administrative services fee to Bankers
Trust. Each Fund incurs expenses such as maintaining shareholder records and
furnishing shareholder statements. Each Fund must provide financial reports.
The following table provides: (i) a summary of expenses relating to purchases
and sales of the Shares of each Fund and the estimated annual operating
expenses of the Fund as a percentage of average daily net assets of each Fund;
and (ii) an example illustrating the dollar cost of such expenses on a $1,000
investment in each Fund.
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Annual Operating Expenses
Growth Fund
.............................................................. .............
Investment advisory fee (after reimbursement or waiver) 0.10%
12b-1 fees 0
Other expenses (after reimbursements or waivers) 1.15
.............................................................. .............
Total operating expenses (after reimbursement or waivers) 1.25%
.............................................................. .............
Growth and Income Fund
.............................................................. .............
Investment advisory fee (after reimbursement or waiver) 0.10%
12b-1 fees 0
Other expenses (after reimbursements or waivers) 0.90
.............................................................. .............
Total operating expenses (after reimbursements or waivers) 1.00%
.............................................................. .............
Expense Table Example:
An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
Examples 1 Year 3 years
- ----------------------------------------------- ------------ -- ---------
Growth Fund $13 $40
Growth and Income Fund $10 $32
- ----------------------------------------------- ------------ -- ---------
The expense table and the example above show the costs and expenses that an
investor will bear directly or indirectly as a shareholder of a Fund. While
reimbursement of distribution expenses in amounts up to 0.20% of average net
assets are authorized to be made pursuant to the Plan of Distribution under Rule
12b-1 of the Investment Company Act of 1940, as amended (the "1940 Act"), it is
not expected that any payments will actually be made under that plan in the
foreseeable future. Bankers Trust has voluntarily agreed to waive a portion of
its investment advisory fee with respect to each Fund. Without such waiver, each
Fund's investment advisory fee would be equal to 0.65%. The expense table and
the example reflect a voluntary undertaking by Bankers Trust or Signature
Broker-Dealer Services, Inc. ("SBDS"), as the distributor (the "Distributor") of
the Shares of each Fund, to waive or reimburse expenses such that the total
operating expenses of each Fund (as a percentage of the Fund's average daily net
assets) will not exceed the following: Growth Fund -- 1.25% and Growth and
Income Fund -- 1.00%. In the absence of this undertaking, assuming total assets
of $25 million in each Fund, it is estimated that "Total Operating Expenses"
would be as follows: Growth Fund -- 1.80% and Growth and Income Fund -- 1.80%.
Other Expenses for each Fund are based on annualized estimates of expenses for a
one-year period. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
Moreover, while each example assumes a 5% annual return, actual performance will
vary and may result in a return greater or less than 5%.
12b-1 fees for each Fund include a shareholder service fee and a distribution
fee. Shareholder service fees are paid by a Fund to SBDS for providing personal
shareholder service and/or maintenance of shareholder accounts. Distribution
fees are paid by a Fund to SBDS for services and expenses in connection with the
distribution of the applicable Fund's shares. Long-term shareholders may pay
more than the economic equivalent of the maximum sales charges permitted by the
National Association of Securities Dealers, Inc. ("NASD"), due to 12b-1 fees.
For more information about each Fund's expenses see "Management of the Funds"
and "Net Asset Value."
<PAGE>5
THE FUNDS IN DETAIL
INVESTMENT OBJECTIVES AND POLICIES
Additional information about the investment policies of each Fund appears in
"Risk Factors and Certain Securities and Investment Practices" in this
Prospectus and in the Funds' SAI. There can be no assurance that the investment
objective of a Fund will be achieved.
The Growth Fund's investment objective is long-term capital growth. The Fund
seeks to achieve this objective through investment primarily in the equity
securities of companies with large market capitalizations, although a smaller
portion of the Fund may be held in smaller capitalized equities or non-U.S.
equities.
The Growth and Income Fund's investment objectives is capital growth and current
income. The Fund seeks to achieve this objective through investment primarily in
the equity securities of companies with large market capitalizations and in
various income producing securities, including, but not limited to, dividend
paying equity securities, corporate bonds, notes, convertible securities,
debentures and money market instruments, although a smaller portion of the Fund
may be held in smaller capitalized equities or non-U.S. equities.
Bankers Trust employs a flexible investment program in pursuit of each Fund's
investment objective. Each Fund is not restricted to investments in specific
market sectors. Each Fund may invest in any market sector and in companies of
any size and may take advantage of any investment opportunity with attractive
long-term prospects. The Adviser takes advantage of its market access and the
research available to it to select investments in promising growth companies
that are involved in new technologies, new products, foreign markets and special
developments, such as research discoveries, acquisitions, recapitalizations,
liquidations or management changes, and companies whose stock may be undervalued
by the market. These situations are only illustrative of the types of investment
each Fund may make. Each Fund is free to invest in any common stock which in the
Adviser's judgment provides above average potential for long-term growth of
capital and, with respect to Growth and Income Fund, income.
Each Fund will generally invest a majority of its assets in equity securities of
large-sized companies (companies with a market capitalization in excess of the
market capitalization of the smallest companies in the S&P500 index, but may
invest in securities of companies having various levels of market
capitalization, including smaller companies whose securities may be more
volatile and less liquid than securities issued by larger companies with higher
levels of net worth. Investments will be in companies in various industries.
Industry and company fundamentals along with key investment themes and various
quantitative screens will be used in the investment process. Criteria for
selection of individual securities include the issuer's competitive environment
and position, prospects for growth, managerial strength, earnings momentum and
quality, return momentum, corporate actions underlying asset value, relative
market value and overall marketability. Each Fund will follow a disciplined
selling process to lessen market risks.
Each Fund may also invest up to 25% of its assets in similar securities of
foreign issuers, primarily in developed markets. For further information on
foreign investments see "Risk Factors and Certain Securities and Investment
Practices -- Risks of Investing in Foreign Securities."
Other Investments and Investment Techniques. Each Fund may also utilize the
following investments and investment techniques and practices: short-sales,
short-term investments, options on stocks, options on stock indices, futures
contracts on stock indices, options on futures contracts, foreign currency
exchange transactions, options on foreign currencies, Rule 144A securities,
when-issued and delayed delivery securities, securities lending, repurchase
agreements and reverse repurchase agreements. See "Risk Factors and Certain
Securities and Investment Practices" in this Prospectus and in the SAI for
further information.
INVESTMENT PRINCIPLES AND RISKS
<PAGE>6
The value of each Fund's investments varies based on many factors.
Stock values fluctuate, sometimes dramatically, in response to the activities of
individual companies and general market and economic conditions. Over time,
however, stocks have shown greater long-term growth potential than other types
of securities.
Because many foreign investments are denominated in foreign currencies, changes
in the value of these currencies can significantly affect a Fund's share price.
General economic factors in the various world markets can also impact the value
of an investor's investment.
The value of bonds fluctuates based on changes in domestic or foreign interest
rates, the credit quality of the issuer, market conditions, and other economic
and political news. In general, bond prices rise when interest rates fall, and
vice versa. This effect is usually more pronounced for longer-term securities.
Lower-quality securities offer higher yields, but also carry more risk.
Bankers Trust may use various investment techniques to hedge a Fund's risks, but
there is no guarantee that these strategies will work as intended. When
investors sell their Shares, they may be worth more or less than what they
originally paid for them. See "Risk Factors and Certain Securities and
Investment Practices" for more information.
ADDITIONAL INVESTMENT LIMITATIONS
As a "diversified" fund, with respect to 75% of each Fund's total assets, no
more than 5% of the total assets of the Fund may be invested in the securities
of any one issuer (excluding cash and cash equivalents, U.S. Government
securities and the securities of other investment companies) and the Fund will
not own more than 10% of the voting securities of any issuer. The Fund will not
invest more than 25% of its assets in the securities of issuers in any one
industry. These are fundamental investment policies of the Fund which may not be
changed without shareholder approval. No more than 15% of the Fund's net assets
may be invested in illiquid or not readily marketable securities (including
repurchase agreements and time deposits with remaining maturities of more than
seven calendar days). Additional investment policies of the Fund are contained
in the Statement of Additional Information.
Each Fund's investment objective is not a fundamental policy and may be changed
upon 30 days prior written notice to but without the approval of the Fund's
shareholders. If there is a change in the Fund's investment objective, the
Fund's shareholders should consider whether the Fund remains an appropriate
investment in light of their then-current needs. See "Investment Restrictions"
in the Statement of Additional Information for a description of the additional
fundamental policies of the Fund that cannot be changed without approval by a
"vote of a majority of the outstanding voting securities" (as defined in the
1940 Act) of the Fund.
RISK FACTORS AND CERTAIN SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of instruments
in which the Funds may invest and strategies Bankers Trust may employ in pursuit
of each Fund's investment objective. A summary of risks and restrictions
associated with these instrument types and investment practices is included as
well.
Bankers Trust may not buy all of these instruments or use all of these
techniques to the full extent permitted unless it believes that doing so will
help a Fund achieve its goal. Holdings and recent investment strategies are
described in the financial reports of the Funds, which are sent to the Funds'
shareholders twice a year. For a free SAI or financial report, call a Service
Agent.
<PAGE>7
Risks of Investing in Foreign Securities
Investors should realize that investing in securities of foreign issuers
involves considerations not typically associated with investing in securities of
companies organized and operated in the United States. Investors should realize
that the value of a Fund's foreign investments may be adversely affected by
changes in political or social conditions, diplomatic relations, confiscatory
taxation, expropriation, nationalization, limitation on the removal of funds or
assets, or imposition of (or change in) exchange control or tax regulations in
foreign countries. In addition, changes in government administrations or
economic or monetary policies in the United States or abroad could result in
appreciation or depreciation of portfolio securities and could favorably or
unfavorably affect a Fund's operations. Furthermore, the economies of individual
foreign nations may differ from the U.S. economy, whether favorably or
unfavorably, in areas such as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position; it may also be more difficult to obtain and enforce a
judgment against a foreign issuer. In general, less information is publicly
available with respect to foreign issuers than is available with respect to U.S.
companies. Most foreign companies are also not subject to the uniform accounting
and financial reporting requirements applicable to issuers in the United States.
Any foreign investments made by a Fund must be made in compliance with U.S. and
foreign currency restrictions and tax laws restricting the amounts and types of
foreign investments.
Because foreign securities generally are denominated and pay dividends or
interest in foreign currencies, the value of the net assets of a Fund as
measured in U.S. dollars will be affected favorably or unfavorably by changes in
exchange rates. In order to protect against uncertainty in the level of future
foreign currency exchange rates, each Fund is also authorized to enter into
certain foreign currency exchange transactions. Furthermore, a Fund's foreign
investments may be less liquid and their prices may be more volatile than
comparable investments in securities of U.S. companies. The settlement periods
for foreign securities, which are often longer than those for securities of U.S.
issuers, may affect portfolio liquidity. Finally, there may be less government
supervision and regulation of securities exchanges, brokers and issuers in
foreign countries than in the United States.
Risks of Investing in Medium- and Small-Capitalization Stocks
The Funds may invest in smaller-sized and medium-sized growth-oriented common
stocks of domestic corporations and, to a limited extent, foreign corporations.
Historically, medium- and small-capitalization stocks have been more volatile in
price than the larger-capitalization stocks included in the S&P 500. Among the
reasons for the greater price volatility of these securities are the less
certain growth prospects of smaller firms, the lower degree of liquidity in the
markets for such stocks, and the greater sensitivity of medium- and small-size
companies to changing economic conditions. In addition to exhibiting greater
volatility, medium-and small-size company stocks may fluctuate independently of
larger company stocks and medium- and small-size companies may or may not have
the ability to pay dividends. Medium- and small-size company stocks may decline
in price as large company stocks rise, or rise in prices as large company stocks
decline.
Securities and Investment Practices
Equity Securities. As used herein, "equity securities" are defined as common
stock, preferred stock, trust or limited partnership interests, rights and
warrants to subscribe to or purchase such securities, sponsored or unsponsored
ADRs, EDRs and GDRs, and convertible securities, consisting of debt securities
or preferred stock that may be converted into common stock or that carry the
right to purchase common stock. Common stocks, the most familiar type, represent
an equity (ownership) interest in a corporation. Although equity securities have
a history of long-term growth in value, their prices fluctuate based on changes
in a company's financial condition and on overall market and economic
conditions. Smaller companies are especially sensitive to these factors.
Debt 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
<PAGE>8
face values. Debt securities, loans, and other direct debt have varying degrees
of quality and varying levels of sensitivity to changes in interest rates.
Longer-term bonds are generally more sensitive to interest rate changes than
short-term bonds. Bonds and other debt instruments may be rated by S&P and
Moody's although there is no minimum rating which debt securities must have (and
debt securities may not be rated) to be an eligible investment for a Fund.
Bankers Trust expects, however, that generally the debt securities in which a
Fund invests will be rated at least BBB by S&P or Baa by Moody's or, if unrated,
of comparable quality in the opinion of Bankers Trust.
Lower-quality foreign government securities are often considered to be
speculative and involve greater risk of default or price changes, or they may
already be in default. These risks are in addition to the general risks
associated with foreign securities.
Convertible Securities. A convertible security is a bond or preferred stock
which may be converted at a stated price within a specific period of time into a
specified number of shares of common stock of the same or different issuer.
Convertible securities are senior to common stock in a corporation's capital
structure, but usually are subordinated to non-convertible debt securities.
While providing a fixed income stream -- generally higher in yield than in the
income derived from a common stock but lower than that afforded by a
non-convertible debt security -- a convertible security also affords an investor
the opportunity, through its conversion feature, to participate in the capital
appreciation of common stock into which it is convertible.
In general, the market value of a convertible security is the higher of its
investment value (its value as a fixed income security or its conversion value
(the value of the underlying shares of common stock if the security is
converted). As a fixed income security, the market value of a convertible
security generally increases when interest rates decline and generally decrease
when interest rates rise; however, the price of a convertible security generally
increases as the market value of the underlying stock increases, and generally
decreases as the market value of the underlying stock declines. Investments in
convertible securities generally entail less risk than investments in the common
stock of the same issuer.
Preferred Stock. Preferred stock has a preference in liquidation (and,
generally, dividends) over common stock but is subordinated in liquidation to
debt. As a general rule the market value of preferred stocks with fixed dividend
rates and no conversion rights varies inversely with interest rates and
perceived credit risk, with the price determined by the dividend rate. Some
preferred stocks are convertible into other securities, for example common
stock, at a fixed price and ratio or upon the occurrence of certain events. The
market price of convertible preferred stocks generally reflects an element of
conversion value. Because many preferred stocks lack a fixed maturity date,
these securities generally fluctuate substantially in value when interest rates
change; such fluctuations often exceed those of long-term bonds of the same
issuer. Some preferred stocks pay an adjustable dividend that may be based on an
index, formula, auction procedure or other dividend rate reserve mechanism. In
the absence of credit deterioration, adjustable rate preferred stocks tend to
have more stable market value than fixed rate preferred stocks.
All preferred stocks are also subject to the same types of credit risks of the
issuer as corporate bonds. In addition, because preferred stock is junior to
debt securities and other obligations of an issuer, deterioration in the credit
rating of the issuer will cause greater changes in the value of a preferred
stock than in a more senior debt security with similar yield characteristics.
Preferred stocks may be rated by S&P and Moody's although there is no minimum
rating which a preferred stock must have (and a preferred stock may not be
rated) to be an eligible investment for a Fund. Bankers Trust expects, however,
that generally the preferred stocks in which a Fund invests will be rated at
least BBB by S&P or Baa by Moody's or, if unrated, of comparable quality in the
opinion of Bankers Trust. Preferred stocks rated CCC by S&P are regarded as
predominantly speculative with respect to the issuer's capacity to pay preferred
stock obligations and represent the highest degree of speculation among
securities rated between BB and CCC; preferred stocks rated Caa by Moody's are
likely to be in arrears on dividend payments. Moody's rating with respect to
preferred stocks does not purport to indicate the future status of payments of
dividends.
<PAGE>9
Warrants are instruments which entitle the holder to buy underlying equity
securities at a specific price for a specific period of time. A warrant tends to
be more volatile than its underlying securities and ceases to have value if it
is not exercised prior to its expiration date. In addition, changes in the value
of a warrant do not necessarily correspond to changes in the value of its
underlying securities.
U.S. Government Securities are high-quality debt securities issued or guaranteed
by the U.S. Treasury or by an agency or instrumentality of the U.S. government.
Not all U.S. government securities are backed by the full faith and credit of
the United States. For example, securities issued by the Federal Farm Credit
Bank or by the Federal National Mortgage Association are supported by the
instrumentality's right to borrow money from the U.S. Treasury under certain
circumstances. However, securities issued by other agencies or instrumentalities
are supported only by the credit of the entity that issued them.
ADRs, GDRs and EDRs are certificates evidencing ownership of shares of a
foreign-based issuer held in trust by a bank or similar financial institution.
Designed for use in U.S. and European securities markets, respectively, ADRs,
GDRs and EDRs are alternatives to the purchase of the underlying securities in
their national markets and currencies. ADRs, GDRs and EDRs are subject to the
same risks as the foreign securities to which they relate. See "Risk Factors and
Certain Securities and Investment Practices -- Risks of Investing in Foreign
Securities."
Rule 144A Securities are securities in the United States that are not registered
for sale under Federal securities laws but which can be resold to institutions
under the SEC's Rule 144A. Provided that a dealer or institutional trading
market in such securities exists, these restricted securities are treated as
exempt from the 15% limit on illiquid securities. Under the supervision of the
Board of Trustees of the Trust, Bankers Trust determines the liquidity of
restricted securities and, through reports from Bankers Trust, the Board will
monitor trading activity in restricted securities. Because Rule 144A is
relatively new, it is not possible to predict how these markets will develop. If
institutional trading in restricted securities were to decline, the liquidity of
a Fund could be adversely affected.
Short Sales. The Funds may from time to time sell securities short. A short sale
is a transaction in which a Fund sells securities it does not own (but has
borrowed) in anticipation of a decline in the market price of the securities.
Possible losses from short sales differ from losses that could be incurred from
a purchase of a security, because losses from short sales may be unlimited,
whereas losses from purchases can equal only the total amount invested.
When a Fund makes a short sale, the proceeds it receives from the sale are
retained by a broker until the Fund replaces the borrowed securities. To deliver
the securities to the buyer, the Fund must arrange through a broker to borrow
the securities and, in so doing, the Fund becomes obligated to replace the
securities borrowed at their market price at the time of replacement, whatever
that price may be. The Fund may have to pay a premium to borrow the securities
and must pay any dividends or interest payable on the securities until they are
replaced.
The Fund's obligation to replace the securities borrowed in connection with a
short sale will be secured by collateral deposited with the broker that consists
of cash or other liquid assets. In addition, the Fund will place in a segregated
account with its custodian an amount of cash or other liquid assets equal to the
difference, if any, between (1) the market value of the securities sold at the
time they were sold short and (2) any cash or other liquid assets deposited as
collateral with the broker in connection with the short sale (not including the
proceeds of the short sale). Until it replaces the borrowed securities, the Fund
will maintain the segregated account daily at a level so that (1) the amount
deposited in the account plus the amount deposited with the broker (not
including the proceeds from the short sale) will equal the current market value
of the securities sold short and (2) the amount deposited in the account plus
the amount deposited with the broker (not including the proceeds from the short
sale) will not be less than the market value of the securities at the time they
were sold short.
Short Sales Against the Box. The Funds may, in addition to engaging in short
sales as described above, enter into short sales of securities such that when
the short position is open the Fund owns an equal amount of the securities sold
short or preferred stocks or debt securities, convertible or exchangeable,
without payment of further consideration, into an equal number of securities
sold short. This kind of short sale, which is described as one
<PAGE>10
"against the box," will be entered into by the Fund for the purpose of receiving
a portion of the interest earned by the executing broker from the proceeds of
the sale. The proceeds of the sale will be held by the broker until the
settlement date when the Fund delivers securities to close out its short
position. Although prior to delivery the Fund will have to pay an amount equal
to any dividends paid on the securities sold short, the Fund will receive the
dividends from the preferred stock or interest from the debt securities
convertible or exchangeable into the securities sold short, plus a portion of
the interest earned from the proceeds of the short sale. The Fund will deposit,
in a segregated account with its custodian, the securities sold short or
convertible or exchangeable preferred stocks or debt securities in connection
with short sales against the box.
When Issued and Delayed Delivery Securities. Each Fund may purchase securities
on a when-issued or delayed delivery basis. Delivery of and payment for these
securities may take place as long as a month or more after the date of the
purchase commitment. The value of these securities is subject to market
fluctuation during this period and no income accrues to the Fund until
settlement takes place. The Fund maintains with the Custodian a segregated
account containing high grade liquid securities in an amount at least equal to
these commitments.
Repurchase Agreements. In a repurchase agreement, a Fund buys a security at one
price and simultaneously agrees to sell it back at a higher price. Delays or
losses could result if the other party to the agreement defaults or becomes
insolvent.
Reverse Repurchase Agreements. In a reverse repurchase agreement, a Fund
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 assets. A reverse repurchase agreement is a form
of borrowing and will be counted towards each Fund's borrowing restrictions. See
"Risk Factors and Certain Securities and Investment Practices - Leverage."
Investment Companies. With respect to certain countries in which capital markets
are either less developed or not easily accessed, investments by a Fund may be
made through investment in other registered investment companies that in turn
are authorized to invest in the securities of such countries. Investment in
other investment companies is limited in amount by the 1940 Act, will involve
the indirect payment of a portion of the expenses, including advisory fees, of
such other investment companies and may result in a duplication of fees and
expenses.
Short-Term Investments. Each Fund intends to stay invested in the securities
described above to the extent practical in light of its objective and long-term
investment perspective. However, a Fund's assets may be invested in high quality
short-term investments to meet anticipated redemptions and expenses for
day-to-day operating purposes and when, in Bankers Trust's opinion, it is
advisable to adopt a temporary defensive position because of unusual and adverse
conditions affecting the respective markets.
Securities Lending. Each Fund is permitted to lend up to 30% of the total value
of its securities. These loans must be secured continuously by cash or
equivalent collateral or by a letter of credit at least equal to the market
value of the securities loaned plus accrued income. By lending its securities,
the Fund can increase its income by continuing to receive income on the loaned
securities as well as by the opportunity to receive interest on the collateral.
Any gain or loss in the market price of the borrowed securities which occurs
during the term of the loan inures to the Fund and its investors. In lending
securities to brokers, dealers and other financial organizations, a Fund is
subject to risks, which like those associated with other extensions of credit,
include delays in recovery and possible loss of rights in the collateral should
the borrower fail financially.
Leverage. Each fund may borrow up to one-third of the value of its total assets,
from banks or through the use of reverse repurchase agreements, to increase its
holdings of portfolio securities. Under the 1940 Act, each Fund 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 liquidations of a Fund's holdings may be disadvantageous
from an investment standpoint.
<PAGE>11
Leveraging by means of borrowing may exaggerate the effect of any increase or
decrease in the value of each Fund's securities and the Fund's net asset value
and money borrowed by a Fund will be subject to interest and other costs (which
may include commitment fees and/or the cost of maintaining minimum average
balances) which may or may not exceed the income received from the securities
purchased with borrowed funds.
Derivatives. Each Fund may invest in various instruments that are commonly
known as derivatives. Generally, a derivative is a financial arrangement, the
value of which is based on, or "derived" from, a traditional security, asset
or market index. Some "derivatives" such as mortgage-related and other
asset-backed securities are in many respects like any other investment,
although they may be more volatile or less liquid than more traditional debt
securities. There are, in fact, many different types of derivatives and many
different ways to use them. There are a range of risks associated with those
uses. A Fund may use futures and options for traditional hedging purposes to
attempt to protect the Fund from exposure to changing interest rates,
securities prices, or currency exchange rates and as a low cost method of
gaining exposure to a particular securities market without investing directly
in those securities. The use of derivatives may result in some leverage.
Leverage involves the use of a small amount of money to control a larger
amount of financial assets and can, in some circumstances, lead to significant
losses. A Fund will limit the leverage created by its use of derivatives for
investment purposes by segregating liquid assets or "covering" the Fund's risk
exposure with holdings that largely offset that risk, as required by the
Securities and Exchange Commission. Bankers Trust will use derivatives only
in circumstances where they offer the most efficient means of improving the
risk/reward profile of a Fund. The use of derivatives for non-hedging purposes
may be considered speculative.
Foreign Currency Exchange Transactions. Each Fund may enter into foreign
currency exchange transactions to convert to and from different foreign
currencies and to convert foreign currencies to and from the U.S. dollar. A Fund
either enters into these transactions on a spot (i.e., cash) basis at the spot
rate prevailing in the foreign currency exchange market or uses forward
contracts to purchase or sell foreign currencies.
A forward foreign currency exchange contract is an obligation by a Fund to
purchase or to sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract. Forward foreign currency exchange
contracts establish an exchange rate at a future date. These contracts are
transferable in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. A forward foreign currency
exchange contract generally has no deposit requirement and is traded at a net
price without commission. Neither spot transactions nor forward foreign currency
exchange contracts eliminate fluctuations in the prices of a Fund's securities
or in foreign exchange rates, or prevent loss if the prices of these securities
should decline.
A Fund may enter into foreign currency hedging transactions in an attempt to
protect against changes in foreign currency exchange rates between the trade and
settlement dates of specific securities transactions or changes in foreign
currency exchange rates that would adversely affect a Fund position or an
anticipated investment position. Although these transactions tend to minimize
the risk of loss due to a decline in the value of the hedged currency, at the
same time they tend to limit any potential gain that might be realized should
the value of the hedged currency increase. The precise matching of the forward
contract amounts and the value of the securities involved will not generally be
possible because the future value of such securities in foreign currencies will
change as a consequence of market movements in the value of such securities
between the date the forward contract is entered into and the date it matures.
The projection of currency market movements is extremely difficult, and the
successful execution of a hedging strategy is highly uncertain.
Options on Foreign Currencies. Each Fund may write covered put and call options
and purchase put and call options on foreign currencies for the purpose of
protecting against declines in the U.S. dollar value of Fund securities and
against increases in the U.S. dollar cost of securities to be acquired. Each
Fund may use options on currency to cross-hedge, which involves writing or
purchasing options on one currency to hedge against changes in exchange rates
for a different, but related, currency. As with other types of options, however,
the writing of an option on foreign currency will constitute only a partial
hedge up to the amount of the premium received, and the Fund could be required
to purchase or sell foreign currencies at disadvantageous exchange rates,
thereby incurring losses. The purchase of an option on foreign currency may be
used to hedge against fluctuations in exchange rates
<PAGE>12
although, in the event of exchange rate movements adverse to a Fund's position,
it may forfeit the entire amount of the premium plus related transaction costs.
In addition, a Fund may purchase call options on a currency when the investment
adviser anticipates that the currency will appreciate in value.
There is no assurance that a liquid secondary market on an options exchange will
exist for any particular option, or at any particular time. If a Fund is unable
to effect a closing purchase transaction with respect to covered options it has
written, the Fund will not be able to sell the underlying currency or dispose of
assets held in a segregated account until it closes out the options or the
options expire or are exercised. Similarly, if the Fund is unable to close out
options it has purchased, it would have to exercise the options in order to
realize any profit and will incur transaction costs. The Fund pays brokerage
commissions or spreads in connection with its options transactions.
Options on Stocks. Each Fund may write and purchase options on stocks. A call
option gives the purchaser of the option the right to buy, and obligates the
writer to sell, the underlying stock at the exercise price at any time during
the option period. Similarly, a put option gives the purchaser of the option the
right to sell, and obligates the writer to buy the underlying stock at the
exercise price at any time during the option period. A covered call option with
respect to which a Fund owns the underlying stock sold by the Fund exposes the
Fund during the term of the option to possible loss of opportunity to realize
appreciation in the market price of the underlying stock or to possible
continued holding of a stock which might otherwise have been sold to protect
against depreciation in the market price of the stock. A covered put option sold
by a Fund exposes the Fund during the term of the option to a decline in price
of the underlying stock.
Options on Securities Indices. Each Fund may purchase and write put and call
options on stock or bond indices listed on domestic and foreign stock exchanges,
in lieu of direct investment in the underlying securities or for hedging
purposes. A stock or bond index fluctuates with changes in the market values of
the securities included in the index.
Options on securities indices are generally similar to options on stocks except
that the delivery requirements are different. Instead of giving the right to
take or make delivery of securities at a specified price, an option on a stock
or bond index gives the holders the right to receive a cash "exercise settlement
amount" equal to (a) the amount, if any, by which the fixed exercise price of
the option exceeds (in the case of a put) or is less than (in the case of a
call) the closing value of the underlying index on the date of the exercise,
multiplied by (b) a fixed "index multiplier."
Successful use by a Fund of options on security indices will be subject to
Bankers Trust's ability to predict correctly movement in the direction of the
security market generally or of a particular industry. This requires different
skills and techniques than predicting changes in the price of individual
securities.
Futures Contracts on Securities Indices. A Fund may enter into contracts
providing for the making and acceptance of cash settlement based upon changes in
the value of an index of domestic or foreign securities ("Futures Contracts").
This investment technique may be used as a low-cost method of gaining exposure
to a particular securities market without investing directly in those securities
or to hedge against anticipated future changes in general market prices which
otherwise might either adversely affect the value of securities held by the Fund
or adversely affect the prices of securities which are intended to be purchased
at a later date for the Fund. A Futures Contract may also be entered into to
close out or offset an existing futures position.
When used for hedging purposes, each transaction in Futures Contracts involves
the establishment of a position which will move in a direction opposite to that
of the investment being hedged. If these hedging transactions are successful,
the futures position taken for the Fund will rise in value by an amount which
approximately offsets the decline in value of the portion of the Fund's
investments that is being hedged. Should general market prices move in an
unexpected manner, the future anticipated benefits of Futures Contracts may not
be achieved or a loss may be realized.
The risks of Futures Contracts also include a potential lack of liquidity in the
secondary market and incorrect assessments of the market.
<PAGE>13
Brokerage costs will be incurred and "margin" will be required to be posted and
maintained as a good faith deposit against performance of obligations under
Futures Contracts written for a Fund. A Fund may not purchase or sell a Futures
Contract if immediately thereafter its margin deposits on its outstanding
Futures Contracts, other than Futures Contracts used for hedging purposes, would
exceed 5% of the market value of the Fund's total assets.
Options on Futures Contracts. Each Fund may invest in options on futures
contracts for similar purposes.
There can be no assurance that the use of these Fund strategies will be
successful.
Asset Coverage. To assure that a Fund's use of futures and related options, as
well as when-issued and delayed-delivery securities and foreign currency
exchange transactions, are not used to achieve investment leverage, a Fund will
cover such transactions, as required under applicable interpretations of the
SEC, either by owning the underlying securities, entering into an off-setting
transaction, or by establishing a segregated account with the Fund's custodian
containing high grade liquid securities in an amount at all times equal to or
exceeding the Fund's commitment with respect to the instruments or contracts.
Portfolio Turnover
A Fund will attempt to purchase securities with the intent of holding them for
investment but may purchase and sell portfolio securities whenever Bankers Trust
believes it to be in the best interests of the relevant Fund. The Funds will not
consider portfolio turnover rate a limiting factor in making investment
decisions consistent with their investment objectives and policies. It is not
possible to predict the Funds' turnover rate. However, it is anticipated that
each Fund's annual turnover rate should not exceed 50%. High portfolio turnover
rates (100% or more) may result in dealer markups or underwriting commissions as
well as other transaction costs, including correspondingly higher brokerage
commissions. In addition, short-term gains realized from portfolio turnover may
be taxable to shareholders as ordinary income. See "Dividends, Capital Gains and
Taxes."
PERFORMANCE
Each Fund's recent strategies and holdings, and performance, is detailed twice a
year in the Funds' financial reports, which are sent to all Fund shareholders.
For current Fund performance or a free copy of the Funds' financial report,
please contact a Service Agent.
Mutual fund performance is commonly measured as total return. Each Fund's
performance is affected by the expenses of that Fund.
Explanation of Terms
Total return is the change in value of an investment in a Fund over a given
period, assuming reinvestment of any dividends and capital gains. A cumulative
total return reflects actual performance of a stated period of time. An average
annual total return is a hypothetical rate of return that, if achieved annually,
would have produced the same cumulative total return if performance had been
constant over the entire period. Average annual total return calculations smooth
out variations in performance; they are not the same as actual year-by-year
results. Average annual total returns covering periods of less than one year
assume that performance will remain constant for the rest of the year.
Unlike some bank deposits or other investments which pay a fixed yield for a
stated period of time, the total return of a Fund will vary depending upon
interest rates, the current market value of the securities held by the Fund and
changes in the expenses of the Fund. In addition, during certain periods for
which total return may be provided, Bankers Trust or SBDS may have voluntarily
agreed to waive portions of their fees, or reimburse certain operating expenses
of a Fund, on a month-to-month basis. Such waivers will have the effect of
increasing the Fund's net income (and therefore its total return) during the
period such waivers are in effect.
Performance information may include comparisons of a Fund's investment results
to various unmanaged indices or results of other mutual funds or investment or
savings vehicles. From time to time, Fund rankings may be quoted from various
sources such as Lipper Analytical Services, Inc., Value Line and Morningstar,
Inc.
<PAGE>14
MANAGEMENT OF THE FUNDS
Trustees and Officers
The officers of the Trust manage each Fund's day-to-day operations and are
directly responsible to the Board. The Board sets broad policies for each Fund
and chooses the Trust's officers. A list of the Trustees and officers and a
brief statement of their present positions and principal occupations during the
past five years is set forth in the Statement of Additional Information.
Investment Adviser
Each Fund has retained the services of Bankers Trust as investment adviser (the
"Adviser").
Bankers Trust Company and Its Affiliates
Bankers Trust Company, a New York banking corporation with principal offices at
130 Liberty Street, New York, New York 10006, is a wholly owned subsidiary of
Bankers Trust New York Corporation. Bankers Trust conducts a variety of general
banking and trust activities and is a major wholesale supplier of financial
services to the international and domestic institutional market.
As of March 31, 1996, Bankers Trust New York Corporation was the eighth
largest bank holding company in the United States with total assets of
approximately $108 billion. Bankers Trust is a worldwide merchant bank
dedicated to serving the needs of corporations, government, financial
institutions and private clients through a global network of over 120 offices
in more than 40 countries. Investment management is a core business of
Bankers Trust, built in a tradition of excellence from its roots as a trust
bank founded in 1903. The scope of Bankers Trust's investment management
capability is unique due to its leadership positions in both active and
passive quantitative management and its presence in major equity and fixed
income markets around the world. Bankers Trust is one of the nation's largest
and most experienced investment managers with approximately $200 billion in
assets under management globally.
Bankers Trust has more than 50 years of experience managing retirement assets
for the nation's largest corporations and institutions. In the past, these
clients have been serviced through separate account and commingled fund
structures. Now the BT Family of Funds brings Bankers Trust's extensive
investment management expertise -- once available to only the largest
institutions in the U.S. -- to individual investors. Bankers Trust's officers
have had extensive experience in managing investment portfolios having
objectives similar to those of each Fund.
Bankers Trust, subject to the supervision and direction of the Board of Trustees
of the Trust, manages each Fund in accordance with the Fund's investment
objective and stated investment policies, makes investment decisions for the
Fund, places orders to purchase and sell securities and other financial
instruments on behalf of the Fund and employs professional investment managers
and securities analysts who provide research services to the Fund. Bankers Trust
may utilize the expertise of any of its world wide subsidiaries and affiliates
to assist it in its role as investment adviser. All orders for investment
transitions on behalf of a Fund are placed by Bankers Trust with broker-dealers
and other financial intermediaries that it selects, including those affiliated
with Bankers Trust. A Bankers Trust affiliate will be used in connection with a
purchase or sale of an investment for the Fund only if Bankers Trust believes
that the affiliate's charge for the transaction does not exceed usual and
customary levels. The Fund will not invest in obligations for which Bankers
Trust or any of its affiliates is the ultimate obligor or accepting bank. The
Fund may, however, invest in the obligations of correspondents and customers of
Bankers Trust.
The Investment Advisory Agreement provides for each Fund to pay Bankers Trust a
fee, accrued daily and paid monthly, equal on an annual basis to the following
percentages of the average daily net assets of the Fund for its then-current
fiscal year: Growth Fund, 0.65% and Growth and Income Fund, 0.65%.
<PAGE>15
Bankers Trust has been advised by its counsel that, in counsel's opinion,
Bankers Trust currently may perform the services for the Trust and the Funds
described in this Prospectus and SAI without violation of the Glass-Steagall Act
or other applicable banking laws or regulations. State laws on this issue may
differ from the interpretations of relevant Federal law, and banks and financial
institutions may be required to register as dealers pursuant to state securities
law.
Portfolio Managers
Mr. James F. Giblin (CFA), Vice President of Bankers Trust, is responsible for
the day-to-day management of the Growth Fund. Mr. Giblin has been head of the
U.S. large capitalization equity group of Bankers Trust's Global Investment
Management business since June 1995. Prior to joining Bankers Trust, Mr. Giblin
was a senior vice president and senior portfolio manager at Putnam Investments
(from May, 1993 until April, 1995). From November, 1977 to April, 1993, Mr.
Giblin was employed by CIGNA Investments in various capacities, including as
head of CIGNA Equity Advisors and as a managing director and portfolio manager
responsible for CIGNA's insurance accounts and mutual funds.
Mr. Sidney F. Hoots, Managing Director of Bankers Trust, is responsible for
the day-to-day management of the Growth and Income Fund. Mr. Hoots manages
the quantitative domestic equity research group of Bankers Trust's Global
Investment Management business and has been with Bankers Trust since 1983.
Bankers Trust personnel may invest in securities for their own account pursuant
to a code of ethics that establishes procedures for personal investing and
restricts certain transactions.
ADMINISTRATOR
Under its Administration and Services Agreement with the Trust, Bankers Trust
calculates the net asset value of each Fund and generally assists the Board of
Trustees of the Trust in all aspects of the administration and operation of the
Funds. The Administration and Services Agreement provides for the Trust to pay
Bankers Trust a fee, accrued daily and paid monthly, equal on an annual basis to
the following percentages of the average daily net assets of the Fund for its
then-current fiscal year: Growth Fund, 0.65% and Growth and Income Fund, 0.65%.
Under the Administration and Services Agreement, Bankers Trust may delegate one
or more of its responsibilities to others, including SBDS, at Bankers Trust's
expense.
DISTRIBUTOR
Under its Distribution Agreement with the Trust, SBDS, as Distributor, serves as
the Trust's principal underwriter on a best efforts basis. In addition, SBDS
provides the Trust with office facilities. SBDS is a wholly owned subsidiary of
Signature Financial Group, Inc. ("SFG"). SFG and its affiliates currently
provide administration and distribution services for other registered investment
companies. The principal business address of SFG and SBDS is 6 St. James Avenue,
Boston, Massachusetts 02116.
DISTRIBUTION AND SERVICE PLAN
Pursuant to the terms of the Trust's Plan of Distribution pursuant to Rule 12b-1
under the 1940 Act (the "Plan"), each Fund shall pay SBDS an amount not
exceeding 0.20% of each Fund's average daily net assets annually for expenses
incurred in connection with any activities primarily intended to result in the
sale of the Fund's shares, including, but not limited to: compensation to and
expenses (including overhead and telephone expenses) of account executives or
other employees of SBDS who, as their primary activity, engage in or support the
distribution of shares; printing of prospectuses, statements of additional
information and reports for other than existing Fund shareholders in amounts in
excess of that typically used in connection with the distribution of shares of
the Fund; costs of placing advertising in various media; services of parties
other than SBDS or its affiliates in formulating sales literature; and
typesetting, printing and distribution of sales literature. All costs and
expenses in connection with implementing and operating the Plan will be paid by
each Fund, subject to the 0.20% of net assets limitation. All costs and expenses
associated with preparing the Prospectuses and SAI and in connection with
printing them for and distributing them to existing shareholders and regulatory
authorities, which costs and expenses would not be considered distribution
expenses for purposes of the Plan, will also be paid by the Funds. To the extent
<PAGE>16
expenses of SBDS under the Plan in any fiscal year of the Trust exceed amounts
payable under the Plan during that year, those expenses may be reimbursed in a
succeeding fiscal year; however, no carrying charge or interest will be added to
the amount of the expense. Expenses incurred in connection with distribution
activities will be identified to each Fund or the other series of the Trust
involved, although it is anticipated that some activities may be conducted on a
Trust-wide basis, with the result that those activities will not be identifiable
to any particular series. In the latter case, expenses will be allocated among
the series of the Trust on the basis of their relative net assets.
SERVICE AGENT
All shareholders must be represented by a Service Agent. Bankers Trust acts as a
Service Agent pursuant to its Administration and Services Agreement with the
Trust and receives no additional compensation from the Funds for such
shareholder services. The service fees of any other Service Agents, including
broker-dealers, will be paid by Bankers Trust from its fees. The services
provided by a Service Agent may include establishing and maintaining shareholder
accounts, processing purchase and redemption transactions, arranging for bank
wires, performing shareholder sub-accounting, answering client inquiries
regarding the Trust, assisting clients in changing dividend options, account
designations and addresses, providing periodic statements showing the client's
account balance, transmitting proxy statements, periodic reports, updated
prospectuses and other communications to shareholders and, with respect to
meetings of shareholders, collecting, tabulating and forwarding to the Trust
executed proxies and obtaining such other information and performing such other
services as the Administrator or the Service Agent's clients may reasonably
request and agree upon with the Service Agent. Service Agents may separately
charge their clients additional fees only to cover provision of additional or
more comprehensive services not already provided under the Administration and
Services Agreement with Bankers Trust, or of the type or scope not generally
offered by a mutual fund, such as cash management services or enhanced
retirement or trust reporting. Each Service Agent has agreed to transmit to
shareholders, who are its customers, appropriate disclosures of any fees that it
may charge them directly.
NET ASSET VALUE
The net asset value per share of each Fund is calculated on each day on which
the New York Stock Exchange Inc. (the "NYSE") is open (each such day being a
"Valuation Day"). The NYSE is currently open on each day, Monday through Friday,
except: (a) January 1st, Presidents' Day (the third Monday in February), Good
Friday, Memorial Day (the last Monday in May), July 4th, Labor Day (the first
Monday in September), Thanksgiving Day (the last Thursday in November) and
December 25th; and (b) the preceding Friday or the subsequent Monday when one of
the calendar-determined holidays falls on a Saturday or Sunday, respectively.
The net asset value per share of each Fund is calculated once on each Valuation
Day as of the close of regular trading on the NYSE (the "Valuation Time"), which
is currently 4:00 p.m., New York time or in the event that the NYSE closes
early, at the time of such early closing. The net asset value per share of the
Fund is computed by dividing the value of the Fund's Assets (i.e., the value of
its investment in the Fund and other assets), less all liabilities, by the total
number of its shares outstanding. The Fund's securities and other assets are
valued primarily on the basis of market quotations or, if quotations are not
readily available, by a method which the Trust's Board of Trustees believes
accurately reflects fair value.
Under procedures adopted by the Board, a net asset value for a Fund later
determined to have been inaccurate for any reason will be recalculated.
Purchases and redemptions made at a net asset value determined to have been
inaccurate will be adjusted, although in certain circumstances, such as where
the difference between the original net asset value and the recalculated net
asset value divided by the recalculated net asset value is 0.005% (1/2 of 1%) or
less or shareholder transactions are otherwise insubstantially affected, further
action is not required.
<PAGE>17
PURCHASE AND REDEMPTION OF SHARES
PURCHASE OF SHARES
The Trust accepts purchase orders for shares of each Fund at the net asset value
per share of the Fund next determined on each Valuation Day. See "Net Asset
Value" above. There is no sales charge on the purchase of shares, but costs of
distributing shares of each Fund may be reimbursed from its assets, as described
herein. Service Agents may impose initial and subsequent investment minimums
that differ from the amounts presented in the "Minimum Investments" table below.
Shares of each Fund may be purchased in only those states where they may be
lawfully sold.
Purchase orders for shares of each Fund that are received by a Service Agent and
transmitted to Bankers Trust, as the Trust's transfer agent (the "Transfer
Agent"), prior to the Valuation Time (currently 4:00 p.m., New York time or
earlier should the NYSE close earlier) on any Valuation Day will be effective at
that day's Valuation Time. Each Trust and SBDS reserves the right to reject any
purchase order.
Shares must be purchased in accordance with procedures established by the
Transfer Agent and Service Agents, including Bankers Trust, in connection with
customers' accounts. It is the responsibility of each Service Agent to transmit
to the Transfer Agent purchase and redemption orders and to transmit to Bankers
Trust as each Fund's custodian (the "Custodian") purchase payments on behalf of
its customers by the following business day (trade date +1) after an order for
shares is placed, and a shareholder must settle with the Service Agent his or
her entitlement to an effective purchase or redemption order as of a particular
time. Because Bankers Trust is the Custodian and Transfer Agent of the Trust,
funds may be transferred directly from or to a customer's account with Bankers
Trust to or from a Fund without incurring the additional costs or delays
associated with the wiring of Federal Funds.
Certificates for shares will not be issued. Each shareholder's account will be
maintained by a Service Agent or the Transfer Agent.
Automatic Investment Plan. Each Fund may offer shareholders an automatic
investment plan under which shareholders may authorize some Service Agents to
place a purchase order each month or quarter for Fund shares. For further
information regarding the automatic investment plan, shareholders should contact
their Service Agent.
MINIMUM INVESTMENTS
To Open An Account $2,500
For retirement accounts $ 500
Through automatic investment plans $1,000
To Add to An Account $ 250
For retirement accounts $ 100
Through automatic investment plans $ 100
Minimum Balance $1,000
For retirement accounts None
REDEMPTION OF SHARES
Shareholders may redeem shares at the net asset value per share next determined
on each Valuation Day. Redemption requests should be transmitted by customers in
accordance with procedures established by the Transfer Agent and the
shareholder's Service Agent. Redemption requests for shares of each Fund
received by the Service Agent and transmitted to the Transfer Agent prior to the
Valuation Time (currently 4:00 p.m., New York time or earlier should the NYSE
close earlier) on each Valuation Day will be effective at that day's Valuation
Time and the
<PAGE>18
redemption proceeds normally will be delivered to the shareholder's account with
the Service Agent on the next day, but in any event within seven calendar days
following receipt of the request.
Service Agents may allow redemptions or exchanges by telephone and may also
disclaim liability for following instructions communicated by telephone that the
Service Agent reasonably believes to be genuine. The Service Agent must provide
the investor with an opportunity to choose whether or not to utilize the
telephone redemption or exchange privilege. The Service Agent must employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine. If the Service Agent does not do so, it may be liable for any losses
due to unauthorized or fraudulent instructions. Such procedures may include,
among others, requiring some form of personal identification prior to acting
upon instructions received by telephone, providing written confirmation of such
transactions and/or tape recording of telephone instructions.
Redemption orders are processed without charge by the Trust. A Service Agent may
on at least 30 days' notice involuntarily redeem a shareholder's account with
the Fund having a balance below the minimum (as shown above), but not if an
account is below the minimum balance due to a change in market value. See
"Minimum Investments" above for minimum balance amounts.
Automatic Cash Withdrawal Plan. Service Agents may offer shareholders an
automatic cash withdrawal plan, under which shareholders who own shares of a
Fund may elect to receive periodic cash payments. Retirement plan accounts are
eligible for automatic cash withdrawal plans only where the shareholder is
eligible to receive qualified distributions. For further information regarding
the automatic cash withdrawal plan, shareholders should contact their Service
Agent.
EXCHANGE PRIVILEGE
Shareholders may exchange their shares of certain other funds in the BT Family
of Funds registered in their state. The Trust reserves the right to terminate or
modify the exchange privilege in the future with respect to any Fund. To make an
exchange, follow the procedures indicated in "Purchase Shares" and "Redemption
of Shares" in that fund's prospectus. Before making an exchange, please note the
following:
- Call your Service Agent for information and a prospectus. Read the
prospectus for relevant information.
- Complete and sign an application, taking care to register your new account
in the same name, address and taxpayer identification number as your
existing account(s).
- Each exchange represents the sale of shares of one fund and the purchase
of shares of another, which may produce a gain or loss for tax purposes.
Your Service Agent will send a written confirmation of each exchange
transaction.
TAX-SAVING RETIREMENT PLANS
Retirement plans offer significant tax savings and are available to individuals,
partnerships, small businesses, corporations, nonprofit organizations and other
institutions. Contact your Service Agent or Bankers Trust for further
information. Bankers Trust can set up your new account in a Fund under a number
of several tax-sheltered plans. These plans contain special tax advantages and
let you invest for retirement while sheltering your investment income from
current taxes. Minimums may differ from those listed elsewhere in the
Prospectus.
- Individual Retirement Accounts (IRAs): personal savings plans that
offer tax advantages for individuals to set aside money for retirement and
allow new contributions of $2,000 per tax year.
- Rollover IRAs: tax-deferred retirement accounts that retain the special
tax advantages of lump sum distributions from qualified retirement plans
and transferred IRA accounts.
<PAGE>19
- Simplified Employee Pension Plans (SEP): a relatively easy and inexpensive
alternative to retirement planning for sole proprietors, partnerships and
corporations. Under a SEP, employers make tax-deductible contributions to
their own and to eligible employees' IRA accounts. Employee contributions
are available though a "Salary Deferral" SEP for businesses with fewer than
25 eligible employees.
- Keogh Plans: defined contribution plans available to individuals with
self-employed income and nonincorporated businesses such as sole
proprietors, professionals and partnerships. Contributions are
tax-deductible to the employer and earnings are tax-sheltered until
distribution.
- Corporate Profit-Sharing and Money-Purchase Plans: defined contribution
plans available to corporations to benefit their employees by making
contributions on their behalf and in some cases permitting their
employees to make contributions.
- 401(k) Programs: defined contribution plans available to corporations
allowing tax-deductible employer contributions and permitting employees
to contribute a percentage of their wages on a tax-deferred basis.
- 403(b) Custodian Accounts: defined contribution plans open to employees
of most nonprofit organizations and educational institutions.
- Deferred Benefit Plans: plan sponsors may invest all or part of their
pension assets in the Fund.
<PAGE>20
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
Each Fund distributes substantially all of its net investment income and capital
gains to shareholders each year. Each Fund distributes capital gains annually.
The Growth Fund distributes dividends annually. The Growth and Income Fund
distributes dividends quarterly. Unless a shareholder instructs the Trust to pay
such dividends and distributions in cash, they will be automatically reinvested
in additional shares of the Fund. When each of the Funds deducts a distribution
from its NAV, the reinvestment price is the applicable Fund's NAV at the close
of business that day. Distribution checks will be mailed within seven days, or
longer for a December ex-dividend date.
Federal Taxes. Each Fund intends to qualify as a regulated investment company,
as defined in the Internal Revenue Code of 1986, as amended (the "Code").
Provided each Fund meets the requirements imposed by the Code and distributes
all of its income and gains, a Fund will not pay any Federal income or excise
taxes.
Distributions from each Fund's income and short-term capital gains are taxed as
dividends, and long-term capital gain distributions are taxed as long-term
capital gains. Each Fund's capital gain distributions are taxable when they are
paid, whether you take them in cash or reinvest them in additional shares.
Distributions declared to shareholders of record in November and December and
paid in January are taxable as if paid on December 31. Each Fund will send each
shareholder a tax statement by January 31 showing the tax status of the
distributions received in the past year.
For Retirement Accounts, if distributions for any taxable year following the
year in which the participant reaches age 70 1/2 are less than the "minimum
required distribution" for that taxable year, an excise tax may be imposed by
the Internal Revenue Service (the "IRS"). The administrator, trustee or
custodian of such a retirement account will be responsible for reporting
distributions from such accounts to the IRS.
Capital Gains. You may realize a capital gain or loss when you redeem (sell) or
exchange shares. Because the tax treatment also depends on your purchase price
and your personal tax position, you should keep your regular account statements
to use in determining your tax.
"Buying a Dividend." On the ex-date for a distribution from capital gains, each
Fund's share value is reduced by the amount of the distribution. If you buy
shares just before the ex-date ("buying a dividend"), you will pay the full
price for the shares and then receive a portion of the price back as a taxable
distribution.
Other Tax Information. You may be subject to state or local taxes on your
investment, depending on the laws in your area. You should consult with your own
tax adviser concerning the application of Federal, state and local taxes to your
distributions from each Fund.
ADDITIONAL INFORMATION ABOUT THE FUNDS
A mutual fund is an investment vehicle that pools shareholders' money and
invests it toward a specified goal. Each Fund is a separate diversified series
of BT Advisor Funds, a Massachusetts business trust, an open-end, diversified
management investment company consisting of twelve funds, with an unlimited
number of authorized shares of beneficial interest which may be divided without
shareholder approval into additional classes of shares having such preferences
and special or relative rights and privileges as the Board of Trustees
determines. The Growth Fund and the Growth and Income Fund are each divided into
two classes. Only the Investment Shares of each Fund are offered by this
prospectus. Each Fund also offers another class of shares, which may have a
sales charge and
<PAGE>21
different expenses. Because of these differences, the investment performance of
the classes may vary. For more information, including your eligibility to
purchase the other class of shares, contact a Service Agent or call Bankers
Trust at (800) 730-1313. The Trust reserves the right to add additional series
in the future. The Trust also reserves the right to issue more than one class of
shares of each Fund.
The Trust may hold special meetings and mail proxy materials. These meetings may
be called to elect or remove trustees, change fundamental policies, approve a
Fund's investment advisory agreement, or for other purposes. Shareholders not
attending these meetings are encouraged to vote by proxy. The Trust's Transfer
Agent will mail proxy materials in advance, including a voting card and
information about the proposals to be voted on.
When matters are submitted for shareholder vote, shareholders of each Fund will
have one vote for each full share held and proportionate, fractional votes for
fractional shares held. A separate vote of one of the Funds is required on any
matter affecting only that Fund on which shareholders are entitled to vote.
Shareholders of a Fund are not entitled to vote on Trust matters that do not
affect that Fund and do not require a separate vote of the Fund. All series of
the Trust will vote together on certain matters, such as electing trustees or
approving independent public auditors. There normally will be no meetings of
shareholders for the purpose of electing Trustees unless and until such time as
less than a majority of Trustees holding office have been elected by
shareholders, at which time the Trustees then in office will call a
shareholder's meeting for the election of Trustees. Any Trustee may be removed
from office upon the vote of shareholders holding at least two-thirds of the
Trust's outstanding shares at a meeting called for that purpose. The Trustees
are required to call such a meeting upon the written request of shareholders
holding at least 10% of the Trust's outstanding shares. The Trust will also
assist shareholders in communicating with one another as provided for in the
1940 Act.
Shareholders of all of the series of the Trust will, however, vote together to
elect Trustees of the Trust and for certain other matters. Under certain
circumstances, the shareholders of one or more series could control the outcome
of these votes.
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a business trust may,
under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
<PAGE>22
Investment Adviser and Administrator
BANKERS TRUST COMPANY
Distributor
SIGNATURE BROKER-DEALER SERVICES, INC.
Custodian and Transfer Agent
BANKERS TRUST COMPANY
Independent Accountants
COOPERS & LYBRAND L.L.P.
Counsel
WILLKIE FARR & GALLAGHER
-------------------------------------------
No person has been authorized to give any information or to make any
representations other than those contained in the Trust's Prospectuses, its
Statements of Additional Information or the Trust's official sales literature in
connection with the offering of the Trust's shares and, if given or made, such
other information or representations must not be relied on as having been
authorized by the Trust. This Prospectus does not constitute an offer in any
state in which, or to any person to whom, such offer may not lawfully be made.
-------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>1
Subject to Completion, dated August 1, 1996
BT ADVISOR FUNDS
Growth Fund
Growth and Income Fund
(Intermediary Class of Shares)
PROSPECTUS: ___________, 1996
BT Advisor Funds (the "Trust") is an open-end, management investment company
(mutual fund) which currently consists of twelve funds. Shares of the two
funds listed above (each, a "Fund") are offered by this prospectus.
Bankers Trust Company ("Bankers Trust") is the investment adviser (the
"Adviser") of each Fund.
Please read this Prospectus before investing, and keep it on file for future
reference. It contains important information, including how each Fund invests
and the services available to shareholders.
To learn more about each Fund and its investments, investors can obtain a copy
of the Funds' Statement of Additional Information (the "SAI"), dated
__________, 1996, which contains each Fund's most recently published financial
report and portfolio listing. The SAI has been filed with the Securities and
Exchange Commission (the "SEC") and is incorporated herein by reference. For a
free copy of this document, call (800) 730-1313 or contact the Trust at 6 St.
James Avenue, Boston, MA 02116, or an Investment Professional.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
BANKERS TRUST OR ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE
FDIC, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
LIKE SHARES OF ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>2
TABLE OF CONTENTS
- ------------------------------------------------------------------------------
Page
----
THE FUNDS.................................................................3
WHO MAY WANT TO INVEST.................................................3
EXPENSE SUMMARY........................................................3
THE FUNDS IN DETAIL.......................................................5
INVESTMENT OBJECTIVES AND POLICIES.....................................5
INVESTMENT PRINCIPLES AND RISKS........................................6
ADDITIONAL INVESTMENT LIMITATIONS......................................6
RISK FACTORS AND CERTAIN SECURITIES AND
INVESTMENT PRACTICES..................................................6
PERFORMANCE...........................................................13
MANAGEMENT OF THE FUNDS...............................................14
ACCOUNT INFORMATION......................................................16
TYPES OF ACCOUNTS.....................................................16
HOW TO BUY SHARES.....................................................17
HOW TO SELL SHARES....................................................19
INVESTOR SERVICES.....................................................21
SHAREHOLDER AND ACCOUNT POLICIES.........................................23
DIVIDENDS, CAPITAL GAINS, AND TAXES...................................23
VALUATION DETAILS.....................................................24
EXCHANGE LIMITATIONS..................................................27
SALES CHARGE REDUCTIONS AND WAIVERS...................................27
ADDITIONAL INFORMATION ABOUT THE FUNDS................................29
<PAGE>3
THE FUNDS
Growth Fund's investment objective is long-term capital growth. The Fund seeks
to achieve this objective through investment primarily in the equity
securities of companies with large market capitalizations, although a smaller
portion of the fund may be held in smaller capitalized equities or non-U.S.
equities. See "Risk Factors and Certain Securities and Investment Practices."
Growth and Income Fund's investment objective is capital growth and current
income. The Fund seeks to achieve this objective through investment primarily in
the equity securities of companies with large market capitalizations and in
various income producing securities, including, but not limited to, dividend
paying equity securities, corporate bonds, notes, convertible securities,
debentures and money market instruments, although a smaller portion of the fund
may be held in smaller capitalized equities or non-U.S. equities. See "Risk
Factors and Certain Securities and Investment Practices."
WHO MAY WANT TO INVEST
Each Fund currently offers two classes of shares, one of which, the
[Intermediary] shares (the "Shares"), are offered through this Prospectus to
investors who engage an Investment Professional. See "Additional Information
about the Funds."
The Funds are designed for investors who are willing to accept short-term
domestic and/or foreign stock market fluctuations in pursuit of potentially high
long-term returns. The Growth Fund invests for growth. The Growth and Income
Fund invests for both growth and income.
Each Fund is not in itself a balanced investment plan. Investors should consider
their investment objective and tolerance for risk when making an investment
decision. When investors sell their Fund Shares, they may be worth more or less
than they originally paid for them.
EXPENSE SUMMARY
Annual operating expenses are paid out of the assets of each Fund. Each Fund
pays an investment advisory fee and an administrative services fee to Bankers
Trust. Each Fund incurs expenses such as maintaining shareholder records and
furnishing shareholder statements. Each Fund must provide financial reports.
The following table provides: (i) a summary of expenses relating to purchases
and sales of the Shares of each Fund and the estimated annual operating expenses
of the Fund as a percentage of average daily net assets of each Fund; and (ii)
an example illustrating the dollar cost of such expenses on a $1,000 investment
in each Fund.
- ------------------------------------------------------------------------------
Shareholder Transaction Expenses
............................................................... ..............
Maximum Sales Charge on Purchases 4.75%
(as a percentage of offering price)
............................................................... ..............
Maximum Sales Charge on Reinvested Distributions None
............................................................... ..............
Redemption Fee None
- ------------------------------------------------------------------------------
Shareholder transaction expenses are charges paid when investors buy, sell,
exchange, or hold Shares of a Fund. Lower front-end sales charges may be
available with purchases of $50,000 or more and/or in conjunction with various
programs. See "Valuation Details," on page 24 for an explanation of how and when
these charges apply.
<PAGE>4
- -------------------------------------------------------------- ------------
Annual Operating Expenses
Growth Fund
.............................................................. ............
Investment advisory fee (after reimbursement or waiver) 0.10%
12b-1 fees 0.50
Other expenses (after reimbursements or waivers) 0.90
.............................................................. ............
Total operating expenses (after reimbursement or waivers) 1.50%
.............................................................. ............
Growth and Income Fund
.............................................................. ............
Investment advisory fee (after reimbursement or waiver) 0.10%
12b-1 fees 0.50
Other expenses (after reimbursements or waivers) 0.90
.............................................................. ............
Total operating expenses (after reimbursements or waivers) 1.50%
.............................................................. ............
Expense Table Example:
An investor would pay the following expenses, including the maximum front-end
sales charge on a $1,000 investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period:
Examples 1 Year 3 years
- ------------------------------------------------- ------------ ---------
Growth Fund $62 $93
Growth and Income Fund $62 $93
- ------------------------------------------------- ------------ ---------
The expense table and the example above show the costs and expenses that an
investor will bear directly or indirectly as a shareholder of a Fund. While
reimbursement of distribution expenses in amounts up to 0.20% of average net
assets are authorized to be made pursuant to the Plan of Distribution under Rule
12b-1 of the Investment Company Act of 1940, as amended (the "1940 Act"), it is
not expected that any payments will actually be made under that plan in the
foreseeable future. Bankers Trust has voluntarily agreed to waive a portion of
its investment advisory fee with respect to each Fund. Without such waiver, each
Fund's investment advisory fee would be equal to 0.65%. The expense table and
the example reflect a voluntary undertaking by Bankers Trust or Signature
Broker-Dealer Services, Inc. ("SBDS"), as the distributor (the "Distributor") of
the Shares of each Fund, to waive or reimburse expenses such that the total
operating expenses of each Fund (as a percentage of the Fund's average daily net
assets) will not exceed the following: Growth Fund -- 1.50% and Growth and
Income Fund -- 1.50%. In the absence of this undertaking, assuming total assets
of $25 million in each Fund, it is estimated that "Total Operating Expenses"
would be as follows: Growth Fund -- 2.30% and Growth and Income Fund -- 2.30%.
Other Expenses for each Fund are based on annualized estimates of expenses for a
one-year period. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
Moreover, while each example assumes a 5% annual return, actual performance will
vary and may result in a return greater or less than 5%.
12b-1 fees for each Fund include a shareholder service fee and a distribution
fee. Shareholder service fees are paid by a Fund to SBDS to enable SBDS to
compensate Investment Professionals for providing personal shareholder service
and/or maintenance of shareholder accounts. Distribution fees are paid by a Fund
to SBDS to compensate Investment Professionals for services and expenses in
connection with the distribution of the applicable Fund's shares. Long-term
shareholders may pay more than the economic equivalent of the maximum sales
charges permitted by the National Association of Securities Dealers, Inc.
("NASD"), due to 12b-1 fees.
For more information about each Fund's expenses see "Management of the Funds"
and "Valuation Details."
<PAGE>5
THE FUNDS IN DETAIL
INVESTMENT OBJECTIVES AND POLICIES
Additional information about the investment policies of each Fund appears in
"Risk Factors and Certain Securities and Investment Practices" in this
Prospectus and in the Funds' SAI. There can be no assurance that the investment
objective of a Fund will be achieved.
The Growth Fund's investment objective is long-term capital growth. The Fund
seeks to achieve this objective through investment primarily in the equity
securities of companies with large market capitalizations, although a smaller
portion of the Fund may be held in smaller capitalized equities or non-U.S.
equities.
The Growth and Income Fund's investment objectives is capital growth and current
income. The Fund seeks to achieve this objective through investment primarily in
the equity securities of companies with large market capitalizations and in
various income producing securities, including, but not limited to, dividend
paying equity securities, corporate bonds, notes, convertible securities,
debentures and money market instruments, although a smaller portion of the Fund
may be held in smaller capitalized equities or non-U.S. equities.
Bankers Trust employs a flexible investment program in pursuit of each Fund's
investment objective. Each Fund is not restricted to investments in specific
market sectors. Each Fund may invest in any market sector and in companies of
any size and may take advantage of any investment opportunity with attractive
long-term prospects. The Adviser takes advantage of its market access and the
research available to it to select investments in promising growth companies
that are involved in new technologies, new products, foreign markets and special
developments, such as research discoveries, acquisitions, recapitalizations,
liquidations or management changes, and companies whose stock may be undervalued
by the market. These situations are only illustrative of the types of investment
each Fund may make. Each Fund is free to invest in any common stock which in the
Adviser's judgment provides above average potential for long-term growth of
capital and, with respect to Growth and Income Fund, income.
Each Fund will generally invest a majority of its assets in equity securities of
large-sized companies (companies with a market capitalization in excess of the
market capitalization of the smaller companies in the S&P500 index), but may
invest in securities of companies having various levels of market
capitalization, including smaller companies whose securities may be more
volatile and less liquid than securities issued by larger companies with higher
levels of net worth. Investments will be in companies in various industries.
Industry and company fundamentals along with key investment themes and various
quantitative screens will be used in the investment process. Criteria for
selection of individual securities include the issuer's competitive environment
and position, prospects for growth, managerial strength, earnings momentum and
quality, return momentum, corporate actions, underlying asset value, relative
market value and overall marketability. Each Fund will follow a disciplined
selling process to lessen market risks.
Each Fund may also invest up to 25% of its assets in similar securities of
foreign issuers, primarily in developed markets. For further information on
foreign investments see "Risk Factors and Certain Securities and Investment
Practices -- Risks of Investing in Foreign Securities."
Other Investments and Investment Techniques. Each Fund may also utilize the
following investments and investment techniques and practices: short-sales,
short-term investments, options on stocks, options on stock indices, futures
contracts on stock indices, options on futures contracts, foreign currency
exchange transactions, options on foreign currencies, Rule 144A securities,
when-issued and delayed delivery securities, securities lending, repurchase
agreements and reverse repurchase agreements. See "Risk Factors and Certain
Securities and Investment Practices" in this Prospectus and in the SAI for
further information.
<PAGE>6
INVESTMENT PRINCIPLES AND RISKS
The value of each Fund's investments varies based on many factors.
Stock values fluctuate, sometimes dramatically, in response to the activities of
individual companies and general market and economic conditions. Over time,
however, stocks have shown greater long-term growth potential than other types
of securities.
Because many foreign investments are denominated in foreign currencies, changes
in the value of these currencies can significantly affect a Fund's share price.
General economic factors in the various world markets can also impact the value
of an investor's investment.
The value of bonds fluctuates based on changes in domestic or foreign interest
rates, the credit quality of the issuer, market conditions, and other economic
and political news. In general, bond prices rise when interest rates fall, and
vice versa. This effect is usually more pronounced for longer-term securities.
Lower-quality securities offer higher yields, but also carry more risk.
Bankers Trust may use various investment techniques to hedge a Fund's risks, but
there is no guarantee that these strategies will work as intended. When
investors sell their Shares, they may be worth more or less than what they
originally paid for them. See "Risk Factors and Certain Securities and
Investment Practices" for more information.
ADDITIONAL INVESTMENT LIMITATIONS
As a "diversified" fund, with respect to 75% of each Fund's total assets, no
more than 5% of the total assets of the Fund may be invested in the securities
of any one issuer (excluding cash and cash equivalents, U.S. Government
securities and the securities of other investment companies) and the Fund will
not own more than 10% of the voting securities of any issuer. The Fund will not
invest more than 25% of its assets in the securities of issuers in any one
industry. These are fundamental investment policies of the Fund which may not be
changed without shareholder approval. No more than 15% of the Fund's net assets
may be invested in illiquid or not readily marketable securities (including
repurchase agreements and time deposits with remaining maturities of more than
seven calendar days). Additional investment policies of the Fund are contained
in the Statement of Additional Information.
Each Fund's investment objective is not a fundamental policy and may be changed
upon 30 days' prior written notice to but without the approval of the Fund's
shareholders. If there is a change in the Fund's investment objective, the
Fund's shareholders should consider whether the Fund remains an appropriate
investment in light of their then-current needs. See "Investment Restrictions"
in the Statement of Additional Information for a description of the additional
fundamental policies of the Fund that cannot be changed without approval by a
"vote of a majority of the outstanding voting securities" (as defined in the
1940 Act) of the Fund.
RISK FACTORS AND CERTAIN SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of instruments
in which the Funds may invest and strategies Bankers Trust may employ in pursuit
of each Fund's investment objective. A summary of risks and restrictions
associated with these instrument types and investment practices is included as
well.
Bankers Trust may not buy all of these instruments or use all of these
techniques to the full extent permitted unless it believes that doing so will
help a Fund achieve its goal. Holdings and recent investment strategies are
described in the financial reports of the Funds, which are sent to the Fund's
shareholders twice a year. For a free SAI or financial report, call an
Investment Professional.
<PAGE>7
Risks of Investing in Foreign Securities
Investors should realize that investing in securities of foreign issuers
involves considerations not typically associated with investing in securities of
companies organized and operated in the United States. Investors should realize
that the value of a Fund's foreign investments may be adversely affected by
changes in political or social conditions, diplomatic relations, confiscatory
taxation, expropriation, nationalization, limitation on the removal of funds or
assets, or imposition of (or change in) exchange control or tax regulations in
foreign countries. In addition, changes in government administrations or
economic or monetary policies in the United States or abroad could result in
appreciation or depreciation of portfolio securities and could favorably or
unfavorably affect a Fund's operations. Furthermore, the economies of individual
foreign nations may differ from the U.S. economy, whether favorably or
unfavorably, in areas such as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position; it may also be more difficult to obtain and enforce a
judgment against a foreign issuer. In general, less information is publicly
available with respect to foreign issuers than is available with respect to U.S.
companies. Most foreign companies are also not subject to the uniform accounting
and financial reporting requirements applicable to issuers in the United States.
Any foreign investments made by a Fund must be made in compliance with U.S. and
foreign currency restrictions and tax laws restricting the amounts and types of
foreign investments.
Because foreign securities generally are denominated and pay dividends or
interest in foreign currencies, the value of the net assets of a Fund as
measured in U.S. dollars will be affected favorably or unfavorably by changes in
exchange rates. In order to protect against uncertainty in the level of future
foreign currency exchange rates, each Fund is also authorized to enter into
certain foreign currency exchange transactions. Furthermore, a Fund's foreign
investments may be less liquid and their prices may be more volatile than
comparable investments in securities of U.S. companies. The settlement periods
for foreign securities, which are often longer than those for securities of U.S.
issuers, may affect portfolio liquidity. Finally, there may be less government
supervision and regulation of securities exchanges, brokers and issuers in
foreign countries than in the United States.
Risks of Investing in Medium- and Small-Capitalization Stocks
The Funds may invest in smaller-sized and medium-sized growth-oriented common
stocks of domestic corporations and, to a limited extent, foreign corporations.
Historically, medium- and small-capitalization stocks have been more volatile in
price than the larger-capitalization stocks included in the S&P 500. Among the
reasons for the greater price volatility of these securities are the less
certain growth prospects of smaller firms, the lower degree of liquidity in the
markets for such stocks, and the greater sensitivity of medium- and small-size
companies to changing economic conditions. In addition to exhibiting greater
volatility, medium-and small-size company stocks may fluctuate independently of
larger company stocks and medium- and small-size companies may or may not have
the ability to pay dividends. Medium- and small-size company stocks may decline
in price as large company stocks rise, or rise in prices as large company stocks
decline.
Securities and Investment Practices
Equity Securities. As used herein, "equity securities" are defined as common
stock, preferred stock, trust or limited partnership interests, rights and
warrants to subscribe to or purchase such securities, sponsored or unsponsored
ADRs, EDRs and GDRs, and convertible securities, consisting of debt securities
or preferred stock that may be converted into common stock or that carry the
right to purchase common stock. Common stocks, the most familiar type, represent
an equity (ownership) interest in a corporation. Although equity securities have
a history of long-term growth in value, their prices fluctuate based on changes
in a company's financial condition and on overall market and economic
conditions. Smaller companies are especially sensitive to these factors.
Debt Securities. Bonds and other debt instruments are used by issuers to borrow
money from investors. The issuer pays the investor a fixed or variable rate of
interest, and must repay the amount borrowed at maturity. Some debt securities,
such as zero coupon bonds, do not pay current interest, but are purchased at a
discount from their face values. Debt securities, loans, and other direct debt
have varying degrees of quality and varying levels of
<PAGE>8
sensitivity to changes in interest rates. Longer-term bonds are generally more
sensitive to interest rate changes than short-term bonds. Bonds and other debt
instruments may be rated by S&P and Moody's although there is no minimum rating
which debt securities must have (and debt securities may not be rated) to be an
eligible investment for a Fund. Bankers Trust expects, however, that generally
the debt securities in which a Fund invests will be rated at least BBB by S&P or
Baa by Moody's or, if unrated, of comparable quality in the opinion of Bankers
Trust.
Lower-quality foreign government securities are often considered to be
speculative and involve greater risk of default or price changes, or they may
already be in default. These risks are in addition to the general risks
associated with foreign securities.
Convertible Securities. A convertible security is a bond or preferred stock
which may be converted at a stated price within a specific period of time into a
specified number of shares of common stock of the same or different issuer.
Convertible securities are senior to common stock in a corporation's capital
structure, but usually are subordinated to non-convertible debt securities.
While providing a fixed income stream -- generally higher in yield than in the
income derived from a common stock but lower than that afforded by a
non-convertible debt security -- a convertible security also affords an investor
the opportunity, through its conversion feature, to participate in the capital
appreciation of common stock into which it is convertible.
In general, the market value of a convertible security is the higher of its
investment value (its value as a fixed income security or its conversion value
(the value of the underlying shares of common stock if the security is
converted). As a fixed income security, the market value of a convertible
security generally increases when interest rates decline and generally decrease
when interest rates rise; however, the price of a convertible security generally
increases as the market value of the underlying stock increases, and generally
decreases as the market value of the underlying stock declines. Investments in
convertible securities generally entail less risk than investments in the common
stock of the same issuer.
Preferred Stock. Preferred stock has a preference in liquidation (and,
generally, dividends) over common stock but is subordinated in liquidation to
debt. As a general rule the market value of preferred stocks with fixed dividend
rates and no conversion rights varies inversely with interest rates and
perceived credit risk, with the price determined by the dividend rate. Some
preferred stocks are convertible into other securities, for example common
stock, at a fixed price and ratio or upon the occurrence of certain events. The
market price of convertible preferred stocks generally reflects an element of
conversion value. Because many preferred stocks lack a fixed maturity date,
these securities generally fluctuate substantially in value when interest rates
change; such fluctuations often exceed those of long-term bonds of the same
issuer. Some preferred stocks pay an adjustable dividend that may be based on an
index, formula, auction procedure or other dividend rate reserve mechanism. In
the absence of credit deterioration, adjustable rate preferred stocks tend to
have more stable market value than fixed rate preferred stocks.
All preferred stocks are also subject to the same types of credit risks of the
issuer as corporate bonds. In addition, because preferred stock is junior to
debt securities and other obligations of an issuer, deterioration in the credit
rating of the issuer will cause greater changes in the value of a preferred
stock than in a more senior debt security with similar yield characteristics.
Preferred stocks may be rated by S&P and Moody's although there is no minimum
rating which a preferred stock must have (and a preferred stock may not be
rated) to be an eligible investment for a Fund. Bankers Trust expects, however,
that generally the preferred stocks in which a Fund invests will be rated at
least BBB by S&P or Baa by Moody's or, if unrated, of comparable quality in the
opinion of Bankers Trust. Preferred stocks rated CCC by S&P are regarded as
predominantly speculative with respect to the issuer's capacity to pay preferred
stock obligations and represent the highest degree of speculation among
securities rated between BB and CCC; preferred stocks rated Caa by Moody's are
likely to be in arrears on dividend payments. Moody's rating with respect to
preferred stocks does not purport to indicate the future status of payments of
dividends.
Warrants are instruments which entitle the holder to buy underlying equity
securities at a specific price for a specific period of time. A warrant tends to
be more volatile than its underlying securities and ceases to have value
<PAGE>9
if it is not exercised prior to its expiration date. In addition, changes in the
value of a warrant do not necessarily correspond to changes in the value of its
underlying securities.
U.S. Government Securities are high-quality debt securities issued or guaranteed
by the U.S. Treasury or by an agency or instrumentality of the U.S. government.
Not all U.S. government securities are backed by the full faith and credit of
the United States. For example, securities issued by the Federal Farm Credit
Bank or by the Federal National Mortgage Association are supported by the
instrumentality's right to borrow money from the U.S. Treasury under certain
circumstances. However, securities issued by other agencies or instrumentalities
are supported only by the credit of the entity that issued them.
ADRs, GDRs and EDRs are certificates evidencing ownership of shares of a
foreign-based issuer held in trust by a bank or similar financial institution.
Designed for use in U.S. and European securities markets, respectively, ADRs,
GDRs and EDRs are alternatives to the purchase of the underlying securities in
their national markets and currencies. ADRs, GDRs and EDRs are subject to the
same risks as the foreign securities to which they relate. See "Risk Factors and
Certain Securities and Investment Practices -- Risks of Investing in Foreign
Securities."
Rule 144A Securities are securities in the United States that are not registered
for sale under Federal securities laws but which can be resold to institutions
under the SEC's Rule 144A. Provided that a dealer or institutional trading
market in such securities exists, these restricted securities are treated as
exempt from the 15% limit on illiquid securities. Under the supervision of the
Board of Trustees of the Trust, Bankers Trust determines the liquidity of
restricted securities and, through reports from Bankers Trust, the Board will
monitor trading activity in restricted securities. Because Rule 144A is
relatively new, it is not possible to predict how these markets will develop. If
institutional trading in restricted securities were to decline, the liquidity of
a Fund could be adversely affected.
Short Sales. The Funds may from time to time sell securities short. A short sale
is a transaction in which a Fund sells securities it does not own (but has
borrowed) in anticipation of a decline in the market price of the securities.
Possible losses from short sales differ from losses that could be incurred from
a purchase of a security, because losses from short sales may be unlimited,
whereas losses from purchases can equal only the total amount invested.
When a Fund makes a short sale, the proceeds it receives from the sale are
retained by a broker until the Fund replaces the borrowed securities. To deliver
the securities to the buyer, the Fund must arrange through a broker to borrow
the securities and, in so doing, the Fund becomes obligated to replace the
securities borrowed at their market price at the time of replacement, whatever
that price may be. The Fund may have to pay a premium to borrow the securities
and must pay any dividends or interest payable on the securities until they are
replaced.
The Fund's obligation to replace the securities borrowed in connection with a
short sale will be secured by collateral deposited with the broker that consists
of cash or other liquid assets. In addition, the Fund will place in a segregated
account with its custodian an amount of cash or other liquid assets equal to the
difference, if any, between (1) the market value of the securities sold at the
time they were sold short and (2) any cash or other liquid assets deposited as
collateral with the broker in connection with the short sale (not including the
proceeds of the short sale). Until it replaces the borrowed securities, the Fund
will maintain the segregated account daily at a level so that (1) the amount
deposited in the account plus the amount deposited with the broker (not
including the proceeds from the short sale) will equal the current market value
of the securities sold short and (2) the amount deposited in the account plus
the amount deposited with the broker (not including the proceeds from the short
sale) will not be less than the market value of the securities at the time they
were sold short.
Short Sales Against the Box. The Funds may, in addition to engaging in short
sales as described above, enter into short sales of securities such that when
the short position is open the Fund owns an equal amount of the securities sold
short or preferred stocks or debt securities, convertible or exchangeable,
without payment of further consideration, into an equal number of securities
sold short. This kind of short sale, which is described as one "against the
box," will be entered into by the Fund for the purpose of receiving a portion of
the interest earned by the executing broker from the proceeds of the sale. The
proceeds of the sale will be held by the broker until the
<PAGE>10
settlement date when the Fund delivers securities to close out its short
position. Although prior to delivery the Fund will have to pay an amount equal
to any dividends paid on the securities sold short, the Fund will receive the
dividends from the preferred stock or interest from the debt securities
convertible or exchangeable into the securities sold short, plus a portion of
the interest earned from the proceeds of the short sale. The Fund will deposit,
in a segregated account with its custodian, the securities sold short or
convertible or exchangeable preferred stocks or debt securities in connection
with short sales against the box.
When Issued and Delayed Delivery Securities. Each Fund may purchase securities
on a when-issued or delayed delivery basis. Delivery of and payment for these
securities may take place as long as a month or more after the date of the
purchase commitment. The value of these securities is subject to market
fluctuation during this period and no income accrues to the Fund until
settlement takes place. The Fund maintains with the Custodian a segregated
account containing high grade liquid securities in an amount at least equal to
these commitments.
Repurchase Agreements. In a repurchase agreement, a Fund buys a security at one
price and simultaneously agrees to sell it back at a higher price. Delays or
losses could result if the other party to the agreement defaults or becomes
insolvent.
Reverse Repurchase Agreements. In a reverse repurchase agreement, a Fund
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 assets. A reverse repurchase agreement is a form
of borrowing and will be counted towards each Fund's borrowing restrictions. See
"Risk Factors and Certain Securities and Investment Practices -- Leverage."
Investment Companies. With respect to certain countries in which capital markets
are either less developed or not easily accessed, investments by a Fund may be
made through investment in other registered investment companies that in turn
are authorized to invest in the securities of such countries. Investment in
other investment companies is limited in amount by the 1940 Act, will involve
the indirect payment of a portion of the expenses, including advisory fees, of
such other investment companies and may result in a duplication of fees and
expenses.
Short-Term Investments. Each Fund intends to stay invested in the securities
described above to the extent practical in light of its objective and long-term
investment perspective. However, a Fund's assets may be invested in high quality
short-term investments to meet anticipated redemptions and expenses for
day-to-day operating purposes and when, in Bankers Trust's opinion, it is
advisable to adopt a temporary defensive position because of unusual and adverse
conditions affecting the respective markets.
Securities Lending. Each Fund is permitted to lend up to 30% of the total value
of its securities. These loans must be secured continuously by cash or
equivalent collateral or by a letter of credit at least equal to the market
value of the securities loaned plus accrued income. By lending its securities,
the Fund can increase its income by continuing to receive income on the loaned
securities as well as by the opportunity to receive interest on the collateral.
Any gain or loss in the market price of the borrowed securities which occurs
during the term of the loan inures to the Fund and its investors. In lending
securities to brokers, dealers and other financial organizations, a Fund is
subject to risks, which like those associated with other extensions of credit,
include delays in recovery and possible loss of rights in the collateral should
the borrower fail financially.
Leverage. Each fund may borrow up to one-third of the value of its total assets,
from banks or through the use of reverse repurchase agreements, to increase its
holdings of portfolio securities. Under the 1940 Act, each Fund 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 liquidations of a Fund's holdings may be disadvantageous
from an investment standpoint.
Leveraging by means of borrowing may exaggerate the effect of any increase or
decrease in the value of each Fund's securities and the Fund's net asset value
and money borrowed by a Fund will be subject to interest and other
<PAGE>11
costs (which may include commitment fees and/or the cost of maintaining minimum
average balances) which may or may not exceed the income received from the
securities purchased with borrowed funds.
Derivatives. Each Fund may invest in various instruments that are commonly
known as derivatives. Generally, a derivative is a financial arrangement, the
value of which is based on, or "derived" from, a traditional security, asset or
market index. Some "derivatives" such as mortgage-related and other
asset-backed securities are in many respects like any other investment,
although they may be more volatile or less liquid than more traditional debt
securities. There are, in fact, many different types of derivatives and many
different ways to use them. There are a range of risks associated with those
uses. A Fund may use futures and options for traditional hedging purposes to
attempt to protect the Fund from exposure to changing interest rates,
securities prices, or currency exchange rates and as a low cost method of
gaining exposure to a particular securities market without investing directly
in those securities. The use of derivatives may result in some leverage.
Leverage involves the use of a small amount of money to control a larger amount
of financial assets and can, in some circumstances, lead to significant losses.
A Fund will limit the leverage created by its use of derivatives for investment
purposes by segregating liquid assets or "covering" the Fund's risk exposure
with holdings that largely offset that risk, as required by the Securities and
Exchange Commission. Bankers Trust will use derivatives only in circumstances
where they offer the most efficient means of improving the risk/reward profile
of a Fund. The use of derivatives for non-hedging purposes may be considered
speculative.
Foreign Currency Exchange Transactions. Each Fund may enter into foreign
currency exchange transactions to convert to and from different foreign
currencies and to convert foreign currencies to and from the U.S. dollar. A Fund
either enters into these transactions on a spot (i.e., cash) basis at the spot
rate prevailing in the foreign currency exchange market or uses forward
contracts to purchase or sell foreign currencies.
A forward foreign currency exchange contract is an obligation by a Fund to
purchase or to sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract. Forward foreign currency exchange
contracts establish an exchange rate at a future date. These contracts are
transferable in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. A forward foreign currency
exchange contract generally has no deposit requirement and is traded at a net
price without commission. Neither spot transactions nor forward foreign currency
exchange contracts eliminate fluctuations in the prices of a Fund's securities
or in foreign exchange rates, or prevent loss if the prices of these securities
should decline.
A Fund may enter into foreign currency hedging transactions in an attempt to
protect against changes in foreign currency exchange rates between the trade and
settlement dates of specific securities transactions or changes in foreign
currency exchange rates that would adversely affect a Fund position or an
anticipated investment position. Although these transactions tend to minimize
the risk of loss due to a decline in the value of the hedged currency, at the
same time they tend to limit any potential gain that might be realized should
the value of the hedged currency increase. The precise matching of the forward
contract amounts and the value of the securities involved will not generally be
possible because the future value of such securities in foreign currencies will
change as a consequence of market movements in the value of such securities
between the date the forward contract is entered into and the date it matures.
The projection of currency market movements is extremely difficult, and the
successful execution of a hedging strategy is highly uncertain.
Options on Foreign Currencies. Each Fund may write covered put and call options
and purchase put and call options on foreign currencies for the purpose of
protecting against declines in the U.S. dollar value of Fund securities and
against increases in the U.S. dollar cost of securities to be acquired. Each
Fund may use options on currency to cross-hedge, which involves writing or
purchasing options on one currency to hedge against changes in exchange rates
for a different, but related, currency. As with other types of options, however,
the writing of an option on foreign currency will constitute only a partial
hedge up to the amount of the premium received, and the Fund could be required
to purchase or sell foreign currencies at disadvantageous exchange rates,
thereby incurring losses. The purchase of an option on foreign currency may be
used to hedge against fluctuations in exchange rates although, in the event of
exchange rate movements adverse to a Fund's position, it may forfeit the entire
amount of
<PAGE>12
the premium plus related transaction costs. In addition, a Fund may purchase
call options on a currency when the investment adviser anticipates that the
currency will appreciate in value.
There is no assurance that a liquid secondary market on an options exchange will
exist for any particular option, or at any particular time. If a Fund is unable
to effect a closing purchase transaction with respect to covered options it has
written, the Fund will not be able to sell the underlying currency or dispose of
assets held in a segregated account until it closes out the options or the
options expire or are exercised. Similarly, if the Fund is unable to close out
options it has purchased, it would have to exercise the options in order to
realize any profit and will incur transaction costs. The Fund pays brokerage
commissions or spreads in connection with its options transactions.
Options on Stocks. Each Fund may write and purchase options on stocks. A call
option gives the purchaser of the option the right to buy, and obligates the
writer to sell, the underlying stock at the exercise price at any time during
the option period. Similarly, a put option gives the purchaser of the option the
right to sell, and obligates the writer to buy the underlying stock at the
exercise price at any time during the option period. A covered call option with
respect to which a Fund owns the underlying stock sold by the Fund exposes the
Fund during the term of the option to possible loss of opportunity to realize
appreciation in the market price of the underlying stock or to possible
continued holding of a stock which might otherwise have been sold to protect
against depreciation in the market price of the stock. A covered put option sold
by a Fund exposes the Fund during the term of the option to a decline in price
of the underlying stock.
Options on Securities Indices. Each Fund may purchase and write put and call
options on stock or bond indices listed on domestic and foreign stock exchanges,
in lieu of direct investment in the underlying securities or for hedging
purposes. A stock or bond index fluctuates with changes in the market values of
the securities included in the index.
Options on securities indices are generally similar to options on stocks except
that the delivery requirements are different. Instead of giving the right to
take or make delivery of securities at a specified price, an option on a stock
or bond index gives the holders the right to receive a cash "exercise settlement
amount" equal to (a) the amount, if any, by which the fixed exercise price of
the option exceeds (in the case of a put) or is less than (in the case of a
call) the closing value of the underlying index on the date of the exercise,
multiplied by (b) a fixed "index multiplier."
Successful use by a Fund of options on security indices will be subject to
Bankers Trust's ability to predict correctly movement in the direction of the
security market generally or of a particular industry. This requires different
skills and techniques than predicting changes in the price of individual
securities.
Futures Contracts on Securities Indices. A Fund may enter into contracts
providing for the making and acceptance of cash settlement based upon changes in
the value of an index of domestic or foreign securities ("Futures Contracts").
This investment technique may be used as a low-cost method of gaining exposure
to a particular securities market without investing directly in those securities
or to hedge against anticipated future changes in general market prices which
otherwise might either adversely affect the value of securities held by the Fund
or adversely affect the prices of securities which are intended to be purchased
at a later date for the Fund. A Futures Contract may also be entered into to
close out or offset an existing futures position.
When used for hedging purposes, each transaction in Futures Contracts involves
the establishment of a position which will move in a direction opposite to that
of the investment being hedged. If these hedging transactions are successful,
the futures position taken for the Fund will rise in value by an amount which
approximately offsets the decline in value of the portion of the Fund's
investments that is being hedged. Should general market prices move in an
unexpected manner, the future anticipated benefits of Futures Contracts may not
be achieved or a loss may be realized.
The risks of Futures Contracts also include a potential lack of liquidity in the
secondary market and incorrect assessments of the market.
<PAGE>13
Brokerage costs will be incurred and "margin" will be required to be posted and
maintained as a good faith deposit against performance of obligations under
Futures Contracts written for a Fund. A Fund may not purchase or sell a Futures
Contract if immediately thereafter its margin deposits on its outstanding
Futures Contracts, other than Futures Contracts used for hedging purposes, would
exceed 5% of the market value of the Fund's total assets.
Options on Futures Contracts. Each Fund may invest in options on futures
contracts for similar purposes.
There can be no assurance that the use of these Fund strategies will be
successful.
Asset Coverage. To assure that a Fund's use of futures and related options, as
well as when-issued and delayed-delivery securities and foreign currency
exchange transactions, are not used to achieve investment leverage, a Fund will
cover such transactions, as required under applicable interpretations of the
SEC, either by owning the underlying securities, entering into an off-setting
transaction, or by establishing a segregated account with the Fund's custodian
containing high grade liquid securities in an amount at all times equal to or
exceeding the Fund's commitment with respect to the instruments or contracts.
Portfolio Turnover
A Fund will attempt to purchase securities with the intent of holding them for
investment but may purchase and sell portfolio securities whenever Bankers Trust
believes it to be in the best interests of the relevant Fund. The Funds will not
consider portfolio turnover rate a limiting factor in making investment
decisions consistent with their investment objectives and policies. It is not
possible to predict the Funds' turnover rate. However, it is anticipated that
each Fund's annual turnover rate should not exceed 50%. High portfolio turnover
rates (100% or more) may result in dealer markups or underwriting commissions as
well as other transaction costs, including correspondingly higher brokerage
commissions. In addition, short-term gains realized from portfolio turnover may
be taxable to shareholders as ordinary income. See "Dividends, Capital Gains and
Taxes."
PERFORMANCE
Each Fund's recent strategies and holdings, and performance, is detailed twice a
year in the Funds' financial reports, which are sent to all Fund shareholders.
For current Fund performance or a free copy of the Funds' financial report,
please contact an Investment Professional.
Mutual fund performance is commonly measured as total return. Each Fund's
performance is affected by the expenses of that Fund. The exclusion of any
applicable sales charge from a performance calculation produces a higher return.
Explanation of Terms
Total return is the change in value of an investment in a Fund over a given
period, assuming reinvestment of any dividends and capital gains. A cumulative
total return reflects actual performance of a stated period of time. An average
annual total return is a hypothetical rate of return that, if achieved annually,
would have produced the same cumulative total return if performance had been
constant over the entire period. Average annual total return calculations smooth
out variations in performance; they are not the same as actual year-by-year
results. Average annual total returns covering periods of less than one year
assume that performance will remain constant for the rest of the year.
Average annual and cumulative total returns may or may not include the effect of
paying the maximum applicable sales charge.
<PAGE>14
Unlike some bank deposits or other investments which pay a fixed yield for a
stated period of time, the total return of a Fund will vary depending upon
interest rates, the current market value of the securities held by the Fund and
changes in the expenses of the Fund. In addition, during certain periods for
which total return may be provided, Bankers Trust or SBDS may have voluntarily
agreed to waive portions of their fees, or reimburse certain operating expenses
of a Fund, on a month-to-month basis. Such waivers will have the effect of
increasing the Fund's net income (and therefore its total return) during the
period such waivers are in effect.
Performance information may include comparisons of a Fund's investment results
to various unmanaged indices or results of other mutual funds or investment or
savings vehicles. From time to time, Fund rankings may be quoted from various
sources such as Lipper Analytical Services, Inc., Value Line and Morningstar,
Inc.
MANAGEMENT OF THE FUNDS
Trustees and Officers
The officers of the Trust manage each Fund's day-to-day operations and are
directly responsible to the Board. The Board sets broad policies for each Fund
and chooses the Trust's officers. A list of the Trustees and officers and a
brief statement of their present positions and principal occupations during the
past five years is set forth in the Statement of Additional Information.
Investment Adviser
Each Fund has retained the services of Bankers Trust as investment adviser (the
"Adviser").
Bankers Trust Company and Its Affiliates
Bankers Trust Company, a New York banking corporation with principal offices at
130 Liberty Street, New York, New York 10006, is a wholly owned subsidiary of
Bankers Trust New York Corporation. Bankers Trust conducts a variety of general
banking and trust activities and is a major wholesale supplier of financial
services to the international and domestic institutional market.
As of March 31, 1996, Bankers Trust New York Corporation was the eighth largest
bank holding company in the United States with total assets of approximately
$108 billion. Bankers Trust is a worldwide merchant bank dedicated to serving
the needs of corporations, government, financial institutions and private
clients through a global network of over 120 offices in more than 40 countries.
Investment management is a core business of Bankers Trust, built in a tradition
of excellence from its roots as a trust bank founded in 1903. The scope of
Bankers Trust's investment management capability is unique due to its leadership
positions in both active and passive quantitative management and its presence in
major equity and fixed income markets around the world. Bankers Trust is one of
the nation's largest and most experienced investment managers with approximately
$200 billion in assets under management globally.
Bankers Trust has more than 50 years of experience managing retirement assets
for the nation's largest corporations and institutions. In the past, these
clients have been serviced through separate account and commingled fund
structures. Now the BT Family of Funds brings Bankers Trust's extensive
investment management expertise -- once available to only the largest
institutions in the U.S. -- to individual investors. Bankers Trust's officers
have had extensive experience in managing investment portfolios having
objectives similar to those of each Fund.
Bankers Trust, subject to the supervision and direction of the Board of Trustees
of the Trust, manages each Fund in accordance with the Fund's investment
objective and stated investment policies, makes investment decisions for the
Fund, places orders to purchase and sell securities and other financial
instruments on behalf of the Fund and employs professional investment managers
and securities analysts who provide research services to the Fund. Bankers Trust
may utilize the expertise of any of its world wide subsidiaries and affiliates
to assist it in its role as
<PAGE>15
investment adviser. All orders for investment transitions on behalf of a Fund
are placed by Bankers Trust with broker-dealers and other financial
intermediaries that it selects, including those affiliated with Bankers Trust. A
Bankers Trust affiliate will be used in connection with a purchase or sale of an
investment for the Fund only if Bankers Trust believes that the affiliate's
charge for the transaction does not exceed usual and customary levels. The Fund
will not invest in obligations for which Bankers Trust or any of its affiliates
is the ultimate obligor or accepting bank. The Fund may, however, invest in the
obligations of correspondents and customers of Bankers Trust.
The Investment Advisory Agreement provides for each Fund to pay Bankers Trust a
fee, accrued daily and paid monthly, equal on an annual basis to the following
percentages of the average daily net assets of the Fund for its then-current
fiscal year: Growth Fund, 0.65% and Growth and Income Fund, 0.65%.
Bankers Trust has been advised by its counsel that, in counsel's opinion,
Bankers Trust currently may perform the services for the Trust and the Funds
described in this Prospectus and SAI without violation of the Glass-Steagall Act
or other applicable banking laws or regulations. State laws on this issue may
differ from the interpretations of relevant Federal law, and banks and financial
institutions may be required to register as dealers pursuant to state securities
law.
PORTFOLIO MANAGERS
Mr. James F. Giblin (CFA), Vice President of Bankers Trust, is responsible for
the day-to-day management of the Growth Fund. Mr. Giblin has been head of the
U.S. large capitalization equity group of Bankers Trust's Global Investment
Management business since June 1995. Prior to joining Bankers Trust, Mr. Giblin
was a senior vice president and senior portfolio manager at Putnam Investments
(from May, 1993 until April, 1995). From November, 1977 to April, 1993, Mr.
Giblin was employed by CIGNA Investments in various capacities, including as
head of CIGNA Equity Advisors and as a managing director and portfolio manager
responsible for CIGNA's insurance accounts and mutual funds.
Mr. Sidney F. Hoots, Managing Director of Bankers Trust, is responsible for
the day-to-day management of the Growth and Income Fund. Mr. Hoots manages
the quantitative domestic equity research group of Bankers Trust's Global
Investment Management business and has been with Bankers Trust since 1983.
Bankers Trust personnel may invest in securities for their own account pursuant
to a code of ethics that establishes procedures for personal investing and
restricts certain transactions.
ADMINISTRATOR
Under its Administration and Services Agreement with the Trust, Bankers Trust
calculates the net asset value of each Fund and generally assists the Board of
Trustees of the Trust in all aspects of the administration and operation of the
Funds. The Administration and Services Agreement provides for the Trust to pay
Bankers Trust a fee, accrued daily and paid monthly, equal on an annual basis to
the following percentages of the average daily net assets of the Fund for its
then-current fiscal year: Growth Fund, 0.65% and Growth and Income Fund, 0.65%.
Under the Administration and Services Agreement, Bankers Trust may delegate one
or more of its responsibilities to others, including SBDS, at Bankers Trust's
expense.
DISTRIBUTOR
Under its Distribution Agreement with the Trust, SBDS, as Distributor, serves as
the Trust's principal underwriter on a best efforts basis. In addition, SBDS
provides the Trust with office facilities. SBDS is a wholly owned subsidiary of
Signature Financial Group, Inc. ("SFG"). SFG and its affiliates currently
provide administration and distribution services for other registered investment
companies. The principal business address of SFG and SBDS is 6 St. James Avenue,
Boston, Massachusetts 02116.
DISTRIBUTION AND SERVICE PLAN
Pursuant to the terms of the Trust's Distribution and Service Plan pursuant to
Rule 12b-1 under the 1940 Act (the "Plan"), each Fund shall pay SBDS service
fees equal on an annual basis up to 0.25% of each Fund's average daily
<PAGE>16
net assets as reimbursement for the costs of compensating Investment
Professionals for providing personal shareholder services and maintaining
shareholder accounts. In addition, each Fund shall pay SBDS a distribution fee
equal on an annual basis to 0.25% of each Fund's average daily net assets as
reimbursement for expenses incurred in connection with any activities primarily
intended to result in the sale of the Fund's shares, including, but not limited
to: printing of prospectuses, statements of additional information and reports
for other than existing shareholders; payment of asset-based sales charges or
commissions to Investment Professionals; costs of placing advertising in various
media; services of parties in formulating sales literature; and typesetting,
printing and distribution of sales literature. All costs and expenses in
connection with implementing and operating the Plan will be paid by each Fund,
subject to the 0.50% of net assets limitation. All costs and expenses associated
with preparing the Prospectuses and SAI and in connection with printing them for
and distributing them to existing shareholders and regulatory authorities, which
costs and expenses would not be considered distribution expenses for purposes of
the Plan, will also be paid by the Funds. To the extent expenses of SBDS under
the Plan in any fiscal year of the Trust exceed amounts payable under the Plan
during that year, those expenses may be reimbursed in a succeeding fiscal year;
however, no carrying charge or interest will be added to the amount of the
expense. Expenses incurred in connection with distribution activities will be
identified to each Fund or the other series of the Trust involved, although it
is anticipated that some activities may be conducted on a Trust-wide basis, with
the result that those activities will not be identifiable to any particular
series. In the latter case, expenses will be allocated among the series of the
Trust on the basis of their relative net assets.
CUSTODIAN AND TRANSFER AGENT
Bankers Trust acts as custodian of the assets of the Trust and serves as the
transfer agent (the "Transfer Agent") for the Trust under the Administration and
Services Agreement with the Trust.
ACCOUNT INFORMATION
TYPES OF ACCOUNTS
Read your Investment Professional's program materials in conjunction with this
Prospectus for details of services that may differ from those described in the
Prospectus and for additional fees that may apply. Some of the services and
features of this Prospectus may not be available to you. Certain features of the
Funds, such as minimum initial or subsequent investment amounts, may be modified
in these programs, and administrative charges may be imposed for the services
rendered.
The different ways to set up (register) your account with BT Advisor Funds are
listed below.
The account guidelines that follow may not apply to certain retirement accounts.
If your employer offers a Fund through a retirement program, contact your
employer for more information. Otherwise, call your Investment Professional
directly.
Ways to Set Up Your Account
Individual or Joint Tenant For your general investment needs
Individual accounts are owned by one person. Joint accounts can have two or more
owners (tenants). Joint accounts may be joint tenants in common or joint tenants
with rights of survivorship.
Retirement
To shelter your retirement from taxes
Retirement plans allow individuals to shelter investment income and capital
gains from current taxes. In addition, contributions to these accounts may be
tax deductible. Retirement accounts require special applications and typically
have lower minimums.
- Individual Retirement Accounts ("IRAs") allow anyone of legal age under 70
1/2 with earned income to invest up to $2,000 per tax year. Individuals can
also invest in a spouse's IRA if the spouse has earned income of less than
$250.
<PAGE>17
- Rollover IRAs retain special tax advantages for certain distributions from
employer sponsored retirement plans.
- Simplified Employee Pension Plans ("SEP-IRAs") provide small business
owners or those with self-employed income (and their eligible employees)
with many of the same advantages as a Keogh, but with fewer administrative
requirements.
- 401(k) Plans allow employees of corporations of all sizes to contribute a
percentage of their wages on a tax deferred basis. These accounts need to
be established by the trustee of the plan.
- Money Purchase/Profit Sharing Plans ("Keogh Plans") are tax deferred
pension accounts designated for employees of unincorporated businesses or
for persons who are self-employed.
Gifts or Transfers to a Minor (UGMA, UTMA)
To invest for a child's education or other future needs
These custodial accounts provide a way to give money to a child and obtain tax
benefits. An individual can give up to $10,000 a year per child without paying
federal gift tax. Depending on state laws, you can set up a custodial account
under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors
Act (UTMA). Contact your Investment Professional.
Trust
For money being invested by a trust
The trust must be established before an account can be opened.
Business or Organization
For investment needs of corporations, associations, partnerships, or other
groups
Contact your Investment Professional.
HOW TO BUY SHARES
Once each business day, two share prices are calculated for shares of each Fund:
the offering price and the NAV. The offering price includes a front-end sales
charge, which you pay when you buy shares of a Fund, unless you qualify for a
reduction or waiver as described on page __. When you buy shares at the offering
price, the Transfer Agent deducts the applicable sales charge and invests the
rest at NAV.
Shares are purchased at the next offering price or NAV, as applicable,
calculated after your investment is received and accepted. The offering price
and NAV are normally calculated at 4:00 p.m. Eastern time.
If you are placing your order through an Investment Professional, it is the
responsibility of your Investment Professional to transmit your order to buy
Shares to the Transfer Agent before 4:00 p.m. Eastern time.
The Transfer Agent must receive payment within three business days after an
order for Shares is placed; otherwise your purchase order may be canceled and
you could be held liable for resulting fees and/or losses.
Share certificates are not available for Shares of the Funds.
If you are new to BT Advisor Funds, complete and sign an account application and
mail it along with your check. If there is no account application accompanying
this Prospectus, call your Investment Professional.
If you already have money invested in a fund in the BT Family of Funds, you can:
- Mail an account application with a check,
- Wire money into your account,
- Open an account by exchanging from another fund in the BT Family of
Funds, or
- Contact your Investment Professional.
<PAGE>18
If you are investing through a tax-sheltered retirement plan, such as an IRA,
for the first time, you will need a special application. Contact your Investment
Professional for more information and a retirement account application.
- ------------------------------------------------------------------------------
Minimum Investments
To Open an Account $2,500
For retirement accounts $ 500
Through automatic investment plans $1,000
To Add to an Account $ 250
For retirement accounts $ 100
Through automatic investment plans $ 100
Minimum Balance $1,000
For retirement accounts None
For further information on opening an account, please consult your Investment
Professional or refer to the account application.
- ------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
To Open an Account To Add an Account
Phone your Investment Contact your Investment Professional. If Contact your Investment Professional or
Professional you are an existing Shareholder, you may call 1-800-730-1313. You may exchange from
exchange from another BT account with the another BT Advisor Funds account (or a fund
same registration, including name, in the BT Family of Funds) with same
address, and taxpayer ID number. registration, including name, address and
taxpayer ID number.
- --------------------------- ------------------------------------------- ---------------------------------------------
Mail Complete and sign the account Make your check payable to the complete
application. Make your check payable to name of the Fund of your choice. Indicate
the complete name of the Fund of your your Fund account number on your check and
choice. Mail to the appropriate address mail to the address printed on your account
indicated on the application. statement.
Exchange by mail:
Call your Investment Professional.
- --------------------------- ------------------------------------------- ---------------------------------------------
In Person Take your account application and check Take your check to your Investment
to your Investment Professional. Professional.
- --------------------------- ------------------------------------------- ---------------------------------------------
Wire Not available. Call your Investment Professional or wire
to:
Routing No.: 101003621
Attn: Bankers Trust/IFTC Universal Account
DDA No.: 75-27-314
</TABLE>
<PAGE>19
<TABLE>
<S> <C> <C>
FBO: (Account name)
(Account number)
Credit: Fund - Fund Number
Growth Fund - ______
Growth and Income Fund - _______
Specify the complete name of the fund of your choice, and
include your account number and your name.
- --------------------------- ------------------------------------------- ---------------------------------------------
Automatically Not available. Use the Systematic Investment Program.
Sign up for this service when opening your
account on your application, or call your
Investment Professional to begin the
program. The initial minimum investment in
this program is $1,000.
- --------------------------- ------------------------------------------- ---------------------------------------------
</TABLE>
HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by selling
(redeeming) some or all of your Shares. Your Shares shall be sold at the next
NAV calculated after an order is received by the Transfer Agent.
NAV is calculated at 4:00 p.m. Eastern time.
To sell Shares in a retirement account, your request must be made in writing,
except for exchanges to other eligible funds in the BT Family of Funds, which
can be requested by phone or in writing. For information on retirement
distributions contact your Investment Professional or call 1-800-677-7596.
If you are selling some but not all of your non-retirement account shares, leave
at least $1,000 worth of shares in the account to keep it open.
To sell shares by bank wire you will need to sign up for these services in
advance when completing your account application.
Certain requests must include a signature guarantee. It is designed to protect
you and Bankers Trust from fraud. Your request must be made in writing and
include a signature guarantee if any of the following situations apply:
- You wish to redeem more than $100,000 worth of Shares,
- Your account registration has changed within the last 30 days,
- The check is being mailed to a different address than the one on your
account (record address),
- The check is being made payable to someone other
than the account owner,
- The redemption proceeds are being transferred to a
BT account with a different registration, or
- You wish to have redemption proceeds wired to a non-predesignated
bank account.
You should be able to obtain a signature guarantee from a bank, broker, dealer,
credit union (if authorized under state law), securities exchange or
association, clearing agency, or savings association. A notary public cannot
provide a signature guarantee.
Selling Shares in Writing
Write a "letter of instruction" with:
<PAGE>20
- Your name,
- The Fund's name and Fund's number,
- Our Fund account number,
- The dollar amount or number of Shares to be redeemed and
- Any other applicable requirements listed in the following table.
Deliver your letter to your Investment Professional, or mail it to the following
address:
Bankers Trust Company
P.O. Box 419210
Kansas City, MO 64141-6210
overnight mailings:
Bankers Trust Company
210 West 10th Street, 8th Floor
Kansas City, MO 64105-1716
Unless otherwise instructed, the Transfer Agent will send a check to the record
address.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Additional Information About Selling Shares
<S> <C> <C>
Account Type Special Requirements
------------ --------------------
Phone your Investment All account types except retirement Maximum check request: $100,000
Professional
All account types You may exchange to other BT Advisor Funds
(or other funds in the BT Family of Funds)
if both accounts are registered with the
same name(s), address, and taxpayer ID
number.
- --------------------------- ------------------------------------------- ---------------------------------------------
Mail or in Person Individual, Joint Tenant, Sale The letter of instruction (with signature
Proprietorship, UGMA, UTMA guaranteed, if required) must be signed by
all persons required to sign for transactions,
exactly as their names appear on the account
and sent to your Investment Professional
or the Transfer Agent.
Retirement Account
The account owner should complete a
retirement distribution form. Contact your
Investment Professional or call 1-800-677-7596.
</TABLE>
<PAGE>21
<TABLE>
<S> <C> <C>
Trust The trustee must sign the letter indicating capacity
as trustee. If the trustee's name is not on the
account registration, provide a copy of the trust
document certified with the last 60 days.
Business or Organization At least one person authorized by corporate resolution to
act on the account must sign the letter.
Executor, Administrator, For instructions contact your Investment Professional or
Conservator/Guardian call 1-800-730-1313.
- --------------------------- ------------------------------------------- ---------------------------------------------
Wire All account types except retirement You must sign up for the wire feature
before using it. To verify that it is in
place, contact your Investment Professional
or call 1-800-730-1313. Minimum wire:
$1,000. Your wire redemption request must
be received by the Transfer Agent before
4:00 p.m. Eastern time for money to be
wired on the next business day.
- --------------------------- ------------------------------------------- ---------------------------------------------
</TABLE>
INVESTOR SERVICES
BT Advisor Funds provide a variety of services to help you manage your account.
Information Services
Statements and reports that your Investment Professional or the Transfer Agent
will send to you include the following:
- Confirmation statements (after every transaction that affects your account
balance, including distributions or your account registration)
- Account statements (quarterly)
- Financial reports (every six months)
To reduce expenses, only one copy of most financial reports will be mailed, even
if you have more than one account in the Fund. Call your Investment Professional
if you need additional copies of financial reports.
Transaction Services
Exchange privilege. You may sell your Shares and buy Shares of other funds in
the BT Family of Funds by telephone or in writing. The shares you exchange will
carry credit for any front-end sales charge you previously paid in connection
with their purchase.
Note that exchanges out of a Fund may be limited to four per calendar year and
that they may have tax consequences for you. For detail on policies and
restrictions governing exchanges including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see page 27.
<PAGE>22
Regular Investment Plans
Systematic Investment Program
To move money from your bank account to BT Advisor Funds
<TABLE>
<CAPTION>
Minimum Initial Minimum Subsequent Frequency Setting up or changing
- --------------- ------------------ --------- ----------------------
<S> <C> <C> <C>
$1,000 $100 Monthly, bimonthly, For a new account, complete the appropriate section
quarterly or on the application.
semi-annually
For existing accounts, call your Investment Professional for an
application.
To change the amount or frequency of your investment, contact your
Investment Professional directly or call 1-800-730-1313. Call at
least 10 business days prior to your next scheduled investment
date.
</TABLE>
Systematic Withdrawal Program lets you set up periodic redemptions from your
account. Because of the Shares' front-end charge, you may not want to set up a
systematic withdrawal plan during a period when you are buying Shares on a
regular basis.
<TABLE>
<CAPTION>
Minimum Frequency Setting up or changing
- ------- --------- ----------------------
<S> <C> <C>
$100 Monthly, quarterly, semi-annually, To establish call your Investment Professional or call
or annually 1-800-730-1313 after your account is open. The
accounts from which the withdrawals be processed must have a minimum
balance of $10,000.
</TABLE>
One easy way to pursue your financial goals is to invest monthly regularly. BT
Advisor Funds offer convenient services that let your transfer money into your
fund account, or between fund accounts automatically. While regular investment
plans do not guarantee a profit and will not protect you against loss in a
declining market, they can be an excellent way to invest for retirement, a
home, educational expenses, and other long-term financial goals. Certain
restrictions apply for retirement accounts. Call your Investment Professional
for more information.
Systematic Exchange Program
To move money from one fund in the BT Family of Funds to another
<TABLE>
<CAPTION>
Minimum Frequency Setting up or changing
- ------- --------- ----------------------
<S> <C> <C>
$100 Monthly, quarterly, semi-annually, To establish call your Investment Professional after
or annually both accounts are open.
To change the amount or frequency of your investment, contact your
Investment Professional directly or call 1-800-730-1313. Call at
least two business days prior to your next scheduled exchange date.
The account from which the exchanges are to be processed must have a
minimum balance of $10,000. The account into which the exchange is
being processed must have a minimum of $1,000.
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>23
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
Each Fund distributes substantially all of its net income and capital gains to
shareholders each year. Each Fund distributes capital gains annually. The Growth
Fund distributes dividends annually. The Growth and Income Fund distributes
dividends quarterly.
Distribution Options
When you open an account, specify on your account application how you want to
receive distributions. The Trust offers four options:
1. Reinvestment Option. Your dividend and capital gain distributions will be
automatically reinvested in additional Shares of the Fund. If you do not
indicate a choice on your application you will be assigned this option.
2. Income-Earned Option. Your capital gain distributions will be
automatically reinvested in additional Shares of the Fund, but you will be
sent a check for each dividend distribution.
3. Cash Option. You will be sent a check for your dividend and capital gain
distributions.
4. Automatic Dividends Program. Your dividend and capital gain distributions
be automatically invested in Shares of another fund in the BT Family of Funds
as long as minimums for that account are met.
If you select distribution option 2 or 3 and the U.S. Postal Service cannot
deliver your checks, or if your checks remain uncashed for six months, those
checks will be reinvested in your account at the current NAV and your election
may be converted to the Reinvestment Option. You may change distribution
option at anytime by notifying the Transfer Agent in writing.
Shares purchased through reinvestment of dividend and capital gain
distributions are not subject to a sales charge.
When each of the Funds deducts a distribution from its NAV, the reinvestment
price is the applicable Fund's NAV at the close of business that day.
Distribution checks will be mailed within seven days, or longer for a December
ex-dividend date.
Taxes
As with any investment, you should consider how an investment in the
Funds could affect you. Below are some of the Funds' tax implications. If your
account is not a tax-deferred retirement account beware of these tax
implications.
Taxes on Distributions. Distributions from the Funds are subject to federal
income tax and may also be subject to state or local taxes. Annual statements
as to the federal tax status of distributions, and distributions that are
attributable to state and local income and personal taxes, if applicable, will
be mailed to shareholders shortly after the end of the year. If living outside
the United States, your distributions from the Funds could also be taxed by
the country in which you reside.
For federal tax purposes, income and short-term capital gain distributions from
each of the Funds are taxed as dividends; long-term capital gain distributions
are taxed as long-term capital gains.
Mutual fund dividends from U.S. government securities are generally free from
state and local income taxes. However, particular states may limit this benefit,
and some types of securities, such as repurchase agreements and
<PAGE>24
some agency-backed securities, may not qualify for the benefit. In addition,
some states may impose intangible property taxes. You should consult your own
tax adviser for details and up-to-date information on the tax laws in your
state.
Distributions are taxable when they are paid, whether you take them in cash or
reinvest them. However, distributions declared in December and paid in January
are taxable as if they were paid on December 31.
Every January, the Transfer Agent will send the Internal Revenue Service (the
"IRS") a statement showing the taxable distributions paid to you in the
previous year.
For retirement accounts, if distributions for any taxable year following the
year in which the participant reaches age 70 1/2 are less than the "minimum
required distribution" for that taxable year, an excise tax may be imposed by
the IRS. The administrator, trustee or custodian of such a retirement account
will be responsible for reporting distributions from such accounts to the IRS.
Taxes on Transactions. Your redemptions, including exchanges, are subject to
capital gains tax. A capital gain or loss is the difference between the cost of
your Shares and the price you receive when you sell them.
Whenever you sell Shares of a Fund, the Transfer Agent will send you or your
Investment Professional a confirmation statement showing how many Shares you
sold and at what price. You also receive a consolidated transaction statement at
least quarterly. However, it is up to you or your tax preparer to determine
whether this sale resulted in a capital gain and, if so, the amount of tax to be
paid. BE SURE TO KEEP YOUR REGULAR ACCOUNT STATEMENTS; the information they
contain will be essential in calculating the amount of your capital gains.
"Buying a dividend." If you buy Shares just before a Fund deducts a capital gain
distribution or dividend distribution, as applicable, from its NAV, you will pay
the full price for the Shares and then receive a portion of the price back in
the form of a taxable distribution.
Currency considerations. If a Fund's dividends exceed its taxable income in any
year, which is sometimes the result of currency-related losses, all or a portion
of the Fund's dividends may be treated as a return of capital to shareholders
for tax purposes. To minimize the risk of a return of capital, each of the Funds
may adjust its dividends to take currency fluctuations into account, which may
cause the dividends to vary. Any return of capital will reduce the cost basis of
your Shares, which will result in a higher reported capital gain or a lower
reported capital loss when you sell your Shares. The statement you receive in
January will specify whether any distributions included a return of capital.
Undistributed net gains from currency transactions, if any, will generally be
distributed as a separate dividend in December.
There are tax requirements that all Funds must follow in order to avoid federal
taxation. In its effort to adhere to these requirements, a Fund may have to
limit its investment activity in some types of instruments.
VALUATION DETAILS
The Funds are open for business each day the NYSE is open. Each Fund's NAV and
offering price, as applicable, is calculated as of the close of regular trading
on the NYSE, currently 4:00 p.m. Eastern time.
A Fund's NAV is the net asset value of a single Share. The NAV is computed by
dividing the value of the Fund's Assets, less all liabilities, by the total
number of its Shares outstanding. Each Fund's securities and other assets are
valued primarily on the basis of market quotations or, if quotations are not
readily available, by Bankers Trust pursuant to procedures adopted by the
Trust's Board of Trustees. These procedures require Bankers Trust to value such
a security at the same value as an equivalent security which is readily
marketable and, in making such comparisons, to consider all relevant factors
under applicable guidelines of the SEC.
<PAGE>25
The offering price (price to buy one Share) is the applicable Fund's NAV, plus a
sales charge. The Funds have a maximum sales charge of 4.75% of the offering
price.
Sales Charges and Investment Professional Concessions
<TABLE>
<CAPTION>
Amount Invested
Investment
Sales Charge Professional
as a % of Concession as
Offering Price Net Amount % of Offering Price
Invested
...................................................... ................. .................... .......................
<S> <C> <C> <C>
Less than $50,000 4.75% 4.99% 4.00%
$50,000 to less than $100,000 4.50 4.71 4.00
$100,000 to less than $250,000 3.50 3.63 3.00
$250,000 to less than $500,000 2.50 2.56 2.00
$500,000 to less than $1 million 2.00 2.04 1.75
$1 million or more None None See Below(a)
<FN>
(a)Investment Professionals will be compensated with a fee (based on average
assets) of 1.00% for purchase amounts of $1 million to $3 million of assets,
0.50% on the next $3 million to $20 million of assets and 0.15% for assets over
$20 million. Assets must remain in the Fund(s) for a period of 18 uninterrupted
months, or the Investment Professional will be required to refund this fee to
SBDS. If the assets are exchanged into a BT Advisor Fund which does not have a
sales charge within the 18 month period, the Investment Professional will be
required to refund this fee.
</TABLE>
- ------------------------------------------------------------------------------
Reinstatement Privilege. If an investor sold all or part of their Shares of a
Fund, they may reinvest an amount equal to all or a portion of the redemption
proceeds in the same Fund or another BT Advisor Fund, without paying any sales
charge, at the NAV next determined after receipt of the investment order,
provided that such reinvestment is made within 30 days of redemption. An
investor must reinstate his or her Shares into an account with the same
registration. This privilege may be exercised only once by a shareholder with
respect to a Fund and certain restrictions may apply.
When an investor signs an account application, he or she will be asked to
certify that his or her social security or taxpayer identification number is
correct and that he or she is not subject to 31% backup withholding for failing
to report income to the IRS. If an investor violates IRS regulations, the IRS
can require a Fund to withhold 31% of the investor's taxable distributions and
redemptions.
An investor may initiate many transactions by telephone: An Investment
Professional or the Transfer Agent may only be liable for losses resulting from
unauthorized transactions if they do not follow reasonable procedures designed
to verify the identity of the caller. An Investment Professional or the Transfer
Agent will request personalized security codes or other information, and may
also record calls. An investor should verify the accuracy of the confirmation
statements immediately after receipt. If investors do not want the ability to
redeem and exchange by telephone, they should call their Investment Professional
or the Transfer Agent for instructions. Additional documentation may be required
from corporations, associations and certain fiduciaries.
Each Fund reserves the right to suspend the offering of Shares for a period of
time. Each Fund also reserves the right to reject any specific purchase order,
including certain purchases by exchange. Purchase orders may be refused if, in
Bankers Trust's opinion, they would disrupt management of a Fund.
When investors place an order to buy Shares, their Shares will be purchased at
the next NAV or offering price, as applicable, calculated after the order is
received and accepted by the Transfer Agent. Note the following:
<PAGE>26
- All checks should be made payable to the specific Fund.
- All purchases must be made in U.S. dollars and checks must be drawn on
U.S. banks.
- The Funds do not accept third-party checks, except those payable to an
existing shareholder who is a natural person (not a corporation or
partnership), credit cards or cash.
- When making a purchase with more than one check, each check must have a
value of at least $50.
- Each Fund reserves the right to limit the number of checks processed at
one time.
- If a check does not clear, the purchase will be canceled and the
investor could be liable for any losses or fees a Fund or the Transfer
Agent has incurred.
- When purchase orders are made by check or periodic automatic investment,
redemptions will not be allowed until the investment being redeemed has
been in the account for 15 business days.
- Direct Purchases: Investors begin to earn dividends as of the business
day following the day the Fund receives payment.
- Automated Order Purchases: Investors begin to earn dividends as of the
business day your order is received and accepted.
Automated Orders Purchase. Shares of the Funds can be purchased or sold
through Investment Professionals utilizing an automated order placement and
settlement system that guarantees payment for orders on a specified date.
To avoid the collection period associated with check purchases, consider
buying Shares by bank wire, U.S. Postal money order, U.S. Treasury check, or
Federal Reserve check.
When investors place an order to sell Shares, Shares will be sold at the next
NAV calculated after the order is received and accepted. Note the following:
- Normally, redemption proceeds will be mailed on the next business day,
but if making immediate payment could adversely affect a Fund it may
take up to seven days to pay you.
- Shares of the Funds will earn dividends through the date of redemption;
however, Shares redeemed on a Friday or prior to a holiday will continue
to earn dividends until the next business day.
- Each Fund may hold payment on redemptions until it is reasonably
satisfied that investments made by check have been collected which can
take up to seven business days.
- Redemptions may be suspended or payment dates postponed when the NYSE is
closed (other than weekends or holidays), when trading on the NYSE is
restricted, or as permitted by the SEC.
The Transfer Agent reserves the right to deduct an annual maintenance fee of
$12.00 from accounts with a value of less than $2,500 (including any amount paid
as a sales charge). The fee, which is payable to the Transfer Agent, is designed
to offset in part the relatively higher costs of servicing smaller accounts.
If a non-retirement account balance falls below $1,000, the investor will be
given 30 days' notice to reestablish the minimum balance. If the investor does
not increase his or her balance, the Transfer Agent reserves the right to close
the account and send the proceeds to the investor. Shares will be redeemed at
the NAV on the day the account is closed.
<PAGE>27
The Transfer Agent may charge a fee for special services, such as providing
historical account documents, that are beyond the normal scope of its services.
EXCHANGE LIMITATIONS
As a shareholder, you have the privilege of exchanging Shares of a Fund for
Shares of other funds in the BT Family of Funds. However, investors should note
the following:
- The Fund an investor exchanges into must be registered for sale in his
or her state.
- Investors may only exchange between accounts that are registered in the
same name, address, and taxpayer identification number.
- Before exchanging into a Fund, investors should read its Prospectus.
- Exchanges between the Funds described in this Prospectus and Funds
described in other BT Funds' prospectuses are restricted during the 90
days following purchase. Exchanges among the Funds described in this
Prospectus are permitted at any time after purchase.
- Exchanges may have tax consequences for you.
- Because excessive trading can hurt Fund performance and shareholders,
each Fund reserves the right to temporarily or permanently terminate the
exchange privilege of any investor who makes more than four exchanges out
of the Fund per calendar year. Accounts under common ownership or
control, including accounts with the same taxpayer identification
number, will be counted together for purposes of the four exchange limit.
- Each Fund reserves the right to refuse exchange purchases by any person
or group if, in Bankers Trust's judgment, the Fund would be unable to
invest the money effectively in accordance with its investment objective
and policies, or would otherwise potentially be adversely affected.
- Exchanges may be restricted or refused if a Fund receives or anticipates
simultaneous orders affecting significant portions of the Fund's assets.
In particular, a pattern of exchanges that coincide with a "market
timing" strategy may be disruptive to a Fund.
- Although the Funds will attempt to give prior notice whenever they are
reasonably able to do so, they may impose these restrictions at any time.
The Funds reserve the right to terminate or modify the exchange privilege
in the future on 60 days' notice to shareholders.
SALES CHARGE REDUCTIONS AND WAIVERS
The front-end sales charge will be reduced for purchases of shares according to
the Sales Charge Schedule shown on page 25 if your purchase qualifies for one of
the following reduction plans.
The following programs are available for front-end sales charge reduction.
Quantity Discounts apply to purchases of Shares of a single Fund or to
combined purchases of Shares of other BT Advisor Funds, including Funds in
this Prospectus and in any other BT Advisor Funds' prospectus. (Minimum
investment is $50,000).
<PAGE>28
To qualify for a Quantity Discount, investing in a Fund's Shares for several
accounts at the same time will be considered a single transaction (Combined
Purchase), as long as Shares are purchased through one Investment Professional
and the total is at least $50,000.
Rights of Accumulation let you determine your front-end sales charge on a Fund's
Shares by adding to your new purchase the value of all of BT Advisor Fund Shares
including Funds in this Prospectus and in any other BT Advisor Funds' prospectus
held by you, your spouse, and your children under age 21.
A Letter of Intent lets you receive the same reduced front-end sales charge on
purchases of Shares made during a 13-month period as if the total amount
invested during the period in BT Advisor Funds in this Prospectus and in any BT
Advisor Funds' prospectus had been invested in a single lump sum (see "Quantity
Discounts" above). You must file your non-binding Letter within 90 days of the
start of your purchases. Your initial investment must be at least 5% of the
amount you plan to invest. Out of the initial investment, 5% of the dollar
amount specified in the Letter will be registered in your name and held in
escrow. You will earn income dividends and capital gain distributions on
escrowed Shares. Neither income dividends nor capital gain distributions
reinvested in additional Shares will apply toward completion of the Letter. The
escrow will be released when your purchase of the total amount has been
completed. You are not obligated to complete the Letter, and in such a case,
sufficient escrowed Shares will be redeemed to pay any applicable front-end
sales charges.
As front-end sales charge will not apply to the following Shares:
1. Purchased by an existing Bankers Trust investment management client;
2. Purchased by a bank trust officer, registered representative, or other
employee (or a member of one of their immediate families) of Investment
Professionals having agreements with SBDS or Bankers Trust;
3. Purchased by a current or former trustee or officer of a BT Fund or a
current or retired officer, director or regular employee of Bankers Trust
or its direct or indirect subsidiaries (a Bankers Trust trustee or
employee), the spouse of a Bankers Trust trustee or employee, a Bankers
Trust trustee or employee acting as custodian for a minor child, or a
person acting as trustee of a trust for the sole benefit of the minor
child of a Bankers Trust trustee or employee;
4. Purchased by a charitable organization (as defined in Section 501(c)(3)
of the Internal Revenue Code) investing $100,000 or more;
5. Purchased for a charitable remainder trust or life income pool
established for the benefit of a charitable organization (as defined in
Section 501(c)(3) of the Internal Revenue Code);
6. Purchased by a trust institution or bank trust department investing on
its own behalf or on behalf of its clients;
7. Purchased in an account for which an Investment Professional, bank,
broker-dealer or financial advisor charges an asset management fee,
provided the Investment Professional's bank, broker-dealer or financial
advisor has an agreement with SBDS or Bankers Trust;
8. Purchased as part of an employee benefit plan having more than 200
eligible employees or a minimum of $1 million of plan assets;
9. Purchased for any state, county, or city, or any governmental
instrumentality, department, authority or agency;
10. Purchased with redemption proceeds from other mutual fund complexes on
which you have previously paid a front-end sales charge;
11. Purchased as part of an IRA, 401(k) or other retirement plan rollover;
or
<PAGE>29
12. Purchased as an exchange from any Fund in this Prospectus or in any other
BT Fund's prospectus.
ADDITIONAL INFORMATION ABOUT THE FUNDS
A mutual fund is an investment vehicle that pools shareholders' money and
invests it toward a specified goal. Each Fund is a separate diversified series
of BT Advisor Funds, a Massachusetts business trust, an open-end, diversified
management investment company consisting of twelve funds, with an unlimited
number of authorized shares of beneficial interest which may be divided without
shareholder approval into additional classes of shares having such preferences
and special or relative rights and privileges as the Board of Trustees
determines. The Growth Fund and the Growth and Income Fund are each divided into
two classes. Only the Intermediary Shares of each Fund are offered by this
prospectus. Each Fund also offers another class of shares which may have
different expenses and no sales charges. Because of these differences, the
investment performance of the classes may vary. For more information, including
your eligibility to purchase the other class of shares, contact your Investment
Professional or call Bankers Trust at (800) 730-1313. The Trust reserves the
right to add additional series in the future. The Trust also reserves the right
to issue more than one class of shares of each Fund.
The Trust may hold special meetings and mail proxy materials. These meetings may
be called to elect or remove trustees, change fundamental policies, approve a
Fund's investment advisory agreement, or for other purposes. Shareholders not
attending these meetings are encouraged to vote by proxy. The Trust's Transfer
Agent will mail proxy materials in advance, including a voting card and
information about the proposals to be voted on.
When matters are submitted for shareholder vote, shareholders of each Fund will
have one vote for each full share held and proportionate, fractional votes for
fractional shares held. A separate vote of one of the Funds is required on any
matter affecting only that Fund on which shareholders are entitled to vote.
Shareholders of a Fund are not entitled to vote on Trust matters that do not
affect that Fund and do not require a separate vote of the Fund. All series of
the Trust will vote together on certain matters, such as electing trustees or
approving independent public auditors. There normally will be no meetings of
shareholders for the purpose of electing Trustees unless and until such time as
less than a majority of Trustees holding office have been elected by
shareholders, at which time the Trustees then in office will call a
shareholder's meeting for the election of Trustees. Any Trustee may be removed
from office upon the vote of shareholders holding at least two-thirds of the
Trust's outstanding shares at a meeting called for that purpose. The Trustees
are required to call such a meeting upon the written request of shareholders
holding at least 10% of the Trust's outstanding shares. The Trust will also
assist shareholders in communicating with one another as provided for in the
1940 Act.
Shareholders of all of the series of the Trust will, however, vote together to
elect Trustees of the Trust and for certain other matters. Under certain
circumstances, the shareholders of one or more series could control the outcome
of these votes.
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a business trust may,
under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
<PAGE>30
Investment Adviser and Administrator
BANKERS TRUST COMPANY
Distributor
SIGNATURE BROKER-DEALER SERVICES, INC.
Custodian and Transfer Agent
BANKERS TRUST COMPANY
Independent Accountants
COOPERS & LYBRAND L.L.P.
Counsel
WILLKIE FARR & GALLAGHER
-------------------------------------------
No person has been authorized to give any information or to make any
representations other than those contained in the Trust's Prospectuses, its
Statements of Additional Information or the Trust's official sales literature
in connection with the offering of the Trust's shares and, if given or made,
such other information or representations must not be relied on as having been
authorized by the Trust. This Prospectus does not constitute an offer in any
state in which, or to any person to whom, such offer may not lawfully be made.
-------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE A
PROSPECTUS.
<PAGE>1
Subject to Completion, dated August 1, 1996
STATEMENT OF
ADDITIONAL INFORMATION
, 1996
BT ADVISOR FUNDS
GROWTH FUND
GROWTH AND INCOME FUND
BT Advisor Funds (the "Trust") is an open-end management
investment company which is comprised of twelve funds each having distinct
investment objectives and policies. The funds listed above (each, a "Fund") are
each a series of the Trust that offers two classes of shares, the Investment
Class and the Intermediary Class (each, a "Class" and collectively the
"Classes"). This Statement of Additional Information describes the shares of the
Classes of the Funds.
TABLE OF CONTENTS
- -----------------
Page
----
RISK FACTORS AND CERTAIN SECURITIES
AND INVESTMENT POLICIES....................................................4
PERFORMANCE INFORMATION....................................................25
VALUATION OF SECURITIES; REDEMPTIONS
AND PURCHASES IN KIND.....................................................26
MANAGEMENT OF THE TRUST....................................................28
ORGANIZATION OF THE TRUST..................................................34
TAXATION...................................................................35
FINANCIAL STATEMENTS.......................................................38
APPENDIX..................................................................A-1
The Classes are offered for sale by Signature Broker-Dealer
Services, Inc. ("Signature"), the Trust's Distributor, to clients and customers
(including affiliates and correspondents) of Bankers Trust Company ("Bankers
Trust"), the Funds' Adviser, and to clients and customers of other
organizations.
This Statement of Additional Information is not a
prospectus and is only authorized for distribution when preceded
<PAGE>2
or accompanied by either the Investment Class' Prospectus or the Intermediary
Class' Prospectus, both dated , 1996. The Prospectus provides the
basic information investors should know before investing and may be obtained
without charge by calling the Trust at the telephone number listed below or by
contacting an Investment Professional or any Service Agent. This Statement of
Additional Information, which is not a Prospectus, is intended to provide
additional information regarding the activities and operations of the Trust
and should be read in conjunction with the Funds' Prospectus. This Statement
of Additional Information is not an offer of any Fund for which an investor
has not received a Prospectus. Capitalized terms not otherwise defined in this
Statement of Additional Information have the meanings accorded to them in the
Funds' Prospectus.
BANKERS TRUST COMPANY
INVESTMENT ADVISER AND ADMINISTRATOR
SIGNATURE BROKER-DEALER SERVICES, INC.
DISTRIBUTOR
6 St. James Avenue, Boston, Massachusetts 02116 (800) 730-1313
<PAGE>3
RISK FACTORS AND CERTAIN SECURITIES AND INVESTMENT POLICIES
Investment Objectives
The investment objective(s) of each Fund is described in the
Funds' Prospectus. There can, of course, be no assurance that any Fund will
achieve its investment objective(s).
Investment Policies
Certificates of Deposit and Bankers' Acceptances. Certificates
of deposit are receipts issued by a depository institution in exchange for the
deposit of funds. The issuer agrees to pay the amount deposited plus interest to
the bearer of the receipt on the date specified on the certificate. The
certificate usually can be traded in the secondary market prior to maturity.
Bankers' acceptances typically arise from short-term credit arrangements
designed to enable businesses to obtain funds to finance commercial
transactions. Generally, an acceptance is a time draft drawn on a bank by an
exporter or an importer to obtain a stated amount of funds to pay for specific
merchandise. The draft is then "accepted" by a bank that, in effect,
unconditionally guarantees to pay the face value of the instrument on its
maturity date. The acceptance may then be held by the accepting bank as an
earning asset or it may be sold in the secondary market at the going rate of
discount for a specific maturity. Although maturities for acceptances can be as
long as 270 days, most acceptances have maturities of six months or less.
Commercial Paper. Commercial paper consists of short-term
(usually from 1 to 270 days) unsecured promissory notes issued by corporations
in order to finance their current operations. A variable amount master demand
note (which is a type of commercial paper) represents a direct borrowing
arrangement involving periodically fluctuating rates of interest under a letter
agreement between a commercial paper issuer and an institutional lender pursuant
to which the lender may determine to invest varying amounts.
For a description of commercial paper ratings, see the
Appendix to this Statement of Additional Information.
Illiquid Securities. Historically, illiquid securities have
included securities subject to contractual or legal restrictions on resale
because they have not been registered under the Securities Act of 1933, as
amended (the "1933 Act"), securities which are otherwise not readily marketable
and repurchase agreements having a maturity of longer than seven days.
Securities which have not been registered under the 1933 Act are referred to as
private placements or restricted securities and are purchased directly from the
issuer or in the
<PAGE>4
secondary market. Mutual funds do not typically hold a significant amount of
these restricted or other illiquid securities because of the potential for
delays on resale and uncertainty in valuation. Limitations on resale might
have an adverse effect on the marketability of portfolio securities and a
mutual fund might be unable to dispose of restricted or other illiquid
securities promptly or at reasonable prices and might thereby experience
difficulty satisfying redemptions within seven days. A mutual fund might also
have to register such restricted securities in order to dispose of them
resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities.
In recent years, however, a large institutional market has
developed for certain securities that are not registered under the 1933 Act,
including repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale of such investments to the
general public or to certain institutions may not be indicative of their
liquidity.
The Securities and Exchange Commission (the "SEC") has adopted
Rule 144A, which allows a broader institutional trading market for securities
otherwise subject to restrictions on their resale to the general public. Rule
144A establishes a "safe harbor" from the registration requirements of the 1933
Act of resales of certain securities to qualified institutional buyers. The
Adviser anticipates that the market for certain restricted securities such as
institutional commercial paper will expand further as a result of this
regulation and the development of automated systems for the trading, clearance
and settlement of unregistered securities of domestic and foreign issuers, such
as the PORTAL System sponsored by the National Association of Securities
Dealers, Inc.
The Adviser will monitor the liquidity of Rule 144A securities
in each Fund's portfolio under the supervision of the Trust's Board of Trustees.
In reaching liquidity decisions, the Adviser will consider, among other things,
the following factors: (1) the frequency of trades and quotes for the security;
(2) the number of dealers and other potential purchasers wishing to purchase or
sell the security; (3) dealer undertakings to make a market in the security; and
(4) the nature of the security and of the marketplace trades (e.g., the time
needed to dispose of the security, the method of soliciting offers and the
mechanics of the transfer).
Short-Term Instruments. When a Fund experiences large
cash inflows through the sale of securities and desirable equity
<PAGE>5
securities, that are consistent with the Fund's investment objective, which
are unavailable in sufficient quantities or at attractive prices, the Fund may
hold short-term investments for a limited time pending availability of such
equity securities. Short-term instruments consist of foreign and domestic: (i)
short-term obligations of sovereign governments, their agencies,
instrumentalities, authorities or political subdivisions; (ii) other
short-term debt securities rated AA or higher by S&P or Aa or higher by
Moody's or, if unrated, of comparable quality in the opinion of Bankers Trust;
(iii) commercial paper; (iv) bank obligations, including negotiable
certificates of deposit, time deposits and banker's acceptances; and (v)
repurchase agreements. At the time the Fund invests in commercial paper, bank
obligations or repurchase agreements, the issuer of the issuer's parent must
have outstanding debt rated AA or higher by S&P or Aa or higher by Moody's or
outstanding commercial paper or bank obligations rated A-1 by S&P or Prime-1
by Moody's; or, if no such ratings are available, the instrument must be of
comparable quality in the opinion of Bankers Trust. These instruments may be
denominated in U.S. dollars or in foreign currencies.
Futures Contracts and Options on Futures Contracts
General. The successful use of such instruments draws upon the
Adviser's skill and experience with respect to such instruments and usually
depends on the Adviser's ability to forecast interest rate and currency exchange
rate movements correctly. Should interest or exchange rates move in an
unexpected manner, a Fund may not achieve the anticipated benefits of futures
contracts or options on futures contracts or may realize losses and thus will be
in a worse position than if such strategies had not been used. In addition, the
correlation between movements in the price of futures contracts or options on
futures contracts and movements in the price of the securities and currencies
hedged or used for cover will not be perfect and could produce unanticipated
losses.
Successful use of the futures contract and related options are
subject to special risk considerations. A liquid secondary market for any
futures or options contract may not be available when a futures or options
position is sought to be closed. In addition, there may be an imperfect
correlation between movements in the securities or currency in the Fund.
Successful use of futures or options contracts are further dependent on Bankers
Trust's ability to correctly predict movements in the securities or foreign
currency markets and no assurance can be given that its judgment will be
correct. Successful use of options on securities or stock indices are subject to
similar risk considerations. In addition, by writing covered call options, the
Fund gives up the opportunity, while the option is in effect, to profit from any
price increase in the underlying securities above the options exercise price.
<PAGE>6
Futures Contracts. A Fund may enter into contracts for the
purchase or sale for future delivery of fixed-income securities, foreign
currencies, or contracts based on financial indices including any index of U.S.
Government securities, foreign government securities or corporate debt
securities. U.S. futures contracts have been designed by exchanges which have
been designated "contracts markets" by the Commodity Futures Trading Commission
("CFTC"), and must be executed through a futures commission merchant, or
brokerage firm, which is a member of the relevant contract market. Futures
contracts trade on a number of exchange markets, and, through their clearing
corporations, the exchanges guarantee performance of the contracts as between
the clearing members of the exchange. A Fund may enter into futures contracts
which are based on debt securities that are backed by the full faith and credit
of the U.S. Government, such as long-term U.S. Treasury Bonds, Treasury Notes,
GNMA modified pass-through mortgage-backed securities and three-month U.S.
Treasury Bills. A Fund may also enter into futures contracts which are based on
bonds issued by entities other than the U.S. Government.
At the same time a futures contract is purchased or sold, the
Fund must allocate cash or securities as a deposit payment ("initial deposit").
It is expected that the initial deposit would be approximately 1 1/2% to 5% of a
contract's face value. Daily thereafter, the futures contract is valued and the
payment of "variation margin" may be required, since each day the Fund would
provide or receive cash that reflects any decline or increase in the contract's
value.
At the time of delivery of securities pursuant to such a
contract, adjustments are made to recognize differences in value arising from
the delivery of securities with a different interest rate from that specified in
the contract. In some (but not many) cases, securities called for by a futures
contract may not have been issued when the contract was written.
Although futures contracts by their terms call for the actual
delivery or acquisition of securities, in most cases the contractual obligation
is fulfilled before the date of the contract without having to make or take
delivery of the securities. The offsetting of a contractual obligation is
accomplished by buying (or selling, as the case may be) on a commodities
exchange an identical futures contract calling for delivery in the same month.
Such a transaction, which is effected through a member of an exchange, cancels
the obligation to make or take delivery of the securities. Since all
transactions in the futures market are made, offset or fulfilled through a
clearinghouse associated with the exchange on which the contracts are traded,
the Fund will incur brokerage fees when it purchases or sells futures contracts.
The purpose of the acquisition or sale of a futures contract,
in the case of a Fund which holds or intends to acquire
<PAGE>7
fixed-income securities, is to attempt to protect the Fund from fluctuations
in interest or foreign exchange rates without actually buying or selling
fixed-income securities or foreign currencies. For example, if interest rates
were expected to increase, the Fund might enter into futures contracts for the
sale of debt securities. Such a sale would have much the same effect as
selling an equivalent value of the debt securities owned by the Fund. If
interest rates did increase, the value of the debt security in the Fund's
portfolio would decline, but the value of the futures contracts to the Fund
would increase at approximately the same rate, thereby keeping the net asset
value of the Fund from declining as much as it otherwise would have. The Fund
could accomplish similar results by selling debt securities and investing in
bonds with short maturities when interest rates are expected to increase.
However, since the futures market is more liquid than the cash market, the use
of futures contracts as an investment technique allows the Fund to maintain a
defensive position without having to sell its portfolio securities.
Similarly, when it is expected that interest rates may
decline, futures contracts may be purchased to attempt to hedge against
anticipated purchases of debt securities at higher prices. Since the
fluctuations in the value of futures contracts should be similar to those of
debt securities, a Fund could take advantage of the anticipated rise in the
value of debt securities without actually buying them until the market had
stabilized. At that time, the futures contracts could be liquidated and the Fund
could then buy debt securities on the cash market. To the extent a Fund enters
into futures contracts for this purpose, the assets in the segregated asset
account maintained to cover the Fund's obligations with respect to such futures
contracts will consist of cash, cash equivalents or high quality liquid
securities from its portfolio in an amount equal to the difference between the
fluctuating market value of such futures contracts and the aggregate value of
the initial and variation margin payments made by the Fund with respect to such
futures contracts.
The ordinary spreads between prices in the cash and futures
market, due to differences in the nature of those markets, are subject to
distortions. First, all participants in the futures market are subject to
initial deposit and variation margin requirements. Rather than meeting
additional variation margin requirements, investors may close futures contracts
through offsetting transactions which could distort the normal relationship
between the cash and futures markets. Second, the liquidity of the futures
market depends on participants entering into offsetting transactions rather than
making or taking delivery. To the extent participants decide to make or take
delivery, liquidity in the futures market could be reduced, thus producing
distortion. Third, from the point of view of speculators, the margin deposit
requirements in the futures market are less onerous than margin requirements in
the securities market. Therefore, increased participation by
<PAGE>8
speculators in the futures market may cause temporary price distortions. Due
to the possibility of distortion, a correct forecast of general interest rate
trends by the Adviser may still not result in a successful transaction.
In addition, futures contracts entail risks. Although the
Adviser believes that use of such contracts will benefit the Funds, if the
Adviser's investment judgment about the general direction of interest rates is
incorrect, a Fund's overall performance would be poorer than if it had not
entered into any such contract. For example, if a Fund has hedged against the
possibility of an increase in interest rates which would adversely affect the
price of debt securities held in its portfolio and interest rates decrease
instead, the Fund will lose part or all of the benefit of the increased value of
its debt securities which it has hedged because it will have offsetting losses
in its futures positions. In addition, in such situations, if a Fund has
insufficient cash, it may have to sell debt securities from its portfolio to
meet daily variation margin requirements. Such sales of bonds may be, but will
not necessarily be, at increased prices which reflect the rising market. A Fund
may have to sell securities at a time when it may be disadvantageous to do so.
Options on Futures Contracts. Each Fund may purchase and write
options on futures contracts for hedging purposes. The purchase of a call option
on a futures contract is similar in some respects to the purchase of a call
option on an individual security. Depending on the pricing of the option
compared to either the price of the futures contract upon which it is based or
the price of the underlying debt securities, it may or may not be less risky
than ownership of the futures contract or underlying debt securities. As with
the purchase of futures contracts, when a Fund is not fully invested it may
purchase a call option on a futures contract to hedge against a market advance
due to declining interest rates.
The writing of a call option on a futures contract constitutes
a partial hedge against declining prices of the security or foreign currency
which is deliverable upon exercise of the futures contract. If the futures price
at expiration of the option is below the exercise price, a Fund will retain the
full amount of the option premium which provides a partial hedge against any
decline that may have occurred in the Fund's portfolio holdings. The writing of
a put option on a futures contract constitutes a partial hedge against
increasing prices of the security or foreign currency which is deliverable upon
exercise of the futures contract. If the futures price at expiration of the
option is higher than the exercise price, the Fund will retain the full amount
of the option premium which provides a partial hedge against any increase in the
price of securities which the Fund intends to purchase. If a put or call option
the Fund has written is exercised, the Fund will incur a loss which will be
reduced by the amount of the premium it
<PAGE>9
receives. Depending on the degree of correlation between changes in the value
of its portfolio securities and changes in the value of its futures positions,
the Fund's losses from existing options on futures may to some extent be
reduced or increased by changes in the value of portfolio securities.
The purchase of a put option on a futures contract is similar
in some respects to the purchase of protective put options on portfolio
securities. For example, a Fund may purchase a put option on a futures contract
to hedge its portfolio against the risk of rising interest rates.
The amount of risk a Fund assumes when it purchases an option
on a futures contract is the premium paid for the option plus related
transaction costs. In addition to the correlation risks discussed above, the
purchase of an option also entails the risk that changes in the value of the
underlying futures contract will not be fully reflected in the value of the
option purchased.
The Board of Trustees of the Trust has adopted the requirement
that futures contracts and options on futures contracts be used as a hedge and a
Fund may also use stock index futures on a continual basis to equitize cash so
that the Fund may maintain 100% equity exposure. In addition to this
requirement, the Board of Trustees of the Trust has also adopted a restriction
that each Fund will not enter into any futures contracts or options on futures
contracts if immediately thereafter the amount of margin deposits on all the
futures contracts of the Fund and premiums paid on outstanding options on
futures contracts owned by the Fund would exceed 5% of the market value of the
total assets of the Fund.
Options On Foreign Currencies. Each Fund may purchase and
write options on foreign currencies for hedging purposes in a manner similar to
that in which futures contracts on foreign currencies, or forward contracts,
will be utilized. For example, a decline in the dollar value of a foreign
currency in which portfolio securities are denominated will reduce the dollar
value of such securities, even if their value in the foreign currency remains
constant. In order to protect against such diminutions in the value of portfolio
securities, the Fund may purchase put options on the foreign currency. If the
value of the currency does decline, a Fund will have the right to sell such
currency for a fixed amount in dollars and will thereby offset, in whole or in
part, the adverse effect on its portfolio which otherwise would have resulted.
Conversely, where a rise in the dollar value of a currency in
which securities to be acquired are denominated is projected, thereby increasing
the cost of such securities, the Fund may purchase call options thereon. The
purchase of such options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other types of options,
however, the benefit to the Fund deriving from
<PAGE>10
purchases of foreign currency options will be reduced by the amount of the
premium and related transaction costs. In addition, where currency exchange
rates do not move in the direction or to the extent anticipated, the Fund
could sustain losses on transactions in foreign currency options which would
require it to forego a portion or all of the benefits of advantageous changes
in such rates.
Each Fund may write options on foreign currencies for the same
types of hedging purposes. For example, where a Fund anticipates a decline in
the dollar value of foreign currency denominated securities due to adverse
fluctuations in exchange rates it could, instead of purchasing a put option,
write a call option on the relevant currency. If the expected decline occurs,
the options will most likely not be exercised, and the diminution in value of
portfolio securities will be offset by the amount of the premium received.
Similarly, instead of purchasing a call option to hedge
against an anticipated increase in the dollar cost of securities to be acquired,
the Fund could write a put option on the relevant currency which, if rates move
in the manner projected, will expire unexercised and allow the Fund to hedge
such increased cost up to the amount of the premium. As in the case of other
types of options, however, the writing of a foreign currency option will
constitute only a partial hedge up to the amount of the premium, and only if
rates move in the expected direction. If this does not occur, the option may be
exercised and the Fund would be required to purchase or sell the underlying
currency at a loss which may not be offset by the amount of the premium. Through
the writing of options on foreign currencies, the Fund also may be required to
forego all or a portion of the benefits which might otherwise have been obtained
from favorable movements in exchange rates.
Each Fund intends to write covered call options on foreign
currencies. A call option written on a foreign currency by a Fund is "covered"
if the Fund owns the underlying foreign currency covered by the call or has an
absolute and immediate right to acquire that foreign currency without additional
cash consideration (or for additional cash consideration held in a segregated
account by its Custodian) upon conversion or exchange of other foreign currency
held in its portfolio. A call option is also covered if the Fund has a call on
the same foreign currency and in the same principal amount as the call written
where the exercise price of the call held (a) is equal to or less than the
exercise price of the call written or (b) is greater than the exercise price of
the call written if the difference is maintained by the Fund in cash, U.S.
Government securities and other high quality liquid securities in a segregated
account with its custodian.
<PAGE>11
Each Fund also intends to write call options on foreign
currencies that are not covered for cross-hedging purposes. A call option on a
foreign currency is for cross-hedging purposes if it is not covered, but is
designed to provide a hedge against a decline in the U.S. dollar value of a
security which the Fund owns or has the right to acquire and which is
denominated in the currency underlying the option due to an adverse change in
the exchange rate. In such circumstances, the Fund collateralizes the option by
maintaining in a segregated account with its custodian, cash or U.S. Government
securities or other high quality liquid securities in an amount not less than
the value of the underlying foreign currency in U.S. dollars marked to market
daily.
Additional Risks Of Options On Futures Contracts, Forward
Contracts And Options On Foreign Currencies. Unlike transactions entered into by
a Fund in futures contracts, options on foreign currencies and forward contracts
are not traded on contract markets regulated by the CFTC or (with the exception
of certain foreign currency options) by the SEC. To the contrary, such
instruments are traded through financial institutions acting as market-makers,
although foreign currency options are also traded on certain national securities
exchanges such as the Philadelphia Stock Exchange and the Chicago Board Options
Exchange, subject to SEC regulation. Similarly, options on currencies may be
traded over-the-counter. In an over-the-counter trading environment, many of the
protections afforded to exchange participants will not be available. For
example, there are no daily price fluctuation limits, and adverse market
movements could therefore continue to an unlimited extent over a period of time.
Although the purchaser of an option cannot lose more than the amount of the
premium plus related transaction costs, this entire amount could be lost.
Moreover, the option writer and a trader of forward contracts could lose amounts
substantially in excess of their initial investments, due to the margin and
collateral requirements associated with such positions.
Options on foreign currencies traded on national securities
exchanges are within the jurisdiction of the SEC, as are other securities traded
on such exchanges. As a result, many of the protections provided to traders on
organized exchanges will be available with respect to such transactions. In
particular, all foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the Options Clearing
Corporation ("OCC"), thereby reducing the risk of counterparty default. Further,
a liquid secondary market in options traded on a national securities exchange
may be more readily available than in the over-the-counter market, potentially
permitting a Fund to liquidate open positions at a profit prior to exercise or
expiration, or to limit losses in the event of adverse market movements.
<PAGE>12
The purchase and sale of exchange-traded foreign currency
options, however, is subject to the risks of the availability of a liquid
secondary market described above, as well as the risks regarding adverse market
movements, margining of options written, the nature of the foreign currency
market, possible intervention by governmental authorities and the effects of
other political and economic events. In addition, exchange-traded options on
foreign currencies involve certain risks not presented by the over-the-counter
market. For example, exercise and settlement of such options must be made
exclusively through the OCC, which has established banking relationships in
applicable foreign countries for this purpose. As a result, the OCC may, if it
determines that foreign governmental restrictions or taxes would prevent the
orderly settlement of foreign currency option exercises, or would result in
undue burdens on the OCC or its clearing member, impose special procedures on
exercise and settlement, such as technical changes in the mechanics of delivery
of currency, the fixing of dollar settlement prices or prohibitions on exercise.
As in the case of forward contracts, certain options on
foreign currencies are traded over-the-counter and involve liquidity and credit
risks which may not be present in the case of exchange-traded currency options.
A Fund's ability to terminate over-the-counter options will be more limited than
with exchange-traded options. It is also possible that broker-dealers
participating in over-the-counter options transactions will not fulfill their
obligations. Until such time as the staff of the SEC changes its position, each
Fund will treat purchased over-the-counter options and assets used to cover
written over-the-counter options as illiquid securities. With respect to options
written with primary dealers in U.S. Government securities pursuant to an
agreement requiring a closing purchase transaction at a formula price, the
amount of illiquid securities may be calculated with reference to the repurchase
formula.
In addition, futures contracts, options on futures contracts,
forward contracts and options on foreign currencies may be traded on foreign
exchanges. Such transactions are subject to the risk of governmental actions
affecting trading in or the prices of foreign currencies or securities. The
value of such positions also could be adversely affected by: (i) other complex
foreign political and economic factors; (ii) lesser availability than in the
United States of data on which to make trading decisions; (iii) delays in the
Fund's ability to act upon economic events occurring in foreign markets during
nonbusiness hours in the United States; (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States; and (v) lesser trading volume.
Options On Securities. Each Fund may write (sell)
covered call and put options to a limited extent on its portfolio
<PAGE>13
securities ("covered options") in an attempt to increase income. However, the
Fund may forego the benefits of appreciation on securities sold or may pay
more than the market price on securities acquired pursuant to call and put
options written by the Fund.
When a Fund writes a covered call option, it gives the
purchaser of the option the right to buy the underlying security at the price
specified in the option (the "exercise price") by exercising the option at any
time during the option period. If the option expires unexercised, the Fund will
realize income in an amount equal to the premium received for writing the
option. If the option is exercised, a decision over which the Fund has no
control, the Fund must sell the underlying security to the option holder at the
exercise price. By writing a covered call option, the Fund forgoes, in exchange
for the premium less the commission ("net premium"), the opportunity to profit
during the option period from an increase in the market value of the underlying
security above the exercise price.
When a Fund writes a covered put option, it gives the
purchaser of the option the right to sell the underlying security to the Fund at
the specified exercise price at any time during the option period. If the option
expires unexercised, the Fund will realize income in the amount of the premium
received for writing the option. If the put option is exercised, a decision over
which the Fund has no control, the Fund must purchase the underlying security
from the option holder at the exercise price. By writing a covered put option,
the Fund, in exchange for the net premium received, accepts the risk of a
decline in the market value of the underlying security below the exercise price.
The Fund will only write put options involving securities for which a
determination is made at the time the option is written that the Fund wishes to
acquire the securities at the exercise price.
A Fund may terminate its obligations as the writer of a call
or put option by purchasing an option with the same exercise price and
expiration date as the option previously written. This transaction is called a
"closing purchase transaction." The Fund will realize a profit or loss for a
closing purchase transaction if the amount paid to purchase an option is less or
more, as the case may be, than the amount received from the sale thereof. To
close out a position as a purchaser of an option, the Fund, may make a "closing
sale transaction" which involves liquidating the Fund's position by selling the
option previously purchased. Where the Fund cannot effect a closing purchase
transaction, it may be forced to incur brokerage commissions or dealer spreads
in selling securities it receives or it may be forced to hold underlying
securities until an option is exercised or expires.
When a Fund writes an option, an amount equal to net premium
received by the Fund is included in the liability section of the Fund's
Statement of Assets and Liabilities as a deferred
<PAGE>14
credit. The amount of the deferred credit will be subsequently marked to
market to reflect the current market value of the option written. The current
market value of a traded option is the last sale price or, in the absence of a
sale, the mean between the closing bid and asked price. If an option expires
on its stipulated expiration date or if the Fund enters into a closing
purchase transaction, the Fund will realize a gain (or loss if the cost of a
closing purchase transaction exceeds the premium received when the option was
sold), and the deferred credit related to such option will be eliminated. If a
call option is exercised, the Fund will realize a gain or loss from the sale
of the underlying security and the proceeds of the sale will be increased by
the premium originally received. The writing of covered call options may be
deemed to involve the pledge of the securities against which the option is
being written. Securities against which call options are written will be
segregated on the books of the custodian for the Fund.
A Fund may purchase call and put options on any securities in
which it may invest. The Fund would normally purchase a call option in
anticipation of an increase in the market value of such securities. The purchase
of a call option would entitle the Fund, in exchange for the premium paid, to
purchase a security at a specified price during the option period. The Fund
would ordinarily have a gain if the value of the securities increased above the
exercise price sufficiently to cover the premium and would have a loss if the
value of the securities remained at or below the exercise price during the
option period.
A Fund would normally purchase put options in anticipation of
a decline in the market value of securities in its portfolio ("protective puts")
or securities of the type in which it is permitted to invest. The purchase of a
put option would entitle the Fund, in exchange for the premium paid, to sell a
security, which may or may not be held in the Fund's portfolio, at a specified
price during the option period. The purchase of protective puts is designed
merely to offset or hedge against a decline in the market value of the Fund's
portfolio securities. Put options may also be purchased by the Fund for the
purpose of affirmatively benefiting from a decline in the price of securities
which the Fund does not own. The Fund would ordinarily recognize a gain if the
value of the securities decreased below the exercise price sufficiently to cover
the premium and would recognize a loss if the value of the securities remained
at or above the exercise price. Gains and losses on the purchase of protective
put options would tend to be offset by countervailing changes in the value of
underlying portfolio securities.
Each Fund has adopted certain other nonfundamental policies
concerning option transactions which are discussed below. The Fund's activities
in options may also be restricted
<PAGE>15
by the requirements of the Internal Revenue Code of 1986, as amended (the
"Code"), for qualification as a regulated investment company.
The hours of trading for options on securities may not conform
to the hours during which the underlying securities are traded. To the extent
that the option markets close before the markets for the underlying securities,
significant price and rate movements can take place in the underlying securities
markets that cannot be reflected in the option markets. It is impossible to
predict the volume of trading that may exist in such options, and there can be
no assurance that viable exchange markets will develop or continue.
A Fund may engage in over-the-counter options transactions
with broker-dealers who make markets in these options. At present, approximately
ten broker-dealers, including several of the largest primary dealers in U.S.
Government securities, make these markets. The ability to terminate
over-the-counter option positions is more limited than with exchange-traded
option positions because the predominant market is the issuing broker rather
than an exchange, and may involve the risk that broker-dealers participating in
such transactions will not fulfill their obligations. To reduce this risk, the
Fund will purchase such options only from broker-dealers who are primary
government securities dealers recognized by the Federal Reserve Bank of New York
and who agree (and are expected to be capable of) entering into closing
transactions, although there can be no guarantee that any such option will be
liquidated at a favorable price prior to expiration. The Adviser will monitor
the creditworthiness of dealers with whom the Fund enters into such options
transactions under the general supervision of the Trust's Trustees.
Option On Securities Indices. In addition to options on
securities, each Fund may also purchase and write (sell) call and put options on
securities indices. Such options give the holder the right to receive a cash
settlement during the term of the option based upon the difference between the
exercise price and the value of the index. Such options will be used for the
purposes described above under "Options on Securities."
Options on securities indices entail risks in addition to the
risks of options on securities. The absence of a liquid secondary market to
close out options positions on securities indices is more likely to occur,
although the Fund generally will only purchase or write such an option if the
Adviser believes the option can be closed out.
Use of options on securities indices also entails the risk
that trading in such options may be interrupted if trading in certain securities
included in the index is interrupted. The Fund will not purchase such options
unless the Adviser believes
<PAGE>16
the market is sufficiently developed such that the risk of trading in such
options is not greater than the risk of trading in options on securities.
Price movements in a Fund's portfolio 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 fund securities to meet settlement obligations.
Forward Foreign Currency Exchange Contracts. Because each fund
buys and sells securities denominated in currencies other than the U.S. dollar
and receives interest, dividends and sale proceeds in currencies other than the
U.S. dollar, each Fund from time to time may enter into foreign currency
exchange transactions to convert to and from different foreign currencies and to
convert foreign currencies to and from the U.S. dollar. A Fund either enters
into these transactions on a spot (i.e., cash) basis at the spot rate prevailing
in the foreign currency exchange market or uses forward contracts to purchase or
sell foreign currencies.
A forward foreign currency exchange contract is an obligation
by a Fund to purchase or sell a specific currency at a future date, which may be
any fixed number of days from the date of the contract. Forward foreign currency
exchange contracts establish an exchange rate at a future date. These contracts
are transferable in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. A forward foreign
currency exchange contract generally has no deposit requirement and is traded at
a net price without commission. Each Fund maintains with its custodian a
segregated account of high grade liquid assets in an amount at least equal to
its obligations under each forward foreign currency exchange contract. Neither
spot transactions nor forward currency exchange contracts eliminate fluctuations
in the prices of the Fund's securities or in foreign exchange rates, or prevent
loss if the prices of those securities should decline.
Each Fund may enter into foreign currency hedging transactions
in an attempt to protect against changes in foreign currency exchange rates
between the trade and settlement dates of specific securities transactions or
changes in foreign currency exchange rates that would adversely affect a
portfolio position or an anticipated investment position. Since consideration of
the prospect for currency parities will be incorporated into Bankers Trust's
long-term investment decisions, a Fund will not routinely enter into foreign
currency hedging transactions with respect to security transactions; however,
Bankers Trust believes that it is important to have the flexibility to enter
into foreign currency hedging transactions when it determines that the
transactions would be in the Fund's best interest. Although these transactions
tend to minimize the risk of loss due to a
<PAGE>17
decline in the value of the hedged currency, at the same time they tend to
limit any potential gain that might be realized should the value of the hedged
currency increase. The precise matching of the forward contract amounts and
the value of the securities involved will not generally be possible because
the future value of such securities in foreign currencies will change as a
consequence of market movements in the value of such securities between the
date the forward contract is entered into and the date it matures. The
projection of currency market movements is extremely difficult, and the
successful execution of a hedging strategy is highly uncertain.
While these contracts are not presently regulated by the CFTC,
the CFTC may in the future assert authority to regulate forward contracts. In
such event the Fund's ability to utilize forward contracts in the manner set
forth in the Prospectus may be restricted. Forward contracts may reduce the
potential gain from a positive change in the relationship between the U.S.
dollar and foreign currencies. Unanticipated changes in currency prices may
result in poorer overall performance for the Fund than if it had not entered
into such contracts. The use of foreign currency forward contracts may not
eliminate fluctuations in the underlying U.S. dollar equivalent value of the
prices of or rates of return on a Fund's foreign currency denominated portfolio
securities and the use of such techniques will subject a Fund to certain risks.
The matching of the increase in value of a forward contract
and the decline in the U.S. dollar equivalent value of the foreign currency
denominated asset that is the subject of the hedge generally will not be
precise. In addition, a Fund may not always be able to enter into foreign
currency forward contracts at attractive prices and this will limit the Fund's
ability to use such contract to hedge or cross-hedge its assets. Also, with
regard to a Fund's use of cross-hedges, there can be no assurance that
historical correlations between the movement of certain foreign currencies
relative to the U.S. dollar will continue. Thus, at any time poor correlation
may exist between movements in the exchange rates of the foreign currencies
underlying a Fund's cross-hedges and the movements in the exchange rates of the
foreign currencies in which the Fund's assets that are the subject of such
cross-hedges are denominated.
Rating Services
The ratings of rating services represent their opinions as to
the quality of the securities that they undertake to rate. It should be
emphasized, however, that ratings are relative and subjective and are not
absolute standards of quality. Although these ratings are an initial criterion
for selection of portfolio investments, Bankers Trust also makes its own
evaluation of these securities, subject to review by the Board of Trustees.
After purchase by a Fund, an obligation may cease to be rated or its rating may
be reduced below the minimum required for purchase by
<PAGE>18
the Fund. Neither event would require a Fund to eliminate the obligation from
its portfolio, but Bankers Trust will consider such an event in its
determination of whether a Fund should continue to hold the obligation. A
description of the ratings used herein and in the Funds' Prospectus is set
forth in the Appendix to this Statement of Additional Information.
Investment Restrictions
The following investment restrictions are "fundamental
policies" of each Fund and may not be changed with respect to the Fund without
the approval of a "majority of the outstanding voting securities" of the Fund.
"Majority of the outstanding voting securities" under the Investment Company Act
of 1940, as amended (the "1940 Act"), and as used in this Statement of
Additional Information and the Prospectus, means, with respect to the Fund, the
lesser of (i) 67% or more of the outstanding voting securities present at a
meeting, if the holders of more than 50% of the outstanding voting securities of
the Fund are present or represented by proxy or (ii) more than 50% of the
outstanding voting securities of the Fund. Whenever the Trust is requested to
vote on a fundamental policy of a Fund, the Trust will hold a meeting of the
corresponding Fund's shareholders and will cast its vote as instructed by that
Fund's shareholders. The percentage of the Trust's votes representing Fund
shareholders not voting will be voted by the Trustees of the Trust in the same
proportion as the Fund shareholders who do, in fact, vote.
As a matter of fundamental policy, no Fund may (except that no
investment restriction of a Fund shall prevent a Fund from investing all of its
investable assets in an open-end investment company with substantially the same
investment objectives):
(1) borrow money or mortgage or hypothecate assets of the
Fund, except that in an amount not to exceed 1/3 of the current value of the
Fund's assets, it may borrow money as a temporary measure for extraordinary or
emergency purposes and enter into reverse repurchase agreements or dollar roll
transactions, and except that it may pledge, mortgage or hypothecate not more
than 1/3 of such assets to secure such borrowings (it is intended that money
would be borrowed only from banks and only either to accommodate requests for
the withdrawal of beneficial interests (redemption of shares) while effecting an
orderly liquidation of portfolio securities or to maintain liquidity in the
event of an unanticipated failure to complete a portfolio security transaction
or other similar situations) or reverse repurchase agreements, provided that
collateral arrangements with respect to options and futures, including deposits
of initial deposit and variation margin, are not considered a pledge of assets
for purposes of this restriction and except that assets may be pledged to secure
letters of credit solely for the purpose of participating in a captive insurance
<PAGE>19
company sponsored by the Investment Company Institute; for additional related
restrictions, see clause (i) under the caption "State and Federal
Restrictions" below (as an operating policy, the Funds may not engage in
dollar roll transactions);
(2) underwrite securities issued by other persons except
insofar as the Trust or the Funds may technically be deemed an underwriter under
the 1933 Act in selling a portfolio security;
(3) make loans to other persons except: (a) through the
lending of the Fund's portfolio securities and provided that any such loans not
exceed 30% of the Fund's 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 (under current regulations, the Fund's fundamental policy
with respect to 20% risk weighing for financial institutions prevent the Fund
from engaging in securities lending);
(4) purchase or sell real estate (including limited
partnership interests but excluding securities secured by real estate or
interests therein), interests in oil, gas or mineral leases, commodities or
commodity contracts (except futures and option contracts) in the ordinary course
of business (except that the Trust may hold and sell, for the Fund's portfolio,
real estate acquired as a result of the Fund's ownership of securities);
(5) concentrate its investments in any particular
industry (excluding U.S. Government securities), but if it is deemed
appropriate for the achievement of a Fund's investment objective(s)), up to
25% of its total assets may be invested in any one industry; and
(6) issue any senior security (as that term is defined in
the 1940 Act) if such issuance is specifically prohibited by the 1940 Act or
the rules and regulations promulgated thereunder, provided that collateral
arrangements with respect to options and futures, including deposits of
initial deposit and variation margin, are not considered to be the issuance of
a senior security for purposes of this restriction.
State And Federal Restrictions. In order to comply with
certain state and Federal statutes and policies each Fund or the Trust, on
behalf of each Fund, will not as a matter of operating policy (except that no
operating policy shall prevent a Fund from investing all of its investable
assets in an open-end investment company with substantially the same investment
objectives):
<PAGE>20
(i) borrow money (including through reverse repurchase or
forward roll transactions) for any purpose in excess of 5%
of the Fund's total assets (taken at cost), except that the
Fund may borrow for temporary or emergency purposes up to
1/3 of its total assets;
(ii) pledge, mortgage or hypothecate for any purpose in excess of
10% of the Fund's total assets (taken at market value),
provided that collateral arrangements with respect to
options and futures, including deposits of initial deposit
and variation margin, and reverse repurchase agreements are
not considered a pledge of assets for purposes of this
restriction;
(iii) purchase any security or evidence of interest therein on
margin, except that such short-term credit as may be
necessary for the clearance of purchases and sales of
securities may be obtained and except that deposits of
initial deposit and variation margin may be made in
connection with the purchase, ownership, holding or sale of
futures;
(iv) sell securities it does not own such that the dollar
amount of such short sales at any one time exceeds 25%
of the net equity of the Fund, and the value of
securities of any one issuer in which the Fund is short
exceeds the lesser of 2.0% of the value of the Fund's
net assets or 2.0% of the securities of any class of any
U.S. issuer and, provided that short sales may be made
only in those securities which are fully listed on a
national securities exchange or a foreign exchange
(This provision does not include the sale of securities
of the Fund contemporaneously owns or has the right to
obtain securities equivalent in kind and amount to those
sold, i.e., short sales against the box.);
(v) invest for the purpose of exercising control or management;
(vi) purchase securities issued by any investment company
except by purchase in the open market where no commission
or profit to a sponsor or dealer results from such
purchase other than the customary broker's commission,
or except when such purchase, though not made in the open
market, is part of a plan of merger or consolidation;
provided, however, that securities of any investment
company will not be purchased for the Fund if such
purchase at the time thereof would cause: (a) more than
10% of the Fund's total assets (taken at the greater of
cost or market value) to be invested in the securities
of such issuers; (b) more than 5% of the Fund's total
assets (taken at the greater of cost or market value) to
be invested in
<PAGE>21
any one investment company; or (c) more than 3% of
the outstanding voting securities of any such issuer to be
held for the Fund; provided further that, except in the
case of a merger or consolidation, the Fund shall not
purchase any securities of any open-end investment company
unless (1) the investment adviser waives the investment
advisory fee with respect to assets invested in other
open-end investment companies and (2) the Fund incurs no
sales charge in connection with the investment;
(vii) invest more than 15% of the Fund's total assets (taken at
the greater of cost or market value) in securities that are
illiquid or otherwise restricted as to resale (excluding
Rule 144A securities) under the 1933 Act;
(viii) invest more than 5% of the Fund's total assets in
securities issued by issuers which (including predecessors)
have been in operation less than three years (other than
U.S. Government securities);
(ix) invest more than 15% of a Fund's net assets (taken at
the greater of cost or market value) in securities that
are illiquid or not readily marketable excluding (a)
Rule 144A securities that have been determined to be
liquid by the Board of Trustees; and (b) commercial
paper that is sold under section 4(2) of the 1933 Act
which: (i) is not traded flat or in default as to
interest or principal; and (ii) is rated in one of the
two highest categories by at least two nationally
recognized statistical rating organizations and the
Trust's Board of Trustees have determined the commercial
paper to be liquid; or (iii) is rated in one of the two
highest categories by one nationally recognized
statistical rating agency and the Trust's Board of
Trustees has determined that the commercial paper is
of equivalent quality and is liquid;
(x) invest in securities issued by an issuer any of whose
officers, directors, trustees or security holders is an
officer or Trustee of the Trust, or is an officer or partner
of the Adviser, if after the purchase of the securities of
such issuer for the Fund one or more of such persons owns
beneficially more than 1/2 of 1% of the shares or
securities, or both, all taken at market value, of such
issuer, and such persons owning more than 1/2 of 1% of such
shares or securities together own beneficially more than 5%
of such shares or securities, or both, all taken at market
value;
<PAGE>22
(xi) invest in warrants (other than warrants acquired by the Fund
as part of a unit or attached to securities at the time of
purchase) if, as a result, the investments (valued at the
lower of cost or market) would exceed 5% of the value of the
Fund's net assets or if, as a result, more than 2% of the
Fund's net assets would be invested in warrants not listed
on a recognized United States or foreign stock exchange, to
the extent permitted by applicable state securities laws;
(xii) write puts and calls on securities unless each of the
following conditions are met: (a) the security
underlying the put or call is within the investment
policies of the Fund and the option is issued by the
Options Clearing Corporation, except for put and call
options issued by non-U.S. entities or listed on
non-U.S. securities or commodities exchanges; (b) the
aggregate value of the obligations underlying the puts
determined as of the date the options are sold shall not
exceed 5% of the Fund's net assets; (c) the securities
subject to the exercise of the call written by the
Fund must be owned by the Fund at the time the call is
sold and must continue to be owned by the Fund until the
call has been exercised, has lapsed, or the Fund has
purchased a closing call, and such purchase has been
confirmed, thereby extinguishing the Fund's obligation
to deliver securities pursuant to the call it has sold;
and (d) at the time a put is written, the Fund
establishes a segregated account with its custodian
consisting of cash or short-term U.S. Government
securities equal in value to the amount the Fund will
be obligated to pay upon exercise of the put (this
account must be maintained until the put is exercised,
has expired, or the Fund has purchased a closing put,
which is a put of the same series as the one previously
written; and
(xiii) buy and sell puts and calls on securities, stock index
futures or options on stock index futures, or financial
futures or options on financial futures unless such
options are written by other persons and: (a) the
options or futures are offered through the facilities
of a national securities association or are listed
on a national securities or commodities exchange,
except for put and call options issued by non-U.S.
entities or listed on non-U.S. securities or
commodities exchanges; (b) the aggregate premiums
paid on all such options which are held at any time do
not exceed 20% of the Fund's total net assets; and
(c) the aggregate margin deposits required on all such
futures or options thereon held at any time do not exceed
5% of the Fund's total assets.
<PAGE>23
There will be no violation of any investment restriction if
that restriction is complied with at the time the relevant action is taken
notwithstanding a later change in market value of an investment, in net or total
assets, in the securities rating of the investment, or any other later change.
Each Fund will comply with the state securities laws and
regulations of all states in which it is registered. Each Fund will comply with
the permitted investments and investment limitations in the securities laws and
regulations of all states in which the Fund, or any other registered investment
company investing in the Fund, is registered.
Portfolio Transactions And Brokerage Commissions
The Adviser is responsible for decisions to buy and sell
securities, futures contracts and options on such securities and futures for
each Fund, the selection of brokers, dealers and futures commission merchants to
effect transactions and the negotiation of brokerage commissions, if any.
Broker-dealers may receive brokerage commissions on portfolio transactions,
including options, futures and options on futures transactions and the purchase
and sale of underlying securities upon the exercise of options. Orders may be
directed to any broker-dealer or futures commission merchant, including to the
extent and in the manner permitted by applicable law, Bankers Trust or its
subsidiaries or affiliates. Purchases and sales of certain portfolio securities
on behalf of a Fund are frequently placed by the Adviser with the issuer or a
primary or secondary market-maker for these securities on a net basis, without
any brokerage commission being paid by the Fund. Trading does, however, involve
transaction costs. Transactions with dealers serving as market-makers reflect
the spread between the bid and the asked prices. Transaction costs may also
include fees paid to third parties for information as to potential purchasers or
sellers of securities. Purchasers of underwritten issues may be made which will
include an underwriting fee paid to the underwriter.
The Adviser seeks to evaluate the overall reasonableness of
the brokerage commissions paid (to the extent applicable) in placing orders for
the purchase and sale of securities for a Fund taking into account such factors
as price, commission (negotiable in the case of national securities exchange
transactions), if any, size of order, difficulty of execution and skill required
of the executing broker-dealer through familiarity with commissions charged on
comparable transactions, as well as by comparing commissions paid by the Fund to
reported commissions paid by others. The Adviser reviews on a routine basis
commission rates, execution and settlement services performed, making internal
and external comparisons.
The Adviser is authorized, consistent with Section 28(e) of
the Securities Exchange Act of 1934, as amended, when placing portfolio
transactions for a Fund with a broker to pay a
<PAGE>24
brokerage commission (to the extent applicable) in excess of that which
another broker might have charged for effecting the same transaction on
account of the receipt of research, market or statistical information. The
term "research, market or statistical information" includes advice as to the
value of securities; the advisability of investing in, purchasing or selling
securities; the availability of securities or purchasers or sellers of
securities; and furnishing analyses and reports concerning issuers,
industries, securities, economic factors and trends, portfolio strategy and
the performance of accounts.
Consistent with the policy stated above, the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. and such other
policies as the Trustees of the Trust may determine, the Adviser may consider
sales of shares of the Trust and of other investment company clients of Bankers
Trust as a factor in the selection of broker-dealers to execute portfolio
transactions. Bankers Trust will make such allocations if commissions are
comparable to those charged by nonaffiliated, qualified broker-dealers for
similar services.
Higher commissions may be paid to firms that provide research
services to the extent permitted by law. Bankers Trust may use this research
information in managing the Fund's assets, as well as the assets of other
clients.
Except for implementing the policies stated above, there is no
intention to place portfolio transactions with particular brokers or dealers or
groups thereof. In effecting transactions in over-the-counter securities, orders
are placed with the principal market-makers for the security being traded
unless, after exercising care, it appears that more favorable results are
available otherwise.
Although certain research, market and statistical information
from brokers and dealers can be useful to a Fund and to the Adviser, it is the
opinion of the management of the Fund that such information is only
supplementary to the Adviser's own research effort, since the information must
still be analyzed, weighed and reviewed by the Adviser's staff. Such information
may be useful to the Adviser in providing services to clients other than the
Funds, and not all such information is used by the Adviser in connection with
the Funds. 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 Funds.
In certain instances there may be securities which are
suitable for a Fund as well as for one or more of the Adviser's other clients.
Investment decisions for a Fund and for the Adviser's other clients are made
with a view to achieving their respective investment objectives. It may develop
that a
<PAGE>25
particular security is bought or sold for only one client even though it might
be held by, or bought or sold for, other clients. Likewise, a particular
security may be bought for one or more clients when one or more clients are
selling that same security. Some simultaneous transactions are inevitable when
several clients receive investment advice from the same investment adviser,
particularly when the same security is suitable for the investment objectives
of more than one client. When two or more clients are simultaneously engaged
in the purchase or sale of the same security, the securities are allocated
among clients in a manner believed to be equitable to each. It is recognized
that in some cases this system could have a detrimental effect on the price or
volume of the security as far as a Fund is concerned. However, it is believed
that the ability of a Fund to participate in volume transactions will produce
better executions for the Fund.
PERFORMANCE INFORMATION
Standard Performance
From time to time, quotations of a Fund's performance may be
included in advertisements, sales literature or shareholder reports. These
performance figures are calculated in the following manner:
Total Return: A Fund's average annual total return is
calculated for certain periods by determining the average
annual compounded rates of return over those periods that
would cause an investment of $1,000 (made at the maximum
public offering price with all distributions reinvested) to
reach the value of that investment at the end of the periods.
A Fund may also calculate total return figures which represent
aggregate performance over a period or year-by-year
performance.
Performance Results: Any total return quotation provided for a
Fund should not be considered as representative of the
performance of the Fund in the future since the net asset
value and public offering price of shares of the Fund will
vary based not only on the type, quality and maturities of the
securities held, but also on changes in the current value of
such securities and on changes in the expenses of the Fund.
These factors and possible differences in the methods used to
calculate total return should be considered when comparing the
total return of a Fund to total returns published for other
investment companies or other investment vehicles. Total
return reflects the performance of both principal and income.
<PAGE>26
Comparison Of Fund Performance
Comparison of the quoted nonstandardized performance of
various investments is valid only if performance is calculated in the same
manner. Since there are different methods of calculating performance, investors
should consider the effect of the methods used to calculate performance when
comparing performance of a Fund with performance quoted with respect to other
investment companies or types of investments.
In connection with communicating its performance to current or
prospective shareholders, a Fund also may compare these figures to the
performance of other mutual funds tracked by mutual fund rating services or to
unmanaged indices which may assume reinvestment of dividends but generally do
not reflect deductions for administrative and management costs. The Funds may
include comparisons of their investment results to the following unmanaged
index: Standard & Poor's 500 Composite Stock Price Index.
Evaluations of a Fund's performance made by independent
sources may also be used in advertisements concerning the Fund. Sources for a
Fund's performance information could include the following: ASIAN WALL STREET
JOURNAL; 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; VALUE
LINE; WALL STREET JOURNAL; WEISENBERGER INVESTMENT COMPANIES SERVICES; and
WORKING WOMAN.
VALUATION OF SECURITIES; REDEMPTIONS AND PURCHASES IN KIND
Equity and debt securities (other than short-term debt
obligations maturing in 60 days or less), including listed securities and
securities for which price quotations are available, will normally be valued
on the basis of market valuations furnished by a pricing service. Short-term
debt obligations and money market securities maturing in 60 days or less are
valued at amortized cost, which approximates market.
Securities for which market quotations are not available are
valued by Bankers Trust pursuant to procedures adopted by the Trust's Board of
Trustees. It is generally agreed that securities for which market quotations
are not readily available should not be valued at the same value as that
carried by an equivalent security which is readily marketable.
The problems inherent in making a good-faith
determination of value are recognized in the codification
<PAGE>27
effected by SEC Financial Reporting Release No. 1 ("FRR 1" (formerly
Accounting Series Release No. 113)) which concludes that there is "no
automatic formula" for calculating the value of restricted securities. It
recommends that the best method simply is to consider all relevant factors
before making any calculation. According to FRR 1 such factors would include
consideration of the:
type of security involved, financial statements, cost at date
of purchase, size of holding, discount from market value of
unrestricted securities of the same class at the time of
purchase, special reports prepared by analysts, information as
to any transactions or offers with respect to the security,
existence of merger proposals or tender offers affecting the
security, price and extent of public trading in similar
securities of the issuer or comparable companies, and other
relevant matters.
To the extent that a Fund purchases securities which are
restricted as to resale or for which current market quotations are not
available, the Adviser of the Fund will value such securities based upon all
relevant factors as outlined in FRR 1.
The Trust, on behalf of each Fund, reserves the right, if
conditions exist which make cash payments undesirable, to honor any request for
redemption or repurchase order by making payment in whole or in part in readily
marketable securities chosen by the Trust and valued as they are for purposes of
computing the Fund's net asset value (a redemption in kind). If payment is made
to a Fund shareholder in securities, an investor, including the Fund, the
shareholder may incur transaction expenses in converting these securities into
cash. The Trust, on behalf of each Fund, has elected, however, to be governed by
Rule 18f-1 under the 1940 Act as a result of which each Fund is obligated to
redeem shares or beneficial interests, as the case may be, with respect to any
one investor during any 90-day period, solely in cash up to the lesser of
$250,000 or 1% of the net asset value of the Fund at the beginning of the
period.
Each investor in a Fund may add to or reduce its investment in
the Fund on each day the Fund determines its net asset value. At the close of
each such business day, the value of each investor's beneficial interest in the
Fund will be determined by multiplying the net asset value of the Fund by the
percentage, effective for that day, which represents that investor's share of
the aggregate beneficial interests in the Fund. Any additions or withdrawals
which are to be effected as of the close of business on that day will then be
effected. The investor's percentage of the aggregate beneficial interests in the
Fund will then be recomputed as the percentage equal to the
<PAGE>28
fraction (i) the numerator of which is the value of such investor's investment
in the Fund as of the close of business on such day plus or minus, as the case
may be, the amount of net additions to or withdrawals from the investor's
investment in the Fund effected as of the close of business on such day, and
(ii) the denominator of which is the aggregate net asset value of the Fund as
of the close of business on such day plus or minus, as the case may be, the
amount of net additions to or withdrawals from the aggregate investments in
the Fund by all investors in the Fund. The percentage so determined will then
be applied to determine the value of the investor's interest in the Fund as
the close of business on the following business day.
Each Fund may, at its own option, accept securities in payment
for shares. The securities delivered in payment for shares are valued by the
method described under "Net Asset Value" as of the day the Fund receives the
securities. This is a taxable transaction to the shareholder. Securities may be
accepted in payment for shares only if they are, in the judgment of Bankers
Trust, appropriate investments for the Fund. In addition, securities accepted in
payment for shares must: (i) meet the investment objective and policies of the
acquiring Fund; (ii) be acquired by the applicable Fund for investment and not
for resale; (iii) be liquid securities which are not restricted as to transfer
either by law or liquidity of market; and (iv) if stock, have a value which is
readily ascertainable as evidenced by a listing on a stock exchange,
over-the-counter market or by readily available market quotations from a dealer
in such securities. Each Fund reserves the right to accept or reject at its own
option any and all securities offered in payment for its shares.
MANAGEMENT OF THE TRUST
The Board of Trustees is composed of persons experienced in
financial matters who meet throughout the year to oversee the activities of the
Funds they represent. In addition, the Trustees review contractual arrangements
with companies that provide services to the Funds and review the Funds'
performance.
The Trustees and officers of the Trust, their age and their
principal occupations during the past five years are set forth below. Their
titles may have varied during that period. Asterisks indicate those Trustees who
are "interested persons" (as defined in the 1940 Act) of the Trust. Unless
otherwise indicated, the address of each Trustee and officer is 6 St. James
Avenue, Boston, Massachusetts.
<PAGE>29
TRUSTEES OF THE BT ADVISOR FUNDS
PHILIP W. COOLIDGE* (age 44) -- President and Trustee;
Chairman, Chief Executive Officer and President, Signature Financial Group,
Inc. ("SFG") (since December, 1988) and Signature (since April, 1989).
MARTIN J. GRUBER (age 58) -- Trustee; Chairman of the
Finance Department and Nomura Professor of Finance, Leonard N. Stern School of
Business, New York University (since 1964).
BRUCE E. LANGTON (age 64) -- Trustee; Retired; Director,
Adela Investment Co. and University Patents, Inc.; formerly Assistant
Treasurer of IBM Corporation (until 1986). His address is 99 Jordan Lane,
Stamford, Connecticut 06903.
RICHARD J. HERRING (age 50) -- Trustee; Professor, Finance
Department, The Wharton School, University of Pennsylvania. His address is
The Wharton School, University of Pennsylvania Finance Department, 3303
Steinberg Hall/Dietrich Hall, Philadelphia; Pennnsylvania 19104.
HARRY VAN BENSCHOTEN (age 68) -- Trustee; retired (since
1987); Corporate Vice President, Newmont Mining Corporation (prior to 1987);
Director, Canada Life Insurance Company of New York and Competitive
Technologies, Inc., a public company listed on the American Stock Exchange.
His address is 6581 Ridgewood Drive, Naples, Florida 33963.
Officers Of The Trust And Funds
Unless otherwise specified, each officer listed below holds
the same position with the Trust.
JOHN R. ELDER (Age 47) -- Treasurer; Vice President, SFG
(since April, 1995); Treasurer, Phoenix Family of Mutual Funds (prior to April
1995); Audit Manager, Price Waterhouse (prior to 1983).
DAVID G. DANIELSON (age 30) -- Assistant Treasurer;
Assistant Manager, SFG (since May, 1991); Graduate Student, Northeastern
University (from April, 1990 to March, 1991); Tax Accountant & Systems
Analyst, Putnam Companies (prior to March, 1990).
BARBARA M. O'DETTE (age 36) -- Assistant Treasurer;
Assistant Treasurer, SFG (since December, 1988) and Signature (since April,
1989); Administrative Controller, Massachusetts Financial Services
Company (prior to December, 1988).
DANIEL E. SHEA (age 33) -- Assistant Treasurer; Assistant
Manager, SFG (since November, 1993); Supervisor and
<PAGE>30
Senior Technical Advisor, Putnam Investments (prior to November, 1993).
THOMAS M. LENZ (age 37) -- Secretary; Senior Vice President
and Associate General Counsel, SFG (since November, 1989); Assistant
Secretary, Signature (since February, 1991); Attorney, Ropes & Gray (prior to
November, 1989).
MOLLY S. MUGLER (age 44) -- Assistant Secretary; Legal
Counsel and Assistant Secretary, SFG (since December, 1988); Assistant
Secretary, Signature (since April, 1989).
LINDA T. GIBSON (age 30) -- Assistant Secretary; Vice
President, Global Product Management and Assistant Secretary, SFG (since May,
1992); Assistant Secretary, Signature (since October, 1992); Student, Boston
University School of Law (September, 1989 to May, 1992); Product Manager, SFG
(January, 1989 to September, 1989).
ANDRES E. SALDANA (age 33) -- Assistant Secretary; Legal
Counsel, SFG (since November, 1992); Assistant Secretary, Signature (since
September, 1993); Attorney, Ropes & Gray (September, 1990 to November, 1992);
law student, Yale Law School (September, 1987 to May, 1990).
Messrs. Coolidge, Danielson, Elder, Lenz, Saldana and
Shea and Mss. Gibson, Mugler and O'Dette also hold similar positions for
other investment companies for which Signature or an affiliate serves as
the principal underwriter.
No person who is an officer or director of Bankers Trust is
an officer or Trustee of the Trust or the Funds. No director, officer or
employee of Signature or any of its affiliates will receive any compensation
from the Trust or a Fund for serving as an officer or Trustee of the Trust or
a Fund. The Trust pays each Trustee who is not a director, officer or employee
of the Adviser, the Distributor, the Administrator or any of their affiliates
an annual fee of $10,000, respectively, per annum plus $625, respectively,
per meeting attended per Trust and reimburses them for travel and out-of-pocket
expenses.
Bankers Trust reimbursed the Funds for a portion of their
Trustees fees for the period above. See "Investment Adviser" and
"Administrator" below.
<PAGE>31
Trustee Compensation Table
(estimated for the fiscal year ended _______, 1996*)
<TABLE>
<CAPTION>
Aggregate Compensation Total Compensation from Fund Complex
Name of Trustee from Trust Paid to Trustees**
--------------- ---------------------- ------------------------------------
<S> <C> <C>
Philip W. Coolidge None*** None***
Martin J. Gruber 12,500 25,000
Bruce E. Langton 12,500 25,000
Richard J. Herring 12,500 25,000
Harry Van Benschoten 12,500 25,000
<FN>
* Amounts shown are estimates of future payments to be made pursuant to existing arrangements.
** Each Trustee also serves as a Trustee of one other Trust of the BT Family of Funds.
*** Mr. Coolidge is considered to be an interested person as defined in the
1940 Act, and accordingly, receives no compensation for services as a
Trustee.
</TABLE>
As of June 28, 1996, the Trustees and officers of the
Trust and the Funds owned in the aggregate less than 1% of the shares of any
Fund or the Trust (all series taken together).
Investment Adviser
Under the terms of each Fund's investment advisory agreement
with Bankers Trust (the "Advisory Agreement"), Bankers Trust manages the Fund
subject to the supervision and direction of the Board of Trustees of the Trust.
Bankers Trust will: (i) act in strict conformity with the Trust's Declaration of
Trust, the 1940 Act and the Investment Advisers Act of 1940, as the same may
from time to time be amended; (ii) manage each Fund in accordance with the
Fund's investment objectives, restrictions and policies; (iii) make investment
decisions for each Fund; and (iv) place purchase and sale orders for securities
and other financial instruments on behalf of each Fund.
Bankers Trust bears all expenses in connection with the
performance of services under each Advisory Agreement. The Trust and each Fund
bear certain other expenses incurred in its operation, including: taxes,
interest, brokerage fees and commissions, if any; fees of Trustees of the Trust
who are not officers, directors or employees of Bankers Trust, Signature or any
of their affiliates; SEC fees and state Blue Sky qualification fees; charges of
custodians and transfer and
<PAGE>32
dividend disbursing agents; certain insurance premiums; outside auditing and
legal expenses; costs of maintenance of corporate existence; costs
attributable to investor services, including, without limitation, telephone
and personnel expenses; costs of preparing and printing prospectuses and
statements of additional information for regulatory purposes and for
distribution to existing shareholders; costs of shareholders' reports and
meetings of shareholders, officers and Trustees of the Trust; and any
extraordinary expenses.
Bankers Trust may have deposit, loan and other commercial
banking relationships with the issuers of obligations which may be purchased on
behalf of the Funds, 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 Funds 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 Funds, Bankers Trust will not inquire or take into consideration whether an
issuer of securities proposed for purchase or sale by a Fund is a customer of
Bankers Trust, its parent or its subsidiaries or affiliates and, in dealing with
its customers, Bankers Trust, its parent, subsidiaries and affiliates will not
inquire or take into consideration whether securities of such customers are held
by any fund managed by Bankers Trust or any such affiliate.
Each Fund's prospectus contains disclosure as to the amount of
Bankers Trust's investment advisory and administration and services fees,
including waivers thereof. Bankers Trust may not recoup any of its waived
investment advisory or administration and services fees. Such waivers by Bankers
Trust shall stay in effect for at least 12 months.
Administrator
Under the administration and services agreements, Bankers
Trust is obligated on a continuous basis to provide such administrative services
as the Board of Trustees of the Trust reasonably deems necessary for the proper
administration of the Trust or a Fund. Bankers Trust will generally assist in
all aspects of the Funds' operations; supply and maintain office facilities
(which may be in Bankers Trust's own offices), statistical and research data,
data processing services, clerical, accounting, bookkeeping and recordkeeping
services (including without limitation the maintenance of such books and records
as are required under the 1940 Act and the rules thereunder, except as
maintained by other agents), internal auditing, executive and administrative
services, and stationery and office supplies; prepare reports to shareholders or
investors; prepare and file tax returns; supply financial
<PAGE>33
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"), Signature performs such sub-administration
duties for the Trust and the Funds as from time to time may be agreed upon by
Bankers Trust and Signature. The Sub-Administration Agreement provides that
Signature will receive such compensation as from time to time may be agreed upon
by Signature and Bankers Trust. All such compensation will be paid by Bankers
Trust.
Bankers Trust has agreed that if in any fiscal year the
aggregate expenses of any Fund (including fees pursuant to the Advisory
Agreement, but excluding interest, taxes, brokerage and, if permitted by the
relevant state securities commissions, extraordinary expenses) exceed the
expense limitation of any state having jurisdiction over a Fund, Bankers Trust
will reimburse the Fund for the excess expense to the extent required by state
law. As of the date of this Statement of Additional Information, the most
restrictive annual expense limitation applicable to any Fund is 2.50% of the
Fund's first $30 million of average annual net assets, 2.00% of the next $70
million of average annual net assets and 1.50% of the remaining average annual
net assets.
Custodian And Transfer Agent
Bankers Trust, 130 Liberty Street, New York, New York 10006,
serves as Custodian for the Trust and for each Fund pursuant to the
administration and services agreements. As Custodian, it holds the Funds'
assets. Bankers Trust also serves as transfer agent of the Trust and of each
Fund pursuant to the respective administration and services agreement. Under its
transfer agency agreement with the Trust, Bankers Trust maintains the
shareholder account records for each 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
Funds for its out-of-pocket expenses. Bankers Trust will comply with the
self-custodian provisions of Rule 17f-2 under the 1940 Act.
<PAGE>34
Use Of Name
The Trust and Bankers Trust have agreed that the Trust may use
"BT" as part of its name for so long as Bankers Trust serves as investment
adviser to the Funds. The Trust has acknowledged that the term "BT" is used by
and is a property right of certain subsidiaries of Bankers Trust and that those
subsidiaries and/or Bankers Trust may at any time permit others to use that
term.
The Trust may be required, on 60 days' notice from Bankers
Trust at any time, to abandon use of the acronym "BT" as part of its name. If
this were to occur, the Trustees would select an appropriate new name for the
Trust, but there would be no other material effect on the Trust, its
shareholders or activities.
Banking Regulatory Matters
Bankers Trust has been advised by its counsel that in its
opinion Bankers Trust may perform the services for the Funds contemplated by the
Advisory Agreements and other activities for the Funds described in the
Prospectus and this Statement of Additional Information without violation of the
Glass-Steagall Act or other applicable banking laws or regulations. However,
counsel has pointed out that future changes in either Federal or state statutes
and regulations concerning the permissible activities of banks or trust
companies, as well as future judicial or administrative decisions or
interpretations of present and future statutes and regulations, might prevent
Bankers Trust from continuing to perform those services for the Trust and the
Funds. State laws on this issue may differ from the interpretations of relevant
Federal law and banks and financial institutions may be required to register as
dealers pursuant to state securities law. If the circumstances described above
should change, the Board of Trustees would review the relationships with Bankers
Trust and consider taking all actions necessary in the circumstances.
Counsel And Independent Accountants
Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd
Street, New York, New York 10022-4669, serves as Counsel to the Trust and each
Fund. Coopers & Lybrand L.L.P., 1100 Main Street, Suite 900, Kansas City,
Missouri 64105 acts as Independent Accountants of the Trust and each Fund.
ORGANIZATION OF THE TRUST
Shares of the Trust do not have cumulative voting rights,
which means that holders of more than 50% of the shares voting for the election
of Trustees can elect all Trustees. Shares are transferable but have no
preemptive, conversion or subscription rights. Shareholders generally vote by
Fund, except
<PAGE>35
with respect to the election of Trustees and the ratification of the
selection of independent accountants.
Massachusetts law provides that shareholders could under
certain circumstances be held personally liable for the obligations of the
Trust. However, the Trust's Declaration of Trust disclaims shareholder liability
for acts or obligations of the Trust and requires that notice of this disclaimer
be given in each agreement, obligation or instrument entered into or executed by
the Trust or a Trustee. The Declaration of Trust provides for indemnification
from the Trust's property for all losses and expenses of any shareholder held
personally liable for the obligations of the Trust. Thus, the risk of a
shareholder's incurring financial loss on account of shareholder liability is
limited to circumstances in which the Trust itself would be unable to meet its
obligations, a possibility that the Trust believes is remote. Upon payment of
any liability incurred by the Trust, the shareholder paying the liability will
be entitled to reimbursement from the general assets of the Trust. The Trustees
intend to conduct the operations of the Trust in a manner so as to avoid, as far
as possible, ultimate liability of the shareholders for liabilities of the
Trust.
TAXATION
Taxation of the Funds
The Trust intends to qualify annually and to elect each Fund
to be treated as a regulated investment company under the Code.
To qualify as a regulated investment company, each Fund must,
among other things: (a) derive in each taxable year at least 90% of its gross
income from dividends, interest, payments with respect to securities loans and
gains from the sale or other disposition of stock, securities or foreign
currencies or other income derived with respect to its business of investing in
such stock, securities or currencies; (b) derive less than 30% of its gross
income from the sale or other disposition of certain assets (namely, in the case
of a Fund, (i) stock or securities; (ii) options, futures, and forward
contracts (other than those on foreign currencies); and (iii) foreign currencies
(including options, futures, and forward contracts on such currencies) not
directly related to the Fund's principal business of investing in stock or
securities (or options and futures with respect to stocks or securities)) held
less than three months (the "30% Limitation"); (c) diversify its holdings so
that, at the end of each quarter of the taxable year, (i) at least 50% of the
market value of the Fund's assets is represented by cash and cash items
(including receivables), U.S. Government securities, the securities of other
regulated investment companies and other securities, with such other securities
of any one issuer limited for the purposes of this calculation to an amount not
greater
<PAGE>36
than 5% of the value of the Fund's total assets and not greater than 10% of the
outstanding voting securities of such issuer and (ii) not more than 25% of the
value of its total assets is invested in the securities of any one issuer
(other than U.S. Government securities or the securities of other regulated
investment companies); and (d) distribute at least 90% of the sum of its
investment company taxable income (which includes, among other items,
dividends, interest and net short-term capital gains in excess of net long-term
capital losses) and its net tax-exempt interest income, if any, each taxable
year.
As a regulated investment company, each Fund will not be
subject to U.S. Federal income tax on its investment company taxable income and
net capital gains (the excess of net long-term capital gains over net
short-term capital losses), if any, that it distributes to shareholders. The
Fund intends to distribute to its shareholders, at least annually,
substantially all of its investment company taxable income and net capital
gains. Amounts not distributed on a timely basis in accordance with a calendar
year distribution requirement are subject to a nondeductible 4% excise tax. To
prevent imposition of the excise tax, the Fund must distribute during each
calendar year an amount equal to the sum of: (1) at least 98% of its ordinary
income (not taking into account any capital gains or losses) for the calendar
year; (2) at least 98% of its capital gains in excess of its capital losses
(adjusted for certain ordinary losses, as prescribed by the Code) for the
one-year period ending on October 31 of the calendar year; and (3) any ordinary
income and capital gains for previous years not distributed during those years.
A distribution will be treated as paid on December 31 of the current calendar
year if it is declared by the Fund in October, November or December with a
record date in such a month and paid by the Fund during January of the
following calendar year. Such distributions will be taxable to shareholders in
the calendar year in which the distributions are declared, rather than the
calendar year in which the distributions are received. To prevent application
of the excise tax, the Fund intends to make its distributions in accordance
with the calendar year distribution requirement.
Each Fund shareholder will also receive, if appropriate,
various written notices after the close of the Fund's prior taxable year as to
the Federal income status of his dividends and distributions which were received
from the Fund during the Fund's prior taxable year. Shareholders should consult
their tax advisers as to any state and local taxes that may apply to these
dividends and distributions. The dollar amount of dividends excluded from
Federal income taxation and the dollar amount subject to such income taxation,
if any, will vary for each shareholder depending upon the size and duration of
each shareholder's investment in the Fund. To the extent that the Fund earns
taxable net investment income, the Fund intends to designate as taxable
dividends the same percentage of each dividend as its taxable net investment
income bears to its total
<PAGE>37
net investment income earned. Therefore, the percentage of each
dividend designated as taxable, if any, may vary.
Distributions
Dividends paid out of the Fund's investment company taxable
income will be taxable to a U.S. shareholder as ordinary income. Distributions
of net capital gains, if any, designated as capital gain dividends are taxable
as long-term capital gains, regardless of how long the shareholder has held the
Fund's shares, and are not eligible for the dividends-received deduction.
Shareholders receiving distributions in the form of additional shares, rather
than cash, generally will have a cost basis in each such share equal to the net
asset value of a share of the Fund on the reinvestment date. Shareholders will
be notified annually as to the U.S.
Federal tax status of distributions.
Sale Of Shares
Any gain or loss realized by a shareholder upon the sale or
other disposition of shares of the Fund, or upon receipt of a distribution in
complete liquidation of a Fund, generally will be a capital gain or loss which
will be long-term or short-term, generally 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 (including shares
acquired pursuant to a dividend reinvestment plan) 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 Fund
shares held by the shareholder 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 such shares.
Foreign Withholding Taxes
Income received by a Fund from sources within foreign
countries may be subject to withholding and other taxes imposed by such
countries.
Backup Withholding
A Fund may be required to withhold U.S. Federal income tax at
the rate of 31% of all taxable distributions payable to shareholders who fail to
provide the Fund with their correct taxpayer identification number or to make
required certifications, or who have been notified by the Internal Revenue
Service that they are subject to backup withholding. Corporate shareholders and
certain other shareholders specified in the Code generally are exempt from such
backup withholding. Backup withholding is not an additional tax. Any amounts
withheld may
<PAGE>38
be credited against the shareholder's U.S. Federal income tax liability.
Foreign Shareholders
The tax consequences to a foreign shareholder of an investment
in a Fund may be different from those described herein. Foreign shareholders are
advised to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in a Fund.
Other Taxation
The Trust is organized as a Massachusetts business trust and,
under current law, neither the Trust nor any Fund is liable for any income or
franchise tax in the Commonwealth of Massachusetts, provided that the Fund
continues to qualify as a regulated investment company under Subchapter M of the
Code.
Fund shareholders may be subject to state and local taxes on
their Fund distributions. Shareholders are advised to consult their own tax
advisers with respect to the particular tax consequences to them of an
investment in a Fund.
FINANCIAL STATEMENTS
The Funds have not yet commenced operations and have no assets
or liabilities as of the date hereof. Consequently, no financial statements are
available for the Funds.
<PAGE>39
Distributor
Signature Broker-Dealer Services, Inc. BT ADVISOR FUNDS
6 St. James Avenue
Boston, MA 02116 - GROWTH FUND
(617) 423-0800 - GROWTH AND INCOME FUND
Investment Adviser Of Each Fund
Bankers Trust Company
130 Liberty Street
New York, NY 10006
Transfer Agent
Bankers Trust Company
280 Park Avenue
New York, NY 10017
Custodian
STATEMENT OF
Bankers Trust Company ADDITIONAL INFORMATION
130 Liberty Street ________________, 1996
New York, NY 10006
Independent Accountants
Coopers & Lybrand L.L.P.
1100 Main Street, Suite 900
Kansas City, MO 64105
Legal Counsel
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, NY 10022-4669
<PAGE>A-1
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.
<PAGE>A-2
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.
Description of S&Ps Corporate Bond Ratings:
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's to a
debt obligation. Capacity to pay interest and repay principal is extremely
strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher-rated issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to weakened capacity to pay interest and repay principal for debt
in this category than in higher-rated categories.
BB - Debt rated BB has less near-term vulnerability to default other than
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,
<PAGE>A-3
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.
Description of S&P commercial paper ratings:
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted A-1+.
Description of Moody's commercial paper ratings:
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered to
have a superior capacity for repayment of short-term promissory obligations.
Description of Fitch Investors Service's commercial paper ratings:
F-1+ Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1 Very Strong Credit Quality. Issues assigned this rating reflect an assurance
of timely payment only slightly less in degree than the strongest issue.
Description of Duff & Phelps' commercial paper ratings:
Duff 1+ Highest certainty of timely payment. Short term liquidity, including
internal operating factors and/or access to alternative sources of funds, is
outstanding, and safety is just below risk free U.S. Treasury short term
obligations.
Duff 1 Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are minor.
<PAGE>A-4
Description of IBCA's Long-Term Ratings:
AAA - Obligations for which there is the lowest expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial. Adverse
changes in business, economic or financial conditions are unlikely to increase
investment risk significantly.
AA - Obligations for which there is a very low expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial. Adverse
changes in business economic or financial conditions may increase investment
risk albeit not very significantly.
A - Obligations for which there is a low expectation of investment risk.
Capacity for timely repayment of principal and interest is strong, although
adverse changes in business, economic or financial conditions may lead to
increased investment risk.
BBB - Capacity for timely repayment of principal and interest is adequate,
although adverse changes in business, economic or financial conditions are more
likely to lead to increased investment risk than for obligations in higher
categories.
BB - Obligations for which there is a possibility of investment risk developing.
Capacity for timely repayment of principal and interest exists, but is
susceptible over time to adverse changes in business, economic or financial
conditions.
B - Obligations for which investment risk exists. Timely repayment of principal
and interest is not sufficiently protected against adverse changes in business,
economic or financial conditions.
CCC - Obligations for which there is a current perceived possibility of default.
Timely repayment of principal and interest is dependent on favorable business,
economic or financial conditions.
CC - Obligations which are highly speculative or which have a high risk of
default.
C - Obligations which are currently in default.
Notes: "+" or "-" may be appended to a rating to denote relative status within
major rating categories.
Ratings of BB and below are assigned where it is considered that speculative
characteristics are present.
Description of IBCA's Short-Term Ratings:
A1 +- Obligations supported by the highest capacity for timely repayment.
<PAGE>A-5
A1 - Obligations supported by a strong capacity for timely repayment.
A2 - Obligations supported by a satisfactory capacity for timely repayment,
although such capacity may be susceptible to adverse changes in business,
economic or financial conditions.
A3 - Obligations supported by an adequate capacity for timely repayment. Such
capacity is more susceptible to adverse changes in business, economic or
financial conditions than for obligations in higher categories.
B - Obligations for which the capacity for timely repayment is susceptible to
adverse changes in business, economic or financial conditions.
C - Obligations for which there is an inadequate capacity to ensure timely
repayment.
D - Obligations which have a high risk of default or which are currently in
default.
Description of Thomson Bank Watch Short-Term Ratings:
TBW-1 - The highest category; indicates a very high likelihood that principal
and interest will be paid on a timely basis.
TBW-2 - The second-highest category; while the degree of safety regarding timely
repayment of principal and interest in strong, the relative degree of safety is
not as high as for issues rated "TBW-1".
TBW-3 - The lowest investment-grade category; indicates that while the
obligation is more susceptible to adverse developments (both internal and
external) than those with higher ratings, the capacity to service principal and
interest in a timely fashion is considered adequate.
TBW-4 - The lowest rating category; this rating is regarded as non-investment
grade and therefore speculative.
Description of Thomson BankWatch Long-Term Ratings:
AAA - The highest category; indicates that the ability to repay principal and
interest on a timely basis is extremely high.
AA - The second-highest category; indicates a very strong ability to repay
principal and interest on a timely basis, with limited incremental risk compared
to issues rated in the highest category.
A - The third-highest category; indicates the ability to repay principal and
interest is strong. Issues rated "a" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.
<PAGE>A-6
BBB - The lowest investment-grade category; indicates an acceptable capacity to
repay principal and interest. Issues rated "BBB" are, however, more vulnerable
to adverse developments (both internal and external) than obligations with
higher ratings.
Non-Investment Grade
(Issues regarded as having speculative characteristics in the likelihood of
timely repayment of principal and interest.)
BB - While not investment grade, the "BB" rating suggests that the likelihood of
default is considerably less than for lower-rated issues. However, there are
significant uncertainties that could affect the ability to adequately service
debt obligations.
B - Issues rated "B" show a higher degree of uncertainty and therefore greater
likelihood of default that higher-rated issues. Adverse development could well
negatively affect the payment of interest and principal on a timely basis.
CCC - Issues rated "CCC" clearly have a high likelihood of default, with little
capacity to address further adverse changes in financial circumstances.
CC - "CC" is applied to issues that are subordinate to other obligations rated
"CCC" and are afforded less protection in the event of bankruptcy or
reorganization.
D - Default
These long-term debt ratings can also be applied to local currency debt. In such
cases the ratings defined above will be preceded by the designation "local
currency."
Ratings in the Long-Term Debt categories may include a plus (+) or Minus (-)
designation, which indicates where within the respective category the issue is
placed.
<PAGE>C-1
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS
None
(b) EXHIBITS:
(lA) Declaration of Trust of the Trust (1)
(lB) Amendment to the Declaration of Trust (2)
(1C) Designation of Series relating to addition of Growth
Fund and Growth and Income Fund (5)
(2) By-Laws of the Trust (1)
(3) Inapplicable
(4) Inapplicable
(5) Investment Advisory Contract (4)
(6) Distribution Agreement (2)
(7) Inapplicable
(8) Custodian Agreement (4)
(9A) Administration and Services Agreement (2)
(9B) Transfer Agency Agreement (4)
(10) Opinion and Consent of counsel (5)
(11) Inapplicable
(12) Inapplicable
(13) Investment letter of initial shareholders (4)
(14) Inapplicable
(15) Plan of Distribution pursuant to Rule 12b-1 under
the Investment Company Act of 1940, as amended (the
"1940 Act") (2)
(16) Method of computations of performance information (4)
(17) Inapplicable
(18) Rule 18f-3 Plan (5)
(1) Incorporated by reference to the Registrant's registration
statement on Form N-lA ("Registration Statement") as filed
with the Commission on August 24, 1995.
<PAGE>C-2
(2) Incorporated by reference to Pre-Effective Amendment No. 2 to
Registrant's Registration Statement as filed with
the Commission on January 3, 1996.
(3) Incorporated by reference to Pre-Effective Amendment No. 3 to
Registrant's Registration Statement as filed with the Commission on
January 12, 1996.
(4) To be filed by amendment.
(5) Filed herein.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE TRUST.
Inapplicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
NUMBER OF RECORD HOLDERS
TITLE OF CLASS (AS OF JUNE 28, 1996)
-------------- ------------------------
International Equity Fund 43
Latin American Equity Fund 6
Pacific Basin Equity Fund 9
Global High Yield Securities Fund 7
Capital Appreciation Fund 18
Small Cap Fund 71
Equity 500 Equal Weighted Index Fund 0
U.S. Bond Index Fund 0
EAFE(R) Equity Index Fund 16
Small Cap Index Fund 5
Growth Fund 0
Growth and Income Fund 0
ITEM 27. INDEMNIFICATION.
Under Article XI, Section 2 of the Trust's Declaration of Trust, any
past or present Trustee or officer of the Trust (including persons
who serve at the Trust's request as directors, officers or trustees
of another organization in which the Trust has any interest as a
shareholder, creditor or otherwise [hereinafter referred to as a
"Covered Person"]) is indemnified to the fullest extent permitted by
law against liability and all expenses reasonably incurred by him in
connection with any action, suit or proceeding to which he may be a
party or otherwise involved by reason of his being or having been a
Covered Person. This provision does not authorize indemnification
when it is determined, in the manner specified in the Declaration of
Trust, that such Covered Person has not acted in good faith in the
reasonable belief that his actions were in or not opposed to the best
<PAGE>C-3
interests of the Trust. Moreover, this provision does not authorize
indemnification when it is determined, in the manner specified in the
Declaration of Trust, that such Covered Person would otherwise be
liable to the Trust or its shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of his
duties. Expenses may be paid by the Trust in advance of the final
disposition of any action, suit or proceeding upon receipt of an
undertaking by such Covered Person to repay such expenses to the
Trust in the event that it is ultimately determined that
indemnification of such expenses is not authorized under the
Declaration of Trust and either (i) the Covered Person provides
security for such undertaking, (ii) the Trust is insured against
losses from such advances or (iii) the disinterested Trustees or
independent legal counsel determines, in the manner specified in the
Declaration of Trust, that there is reason to believe the Covered
Person will be found to be entitled to indemnification.
Insofar as indemnification for liability arising under the Securities
Act of 1933, as amended (the "1933 Act"), may be permitted to
Trustees, officers and controlling persons of the Trust pursuant to
the foregoing provisions, or otherwise, the Trust has been advised
that in the opinion of the Commission such indemnification is against
public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Trust of expenses
incurred or paid by a Trustee, officer or controlling person of the
Trust in the successful defense of any action, suit or proceeding) is
asserted by such Trustee, officer or controlling person in connection
with the securities being registered, the Trust will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Bankers Trust serves as investment adviser to each Fund.
Bankers Trust, a New York banking corporation, is a wholly owned subsidiary of
Bankers Trust New York Corporation. Bankers Trust conducts a variety of
commercial banking and trust activities and is a major wholesale supplier of
financial services to the international institutional market.
To the knowledge of the Trust, none of the directors or
officers of Bankers Trust, except those set forth below, is or has been at any
time during the past two fiscal years engaged in any other business,
profession, vocation or employment of a substantial nature, except that
certain directors and officers also hold various positions with and engage in
business for Bankers Trust New York Corporation. Set forth below are the names
and principal businesses of the directors and officers of Bankers Trust who
are or during the past two fiscal years have been engaged in any other
business, profession, vocation or employment of a substantial nature. These
persons may be contacted c/o Bankers Trust Company, 130 Liberty Street, New
York, New York 10006.
NAME AND PRINCIPAL BUSINESS ADDRESS, PRINCIPAL OCCUPATION AND OTHER
INFORMATION
<PAGE>C-4
George B. Beitzel, 29 King Street, Chappaqua, NY 10514-3432. Retired Senior
Vice President and Director of International Business Machines Corporation.
Director of Bankers Trust and Bankers Trust New York Corporation. Director of
Computer Task Group, FlightSafety International, Inc., Phillips Gas Company,
Phillips Petroleum Company, Caliber Systems, Inc. (formerly Roadway Services,
Inc.), Rohm and Hass Company and TIG Holdings, Chairman Emeritus of Amherst
College, and Chairman of the Colonial Williamsburg Foundation.
Phillip A. Griffiths, Director, Institute for Advanced Study, Olden Lane,
Princeton, NJ 08540. Director of Bankers Trust Company. Chairman, Committee on
Science, Engineering and Public Policy of the National Academies of Sciences
and Engineering & the Institute of Medicine; member, National Academy of
Sciences, American Academy of Arts and Sciences, American Philosophical
Society, member and chairman of the Nominations Committee and Committee on
Science and Engineering Indicators, National Science Board, and trustee of
North Carolina School of Science and Mathematics and the Woodward Academy.
Former member of the board of directors, Research Triangle Institute.
William R. Howell, J.C. Penney Company, Inc., P.O. Box 10001, Dallas, TX
75301-0001. Chairman of the Board and Chief Executive Officer, J.C. Penney
Company, Inc. Director of Bankers Trust and Bankers Trust New York
Corporation. Also a Director of Exxon Corporation, Halliburton Company,
Warner-Lambert Corporation, National Urban League, Inc. and the National
Retail Federation..
Jon M. Huntsman, Huntsman Corporation, 500 Huntsman Way, Salt Lake City, UT
84108. Chairman and Chief Executive Officer, Huntsman Corporation and other
affiliated companies. Director of Bankers Trust and Bankers Trust New York
Corporation. Chairman, chief executive officer and director of Sunstar
Corporation and JK Corp. Chairman and director of Co-Ex Plastics Inc. and
Global Polymers Corporation. Chairman of Constar Corporation and Petrostar
Corporation. President of Autostar Corporation and Restar Corporation.
Director of Airstar Corporation, Consolidated Press International (Australia),
Razzleberry Foods Corporation and Thiokol Corporation. General Partner of
Huntsman Group Ltd., McLeod Creek Partnership and Trustar Ltd. Chairman of
Primary Children's Medical Center Foundation, an overseer, The Wharton School,
University of Pennsylvania, an advisor, University of Utah, Eccles Business
School, founder of Huntsman Cancer Institute, University of Utah, chairman and
director of the Huntsman Cancer Foundation, and a trustee and president of the
Jon and Karen Huntsman Foundation.
Vernon E. Jordan, Jr., Akin, Gump, Strauss, Hauer & Feld, LLP, 1333 New
Hampshire Ave., N.W., Suite 400, Washington, DC 20036. Senior Partner, Akin,
Gump, Strauss, Hauer & Feld, LLP. Director of Bankers Trust and Bankers Trust
New York Corporation. Also a Director of American Express Company, Corning
Incorporated, Dow Jones, Inc., J.C. Penney Company, Inc., Revlon Group
Incorporated, Ryder System, Inc., Sara Lee Corporation, Union Carbide
Corporation and Xerox Corporation, a trustee of Brookings Institution, The
Ford Foundation and Howard University, and governor of the Joint Center for
Political and Economic Studies.
<PAGE>C-5
Hamish Maxwell, Philip Morris Companies Inc., 100 Park Avenue, 10th Floor, New
York, NY 10017. Retired Chairman and Chief Executive Officer, Philip Morris
Companies Inc. Director of Bankers Trust and Bankers Trust New York
Corporation. Director of The New Corporation Limited and Sola International
Inc.
Frank N. Newman, President and Chief Executive Officer of Bankers Trust
Company and Bankers Trust New York Corporation, 130 Liberty Street, New York,
NY 10006. Director of Bankers Trust Company. Former Deputy Secretary of the
United States Treasury and former vice chairman of the board and director of
BankAmerica Corporation and Bank of America. Also a director of Carnegie Hall.
N.J. Nicholas Jr., 15 West 53rd Street, New York, NY 10019. Former President,
Co-Chief Executive Officer and Director of Time Warner Inc. Director of
Bankers Trust and Bankers Trust New York Corporation. Also a Director of
Boston Scientific Corporation and Xerox Corporation.
Russell E. Palmer, The Palmer Group, 3600 Market Street, Suite 530,
Philadelphia, PA 19104. Chairman and Chief Executive Officer of The Palmer
Group. Director of Bankers Trust and Bankers Trust New York Corporation.
Former Dean of The Wharton School, University of Pennsylvania and former chief
executive officer of Touche Ross & Co. (now Deloitte and Touche). Also
Director of Allied-Signal Inc., Contel Cellular, Inc., Federal Home Loan
Mortgage Corporation, GTE Corporation, Goodyear Tire & Rubber Company, Imasco
Limited, The May Department Stores Company and Safeguard Scientifics, Inc.
Member, Radnor Venture Partners Advisory Board, advisory board of the
Controller General of the United States, and a trustee, the University of
Pennsylvania.
Donald L. Stahelli, Chairman of the Board and Chief Executive Officer,
Continental Grain Company, 277 Park Avenue, 50th Floor, New York, NY 10172.
Director of Bankers Trust Company. Also a director of ContiFinancial
Corporation, Prudential Life Insurance Company of America, National Committee
on United States-China Relations, America-China Society, U.S.-Russia Trade
Council, The Points of Light Foundation and New York City Partnership, Vice
Chairman of the U.S.-China Business Council, member of the Advisory Board of
Rabobank Nederland (Utrecht, The Netherlands), Council on Foreign Relations
and the Executive Committee of the National Advisory Council of Brigham Young
University's Marriott School of Management and a trustee of the American
Graduate School of International Management.
Patricia Carry Stewart, c/o Office of the Secretary, 280 Park Avenue - 17W,
New York, NY 10017. Former Vice President, The Edna McConnell Clark
Foundation. Director of Bankers Trust and Bankers Trust New York Corporation.
Director, Borden Inc., Continental Corp. and Melville Corporation, director
and vice chair of Community Foundation for Palm Beach and Martin Counties, and
a trustee emerita of Cornell University.
George J. Vojta, Bankers Trust Company, 130 Liberty Street, New York, NY
10006. Vice Chairman of the Board of Bankers Trust and Bankers Trust New York
Corporation. Director of Northwest Airlines and Private Export Funding Corp.,
the New York State Banking Board and
<PAGE>C-6
St. Lukes-Roosevelt Hospital Center, a partner of New York City Partnership
and chairman, Wharton Financial Services Center.
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) Signature Broker-Dealer Services, Inc. is the Distributor
("Signature") for the shares of BT Advisor Funds. Signature also
serves as the principal underwriter or placement agent for other
registered investment companies.
(b) Set forth below are the names, principal business addresses and
positions of each director and officer of Signature. Unless otherwise
noted, the principal business address of these individuals is
Signature Broker-Dealer Services, Inc., 6 St. James Avenue, Boston,
Massachusetts 02116. Unless otherwise specified, none of the officers
and directors of Signature serve as officers and Trustees of the
Trust.
PHILIP W. COOLIDGE: Chief Executive Officer, President and Director of
Signature and President and Trustee of the Registrant.
LINWOOD C. DOWNS: Treasurer of Signature.
JOHN R. ELDER: Assistant Treasurer of Signature and Treasurer of the
Registrant.
JOAN GULINELLO: Secretary of Signature.
<PAGE>C-7
THOMAS M. LENZ: Assistant Secretary of Signature and Secretary of the
Registrant.
MOLLY S. MUGLER: Assistant Secretary of Signature and Assistant Secretary of
the Registrant.
LINDA T. GIBSON: Assistant Secretary of Signature and Assistant Secretary of
the Registrant.
ANDRES E. SALDANA: Assistant Secretary of Signature and Assistant Secretary of
the Registrant.
SUSAN JAKUBOSKI: Assistant Treasurer of Signature.
BARBARA M. O'DETTE: Assistant Treasurer of Signature and Assistant Treasurer
of the Registrant.
BETH A. REMY: Assistant Treasurer of Signature.
JULIE J. WYETZNER: Product Management Officer of Signature.
ROBERT G. DAVIDOFF: Director of Signature; CMNY Capital, L.P, 135 East 57th
Street, New York, NY 10022.
DONALD S. CHADWICK: Director of Signature; Scarborough & Company, 110 East
42nd Street, New York, NY 10017.
LEEDS HACKETT: Director of Signature; National Credit Management Corporation,
10155 York Road, Cockeysville, MD 21030.
LAURENCE E. LEVINE: Director of Signature; First International Capital, Ltd.,
130 Sunrise Avenue, Palm Beach, FL 33480.
(c) Inapplicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
BT ADVISOR FUNDS: 6 St. James Avenue, Boston, MA 02116.
BANKERS TRUST COMPANY:130 Liberty Street, New York, NY 10006.
INVESTORS FIDUCIARY TRUST COMPANY: 127 West 10th Street, Kansas City, MO
64105.
SIGNATURE BROKER-DEALER SERVICES, INC.: 6 St. James Avenue, Boston, MA 02116.
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
(a) The Registrant undertakes to file a post-effective amendment,
including financials, which need not be certified, within four to six
months following the commencement of
<PAGE>C-8
operations of each of its series. The financial statements included
in such amendment will be as of and for the time period ended on a
date reasonably close or as soon as practicable to the date of the
amendment.
(b) The Registrant undertakes to comply with Section 16(c) of the 1940
Act as though such provisions of the Act were applicable to the
Registrant except that the request referred to in the third full
paragraph thereof may only be made by shareholders who hold in the
aggregate at least 10% of the outstanding shares of the Registrant,
regardless of the net asset value or values of shares held by such
requesting shareholders.
(c) If the information called for by Item 5A of Form N-lA is contained
in the latest annual report to shareholders, the Registrant shall
furnish each person to whom a prospectus is delivered with a copy of
the Registrant's latest annual report to shareholders upon request
and without charge.
<PAGE>C-9
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, as amended, the Registrant certifies that it
has duly caused this Registration Statement on Form N-lA (the "Registration
Statement") to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Boston and the Commonwealth of Massachusetts on the
12th day of July, 1996.
BT ADVISOR FUNDS
By: /s/ PHILIP W. COOLIDGE
Philip W. Coolidge, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on July 12, 1996.
SIGNATURE TITLE
- --------- -----
/S/PHILIP W. COOLIDGE Trustee
Philip W. Coolidge
/S/HARRY VAN BENSCHOTEN* Trustee
Harry Van Benschoten
/S/MARTIN J. GRUBER* Trustee
Martin J. Gruber
/S/BRUCE E. LANGTON* Trustee
Bruce E. Langton
/S/RICHARD J. HERRING* Trustee
Richard J. Herring
/S/JOHN R. ELDER Treasurer (Principal Financial and
John R. Elder Principal Accounting Officer)
*By: /s/ PHILIP W. COOLIDGE
Philip W. Coolidge as Attorney-in-Fact pursuant to a Power of
Attorney previously filed.
<PAGE>
BT ADVISORS FUNDS
EXHIBITS
TO
REGISTRATION STATEMENT ON
FORM N-lA
EXHIBIT INDEX
EXHIBIT NO.
(1C) Designation of Series relating to addition of Growth Fund and Growth
and Income Fund
(10) Opinion and Consent of Counsel
(18) Rule 18f-3 Plan
<PAGE>
Appendix I
BT ADVISOR FUNDS
Fourth Amended and Restated Establishment and
Designation of Series of Shares of
Beneficial Interest (par value $0.00001 per share)
Dated as of July 22, 1996
Pursuant to Article VI, Section 6.9 of the Declaration of
Trust, dated as of July 24, 1995, as amended (the "Declaration of Trust"), of BT
Advisor Funds (formerly, BT Global Investors) (the "Trust"), the Trustees of the
Trust hereby amend and restate the Establishment and Designation of Series
appended to the Declaration of Trust to establish and designate two additional
series of Shares (as defined in the Declaration of Trust) (each an "Additional
Fund" and collectively with the existing series of Shares of the Trust, the
"Funds"). These Additional Funds shall be designated the Growth Fund and the
Growth and Income Fund, respectively, and shall each consist of two classes of
Shares, the Investment Class and the Intermediary Class.
1. The Funds shall be redesignated, respectively, as follows:
Capital Appreciation Fund
Small Cap Fund
Latin American Equity Fund
Pacific Basin Equity Fund
International Equity Fund
Global High Yield Securities Fund
Equity 500 Equal Weighted Index Fund - Advisor Class
Shares
Equity 500 Equal Weighted Index Fund - Institutional Class Shares
U.S. Bond Index Fund - Advisor Class Shares
U.S. Bond Index Fund - Institutional Class Shares
EAFE(R) Equity Index Fund - Advisor Class Shares
EAFE(R) Equity Index Fund - Institutional Class Shares
Small Cap Index Fund - Advisor Class Shares
Small Cap Index Fund - Institutional Class Shares
Growth Fund - Intermediary Class Shares
Growth Fund - Investment Class Shares
Growth and Income Fund - Intermediary Class Shares
Growth and Income Fund - Investment Class Shares
<PAGE>
and shall have the following special and relative rights:
2. Each Fund shall be authorized to hold cash, invest in
securities, instruments and other properties and use investment techniques as
from time to time described in the Trust's then currently effective registration
statement under the Securities Act of 1933, as amended, to the extent pertaining
to the offering of Shares of such Fund. Each Share of a Fund shall be
redeemable, shall be entitled to one vote (or fraction thereof in respect of a
fractional share) on matters on which Shares of the Fund shall be entitled to
vote, shall represent a pro rata beneficial interest in the assets allocated or
belonging to the Fund, and shall be entitled to receive its pro rata share of
the net assets of the Fund upon liquidation of the Fund, all as provided in
Section 6.9 of the Declaration.
The proceeds of sales of Shares of a Fund, together with any income and gain
thereon, less any diminution or expenses thereof, shall irrevocably belong to
that Fund, unless otherwise required by law.
3. Shareholders of each Fund shall vote separately as a class
on any matter to the extent required by, and any matter shall be deemed to have
been effectively acted upon with respect to the Fund as provided, in, Rule
18f-2, as from time to time in effect, under the Investment Company Act of 1940,
as amended, or any successor rule, and by the Declaration of Trust.
4. The assets and liabilities of the Trust shall be allocated
among the Funds as set forth in Section 6.9 of the Declaration of Trust.
5. Subject to the provisions of Section 6.9 and Article IX of
the Declaration of Trust, the Trustees (including any successor Trustees) shall
have the right at any time and from time to time to reallocate assets and
expenses, to change the designation of any Fund or any other series hereafter
created, or otherwise to change the special and relative rights of any Fund or
any such other series.
<PAGE>
IN WITNESS WHEREOF, the undersigned have signed this
instrument as of July 22, 1996. This instrument may be executed by the
Trustees on separate counterparts but shall be effective only when signed by a
majority of the Trustees.
/s/ Philip W. Coolidge
Philip W. Coolidge
As Trustee and not Individually
/s/ Bruce E. Langton
Bruce E. Langton
As Trustee and not Individually
/s/ Martin J. Gruber
Martin J. Gruber
As Trustee and not Individually
/s/ Harry Van Benschoten
Harry Van Benschoten
As Trustee and not Individually
/s/ Richard J. Herring
Richard J. Herring
As Trustee and not Individually
<PAGE>1
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677
August 1, 1996
BT Advisor Funds
6 St. James Avenue
Boston, Massachusetts, 02116
Ladies and Gentlemen:
We have acted as counsel to BT Advisor Funds (the "Trust"), a business trust
organized under the laws of The Commonwealth of Massachusetts, in connection
with the Trust's establishment of two new series, the Growth Fund and the
Growth and Income Fund (the "Funds").
We have examined copies of the Trust's Declaration of Trust, as amended (the
"Declaration"), the Trust's By-Laws, the Trust's Registration Statement, as
amended, on Form N-1A, Securities Act File No. 33-62103 and Investment Company
Act File No. 811-7347 (the "Registration Statement"), and the Fourth Amended
and Restated Establishment and Designation of Series of Shares of Beneficial
Interest (par value $0.00001 per share) dated as of July 22, 1996. We have
also examined such other records, documents, papers, statutes and authorities
as we have deemed necessary to form a basis for the opinion hereinafter
expressed.
In our examination of material, we have assumed the genuineness of all
signatures and the conformity to original documents of all copies submitted to
us. As to various questions of fact material to our opinion, we have relied
upon statements and certificates of officers and representatives of the Trust
and others.
Based upon the foregoing, we are of the opinion that the shares of beneficial
interest of each Fund, par value $0.00001 per share (collectively, the
"Shares") when duly sold, issued and paid for in accordance with the terms of
the Declaration, the Trust's By-Laws and the Registration Statement, will be
validly issued and will be fully paid and non-assessable shares of beneficial
interest of the Trust, except that, as set forth in the Registration
Statement, shareholders of the Trust may under certain
<PAGE>2
circumstances be held personally liable for its obligations.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, to the reference to us in the statement of additional
information included as part of the Registration Statement and to the filing
of this opinion as an exhibit to any application made by or on behalf of the
Trust or any distributor or dealer in connection with the registration or
qualification of the Trust or the Shares under the securities laws of any
state or other jurisdiction.
We are members of the Bar of the State of New York and do not hold ourselves
out as being conversant with the laws of any jurisdiction other than those of
the United States of America and the State of New York. We note that we are
not licensed to practice law in The Commonwealth of Massachusetts, and to the
extent that any opinion expressed herein involves the law of The Commonwealth
of Massachusetts, such opinion should be understood to be based solely upon
our review of the documents referred to above, the published statutes of The
Commonwealth of Massachusetts, and where applicable, published cases, rules or
regulations of regulatory bodies of The Commonwealth of Massachusetts.
Very truly yours,
/s/ Willkie Farr & Gallagher
<PAGE>1
BT GLOBAL INVESTORS
Multiple Class Expense Allocation Plan
Adopted Pursuant to Rule 18f-3
WHEREAS, BT Global Investors, a Massachusetts business trust (the "Trust"),
engages in business as an open-end management investment company and is
registered as such under the Investment Company Act of 1940, as amended (the
"Act"); and
WHEREAS, the Trust is authorized to (i) issue shares of beneficial interest
("Shares") in separate series, with the Shares of each such series
representing the interests in a separate portfolio of securities and other
assets, and (ii) divide the Shares within each such series into two or more
Classes; and
WHEREAS, the Trust has established ten series as of the date hereof: Global
High Yield Securities Fund, Capital Appreciation Fund, Small Cap Fund,
International Equity Fund, Pacific Basin Equity Fund, Latin American Equity
Fund, U.S. Bond Index Fund, Equity 500 Equal Weighted Index Fund, Small Cap
Index Fund and EAFE Equity Index Fund (such portfolios being referred to
collectively herein as the "Initial Series," such series, together with all
other series subsequently established by the Trust and made subject to this
Plan, being referred to herein individually as a "Series" and collectively as
the "Series"); and
WHEREAS, Shares of each of the U.S. Bond Index Fund, Equity 500 Equal
Weighted Index Fund, Small Cap Index Fund and EAFE Equity Index Fund series of
the Trust have been divided into two Classes, such Classes having been
established and designated as "Institutional Class" shares and "Advisor Class"
shares (each a "Class," such Classes together with all other Classes
subsequently established by the Trust and made subject to this Plan, being
referred to herein individually as a "Class" and collectively as the
"Classes"); and
WHEREAS, the Board of Trustees as a whole, and the Trustees who are not
Interested Persons (as defined in the Act) of the Trust (the "Qualified
Trustees"), having determined in the exercise of their reasonable business
judgment that this Plan is in the best interest of each Class of each Initial
Series, each Initial Series as a whole, and the Trust as a whole, have
accordingly approved this Plan.
NOW, THEREFORE, the Trust hereby adopts this Plan in accordance with Rule
18f-3 under the Act, on the following terms and conditions:
1. Class Differences. Each Class of Shares of an Initial Series shall
represent interests in the same portfolio of investments of such Initial
Series and shall be identical in all respects, except that each Class shall
differ with respect to: (i) arrangements for shareholder services or the
distribution of Shares, or both, and the allocation of expenses, as provided
for in Section 2 of this Plan; (ii) the exclusive right of a Class to vote on
certain matters relating to the Distribution and Services Plan adopted by the
Trust pursuant to Rule 12b-1 under the Act with respect to such Class, if any,
(iii) such differences relating, to purchase minimums, sales charges, eligible
investors, conversion features and exchange privileges as may be set forth in
the prospectuses and statements of additional information of the Initial
Series, as
<PAGE>2
the same may be amended or supplemented from time to time (the "Prospectuses"
and "SAIs," respectively); and (iv) the designation of each Class of Shares.
2. Allocation of Expenses.
(a) Class Expenses. Expenses relating to different arrangements for
shareholder services or the distribution of Shares, or both, shall be
allocated to and paid by that Class. A Class may pay a different share of
other expenses, not including advisory or custodial fees or other expenses
related to the management of a Series' assets, if such expenses are actually
incurred in a different amount by that Class, or if the Class receives
services of a different kind or to a different degree than other Classes. For
example, expenses incurred in connection with any meeting of shareholders of a
particular Class, and litigation expenses incurred with respect to matters
affecting only a particular Class shall be allocated to that Class.
(b) Other Allocations. All other expenses of a Series shall be
allocated to each Class on the basis of the net asset value of that Class in
relation to the net asset value of the Series. Notwithstanding the foregoing,
the distributor or adviser of a Series may waive or reimburse the expenses of
a specific Class or Classes to the extent permitted under Rule 18f-3 under the
Act.
3. Term and Termination.
(a) Initial Series. This Plan shall become effective with respect to
each Class of an Initial Series as of the later of (i) the date on which a
Registration Statement with respect to the Retail Class Shares and
Institutional Class Shares of such Initial Series becomes effective under the
Securities Act of 1933, as amended, or (ii) the date on which each such Class
of each Initial Series commences offering its Shares to the public, and shall
continue in effect with respect to such Class of Shares (subject to Section
3(c) hereof) until terminated in accordance with the provisions of Section
3(c) hereof.
(b) Additional Series or Classes. This Plan shall become effective
with respect to any Class of an Initial Series other than the Advisor Class
Shares and the Institutional Class Shares and with respect to each additional
Series or Class thereof established by the Trust after the date hereof and
made subject to this Plan, upon commencement of the initial public offering
thereof, provided that the Plan has previously been approved with respect to
such additional Series or Class by votes of a majority of both (i) the Board
of Trustees of the Trust and (ii) the Qualified Trustees, and shall continue
in effect with respect to each such additional Series or Class (subject to
Section 3(c) hereof) until terminated in accordance with the provisions of
Section 3(c) hereof. An addendum hereto setting forth any specific and
different terms of such additional Series or Classes shall be attached to this
Plan.
(c) Termination. This Plan may be terminated at any time with respect
to the Trust or any Series or Class thereof, as the case may be, by vote of a
majority of both the Trustees of the Trust and the Qualified Trustees. The
Plan may remain in effect with respect to a Series or Class thereof even if it
has been terminated in accordance with this Section 3(c) with respect to one
or more other Series or Classes of the Trust.
<PAGE>3
4. Amendments. Any material amendment to this Plan shall require the
affirmative vote of a majority of both the Trustees of the Trust and the
Qualified Trustees.
Dated: November 8, 1995
BT0465
