o BT PYRAMID MUTUAL FUNDS o
BT PRESERVATIONPLUS FUND
SEMI-ANNUAL REPORT
MARCH o 1998
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BT PreservationPlus Fund
Table of Contents
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Letter to Shareholders 3
BT PreservationPlus Fund
Statement of Assets and Liabilities 5
Statement of Operations 5
Statement of Changes in Net Assets 6
Financial Highlights 7
Notes to Financial Statements 8
PreservationPlus Portfolio
Statement of Net Assets 10
Statement of Operations 12
Statement of Changes in Net Assets 13
Financial Highlights 13
Notes to Financial Statements 14
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The Fund is not insured by the FDIC and is not
a deposit, obligation of or guaranteed by Bankers
Trust Company. The Fund is subject to investment
risks, including possible loss of principal amount
invested.
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2
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BT PreservationPlus Fund
Letter to Shareholders
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We are pleased to present you with this first semi-annual report for the BT
PreservationPlus Fund (the "Fund"), providing a detailed review of the market,
the Portfolio, and our outlook. Included are a complete financial summary of the
Fund's operations and a listing of the Portfolio's holdings. The Fund's
Investment Class Shares and Institutional Class Shares have not been in
operation for a full six months, thus, while this is a semi-annual report,
performance is being reported for the most recent quarter and life of the Fund
as of March 31, 1998.
The Fund's Investment Class Shares returned 1.39%* for the three months ended
March 31, 1998, as compared to 1.23% for the IBC-First Tier Money Funds
average.** The Fund's Institutional Class Shares returned 1.43%* for the three
months ended March 31, 1998, as compared to 1.32% for the IBC-First
Tier-Institutional Only Money Funds average.** Since its inception on October 1,
1997, the Fund's Investment Class Shares are up 2.84%, as compared to 2.51% for
the IBC-First Tier Money Funds average.*** And since its inception on December
16, 1997, the Fund's Institutional Class Shares are up 1.70%, as compared to
1.32% for the IBC First Tier-Institutional Only Money Funds average.***
It is well worth noting that the BT PreservationPlus Fund is the first SEC
registered mutual fund specifically designed as an investment alternative to
traditional GIC commingled funds and other stable value products. The Fund is
open to investors in participant-directed employee benefit plans, including
corporate 401(k), public 457, and not-for-profit 403(b) plans. As of March 31,
1998, the Fund had more than $125 million in total assets across all classes of
shares.
MARKET ACTIVITY
For most of the semi-annual period, the bond market continued the bullish trend
which had been in place for much of 1997 and which had gained momentum early in
the fourth calendar quarter. Yields declined primarily due to an acceleration of
concerns that excess capacity in Asia would ultimately lead to pricing pressure
in the U.S. The strength of this sentiment offset evidence that domestic sources
of economic growth were strong enough to make easing of monetary policy by the
Federal Reserve Board unlikely. The Asian crisis also created a flight to
quality that benefited U.S. Treasuries from October through January. In
addition, Asian countries were forced to sell short-term U.S. debt to defend
their currencies, which helped to further flatten the yield curve. In this
environment, mortgages suffered from fears that a decline in the ten-year
Treasury yield would spark a new refinancing wave. Corporate bonds suffered from
concerns about the effects of global overcapacity on corporate profitability in
1998.
During the first calendar quarter of 1998, the bond market traded in a broad
range, primarily due to diminishing fears about the impact of the Asian crisis
on the U.S. economy and the seeming result, i.e. interest rate stability. The
bond market ended the month of March marginally lower, as oil prices recovered
from their ten-year low and as investor concerns regarding continued strong
domestic demand and a robust job market eased. These shifts in market perception
led to the corporate sector benefiting from low levels of new issue supply and
the mortgage sector benefiting from stable rates tempering pre-payment
concerns--each sector outperforming Treasuries for this quarter. In all, the
combination of opposing forces led to a flattening yield curve, as
disinflationary pressures affected the longer end of the curve while the shorter
end of the curve remained anchored by a Fed Funds target rate of 5.50%.
From September 30, 1997 through March 31, 1998, the 2-year Treasury bond yield
dropped 0.22% to 5.56%, and the 5-year Treasury bond yield rallied even more
dramatically, dropping 0.37% to 5.61%. This movement flattened the yield curve,
narrowing the 2 to 5 year spread from 0.21% at September 30, 1997 to 0.05% on
March 31, 1998.
INVESTMENT REVIEW
The Fund is off to an exciting start. The Fund has met its objective of
maintaining a stable value per share, with its NAV staying steady at $10 per
share every day since inception. Both Classes of Fund Shares have also
outperformed their respective money market fund averages during this period. We
believe the Fund is well positioned for a potential high level of current income
over the long term.
More specifically, the Fund is diversified across the major sectors of the
investment grade fixed income market, allocating 30.5% to corporate bonds, 29.2%
to mortgage-backed securities, 25.8% to asset-backed securities, 14.4% to cash
equivalents, and 0.1% to Wrapper Agreements, as of March 31, 1998. This
allocation of fixed income securities is intentionally weighted towards the
higher yielding corporate, asset backed and mortgage sectors, as these sectors
have historically offered a higher yield than U.S. government securities.
The Fund is the first SEC registered mutual fund to make use of Wrapper
Agreements to seek to maintain principal stability in the face of fluctuations
in values due to changes in yields. To date, we have entered the Portfolio into
three Wrapper Agreements, each of which covers approximately one-third of the
fixed income securities in the Portfolio covered by such Agreements. Generally
speaking, Wrapper Agreements are issued by insurance companies, banks and other
financial institutions. The Wrapper Agreements held by the Portfolio as of March
31, 1998 are issued by Barclay's Bank PLC, National Westminster Bank PLC, and
Credit Suisse Financial Products. This has been a successful strategy for the
Fund.
The average credit quality of the investments in the Fund at the end of the
semi-annual period was a strong AA+, as measured by Standard & Poor's. The
average quality of the issuers of the Wrapper Agreements at that time was AA, as
measured by Standard & Poor's. The Fund's duration at March 31, 1998 stood at
2.9 years.
MANAGER OUTLOOK
For the near term, we anticipate that the bond market should continue to do
well, confident in the belief that the Federal Reserve Board is on hold, that
inflation remains at bay, and that economic expansion will continue. To the
extent that the economy continues to grow at a relatively strong pace, we expect
yields to move higher in response. Given this scenario, we expect to invest new
contributions into the Fund in fixed income securities offering higher yields,
which we anticipate, in turn, would benefit the Fund. We also anticipate
entering the Portfolio into a fourth Wrapper Agreement, which will continue
diversifying the Fund's exposure. Over the longer-term horizon, the fixed income
market may have to deal with an official tightening of monetary policy by the
Federal Reserve Board.
3
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BT PreservationPlus Fund
Letter to Shareholders
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We will maintain our long-term perspective for the Fund, monitoring economic
conditions and how they affect the financial markets, as we seek to provide a
high level of current income while seeking to maintain a stable value per share.
We value your support of the PreservationPlus Fund and look forward to serving
your investment needs in the years ahead.
/s/ Louis R. D'Arienzo /s/ John Axtell
_______________________________________________
Eric Kirsch, Louis R. D'Arienzo and John Axtell
Portfolio Managers of the
PreservationPlus Portfolios
March 31, 1998
Diversification of Portfolio Investments
By Theme as of March 31, 1998
(percentages are based on market value)
U.S. Government 23%
Industrial 10%
MSC 3%
Short-Term 32%
Financial Services 32%
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+ Includes themes with weightings of less than 4%.
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* 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. The Fund seeks to
maintain a constant $10.00 share net asset value. The Fund is not a money
market fund, and there can be no assurance that it will be able to do so.
The Fund will hold fixed income securities, money market instruments,
futures, options, and other instruments, and contracts with financial
institutions, such as insurance companies and banks that are intended to
stabilize the value per share. The Fund is not insured by the FDIC and is
not a deposit, obligation of, or guaranteed by Bankers Trust Company. The
Fund is subject to investment risks, including possible loss of principal
amount invested.
** It should be noted that given the different compositions of the Fund versus
that of the IBC Money Fund averages, for attribution comparisons going
forward, the Fund currently has under consideration an alternate benchmark,
which is more accurately representative of the Fund objective.
*** The IBC Money Fund averages for the Life of Fund time period are calculated
from September 30, 1997 for the Investment Class comparison and from
December 31, 1997 for the Institutional Class comparison.
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BT PreservationPlus Fund Investment Class and Institutional Class
Performance Comparison
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Comparison of Change in
Value of a $10,000 Investment
in the BT PreservationPlus
Fund, Investment Class and
Institutional Class.
Total Return for the Period
Ended March 31, 1998
Inception Return
10/1/97* 2.84%***
12/15/97** 1.70%***
* Investment Class inception date.
** Institutional Class inception date.
*** Annualized.
Investment return and principal value may fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
[GRAPH APPEARS BELOW]
BT PreservationPlus Fund Investment Class - $10,284
Dec-97 10,143
Mar-98 10,284
BT PreservationPlus Fund Institutional Class- $10,170
Dec-97 10,000
Mar-98 10,170
Past performance is not indicative of future performance.
4
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BT PreservationPlus Fund
Statement of Assets and Liabilities March 31, 1998 (unaudited)
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<TABLE>
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Assets
Investment in PreservationPlus Portfolio, at Value $ 125,474,457
Prepaid Expenses and Other 68,183
Due from Bankers Trust, net 27,606
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Total Assets 125,570,246
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Liabilities
Payable for Fund Shares Redeemed 3,824
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Total Liabilities 3,824
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Net Assets $ 125,566,422
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Composition of Net Assets
Paid-in Capital $ 125,566,422
Unrealized Depreciation on Investment (140,926)
Accumulated Realized Gain on Investment 79,169
Unrealized Appreciation on Wrapper Agreements 61,757
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Net Assets -- 100.00% $ 125,566,422
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Net Asset Value, Offering and Redemption
Price Per Share (net assets divided by shares outstanding)
Shares Outstanding:
Investment Class Shares+ $ 10.00
Institutional Class Shares++ $ 10.00
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+ Net asset value, offering and redemption price per share (based on net assets
of $15,237,307 and 1,522,982 shares of beneficial interest outstanding and
.001 par value, unlimited number of shares of beneficial interest
authorized).
++ Net asset value, offering and redemption price per share (based on net assets
of $110,390,872 and 11,033,656 shares of beneficial interest outstanding and
.001 par value, unlimited number of shares of beneficial interest
authorized).
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Statement of Operations For the period ended March 31, 1998* (unaudited)
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<TABLE>
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Investment Income
Income net of expenses allocated from PreservationPlus Portfolio $ 1,817,029
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Expenses
Administration and Shareholder Service Fees 78,063
Registration Fees 3,153
Insurance Expense 1,171
Organization Expenses 2,259
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Total Expenses 84,646
Less: Expenses Absorbed by Bankers Trust (exclusive of portfolio waivers)
Investment Class (4,465)
Institutional Class (58,477)
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Net Expenses 21,704
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Net Investment Income 1,795,325
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Unrealized (Depreciation) Appreciation on:
Investment (140,926)
Wrapper Agreements 61,757
Realized Gain from Investment Transations 79,169
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Net Increase in Net Assets from Operations $ 1,795,325
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</TABLE>
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* The Investment and Institutional shares commenced operations on October 1,
1997 and December 12, 1997, respectively.
See Notes to Financial Statements on Pages 8 and 9
5
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BT PreservationPlus Fund
Statement of Changes in Net Assets
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<TABLE>
<CAPTION>
For the period ended
March 31, 1998+*
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<S><C>
Increase (Decrease) in Net Assets from:
Operations
Net Investment Income $ 1,795,325
Unrealized Depreciation on Investment (140,926)
Unrealized Appreciation on Wrapper Agreements 61,757
Realized Gain from Investment Transactions 79,169
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Net Increase in Net Assets from Operations 1,795,325
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Distributions to Shareholders
Net Investment Income
Investment Class (229,727)
Institutional Class (1,565,598)
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Total Distributions (1,795,325)
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Capital Transactions in Shares of Beneficial Interest
Net Increase Resulting from Investment Class Shares 15,229,816
Net Increase Resulting from Institutional Class Shares 110,336,606
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Net Increase from Capital Transactions in Shares of Beneficial Interest 125,566,422
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Total Increase in Net Assets 125,566,422
Net Assets
Beginning of Period --
---------------
End of Period $ 125,566,422
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</TABLE>
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+ Unaudited
* The Investment and Institutional Shares commenced operations on October 1,
1997 and December 12, 1997, respectively.
See Notes to Financial Statements on Pages 8 and 9
6
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BT PreservationPlus Fund
Financial Highlights (unaudited)
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Contained below are selected data for a share outstanding, total investment
return, ratios to average net assets and other supplemental data for the periods
indicated.
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<CAPTION>
Investment Class Shares Institutional Class Shares
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For the period For the period
October 1, 1997* through December 12, 1997* through
March 31, 1998 March 31, 1998
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<S><C>
Per Share Operating Performance:
Net Asset Value, Beginning of Period $ 10.00 $ 10.00
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Income from Investment Operations
Net Investment Income 0.29 0.17
Distributions to Shareholders
Net Investment Income (0.29) (0.17)
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Net Asset Value, End of Period $ 10.00 $ 10.00
========== =========
Total Investment Return
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) $ 15,237 $ 110,391
Ratios to Average Net Assets:***
Net Investment Income 5.36%** 5.81%**
Net Expenses, Including Expenses of the
PreservationPlus Portfolio 0.55%** 0.40%**
Decrease Reflected in the Above Expense Ratio Due
to Absorption of Expenses by Bankers Trust 0.31%** 0.41%**
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* Commencement of operations
** Annualized
*** Includes Fund share of Portfolio expenses
See Notes to Financial Statements on Pages 8 and 9
7
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BT PreservationPlus Fund
Notes to Financial Statements (unaudited)
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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 an unincorporated
business trust under the laws of the Commonwealth of Massachusetts. The
PreservationPlus Fund (the "Fund") is one of the Funds offered to investors by
the Trust.
The PreservationPlus Fund offers two classes of shares to investors; Investment
Class and Institutional Class shares (the "Classes"). Both classes of shares
have identical rights to earnings, assets and voting privileges, except that
each class has its own expenses directly attributable to a particular class and
exclusive voting rights with respect to matters affecting a single class.
The Investment and Institutional shares commenced operations and began offering
shares of beneficial interest on October 1, 1997 and December 12, 1997,
respectively.
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 PreservationPlus Portfolio (the "Portfolio"). The value
of such investment in the Portfolio reflects the Fund's proportionate interest
in the net assets of the Portfolio. At March 31, 1998, the Fund's proportionate
interest in net assets of the Portfolio was 100%.
The financial statements of the Portfolio, including the Statement of Net
Assets, are contained elsewhere in this report.
B. Security Transactions and Related Investment Income
Security transactions are accounted for on the trade date. Realized gains and
losses on investments sold are computed on the basis of identified cost. The
realized and unrealized gains and losses in the Statement of Operations
represent the results related to the Funds underlying assets and the offsetting
valuation change of the Wrapper Agreements.
The Fund earns 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, including the Fund, at the time of
such determination. Net investment income is allocated daily to each class of
shares based upon the relative proportion of net assets.
C. Dividends
It is the Fund's policy to declare dividends daily and distribute dividends
monthly to shareholders from net investment income. Dividends 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, will be made
annually.
D. Federal Income Taxes
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code and distribute substantially all of its 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 gain distributions
determined annually in accordance with federal tax regulations which may differ
from generally accepted accounting principles.
E. Other
The Trust accounts separately for the assets, liabilities and operations of the
Fund and Classes. Expenses directly attributable to each Fund or Class are
charged to that Fund or Class, while expenses which are attributable to the
Trust are allocated among the Funds.
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. Actual results could
differ from those estimates.
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 .25% of the average daily net assets of the Fund.
For the period ended March 31, 1998, this fee aggregated to $10,153 and $67,910
for the PreservationPlus Investment Class and Institutional Class, respectively.
Bankers Trust has voluntarily undertaken to waive its fees and reimburse
expenses of each Class, to the extent necessary, to limit all expenses as
follows: PreservationPlus Fund Investment Class of Shares to .34% of the average
daily net assets of the Class, excluding expenses of the Portfolio and .68% of
the average daily net assets of the Class, including expenses of the Portfolio;
and PreservationPlus Fund Institutional Class of Shares to .02% of the average
daily net assets of the Class, excluding expenses of the Portfolio and .36% of
the average daily net assets of the Class, including expenses of the Portfolio.
For the period ended March 31, 1998, expenses have been reduced by $4,465 and
$58,477 net of Portfolio waivers for the PreservationPlus Investment Class and
Institutional Class, respectively. Amount due from Bankers Trust consisted of
reimbursable expenses of $27,606 net of accrued administration and service fees
of $25,743 at March 31, 1998.
The Fund is a participant with other affiliated entities in a revolving credit
facility ("the revolver") and a discretionary demand line of credit facility
collectively ("the credit facilities") in the amounts of $50,000,000 and
$100,000,000, respectively. A commitment fee of .07% per annum on the average
daily amount of the available commitment is payable on a calendar quarter basis
and apportioned equally amongst all participants. Amounts borrowed under the
credit facilities will bear interest at a rate per annum equal to the Federal
Funds Rate plus .45%. No amounts were drawn down or outstanding under the credit
facilities as of March 31, 1998.
Certain officers of the Fund are also directors, officers and/or employees of
Edgewood Services Inc., Distributor for the Fund, none of whom received
compensation for services from the Fund.
8
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BT PreservationPlus Fund
Notes to Financial Statements (continued)
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Note 3--Shares of Beneficial Interest
It is the Funds' policy to maintain a continuous net asset value of $10.00 per
share for the Fund and the Fund has adopted certain investment, portfolio
valuation, and distribution policies to enable it to do so. There is no
assurance, however, that the Fund will be able to maintain a stable net asset
value of $10.00 per share.
At March 31, 1998, there were an unlimited number of shares of beneficial
interest authorized. Transactions in shares of beneficial interest were as
follows:
Investment Class Shares* Institutional Class Shares*
------------------------ ---------------------------
For the period For the period
ended March 31, 1998 ended March 31, 1998
------------------------ ---------------------------
Shares Amount Shares Amount
--------- ------------ ---------- ---------------
Sold 1,500,005 $ 15,000,050 11,366,827 $113,668,319
Reinvested 22,977 229,766 156,573 1,565,724
Redeemed -- -- (489,744) (4,897,437)
--------- ------------ ---------- ------------
1,522,982 $ 15,229,816 11,033,656 $110,336,606
========= ============ ========== ============
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* The Investment Class and Institutional class commenced operations on October
1, 1997 and December 12, 1997, respectively.
9
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PreservationPlus Portfolio
Statement of Net Assets March 31, 1998 (unaudited)
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Principal
Amount Security Value
------- -------- -----
CORPORATE DEBT
NON-CONVERTIBLE - 53.80%
Financial Services - 39.09%
$1,000,000 ABN AMRO Bank NV,
7.55%, 6/28/06 $ 1,073,320
2,000,000 American Express Master Trust-CI. A,
7.60%, 8/15/02 2,093,946
1,000,000 American General Finance,
5.90%,1/15/03 986,535
1,500,000 Associates Corp. N.A.,
6.68%, 9/17/99 1,515,024
2,000,000 AT&T Universal Card Master
Trust-CI. A, 5.95%,10/17/02 2,005,320
300,000 BankAmerica Corp.,
7.50%,10/15/02 315,107
2,000,000 California Infrastructure PG&E-CI. A7,
6.42%, 9/25/08 2,025,580
1,000,000 Chase Credit Card Master Trust-CI. A,
6.30%,4/15/03 1,010,530
100,000 Chase Manhattan Corp.,
10.00%, 6/15/99 104,505
2,000,000 Chase Manhattan Corp.,
7.25%, 6/01/07 2,106,160
2,300,000 Chase Manhattan Credit Card Master
Trust-CI. A,
6.73%, 2/15/03 2,322,701
1,000,000 CitiBank Credit Card Master Trust-CI. A,
5.75%,1/15/03 996,400
1,000,000 CNA Financial,
6.45%,1/15/08 985,874
2,000,000 Discover Card Master Trust-CI. A,
5.80%, 9/16/03 1,989,360
2,000,000 Discover Card Master Trust-CI. A,
6.20%, 5/16/06 2,009,780
2,000,000 DuPont,
9.15%, 4/15/00 2,125,098
1,000,000 EQCC Home Equity Loan Trust-CI. A5,
6.54%, 4/15/11 1,009,920
300,000 First Union National Bank,
7.125%,10/15/06 314,747
2,000,000 First USA Credit Card Master Trust-CI. A,
6.42%, 3/17/05 2,035,980
3,000,000 Ford Credit Auto Loan Master Trust-CI. A,
6.50%, 8/15/02 3,039,360
2,000,000 Ford Motor Credit,
6.00%,1/14/03 1,986,390
1,300,000 GMAC,
6.875%, 7/15/01 1,331,742
1,000,000 Household Finance Co.,
8.375%,11/15/01 1,069,405
1,000,000 J.P. Morgan & Co.,
6.70%,11/01/07 1,009,980
2,000,000 MBNA Master Credit Card Trust-CI. A,
6.55%,1/15/07 2,050,820
1,000,000 MBNA Master Credit Card Trust-CI. A,
6.60%,1/15/03 1,017,170
Principal
Amount Security Value
------- -------- -----
$2,000,000 NationsBank Credit Card Master
Trust-CI. A,
6.00%,12/15/05 $ 1,997,740
750,000 Premier Auto Trust-CI. A4,
5.82%,12/06/02 747,656
1,000,000 Providian Master Trust-CI. A,
6.25%, 6/15/07 1,011,730
2,000,000 Salomon Smith Barney Holdings,
7.98%, 3/01/00 2,067,510
2,700,000 Standard Credit Card Trust,
5.95%,10/07/04 2,683,692
2,000,000 Toyota Auto Lease Trust-CI. A2,
6.35%, 9/25/00 2,012,500
-------------
49,051,582
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Industrial - 12.27%
2,000,000 American Home Products,
7.70%, 2/15/00 2,060,136
2,000,000 Anheuser Busch Cos.,
9.00%,12/01/09 2,435,468
1,565,000 Exxon Capital Corp.,
6.50%, 7/15/99 1,578,562
1,000,000 GTE Southwest, Inc.,
6.23%,1/01/07 988,830
2,000,000 Hanson Overseas,
6.75%, 9/15/05 2,036,020
500,000 Sears Roebuck Acceptance,
6.125%,1/15/06 490,447
1,000,000 TRW, Inc.,
6.05%,1/15/05 986,445
1,500,000 Texaco Capital,
8.50%, 2/15/03 1,647,630
1,890,000 Wal-Mart Stores,
9.10%, 7/15/00 2,018,900
100,000 Wal-mart Stores, Inc.,
6.50%, 6/01/03 101,925
1,000,000 Walt Disney Co., 6.75%, 3/30/06 1,037,495
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15,381,858
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Utility - 2.44%
2,000,000 Consolidated Natural Gas,
6.625%,12/01/08 2,049,540
1,000,000 Virginia Electric & Power,
6.75%, 2/01/07 1,017,075
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3,066,615
-------------
Total Corporate Debt Non-convertible 67,500,055
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(Cost $67,662,661)
FOREIGN DEBT - 1.64%
Foreign Debt - 1.64%
1,000,000 Alberta Province,
9.25%, 4/01/00 1,060,265
1,000,000 Province of Ontario,
6.00%, 2/21/06 994,760
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2,055,025
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Total Foreign Debt 2,055,025
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(Cost $2,068,946)
See Notes to Financial Statements on Pages 14 and 15
10
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PreservationPlus Portfolio
Statement of Net Assets March 31, 1998 (unaudited)
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Principal
Amount Security Value
------- -------- -----
U.S. GOVERNMENT & AGENCY - 28.86%
$ 110,548 FGLMC,
7.50%, 10/01/27 $ 113,346
301,770 FGLMC,
7.50%, 4/01/27 309,409
541,440 FGLMC,
7.50%, 6/01/27 555,146
2,000,000 FNMA TBA,
6.00%, 4/01/08 1,971,250
2,000,000 FNMA TBA,
6.50%, 4/01/23 2,008,126
1,500,000 FNMA TBA,
6.50%, 4/01/23 1,485,000
1,000,000 FNMA TBA,
7.00%, 9/01/06 1,018,125
7,000,000 FNMA TBA,
7.00%, 9/01/21 7,076,566
4,000,000 FNMA TBA,
7.50%, 9/01/21 4,103,752
1,000,000 FNMA TBA,
7.50%, 4/01/23 1,029,063
1,000,000 FNMA TBA,
8.00%, 9/01/21 1,036,563
995,031 FNMA,
6.50%,10/01/27 985,081
482,283 FNMA,
7.00%, 9/01/12 491,024
3,501,424 FNMA,
8.00%, 5/01/17 3,629,446
1,000,000 GNMA TBA,
6.50%, 6/25/23 990,625
1,000,000 GNMA TBA,
7.00%, 9/01/21 1,010,938
3,000,000 GNMA TBA,
7.50%, 9/01/21 3,079,689
2,000,000 GNMA TBA,
8.00%, 8/01/21 2,073,126
1,000,000 GNMA TBA,
8.50%, 4/01/21 1,055,625
1,100,848 GNMA,
8.00%, 5/15/22 1,141,099
968,386 GNMA,
9.00%, 11/15/20 1,047,658
-------------
36,210,657
-------------
Total U.S. Government & Agency
(Cost $36,175,056) 36,210,657
-------------
Principal
Amount Security Value
------- -------- -----
SHORT TERM INSTRUMENTS - 39.69%
Mutual Fund - 10.06%
$12,621,628 BT Institutional Cash Management Fund,
5.51%, 4/01/98 $ 12,621,628
-------------
Repurchase Agreement - 29.63%
37,184,755 Goldman Sachs, dated 3/31/98,
5.85%, principal and interest
in the amount of $37,190,797,
due 4/1/98. (Collateralized by
U.S. Treasury Bonds,11.625%
par value of 29,655,000, due
11/15/02, value of $38,062,720) 37,184,755
-------------
Total Short Term Instruments
(Cost $49,806,383) 49,806,383
-------------
Wrapper Agreements
Wrapper Agreement #1 National Westminster 16,251
Wrapper Agreement #2 Barclays Bank 16,251
Wrapper Agreement #3 Credit Suisse 29,255
-------------
Total Wrapper Agreements 61,757
-------------
Total lnvestments
(Cost $155,713,046) 123.99% $155,633,877
Liabilities in Excess of Other Assets (23.99)% (30,159,318)
-------- -------------
Net Assets 100.00% $125,474,559
======== =============
- ----------
The following abbreviations are used in portfolio descriptions:
FGLMC - Federal Home Loan Mortgage Corp.
FNMA - Federal National Mortgage Association
GNMA - Government National Mortgage Association
TBA - To be announced securities. TBA's represent firm commitments of the
Portfolio for securities authorized for issuance but not yet actually
issued.
Wrapper Agreements - Each Wrapper Agreement obligates the wrapper provider to
maintain the book value of a portion of the Portfolio's
assets up to a specified maximum dollar amount, upon the
occurrence of certain specified events. Valuation presented
represents amounts due Portfolio of each provider's portion
of the Portfolio's unrealized depreciation, net of realized
gains.
See Notes to Financial Statements on Pages 14 and 15
11
<PAGE>
- --------------------------------------------------------------------------------
PreservationPlus Portfolio
Statement of Operations For the period ended March 31, 1998* (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S><C>
Investment Income
Interest Income, net $ 1,851,441
Crediting Rate Interest 70,568
--------------
1,922,009
--------------
Expenses
Advisory Fee 109,513
Administration and Service Fee 15,645
Wrapper Fee 42,398
--------------
Total Expenses 167,556
Less: Expenses Absorbed by Bankers Trust (62,579)
--------------
Net Expenses 104,977
--------------
Net Investment Income 1,817,032
--------------
Net Realized and Unrealized Gain (Loss) on Investments and Wrapper Agreements
Unrealized (Depreciation) Appreciation on:
Investments (140,926)
Wrapper Agreements 61,757
Realized Gain on Investment Transactions 79,169
--------------
Net Realized and Unrealized Gain (Loss) on Investments and Wrapper Agreements --
--------------
Net Increase in Net Assets from Operations $ 1,817,032
==============
</TABLE>
- ----------
* The PreservationPlus Portfolio commenced operations on October 1, 1997.
See Notes to Financial Statements on Pages 14 and 15
12
<PAGE>
- --------------------------------------------------------------------------------
PreservationPlus Portfolio
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the
period ended
March 31, 1998+*
----------------
<S><C>
Increase (Decrease) in Net Assets from:
Operations
Net Investment Income $ 1,817,032
Unrealized Depreciation on Investments (140,926)
Unrealized Appreciation on Wrapper Agreements 61,757
Realized Gain on Investments 79,169
---------------
Net Increase in Net Assets from Operations 1,817,032
---------------
Capital Transactions
Proceeds from Capital Invested 185,989,895
Value of Capital Withdrawn (62,332,368)
---------------
Net Increase in Net Assets from Capital Transactions 123,657,527
---------------
Total Increase in Net Assets 125,535,616
Net Assets
Beginning of Period --
End of Period $ 125,474,559
===============
</TABLE>
- ----------
+ Unaudited
* The Investment and Institutional Shares commenced operations on October 1,
1997 and December 12, 1997, respectively.
- --------------------------------------------------------------------------------
Financial Highlights (unaudited)
- --------------------------------------------------------------------------------
Contained below are selected ratios and supplemental data for the period
indicated for the PreservationPlus Portfolio.
<TABLE>
<CAPTION>
For the period*
ended
March 31, 1998
---------------
<S><C>
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) $ 125,475
Ratios to Average Net Assets:
Net Investment Income 5.81%**
Expenses 0.35%**
Decrease Reflected in the Above Expense Ratio Due
to Absorption of Expenses by Bankers Trust 0.20%**
Portfolio Turnover Rate 187%
</TABLE>
- ----------
* Commencement of operations--Investment Class October 1, 1997, Institutional
Class December 12, 1997
** Annualized
See Notes to Financial Statements on Pages 14 and 15
13
<PAGE>
- --------------------------------------------------------------------------------
PreservationPlus Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 1--Organization and Significant Accounting Policies
A. Organization
The PreservationPlus 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 and commenced
operations on October 1, 1997 as an unincorporated trust under the laws of New
York. The Declaration of Trust permits the Board of Trustees (the "Trustees") to
issue beneficial interests in the Portfolio.
B. Security Valuation
Debt securities (other than short-term debt obligations maturing in 60 days or
less), including listed securities and securities for which price quotations are
available, will normally be valued on the basis of market valuations furnished
by a pricing service. Such market valuations may represent the last quoted price
on the securities' major trading exchange or quotes received from dealers or
market makers in the relevant securities or may be determined through the use of
matrix pricing. In matrix pricing, pricing services may use various pricing
models, involving comparable securities, historic relative price movements,
economic factors and dealer quotations. Over-the-counter securities will
normally be valued at the bid price. Short-term debt obligations and money
market securities maturing in 60 days or less are valued at amortized cost.
Securities for which market quotations are not readily available are valued by
Bankers Trust pursuant to procedures adopted by the Portfolio's Trust Board.
Wrapper Agreements, see also (note 5), generally will be equal to the difference
between the Book Value and Market Value (plus accrued interest) on the
applicable covered assets and will either be reflected as an asset or liability
of the portfolio. The Portfolio's Trust Board in performing its fair value
determination of the Portfolio's Wrapper Agreements considers the
creditworthiness and the ability of Wrapper Provider to pay amounts due under
the Wrapper Agreements.
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
discount on investments. Realized gains and losses from the security
transactions are recorded on the identified cost basis. The credit rating
represents the actual interest earned on covered assets under the portfolio's
wrapper agreements ("the agreements") plus or minus an adjustment for an amount
receivable from or payable to the wrapper provider based on fluctuation in the
market value of covered assets under the agreements.
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 Advisor, 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 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. 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. 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. Actual results could
differ from those estimates.
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 and shareholder
services to the Portfolio in return for a fee computed daily and paid monthly at
an annual rate of .05% of the Portfolio's average daily net assets. Amounts owed
under the Administration and Services Agreement amounted to $5,167 at March 31,
1998.
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 .35% of the Portfolio's
average daily net assets. Accrued Advisory Fee payable amounted to $15,502 net
of reimbursable expenses of $20,669 at March 31, 1998.
The Portfolio may invest in the BT Institutional Cash Management Fund ("The
Fund"), an open-end management investment company managed by Bankers Trust
Company ("the Company"). The Fund is offered as a cash management option to the
Portfolio and other accounts managed by the Company. Distributions from the Fund
to the Portfolio as of March 31, 1998 amounted to $163,493.
The Portfolio is a participant with other affiliated entities in a revolving
credit facility ("the revolver") and a discretionary demand line of credit
facility collectively ("the credit facilities") in the amounts of $50,000,000
and $100,000,000, respectively. A commitment fee of .07% per annum on the
average daily amount of the available commitment is payable on a calendar
quarter basis and apportioned equally amongst all participants. Amounts borrowed
under the credit facilities will bear interest at a rate per annum equal to the
Federal Funds Rate plus .45%. No amounts were drawn down or outstanding under
the credit facilities as of and for the period ended March 31, 1998.
14
<PAGE>
- --------------------------------------------------------------------------------
PreservationPlus Portfolio
- --------------------------------------------------------------------------------
Bankers Trust has voluntarily undertaken to waive its fees and reimburse
expenses of the Portfolio, to the extent necessary, to limit all expenses to
.35% of the average daily net assets of the Portfolio. For the period ended
March 31, 1998, expenses of the Portfolio have been reduced by $62,579.
Note 3--Purchases and Sales of Investment Securities
The payable for securities purchased amounted to $31,146,632 at March 31, 1998.
The aggregate cost of purchases and proceeds from sales of investments, other
than short-term obligations, for the period ended March 31, 1998, were
$225,588,023 and $119,655,304, respectively. For federal income tax purposes,
the tax basis of investments held at March 31, 1998 was $155,713,046. The
aggregate gross unrealized appreciation was $175,421, and the aggregate gross
unrealized depreciation for all investments was $319,347 as of March 31, 1998.
Note 4--Net Assets
On March 31, 1998 net assets consisted of:
Paid-in Capital $125,474,559
============
Note 5--Wrapper Agreements
The Portfolio will enter into Wrapper Agreements with insurance companies, banks
or other financial institutions ("Wrapper Providers") that are rated, at the
time of purchase, in one of the top two long-term rating categories by Moody's
or S&P. There is no active trading market for Wrapper Agreements, and none is
expected to develop; therefore, they will be considered illiquid.
A default by the issuer of a Portfolio Security or a Wrapper Provider on its
obligations might result in a decrease in the value of the Portfolio assets and,
consequently, the Shares. The Wrapper Agreements generally do not protect the
Portfolio from loss if an issuer of Portfolio Securities defaults on payments of
interest or principal. Additionally, a Fund shareholder may realize more or less
than the actual investment return on the Portfolio Securities depending upon the
timing of the shareholder's purchases and redemption of Shares, as well as those
of other shareholders.
15
<PAGE>
BT INVESTMENT
PRESERVATIONPLUS FUND
Investment Advisor and Administrator of the Portfolio
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
ERNST & YOUNG, L.L.P.
787 7th Avenue
New York, NY 10019
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. This
must be preceded or accompanied by a current prospectus
for the Fund.
--------------------
STA491100
STA495100(5/98)
