o BT PYRAMID MUTUAL FUNDS o
BT INVESTMENT
EQUITY APPRECIATION FUND
SEMI-ANNUAL REPORT
------------------
MARCH o 1998
<PAGE>
BT Investment Equity Appreciation Fund
Table of Contents
Letter to Shareholders 3
BT Investment Equity Appreciation Fund
Statement of Net Assets 5
Statement of Operations 7
Statements of Changes in Net Assets 8
Financial Highlights 8
Notes to Financial Statements 9
--------------------------
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.
--------------------------
2
<PAGE>
BT Investment Equity Appreciation Fund
Letter to Shareholders
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 the Funds holdings.
The BT Investment Equity Appreciation Fund (the "Fund") had a total return of
7.59%* for the six months ended March 31, 1998, as compared to 11.94% for the
S&P 400 Midcap Index** and 8.41% for the Lipper Growth Average***. Since its
inception on October 12, 1993, the Fund delivered a total return of 98.15%
cumulatively, or 16.55% annualized, as of March 31, 1998. The Fund returned
46.32% for the year ended March 31, 1998.
MARKET ACTIVITY
Overall, the six months ended March 31, 1998 were a period of significant
volatility for mid capitalization growth stocks. The last quarter of 1997 was
disappointing from a performance perspective; the first quarter of 1998 was much
improved. Here's why.
At the start of the fourth quarter of 1997, midcap growth stocks had just
experienced a five month period during which they had produced 30% plus
performance, and stocks were somewhat extended. In addition, the effects of the
Asian financial crises began to spread about this time. Midcap growth stocks
came under pressure, as U.S. investors sought both to lock in gains and to
discount the expected negative impact these crises would have on the earnings
growth of companies with significant exposure to Asia--especially the technology
stocks. Investors tended to turn their focus to large cap names and more
value-oriented stocks.
- ------------------------------------------
Objective
Seeks capital growth over the long term
through investment in medium-sized
companies that show growth potential.
- ------------------------------------------
- ------------------------------------------
Investment Instruments
Primarily common stocks of medium-sized
U.S. corporations and, to a lesser extent,
foreign corporations.
- ------------------------------------------
The new year began with a whimper, as the midcap market continued to reconcile
the events in Asia. Expectations for both fourth quarter earnings results and
first quarter earnings estimates were low. But as the first quarter progressed,
investor sentiment toward midcap growth stocks improved for a number of reasons.
First, the impact of the Asian crisis became more clear and measurable, and the
situation was not as bad as many had expected. Second, thanks to strong internal
growth, the earnings growth of many companies with international exposure was
sustained despite the scare from overseas. Third, those companies that were more
negatively impacted had lowered expectations enough that investors were no
longer as worried about the effects. And finally, what may be called the
virtuous circle of rising prices and improving sentiment boosted midcap growth
stocks' performance nicely in February and March. Relative valuation levels of
these stocks had been dramatically reduced, reaching levels even cheaper than
they were in April 1997 at which point they were at seven year lows. For all
these reasons, plus sustained strong U. S. economic conditions, few signs of
inflation, and interest rate fears at bay, midcap growth stocks performed well
for the first calendar quarter as a whole, participating with the other segments
of the stock market in a robust rally.
INVESTMENT REVIEW
As has been our long-standing policy, we stayed true to the Fund's
growth-oriented investment style throughout both the difficult fourth quarter
and the more positive first quarter. Of course, when midcap growth stocks are in
favor, the Fund benefits. In fact, the Fund outperformed both its Lipper
category average and its benchmark during the rally of the first calendar
quarter.
Relative sector positioning was the primary factor impacting performance
throughout. For example, in the last quarter of 1997, the Fund was underweight
in the outperforming value-oriented sectors of utilities, financial, and
consumer staples and was overweight in the poorly performing sectors of
healthcare and technology. However, that same strategy worked to the Fund's
favor in the next quarter, when technology and healthcare were among the best
performing sectors, as were communications services, transportation, and
consumer cyclicals, where the Fund was also overweight. The Fund's overweight
position in energy, the only sector posting a loss during this six month period,
negatively impacted performance.
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Ten Largest Stock Holdings
- -------------------------------------------------------------------
Compuware Corp. Comverse Technology, Inc.
- -------------------------------------------------------------------
Ace, Ltd. Linens 'N Things, Inc.
- -------------------------------------------------------------------
Outdoor Systems, Inc. Mylan Laboratories, Inc.
- -------------------------------------------------------------------
General Cable Corp. Ocwen Financial Corp.
- -------------------------------------------------------------------
Royal Caribbean Cruises, Ltd. WinStar Communications, Inc.
- -------------------------------------------------------------------
MANAGER OUTLOOK
Going forward, we are encouraged by the environment for midcap growth stocks.
Earnings growth remains relatively robust; valuation levels are still very
attractive; and investor sentiment is positive. In general, the companies the
Fund owns are experiencing strong fundamental growth in earnings and are
expressing upbeat outlooks for the remainder of 1998. Given this scenario and
the Fund's performance during the stock market rally of the first calendar
quarter, we believe it continues to be well positioned in the midcap growth
names for the near future. Over the longer term, it has been shown that
investors will pay for reasonably priced earnings growth.
Still, as we have seen just in the most recent semi-annual period, returns can
be volatile in the short term, and thus it is important to remember that
investors should take a long-term view when invest-
- ----------
* 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
<PAGE>
BT Investment Equity Appreciation Fund
Letter to Shareholders
Diversification of Portfolio Investments
By Theme as of March 31, 1998
(percentages are based on market value)
[PIE CHART APPEARS HERE]
New Consumer 5%
New Health Care Paradigm 7%
Our Strengthening Financial Structure 10%
Return to Home Ownership 4%
Stores of Value 6%
Telecommunications 14%
Managing the Information Age 6%
Life Sciences Revolution 5%
Energizing the Globe 7%
Consolidating America 7%
Client Server Computing 6%
America's Changing Leisure Time 6%
Other 17%
- ----------
+ Includes themes with weightings of less than 4%.
ing in this segment of the market. We remain disciplined in our process, and we
continue to focus on companies that offer compelling valuations relative to
their growth rates. Given the recent high volatility of the stock market, we
also remain focused on companies that have strong, consistent earnings and
revenue growth.
We remain dedicated to our use of extensive fundamental research, as well as to
our thematic approach and screening process, as we seek to identify attractive
investment opportunities in unrecognized growth companies and sectors. As we
look ahead, we are particularly emphasizing our research on companies in the
telecommunications sector, as we believe many of these companies will benefit
from deregulation, consolidation, and market expansion, and on the consumer
sector, as it should benefit from strong consumer spending. Finally, we continue
to strictly adhere to our sell discipline to help mitigate risk and to use the
volatility of the marketplace to our investors' advantage by initiating or
adding to positions on weakness.
We will continue to monitor economic conditions and their effect on financial
markets, as we seek capital growth over the long term.
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
Equity Appreciation Portfolio
March 31, 1998
- -------------------------------------------------------------------------------
Performance Comparison
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, 1998
Six Months Since 10/12/93*
7.59% 16.55%**
* The Fund's 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 HERE - SEE PLOT POINTS BELOW]
BT Investment Equity S&P MidCap
Appreciation Fund 400 Index
Oct-93 $10,000 $10,000
Dec-93 9,899 10,233
Mar-94 9,657 9,844
Jun-94 9,051 9,485
Sep-94 9,939 10,217
Dec-94 10,242 9,866
Mar-95 10,909 10,664
Jun-95 12,111 11,605
Sep-95 14,283 12,737
Dec-95 14,095 12,919
Mar-96 14,262 13,715
Jun-96 15,354 14,110
Sep-96 16,061 14,521
Dec-96 15,448 15,400
Mar-97 13,679 15,171
Jun-97 15,771 17,408
Sep-97 18,603 20,199
Dec-97 17,650 20,432
Mar-98 19,815 22,682
Past performance is not indicative of future performance.
4
<PAGE>
BT Investment Equity Appreciation Fund
Statement of Net Assets March 31, 1998 (unaudited)
Shares Description Value
------ ----------- -----
COMMON STOCKS - 94.69%
America's Changing Leisure Time - 5.90%
52,400 Avis Rent A Car, Inc.* $ 1,699,725
32,600 Carnival Corp.-Class A 2,273,850
45,900 Royal Caribbean Cruises, Ltd. 3,215,869
41,000 Ryanair Holdings PLC - ADR* 1,517,000
44,400 Starbucks Corp.* 2,011,875
------------
10,718,319
------------
America's Educational Crisis - 1.45%
55,900 Sylvan Learning Systems, Inc.* 2,634,288
------------
America's Industrial Renaissance - 0.90%
37,200 Sunbeam Corp. 1,639,125
------------
Client Server Computing - 5.62%
99,044 Compuware Corp.* 4,890,297
24,950 Network Associates, Inc.* 1,652,938
57,200 Parametric Technology Co.* 1,905,475
68,900 Platinum Technology, Inc.* 1,774,175
------------
10,222,885
------------
Consolidating America - 6.48%
20,900 Chancellor Media Corporation* 958,787
27,600 Clear Channel Communications, Inc.* 2,704,800
35,400 MSC Industrial Direct Co., Inc.* 1,918,238
102,075 Outdoor Systems, Inc.* 3,579,005
101,400 United Rentals, Inc.* 2,636,400
------------
11,797,230
------------
Energizing the Globe - 6.92%
67,032 BJ Services Co.* 2,442,478
40,076 Cooper Cameron Corp.* 2,419,589
128,800 Global Industries Ltd.* 2,624,300
83,200 R&BFalcon Corp.* 2,464,800
102,800 Varco International, Inc.* 2,647,100
------------
12,598,267
------------
Environmental Crisis - 3.75%
114,000 Allied Waste Industries, Inc.* 2,846,437
48,000 American Disposal Services, Inc. 1,812,000
70,900 EarthShell Corporation* 1,267,338
20,200 USA Waste Services, Inc.* 900,163
------------
6,825,938
------------
Interactive Media - 2.34%
48,200 Snyder Communications, Inc.* 2,259,375
60,500 True North Communications, Inc. 1,996,500
------------
4,255,875
------------
Life on the Net - 3.43%
31,400 America Online,Inc.* 2,145,013
72,400 E*TRADE Group, Inc.* 1,805,475
49,315 Sterling Commerce, Inc.* 2,286,983
------------
6,237,471
------------
Life Sciences Revolution - 4.41%
43,318 Elan Corp. plc, ADR* 2,799,426
127,200 Mylan Laboratories, Inc. 2,925,600
64,000 Watson Pharmaceuticals, Inc.* 2,304,000
------------
8,029,026
------------
Shares Description Value
------ ----------- -----
Managing the Information Age - 5.33%
39,700 Cambridge Technology Partners, Inc.* $ 1,967,631
77,300 Checkfree Holdings Corporation* 1,710,263
38,200 Computer Horizons Corp.* 1,919,550
56,300 Concord EFS, Inc.* 1,945,869
38,300 Keane, Inc.* 2,163,950
------------
9,707,263
------------
New Consumer - 5.29%
68,200 International Home Foods, Inc.* 2,267,650
62,200 Keebler Foods Co.* 1,866,000
76,200 Proffitt's, Inc.* 2,762,250
59,800 TJX Companies, Inc. 2,705,950
------------
9,601,850
------------
New Health Care Paradigm - 7.12%
51,600 Arterial Vascular Engineering, Inc.* 1,889,850
57,000 Concentra Managed Care, Inc.* 1,752,750
43,900 HBO & Co. 2,650,463
50,500 Henry Schein, Inc.* 2,095,750
45,900 McKesson Corp. 2,650,724
26,100 Safeskin Corp.* 1,928,138
------------
12,967,675
------------
Our Strengthening Financial Structure - 9.84%
105,000 Ace, Ltd. 3,957,188
36,800 FINOVA Group, Inc. 2,166,600
30,100 Fremont General Corporation 1,770,256
26,400 Life Re Corporation 1,947,000
35,900 Mercury General Corporation 2,245,994
41,600 Newcourt Credit Group, Inc.* 2,080,000
103,700 Ocwen Financial Corp.* 2,877,675
32,700 Waddell & Reed Financial, Inc.* 850,200
------------
17,894,913
------------
Productivity Enhancement - 2.21%
48,700 Saville Systems PLC* 2,495,875
93,500 Sensormatic Electronics Corporation 1,531,063
------------
4,026,938
------------
Return to Home Ownership - 3.87%
30,700 Ethan Allen Interiors, Inc. 1,834,325
63,100 Lennar Corp. 2,173,006
55,200 Linens 'N Things, Inc.* 3,032,550
------------
7,039,881
------------
Stores of Value - 5.75%
37,650 Consolidated Stores Corp.* 1,616,596
50,200 Family Dollar Stores, Inc. 1,907,600
47,100 Knoll, Inc.* 1,816,294
160,100 PETsMART, Inc.* 1,711,069
48,900 Stage Stores, Inc.* 2,524,463
24,300 Steelcase, Inc.-Class A 886,950
------------
10,462,972
------------
See Notes to Financial Statements on Pages 9 and 10
5
<PAGE>
BT Investment Equity Appreciation Fund
Statement of Net Assets March 31, 1998 (unaudited)
Shares Description Value
------ ----------- -----
Telecommunications - 13.60%
24,400 Ascend Communications, Inc.* $ 924,150
33,800 Aspect Telecommunications Corporation* 906,262
33,300 Bay Networks, Inc.* 903,262
29,800 CIENA Corp.* 1,270,225
63,900 Comverse Technology, Inc.* 3,123,113
59,100 Frontier Corp. 1,924,444
73,800 General Cable Corp.* 3,348,675
21,700 Intermedia Communications, Inc.* 1,727,863
65,400 Nextel Communications, Inc.* 2,207,250
33,000 Pacific Gateway Exchange, Inc.* 1,889,250
51,600 Premiere Technologies, Inc.* 1,786,650
48,400 Qwest Communications International, Inc.* 1,881,550
66,700 WinStar Communications, Inc.* 2,851,425
------------
24,744,119
------------
Ubiquitous Semiconductor - 0.48%
23,900 Maxim Integrated Products, Inc.* 870,852
------------
Total Common Stocks (Cost $129,184,976) 172,274,887
------------
PREFERRED STOCK CONVERTIBLE - 1.45%
Energizing the Globe - 1.45%
33,100 AES Trust I-Ser. A, 5.375%, 3/31/27
(Cost $1,704,474) $ 2,643,863
------------
Shares Description Value
------ ----------- -----
SHORT TERM INSTRUMENT - 0.41%
Mutual Fund - 0.41%
747,100 BT Institutional Cash Management Fund,
(Cost $747,100) $ 747,100
------------
Total Investments (Cost $131,636,545) 96.55% 175,665,850
Other Assets in Excess of Liabilities 3.45% 6,272,216
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Net Assets 100.00% $181,938,066
======= ============
Net Asset Value, Offering and Redemption
Price Per Share $ 16.84
============
Shares Outstanding ($.001 par value per share,
unlimited number of shares of beneficial interest
authorized) 10,801,179
============
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* Non-Income Producing Security
The following abbreviation is used in portfolio descriptions:
ADR -- American Depository Receipt
See Notes to Financial Statements on Pages 9 and 10
6
<PAGE>
BT Investment Equity Appreciation Fund
Statement of Operations For the six months ended March 31, 1998 (unaudited)
<TABLE>
<S><C>
Investment Income
Dividends $ 258,397
Interest 262,261
---------------
Total Investment Income 520,658
---------------
Expenses
Advisory Fees 540,046
Administration and Services Fees 418,444
Professional Fees 12,405
Shareholder Reports 7,966
Registration Fees 12,047
Trustees Fees 4,164
Miscellaneous 1,899
---------------
Total Expenses 996,971
Less Expenses Absorbed by Bankers Trust (166,131)
---------------
Net Expenses In Excess of Investment Income 830,840
---------------
Expenses in Excess of Investment Income (310,182)
---------------
Realized and Unrealized Gain (Loss) on Investments
Net Realized Gain from Investment Transactions 8,617,103
Net Change in Unrealized Appreciation/Depreciation on Investments 4,202,242
---------------
Net Realized and Unrealized Gain on Investments 12,819,345
---------------
Net Increase in Net Assets from Operations $ 12,509,163
===============
</TABLE>
See Notes to Financial Statements on Pages 9 and 10
7
<PAGE>
BT Investment Equity Appreciation Fund
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the six For the
months ended year ended
March 31, 1998+ September 30, 1997
--------------- ------------------
<S><C>
Increase (Decrease) in Net Assets from:
Operations
Expenses in Excess of Investment Income $ (310,182) $ (588,568)
Net Realized Gain from Investment Transactions 8,617,103 5,456,749
Net Change in Unrealized Appreciation/Depreciation on Investments 4,202,242 15,660,007
--------------- ---------------
Net Increase in Net Assets from Operations 12,509,163 20,528,188
--------------- ---------------
Distributions to Shareholders
Net Realized Gain from Investment Transactions (10,600,974) (8,100,387)
--------------- ---------------
Capital Transactions in Shares of Beneficial Interest
Proceeds from Sales of Shares 102,584,335 51,997,331
Dividend Reinvestments 10,600,487 8,100,387
Cost of Shares Redeemed (103,163,259) (62,504,915)
Other Capital Transaction -- 2,419,383
--------------- ---------------
Net Increase from Capital Transactions in Shares of Beneficial Interest 10,021,563 12,186
--------------- ---------------
Total Increase in Net Assets 11,929,752 12,439,987
Net Assets
Beginning of Period 170,008,314 157,568,327
--------------- ---------------
End of Period (including undistributed net investment income (Expenses in
Excess of Investment Income) of ($310,182) and $0, respectively $ 181,938,066 $ 170,008,314
=============== ===============
</TABLE>
- ----------
+ Unaudited
- -------------------------------------------------------------------------------
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 BT Equity Appreciation Fund.
<TABLE>
<CAPTION>
For the six For the For the For period For the
months ended year ended year ended Jan. 1, 1995 to year ended
March 31, 1998+++ Sep. 30, 1997 Sep. 30, 1996 Sep. 30, 1995+ Dec. 31, 1994
----------------- ------------- ------------- --------------- -------------
<S><C>
Per Share Operating Performance:
Net Asset Value, Beginning of Period $16.70 $15.23 $14.14 $10.14 $ 9.80
------ ------ ------ ------ ------
Income from Investment Operations
Expenses in Excess of Investment Income (0.03) (0.06) (0.05) (0.02) (0.03)
Net Realized and Unrealized Gain (Loss) on
Investment Transactions 1.14 2.31 1.72 4.02 0.37
------ ------ ------ ------ ------
Total Income (Loss) from Investment Operations 1.11 2.25 1.67 4.00 0.34
------ ------ ------ ------ ------
Distributions to Shareholders
Net Realized Gain from Investment Transactions (0.97) (0.78) (0.58) -- --
------ ------ ------ ------ ------
Net Asset Value, End of Period $16.84 $16.70 $15.23 $14.14 $10.14
====== ====== ====== ====== ======
Total Investment Return 7.59%* 15.82% 12.45% 39.45% 3.47%
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) $181,938 $170,008 $157,568 $92,033 $29,973
Ratios to Average Net Assets:
Expenses in Excess of Investment Income (0.35)%* (0.39)% (0.42)% (0.38)%* (0.32)%
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 0.19%* 0.20% 0.24% 0.33%* 0.46%
Portfolio Turnover Rate 94% 188% 271%++ 125%++ 157%++
</TABLE>
<TABLE>
<CAPTION>
For the period
October 12, 1993
(commencement
of operations to
Dec. 31, 1993
-----------------
<S><C>
Per Share Operating Performance:
Net Asset Value, Beginning of Period $10.00
------
Income from Investment Operations
Expenses in Excess of Investment Income (0.00)
Net Realized and Unrealized Gain (Loss) on
Investment Transactions (0.20)
------
Total Income (Loss) from Investment Operation (0.20)
------
Distributions to Shareholders
Net Realized Gain from Investment Transactions --
------
Net Asset Value, End of Period $ 9.80
======
Total Investment Return (8.81)%*
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) $19,465
Ratios to Average Net Assets:
Expenses in Excess of Investment Income (0.11)%*
Expenses 1.00%*
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses by
Bankers Trust 0.60%*
Portfolio Turnover Rate 137%*
</TABLE>
- ----------
+ Board of Trustees approved the change of the BT Investment Equity
Appreciation Fund's year end from December 31 to September 30.
++ Amounts were previously included in the Capital Appreciation Portfolio
Financial Highlights.
+++ Unaudited.
* Annualized
See Notes to Financial Statements on Pages 9 and 10
8
<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.
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. Expenses
are recorded when incurred. 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. 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.
F. 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.
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.
G. 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. 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 .50% of the Fund's average daily net assets.
Amounts owed under the Administration and Services Agreement amounted to $50,777
at March 31, 1998.
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 .65% of
the Fund's average daily net assets. At March 31, 1998 amounts owed under the
Advisory Agreement amounted to $88,638 net of reimbursable expenses of $24,884.
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 .20% 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 year ended September 30, 1997, there were no reimbursable
expenses 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 1% of the average daily
net assets of the Fund. For the six month period ended March 31, 1998, expenses
of the Fund have been reduced by $166,131.
9
<PAGE>
BT Investment Equity Appreciation Fund
Notes to Financial Statements (unaudited)
Certain officers of the Fund are also directors, officers and/or employees of
Edgewood. None of the officers so affiliated received compensation for services
as officers of the Fund.
Investment in affiliated fund
The BT Investment Equity Appreciation Fund ("the Equity Fund") 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 equity fund and other accounts
managed by the Company. Distributions from the Fund to the equity fund as of
March 31, 1998 amounted to $259,273 and are included in interest income.
The BT Investment Equity Appreciation 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 quarterly 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.
Note 3--Shares of Beneficial Interest
At March 31, 1998, 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 month period ended year ended
March 31, 1998 (unaudited) September 30, 1997
-------------------------- ---------------------------
Shares Amount Shares Amount
---------- ------------- ---------- ----------
<S><C>
Sold 6,555,108 $ 102,584,335 3,685,748 $ 51,997,331
Reinvested 739,947 10,600,487 582,292 8,100,387
Redeemed (6,673,776) (103,163,259) (4,432,111) (62,504,915)
Other Capital
Transaction -- $ -- -- $ 2,419,383
--------- ------------- --------- ------------
Net Increase (Decrease) 621,279 $ 10,021,563 (164,071) $ 12,186
========= ============= ========= ============
</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, 1998 were
$148,907,368 and $149,101,972, respectively. For federal income tax purposes,
the tax basis of investments held at March 31, 1998 was $131,636,545. The
aggregate gross unrealized appreciation for all investments was $45,446,712 and
the aggregate gross unrealized depreciation for all investments was $1,417,407.
Payable for investments purchased amounted to $813,639 at March 31, 1998.
Note 5--Net Assets
At March 31, 1998, net assets consisted of:
Paid-in Capital $134,098,565
Undistributed Net Income (310,182)
Accumulated Net Realized Gain from
Investment Transactions 2,482,752
Net Unrealized Appreciation on Investments 45,666,931
------------
$181,938,066
============
10
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<PAGE>
BT PYRAMID MUTUAL FUNDS
BT INVESTMENT EQUITY APPRECIATION 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
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. This must be preceded or
accompanied by a current prospectus for the Fund.
------------------------
STA477100 (5/98)
