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- BT PYRAMID MUTUAL FUNDS -
BT INVESTMENT
EQUITY APPRECIATION FUND
SEMI-ANNUAL REPORT
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MARCH-1997
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BT INVESTMENT EQUITY APPRECIATION FUND
TABLE OF CONTENTS
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LETTER TO SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . . . 3
BT INVESTMENT EQUITY APPRECIATION FUND
Schedule of Portfolio Investments. . . . . . . . . . . . . . . 6
Statement of Assets and Liabilities. . . . . . . . . . . . . . 8
Statement of Operations. . . . . . . . . . . . . . . . . . . . 8
Statement of Changes in Net Assets . . . . . . . . . . . . . . 9
Financial Highlights . . . . . . . . . . . . . . . . . . . . . 9
Notes to Financial Statements. . . . . . . . . . . . . . . . . 10
2
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BT INVESTMENT EQUITY APPRECIATION FUND
LETTER TO SHAREHOLDERS
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We are pleased to present you with this semi-annual report for the BT Investment
Equity Appreciation 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 its holdings.
The Equity Appreciation Fund (the "Fund") had a total return of (14.83)%* for
the six months ended March 31, 1997, as compared to 4.48% for the S&P Midcap 400
Index** and (3.62)% for the Lipper Midcap Growth Average+. Since its inception
on October 12, 1993, the Fund has returned 35.42% cumulatively, or 9.14%
annualized. The Fund returned (4.09)% for the year ended March 31, 1997.
MARKET ACTIVITY
In sharp contrast to the strong performance, growth-oriented market trends, and
high investor optimism of the previous semi-annual period, the six months ended
March 31, 1997 may best be characterized by a "glass half empty" point of view,
with investors focusing more on what may go wrong with an investment than on
what will go right. Specifically, investors have been intensely concerned with
inflation pressures, corporate earnings, and market valuation levels.
Exacerbating concerns about overall stock market valuations were Federal Reserve
Board Chairman Alan Greenspan's "irrational exuberance" comments. The direction
of interest rates also tempered investor enthusiasm, as most high profile
investors and market strategists anticipated Federal Reserve Board tightening
and expressed reservations about its consequent effects on economic growth and
earnings performance. On March 25, 1997, the fed funds rate was, in fact,
raised by 0.25%. Overall, volatility during the semi-annual period was higher
than in the recent past.
OBJECTIVE
Seeks capital growth over the long term through investment in medium-sized
companies that show growth potential.
These market trends and perceptions largely contributed to investors' aversion
to high growth, mid cap stocks. Instead, investors preferred the perceived
safety of larger, mature companies as well as lower multiple/lower growth,
value-oriented stocks. In turn, high growth, mid cap companies were under
constant selling pressure, despite the fact that their fundamentals remain
sound. Higher growth sectors within the market, such as technology, health
care, and communications were particularly hard hit. In all, value sharply
outperformed growth for the six month period, and the S&P 400 Midcap Index
lagged the large cap segment of the market but outperformed the small cap
sector.
INVESTMENT REVIEW
The Fund's relative underperformance can be attributed to style and sector
positioning. As growth managers, we generally overweight the Fund in those
sectors that we believe will exhibit superior earnings growth over the long
term, including technology, health care, and communications-each of which
performed poorly during this period. Technology was hurt by concerns about
earnings shortfalls from several large and visible market leaders. Health care
was hurt by mounting concerns about both potential reimbursement cuts related to
Medicare reform and the possibility of renewed attempts at health care reform.
New realities of a competitive market in the communications industry impacted
this sector. The Fund's underperformance can also be partly attributed to its
underweighted position in more value-oriented sectors such as consumer staples,
financials, and transportation, each of which performed well during these six
months.
INVESTMENT INSTRUMENTS
Primarily common stocks of medium-sized U.S. corporations and, to a
lesser extent, foreign corporations.
On the other hand, our sell discipline helped the Fund during this extremely
difficult investment climate for managers of mid cap growth portfolios. For
example, we sold the Fund's holdings of Pure Atria Software, a company providing
products that help to automate the creation of software applications. Our
fundamental checks indicated that there was trouble with the integration of the
recently merged Atria Software and Pure Software companies and that earnings
were in jeopardy. We sold the Fund's position at $27, and in fact, the stock
has recently traded at $10. We also trimmed the Fund's exposure to the energy
sector early in 1997 due to somewhat extended valuations. This move proved
timely, given the sell-off in this sector during February, as seasonal factors
dominated. Still, we remain very positive about the long-term prospects of the
energy sector, especially the oil field services stocks.
TEN LARGEST STOCK HOLDINGS
Fruit of the Loom, Inc.-Cl. A Everest Renaissance Hldgs., Inc.
Ace Ltd. Compuware Corp.
Culligan Water Technologies, Inc. Tidewater, Inc.
BJ Services Co. Global Marine, Inc.
Applied Materials, Inc. USA Waste Services, Inc.
We also exploited the period's volatility to the Fund's advantage, using periods
of weakness to initiate or add to positions in companies with strong future
prospects. For example, we added to the Fund's holdings in Allen Telecom, a
provider of wireless telecommunications products and services. Our checks with
the company showed that business was quite robust and that sales and earnings
were going to be slightly better than expected. In fact, the market has
subsequently started to recognize this opportunity as well.
We are in the process of developing two new themes for the Fund. Clean Water:
The Next Scarce Resource, focuses on the fact that demand for clean water for
both consumption and industrial uses is growing very rapidly, while the ability
to supply this water has not kept up the pace. The business of supplying water
and equipment is undergoing both a market expansion and a competitive
consolidation, which we believe will lead to more profitable and better managed
companies. Cutting the Cord: The Wireless Opportunity is based on the premise
that the combination of global deregulation, increasing competition, new
wireless providers, and the shift from
- ---------------
* Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
** Indexes are unmanaged, and investments cannot be made in an index.
+ Lipper figures represent the average of the total returns reported by all
of the mutual funds designated by Lipper Analytical Services, Inc. as
falling into the respective categories indicated. These figures do not
reflect sales charges.
3
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BT INVESTMENT EQUITY APPRECIATION FUND
LETTER TO SHAREHOLDERS
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DIVERSIFICATION OF PORTFOLIO INVESTMENTS
By Theme as of March 31, 1997
(percentages are based on market value)
[CHART]
Client-Server Computing 5%
Telecommunications 6%
America's Industrial Renaissance 8%
Our Strengthening Financial Structure 9%
Life Sciences Revolution 10%
New Healthcare Paradigm 12%
Life On the Net 4%
New Consumer 4%
Environmental Crisis 4%
The Ubiquitous Semiconductor 4%
Other 21%+
Re-Energizing America 13%
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+ Includes cash and themes with weightings of less than 4%.
analog to digital will lead to a prolonged spending cycle in wireless
telecommunications equipment.
Our investment themes for the Fund continue to point to potentially attractive
investment opportunities. The Life Sciences Revolution includes selected
biotechnology and drug companies that should benefit from improved profitability
and an unprecedented number of drugs in late-stage clinical trials. Re-
Energizing America includes energy service companies, which should see strong
earnings growth as a result of strong exploration and production spending in
1997 as well as robust demand for natural gas and oil in emerging markets
worldwide. The New Healthcare Paradigm focuses on value-added medical device,
managed care, and health care information services companies, which should be
strong as the need to measure cost and quality continues to be a major industry
challenge. Stores of Value and the New Consumer, which look at strong retail
operators, should benefit from continued strong economic growth and high
consumer confidence levels. We are also developing another investment theme for
the Fund that will seek to capitalize on the increasing usage of technology
coupled with a shortage of skilled workers to implement and manage that
technology.
MANAGER OUTLOOK
While we are disappointed with the recent performance of the Fund, there are
several reasons why we think the long-term outlook remains promising for mid cap
companies that generate superior and consistent earnings growth. First,
absolute and relative valuation levels of these growth companies have retreated
to levels not seen in three or four years. The broad correction experienced by
many of these companies can be seen in the fact that of 1,550 mid cap stocks
measured, the average stock is down 20% from its high, and within the S&P MidCap
400 Index, the average stock is down 18% from its high. These statistics
highlight the valuation contraction experienced by the mid cap universe that has
not been captured within the performance of the Index alone.
Second, despite investors' aversion to growth companies, the fundamentals have
not really changed. Throughout this period of uncertainty, our continued
contacts with and monitoring of managements of mid cap companies indicate that
business is strong and earnings growth remains intact. We believe that this
combination of reasonable valuation levels with sound fundamentals should bode
well for the mid cap segment of the market over the longer term.
Finally, our outlook for the economy leads us to be positive. We are
forecasting GDP growth in the area of 2.5 - 3.0% for calendar 1997, with
interest rates and inflation moving slightly higher. Provided the Federal
Reserve Board's interest rate hikes do not stall economic growth, mid cap growth
companies should continue to perform well from an earnings standpoint. While we
do expect continued volatility throughout the year, historically, investors have
been willing to pay for reasonably priced earnings growth, and the mid cap
sector has time-proven attractive return potential.
As always, our strategy is to remain true to the philosophy and growth
disciplines that have benefited the Fund's investors over the long-term
investment horizon so necessary in this asset class. We continue to focus on:
- - in-depth, fundamental research to identify companies with consistent,
strong earnings and revenue growth
- - a thematic approach and screening process to help us identify unrecognized
growth companies and/or sectors
- - capitalizing on market volatility by initiating or adding to positions in
solid companies at reasonable prices, and
- - a sell discipline that helps to mitigate risk in the portfolio.
We will, of course, continue monitoring economic conditions and how they affect
the financial markets, as we seek capital growth over the long term, with
current income as a secondary objective.
We value your ongoing support of the BT Investment Equity Appreciation Fund and
look forward to continuing to serve your investment needs in the years ahead.
/s/ Anthony Takazawa
Anthony Takazawa
Portfolio Manager of the
BT INVESTMENT EQUITY APPRECIATION FUND
March 31, 1997
4
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BT INVESTMENT EQUITY APPRECIATION FUND
PERFORMANCE COMPARISON
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Comparison of Change in Value of a $10,000 Investment in the BT Investment
Equity Appreciation Fund and the S&P MidCap 400 Index since October 31, 1993.
TOTAL RETURN FOR THE PERIOD
ENDED MARCH 31, 1997
Six Months Since 10/12/93*
(14.83)% 35.42%
* 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.
[GRAPH]
BT Investment Equity S&P MidCap 400
Appreciation Fund - $13,679 Index - $15,171
Oct-93 10000 10000
Dec-93 9899 10233
Mar-94 9657 9844
Jun-94 9051 9485
Sep-94 9939 10217
Dec-94 10242 9866
Mar-95 10909 10664
Jun-95 12111 11605
Sep-95 14283 12737
Dec-95 14095 12919
Mar-96 14262 13715
Jun-96 15354 14110
Sep-96 16061 14521
Dec-96 15448 15400
Mar-97 13679 15171
Past performance is not indicative of future performance.
5
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BT INVESTMENT EQUITY APPRECIATION FUND
SCHEDULE OF PORTFOLIO INVESTMENTS MARCH 31, 1997 (UNAUDITED)
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Shares Description Value
------ ----------- -----
COMMON STOCKS - 92.60%
AMERICA'S CHANGING LEISURE TIME - 3.04%
28,300 Carnival Corp.-Cl. A. . . . . . . . . . . $ 1,047,100
35,100 Harley-Davidson, Inc. . . . . . . . . . . 1,189,013
30,100 Lone Star Steakhouse & Saloon (a) . . . . 688,537
25,300 Starwood Lodging Trust. . . . . . . . . . 986,700
-------------
3,911,350
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AMERICA'S INDUSTRIAL RENAISSANCE - 7.43%
56,172 Agco Corp.. . . . . . . . . . . . . . . . 1,551,752
28,300 American Standard Companies, Inc. (a) . . 1,273,500
44,700 BE Aerospace, Inc. (a). . . . . . . . . . 1,095,150
44,300 Delta & Pine Land Co. . . . . . . . . . . 1,373,300
41,000 EMC Corp. (a) . . . . . . . . . . . . . . 1,455,500
19,413 Raychem Corp. . . . . . . . . . . . . . . 1,599,146
40,648 Sunbeam Corporation, Inc. . . . . . . . . 1,219,440
-------------
9,567,788
-------------
CLIENT-SERVER COMPUTING - 5.40%
59,696 Cognos, Inc. (a). . . . . . . . . . . . . 1,552,096
30,686 Compuware Corp. (a) . . . . . . . . . . . 1,925,546
35,266 Electronics for Imaging, Inc. (a) . . . . 1,406,232
23,400 Honeywell, Inc. . . . . . . . . . . . . . 1,588,275
28,800 Legato Systems, Inc. (a). . . . . . . . . 482,400
-------------
6,954,549
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ENVIRONMENTAL CRISIS - 4.20%
52,300 Culligan Water Technologies, Inc. (a) . . 2,046,237
52,378 USA Waste Services, Inc. (a). . . . . . . 1,859,419
48,545 U.S. Filter Corp. (a) . . . . . . . . . . 1,498,827
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5,404,483
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FLOURISHING IN THE MANAGED CARE
ENVIRONMENT - 1.69%
8,300 PacifiCare Health Systems, Inc.-Cl. B (a) 715,875
53,737 PhyCor, Inc. (a). . . . . . . . . . . . . 1,464,333
-------------
2,180,208
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INTERACTIVE MEDIA - 1.35%
58,167 Outdoor Systems, Inc. (a) . . . . . . . . 1,737,739
-------------
LIFE ON THE NET - 3.73%
21,061 America Online, Inc. (a). . . . . . . . . 892,460
67,700 FORE Systems, Inc. (a). . . . . . . . . . 1,015,500
69,557 Network General Corp. (a) . . . . . . . . 1,495,475
48,115 Sterling Commerce, Inc. (a) . . . . . . . 1,395,335
-------------
4,798,770
-------------
LIFE SCIENCES REVOLUTION - 10.37%
18,500 Agouron Pharmaceuticals, Inc. (a) . . . . 1,306,563
41,300 BioChem Pharma, Inc. (a). . . . . . . . . 1,775,900
42,000 Centocor, Inc. (a). . . . . . . . . . . . 1,281,000
70,400 Cephalon, Inc. (a). . . . . . . . . . . . 1,478,400
30,500 Dura Pharmaceuticals, Inc. (a). . . . . . 1,090,375
46,518 Elan Corp., ADR (a) . . . . . . . . . . . 1,587,427
59,700 Genzyme Corp. (a) . . . . . . . . . . . . 1,343,250
68,500 Liposome Company, Inc. (a). . . . . . . . 1,395,687
16,500 Millipore Corp. . . . . . . . . . . . . . 699,188
95,900 Mylan Laboratories. . . . . . . . . . . . 1,402,537
-------------
13,360,327
-------------
MANAGING THE INFORMATION AGE - 1.99%
24,900 Ciber, Inc. (a) . . . . . . . . . . . . . 628,725
4,800 Gartner Group, Inc.-Cl. A (a) . . . . . . 103,800
22,800 Keane, Inc. (a) . . . . . . . . . . . . . $ 749,550
24,455 McAfee Associates, Inc. (a) . . . . . . . 1,082,134
-------------
2,564,209
-------------
MOVE TO OUTSOURCING - 2.00%
5,424 Catalina Marketing Corp. (a). . . . . . . 220,350
19,400 Coca-Cola Enterprises, Inc. . . . . . . . 1,113,075
37,212 Danka Business Systems, ADR . . . . . . . 1,169,852
5,600 West TeleServices Corp. (a) . . . . . . . 72,100
-------------
2,575,377
-------------
NEW CONSUMER - 4.20%
38,200 Footstar, Inc. (a). . . . . . . . . . . . 1,131,675
63,900 Fruit of the Loom, Inc.-Cl. A (a) . . . . 2,651,850
11,458 Gucci Group NV. . . . . . . . . . . . . . 826,408
21,628 Jones Apparel Group, Inc. (a) . . . . . . 802,940
-------------
5,412,873
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NEW HEALTHCARE PARADIGM - 11.52%
31,145 Cardinal Health, Inc. . . . . . . . . . . 1,693,509
33,200 Dentsply International, Inc.. . . . . . . 1,660,000
11,600 Guidant Corp. . . . . . . . . . . . . . . 713,400
34,300 HBO & Co. . . . . . . . . . . . . . . . . 1,629,250
78,254 Healthsouth Corp. (a) . . . . . . . . . . 1,496,608
25,900 Heartport, Inc. (a) . . . . . . . . . . . 634,550
28,700 McKesson Corp.. . . . . . . . . . . . . . 1,836,800
53,983 Omnicare, Inc.. . . . . . . . . . . . . . 1,268,601
19,400 Rexall Sundown, Inc. (a). . . . . . . . . 497,125
78,700 Safeskin Corp. (a). . . . . . . . . . . . 1,426,438
31,100 United Healthcare Corp. . . . . . . . . . 1,481,137
16,550 U.S. Surgical Corp. . . . . . . . . . . . 504,775
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14,842,193
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OUR STRENGTHENING FINANCIAL STRUCTURE - 8.92%
41,200 Ace Ltd.. . . . . . . . . . . . . . . . . 2,636,800
65,900 Amerin Corp. (a). . . . . . . . . . . . . 1,326,238
37,000 Edwards (A.G.), Inc.. . . . . . . . . . . 1,137,750
66,700 Everest Reinsurance Holdings, Inc.. . . . 1,959,313
43,800 First Security Corp.. . . . . . . . . . . 1,407,075
31,500 Provident Companies, Inc. . . . . . . . . 1,724,625
55,900 Western National Corp.. . . . . . . . . . 1,306,662
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11,498,463
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RE-ENERGIZING AMERICA - 11.90%
87,600 Abacan Resource Corp. (a) . . . . . . . . 689,850
19,800 AES Corp. (a) . . . . . . . . . . . . . . 1,108,800
41,766 BJ Services Co. (a) . . . . . . . . . . . 1,999,547
26,688 Cooper Cameron Corp. (a). . . . . . . . . 1,828,128
37,200 ENSCO International, Inc. (a) . . . . . . 1,832,100
49,700 Falcon Drilling Company, Inc. (a) . . . . 1,838,900
73,500 Global Industries Ltd. (a). . . . . . . . 1,571,063
87,067 Global Marine, Inc. (a) . . . . . . . . . 1,871,940
40,200 Noble Drilling Corp. (a). . . . . . . . . 693,450
41,309 Tidewater, Inc. . . . . . . . . . . . . . 1,900,214
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15,333,992
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RETURN TO HOME OWNERSHIP - 1.11%
95,100 Furniture Brands Intl., Inc. (a). . . . . 1,426,500
-------------
STORES OF VALUE - 3.32%
70,784 Borders Group, Inc. (a) . . . . . . . . . 1,336,048
47,340 Consolidated Stores Corp. (a) . . . . . . 1,668,735
63,000 General Nutrition Companies, Inc. (a) . . 1,275,750
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4,280,533
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See Notes to Financial Statements on Pages 10 and 11
6
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BT INVESTMENT EQUITY APPRECIATION FUND
SCHEDULE OF PORTFOLIO INVESTMENTS MARCH 31, 1997 (UNAUDITED)
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Shares Description Value
------ ----------- -----
TELECOMMUNICATIONS - 6.30%
81,900 Allen Group, Inc. (a) . . . . . . . . . . . . $ 1,433,250
34,700 Groupe AB SA - ADR (a). . . . . . . . . . . . 333,987
56,677 McLeod, Inc.-Cl. A (a). . . . . . . . . . . . 1,006,017
45,100 Newbridge Networks Corp. (a). . . . . . . . . 1,290,987
54,616 Omnipoint Corp. (a) . . . . . . . . . . . . . 532,506
32,359 QUALCOMM, Inc. (a). . . . . . . . . . . . . . 1,824,239
22,100 Sawtek, Inc. (a). . . . . . . . . . . . . . . 635,375
45,799 Teleport Communications Group, Inc. (a) . . . 1,053,377
-----------
8,109,738
-----------
THE UBIQUITOUS SEMICONDUCTOR - 4.13%
42,700 Applied Materials, Inc. (a) . . . . . . . . . 1,980,213
19,100 ASM Lithography Holding NV (a). . . . . . . . 1,432,500
19,200 KLA Instruments Corp. (a) . . . . . . . . . . 700,800
17,600 Novellus Systems, Inc. (a). . . . . . . . . . 1,214,400
-----------
5,327,913
-----------
TOTAL COMMON STOCKS (Cost $117,724,109). . . . . . . . . . . $ 119,287,005
-----------
CONVERTIBLE PREFERRED STOCK - 1.28%
RE-ENERGIZING AMERICA - 1.28%
33,900 AES Trust I-Ser. A (a) (Cost $1,695,000). . . $ 1,648,388
-----------
Principal
Amount
------
SHORT TERM INSTRUMENTS - 5.10%
U.S. TREASURY BILLS - 5.10%
$ 120,000 5.12%, 4/24/97. . . . . . . . . . . . . . . . $ 119,616
6,515,000 5.01%, 5/29/97. . . . . . . . . . . . . . . . 6,460,736
-----------
TOTAL SHORT-TERM INSTRUMENTS (Cost $6,580,620) . . . . . . . $ 6,580,352
-------------
TOTAL INVESTMENTS (Cost $125,999,729). . . . . . . . .98.98% $ 127,515,745
Other Assets Less Liabilities. . . . . . . . . . . . . 1.02% 1,308,991
------- -------------
NET ASSETS . . . . . . . . . . . . . . . . . . . 100.00% $ 128,824,736
------- -------------
------- -------------
- --------------------
(a) Non-Income Producing Security
The following abbreviation is used in portfolio descriptions:
ADR -- American Depository Receipt
See Notes to Financial Statements on Pages 10 and 11
7
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BT INVESTMENT EQUITY APPRECIATION FUND
STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments, at Value (Cost of $125,999,729) . . . . . . . $ 127,515,745
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . 594
Receivable for Securities Sold . . . . . . . . . . . . . . 1,903,068
Receivable for Shares of Beneficial Interest Subscribed. . 166,850
Dividends Receivable . . . . . . . . . . . . . . . . . . . 31,035
Prepaid Expenses and Other . . . . . . . . . . . . . . . . 24,783
-------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . 129,642,075
-------------
LIABILITIES
Due to Bankers Trust . . . . . . . . . . . . . . . . . . . 104,581
Payable for Securities Purchased . . . . . . . . . . . . . 567,216
Payable for Shares of Beneficial Interest Redeemed . . . . 114,479
Accrued Expenses and Other . . . . . . . . . . . . . . . . 31,063
-------------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . 817,339
-------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . $ 128,824,736
-------------
-------------
COMPOSITION OF NET ASSETS
Paid-in Capital. . . . . . . . . . . . . . . . . . . . . . $ 124,542,356
Accumulated Net Investment Loss. . . . . . . . . . . . . . (836,403)
Accumulated Net Realized Gain from Investment
Transactions. . . . . . . . . . . . . . . . . . . . . . . 3,602,767
Net Unrealized Appreciation on Investments . . . . . . . . 1,516,016
-------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . $ 128,824,736
-------------
-------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
SHARE (net assets divided by shares outstanding). . . . . . $ 12.29
-------------
-------------
SHARES OUTSTANDING ($0.001 par value per share,
unlimited number of shares of beneficial interest
authorized) . . . . . . . . . . . . . . . . . . . . . . . . 10,478,923
-------------
-------------
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STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign withholding tax of $2,286) . . . $ 119,376
Interest . . . . . . . . . . . . . . . . . . . . . . . . . 318,606
-------------
TOTAL INVESTMENT INCOME. . . . . . . . . . . . . . . . . . . 437,982
-------------
EXPENSES
Advisory Fees. . . . . . . . . . . . . . . . . . . . . . . 488,433
Administration and Services Fees . . . . . . . . . . . . . 375,718
Professional Fees. . . . . . . . . . . . . . . . . . . . . 14,026
Printing and Shareholder Reports . . . . . . . . . . . . . 10,991
Registration Fees. . . . . . . . . . . . . . . . . . . . . 6,498
Trustees Fees. . . . . . . . . . . . . . . . . . . . . . . 3,952
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . 2,577
-------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . 902,195
Less Expenses Absorbed by Bankers Trust. . . . . . . . . . (150,758)
-------------
Net Expenses . . . . . . . . . . . . . . . . . . . . . 751,437
-------------
NET INVESTMENT LOSS. . . . . . . . . . . . . . . . . . . . . (313,455)
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net Realized Gain from Investment Transactions . . . . . . 328,727
Net Change in Unrealized Depreciation on Investments . . . (22,651,041)
-------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS. . . . . . . (22,322,314)
-------------
NET DECREASE IN NET ASSETS FROM OPERATIONS . . . . . . . . . $ (22,635,769)
-------------
-------------
See Notes to Financial Statements on Pages 10 and 11
8
<PAGE>
- --------------------------------------------------------------------------------
BT INVESTMENT EQUITY APPRECIATION FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1997+ SEPTEMBER 30, 1996
---------------- ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net Investment Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ (313,455) $ (522,948)
Net Realized Gain from Investment Transactions . . . . . . . . . . . . . . . . . . . . . . . . 328,727 12,547,154
Net Change in Unrealized Appreciation (Depreciation) on Investments. . . . . . . . . . . . . . (22,651,041) 4,988,588
------------ ------------
Net Increase in Net Assets from Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . (22,635,769) 17,012,794
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
Net Realized Gain from Investment Transactions . . . . . . . . . . . . . . . . . . . . . . . . (7,964,931) (4,988,705)
------------ ------------
CAPITAL TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST
Proceeds from Sales of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,523,249 76,035,829
Dividend Reinvestments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,964,931 4,998,705
Cost of Shares Redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (23,631,071) (27,513,098)
------------ ------------
Net Increase from Capital Transactions in
Shares of Beneficial Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,857,109 53,521,436
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (28,743,591) 65,535,525
NET ASSETS
Beginning of Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157,568,327 92,032,802
------------ ------------
End of Period (includes accumulated net investment loss of $836,403 and $0, respectively). . . .$ 128,824,736 $ 157,568,327
------------ ------------
------------ ------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below are selected data for a share outstanding, total investment
return, other supplemental data and ratios to average net assets for the periods
indicated for the Equity Appreciation Fund.
<CAPTION>
FOR THE PERIOD
OCTOBER 12, 1993
FOR THE FOR THE FOR PERIOD FOR THE (COMMENCEMENT
SIX MONTHS ENDED YEAR ENDED JANUARY 1, 1995 TO YEAR ENDED OF OPERATIONS) TO
MARCH 31, SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1997+ 1996 1995++ 1994 1993
--------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . $15.23 $14.14 $10.14 $9.80 $10.00
------- ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Loss. . . . . . . . . . . . . . . . (0.03) (0.05) (0.02) (0.03) (0.00)
Net Realized and Unrealized Gain (Loss) on
Investment Transactions. . . . . . . . . . . . . (2.14) 1.72 4.02 0.37 (0.20)
------- ------ ------ ------ ------
Total Income (Loss) from Investment Operations . . . (2.17) 1.67 4.00 0.34 (0.20)
------- ------ ------ ------ ------
DISTRIBUTIONS TO SHAREHOLDERS
Net Realized Gain from Investment Transactions . . (0.77) (0.58) -- -- --
------- ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . $12.29 $15.23 $14.14 $10.14 $9.80
------- ------ ------ ------ ------
------- ------ ------ ------ ------
TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . . (14.83)% 12.45% 39.45% 3.47% (8.81)%*
SUPPLEMENTAL DATA AND RATIOS:
Net Assets, End of Period (000s omitted) . . . . . $128,825 $157,568 $92,033 $29,973 $19,465
Ratios to Average Net Assets:
Net Investment Income. . . . . . . . . . . . . . (0.42)%* (0.42)% (0.38)%* (0.32)% (0.11)%*
Expenses . . . . . . . . . . . . . . . . . . . . 1.00%* 1.00% 1.00%* 1.00% 1.00%*
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses by
Bankers Trust. . . . . . . . . . . . . . . . . 0.20%* 0.24% 0.33%* 0.46% 0.60%*
Portfolio Turnover Rate. . . . . . . . . . . . . 108%
Average Commission Per Share** . . . . . . . . . $0.06
</TABLE>
- ---------------
+ Unaudited
++ Board of Trustees approved the change of the BT Investment Equity
Appreciation Fund's year end from December 31 to September 30.
* Annualized
** For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for security
trades upon which commissions are charged.
See Notes to Financial Statements on Pages 10 and 11
9
<PAGE>
- --------------------------------------------------------------------------------
BT INVESTMENT EQUITY APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
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 Equity
Appreciation 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 October 12, 1993.
Effective September 30, 1996, the Fund no longer achieves its investment
objective by investing all of its assets in the Capital Appreciation Portfolio
(the "Portfolio"). The Fund withdrew its investment in the Portfolio and has
engaged Bankers Trust as investment adviser to manage the Fund. As of September
30, 1996, $157,534,375 in net assets was withdrawn from the Portfolio and
transferred to the Fund.
B. SECURITY VALUATION
The Fund's investments listed or traded on National Stock Exchanges or other
domestic or foreign exchanges are valued based on the closing price of a
security traded on that exchange prior to the time when the Fund assets are
valued. Short-term obligations with remaining maturities of 60 days or less are
valued at amortized cost. Other short-term debt securities are valued on a mark-
to-market basis until such time as they reach a remaining maturity of 60 days,
whereupon they will be valued at amortized cost using their value on the 61st
day. All other securities and other assets are valued at their fair value as
determined in good faith under procedures established by and under the general
supervision of the Trustees.
C. SECURITY TRANSACTIONS AND INTEREST INCOME
Security transactions are accounted for on a trade date basis. Dividend income
is recorded on the ex-dividend date. Interest income is recorded on the accrual
basis and includes amortization of premium and discount on investments.
Realized gains and losses from securities transactions are recorded on the
identified cost basis.
D. REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with financial institutions deemed
to be creditworthy by the Fund's investment adviser, subject to the seller's
agreement to repurchase such securities at a mutually agreed upon price.
Securities purchased subject to repurchase agreements are deposited with the
Fund'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 fall
below the value of the repurchase price plus accrued interest, the Fund 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 Fund maintains the right to sell the underlying
securities at market value and may claim any resulting loss against the seller.
However, in the event of default or bankruptcy by the seller, realization and/or
retention of the collateral may be subject to legal proceedings.
E. OPTION CONTRACTS
The Fund may enter into option contracts. Upon the purchase of a put option or a
call option by the Fund, the premium paid is recorded as an investment and
valued at mark-to-market daily to reflect the current market value. When a
purchased option expires, the Fund will realize a gain or loss in the amount of
the cost of the option. When the Fund enters into a closing sale transaction,
the Fund will realize a gain or loss depending on whether the sale proceeds from
the closing sale transaction are greater or less than the cost of the option.
When the Fund exercises a put option, it realizes a gain or loss from the sale
of the underlying security and the proceeds from such sale will be decreased by
the premium originally paid. When the Fund exercises a call option, the cost of
the security which the Fund purchases upon exercise will be increased by the
premium originally paid.
F. DIVIDENDS
It is the Fund's policy to declare and distribute dividends quarterly to
shareholders from net investment income, if any. Dividends and distributions
payable to shareholders are recorded by the Fund on the ex-dividend date.
Distributions of net realized short-term and long-term capital gains, if any,
earned by the Fund will be made annually to the extent they are not offset by
any capital loss carryforwards.
G. 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
substantially all of its taxable income to shareholders. Therefore, no federal
income tax provision is required.
H. OTHER
The Trust accounts separately for the assets, liabilities, and operations of the
Fund. Expenses directly attributable to the Fund are charged to that 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 0.50 of 1% of the Fund's average daily net assets.
For the six months ended March 31, 1997, this fee aggregated $375,718.
The Fund has entered into an Advisory Agreement in which the Fund pays Bankers
Trust an advisory fee computed daily and paid monthly at an annual rate 0.65 of
1% of the Fund's average daily net assets. For the six months ended March 31,
1997, this fee aggregated $488,433.
The Trust has entered into a Distribution Agreement with Edgewood Services, Inc.
("Edgewood"). Under the Distribution Agreement with the Trust, pursuant to Rule
12b-1 of the 1940 Act, Edgewood 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 six months ended March 31, 1997, there were
no reimbursable expenses incurred under this agreement.
10
<PAGE>
- --------------------------------------------------------------------------------
BT INVESTMENT EQUITY APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
Bankers Trust has voluntarily undertaken to waive and reimburse expenses of the
Fund, to the extent necessary, to limit all expenses to 1.00 of 1% of the
average daily net assets of the Fund. For the six months ended March 31, 1997,
expenses of the Fund have been reduced by $150,758.
Certain trustees and officers of the Fund are also directors, officers and/or
employees of Edgewood. 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.
For the six months ended March 31, 1997, the Fund paid brokerage commissions of
$246,425.
NOTE 3--SHARES OF BENEFICIAL INTEREST
At March 31, 1997, there were an unlimited number of shares of beneficial
interest authorized. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
For the For the
six months ended year ended
March 31, 1997 (unaudited) September 30, 1996
----------------------------- ------------------------------
Shares Amount Shares Amount
----------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold 1,242,938 $ 17,523,249 5,437,029 $ 76,035,829
Reinvested 573,842 7,964,931 370,819 4,998,705
Redeemed (1,681,828) (23,631,071) (1,973,734) (27,513,098)
---------- ------------- ---------- -------------
Net Increase 134,952 $ 1,857,109 3,834,114 $ 53,521,436
---------- ------------- ---------- -------------
---------- ------------- ---------- -------------
</TABLE>
NOTE 4--PURCHASES AND SALES OF INVESTMENT SECURITIES
The aggregate cost of purchases and proceeds from sales of investments, other
than short-term obligations, for the six months ended March 31, 1997 were
$148,742,103 and $147,192,697, respectively. For federal income tax purposes,
the tax basis of investments held at March 31, 1997 was $126,136,278. The
aggregate gross unrealized appreciation for all investments was $10,689,408 and
the aggregate gross unrealized depreciation for all investments was $9,309,942.
11
<PAGE>
BT PYRAMID MUTUAL FUNDS
BT INVESTMENT EQUITY APPRECIATION FUND
INVESTMENT ADVISER OF THE PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY
130 Liberty Street
New York, NY 10006
DISTRIBUTOR
EDGEWOOD SERVICES, INC.
Clearing Operations
P.O. Box 897
Pittsburgh, PA 15230-0897
CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY
130 Liberty Street
New York, NY 10006
INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P
1100 Main Street, Suite 900
Kansas City, MO 64105
COUNSEL
WILLKIE FARR & GALLAGHER
153 East 53rd Street
New York, NY 10022
---------
For information on how to invest, shareholder account information and
current price and yield information, please contact your relationship
manager or the BT Mutual Fund Service Center at (800) 730-1313.
---------
