<PAGE>
- B T P Y R A M I D M U T U A L F U N D S -
BT INVESTMENT LIMITED TERM
U.S. GOVERNMENT SECURITIES FUND
ANNUAL REPORT
-------------------------------------------------------------
S E P T E M B E R - 1 9 9 6
<PAGE>
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BT INVESTMENT LIMITED TERM U.S. GOVERNMENT SECURITIES FUND
TABLE OF CONTENTS
- ----------------------------------------------------------------------
<TABLE>
<S> <C>
LETTER TO SHAREHOLDERS.................................................... 3
BT INVESTMENT LIMITED TERM U.S. GOVERNMENT SECURITIES FUND
Statement of Assets and Liabilities................................... 5
Statement of Operations............................................... 5
Statement of Changes in Net Assets.................................... 6
Financial Highlights.................................................. 6
Notes to Financial Statements......................................... 7
Report of Independent Accountants..................................... 8
SHORT/INTERMEDIATE U.S. GOVERNMENT SECURITIES PORTFOLIO
Schedule of Portfolio Investments..................................... 9
Statement of Assets and Liabilities................................... 10
Statement of Operations............................................... 10
Statement of Changes in Net Assets.................................... 11
Financial Highlights.................................................. 11
Notes to Financial Statements......................................... 12
Report of Independent Accountants..................................... 13
</TABLE>
2
<PAGE>
- --------------------------------------------------------------------------------
BT INVESTMENT LIMITED TERM U.S. GOVERNMENT SECURITIES FUND
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
We are pleased to present you with this annual report for the BT Investment
Limited Term U.S. Government Securities Fund, providing a review of the market,
the portfolio, and our outlook as well as a complete financial summary of the
Fund's operations and a listing of the Portfolio's holdings.
The BT Investment Limited Term U.S. Government Securities Fund (the "Fund")
returned 4.86% for the twelve months ended September 30, 1996, as compared to
4.41% for the Lipper Short/Intermediate U.S. Government Funds Average. Since its
inception on August 24, 1992, the Fund is up 20.30%.
MARKET ACTIVITY
The Fund's fiscal year began toward the end of one of the best years for the
bond market ever, as evidence of a slowing economy and continued low inflation
created a climate of optimism that pushed rates down across the board. During
the fourth calendar quarter, the 5-year bond yield was down by 0.63% and the
2-year U.S. Treasury Notes ("Treasuries") fell 0.65%. In contrast, the first
quarter of 1996 saw rates increase dramatically in the bond market, primarily
due to stronger than expected economic indicators in general and the early
February 1996 report indicating higher than anticipated employment figures in
particular. It is interesting to note that the market reversed even with yet
another cut in interest rates by the Federal Reserve Board at the end of
January.
By the end of June, rates had increased further, due to monthly non-farm
employment figures that continued to be higher than anticipated and concerns
about a possible tightening by the Federal Reserve Board. As a result, the short
end of the yield curve steepened slightly during this quarter and then remained
virtually unchanged through the end of September, leaving the 2 to 5 year spread
at 0.35%.
Still, during the third calendar quarter, conflicting economic signals left
market participants uncertain as to the paths of growth and inflation going
forward. Three Federal Reserve Board meetings passed with no action. On a
duration-adjusted basis, mortgage-backed securities outperformed Treasuries for
the last half of the Fund's fiscal year.
INVESTMENT REVIEW
The Fund began with a duration longer than the benchmark, in anticipation of the
Federal Reserve Board's January easing of interest rates. But then, the change
in yields on the 2-year U.S. Treasuries moved somewhat faster than we
anticipated in early February and interest rates unexpectedly rose without any
action from the Federal Reserve Board toward the end of September, and so the
Fund underperformed its benchmark slightly. Primarily due to effective asset
allocation and the ability to quickly adjust duration as market conditions
changed, the Fund outperformed its category average.
More specifically, we shifted the portfolio's duration from longer than the
Index to shorter than the Index following the release of the stronger than
anticipated February employment figures, and we were able to capture substantial
gains from this position as the market traded off most considerably through
February and March.
The focus from that point on was on each month's employment figures, every one
of which indicated a strong and growing economy. Thus, for the remainder of the
Fund's fiscal year, the Fund maintained a duration of neutral to slightly
shorter than the benchmark. As of September 30, 1996, the Fund had a duration
matching the 1.75 years of the Index.
Since the Federal Reserve Board appears to be on hold until inflation manifests
itself more clearly, we marginally increased our mortgage sector overweight. We
believe this sector provides incremental spread with limited risk of
prepayments. As of September 30, the Fund was allocated 85.8% to U.S. Treasury
Notes, 11.4% to Repurchase Agreement, and 2.8% to U.S. Government Agency based
on a market value of investments.
MANAGER OUTLOOK
Looking ahead, economic signals remain ambiguous. While consumption seems to be
waning, the housing sector continues to exhibit resilience in the face of higher
interest rates. Inflation remains subdued, but with the unemployment rate at
5.1%, wage pressures may be imminent. Thus, for now, we maintain our mortgage
sector overweight, since we believe both seasonal effects and current interest
rate levels should bode well for prepayments. We also established a modest
duration overweight position in the beginning of October.
We will, of course, continue monitoring economic conditions and how they affect
the financial markets, as we seek to provide high levels of current income with
the preservation of capital.
* * *
We value your ongoing support of the BT Investment Limited Term U.S. Government
Securities Fund and look forward to serving your investment needs in the years
ahead.
Lou Hudson
Portfolio Manager of the
Short/Intermediate U.S. Government Securities Portfolio
September 30, 1996
3
<PAGE>
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BT INVESTMENT LIMITED TERM U.S. GOVERNMENT SECURITIES FUND
LETTER TO SHAREHOLDERS
- ----------------------------------------------------------------------
The following graph illustrates the Fund's return versus the Lehman 1-3 Year
Government Index from August 31, 1992 to September 30, 1996, assuming a $10,000
initial investment:
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE
IN VALUE OF A $10,000
INVESTMENT IN THE
BT INVESTMENT LIMITED
TERM U.S. GOVERNMENT
SECURITIES FUND AND THE
LEHMAN 1-3 YEAR
GOVERNMENT INDEX
TOTAL RETURN ENDED SEPTEMBER 30,
1996
One Year Since 8/24/92*
4.86 % 20.30%
* The Fund's inception date
Investment return and principal
value may fluctuate so that
shares, when redeemed, may be
worth more or less than their
original cost.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
<S> <C> <C>
BT INVESTMENT
<CAPTION>
LIMITED TERM
U.S. GOVERNMENT LEHMAN 1-3 YEAR
SECURITIES FUND GOVERNMENT INDEX
<S> <C> <C>
8/31/1992 $10,000 $10,000
9/30/1992 $10,111 $10,094
12/31/1992 $10,044 $10,115
3/31/1993 $10,310 $10,333
6/30/1993 $10,404 $10,448
9/30/1993 $10,613 $10,592
12/31/1993 $10,666 $10,659
3/31/1994 $10,597 $10,607
6/30/1994 $10,614 $10,607
9/30/1994 $10,630 $10,714
12/31/1994 $10,659 $10,714
3/31/1995 $10,958 $11,070
6/30/1995 $11,307 $11,421
9/30/1995 $11,440 $11,591
12/31/1995 $11,704 $11,876
3/31/1996 $11,742 $11,921
6/30/1996 $11,846 $12,046
9/30/1996 $11,996 $12,247
Past performance is not indicative of future
performance.
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
OBJECTIVE Seeks high level of current income with the preservation of capital.
- -----------------------------------------------------------------------------------------------------
INVESTMENT INSTRUMENTS Direct obligations issued or guaranteed by the U.S. Government, or its
agencies and instrumentalities, including repurchase agreements
collateralized by U.S. Government obligations. The average weighted
maturity of securities will range from two to five years.
- -----------------------------------------------------------------------------------------------------
</TABLE>
DIVERSIFICATION OF PORTFOLIO
INVESTMENTS BY ASSET TYPE
AS OF SEPTEMBER 30, 1996
(PERCENTAGES ARE BASED ON MARKET VALUE)
4
<PAGE>
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BT INVESTMENT LIMITED TERM U.S. GOVERNMENT SECURITIES FUND
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
U.S. Government Agency 2.8%
Repurchase Agreements 11.4%
U.S. Treasury Notes 85.8%
</TABLE>
5
<PAGE>
- --------------------------------------------------------------------------------
BT INVESTMENT LIMITED TERM U.S. GOVERNMENT SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in Short/Intermediate U.S. Government Securities
Portfolio, at Value......................................... $ 52,224,002
Deferred Organization and Prepaid Expenses................... 13,206
Due from Bankers Trust....................................... 58,590
-------------
Total Assets..................................................... 52,295,798
-------------
LIABILITIES
Payable for Shares of Beneficial Interest Redeemed........... 503,012
Dividends Payable............................................ 5,767
Accrued Expenses and Other................................... 50,356
-------------
Total Liabilities................................................ 559,135
-------------
NET ASSETS ($0.001 Par Value Per Share, Unlimited Number of
Shares of Beneficial Interest Authorized)...................... $ 51,736,663
-------------
-------------
COMPOSITION OF NET ASSETS
Paid-in Capital.............................................. $ 52,037,386
Accumulated Net Realized Loss from Investment Transactions... (567,118)
Net Unrealized Appreciation on Investments................... 266,395
-------------
NET ASSETS, SEPTEMBER 30, 1996................................... $ 51,736,663
-------------
-------------
SHARES OUTSTANDING............................................... 5,277,821
-------------
-------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE (net
assets divided by shares outstanding).......................... $ 9.80
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS FOR THE PERIOD JANUARY 1, 1996 TO SEPTEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Income Allocated from Short/Intermediate U.S. Government
Securities Portfolio, net................................... $ 1,602,645
------------
EXPENSES
Administration and Services.................................. 87,048
Registration................................................. 31,779
Shareholder Reports.......................................... 38,672
Professional................................................. 19,412
Trustees..................................................... 5,162
Miscellaneous................................................ 5,206
------------
Total Expenses............................................... 187,279
Less: Expenses Absorbed by Bankers Trust..................... (100,231)
------------
Net Expenses................................................. 87,048
------------
NET INVESTMENT INCOME............................................ 1,515,597
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net Realized Loss from Investment Transactions............... (405,643)
Net Change in Unrealized Appreciation of Investments......... 23,331
------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS.................. (382,312)
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS....................... $ 1,133,285
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGE 7
5
<PAGE>
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BT INVESTMENT LIMITED TERM U.S. GOVERNMENT SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
PERIOD
JANUARY 1,
1996 TO FOR THE YEAR
SEPTEMBER 30, ENDED
1996+ DECEMBER 31, 1995
------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net Investment Income.................... $ 1,515,597 $ 1,766,090
Net Realized Gain (Loss) from Investment
Transactions............................ (405,643) 463,090
Net Change in Unrealized Appreciation on
Investments............................. 23,331 628,130
------------- -----------------
Net Increase in Net Assets from Operations... 1,133,285 2,857,310
------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income.................... (1,515,597) (1,766,090)
Net Realized Gains from Investment
Transactions............................ (113,083) --
------------- -----------------
Total Distributions.......................... (1,628,680) (1,766,090)
------------- -----------------
CAPITAL TRANSACTIONS IN SHARES OF BENEFICIAL
INTEREST (NOTE 3)
Net Proceeds from Shares Issued in Merger
Transaction............................. 26,715,127 --
Net Decrease from Capital Transactions in
Shares of Beneficial Interest........... (4,352,961) (2,523,359)
------------- -----------------
Net Increase (Decrease) from Capital
Transactions in Shares of Beneficial
Interest................................... 22,362,166 (2,523,359)
------------- -----------------
TOTAL INCREASE (DECREASE) IN NET ASSETS...... 21,866,771 (1,432,139)
NET ASSETS
Beginning of Period.......................... 29,869,892 31,302,031
------------- -----------------
End of Period................................ $ 51,736,663 $ 29,869,892
------------- -----------------
------------- -----------------
</TABLE>
FINANCIAL HIGHLIGHTS
- ----------------------------------------------------------------------
Contained below are selected data for a share outstanding, total investment
return, other supplemental data and ratios to average net assets for each of the
periods indicated for the BT Investment Limited Term U.S. Government Securities
Fund.
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
JANUARY 1, 1996 FOR THE YEAR AUGUST 24, 1992
TO ENDED DECEMBER 31, (COMMENCEMENT
SEPTEMBER 30, ------------------------------- OF OPERATIONS) TO
1996+ 1995 1994 1993 DECEMBER 31, 1992
----------------- --------- --------- --------- -----------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD.......... $ 9.96 $ 9.61 $ 10.06 $ 9.93 $ 10.00
------- --------- --------- --------- ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income..................... 0.38 0.57 0.44 0.41 0.14
Net Realized and Unrealized Gain (Loss) on
Investment Transactions.................. (0.14) 0.35 (0.45) 0.20 (0.07)
------- --------- --------- --------- ------
Total from Investment Operations.............. 0.24 0.92 (0.01) 0.61 0.07
------- --------- --------- --------- ------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income..................... (0.38) (0.57) (0.44) (0.41) (0.14)
Net Realized Gain from Investment
Transactions............................. (0.02) -- -- (0.07) --
------- --------- --------- --------- ------
Total Distributions........................... (0.40) (0.57) (0.44) (0.48) (0.14)
------- --------- --------- --------- ------
NET ASSET VALUE, END OF PERIOD................ $ 9.80 $ 9.96 $ 9.61 $ 10.06 $ 9.93
------- --------- --------- --------- ------
------- --------- --------- --------- ------
TOTAL INVESTMENT RETURN....................... 2.50% 9.81% (0.08)% 6.21% 2.02%
SUPPLEMENTAL DATA AND RATIOS:
Net Assets, End of Period (000's
omitted)................................. $ 51,737 $ 29,870 $ 31,302 $ 3,462 $ 3,188
Ratios to Average Net Assets:
Net Investment Income................... 5.22%* 5.81% 4.69% 4.35% 4.08%*
Expenses, including Expenses of the
Short/ Intermediate U.S. Government
Securities Portfolio................... 0.60%* 0.60% 0.60% 0.60% 0.60%*
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses by
Bankers Trust.......................... 0.40%* 0.24% 0.34% 1.43% 5.60%*
</TABLE>
- ----------------
* Annualized
+ On February 9, 1996, the Board of Trustees voted to approve the change of the
fiscal year end from December 31 to September 30.
SEE NOTES TO FINANCIAL STATEMENTS ON PAGE 7
6
<PAGE>
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BT INVESTMENT LIMITED TERM U.S. GOVERNMENT SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
- ----------------------------------------------------------------------
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION
BT Pyramid Mutual Funds ("the Trust") is registered under the Investment Company
Act of 1940 ("the Act"), as amended, as an open-end management investment
company. The Trust was organized on February 28, 1992, as a business trust under
the laws of the Commonwealth of Massachusetts. The BT Investment Limited Term
U.S. Government Securities Fund (the "Fund") is one of the funds offered to
investors by the Trust. The Fund commenced operations and began offering shares
of beneficial interest on August 24, 1992. The Fund invests substantially all of
its assets in the Short/Intermediate U.S. Government Securities Portfolio (the
"Portfolio"). The Portfolio is an open-end management investment company
registered under the Act. The Fund seeks to achieve its investment objective by
investing all of its investable assets in the Portfolio. The value of such
investment in the Portfolio reflects the Fund's proportionate interest in the
net assets of the Portfolio. At September 30, 1996, the Fund's investment was
approximately 100% of the Portfolio.
The financial statements of the Portfolio, including the Schedule of Portfolio
Investments, are contained elsewhere in this report.
On February 9, 1996, the Board of Trustees approved the change of the fiscal
year end from December 31 to September 30.
B. INVESTMENT INCOME
The Fund earns interest income, net of expenses, daily on its investment in the
Portfolio. All of the net investment income and realized and unrealized gains
and losses from the security transactions of the Portfolio are allocated pro
rata among the investors in the Portfolio at the time of such determination.
C. ORGANIZATION EXPENSES
Costs incurred by the Fund in connection with its organization and initial
registration are being amortized evenly over a five year period.
D. DIVIDENDS
The Fund declares dividends daily and pays these dividends monthly from net
investment income. Dividends payable to shareholders are recorded by the Fund on
the ex-dividend date, which is the same as the declaration date. Distributions
of net realized short-term and long-term capital gains, if any, will be made
annually.
E. FEDERAL INCOME TAXES
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income to shareholders. Therefore, no federal income tax provision is
required. The Fund may periodically make reclassifications among certain of its
capital accounts as a result of the timing and characterization of certain
income and capital gains distributions determined annually in accordance with
federal tax regulations which may differ from generally accepted accounting
principles. For the period ended September 30, 1996, $74,016 of net realized
gains was reclassified from accumulated net realized loss to paid-in-capital.
For the period September 30, 1996, the Fund has a capital loss carry forward of
$567,118 of which $67,939 expires in 2002 and $499,179 expires in 2004.
F. OTHER
The Trust accounts separately for the assets, liabilities, and operations of the
Fund. Expenses directly attributable to the Fund are charged to the Fund, while
expenses which are attributable to all of the Trust's funds are allocated among
them.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements.
NOTE 2 -- FEES AND TRANSACTIONS WITH AFFILIATES
The Fund has entered into an Administration and Services Agreement with Bankers
Trust Company ("Bankers Trust"). Under this Administration and Services
Agreement, Bankers Trust provides administrative, custody, transfer agency and
shareholder services to the Fund in return for a fee computed daily and paid
monthly at an annual rate of 0.30 of 1% of the Fund's average daily net assets.
For the period January 1, 1996 to September 30, 1996, this fee aggregated
$87,048.
On September 30, 1996, the Trust entered into a Distribution Agreement with
Edgewood Services, Inc. ("Edgewood"). Prior to September 30, Signature
Broker-Dealer Services, Inc. ("Signature") was the Trust's distributor. Under
the Distribution Agreement with the Trust, pursuant to Rule 12b-1 of the 1940
Act, Edgewood, and previously Signature, may seek reimbursement, at an annual
rate not exceeding 0.20 of 1% of the Fund's average daily net assets, for
expenses incurred in connection with any activities primarily intended to result
in the sale of the Fund's shares. For the period January 1, 1996 to September
30, 1996, no reimbursable expenses were incurred under this agreement.
Bankers Trust has voluntarily undertaken to waive and reimburse expenses of the
Fund, to the extent necessary, to limit all expenses to 0.30 of 1% of the
average daily net assets of the Fund, excluding expenses of the Portfolio, and
0.60 of 1% of the average daily net assets of the Fund, including expenses of
the Portfolio. For the period January 1, 1996 to September 30, 1996, expenses of
the Fund have been reduced by $100,231.
The Fund is subject to such limitations as may from time to time be imposed by
the Blue Sky laws of states in which the Fund sells its shares. Currently, the
most restrictive jurisdiction imposes expense limitations of 2.5% of the first
$30,000,000 of the average daily net assets, 2.0% of the next $70,000,000, and
1.5% of any excess over $100,000,000.
Certain trustees and officers of the Fund are also directors, officers and/or
employees of Edgewood and/or Signature. None of the trustees so affiliated
received compensation for services as trustee of the Fund. Similarly, none of
the Fund's officers received compensation from the Fund.
NOTE 3 -- SHARES OF BENEFICIAL INTEREST
At September 30, 1996, there were an unlimited number of shares of beneficial
interest authorized. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 1, 1996 FOR THE YEAR ENDED
TO SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold*.................... 3,817,849 $ 37,544,648 1,207,729 $ 11,921,648
Reinvested............... 162,886 1,602,240 178,335 1,754,361
Redeemed................. (1,703,203) (16,784,722) (1,643,080) (16,199,368)
---------- ------------ ---------- ------------
Net Increase
(Decrease).............. 2,277,532 $ 22,362,166 (257,016) $ (2,523,359)
---------- ------------ ---------- ------------
---------- ------------ ---------- ------------
</TABLE>
- --------------------
* On June 5, 1996, the BT Investment Limited Term U.S. Government Securities
Fund acquired the assets of BT Investment Funds Short/ Intermediate U.S.
Government Securities Fund in exchange for 2,720,481 shares of beneficial
interest at the net asset value of $9.82 per share amounting to $26,715,127.
7
<PAGE>
- --------------------------------------------------------------------------------
BT INVESTMENT LIMITED TERM U.S. GOVERNMENT SECURITIES FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- ----------------------------------------------------------------------
To the Trustees and Shareholders of
BT Pyramid Mutual Funds:
We have audited the accompanying statement of assets and liabilities of the BT
Investment Limited Term U.S. Government Securities Fund (one of the funds
comprising the BT Pyramid Mutual Funds) as of September 30, 1996, and the
related statement of operations for the nine months then ended, the statement of
changes in net assets for the nine months ended September 30, 1996 and the year
ended December 31, 1995, and the financial highlights for the nine months ended
September 30, 1996, each of the three years in the period ended December 31,
1995 and for the period August 24, 1992 (commencement of operations) to December
31, 1992. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1996 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the BT
Investment Limited Term U.S. Government Securities Fund of BT Pyramid Mutual
Funds as of September 30, 1996, the results of its operations, the changes in
its net assets, and the financial highlights for the periods referred to above,
in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Kansas City, Missouri
November 7, 1996
8
<PAGE>
- --------------------------------------------------------------------------------
SHORT/INTERMEDIATE U.S. GOVERNMENT SECURITIES PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS SEPTEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT DESCRIPTION VALUE
- ---------------------------------------- --------------
<C> <S> <C>
U.S. GOVERNMENT & AGENCY
OBLIGATIONS - 90.82%
U.S. TREASURY NOTES - 87.95%
$2,000,000 5.25%, 12/31/97............... $ 1,984,372
900,000 6.00%, 5/31/98................ 899,295
10,000,000 6.25%, 6/30/98................ 10,029,663
12,500,000 6.125%, 8/31/98............... 12,505,828
7,090,000 6.00%, 9/30/98................ 7,081,138
9,200,000 6.375%, 5/15/99............... 9,228,750
3,200,000 6.00%, 8/15/99................ 3,177,754
1,000,000 7.125%, 9/30/99............... 1,022,812
--------------
45,929,612
--------------
UTILITY - 2.87%
1,500,000 Tennessee Valley Authority,
6.00%, 1/15/97............... 1,501,164
--------------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS
(Cost $47,476,643)...................... $ 47,430,776
--------------
<CAPTION>
PRINCIPAL
AMOUNT DESCRIPTION VALUE
- ---------------------------------------- --------------
<C> <S> <C>
SHORT TERM INSTRUMENT - 11.64%
REPURCHASE AGREEMENT - 11.64%
$6,080,492 Repurchase Agreement with
Sanwa Bank, Dated 9/30/96,
5.55%. Principal and Interest
in the Amount of $6,081,429,
due 10/1/96. (Collateralized
by U.S. Treasury Notes, Par
Value $5,834,000, 7.875% due
4/15/98, value of $6,203,511)
(Cost $6,080,492)............ $ 6,080,492
--------------
TOTAL INVESTMENTS
(Cost $53,557,135) -- 102.46%........... $ 53,511,268
Liabilities in Excess of Other Assets --
(2.46%)................................. (1,287,143)
--------------
NET ASSETS -- 100.00%................... $ 52,224,125
--------------
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGE 12
9
<PAGE>
- --------------------------------------------------------------------------------
SHORT/INTERMEDIATE U.S. GOVERNMENT SECURITIES PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at Value (Cost of $53,557,135 including
Repurchase Agreement amounting to $6,080,492)............... $ 53,511,268
Cash......................................................... 35,625
Interest Receivable and Prepaid Expenses..................... 527,629
Due from Bankers Trust....................................... 14,749
--------------
Total Assets..................................................... 54,089,271
--------------
LIABILITIES
Payable for Securities Purchased............................. 1,849,390
Accrued Expenses and Other................................... 15,756
--------------
Total Liabilities................................................ 1,865,146
--------------
NET ASSETS....................................................... $ 52,224,125
--------------
--------------
COMPOSITION OF NET ASSETS
Paid-in Capital.............................................. $ 52,269,992
Net Unrealized Depreciation on Investments................... (45,867)
--------------
NET ASSETS, SEPTEMBER 30, 1996................................... $ 52,224,125
--------------
--------------
</TABLE>
STATEMENT OF OPERATIONS FOR THE PERIOD JANUARY 1, 1996 TO SEPTEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest..................................................... $ 2,322,522
--------------
EXPENSES
Advisory..................................................... 100,786
Administration and Services.................................. 20,157
Professional................................................. 17,827
Miscellaneous................................................ 3,105
--------------
Total Expenses............................................... 141,875
Less: Expenses Absorbed by Bankers Trust..................... (20,932)
--------------
Net Expenses................................................. 120,943
--------------
NET INVESTMENT INCOME............................................ 2,201,579
--------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net Realized Loss on Investment Transactions................... (543,943)
Net Change in Unrealized Depreciation of Investments........... (220,154)
--------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS.................. (764,097)
--------------
NET INCREASE IN NET ASSETS FROM OPERATIONS....................... $ 1,437,482
--------------
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGE 12
10
<PAGE>
- --------------------------------------------------------------------------------
SHORT/INTERMEDIATE U.S. GOVERNMENT SECURITIES PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 1,
1996 FOR THE
TO SEPTEMBER YEAR ENDED
30, 1996+ DECEMBER 31, 1995
-------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net Investment Income.................... $ 2,201,579 $ 3,185,902
Net Realized Gain (Loss) from Investment
Transactions........................... (543,943 ) 834,099
Net Change in Unrealized Appreciation
(Depreciation) on Investments.......... (220,154 ) 965,227
-------------- -----------------
Net Increase in Net Assets from Operations... 1,437,482 4,985,228
-------------- -----------------
CAPITAL TRANSACTIONS
Proceeds from Capital Invested........... 46,130,920 24,442,594
Value of Capital Withdrawn............... (50,522,190 ) (21,520,447)
-------------- -----------------
Net Increase (Decrease) in Net Assets from
Capital Transactions........................ (4,391,270 ) 2,922,147
-------------- -----------------
TOTAL INCREASE (DECREASE) IN NET ASSETS...... (2,953,788 ) 7,907,375
NET ASSETS
Beginning of Period.......................... 55,177,913 47,270,538
-------------- -----------------
End of Period................................ $52,224,125 $ 55,177,913
-------------- -----------------
-------------- -----------------
</TABLE>
FINANCIAL HIGHLIGHTS
- ----------------------------------------------------------------------
Contained below are selected supplemental data and ratios to average net assets
for each of the periods indicated for the Short/Intermediate U.S. Government
Securities Portfolio.
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE PERIOD AUGUST 24, 1992
JANUARY 1, 1996 FOR THE YEAR ENDED DECEMBER 31, (COMMENCEMENT
TO SEPTEMBER 30, ------------------------------- OF OPERATIONS)TO
1996+ 1995 1994 1993 DECEMBER 31, 1992
--------------------- --------- --------- --------- -----------------
<S> <C> <C> <C> <C> <C>
SUPPLEMENTAL DATA AND RATIOS
Net Assets, End of Period (000's
omitted)............................ $ 52,224 $ 55,178 $ 47,271 $ 17,729 $ 4,999
Ratios to Average Net Assets
Net Investment Income............... 5.46%* 6.09% 4.91% 4.25% 4.36%*
Expenses............................ 0.30%* 0.30% 0.30% 0.30% 0.30%*
Decrease Reflected in Above Expense
Ratio Due to Absorption of
Expenses by Bankers Trust......... 0.05%* 0.05% 0.09% 0.25% 1.41%*
Portfolio Turnover Rate............. 314% 246% 202% 267% 75%
</TABLE>
- ----------------
* Annualized.
+ On February 9, 1996, the Board of Trustees voted to approve the change of the
fiscal year end from December 31 to September 30.
SEE NOTES TO FINANCIAL STATEMENTS ON PAGE 12
11
<PAGE>
- --------------------------------------------------------------------------------
SHORT/INTERMEDIATE U.S. GOVERNMENT SECURITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
- ----------------------------------------------------------------------
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION
The Short/Intermediate U.S. Government Securities Portfolio (the "Portfolio") is
registered under the Investment Company Act of 1940 (the "Act"), as amended, as
an open-end management investment company. The Portfolio was organized on
December 11, 1991, as an unincorporated trust under the laws of New York and
commenced operations on August 24, 1992. The Declaration of Trust permits the
Board of Trustees (the "Trustees") to issue beneficial interests in the
Portfolio.
On February 9, 1996, the Board of Trustees approved the change of the fiscal
year end from December 31 to September 30.
B. SECURITY VALUATION
The Portfolio's investments are carried at fair market value as determined by an
independent pricing service at the end of each business day. Short-term
obligations with remaining maturities of 60 days or less, are valued at
amortized cost which with accrued interest approximates value. Securities for
which quotations are not available are stated at fair value as determined by the
Board of Trustees.
C. SECURITY TRANSACTIONS AND INTEREST INCOME
Security transactions are accounted for on a trade date basis. Interest income
is recorded on the accrual basis and includes amortization of premium and
accretion of discount on investments. Realized gains and losses from security
transactions are recorded on the identified cost basis.
All of the net investment income and realized and unrealized gains and losses
from the security transactions of the Portfolio are allocated pro rata among the
investors in the Portfolio at the time of such determination.
D. REPURCHASE AGREEMENTS
The Portfolio may enter into repurchase agreements with financial institutions
deemed to be creditworthy by the Portfolio's Investment Adviser, subject to the
seller's agreement to repurchase and the Portfolio's agreement to resell such
securities at a mutually agreed upon price. Securities purchased subject to
repurchase agreements are deposited with the Portfolio's custodian, and pursuant
to the terms of the repurchase agreement must have an aggregate market value
greater than or equal to the repurchase price plus accrued interest at all
times. If the value of the underlying securities falls below the value of the
repurchase price plus accrued interest, the Portfolio will require the seller to
deposit additional collateral by the next business day. If the request for
additional collateral is not met, or the seller defaults on its repurchase
obligation, the Portfolio maintains the right to sell the underlying securities
at market value and may claim any resulting loss against the seller.
E. FEDERAL INCOME TAXES
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code. Therefore, no federal income tax provision is required.
F. OTHER
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements.
NOTE 2 -- FEES AND TRANSACTIONS WITH AFFILIATES
The Portfolio has entered into an Administration and Services Agreement with
Bankers Trust Company ("Bankers Trust"). Under this Administration and Services
Agreement, Bankers Trust provides administrative, custody, transfer agency and
shareholder services to the Portfolio in return for a fee computed daily and
paid monthly at an annual rate of 0.05 of 1% of the Portfolio's average daily
net assets. For the period January 1, 1996 to September 30, 1996, this fee
aggregated $20,157
The Portfolio has entered into an Advisory Agreement with Bankers Trust. Under
this Advisory Agreement, the Portfolio pays Bankers Trust an advisory fee
computed daily and paid monthly at an annual rate of 0.25 of 1% of the
Portfolio's average daily net assets. For the period January 1, 1996 to
September 30, 1996, this fee aggregated $100,786.
Bankers Trust has voluntarily undertaken to waive and reimburse expenses of the
Portfolio, to the extent necessary, to limit all expenses to 0.30 of 1% of the
average daily net assets of the Portfolio. For the period January 1, 1996 to
September 30, 1996, expenses of the Portfolio have been reduced $20,932.
On September 30, 1996, the Trust (BT Pyramid Mutual Funds) entered into a
Distribution Agreement with Edgewood Services, Inc. ("Edgewood"). Prior to
September 30, Signature Broker-Dealer Services, Inc. was the Trust's
Distributor.
Certain trustees and officers of the Portfolio are also directors, officers
and/or employees of Edgewood or Signature. None of the trustees so affiliated
received compensation for services as trustees of the Portfolio. Similarly, none
of the Portfolio's officers received compensation from the Portfolio.
NOTE 3 -- PURCHASE AND SALE OF INVESTMENT SECURITIES
The aggregate cost of purchases and proceeds from sales of investments of
long-term U.S. Government obligations, for the period January 1, 1996 to
September 30, 1996, were $150,807,498 and $149,891,576, respectively. For
federal income tax purposes, the tax basis of investments held at September 30,
1996 was $53,573,478. The aggregate gross unrealized appreciation for all
investments was $38,322 and the aggregate gross unrealized depreciation for all
investments was $100,532.
12
<PAGE>
- --------------------------------------------------------------------------------
SHORT/INTERMEDIATE U.S. GOVERNMENT SECURITIES PORTFOLIO
REPORT OF INDEPENDENT ACCOUNTANTS
- ----------------------------------------------------------------------
To the Trustees and Holders of Beneficial
Interest of the Short/Intermediate U.S. Government Securities Portfolio:
We have audited the accompanying statement of assets and liabilities of the
Short/Intermediate U.S. Government Securities Portfolio, including the schedule
of portfolio investments, as of September 30, 1996, and the related statement of
operations for the nine months then ended, the statement of changes in net
assets for the nine months ended September 30, 1996 and the year ended December
31, 1995, and the financial highlights for the nine months ended September 30,
1996, each of the three years in the period ended December 31, 1995 and for the
period August 24, 1992 (commencement of operations) to December 31, 1992. These
financial statements and financial highlights are the responsibility of the
Portfolio's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1996 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Short/Intermediate U.S. Government Securities Portfolio as of September 30,
1996, the results of its operations, the changes in its net assets, and the
financial highlights for the periods referred to above, in conformity with
generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Kansas City, Missouri
November 7, 1996
13
<PAGE>
BT PYRAMID MUTUAL FUNDS
BT INVESTMENT LIMITED
TERM U.S. GOVERNMENT
SECURITIES FUND
For shareholder account information
and current price and yield
quotations, shareholders may call
their relationship manager or
servicing agent. Prospectuses
containing more extensive information
regarding the BT Investment Limited
Term U.S. Government Securities Fund
may be obtained by calling or writing
to Investors Fiduciary Trust Company
or Edgewood Services, Inc., the
primary Servicing Agent and
Distributor, respectively, of BT
Pyramid Mutual Funds:
BT PYRAMID MUTUAL FUNDS
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, MO 64105
(800) 730-1313
BT PYRAMID MUTUAL FUNDS
Edgewood Services, Inc.
Clearing Operations
P.O. Box 897
Pittsburgh, PA 15230-8097
You may write to the BT Investment
Limited Term
U.S. Government Securities Fund at the
following address:
BT PYRAMID MUTUAL FUNDS
Clearing Operations
P.O. Box 897
Pittsburgh, PA 15230-8097
STA461200
