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BT ADVISOR FUNDS
PROSPECTUS -- Institutional Class Shares
JANUARY 16, 1996, as amended April 8, 1996
BT Advisor Funds (the "Trust") is an open-end, management investment company
(mutual fund) which currently consists of ten funds. The U.S. Bond Index Fund
(the "Fund") is a separate series of the Trust and offers two classes of shares.
The shares offered by this prospectus are the Institutional Class Shares (the
"Shares"). The Fund seeks to replicate as closely as possible the performance of
the Lehman Brothers Aggregate Bond Index before the deduction of the expenses
allocable to the Shares of the Fund and the U.S. Bond Index Portfolio (the
"Expenses"). There is no assurance, however, that the Fund will achieve its
stated objective.
UNLIKE OTHER OPEN-END MANAGEMENT INVESTMENT COMPANIES (MUTUAL FUNDS), THE FUND
SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING ALL OF ITS INVESTABLE
ASSETS ("ASSETS") IN THE U.S. BOND INDEX PORTFOLIO (THE "PORTFOLIO") WHICH IS A
SEPARATE FUND WITH AN IDENTICAL INVESTMENT OBJECTIVE. THE INVESTMENT PERFORMANCE
OF THE FUND WILL CORRESPOND DIRECTLY TO THE INVESTMENT PERFORMANCE OF THE
PORTFOLIO. SEE "SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE" ON
PAGE 9.
Bankers Trust Company ("Bankers Trust") is the investment adviser (the
"Adviser") of the Portfolio.
Please read this Prospectus before investing, and keep it on file for future
reference. It contains important information, including how the Fund invests and
the services available to shareholders.
To learn more about the Fund and its investments, investors can obtain a copy of
the Fund's Statement of Additional Information (the "SAI"), dated January 16,
1996. 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) 368-4031 or contact the Trust at 6 St. James Avenue,
Boston, MA 02116, or a Service Agent.
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.
U.S. Bond
Index Fund
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.
BANKERS TRUST COMPANY
Investment Adviser of the
Portfolio and Administrator
SIGNATURE BROKER-
DEALER SERVICES, INC.
Distributor
6 St. James Avenue
Boston, Massachusetts 02116
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CONTENTS
THE FUND 3 WHO MAY WANT TO INVEST
4 INVESTMENT PRINCIPLES AND RISKS
The Fund's overall approach to investing.
4 EXPENSE SUMMARY The Fund's annual operating
expenses.
THE FUND
IN DETAIL 5 INVESTMENT OBJECTIVES AND POLICIES
8 RISK FACTORS AND CERTAIN SECURITIES AND
INVESTMENT PRACTICES
9 SPECIAL INFORMATION CONCERNING MASTER-FEEDER
FUND STRUCTURE
10 SECURITIES AND INVESTMENT PRACTICES
14 PERFORMANCE How the Fund has done over time.
15 MANAGEMENT OF THE TRUST AND THE PORTFOLIO
ACCOUNT
INFORMATION 18 TYPES OF ACCOUNTS Different ways to setup your
account, including tax-sheltered retirement
plans.
19 HOW TO BUY SHARES Opening an account and making
additional investments.
21 HOW TO SELL SHARES Taking money out and closing
your account.
24 INVESTOR SERVICES To help you manage your
account.
SHAREHOLDER AND
ACCOUNT POLICIES 25 DIVIDENDS, CAPITAL GAINS AND TAXES
27 VALUATION DETAILS Share price calculations and
the timing of purchases and redemptions.
28 EXCHANGE LIMITATIONS
29 ADDITIONAL INFORMATION ABOUT THE TRUST AND THE
PORTFOLIO
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THE FUND
The Trust seeks to achieve the investment objective of the Fund by investing all
the Assets of the Fund in the Portfolio.
The U.S. BOND INDEX FUND seeks to replicate as closely as possible (before
deduction of Expenses) the investment performance of the Lehman Brothers
Aggregate Bond Index (the "Aggregate Bond Index"), a broad market weighted index
which encompasses U.S. Treasury and agency securities, corporate investment
grade bonds, international (dollar-denominated) investment grade bonds, and
mortgage-backed securities. The Fund will be invested primarily in fixed income
securities of the U.S. Government or any agency thereof, publicly issued fixed
rate domestic debt of industrial, financial, and utility corporations, and U.S.
dollar denominated fixed income securities of foreign and supranational entities
issued publicly in the United States. The Fund will also invest in mortgage
pass-through securities issued by the Government National Mortgage Association,
the Federal Home Loan Mortgage Corporation, and the Federal National Mortgage
Association. The U.S. Bond Index Fund invests all of its Assets in the U.S. Bond
Index Portfolio.
WHO MAY WANT TO INVEST
Shares of the Fund are offered through this Prospectus to institutional
investors.
The Portfolio is not managed according to traditional methods of "active"
investment management, which involve the buying and selling of securities based
upon economic, financial and market analysis and investment judgment. Instead,
the Portfolio, utilizing a "passive" or "indexing" investment approach, attempts
to replicate the investment performance of the index through statistical
procedures.
The Portfolio represents all major sectors of the investment grade fixed-income
securities markets. The Fund may be a suitable investment vehicle for those
investors seeking ownership in the "bond market" as a whole, without regard to
particular sectors. The Fund is also suitable for those investors with common
stock holdings who are seeking a complementary fixed-income investment to create
a more balanced asset mix.
The Trust is intended to be a long-term investment vehicle and is not designated
to provide investors with a means of speculating on short-term market movements.
Investors who engage in excessive account activity generate additional costs
which are borne by all the Trust's shareholders. In order to minimize such
costs, the Trust has adopted the following policies. The Trust reserves the
right to reject any purchase request (including exchange purchases from other BT
Advisor Funds) that is reasonably deemed to be disruptive to efficient portfolio
management, either because of the timing of the investment or previous excessive
trading by the investor. Additionally, the Trust has adopted exchange privilege
limitations as described in the section "Exchange Limitations." Finally, the
Trust reserves the right to suspend the offering of its shares.
The Fund is not in itself a balanced investment plan. Investors should consider
their investment objective and tolerance for risk when making an investment
decision. When investors sell their Fund Shares, they may be worth more or less
than what they paid for them.
INVESTMENT PRINCIPLES AND RISKS
The value of the Portfolio's investments varies based on many factors. 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.
When investors sell their Fund Shares, they may be worth more or less than what
they paid for them. See "Risk Factors and Certain Securities and Investment
Practices" for more information.
EXPENSE SUMMARY
ANNUAL OPERATING EXPENSES are paid out of the assets of the Portfolio and the
Fund. The Portfolio pays an investment advisory fee and an administrative
services fee to Bankers Trust. The Fund incurs expenses such as maintaining
shareholder records and furnishing shareholder statements. The Fund must provide
financial reports.
The following table provides: (i) a summary of expenses relating to purchases
and sales of the Shares of the Fund and the annual operating expenses of the
Fund and expenses of the Portfolio, in the aggregate, as a percentage of
average daily net assets of the Fund; and (ii) an example illustrating the
dollar cost of such expenses on a $1,000 investment in the Fund. THE TRUSTEES
OF THE TRUST BELIEVE THAT THE EXPENSES OF THE FUND AND EXPENSES OF THE
PORTFOLIO, IN THE AGGREGATE, WILL BE LESS THAN OR APPROXIMATELY EQUAL TO THE
EXPENSES WHICH THE FUND WOULD INCUR IF THE TRUST RETAINED THE SERVICES OF AN
INVESTMENT ADVISER AND THE ASSETS OF THE FUND WERE INVESTED DIRECTLY IN THE TYPE
OF SECURITIES BEING HELD BY THE PORTFOLIO.
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SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge on Purchases
(as a percentage of offering price) None
..............................................................................
Maximum Sales Charge on Reinvested Distributions None
..............................................................................
Redemption Fee None
..............................................................................
Exchange Fee None
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Shareholder transaction expenses are charges paid when investors buy, sell,
exchange, or hold Shares of the Fund. See "Account information" for an
explanation of how and when these charges apply.
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ANNUAL OPERATING EXPENSES
Investment advisory fee (after reimbursement or waiver) 0.10%
..............................................................................
Other expenses
(after reimbursements or waivers) 0.15%
..............................................................................
Total operating expenses (after reimbursements or waivers) 0.25%
..............................................................................
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:
..............................................................................
Example 1 year 3 years
..............................................................................
$3 $8
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The expense table and the example above show the costs and expenses that an
investor will bear directly or indirectly as a shareholder of the Fund. Bankers
Trust has voluntarily agreed to waive a portion of its investment advisory fee
with respect to the Portfolio. Without such waiver, the Portfolio's investment
advisory fee would be equal to 0.15%. 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 the Fund,
to waive or reimburse expenses such that the total operating expenses of the
Fund and the corresponding Portfolio (as a percentage of the Fund's average
daily net assets) would be equal to 0.25%. In the absence of this undertaking,
assuming total assets of $100 million in the Fund, it is estimated that "Total
Operating Expenses" would be 0.55%. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN. Moreover, while the example assumes a 5% annual return,
actual performance will vary and may result in a return greater or less than 5%.
Currently, the Fund has issued two classes of Shares. The Fund offers by
separate prospectus another class of Shares. Because the expenses vary between
the classes, performance will vary with respect to each class. Additional
information concerning the Fund's other class of Shares is available from
Bankers Trust, as administrator, at (800) 368-4031.
For more information about the Fund's and the Portfolio's expenses see
"Management of the Trust and the Portfolio" and "Valuation Details."
THE FUND IN DETAIL
INVESTMENT OBJECTIVES AND POLICIES
The Trust seeks to achieve the investment objective of the Fund by investing all
of its Assets in the Portfolio, which has the same investment objective as the
Fund. Since the investment characteristics of the Fund will correspond directly
to those of the Portfolio, the following is a discussion of the various
investments of and techniques employed by the Portfolio. Additional information
about the investment policies of the Portfolio appears in "Risk Factors and
Certain Securities and Investment Practices" in this Prospectus and in the
Fund's SAI. There can be no assurance that the investment objective of either
the Fund or the Portfolio will be achieved.
The U.S. BOND INDEX PORTFOLIO seeks to replicate as closely as possible (before
deduction of Expenses) the investment performance of the Aggregate Bond Index, a
broad market weighted index which encompasses four major classes of investment
grade fixed-income securities in the United States: U.S. Treasury and agency
securities, corporate bonds, international (dollar-denominated) bonds, and
mortgage-backed securities, with maturities greater than one year.
As of December 31, 1995, the major classes of fixed-income securities
represented the following proportions of the Index's total market value:
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AGGREGATE
BOND INDEX
..............................................................................
U.S. Treasury and agency securities 53%
..............................................................................
Corporate bonds 14%
..............................................................................
International (dollar-denominated) bonds 3%
..............................................................................
Mortgage-backed securities 29%
..............................................................................
Asset Backed Securities 1%
..............................................................................
Dollar-weighted average maturity (Years) 8.5 yrs
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The U.S. Bond Index Portfolio will be unable to hold all of the individual
issues which comprise the Index because of the large number of securities
involved. Instead, the Portfolio will hold a representative sample of the
securities in the Index, selecting one or two issues to represent entire
"classes" or types of securities in the Index. The Portfolio will be constructed
so as to match as closely as possible the composition of the Index by investing
in fixed-income securities approximating their relative proportion of the
Index's total market value.
At the broadest level, the U.S. Bond Index Portfolio will seek to hold
securities and other investments which reflect the weighting of the major asset
classes in the Index, these classes include U.S. Treasury and agency securities,
corporate bonds, and mortgage-backed securities. For example, if U.S. Treasury
and agency securities represent approximately 60% of the Index's interest rate
risk, then approximately 60% of the Portfolio's interest rate risk will come
from such securities and other investments. Similarly, if corporate bonds
represent 20% of the interest rate risk of the Index, then they will represent
approximately 20% of the interest rate risk of the Portfolio. Such a sampling
technique is expected to be an effective means of substantially replicating the
income and capital returns provided by the Index before deduction of Fund and
Portfolio expenses.
The Portfolio may, from time to time, substitute one type of investment grade
bond for another. For instance, a Portfolio may hold more short-term corporate
bonds (and, in turn, hold fewer short U.S. Treasury bonds) than represented in
the Index so as to increase income. This corporate substitution strategy will
entail the assumption of additional credit risk; however, substantial
diversification within the corporate sector should moderate issue-specific
credit risk. Overall, credit risk is expected to be very low for the U.S. Bond
Index Portfolio.
Fixed-income securities will be primarily of investment grade quality - i.e.,
those rated at least Baa by Moody's Investors Service, Inc. ("Moody's") or BBB-
by Standard & Poor's Corporation ("S&P"). Securities rated Baa or BBB possess
some speculative characteristics.
The Portfolio may invest in U.S. Treasury bills, notes and bonds and other "full
faith and credit" obligations of the U.S. Government and in U.S. Government
agency securities, which are debt obligations issued or guaranteed by agencies
or instrumentalities of the U.S. Government ("U.S. Government Securities"). Such
"agency" securities may not be backed by the "full faith and credit" of the U.S.
Government. Such U.S. Government agencies may include the Federal Farm Credit
Banks, the Resolution Trust Corporation and the Government National Mortgage
Association. Even though they all carry top (AAA) credit ratings, "agency"
obligations are not explicitly guaranteed by the U.S. Government and so are
perceived as somewhat riskier than comparable Treasury bonds.
As a mutual fund investing primarily in fixed-income securities, the Portfolio
is subject to interest rate, income, call and credit risks. Since the
Portfolio also invests in mortgage-backed securities, it is also subject to
prepayment risk. See "Risk Factors and Certain Securities and Investment
Practices."
For more information about the historical performance of the Aggregate Bond
Index, see the SAI.
GENERAL
Over time, the correlation between the performance of the Fund and the Index is
expected to be 0.95 or higher before deduction of Expenses of the Fund and
expenses of the Portfolio. A correlation of 1.00 would indicate perfect
correlation, which would be achieved when the net asset value of the Fund,
including the value of its dividend and any capital gain distributions,
increases or decreases in exact proportion to changes in the Index. The Fund's
ability to track its Index may be affected by, among other things, transaction
costs, administration and other expenses incurred by the Fund or the Portfolio,
changes in either the composition of the Index or the assets of the Portfolio,
and the timing and amount of Portfolio investor contributions and withdrawals,
if any. In the unlikely event that a high correlation is not achieved, the
Trust's Board of Trustees will consider alternatives. Because the Portfolio
seeks to track the Index, Bankers Trust will not attempt to judge the merits of
any particular stock as an investment.
Under normal circumstances, the Portfolio will invest at least 80% of its assets
in the securities of its Index.
As a diversified fund, no more than 5% of the assets of the Portfolio may be
invested in the securities of one issuer (other than U.S. Government
Securities), except that up to 25% of the Portfolio's assets may be invested
without regard to this limitation. The Portfolio will not invest more than 25%
of its assets in the securities of issuers in any one industry. These are
fundamental investment policies of the Portfolio which may not be changed
without investor approval. No more than 15% of the Portfolio's net assets may be
invested in illiquid or not readily marketable securities (including repurchase
agreements and time deposits maturing in more than seven days). Additional
investment policies of the Portfolio are contained in the SAI.
The Portfolio may maintain up to 25% of its assets in short-term debt securities
and money market instruments to meet redemption requests or to facilitate
investment in the securities of the Index. Securities index futures contracts
and related options, warrants, convertible securities and swap agreements may be
used for several reasons: to simulate full investment in the underlying Index
while retaining a cash balance for fund management purposes, to facilitate
trading, or to reduce transaction costs or to seek higher investment returns
when a futures contract, option, warrant, convertible security or swap agreement
is priced more attractively than the underlying equity security or Index. These
instruments may be considered derivatives. See "Risk Factors and Certain
Securities and Investment Practices -- Derivatives."
The use of derivatives for non-hedging purposes may be considered speculative.
While each of these securities can be used as leveraged investments, the
Portfolio may not use them to leverage its net assets. The Portfolio will not
invest in such instruments as part of a temporary defensive strategy (such as
altering the aggregate maturity of the Portfolio) to protect the Portfolio
against potential market declines.
The Portfolio may lend its investment securities and purchase securities on a
when-issued and a delayed delivery basis. The Portfolio may also invest in
mortgage-related and other asset-backed securities. See "Risk Factors and
Certain Securities and Investment Practices" for more information about the
investment practices of the Portfolio.
RISK FACTORS AND CERTAIN SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of instruments
in which the Portfolio may invest and strategies Bankers Trust may employ in
pursuit of the Portfolio'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 the Portfolio achieve its goal. Holdings and recent investment strategies
are described in the financial reports of the Fund and the Portfolio, which are
sent to Fund shareholders twice a year. For a free SAI or financial report, call
your Service Agent or Bankers Trust.
FIXED INCOME SECURITY RISK
Investors in the Fund are exposed to four types of risk from fixed income
securities: (1) Interest rate risk is the potential for fluctuations in bond
prices due to changing interest rates; (2) Income risk is the potential for a
decline in a Portfolio's income due to falling market interest rates; (3) Credit
risk is the possibility that a bond issuer will fail to make timely payments of
either interest or principal to the Portfolio; and (4) Prepayment risk or call
risk is the likelihood that, during periods of falling interest rates,
securities with high stated interest rates will be prepaid (or "called") prior
to maturity, requiring the Portfolio to invest the proceeds at generally lower
interest rates.
SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE
Unlike other open-end management investment companies (mutual funds) which
directly acquire and manage their own portfolio securities, the Fund seeks to
achieve its investment objective by investing all of its Assets in the
Portfolio, a separate registered investment company with the same investment
objectives as the Fund. Therefore, an investor's interest in the Portfolio's
securities is indirect, like investments in other investment companies and
pooled investment vehicles. In addition to selling a beneficial interest to the
Fund, the Portfolio may sell beneficial interests to other mutual funds or
institutional investors. Such investors will invest in the Portfolio on the same
terms and conditions and will pay a proportionate share of the Portfolio's
expenses. However, the other investors investing in the Portfolio are not
required to sell their shares at the same public offering price as the Fund due
to variations in sales commissions and other operating expenses. Therefore,
investors in the Fund should be aware that these differences may result in
differences in returns experienced by investors in the different funds that
invest in the Portfolio. Such differences in returns are also present in other
mutual fund structures. Information concerning other holders of interests in the
Portfolio is available from Bankers Trust, as the Administrator, at (800)
368-4031.
The master-feeder structure has been developed relatively recently, so
shareholders should carefully consider this investment approach.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may experience higher pro rata
operating expenses, thereby producing lower returns (however, this possibility
exists as well for traditionally structured funds which have large institutional
investors). Additionally, the Portfolio may become less diverse, resulting in
increased portfolio risk. Also, funds with a greater pro rata ownership in the
Portfolio could have effective voting control of the operations of the
Portfolio. Except as permitted by the SEC, whenever the Trust is requested to
vote on matters pertaining to the Portfolio, the Trust will hold a meeting of
shareholders of the Fund and will cast all of its votes in the same proportion
as the votes of the Fund's shareholders. Fund shareholders who do not vote will
not affect the Trust's votes at the Portfolio meeting. The percentage of the
Trust's votes representing Fund shareholders not voting will be voted by the
Trustees or officers of the Trust in the same proportion as the Fund
shareholders who do, in fact, vote. Certain changes in the Portfolio's
investment objectives, policies or restrictions may require the Fund to withdraw
its interest in the Portfolio. Any such withdrawal could result in a
distribution "in kind" of portfolio securities (as opposed to a cash
distribution from the Portfolio). If securities are distributed, the Fund could
incur brokerage, tax or other charges in converting the securities to cash. In
addition, the distribution in kind may result in a less diversified portfolio of
investments or adversely affect the liquidity of the Fund. Notwithstanding the
above, there are other means for meeting redemption requests, such as borrowing.
The Fund may withdraw its investment from the Portfolio at any time, if the
Board of Trustees of the Trust determines that it is in the best interests of
the shareholders of the Fund to do so. Upon any such withdrawal, the Board of
Trustees of the Trust would consider what action might be taken, including the
investment of all the Assets of the Fund in another pooled investment entity
having the same investment objectives as the Fund or the retaining of an
investment adviser to manage the Fund's Assets in accordance with the investment
policies described herein with respect to the corresponding Portfolio.
The Fund's investment objective is not a fundamental policy and may be changed
upon notice to but without the approval of the Fund's shareholders. If there is
a change in the Fund's investment objective, the Fund's shareholders should
consider whether the Fund remains an appropriate investment in light of their
then-current needs. The investment objective of the Portfolio is also not a
fundamental policy. Shareholders of the Fund will receive 30 days prior written
notice with respect to any change in the investment objective of the Fund or the
Portfolio. See "Risk Factors and Certain Securities and Investment Practices" in
the SAI for a description of the fundamental policies of the Portfolio that
cannot be changed without approval by "the vote of a majority of the outstanding
voting securities" (as defined in the Investment Company Act of 1940, as amended
(the "1940 Act")) of the Portfolio.
For descriptions of the investment objective, policies and restrictions of the
Portfolio, see "The Fund in Detail" herein and "Risk Factors and Certain
Securities and Investment Practices" in this Prospectus and in the SAI. For
descriptions of the management of the Trust and the Portfolio, see "Management
of the Trust and the Portfolio" herein and in the SAI. For descriptions of the
expenses of the Portfolio, see "The Fund--Expense Summary," herein and
"Management of the Trust and the Portfolio" herein and in the SAI.
SECURITIES AND INVESTMENT PRACTICES
SHORT-TERM INVESTMENTS. The Portfolio may invest in certain short-term fixed
income securities. Such securities may be used to invest uncommitted cash
balances, to maintain liquidity to meet shareholder redemptions or to serve as
collateral for the obligations underlying the Portfolio's investment in
securities index futures or related options or warrants. These securities
include: obligations issued or guaranteed by the U.S. Government or any of its
agencies or instrumentalities or by any of the states, repurchase agreements,
time deposits, certificates of deposit, bankers' acceptances and commercial
paper.
U.S. GOVERNMENT SECURITIES are obligations of, or guaranteed by, the U.S.
Government, its agencies or instrumentalities. Some U.S. Government securities,
such as Treasury bills, notes and bonds, are supported by the full faith and
credit of the United States; others, such as those of the Federal Home Loan
Banks, are supported by the right of the issuer to borrow from the Treasury;
others, such as those of the Federal National Mortgage Association, are
supported by the discretionary authority of the U.S. Government to purchase the
agency's obligations; and still others, such as those of the Student Loan
Marketing Association, are supported only by the credit of the instrumentality.
SECURITIES LENDING. The Portfolio may lend its investment securities to
qualified institutional investors for either short-term or long-term purposes of
realizing additional income. Loans of securities by the Portfolio will be
collateralized by cash, letters of credit, or securities issued or guaranteed by
the U.S. Government or its agencies. The collateral will equal at least 100% of
the current market value of the loaned securities, and such loans may not exceed
30% of the value of the Portfolio's net assets. The risks in lending portfolio
securities, as with other extensions of credit, consist of possible loss of
rights in the collateral should the borrower fail financially. In determining
whether to lend securities, Bankers Trust will consider all relevant facts and
circumstances, including the creditworthiness of the borrower.
WHEN ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase
securities on a when-issued or delayed delivery basis. Delivery of and payment
for these securities may take place as long as a month or more after the date of
the purchase commitment. The value of these securities is subject to market
fluctuation during this period and no income accrues to the Portfolio until
settlement takes place. The Portfolio maintains with the Custodian a segregated
account containing high grade liquid securities in an amount at least equal to
these commitments.
MORTGAGE-RELATED SECURITIES. As part of its effort to replicate the investment
performance of its Index, the Portfolio may invest in mortgage-backed
securities. Mortgage-backed securities represent an interest in an underlying
pool of mortgages. Unlike ordinary fixed-income securities, which generally pay
a fixed rate of interest and return principal upon maturity, mortgage-backed
securities repay both interest income and principal as part of their periodic
payments. Because the mortgages underlying mortgage-backed certificates can be
prepaid at any time by homeowners or corporate borrowers, mortgage-backed
securities give rise to certain unique "pre-payment" risks. See "Risk Factors
and Certain Securities and Investment Practices."
The Portfolio may purchase mortgage-backed securities issued by the Government
National Mortgage Association (GNMA), the Federal Home Loan Mortgage Corporation
(FHLMC), the Federal National Mortgage Association (FNMA), and the Federal
Housing Authority (FHA). GNMA securities are guaranteed by the U.S. Government
as to the timely payment of principal and interest; securities from other
Government-sponsored entities are generally not secured by an explicit pledge of
the U.S. Government. The Portfolio may also invest in conventional mortgage
securities, which are packaged by private corporation and are not guaranteed by
the U.S. Government. Mortgage securities that are guaranteed by the U.S.
Government are guaranteed only as to the timely payment of principal and
interest. The market value of such securities is not guaranteed and may
fluctuate.
DERIVATIVES
The Portfolio may invest in various instruments that are commonly known as
derivatives. Generally, a derivative is a financial arrangement, the value of
which is based on, or "derived" from, a traditional security, asset, or market
index. Some "derivatives" such as mortgage-related and other asset-backed
securities are in many respects like any other investment, although they may be
more volatile or less liquid than more traditional debt securities. There are,
in fact, many different types of derivatives and many different ways to use
them. There are a range of risks associated with those uses. Futures and options
are commonly used for traditional hedging purposes to attempt to protect a fund
from exposure to changing interest rates, securities prices, or currency
exchange rates and as a low cost method of gaining exposure to a particular
securities market without investing directly in those securities. Derivatives
will not be used to increase portfolio risk above the level that could be
achieved using only traditional investment securities or to acquire exposure to
changes in the value of assets or indices that by themselves would not be
purchased for the Portfolio.
Securities Index Futures and Related Options. The Portfolio may enter into
securities index futures contracts and related options provided that not more
than 5% of its assets are required as a margin deposit for futures contracts or
options and provided that not more than 20% of the Portfolio's assets are
invested in futures and options at any time. When the Portfolio has cash from
new investments in the Portfolio or holds a portion of its assets in money
market instruments, it may enter into index futures or options to attempt to
increase its exposure to the market. Strategies the Portfolio could use to
accomplish this include purchasing futures contracts, writing put options, and
purchasing call options. When the Portfolio wishes to sell securities, because
of shareholder redemptions or otherwise, it may use index futures or options to
hedge against market risk until the sale can be completed. These strategies
could include selling futures contracts, writing call options, and purchasing
put options.
Swap Agreements. The Portfolio may enter into swap agreements only to the extent
that obligations under such agreements represent not more than 10% of the
Portfolio's total assets. Swap agreements are contracts between parties in which
one party agrees to make payments to the other party based on the change in
market value of a specified index or asset. In return, the other party agrees to
make payments to the first party based on the return of a different specified
index or asset.
Although swap agreements entail the risk that a party will default on its
payment obligations thereunder, the Portfolio will minimize this risk by
entering into agreements that mark to market no less frequently than quarterly.
Swap agreements also bear the risk that the Portfolio will not be able to meet
its obligation to the counterparty. This risk will be mitigated by investing the
Portfolio in the specific asset for which it is obligated to pay a return.
Warrants. The Portfolio's investment in warrants will not exceed more than 5% of
its assets (2% with respect to warrants not listed on the New York or American
Stock Exchanges). 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.
Convertible Securities. The Portfolio may invest in convertible securities which
are 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 decreases
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.
Further risks associated with the use of futures contracts, options, warrants,
convertible securities and swap agreements. The risk of loss associated with
futures contracts in some strategies can be substantial due to both the low
margin deposits required and the extremely high degree of leverage involved in
futures pricing. As a result, a relatively small price movement in a futures
contract may result in an immediate and substantial loss or gain. However, the
Portfolio will not use futures contracts, options, warrants, convertible
securities and swap agreements for speculative purposes or to leverage their net
assets. Accordingly, the primary risks associated with the use of futures
contracts, options, warrants, convertible securities and swap agreements by the
Portfolio are: (i) imperfect correlation between the change in market value of
the securities held by the Portfolio and the prices of futures contracts,
options, warrants, convertible securities and swap agreements; and (ii) possible
lack of a liquid secondary market for a futures contract and the resulting
inability to close a futures position prior to its maturity date. The risk of
imperfect correlation will be minimized by investing only in those contracts
whose behavior is expected to resemble that of the Portfolio's underlying
securities. The risk that the Portfolio will be unable to close out a futures
position will be minimized by entering into stock transactions on an exchange
with an active and liquid secondary market. However options, warrants,
convertible securities and swap agreements purchased or sold over-the-counter
may be less liquid than exchange-traded securities. Illiquid securities, in
general, may not represent more than 15% of the net assets of the Portfolio.
Asset Coverage. To assure that the Portfolio's use of futures and related
options, as well as when-issued and delayed-delivery securities, interest rate
swaps and foreign currency forward futures and related options transactions are
not used to achieve excessive investment leverage, the Portfolio 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 Portfolio's custodian containing
high grade liquid debt securities in an amount at all times equal to or
exceeding the Portfolio's commitment with respect to these instruments or
contracts.
PORTFOLIO TURNOVER
The frequency of Portfolio transactions-the Portfolio's portfolio turnover
rate-will vary from year to year depending on market conditions and the
Portfolio's cash flows. The Portfolio's annual portfolio turnover rate is not
expected to exceed 100%.
PERFORMANCE
The Portfolio's recent strategies and holdings, and the Fund's performance, is
detailed twice a year in the Fund's financial reports, which are sent to Fund
shareholders.
For current Fund performance or a free copy of the Fund's financial report,
please contact your Service Agent or Bankers Trust.
Mutual fund performance is commonly measured as total return and/or yield. The
Fund's performance is affected by the expenses of the Fund.
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in the Fund over a given
period, assuming reinvestment of any dividends and capital gains. A cumulative
total return reflects actual performance over a stated period of time. An
average annual total return is a hypothetical rate of return that, if achieved
annually, would have produced the same cumulative total return if performance
had been constant over the entire period. Average annual total return
calculations smooth out variations in performance; they are not the same as
actual year-by-year results. Average annual total returns covering periods of
less than one year assume that performance will remain constant for the rest of
the year.
YIELD refers to the income generated by an investment in the Fund over a given
period of time, expressed as an annual percentage rate. Yields are calculated
according to a standard that is required for all stock and bond funds. Because
this differs from other accounting methods, the quoted yield may not equal the
income actually paid to shareholders.
Performance information may include comparisons of the Fund's investment results
to various unmanaged indices or results of other mutual funds or investment or
savings vehicles. From time to time, the Fund rankings may be quoted from
various sources, such as Lipper Analytical Services, Inc., Value Line and
Morningstar, Inc.
Unlike some bank deposits or other investments which pay a fixed yield for a
stated period of time, the total return of the Fund will vary depending upon
interest rates, the current market value of the securities held by the Portfolio
and changes in the expenses of the Fund or Portfolio. 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 the Fund or Portfolio, on a month-to-month basis.
Such waivers will have the effect of increasing the Fund's net income (and
therefore its yield and total return) during the period such waivers are in
effect.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN INDICATION OF
FUTURE PERFORMANCE.
MANAGEMENT OF THE TRUST AND THE PORTFOLIO
BOARD OF TRUSTEES
The Trust and the Portfolio are each governed by a Board of Trustees which is
responsible for protecting the interests of investors. A majority of the
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Trust or the Portfolio, as the case may be, have adopted written procedures
reasonably appropriate to deal with potential conflicts of interest arising from
the fact that the same individuals are Trustees of the Trust and the Portfolio,
up to and including creating separate boards of trustees. See "Management of the
Trusts and the Portfolios" in the SAI for more information with respect to the
Trustees and officers of the Trust and Portfolio.
INVESTMENT ADVISER
The Trust has not retained the services of an investment adviser since the Trust
seeks to achieve the investment objective of the Fund by investing all the
Assets of the Fund in the Portfolio. The Portfolio has retained the services of
Bankers Trust as investment adviser.
BANKERS TRUST COMPANY AND ITS AFFILIATES
Bankers Trust Company, a New York banking corporation with principal offices at
280 Park Avenue, New York, New York 10017, is a wholly owned subsidiary of
Bankers Trust New York Corporation. Bankers Trust conducts a variety of general
banking and trust activities and is a major wholesale supplier of financial
services to the international and domestic institutional market.
As of December 31, 1995, Bankers Trust New York Corporation was the ninth
largest bank holding company in the United States with total assets of
approximately $104 billion. Bankers Trust is a worldwide merchant bank dedicated
to servicing the needs of corporations, governments, financial institutions and
private clients through a global network of over 120 offices in more than 40
countries. Investment management is a core business of Bankers Trust, built on a
tradition of excellence from its roots as a trust bank founded in 1903. The
scope of Bankers Trust's investment management capability is unique due to its
leadership positions in both active and passive quantitative management and its
presence in major equity and fixed income markets around the world. Bankers
Trust is one of the nation's largest and most experienced investment managers
with approximately $200 billion in assets under management globally. Of that
total, approximately $82 billion are in U.S. equity index assets alone. When
bond and international funds are included, Bankers Trust manages approximately
$94 billion in total index assets. This makes Bankers Trust one of the nation's
leading managers of index funds.
Bankers Trust has more than 50 years of experience managing retirement assets
for the nation's largest corporations and institutions. In the past, these
clients have been serviced through separate account and commingled fund
structures. Now, the BT Family of Funds brings Bankers Trust's extensive
investment management expertise - once available to only the largest
institutions in the U.S. - to individual investors. Bankers Trust's officers
have had extensive experience in managing investment portfolios having
objectives similar to those of the Portfolio.
Bankers Trust, subject to the supervision and direction of the Board of Trustees
of the Portfolio, manages the Portfolio in accordance with the Portfolio's
investment objective and stated investment policies, makes investment decisions
for the Portfolio, places orders to purchase and sell securities and other
financial instruments on behalf of the Portfolio and employs professional
investment managers and securities analysts who provide research services to the
Portfolio. Bankers Trust may utilize the expertise of any of its world wide
subsidiaries and affiliates to assist it in its role as investment adviser. All
orders for investment transactions on behalf of the Portfolio are placed by
Bankers Trust with broker-dealers and other financial intermediaries that it
selects, including those affiliated with Bankers Trust. A Bankers Trust
affiliate will be used in connection with a purchase or sale of an investment
for the Portfolio only if Bankers Trust believes that the affiliate's charge for
the transaction does not exceed usual and customary levels. The Portfolio will
not invest in obligations for which Bankers Trust or any of its affiliates is
the ultimate obligor or accepting bank. The Portfolio may, however, invest in
the obligations of correspondents and customers of Bankers Trust.
The Investment Advisory Agreement provides for the Portfolio to pay Bankers
Trust a fee from the Portfolio, accrued daily and paid monthly, equal on an
annual basis to 0.15% of the average daily net assets of the Portfolio for its
then-current fiscal year.
Bankers Trust has been advised by its counsel that, in counsel's opinion,
Bankers Trust currently may perform the services for the Trust and the Portfolio
described in this Prospectus and the SAI without violation of the Glass-Steagall
Act or other applicable banking laws or regulations. 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.
Bankers Trust investment 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.
PORTFOLIO MANAGER
Louis R. D'Arienzo, Vice President of Bankers Trust, is responsible for the
day-to-day management of the U.S. Bond Index Portfolio. Mr. D'Arienzo has been
employed by Bankers Trust since 1981 and has twelve years trading and
investment experience in fixed income securities.
ADMINISTRATOR
Under its Administration and Services Agreement with the Trust, Bankers Trust
calculates the net asset value of the Fund and generally assists the Board of
Trustees of the Trust in all aspects of the administration and operation of the
Fund. The Administration and Services Agreement provides for the respective
Trust to pay Bankers Trust a fee, accrued daily and paid monthly equal on an
annual basis to 0.20% of the average daily net assets of the Fund, attributable
to the Class, for its then-current fiscal year.
Under an Administration and Services Agreement with the Portfolio, Bankers Trust
calculates the value of the assets of the Portfolio and generally assists the
Board of Trustees in all aspects of the administration and operation of the
Portfolio. The Administration and Services Agreement provides for the Portfolio
to pay Bankers Trust a fee, accrued daily and paid monthly, equal on an annual
basis to 0.05% of the Portfolio's average daily net assets for its then-current
fiscal year. 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.
CUSTODIAN AND TRANSFER AGENT
Bankers Trust acts as custodian of the assets of the Trust and Portfolio and
serves as the transfer agent (the "Transfer Agent") for the Trust and Portfolio
under the Administration and Services Agreement with the Trust and Portfolio.
ACCOUNT INFORMATION
TYPES OF ACCOUNTS
The account guidelines that follow may not apply to certain accounts or to
certain retirement accounts. Some of the services and features of this
Prospectus may not be available to you. Certain features of the Fund, 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 Bankers Trust are
listed below.
The account guidelines that follow may not apply to the Fund or to certain
retirement accounts. If your employer offers the Fund through a retirement
program, contact your employer for more information. Otherwise, call your
Service Agent 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 SAVINGS 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.
* 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 Service Agent or Bankers Trust.
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 Service Agent or Bankers Trust.
HOW TO BUY SHARES
Shares are purchased at the Fund's net asset value ("NAV") next calculated after
your investment is received and accepted. The NAV is normally calculated at 4:00
p.m. Eastern time.
If you are placing your order through a Service Agent, it is the responsibility
of your Service Agent to transmit your order to buy Shares to the Transfer Agent
before 4:00 p.m. Eastern time.
The Transfer Agent must receive payment by the following business day (trade
date +1) 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 Fund.
IF YOU ARE NEW TO THE BT FAMILY OF 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 Service Agent or Bankers
Trust.
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 Service Agent.
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 Service
Agent or Bankers Trust for more information and a retirement account
application.
Investments by individual employees participating in a retirement program are
made through their Program Sponsor's recordkeeper, who is responsible for
transmitting all orders for the purchase, redemption or exchange of Shares of
the Fund. The availability of the Fund, and the procedures for investing, depend
upon the provisions of the Program and whether the Program Sponsor has
contracted with the Trust or its transfer agent for special processing services,
including subaccounting. Individual investors who separate from a program, other
institutional investors and Individual Retirement Account investors must arrange
for services through BT Institutional Service Center, the Manager by contacting
them at (800) 368-4031, P.O. Box 419210, Kansas City, MO 64141-6210.
MINIMUM INVESTMENT (EXCLUDING RETIREMENT PLANS)
TO OPEN AN ACCOUNT $5 MILLION
TO ADD TO AN ACCOUNT $100,000
MINIMUM BALANCE $1 MILLION
For further information on opening an account, please consult your Service Agent
or refer to the account application.
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
------------------ --------------------
PHONE YOUR Contact your Service Agent. Contact your Service Agent or
SERVICE AGENT If you are an existing call 1-(800) 368-4031. You may
shareholder, you may exchange exchange from another Bankers
from another Bankers Trust Trust account with the same
account with the same registration, including name,
registration, including address, and taxpayer ID number.
name, address and taxpayer
ID number.
..............................................................................
MAIL Complete and sign the account Make your check payable to the
application. Make your check complete name of the Fund of
payable to the complete name your choice. Indicate your
of the Fund of your choice. Fund account number on your
Mail to the appropriate check and mail to the address
address indicated on the printed on your account
application. statement. Exchange by mail:
call your Service Agent or
Bankers Trust for instructions.
..............................................................................
<PAGE>
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
------------------ --------------------
IN PERSON Take your account application Take your check to your
and check to your Service Service Agent.
Agent.
..............................................................................
WIRE Not available. Call your Service Agent or
Bankers Trust or wire to:
ROUTING NO.: 021001033
ATTN: Bankers Trust/IFTC Deposit
DDA: #00-226-296
FBO: (Account name)
(Account number)
CREDIT: Fund Number
U.S. Bond Index Fund - 511
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, or call your Service
Agent to begin the program.
..............................................................................
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 normally
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 Service Agent or call 1-800-943-2222.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR NON-RETIREMENT ACCOUNT SHARES, leave
at least $1,000,000 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 Bankers Trust 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:
* Your name,
* The Fund's name and Fund's number,
* Your Fund account number,
* The dollar amount or number of Shares to be redeemed and
* Any other applicable requirements listed in the following table.
Deliver your letter to your Service Agent, 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.
ADDITIONAL INFORMATION ABOUT SELLING SHARES
ACCOUNT TYPE SPECIAL REQUIREMENTS
------------ --------------------
PHONE YOUR All account types except Maximum check request:
SERVICE AGENT retirement $100,000.
All account types You may exchange to 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 Individual, Joint Tenant, Sole The letter of instruction
PERSON Proprietorship, UGMA, UTMA (with signature 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 Service Agent or
the Transfer Agent.
Retirement account The account owner should
complete a retirement
distribution form. Contact
your Service Agent or call
1-800-943-2222.
Trust The trustee must sign the
letter indicating capacity as
trustee. If the trustee's name
is not on the account
registration, provide a copy
of the trust document certified
within the last 60 days.
Business or Organization At least one person authorized
by corporate resolution to act
on the account must sign the
letter.
Executor, Administrator, For instructions contact
Conservator/Guardian your Service Agent or call
1-800-368-4031.
..............................................................................
<PAGE>
ACCOUNT TYPE SPECIAL REQUIREMENTS
------------ --------------------
WIRE All account types except You must sign up for the wire
retirement feature before using it. To
verify that it is in place,
contact your Service Agent or
call 1-800-368-4031. Minimum
wire: $500.
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.
.............................................................................
AUTOMATICALLY Not available. Use the Systematic Withdrawal
Program. Sign up for this
service when opening your
account, or call your Service
Agent to begin the program.
..............................................................................
INVESTOR SERVICES
The BT Family of Funds provides a variety of services to help you manage your
account.
INFORMATION SERVICES
STATEMENTS AND REPORTS that your Service Agent 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 Service Agent 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.
Note that exchanges out of the Fund may be limited to four per calendar year and
that they may have tax consequences for you. For details on policies and
restrictions governing exchanges including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see page 28.
SYSTEMATIC INVESTMENT, WITHDRAWAL AND EXCHANGE PROGRAM
One easy way to pursue your financial goals is to invest money regularly. The BT
Family of Funds offers convenient services that let you transfer money into your
fund account, out of 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 Service
Agent for more information.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
The Fund distributes substantially all of its net income and capital gains to
shareholders each year. The Fund distributes capital gains annually. Normally,
income dividends for the Fund are distributed monthly.
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 the 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.
FOR RETIREMENT ACCOUNTS, all distributions are automatically reinvested. When
you are over 59 1/2 years old, you can receive distributions in cash. If
distributions from a retirement account 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 equal to 50% of
the deficiency 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.
When the Fund deducts a distribution from its NAV, the reinvestment price is
the 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 Fund
could affect you. Below are some of the Fund's tax implications. If your
account is not a tax-deferred retirement account beware of these tax
implications.
TAXES ON DISTRIBUTIONS. Distributions from the Fund 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 Fund could also be taxed by the
country in which you reside.
For federal tax purposes, income and short-term capital gain distributions
from the Fund 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 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 IRS a statement showing the
taxable distributions paid to you in the previous year.
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 the Fund, the Transfer Agent will send you or your
Service Agent 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 the 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.
There are tax requirements that all Funds must follow in order to avoid
federal taxation. In its effort to adhere to these requirements, the Fund may
have to limit its investment activity in some types of instruments.
VALUATION DETAILS
THE FUND is open for business each day the New York Stock Exchange Inc. (the
"NYSE") is open. The Fund's NAV is calculated as of the close of regular
trading on the NYSE, currently 4:00 p.m. Eastern time.
THE FUND'S NAV is the value of a single Share. The NAV of the Fund is computed
by dividing the value of the Fund's Assets (i.e., the value of its investment
in the Portfolio and other assets), less all liabilities, allocable to the
Institutional Class Shares by the total number of its Shares outstanding. The
Portfolio's securities and other assets are valued primarily on the basis of
market quotations or, if quotations are not readily available, by Bankers
Trust pursuant to procedures adopted by the Portfolio'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.
WHEN INVESTORS SIGN THEIR ACCOUNT APPLICATION, they will be asked to certify
that their social security or taxpayer identification number is correct and
that they are not subject to 31% backup withholding for failing to report
income to the IRS. If investors violate IRS regulations, the IRS can require
the Fund to withhold 31% of their taxable distributions and redemptions.
INVESTORS MAY INITIATE MANY TRANSACTIONS BY TELEPHONE: A Service Agent 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. A Service Agent or the Transfer Agent will request
personalized security codes or other information, and may also record calls.
Investors 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 Service Agent or the Transfer
Agent for instructions. Additional documentation may be required from
corporations, associations and certain fiduciaries.
THE FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period of
time. The 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 the 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:
* All checks should be made payable to the Fund.
* All purchases must be made in U.S. dollars and checks must be drawn on U.S.
banks.
* The Fund does not accept third party checks, except those payable to an
existing shareowner 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.
* The Fund reserves the right to limit the number of checks processed at one
time.
* If a check does not clear, the purchase will be cancelled and the investor
could be liable for any losses or fees the Fund or the Transfer Agent has
incurred.
* When purchases 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: In the case of the Fund, investors begin to earn dividends
as of the first business day following the day the Fund receives payment.
* Automated Order Purchases: In the case of the Fund, investors begin to earn
dividends as of the business day an order is received and accepted.
AUTOMATED ORDERS PURCHASE. Shares of the Fund can be purchased or sold through
Service Agents 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, investors
should 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 the Fund it may take up
to seven days to pay you.
* Shares of the Fund 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.
* The 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 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, investors have the privilege of exchanging Shares of the
Fund for Shares of other funds in the BT Family of Funds at NAV. However,
investors should note the following:
* The Fund an investor exchanges into must be registered for sale in their
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 Fund and funds described in other BT Family of Funds'
Prospectuses, with the exception of other BT Advisor Institutional Class
Index Funds, are restricted during the 90 days following purchase.
* Exchanges may have tax consequences for you.
* Because excessive trading can hurt Fund performance and shareholders, the
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.
* The 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 the 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 the Fund.
* Although the Fund will attempt to give prior notice whenever it is
reasonably able to do so, they may impose these restrictions at any time.
The Fund reserves the right to terminate or modify the exchange privilege in
the future on 60 days' notice to shareholders.
ADDITIONAL INFORMATION ABOUT THE TRUST AND PORTFOLIO
The Fund is a mutual fund: an investment that pools shareholders' money and
invests it toward a specified goal. The Fund is a separate diversified series
of BT Advisor Funds, a Massachusetts business trust. The Fund offers two
classes of Shares of beneficial interest, Institutional Class Shares and
Advisor Class Shares. The Portfolio is a separate diversified series of BT
Investment Portfolios, a New York master trust fund.
The Portfolio is a separate subtrust (or "Series") of BT Investment
Portfolios. The Trust and BT Investment Portfolios reserves the right to add
additional series in the future. The Trust also reserves the right to issue
additional classes of Shares of the Fund.
The Trust or the Portfolio may hold special meetings and mail proxy materials.
These meetings may be called to elect or remove trustees, change fundamental
policies, approve Portfolio'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 the Fund will
have one vote for each full share held and proportionate, fractional votes for
fractional shares held. A separate vote of the Fund or classes is required on
any matter affecting only the Fund or class on which shareholders are entitled
to vote. Shareholders of the Fund or class are not entitled to vote on Trust
matters that do not affect the Fund or class, respectively, and do not require
a separate vote of the Fund or class. All series of the Trust and all classes
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
shareholders' meeting for the election of Trustees. Any Trustee may be removed
from office upon the vote of shareholders holding at least two-thirds of the
Trust's outstanding shares at a meeting called for that purpose. The Trustees
are required to call such a meeting upon the written request of shareholders
holding at least 10% of the Trust's outstanding shares. The Trust will also
assist shareholders in communicating with one another as provided for in the
1940 Act.
Each series of the Trust will vote separately on any matter involving the
corresponding Portfolio. 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 series of BT Investment
Portfolios will vote together or separately on matters in the same manner, and
in the same circumstances, as do the series of the Trust. As with the Trust,
the investors in one or more series of BT Investment Portfolios 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.
The Declaration of Trust of BT Investment Portfolios provides that the Fund
and other entities investing in the Portfolio (e.g., other investment
companies, insurance company separate accounts and common and commingled trust
funds) will each be liable for all obligations of the Portfolio. However, the
risk of the Fund incurring financial loss on account of such liability is
limited to circumstances in which both inadequate insurance existed and the
Portfolio itself was unable to meet its obligations. Accordingly, the Trustees
of the Trust believe that neither the Fund nor its shareholders will be
adversely affected by reason of the Fund's investing in the Portfolio. No
series of BT Investment Portfolios has any preference over any other series.
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
INVESTMENT ADVISER OF THE PORTFOLIO 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>
BT ADVISOR FUNDS
PROSPECTUS -- Institutional Class Shares
JANUARY 16, 1996, as amended April 8, 1996
BT Advisor Funds (the "Trust") is an open-end, management investment company
(mutual fund) which currently consists of ten funds. The Small Cap Index Fund
(the "Fund") is a separate series of the Trust and offers two classes of shares.
The shares offered by this prospectus are the Institutional Class Shares (the
"Shares"). The Fund seeks to replicate as closely as possible the performance of
the Russell 2000 Small Stock Index before the deduction of the expenses
allocable to the Shares of the Fund and the Small Cap Index Portfolio (the
"Expenses"). There is no assurance, however, that the Fund will achieve its
stated objective.
UNLIKE OTHER OPEN-END MANAGEMENT INVESTMENT COMPANIES (MUTUAL FUNDS), THE FUND
SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING ALL OF ITS INVESTABLE
ASSETS ("ASSETS") IN THE SMALL CAP INDEX PORTFOLIO (THE "PORTFOLIO") WHICH IS A
SEPARATE FUND WITH AN IDENTICAL INVESTMENT OBJECTIVE. THE INVESTMENT PERFORMANCE
OF THE FUND WILL CORRESPOND DIRECTLY TO THE INVESTMENT PERFORMANCE OF THE
PORTFOLIO. SEE "SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE" ON
PAGE 8.
Bankers Trust Company ("Bankers Trust") is the investment adviser (the
"Adviser") of the Portfolio.
Please read this Prospectus before investing, and keep it on file for future
reference. It contains important information, including how the Fund invests and
the services available to shareholders.
To learn more about the Fund and its investments, investors can obtain a copy of
the Fund's Statement of Additional Information (the "SAI"), dated January 16,
1996. 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) 368-4031 or contact the Trust at 6 St. James Avenue,
Boston, MA 02116, or a Service Agent.
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.
Small Cap
Index Fund
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.
BANKERS TRUST COMPANY
Investment Adviser of the
Portfolio and Administrator
SIGNATURE BROKER-
DEALER SERVICES, INC.
Distributor
6 St. James Avenue
Boston, Massachusetts 02116
<PAGE>
CONTENTS
THE FUND 3 WHO MAY WANT TO INVEST
4 INVESTMENT PRINCIPLES AND RISKS The Fund's
overall approach to investing.
4 EXPENSE SUMMARY The Fund's annual
operating expenses.
THE FUND
IN DETAIL 6 INVESTMENT OBJECTIVES AND POLICIES
7 RISK FACTORS AND CERTAIN SECURITIES AND
INVESTMENT PRACTICES
8 SPECIAL INFORMATION CONCERNING MASTER-FEEDER
FUND STRUCTURE
10 SECURITIES AND INVESTMENT PRACTICES
13 PERFORMANCE How the Fund has done over time.
14 MANAGEMENT OF THE TRUST AND THE PORTFOLIO
ACCOUNT
INFORMATION 17 TYPES OF ACCOUNTS Different ways to setup your
account, including tax-sheltered retirement
plans.
18 HOW TO BUY SHARES Opening an account and making
additional investments.
20 HOW TO SELL SHARES Taking money out and closing
your account.
23 INVESTOR SERVICES To help you manage your
account.
SHAREHOLDER AND
ACCOUNT POLICIES 24 DIVIDENDS, CAPITAL GAINS AND TAXES
26 VALUATION DETAILS Share price calculations and
the timing of purchases and redemptions.
27 EXCHANGE LIMITATIONS
28 ADDITIONAL INFORMATION ABOUT THE TRUST AND THE
PORTFOLIO
<PAGE>
THE FUND
The Trust seeks to achieve the investment objective of the Fund by investing all
the Assets of the Fund in the Portfolio.
The Small Cap Index Fund seeks to replicate as closely as possible (before
deduction of Expenses) the total return of the Russell 2000 Small Stock Index
(the "Russell 2000"), an index consisting of 2,000 small-capitalization common
stocks. The Fund will include the common stock of one or more companies included
in the Russell 2000 Index, on the basis of computer-generated statistical data,
that are deemed representative of the industry diversification of the entire
Russell 2000 Index. The Fund invests all of its Assets in the Small Cap Index
Portfolio.
WHO MAY WANT TO INVEST
Shares of the Fund are offered through this Prospectus to institutional
investors.
The Portfolio is not managed according to traditional methods of "active"
investment management, which involve the buying and selling of securities based
upon economic, financial and market analysis and investment judgment. Instead,
the Portfolio, utilizing a "passive" or "indexing" investment approach, attempts
to replicate the investment performance of the Index through statistical
procedures.
The Fund may be appropriate for investors who are willing to ride out domestic
stock market fluctuations in pursuit of potentially higher long-term returns.
The Portfolio invests for growth and does not pursue income. Over time, stocks,
although more volatile, have shown greater growth potential than other types of
securities. In the shorter term, however, stock prices can fluctuate
dramatically in response to market factors.
The Trust is intended to be a long-term investment vehicle and is not designated
to provide investors with a means of speculating on short-term market movements.
Investors who engage in excessive account activity generate additional costs
which are borne by all the Trust's shareholders. In order to minimize such
costs, the Trust has adopted the following policies. The Trust reserves the
right to reject any purchase request (including exchange purchases from other BT
Advisor Funds) that is reasonably deemed to be disruptive to efficient portfolio
management, either because of the timing of the investment or previous excessive
trading by the investor. Additionally, the Trust has adopted exchange privilege
limitations as described in the section "Exchange Limitations." Finally, the
Trust reserves the right to suspend the offering of its shares.
The Fund is not in itself a balanced investment plan. Investors should consider
their investment objective and tolerance for risk when making an investment
decision. When investors sell their Fund Shares, they may be worth more or less
than what they paid for them.
INVESTMENT PRINCIPLES AND RISKS
The value of the Portfolio'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.
When investors sell their Fund Shares, they may be worth more or less than what
they paid for them. See "Risk Factors and Certain Securities and Investment
Practices" for more information.
EXPENSE SUMMARY
ANNUAL OPERATING EXPENSES are paid out of the assets of the Portfolio and Fund.
The Portfolio pays an investment advisory fee and an administrative services fee
to Bankers Trust. The Fund incurs expenses such as maintaining shareholder
records and furnishing shareholder statements. The Fund must provide financial
reports.
The following table provides: (i) a summary of expenses relating to purchases
and sales of the Shares of the Fund and the annual operating expenses of the
Fund and expenses of the Portfolio, in the aggregate, as a percentage of
average daily net assets of the Fund; and (ii) an example illustrating the
dollar cost of such expenses on a $1,000 investment in the Fund. THE TRUSTEES
OF THE TRUST BELIEVE THAT THE EXPENSES OF THE FUND AND EXPENSES OF THE
PORTFOLIO, IN THE AGGREGATE, WILL BE LESS THAN OR APPROXIMATELY EQUAL TO THE
EXPENSES WHICH THE FUND WOULD INCUR IF THE TRUST RETAINED THE SERVICES OF AN
INVESTMENT ADVISER AND THE ASSETS OF THE FUND WERE INVESTED DIRECTLY IN THE TYPE
OF SECURITIES BEING HELD BY THE PORTFOLIO.
- ------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge on Purchases
(as a percentage of offering price) None*
..............................................................................
Maximum Sales Charge on Reinvested Distributions None
..............................................................................
Redemption Fee None*
..............................................................................
Exchange Fee None
- ------------------------------------------------------------------------------
Shareholder transaction expenses are charges paid when investors buy, sell,
exchange, or hold Shares of a Fund. See "Account Information" for an
explanation of how and when these charges apply.
* A transaction fee of 0.25% is deducted from purchases, redemptions and
exchanges into and out of the Fund. These transaction fees are paid to the Fund
and are deducted automatically from the amount invested, exchanged or redeemed.
The fee applies to all redemptions and an initial investment in the Fund and all
subsequent purchases (including purchases made by exchange from another BT
Fund), but not to reinvested dividend or capital gain distributions.
The purpose of the 0.25% transaction fee is to allocate transaction costs
associated with purchases, redemptions and exchanges to investors making those
purchases, redemptions and exchanges, thus insulating existing shareholders from
those transaction costs. These costs include: (1) brokerage costs; and (2) the
effect of the "bid-ask" spread in small and medium sized company stock markets.
Since the investors, not the Fund, bear these costs, the Fund is expected to be
able to track its benchmark index more closely.
- ------------------------------------------------------------------------------
ANNUAL OPERATING EXPENSES
Investment advisory fee (after reimbursement or waiver) 0.10%
..............................................................................
Other expenses
(after reimbursements or waivers) 0.15%
..............................................................................
Total operating expenses (after reimbursements or waivers) 0.25%
..............................................................................
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:
..............................................................................
Example 1 year 3 years
..............................................................................
$8 $13
- ------------------------------------------------------------------------------
The expense table and the example above show the costs and expenses that an
investor will bear directly or indirectly as a shareholder of the Fund. Bankers
Trust has voluntarily agreed to waive a portion of its investment advisory fee
with respect to the Portfolio. Without such waiver, the Portfolio's investment
advisory fee would be equal to 0.15%. 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 the Fund,
to waive or reimburse expenses such that the total operating expenses of the
Fund and the Portfolio (as a percentage of the Fund's average daily net assets)
would be equal to 0.25%. In the absence of this undertaking, assuming total
assets of $100 million in the Fund, it is estimated that "Total Operating
Expenses" would be 0.55%. 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%.
Currently, the Fund has issued two classes of Shares. The Fund offers by
separate prospectus another class of Shares. Because the expenses vary between
the classes, performance will vary with respect to each class. Additional
information concerning the Fund's other class of Shares is available from
Bankers Trust, as administrator, at (800) 368-4031.
For more information about the Fund's and the Portfolio's expenses see
"Management of the Trust and the Portfolio" and "Valuation Details."
THE FUND IN DETAIL
INVESTMENT OBJECTIVES AND POLICIES
The Trust seeks to achieve the investment objective of the Fund by investing all
of its Assets in the Portfolio, which has the same investment objective as the
Fund. Since the investment characteristics of the Fund will correspond directly
to those of the Portfolio, the following is a discussion of the various
investments of and techniques employed by the Portfolio. Additional information
about the investment policies of the Portfolio appears in "Risk Factors and
Certain Securities and Investment Practices" in this Prospectus and in the
Fund's SAI. There can be no assurance that the investment objective of either
the Fund or the Portfolio will be achieved.
The SMALL CAP INDEX PORTFOLIO seeks to replicate as closely as possible (before
deduction of expenses of the Fund and Portfolio) the total return of the Russell
2000.
The Russell 2000 Index is composed of approximately 2,000 small-capitalization
common stocks. A company's stock market capitalization is the total market value
of its floating outstanding shares. As of December 31, 1995, the average stock
market capitalization of the Russell 2000 was $280 million and the weighted
average stock market capitalization of the Russell 2000 was $540 million.
The Portfolio is neither sponsored by nor affiliated with the Frank Russell
Company. Frank Russell's only relationship to the Portfolio is the licensing of
the use of the Russell 2000 Small Stock Index. Frank Russell Company is the
owner of the trademarks and copyrights relating to the Russell indices.
The Portfolio invests in a statistically selected sample of the approximately
2,000 stocks included in the Russell 2000 Index. The stocks of the Russell 2000
to be included in the Portfolio will be selected utilizing a statistical
sampling technique known as "optimization." This process selects stocks for the
Portfolio so that various industry weightings, market capitalizations and
fundamental characteristics (e.g. price-to-book, price-to-earnings,
debt-to-asset ratios, and dividend yields) closely approximate those of the
Russell 2000. For instance, if 10% of the capitalization of the Russell 2000
consists of utility companies with relatively small capitalizations, then the
Portfolio is constructed so that approximately 10% of the Portfolio's assets are
invested in the stocks of utility companies with relatively small
capitalizations. The stocks held by the Portfolio are weighted to make the
Portfolio's aggregate investment characteristics similar to those of the Russell
2000 Index as a whole.
For more information about the historical performance of the Russell 2000,
please see the SAI.
GENERAL
Over time, the correlation between the performance of the Fund and the Index is
expected to be 0.95 or higher before deduction of Expenses of the Fund and
expenses of the Portfolio. A correlation of 1.00 would indicate perfect
correlation, which would be achieved when the net asset value of the Fund,
including the value of its dividend and any capital gain distributions,
increases or decreases in exact proportion to changes in the Index. The Fund's
ability to track its Index may be affected by, among other things, transaction
costs, administration and other expenses incurred by the Fund or the Portfolio,
changes in either the composition of the Index or the assets of the Portfolio,
and the timing and amount of Portfolio investor contributions and withdrawals,
if any. In the unlikely event that a high correlation is not achieved, the
Trust's Board of Trustees will consider alternatives. Because the Portfolio
seeks to track the Index, Bankers Trust will not attempt to judge the merits of
any particular stock as an investment.
Under normal circumstances, the Portfolio will invest at least 80% of its assets
in the securities of the Index.
As a diversified fund, no more than 5% of the assets of the Portfolio may be
invested in the securities of one issuer (other than U.S. Government
Securities), except that up to 25% of the Portfolio's assets may be invested
without regard to this limitation. The Portfolio will not invest more than 25%
of its assets in the securities of issuers in any one industry. These are
fundamental investment policies of the Portfolio which may not be changed
without investor approval. No more than 15% of the Portfolio's net assets may be
invested in illiquid or not readily marketable securities (including repurchase
agreements and time deposits maturing in more than seven days). Additional
investment policies of the Portfolio are contained in the SAI.
The Portfolio may maintain up to 25% of its assets in short-term debt securities
and money market instruments to meet redemption requests or to facilitate
investment in the securities of the Index. Securities index futures contracts
and related options, warrants, convertible securities and swap agreements may be
used for several reasons: to simulate full investment in the underlying Index
while retaining a cash balance for fund management purposes, to facilitate
trading, or to reduce transaction costs or to seek higher investment returns
when a futures contract, option, warrant, convertible security or swap agreement
is priced more attractively than the underlying equity security or Index. These
instruments may be considered derivatives. See "Risk Factors and Certain
Securities and Investment Practices -- Derivatives."
The use of derivatives for non-hedging purposes may be considered speculative.
While each of these securities can be used as leveraged investments, the
Portfolio may not use them to leverage its net assets. The Portfolio will not
invest in such instruments as part of a temporary defensive strategy (such as
altering the aggregate maturity of the Portfolio) to protect the Portfolio
against potential market declines.
The Portfolio may lend its investment securities and purchase securities on a
when-issued and a delayed delivery basis. See "Risk Factors and Certain
Securities and Investment Practices" for more information about the investment
practices of the Portfolio.
RISK FACTORS AND CERTAIN SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of instruments
in which the Portfolio may invest and strategies Bankers Trust may employ in
pursuit of the Portfolio'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 the Portfolio achieve its goal. Holdings and recent investment strategies
are described in the financial reports of the Fund and the Portfolio, which are
sent to Fund shareholders twice a year. For a free SAI or financial report, call
your Service Agent or Bankers Trust.
MARKET RISK
As a mutual fund investing primarily in common stocks, the Portfolio is subject
to market risk -- i.e., the possibility that common stock prices will decline
over short or even extended periods. The U.S. stock market tends to be cyclical,
with periods when stock prices generally rise and periods when prices generally
decline.
RISKS OF INVESTING IN MEDIUM- AND SMALL-CAPITALIZATION STOCKS
Historically, medium- and small-capitalization stocks have been more volatile in
price than the larger-capitalization stocks included in the Standard & Poor's
500 Composite Stock Price Index (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. Medium- and small-size company stocks may decline in price as
large company stocks rise, or rise in prices as large company stocks decline.
SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE
Unlike other open-end management investment companies (mutual funds) which
directly acquire and manage their own portfolio securities, the Fund seeks to
achieve its investment objective by investing all of its Assets in the
Portfolio, a separate registered investment company with the same investment
objectives as the Fund. Therefore, an investor's interest in the Portfolio's
securities is indirect, like investments in other investment companies and
pooled investment vehicles. In addition to selling a beneficial interest to the
Fund, the Portfolio may sell beneficial interests to other mutual funds or
institutional investors. Such investors will invest in the Portfolio on the same
terms and conditions and will pay a proportionate share of the Portfolio's
expenses. However, the other investors investing in the Portfolio are not
required to sell their shares at the same public offering price as the Fund due
to variations in sales commissions and other operating expenses. Therefore,
investors in the Fund should be aware that these differences may result in
differences in returns experienced by investors in the different funds that
invest in the Portfolio. Such differences in returns are also present in other
mutual fund structures. Information concerning other holders of interests in the
Portfolio is available from Bankers Trust, as the Administrator, at (800)
368-4031.
The master-feeder structure has been developed relatively recently, so
shareholders should carefully consider this investment approach.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may experience higher pro rata
operating expenses, thereby producing lower returns (however, this possibility
exists as well for traditionally structured funds which have large institutional
investors). Additionally, the Portfolio may become less diverse, resulting in
increased portfolio risk. Also, funds with a greater pro rata ownership in the
Portfolio could have effective voting control of the operations of the
Portfolio. Except as permitted by the SEC, whenever the Trust is requested to
vote on matters pertaining to a Portfolio, the Trust will hold a meeting of
shareholders of the Fund and will cast all of its votes in the same proportion
as the votes of the Fund's shareholders. Fund shareholders who do not vote will
not affect a Trust's votes at the Portfolio meeting. The percentage of the
Trust's votes representing Fund shareholders not voting will be voted by the
Trustees or officers of the Trust in the same proportion as the Fund
shareholders who do, in fact, vote. Certain changes in the Portfolio's
investment objectives, policies or restrictions may require the Fund to withdraw
its interest in the Portfolio. Any such withdrawal could result in a
distribution "in kind" of portfolio securities (as opposed to a cash
distribution from the Portfolio). If securities are distributed, the Fund could
incur brokerage, tax or other charges in converting the securities to cash. In
addition, the distribution in kind may result in a less diversified portfolio of
investments or adversely affect the liquidity of the Fund. Notwithstanding the
above, there are other means for meeting redemption requests, such as borrowing.
The Fund may withdraw its investment from the Portfolio at any time, if the
Board of Trustees of the Trust determines that it is in the best interests of
the shareholders of the Fund to do so. Upon any such withdrawal, the Board of
Trustees of the Trust would consider what action might be taken, including the
investment of all the Assets of the Fund in another pooled investment entity
having the same investment objectives as the Fund or the retaining of an
investment adviser to manage the Fund's Assets in accordance with the investment
policies described herein with respect to the Portfolio.
The Fund's investment objective is not a fundamental policy and may be changed
upon notice to but without the approval of the Fund's shareholders. If there is
a change in the Fund's investment objective, the Fund's shareholders should
consider whether the Fund remains an appropriate investment in light of their
then-current needs. The investment objective of the Portfolio is also not a
fundamental policy. Shareholders of the Fund will receive 30 days prior written
notice with respect to any change in the investment objective of the Fund or the
Portfolio. See "Risk Factors and Certain Securities and Investment Practices" in
the SAI for a description of the fundamental policies of the Portfolio that
cannot be changed without approval by "the vote of a majority of the outstanding
voting securities" (as defined in the Investment Company Act of 1940, as amended
(the "1940 Act")) of the Portfolio.
For descriptions of the investment objective, policies and restrictions of the
Portfolio, see "The Fund in Detail" herein and "Risk Factors and Certain
Securities and Investment Practices" in this Prospectus and in the SAI. For
descriptions of the management of the Trust and the Portfolio, see "Management
of the Trust and the Portfolio" herein and in the SAI. For descriptions of the
expenses of the Portfolio, see "The Fund--Expense Summary," herein and
"Management of the Trust and the Portfolio" herein and in the SAI.
SECURITIES AND INVESTMENT PRACTICES
SHORT-TERM INVESTMENTS. The Portfolio may invest in certain short-term fixed
income securities. Such securities may be used to invest uncommitted cash
balances, to maintain liquidity to meet shareholder redemptions or to serve as
collateral for the obligations underlying the Portfolio's investment in
securities index futures or related options or warrants. These securities
include: obligations issued or guaranteed by the U.S. Government or any of its
agencies or instrumentalities or by any of the states, repurchase agreements,
time deposits, certificates of deposit, bankers' acceptances and commercial
paper.
U.S. GOVERNMENT SECURITIES are obligations of, or guaranteed by, the U.S.
Government, its agencies or instrumentalities. Some U.S. Government securities,
such as Treasury bills, notes and bonds, are supported by the full faith and
credit of the United States; others, such as those of the Federal Home Loan
Banks, are supported by the right of the issuer to borrow from the Treasury;
others, such as those of the Federal National Mortgage Association, are
supported by the discretionary authority of the U.S. Government to purchase the
agency's obligations; and still others, such as those of the Student Loan
Marketing Association, are supported only by the credit of the instrumentality.
SECURITIES LENDING. The Portfolio may lend its investment securities to
qualified institutional investors for either short-term or long-term purposes of
realizing additional income. Loans of securities by the Portfolio will be
collateralized by cash, letters of credit, or securities issued or guaranteed by
the U.S. Government or its agencies. The collateral will equal at least 100% of
the current market value of the loaned securities, and such loans may not exceed
30% of the value of the Portfolio's net assets. The risks in lending portfolio
securities, as with other extensions of credit, consist of possible loss of
rights in the collateral should the borrower fail financially. In determining
whether to lend securities, Bankers Trust will consider all relevant facts and
circumstances, including the creditworthiness of the borrower.
WHEN ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase
securities on a when-issued or delayed delivery basis. Delivery of and payment
for these securities may take place as long as a month or more after the date of
the purchase commitment. The value of these securities is subject to market
fluctuation during this period and no income accrues to the Portfolio until
settlement takes place. The Portfolio maintains with the custodian a segregated
account containing high grade liquid securities in an amount at least equal to
these commitments.
DERIVATIVES
The Portfolio may invest in various instruments that are commonly known as
derivatives. Generally, a derivative is a financial arrangement, the value of
which is based on, or "derived" from, a traditional security, asset, or market
index. Some "derivatives" such as mortgage-related and other asset-backed
securities are in many respects like any other investment, although they may be
more volatile or less liquid than more traditional debt securities. There are,
in fact, many different types of derivatives and many different ways to use
them. There are a range of risks associated with those uses. Futures and options
are commonly used for traditional hedging purposes to attempt to protect a fund
from exposure to changing interest rates, securities prices, or currency
exchange rates and as a low cost method of gaining exposure to a particular
securities market without investing directly in those securities. Derivatives
will not be used to increase portfolio risk above the level that could be
achieved using only traditional investment securities or to acquire exposure to
changes in the value of assets or indices that by themselves would not be
purchased for the Portfolio.
Securities Index Futures and Related Options. The Portfolio may enter into
securities index futures contracts and related options provided that not more
than 5% of its assets are required as a margin deposit for futures contracts or
options and provided that not more than 20% of the Portfolio's assets are
invested in futures and options at any time. When the Portfolio has cash from
new investments in the Portfolio or holds a portion of its assets in money
market instruments, it may enter into index futures or options to attempt to
increase its exposure to the market. Strategies the Portfolio could use to
accomplish this include purchasing futures contracts, writing put options, and
purchasing call options. When the Portfolio wishes to sell securities, because
of shareholder redemptions or otherwise, it may use index futures or options to
hedge against market risk until the sale can be completed. These strategies
could include selling futures contracts, writing call options, and purchasing
put options.
Swap Agreements. The Portfolio may enter into swap agreements only to the extent
that obligations under such agreements represent not more than 10% of the
Portfolio's total assets. Swap agreements are contracts between parties in which
one party agrees to make payments to the other party based on the change in
market value of a specified index or asset. In return, the other party agrees to
make payments to the first party based on the return of a different specified
index or asset.
Although swap agreements entail the risk that a party will default on its
payment obligations thereunder, the Portfolio will minimize this risk by
entering into agreements that mark to market no less frequently than quarterly.
Swap agreements also bear the risk that the Portfolio will not be able to meet
its obligation to the counterparty. This risk will be mitigated by investing the
Portfolio in the specific asset for which it is obligated to pay a return.
Warrants. The Portfolio's investment in warrants will not exceed more than 5% of
its assets (2% with respect to warrants not listed on the New York or American
Stock Exchanges). 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.
Convertible Securities. The Portfolio may invest in convertible securities which
are 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 decreases
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.
Further risks associated with the use of futures contracts, options, warrants,
convertible securities and swap agreements. The risk of loss associated with
futures contracts in some strategies can be substantial due to both the low
margin deposits required and the extremely high degree of leverage involved in
futures pricing. As a result, a relatively small price movement in a futures
contract may result in an immediate and substantial loss or gain. However, the
Portfolio will not use futures contracts, options, warrants, convertible
securities and swap agreements for speculative purposes or to leverage their net
assets. Accordingly, the primary risks associated with the use of futures
contracts, options, warrants, convertible securities and swap agreements by the
Portfolio are: (i) imperfect correlation between the change in market value of
the securities held by the Portfolio and the prices of futures contracts,
options, warrants, convertible securities and swap agreements; and (ii) possible
lack of a liquid secondary market for a futures contract and the resulting
inability to close a futures position prior to its maturity date. The risk of
imperfect correlation will be minimized by investing only in those contracts
whose behavior is expected to resemble that of the Portfolio's underlying
securities. The risk that the Portfolio will be unable to close out a futures
position will be minimized by entering into stock transactions on an exchange
with an active and liquid secondary market. However options, warrants,
convertible securities and swap agreements purchased or sold over-the-counter
may be less liquid than exchange-traded securities. Illiquid securities, in
general, may not represent more than 15% of the net assets of the Portfolio.
Asset Coverage. To assure that the Portfolio's use of futures and related
options, as well as when-issued and delayed-delivery securities, interest rate
swaps and foreign currency forward futures and related options transactions are
not used to achieve excessive investment leverage, the Portfolio 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 Portfolio's custodian containing
high grade liquid debt securities in an amount at all times equal to or
exceeding the Portfolio's commitment with respect to these instruments or
contracts.
PORTFOLIO TURNOVER
The frequency of Portfolio transactions-the Portfolio's portfolio turnover
rate-will vary from year to year depending on market conditions and the
Portfolio's cash flows. The Portfolio's annual portfolio turnover rate is not
expected to exceed 100%.
PERFORMANCE
The Portfolio's recent strategies and
holdings, and the Fund's performance, is detailed twice a year in the Fund's
financial reports, which are sent to all Fund shareholders.
For current Fund performance or a free copy of the Fund's financial report,
please contact your Service Agent or Bankers Trust.
Mutual fund performance is commonly measured as total return and/or yield. The
Fund's performance is affected by the expenses of the Fund.
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in the Fund over a given
period, assuming reinvestment of any dividends and capital gains. A cumulative
total return reflects actual performance over a stated period of time. An
average annual total return is a hypothetical rate of return that, if achieved
annually, would have produced the same cumulative total return if performance
had been constant over the entire period. Average annual total return
calculations smooth out variations in performance; they are not the same as
actual year-by-year results. Average annual total returns covering periods of
less than one year assume that performance will remain constant for the rest of
the year.
YIELD refers to the income generated by an investment in a Fund over a given
period of time, expressed as an annual percentage rate. Yields are calculated
according to a standard that is required for all stock and bond funds. Because
this differs from other accounting methods, the quoted yield may not equal the
income actually paid to shareholders.
Performance information may include comparisons of the 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.
Unlike some bank deposits or other investments which pay a fixed yield for a
stated period of time, the total return of the Fund will vary depending upon
interest rates, the current market value of the securities held by the Portfolio
and changes in the expenses of the Fund or Portfolio. 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 the Fund or the Portfolio, on a month-to-month
basis. Such waivers will have the effect of increasing the Fund's net income
(and therefore its yield and total return) during the period such waivers are in
effect.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN INDICATION OF
FUTURE PERFORMANCE.
MANAGEMENT OF THE TRUST AND THE PORTFOLIO
BOARD OF TRUSTEES
The Trust and the Portfolio is governed by a Board of Trustees which is
responsible for protecting the interests of investors. A majority of the
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Trust or the Portfolio, as the case may be, have adopted written procedures
reasonably appropriate to deal with potential conflicts of interest arising from
the fact that the same individuals are Trustees of the Trust and the Portfolio,
up to and including creating separate boards of trustees. See "Management of the
Trust and the Portfolio" in the SAI for more information with respect to the
Trustees and officers of the Trust and the Portfolio.
INVESTMENT ADVISER
The Trust has not retained the services of an investment adviser since the Trust
seeks to achieve the investment objective of the Fund by investing all the
Assets of the Fund in the Portfolio. The Portfolio has retained the services of
Bankers Trust as investment adviser.
BANKERS TRUST COMPANY AND ITS AFFILIATES
Bankers Trust Company, a New York banking corporation with principal offices at
280 Park Avenue, New York, New York 10017, is a wholly owned subsidiary of
Bankers Trust New York Corporation. Bankers Trust conducts a variety of general
banking and trust activities and is a major wholesale supplier of financial
services to the international and domestic institutional market.
As of December 31, 1995, Bankers Trust New York Corporation was the ninth
largest bank holding company in the United States with total assets of
approximately $104 billion. Bankers Trust is a worldwide merchant bank dedicated
to servicing the needs of corporations, governments, financial institutions and
private clients through a global network of over 120 offices in more than 40
countries. Investment management is a core business of Bankers Trust, built on a
tradition of excellence from its roots as a trust bank founded in 1903. The
scope of Bankers Trust's investment management capability is unique due to its
leadership positions in both active and passive quantitative management and its
presence in major equity and fixed income markets around the world. Bankers
Trust is one of the nation's largest and most experienced investment managers
with approximately $200 billion in assets under management globally. Of that
total, approximately $82 billion are in U.S. equity index assets alone. When
bond and international funds are included, Bankers Trust manages approximately
$94 billion in total index assets. This makes Bankers Trust one of the nation's
leading managers of index funds.
Bankers Trust has more than 50 years of experience managing retirement assets
for the nation's largest corporations and institutions. In the past, these
clients have been serviced through separate account and commingled fund
structures. Now, the BT Family of Funds brings Bankers Trust's extensive
investment management expertise -- once available to only the largest
institutions in the U.S. -- to individual investors. Bankers Trust's officers
have had extensive experience in managing investment portfolios having
objectives similar to those of the Portfolio.
Bankers Trust, subject to the supervision and direction of the Board of Trustees
of the Portfolio, manages the Portfolio in accordance with the Portfolio's
investment objective and stated investment policies, makes investment decisions
for the Portfolio, places orders to purchase and sell securities and other
financial instruments on behalf of the Portfolio and employs professional
investment managers and securities analysts who provide research services to the
Portfolio. Bankers Trust may utilize the expertise of any of its world wide
subsidiaries and affiliates to assist it in its role as investment adviser. All
orders for investment transactions on behalf of the Portfolio are placed by
Bankers Trust with broker-dealers and other financial intermediaries that it
selects, including those affiliated with Bankers Trust. A Bankers Trust
affiliate will be used in connection with a purchase or sale of an investment
for the Portfolio only if Bankers Trust believes that the affiliate's charge for
the transaction does not exceed usual and customary levels. The Portfolio will
not invest in obligations for which Bankers Trust or any of its affiliates is
the ultimate obligor or accepting bank. The Portfolio may, however, invest in
the obligations of correspondents and customers of Bankers Trust.
The Investment Advisory Agreement provides for the Portfolio to pay Bankers
Trust a fee, accrued daily and paid monthly, equal on an annual basis to 0.15%
of the average daily net assets of the Portfolio for its then-current fiscal
year.
Bankers Trust has been advised by its counsel that, in counsel's opinion,
Bankers Trust currently may perform the services for the Trust and the Portfolio
described in this Prospectus and the SAI without violation of the Glass-Steagall
Act or other applicable banking laws or regulations. 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.
Bankers Trust investment 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.
PORTFOLIO MANAGER
Frank Salerno, Managing Director of Bankers Trust, is responsible for the
management of the Portfolio. Mr. Salerno oversees administration, management and
trading of international and domestic equity index strategies. He has been
employed by Bankers Trust since 1981 and has managed the Portfolio's assets
since the Portfolio commenced operations.
ADMINISTRATOR
Under its Administration and Services Agreement with the Trust, Bankers Trust
calculates the net asset value of the Fund and generally assists the Board of
Trustees of the Trust in all aspects of the administration and operation of the
Fund. 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
0.20% of the average daily net assets of the Fund, attributable to the Class,
for its then-current fiscal year.
Under an Administration and Services Agreement with the Portfolio, Bankers Trust
calculates the value of the assets of the Portfolio and generally assists the
Board of Trustees in all aspects of the administration and operation of the
Portfolio. The Administration and Services Agreement provides for the Portfolio
to pay Bankers Trust a fee, accrued daily and paid monthly, equal on an annual
basis to 0.05% of the Portfolio's average daily net assets for its then-current
fiscal year. 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.
CUSTODIAN AND TRANSFER AGENT
Bankers Trust acts as custodian of the assets of the Trust and the Portfolio and
serves as the transfer agent (the "Transfer Agent") for the Trust and the
Portfolio under the Administration and Services Agreement with the Trust and the
Portfolio.
ACCOUNT INFORMATION
TYPES OF ACCOUNTS
The account guidelines that follow may not apply to certain accounts. Some of
the services and features of this Prospectus may not be available to you.
Certain features of the Fund, 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 Bankers Trust are
listed below.
The account guidelines that follow may not apply to the Fund or to certain
retirement accounts. If your employer offers the Fund through a retirement
program, contact your employer for more information. Otherwise, call your
Service Agent 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 SAVINGS 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.
* 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 Service Agent or Bankers Trust.
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 Service Agent or Bankers Trust.
HOW TO BUY SHARES
Shares are purchased at the Fund's net asset value ("NAV") next calculated after
your investment is received and accepted. The NAV is normally calculated at 4:00
p.m. Eastern time.
If you are placing your order through a Service Agent, it is the responsibility
of your Service Agent to transmit your order to buy Shares to the Transfer Agent
before 4:00 p.m. Eastern time.
The Transfer Agent must receive payment by the following business day (trade
date +1) 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 Fund.
IF YOU ARE NEW TO THE BT FAMILY OF 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 Service Agent or Bankers
Trust.
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 Service Agent.
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 Service
Agent or Bankers Trust for more information and a retirement account
application.
Investments by individual employees participating in a retirement program are
made through their Program Sponsor's recordkeeper, who is responsible for
transmitting all orders for the purchase, redemption or exchange of Shares of
the Fund. The availability of the Fund, and the procedures for investing, depend
upon the provisions of the Program and whether the Program Sponsor has
contracted with the Trust or its transfer agent for special processing services,
including subaccounting. Individual investors who separate from a program, other
institutional investors and Individual Retirement Account investors must arrange
for services through BT Institutional Service Center, the Manager, by contacting
them at (800) 368-4031, P.O. Box 419210, Kansas City, MO 64141-6210.
MINIMUM INVESTMENT (EXCLUDING RETIREMENT PLANS)
TO OPEN AN ACCOUNT $5 MILLION
TO ADD TO AN ACCOUNT $100,000
MINIMUM BALANCE $1 MILLION
For further information on opening an account, please consult your Service Agent
or refer to the account application.
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
------------------ --------------------
PHONE YOUR Contact your Service Agent. Contact your Service Agent or
SERVICE AGENT If you are an existing call 1-(800) 368-4031. You may
shareholder, you may exchange exchange from another Bankers
from another Bankers Trust Trust account with the same
account with the same registration, including name,
registration, including address, and taxpayer ID number.
name, address and taxpayer
ID number.
..............................................................................
MAIL Complete and sign the account Make your check payable to the
application. complete name of the Fund of
Make your check payable to the your choice. Indicate your
complete name of the Fund of Fund account number on your
your choice. Mail to the check and mail to the address
appropriate address indicated printed on your account
on the application. statement. Exchange by mail:
call your Service Agent or
Bankers Trust for instructions.
..............................................................................
IN PERSON Take your account application Take your check to your
and check to your Service Service Agent.
Agent.
..............................................................................
<PAGE>
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
------------------ --------------------
WIRE Not available. Call your Service Agent or
Bankers Trust or wire to:
ROUTING NO.: 021001033
ATTN: Bankers Trust/IFTC Deposit
DDA: #00-226-296
FBO: (Account name)
(Account number)
CREDIT: Fund Number
Small Cap Index Fund - 513
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, or call your Service
Agent to begin the program.
..............................................................................
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 normally
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 Service Agent or call 1-800-943-2222.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR NON-RETIREMENT ACCOUNT SHARES, leave
at least $1,000,000 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 Bankers Trust 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:
* Your name,
* The Fund's name and Fund's number,
* Your Fund account number,
* The dollar amount or number of Shares to be redeemed and
* Any other applicable requirements listed in the following table.
Deliver your letter to your Service Agent, 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.
ADDITIONAL INFORMATION ABOUT SELLING SHARES
ACCOUNT TYPE SPECIAL REQUIREMENTS
------------ --------------------
PHONE YOUR All account types except Maximum check request:
SERVICE AGENT retirement $100,000.
All account types You may exchange to 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 Individual, Joint Tenant, Sole The letter of instruction
PERSON Proprietorship, UGMA, UTMA (with signature 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 Service Agent or
the Transfer Agent.
Retirement account The account owner should
complete a retirement
distribution form. Contact your
Service Agent or call 1-
800-943-2222.
Trust The trustee must sign the
letter indicating capacity as
trustee. If the trustee's name
is not on the account
registration, provide a copy
of the trust document certified
within the last 60 days.
Business or Organization At least one person authorized
by corporate resolution to act
on the account must sign the
letter.
Executor, Administrator, For instructions contact
Conservator/Guardian your Service Agent or call
1-800-368-4031.
..............................................................................
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ACCOUNT TYPE SPECIAL REQUIREMENTS
------------ --------------------
WIRE All account types except You must sign up for the wire
retirement feature before using it. To
verify that it is in place,
contact your Service Agent or
call 1-800-368-4031. Minimum
wire: $500.
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.
.............................................................................
AUTOMATICALLY Not available. Use the Systematic Withdrawal
Program. Sign up for this
service when opening your
account, or call your Service
Agent to begin the program.
..............................................................................
INVESTOR SERVICES
The BT Family of Funds provides a variety of services to help you manage your
account.
INFORMATION SERVICES
STATEMENTS AND REPORTS that your Service Agent 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 Service Agent 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.
Note that exchanges out of the Fund may be limited to four per calendar year and
that they may have tax consequences for you. For details on policies and
restrictions governing exchanges including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see page 27.
SYSTEMATIC INVESTMENT, WITHDRAWAL AND EXCHANGE PROGRAM
One easy way to pursue your financial goals is to invest money regularly. The BT
Family of Funds offers convenient services that let you transfer money into your
fund account, out of 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 Service
Agent for more information.
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
The Fund distributes substantially all of its net income and capital gains to
shareholders each year. Normally, income dividends and capital gains are
distributed annually.
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 the 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.
FOR RETIREMENT ACCOUNTS, all distributions are automatically reinvested. When
you are over 59 1/2 years old, you can receive distributions in cash. If
distributions from a retirement account 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 equal to 50% of the
deficiency 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.
When the Fund deducts a distribution from its NAV, the reinvestment price is the
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 Fund could
affect you. Below are some of the Fund's tax implications. If your account is
not a tax-deferred retirement account beware of these tax implications.
TAXES ON DISTRIBUTIONS. Distributions from the Fund 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 Fund could also be taxed by the
country in which you reside.
For federal tax purposes, income and short-term capital gain distributions from
the Fund 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 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 IRS a statement showing the
taxable distributions paid to you in the previous year.
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 the Fund, the Transfer Agent will send you or your
Service Agent 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 the 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.
There are tax requirements that all Funds must follow in order to avoid federal
taxation. In its effort to adhere to these requirements, the Fund may have to
limit its investment activity in some types of instruments.
VALUATION DETAILS
The Fund is open for business each day the New York Stock Exchange, Inc. (the
"NYSE") is open. The Fund's NAV is calculated as of the close of regular trading
on the NYSE, currently 4:00 p.m. Eastern time.
THE FUND'S NAV is the value of a single Share. The NAV of the Fund is computed
by dividing the value of the Fund's Assets (i.e., the value of its investment in
the Portfolio and other assets), less all liabilities, allocable to the
Institutional Class Shares by the total number of its Shares outstanding. The
Portfolio's securities and other assets are valued primarily on the basis of
market quotations or, if quotations are not readily available, by Bankers Trust
pursuant to procedures adopted by the Portfolio'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.
WHEN INVESTORS SIGN THEIR ACCOUNT APPLICATION, they will be asked to certify
that their social security or taxpayer identification number is correct and that
they are not subject to 31% backup withholding for failing to report income to
the IRS. If investors violate IRS regulations, the IRS can require the Fund to
withhold 31% of their taxable distributions and redemptions.
INVESTORS MAY INITIATE MANY TRANSACTIONS BY TELEPHONE: A Service Agent 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. A Service Agent or the Transfer Agent will request
personalized security codes or other information, and may also record calls.
Investors 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 Service Agent or the Transfer Agent for
instructions. Additional documentation may be required from corporations,
associations and certain fiduciaries.
THE FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period of
time. The 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 the 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:
* All checks should be made payable to the Fund.
* All purchases must be made in U.S. dollars and checks must be drawn on U.S.
banks.
* The Fund does not accept third party checks, except those payable to an
existing shareowner 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.
* The Fund reserves the right to limit the number of checks processed at one
time.
* If a check does not clear, the purchase will be cancelled and the investor
could be liable for any losses or fees the Fund or the Transfer Agent has
incurred.
* When purchases 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.
AUTOMATED ORDERS PURCHASE. Shares of the Fund can be purchased or sold through
Service Agents 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, investors should
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 the Fund it may take up to
seven days to pay you.
* Shares of the Fund will earn dividends through the date of redemption.
* The 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 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, investors have the privilege of exchanging Shares of the
Fund for Shares of other funds in the BT Family of Funds at NAV. However,
investors should note the following:
* The Fund an investor exchanges into must be registered for sale in their
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 Fund and funds described in other BT Family of Funds'
Prospectuses, with the exception of other BT Advisor Institutional Class Index
funds, are restricted during the 90 days following purchase.
* Exchanges may have tax consequences for you.
* Because excessive trading can hurt Fund performance and shareholders, the 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.
* The 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 the 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 the Fund.
* Although the Fund will attempt to give prior notice whenever it is reasonably
able to do so, they may impose these restrictions at any time. The Fund
reserves the right to terminate or modify the exchange privilege in the future
on 60 days' notice to shareholders.
ADDITIONAL INFORMATION ABOUT THE TRUST AND PORTFOLIO
The Fund is a mutual fund: an investment that pools shareholders' money and
invests it toward a specified goal. The Fund is a separate diversified series of
BT Advisor Funds, a Massachusetts business trust. The Fund offers two classes of
Shares of beneficial interest, Institutional Class Shares and Advisor Class
Shares. The Small Cap Index Portfolio is a separate diversified series of BT
Investment Portfolios, a New York master trust fund.
The Portfolio is a separate subtrust (or "Series") of BT Investment Portfolios.
The Trust and BT Investment Portfolios reserves the right to add additional
series in the future. The Trust also reserves the right to issue additional
classes of Shares of the Fund.
The Trust or the Portfolio may hold special meetings and mail proxy materials.
These meetings may be called to elect or remove trustees, change fundamental
policies, approve Portfolio'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 the Fund will
have one vote for each full share held and proportionate, fractional votes for
fractional shares held. A separate vote of the Fund or classes is required on
any matter affecting only the Fund or class on which shareholders are entitled
to vote. Shareholders of the Fund or class are not entitled to vote on Trust
matters that do not affect the Fund or class, respectively, and do not require a
separate vote of the Fund or class. All series of the Trust and all classes 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 shareholders' meeting for the
election of Trustees. Any Trustee may be removed from office upon the vote of
shareholders holding at least two-thirds of that 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 that
Trust's outstanding shares. The Trust will also assist shareholders in
communicating with one another as provided for in the 1940 Act.
Each series of the Trust will vote separately on any matter involving a
Portfolio. 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 series of BT Investment Portfolios will vote
together or separately on matters in the same manner, and in the same
circumstances, as do the series of the Trust. As with the Trust, the investors
in one or more series of BT Investment Portfolios 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.
The Declaration of Trust of BT Investment Portfolios provides that the Fund and
other entities investing in a Portfolio (e.g., other investment companies,
insurance company separate accounts and common and commingled trust funds) will
each be liable for all obligations of the Portfolio. However, the risk of the
Fund incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance existed and the Portfolio
itself was unable to meet its obligations. Accordingly, the Trustees of the
Trust believe that neither the Fund nor its shareholders will be adversely
affected by reason of the Fund's investing in the Portfolio. No series of BT
Investment Portfolios has any preference over any other series.
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INVESTMENT ADVISER OF THE PORTFOLIO 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.
........................
