o BT PYRAMID MUTUAL FUNDS o
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BT INSTITUTIONAL ASSET
MANAGEMENT FUND
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S E M I - A N N U A L R E P O R T
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S E P T E M B E R o 1 9 9 8
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BT Institutional Asset Management Fund
Table of Contents
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Letter to Shareholders 3
BT Institutional Asset Management Fund
Statement of Assets and Liabilities 6
Statement of Operations 6
Statements of Changes in Net Assets 7
Financial Highlights 8
Notes to Financial Statements 9
Asset Management Portfolio
Schedule of Portfolio Investments 10
Statement of Assets and Liabilities 13
Statement of Operations 13
Statements of Changes in Net Assets 14
Financial Highlights 14
Notes to Financial Statements 15
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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
<PAGE>
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BT Institutional Asset Management Fund
Letter to Shareholders
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We are pleased to present you with this semi-annual report for the BT
Institutional Asset Management Fund (the "Fund"), providing a review of the
markets, the Portfolio, and our outlook as well as a complete financial summary
of the Fund's operations and a listing of the Portfolio's holdings.
MARKET ACTIVITY
U.S. MARKETS
Interest rates fell over the Fund's semi-annual period, declining for several
reasons:
o The U.S. government generated a $70 billion budget surplus, eliminating the
deficit for the first time in almost 30 years.
o The crisis in Asian equity markets led to concerns about whether U.S. economic
growth would slow, whether inflation would stay benign, and whether
deflationary forces would be felt.
o Based on well-publicized financial troubles in key countries, such as Russia
and Japan, global economies seemed more interwoven than ever--and more
uncertain than ever.
o Anticipation was high that the Federal Reserve Board would have to ease its
official monetary policy.
In fact, the Federal Reserve Board did lower the fed funds rate by 25 basis
points on September 29th, bringing it to 5.25%.
Global economic turmoil created a flight to quality that supported a U.S. bond
market rally, but also generated significant volatility within the equity
markets.
o The low inflation trend has been exceptionally supportive of lower bond yields
in the U.S. for the past two years, aided by declining commodity prices,
modest wage growth, strong productivity gains, and a vigilant central bank.
o Equity investors tended to turn their focus away from smaller, growth-oriented
stocks and toward large cap names and more value-oriented stocks.
U.S. EQUITIES
Equities in general were on a roller coaster, as concerns roiling the markets
during the previous six months only heightened during this semi-annual period.
o Large cap stocks, even with a -6.97% return from the S&P 500 Index for the six
months, led the U.S. equity market, as investor sentiment kept an overwhelming
premium on the liquidity and perceived safety of blue-chip, growth-oriented
industry leaders. Midcap stocks, as measured by the S&P 400 MidCap Index,
returned -16.09%, and small cap stocks, as measured by the Russell 2000 Index,
were impacted the most, suffering a -23.87% return.
o Following a robust rally in the preceding quarter, renewed fears of a Federal
Reserve Board interest rate increase drove the market lower during the second
calendar quarter.
o The volatility of the third calendar quarter was highlighted by several
factors:
-- Russia's financial collapse and fresh concerns of contagion to Latin
America from Asia's ongoing financial crisis were added to investors' list
of troublesome events.
-- There was renewed focus on slowing growth in U.S. corporate earnings and in
the overall economy, as widely reported problems in high technology and
basic industries spread to major global consumer companies, such as Coca
Cola and Gillette.
-- News of major U.S. and European financial institutions' direct exposure to
emerging markets and their secondary exposure to hedge funds that aggressively
place leverage bets abroad began to spread.
In all, investor sentiment, punctuated by fear and uncertainty, kept larger caps
in the lead through July. In August, the larger caps finally succumbed to the
negative sentiment, bringing all of the market sectors down with them. This
ultimately set the market up for a short-term relief rally in September.
U.S. BONDS
The U.S. bond market rallied during the semi-annual period, continuing the
bullish trend in place since early 1997 and trading up even further as investors
sought a haven of safety from the worldwide economic uncertainty. Overall, the
yield curve flattened.
o U.S. Treasuries were the primary beneficiaries of the high-volume flight to
quality, benefiting from both foreign investors and domestic equity investors
seeking relative stability. Municipal bonds rallied as well, though not quite
to the same extent.
o Yield spreads on corporate and asset-backed securities continued to widen with
investor concerns about the negative domestic credit implications of the
financial crisis in foreign markets.
o The mortgage-backed sector also lagged duration-matched Treasuries, as the
expectation of high prepayments was renewed.
- ---------------------------------------------------
Five Largest Common Stock Holdings
- ---------------------------------------------------
Pfizer, Inc.
...................................................
Merck & Co., Inc.
...................................................
General Electric Co.
...................................................
Cisco Systems, Inc.
...................................................
Johnson & Johnson
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INTERNATIONAL MARKETS
Most of the world's developed equity markets enjoyed a record-setting pace
through mid-July, but emerging market uncertainties spoiled this trend for the
remainder of the third calendar quarter. Market watchers initially viewed the
sell-off as an over-reaction to localized events, but in time it became
increasingly apparent that the G7 nations would not be immune to such contagion.
Although no single event led to the massive correction experienced this summer,
several bonfires contributed in a significant way. These included:
o Russian political, financial and economic turmoil
o Japanese indecisiveness regarding methods for stimulating its economy and
dealing with bankrupt financial institutions
o global bank exposure to foundering hedge funds
o weaker U.S. corporate earnings amidst high price/earnings multiples
o moves toward impeachment proceedings against President Clinton
o potential for foreign loan defaults in Brazil and the potential devaluation of
its currency, the real, and
o election jitters in Germany.
Furthermore, world markets were disappointed that the U.S. Federal Reserve Board
reduced its key discount rate by only 0.25% at the end of September. Although
the Fed's behavior in recent years has been to move in such increments, market
pundits had expected a half percent move in recognition of the rapidly weakening
economic outlook both at home and abroad.
International bond markets were also impacted by most of the same factors
mentioned above, punctuated toward the end of the period by
3
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BT Institutional Asset Management Fund
Letter to Shareholders
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Russia defaulting on its domestic debt only weeks after entering into a new
International Monetary Fund (IMF)-assisted bailout.
CASH
The U.S. dollar had been rather irrepressible for most of the semi-annual
period, standing strong versus most currencies, including the Japanese yen, the
German mark, and the British pound. Toward the end of the third calendar
quarter, even the U.S. dollar temporarily joined the ranks of dramatically
plunging assets, adding further confusion to the already volatile financial
markets. In part, recent softness in the "greenback" may reflect the growing
realization that the U.S. will ultimately be the effective guardian of the
world's financial system by heading up bailout efforts of emerging economies and
leading the way on interest rate cuts.
INVESTMENT REVIEW
The Fund significantly outperformed its Lipper category average for the
semi-annual period ended September 30, 1998, and underperformed the Asset
Allocation Index-Long Range benchmark by just 0.23%.
<TABLE>
<CAPTION>
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Periods ended September 30, 1998 Cumulative Total Returns Average Annual Total Returns
- --------------------------------------------------------------------------------------------------------------------
Past 6 Past 1 Past 3 Past 5 Since Past 1 Past 3 Past 5 Since
months year years years inception year years years inception
- --------------------------------------------------------------------------------------------------------------------
<S><C>
BT Investment Institutional
Asset Management Fund(1)
(inception 9/16/93) -1.30% 11.19% 62.98% 88.05% 88.05% 11.19% 17.68% 13.46% 13.36%
- --------------------------------------------------------------------------------------------------------------------
Asset Allocation Index--
Long Range(2) -1.07% 10.10% 56.60% 92.86% 92.86% 10.10% 16.13% 14.04% 14.04%
- --------------------------------------------------------------------------------------------------------------------
S&P 500 Index(2) -6.97% 9.05% 84.29% 147.92% 147.92% 9.05% 22.60% 19.91% 19.91%
- --------------------------------------------------------------------------------------------------------------------
Salomon Broad Investment
Grade (BIG) Index(3) 6.56% 11.47% 28.33% 41.68% 41.68% 11.47% 8.67% 7.22% 7.22%
- --------------------------------------------------------------------------------------------------------------------
Lipper Flexible Portfolio Average(4) -6.79% 2.20% 43.89% 74.61% 74.61% 2.20% 12.76% 11.56% 11.56%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Given the financial markets' volatility in a very difficult environment, the
Fund remained relatively close to its benchmark weightings in U.S. stocks and in
the U.S. bond sector. The U.S. equity portion of the Fund's portfolio did not
match S&P 500 Index performance in the semi-annual period, nor did the fixed
income portion of the Fund's portfolio match the Salomon Broad Investment Grade
(BIG) Index3 in the six month period. While our decision to invest in
international securities in general also detracted from relative performance,5
superior country selection added value enough to offset the negative impact.
This, along with our decision to overweight international bonds late in the
third calendar quarter helped performance sufficiently to bring the Fund close
to matching its benchmark. Individual security selection in all asset classes
also remained strong.
As of September 30, 1998, the Fund's asset weightings were 48% in U.S. equities,
32% in U.S. bonds, 9% in international bonds, 4% in international equities, and
7% in cash and other short-term instruments.
MANAGER OUTLOOK
Despite the unsettled state of the financial markets and widespread global
problems, we still expect respectable growth in both Western Europe and North
America next year--about 2% or a bit more. In the U.S., this moderate growth
scenario is actually ideal from the Federal Reserve Board's point of view, given
the super-heated labor market. If the weaker tone in the U.S. currency
continues, growth prospects would be boosted in the U.S.
Concerns over credit quality will undoubtedly continue to weigh heavily on
investment decisions. In this context, the desire for liquidity and perceived
safety will probably keep short-term rates on government securities low relative
to the stance of monetary policy. While we see the Fed and other major central
banks alert to the possible need for easier policy, we expect further moves on
official interest rates, but incremental and modest ones through year end. High
quality government bonds likely will remain in demand, while lower-rated
borrowers will probably have to continue to pay significant risk premia. More
stringent borrowing requirements will, in turn, tend to slow economy activity
and to pinch profits. In the U.S., equities already have had to contend with a
squeeze on corporate profit margins borne of accelerating labor costs. The
profit picture is likely to worsen as economic growth slows somewhat in 1999.
- ----------------------------------------------------
Five Largest Fixed Income Securities
- ----------------------------------------------------
FNMA TBA, 7.50%, 9/01/21
....................................................
US Treasury Note, 5.625%, 5/15/08
....................................................
FNMA TBA, 6.50%, 4/01/23
....................................................
GNMA TBA, 7.50%, 9/01/21
....................................................
FHLB, 5.125%, 9/15/03
- ----------------------------------------------------
- -----------
(1) 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.
(2) Indices are unmanaged, and investments cannot be made in an index. The S&P
500 Index is an indicator of general market performance. The Asset
Allocation Index is comprised of the following indices: S&P 500, Salomon
Broad Investment Grade Bond, T-Bill 3-month.
(3) The Salomon Broad Investment Grade Index covers an all-inclusive universe of
institutionally-traded U.S. Treasury, agency, mortgage and corporate
securities.
(4) 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.
(5) Foreign investing involves special risks, including currency risk, increased
volatility of foreign securities and differences in auditing and other
financial standards.
4
<PAGE>
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BT Institutional Asset Management Fund
Performance Comparison
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Diversification of Portfolio Investments
By Asset Class as of September 30, 1998
(percentages are based on market value)
[PIE CHART APPEARS HERE -- SEE PERCENTAGES BELOW]
Short Term
Instruments 7%
Stocks 52%
Bonds 41%
This diversification pie chart shows the Fund's investment exposure to different
asset classes (i.e. stocks, bonds and short term instruments) based on the risk
characteristics of the asset class rather than the actual instrument. For
example, the Fund may buy or sell a futures contract to increase or decrease the
Fund's exposure to the stock market.
- --------------------------------------------------------------------------------
Internationally, we believe the unprecedented volatility of not only emerging
markets but their mature counterparts as well points to a need to pare risk and
to revisit the fundamental facts that can contribute to outperformance. We
continue to believe that economic and monetary union will be a driver for
European strength; Japan is unlikely to effect a long-lasting resolution to its
economic quagmire; and caution is still the word for emerging markets, including
Asia ex-Japan, particularly in the global credit crunch scenario.
Although we expect future periods of volatility in the markets while global
economic events run their course, there have been several developments in the
last few weeks that indicate an improving investment outlook. These include
easing of monetary policy yet again by the U.S. Federal Reserve Board, some
progress on Japanese bank reform, and a slight reversal of the recent credit
crunch.
We will, of course, continue to closely observe economic conditions and how they
affect the financial markets, as we seek to provide high total return with
reduced risk over the long term.
We value your ongoing support of the BT Institutional Asset Management Fund and
look forward to continuing to serve your investment needs in the years ahead.
/s/ Philip Green
________________
Philip Green
Portfolio Manager of the
BT Institutional Asset Management Portfolio
September 30, 1998
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Performance Comparison
- --------------------------------------------------------------------------------
Comparison of Change in
Value of a $10,000
Investment in the BT
Institutional Asset
Management Fund, the Asset
Allocation Index-Long Range
and the S&P 500 Index as of
September 30, 1993
- ----------------------------------------
Total Return for the
Period Ended September 30, 1998
1 Year 5 Year Since 9/16/93(1)
11.19%(2) 13.46%(2) 13.36%(2)
(1) The Fund's inception date.
(2) 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 PLOTS POINTS BELOW]
BT Institutional Asset Allocation
Asset Management Index--Long S&P 500
Fund - $18,805 Range(+) - $19,192 Index - $24,792
Dec-93 $10,000 $10,000 $10,000
Mar-94 9,672 9,837 9,844
Jun-94 9,535 9,836 9,886
Sep-94 9,718 10,132 10,369
Dec-94 9,760 10,161 10,367
Mar-95 10,361 10,896 11,377
Jun-95 11,048 11,715 12,463
Sep-95 11,540 12,316 13,454
Dec-95 12,056 12,931 14,264
Mar-96 12,409 13,245 15,030
Jun-96 12,794 13,611 15,705
Sep-96 13,202 13,957 16,190
Dec-96 14,012 14,765 17,539
Mar-97 14,185 14,981 18,009
Jun-97 15,858 16,606 21,155
Sep-97 16,915 17,518 22,737
Dec-97 17,305 18,005 23,390
Mar-98 19,053 19,496 26,652
Jun-98 18,805 19,192 24,524
Sep-98 18,805 19,192 24,792
Past performance is not indicative of future performance. The S&P 500 Index is
unmanaged, and investments may not be made in an index.
- ----------
(+) Asset allocation Index-Long Range is comprised of the following:
55% S&P 500 Index
35% Salomon Broad Investment Grade Bond Index
10% T-Bill 3-Month Index
5
<PAGE>
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BT Institutional Asset Management Fund
Statement of Assets and Liabilities September 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S><C>
Assets
Investment in Asset Management Portfolio, at Value $521,098,238
Receivable for Shares of Beneficial Interest Subscribed 2,268
Prepaid Expenses and Other 11,541
Due from Bankers Trust 3,079
------------
Total Assets 521,115,126
------------
Liabilities
Payable for Shares of Beneficial Interest Redeemed 1,082,921
Accrued Expenses and Other 22,934
------------
Total Liabilities 1,105,855
------------
Net Assets $520,009,271
============
Composition of Net Assets
Paid-in Capital $441,188,935
Undistributed Net Investment Income 964,978
Undistributed Net Realized Gain from Investments, Foreign Currency
Transactions, Forward Foreign Currency Contracts and Futures Contracts 83,719,843
Net Unrealized Appreciation/(Depreciation) on:
Investments, Forward Foreign Currency Contracts and Foreign Currency Transactions 1,582,937
Futures Contracts (7,447,422)
------------
Net Assets $520,009,271
============
Net Asset Value, Offering and Redemption Price Per Share
(net assets divided by shares outstanding) $ 14.10
============
Shares Outstanding ($0.001 par value per share, unlimited number of shares
of beneficial interest authorized) 36,868,520
============
</TABLE>
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Statement of Operations For the six month period ended September 30, 1998
(unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S><C>
Investment Income
Income Allocated from Asset Management Portfolio, net $ 8,033,692
------------
Expenses
Administration and Services Fees 396,847
Registration Fees 18,295
Trustees Fees 4,545
Miscellaneous 2,380
------------
Total Expenses 422,067
Less Expenses Absorbed by Bankers Trust (422,067)
------------
Net Expenses --
------------
Net Investment Income 8,033,692
------------
Realized and Unrealized Gain (Loss) on Investment, Foreign Currency
Transactions, Forward Foreign Currency Contracts, and Futures Contracts
Net Realized Gain (Loss) from:
Investment, Forward Foreign Currency Contracts and Foreign Currency Transactions 1,504,034
Futures Contracts 9,913,075
Net Change in Unrealized Appreciation/Depreciation on:
Investment, Forward Foreign Currency Contracts and Foreign Currency
Transactions (16,746,677)
Futures Contracts (10,739,977)
------------
Net Realized and Unrealized Loss on Investment, Foreign Currency Transactions,
Forward Foreign Currency Contracts and Futures Contracts (16,069,545)
------------
Net Decrease in Net Assets from Operations $ (8,035,853)
============
</TABLE>
See Notes to Financial Statements on Page 9
6
<PAGE>
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BT Institutional Asset Management Fund
Statements of Changes in Net Assets
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<TABLE>
<CAPTION>
For the For the
six months ended year ended
September 30, 1998(+) March 31, 1998
--------------------- --------------
<S><C>
Increase (Decrease) in Net Assets from:
Operations
Net Investment Income $ 8,033,692 $ 10,772,493
Net Realized Gain from Investment, Forward Foreign Currency Contracts,
Foreign Currency Transactions and Futures Contracts 11,417,109 79,087,419
Net Change in Unrealized Appreciation/Depreciation on Investment, Forward Foreign
Currency Contracts, Foreign Currency Transactions and Futures Contracts (27,486,654) 15,983,859
------------ ------------
Net Increase (Decrease) in Net Assets from Operations (8,035,853) 105,843,771
------------ ------------
Distributions to Shareholders
Net Investment Income (7,917,734) (10,455,723)
Net Realized Gain from Investment Transactions -- (30,108,358)
------------ ------------
Total Distributions (7,917,734) (40,564,081)
------------ ------------
Capital Transactions in Shares of Beneficial Interest
Proceeds from Sales of Shares 117,822,672 203,101,614
Dividend Reinvestments 7,915,275 40,563,144
Cost of Shares Redeemed (86,572,924) (82,461,234)
------------ ------------
Net Increase from Capital Transactions in Shares of Beneficial Interest 39,165,023 161,203,524
------------ ------------
Total Increase in Net Assets 23,211,436 226,483,214
Net Assets
Beginning of Period 496,797,835 270,314,621
------------ ------------
End of Period (includes undistributed net investment income of $964,978 and $849,020,
respectively) $520,009,271 $496,797,835
============ ============
</TABLE>
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(+) Unaudited
See Notes to Financial Statements on Page 9
7
<PAGE>
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BT Institutional Asset Management Fund
Financial Highlights
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Contained below are selected data for a share outstanding, total investment
return, other supplemental data and ratios to average net assets for each period
indicated for the BT Institutional Asset Management Fund.
<TABLE>
<CAPTION>
For the period
For the six For the years ended September 16, 1993
months ended March 31, (Commencement
September 30, ------------------------------------ of Operations) to
1998(+) 1998 1997 1996 1995 March 31, 1994
------------- ---- ---- ---- ---- ------------------
<S><C>
Per Share Operating Performance:
Net Asset Value, Beginning of Period $14.50 $12.05 $11.25 $9.99 $9.61 $10.00
------ ------ ------ ------ ----- -----
Income from Investment Operations
Net Investment Income 0.22 0.37 0.38 0.41 0.36 0.11
Net Realized and Unrealized Gain (Loss) on
Investment, Forward Foreign Currency
Contracts, Foreign Currency Transactions and
Futures Contracts (0.40) 3.60 1.19 1.52 0.30 (0.44)
------ ------ ------ ------ ----- -----
Total Income (Loss) from Investment Operations (0.18) 3.97 1.57 1.93 0.66 (0.33)
------ ------ ------ ------ ----- -----
Distributions to Shareholders
Net Investment Income (0.22) (0.37) (0.45) (0.42) (0.28) (0.06)
Net Realized Gain from Investment
Transactions -- (1.15) (0.32) (0.25) -- --
------ ------ ------ ------ ----- -----
Total Distributions (0.22) (1.52) (0.77) (0.67) (0.28) (0.06)
------ ------ ------ ------ ----- -----
Net Asset Value, End of Period $14.10 $14.50 $12.05 $11.25 $9.99 $9.61
====== ====== ====== ====== ===== =====
Total Investment Return (1.30)% 34.34% 14.31% 19.77% 7.13% (6.06)%
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) $520,009 $496,798 $270,315 $183,767 $83,201 $75,021
Ratios to Average Net Assets:
Net Investment Income 3.03%* 2.97% 3.12% 3.99% 3.78% 2.83%*
Expenses, Including Expenses of the Asset
Management Portfolio 0.60%* 0.60% 0.60% 0.60% 0.60% 0.60%*
Decrease Reflected in Above Expense Ratio
Due to Absorption of Expenses by
Bankers Trust 0.36%* 0.32% 0.36% 0.39% 0.43% 0.73%*
</TABLE>
- ---------
* Annualized
(+) Unaudited
See Notes to Financial Statements on Page 9
8
<PAGE>
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BT Institutional Asset Management 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 Institutional Asset
Management 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 September 16, 1993. The Fund invests substantially all of its
investable assets in the Asset Management Portfolio (the "Portfolio"). The
Portfolio is an open-end management investment company registered under the Act.
The Fund seeks to achieve its investment objective by investing all of its
investable assets in the Portfolio. The value of such investment in the
Portfolio reflects the Fund's proportionate interest in the net assets of the
Portfolio. At September 30, 1998, the Fund's investment was approximately 80% of
the Portfolio.
The financial statements of the Portfolio, including the Statement of Assets and
Liabilities, are contained elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
B. Security Valuation
Valuation of securities by the Portfolio is discussed in Note 1B of the
Portfolio's Notes to FinancialStatements which are included elsewhere in this
report.
C. Investment Income
The Fund earns income, net of expenses, daily on its investment in the Asset
Management Portfolio on the accrual basis. All of the net investment income and
realized and unrealized gains and losses from the security transactions of the
Portfolio are allocated pro rata among the investors in the Portfolio at the
time of such determination.
D. Distributions
It is the Fund's policy to declare and distribute dividends quarterly to
shareholders from net investment income. Dividends payable to shareholders are
recorded by the Fund on the ex-dividend date, which is the same as the
declaration date. Distributions of net realized short-term and long-term capital
gains, if any, will be made annually to the extent they are not offset by any
capital loss carryforwards.
E. Federal Income Taxes
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and 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 differences in the
characterization and allocation of certain income and capital gains
distributions determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles.
F. Other
The Trust accounts separately for the assets, liabilities and operations of each
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 0.15% of the Fund's average daily net assets.
The Trust has entered into a distribution agreement with ICCDistributors, Inc.
("ICC") under which ICC will serve as distributor for shares sold on behalf of
the fund.
Bankers Trust has voluntarily undertaken to waive its fees and reimburse, to the
extent necessary, expenses to eliminate all expenses of the Fund, excluding
expenses of the Portfolio and to limit all expenses to 0.60 of 1% of the average
daily net assets of the Fund, including expenses of the Portfolio.
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 among 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 six-month period ended September 30, 1998.
Note 3--Shares of Beneficial Interest
At September 30, 1998, there were an unlimited number of shares of beneficial
interest authorized. Transactions in shares of beneficial interest were as
follows:
For the six-month For the
period ended year ended
September 30, 1998(+) March 31, 1998
--------------------- --------------------
Shares Amount Shares Amount
------ ------ ------ ------
Sold 8,022,913 $117,822,672 14,789,248 $203,101,614
Reinvested 542,548 7,915,275 3,040,333 40,563,144
Redeemed (5,967,872) (86,572,924) (5,985,067) (82,461,234)
---------- ------------ ---------- ------------
Net Increase 2,597,589 $ 39,165,023 11,844,514 $161,203,524
========== ============ ========== ============
- ---------
(+) Unaudited
9
<PAGE>
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Asset Management Portfolio
Schedule of Portfolio Investments September 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
Shares Description Value
------ ----------- -----
COMMON STOCKS - 36.99%
Aerospace - 0.11%
17,600 Boeing Co. $ 603,900
2,352 Raytheon Co. - Class A 121,874
-----------
725,774
-----------
Airlines - 0.34%
28,600 AMR Corp.* 1,585,513
6,800 Delta Air Lines, Inc. 661,300
-----------
2,246,813
-----------
Auto Related - 0.82%
28,500 Chrysler Corp. 1,364,437
53,000 Dana Corp. 1,977,562
36,900 General Motors Corp. 2,017,968
-----------
5,359,967
-----------
Banks - 2.18%
97,000 BankAmerica Corp. 5,832,125
109,800 Bank of Boston Corp. 3,623,400
92,800 Chase Manhattan Corp. 4,013,600
7,700 Citicorp 715,618
-----------
14,184,743
-----------
Beverages - 1.07%
37,200 Coca-Cola Co. 2,143,650
27,400 Coca-Cola Enterprises, Inc. 691,850
127,400 PepsiCo, Inc. 3,750,338
13,800 Seagram Company Ltd. 395,887
-----------
6,981,725
-----------
Chemicals and Toxic Waste - 1.59%
19,200 Air Products and Chemicals, Inc. 571,200
82,200 Du Pont (E.I.) de Nemours & Co. 4,613,475
84,500 Monsanto Co. 4,763,687
16,900 Solutia, Inc. 381,306
-----------
10,329,668
-----------
Computer Services - 1.39%
65,000 Cendant Corp.* 755,625
78,250 Cisco Systems, Inc.* 7,255,242
40,700 Seagate Technology, Inc.* 1,020,043
-----------
9,030,910
-----------
Computer Software - 1.16%
22,800 BMC Software, Inc.* 1,369,425
55,275 Computer Associates International, Inc. 2,045,175
28,400 Microsoft Corp.* 3,125,775
35,625 Oracle Corp.* 1,037,578
-----------
7,577,953
-----------
Diversified - 1.35%
114,900 AlliedSignal, Inc. 4,064,587
28,200 SUPERVALU, Inc. 657,412
21,400 Textron, Inc. 1,297,375
36,200 United Technologies Corp. 2,767,038
-----------
8,786,412
-----------
Drugs - 3.42%
45,600 Lilly (Eli) & Co. 3,571,050
58,600 Merck & Co., Inc. 7,592,362
104,600 Pfizer, Inc. 11,081,062
-----------
22,244,474
-----------
Shares Description Value
------ ----------- -----
Electrical Equipment - 1.59%
48,400 Emerson Electric Co. $ 3,012,900
92,200 General Electric Co 7,335,662
-----------
10,348,562
-----------
Electronics - 1.15%
51,400 Analog Devices, Inc.* 825,612
46,000 Intel Corp. 3,944,500
23,900 LSI Logic Corp.* 301,737
38,400 Motorola, Inc. 1,639,200
23,000 Xilinx, Inc.* 805,000
-----------
7,516,049
-----------
Entertainment - 0.21%
54,081 Disney (Walt) Co. 1,368,925
-----------
Environmental Control - 0.11%
47,000 U.S. Filter Corp.* 752,000
-----------
Financial Services - 1.78%
29,900 Associates First Capital Corp. - Class A 1,950,975
72,000 Freddie Mac 3,559,500
41,100 First Data Corp. 965,850
39,400 MBNA Corp. 1,127,825
20,400 Merrill Lynch & Co., Inc. 966,450
21,800 T. Rowe Price Associates, Inc. 640,375
62,949 Travelers Group, Inc. 2,360,588
-----------
11,571,563
-----------
Foods - 1.33%
89,000 Bestfoods 4,310,938
11,125 Corn Products International, Inc.* 280,906
59,500 Sara Lee Corp. 3,213,000
10,875 Sodexho Marriott Services, Inc. 326,250
12,730 Tricon Global Restaurants, Inc.* 496,470
-----------
8,627,564
-----------
Healthcare - 1.04%
16,800 Abbott Laboratories 729,750
77,500 Johnson & Johnson 6,064,375
-----------
6,794,125
-----------
Hospital Supplies and Healthcare - 0.94%
36,700 Baxter International, Inc. 2,183,650
39,600 Becton, Dickinson & Company 1,628,550
54,600 U. S. Surgical Corp. 2,276,138
-----------
6,088,338
-----------
Hotel/Motel - 0.32%
87,000 Marriott International, Inc.* 2,077,125
-----------
Household Products - 0.99%
21,800 Clorox Co. 1,798,500
65,400 Procter & Gamble Co. 4,639,313
-----------
6,437,813
-----------
Insurance - 1.21%
63,675 American International Group, Inc. 4,902,975
14,600 General Re Corp. 2,963,800
-----------
7,866,775
-----------
See Notes to Financial Statements on Pages 15 through 17
10
<PAGE>
- --------------------------------------------------------------------------------
Asset Management Portfolio
Schedule of Portfolio Investments September 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
Shares Description Value
------ ----------- -----
Metals - 0.11%
20,000 Alcan Aluminum Co. Ltd. $ 468,750
21,600 Freeport-McMoRan Copper & Gold, Inc.-
Class B 256,500
-----------
725,250
-----------
Office Equipment and Computers - 1.04%
38,200 Hewlett-Packard Co. 2,022,213
26,400 International Business Machines Corp. 3,379,200
15,900 Xerox Corp. 1,347,525
-----------
6,748,938
-----------
Oil Equipment and Services - 0.21%
25,400 Apache Corp. 681,038
13,200 Schlumberger Ltd. 664,125
-----------
1,345,163
-----------
Oil - Domestic - 0.75%
5,800 Atlantic Richfield Co. 411,438
16,927 Burlington Resources, Inc. 632,647
54,600 ENSCO International, Inc. 590,363
26,900 Noble Drilling Corp.* 396,775
14,300 Phillips Petroleum Co. 645,288
61,400 Unocal Corp. 2,225,750
-----------
4,902,261
-----------
Oil - International - 2.06%
17,400 Amoco Corp. 937,425
11,600 Chevron Corp. 975,125
41,900 Exxon Corp. 2,940,856
15,200 Mobil Corp. 1,154,250
65,600 Royal Dutch Petroleum Co. 3,124,200
68,000 Texaco, Inc. 4,262,750
-----------
13,394,606
-----------
Paper and Forest Products - 0.35%
29,400 Champion International Corp. 920,588
28,900 International Paper Co. 1,347,463
-----------
2,268,051
-----------
Printing and Publishing - 0.54%
44,500 McGraw-Hill Companies, Inc. 3,526,625
-----------
Railroads - 0.32%
64,800 Burlington Northern Santa Fe 2,073,600
-----------
Retail - 1.60%
72,538 Dollar General Corp. 1,931,324
31,200 Federated Department Stores, Inc.* 1,134,900
61,800 Lowe's Companies, Inc. 1,966,013
18,500 Nine West Group, Inc.* 176,907
26,400 Tiffany & Co. 828,300
80,000 Wal-Mart Stores, Inc. 4,370,000
-----------
10,407,444
-----------
Telecommunications - 1.87%
81,700 AT&T Corp. 4,774,344
58,700 Comcast Corp. - Class A 2,755,231
71,400 MCI WorldCom, Inc. 3,489,668
15,700 Sprint Corp. 1,130,400
-----------
12,149,643
-----------
Shares Description Value
------ ----------- -----
Tobacco - 0.77%
109,100 Philip Morris Companies, Inc. $ 5,025,419
------------
Utility - Electric - 1.16%
16,900 American Electric Power Co. 824,931
11,900 Dominion Resources, Inc. 531,038
21,500 FirstEnergy Corp. 667,844
30,400 FPL Group, Inc. 2,118,500
36,400 PG&E Corp. 1,162,525
16,500 Public Service Enterprise Group, Inc. 648,656
33,900 Texas Utilities Co. 1,578,469
------------
7,531,963
------------
Utility - Gas, Natural Gas - 0.38%
46,000 Consolidated Natural Gas Co. 2,507,000
------------
Utility - Telephone - 1.73%
19,600 Ameritech Corp. 928,550
15,400 Bell Atlantic Corp. 745,938
17,800 BellSouth Corp. 1,339,450
41,200 Frontier Corp. 1,127,850
81,500 GTE Corp. 4,482,500
24,256 Lucent Technologies, Inc. 1,675,180
218,000 SBC Communications, Inc. 968,738
------------
11,268,206
------------
Total Common Stocks (Cost $246,624,781) 240,791,447
------------
Principal
Amount
------
NON-CONVERTIBLE CORPORATE DEBT - 2.15%
Financial Services - 1.29%
$ 400,000 BankBoston Corp., 6.38%, 8/11/00 409,648
510,000 Chrysler Financial Corp., 6.11%, 7/28/99 513,749
1,450,000 Ford Motor Credit Co., 6.55%,11/08/00 1,512,088
600,000 Great Western Financial Corp.,
6.375%,7/01/00 610,175
940,000 IBM Credit Corp, 5.875%, 8/25/99 946,289
1,375,000 KFW International Finance, 8.20%, 6/01/06 1,630,545
675,000 Meditrust, 7.114%, 8/15/04 (c)(d) 630,254
880,000 NationsBank, 7.00%, 9/15/01 919,975
315,000 PaineWebber Group, Inc., 6.65%, 4/13/10 328,213
850,000 Salomon, Inc., 7.50%, 2/01/03 909,733
------------
8,410,669
------------
Foreign Industrial - 0.04%
269,000 Celulosa Arauco y Constitu,
6.75%, 12/15/03 242,520
------------
Industrial - 0.43%
290,000 Diageo Capital plc, 6.125%, 8/15/05 305,813
20,000 Federated Department Stores, Inc.,
6.79%, 7/15/27 21,129
260,000 Ford Motor Company, 6.625%, 10/01/28 262,560
310,000 IBM Corp, 6.50%, 1/15/28 324,928
635,000 Markel Capital Trust, 8.71%, 1/01/46 700,015
420,000 Mutual Life Insurance Co., 0.00%,
8/15/24 (b)(c) 623,213
535,000 Texas Instruments, Inc., 6.75%, 7/15/99 541,559
------------
2,779,217
------------
See Notes to Financial Statements on Pages 15 through 17
11
<PAGE>
- --------------------------------------------------------------------------------
Asset Management Portfolio
Schedule of Portfolio Investments September 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Description Value
------ ----------- -----
Utility - 0.39%
$ 400,000 Ameritech Capital Funding Corp.,
6.55%, 01/15/28 $ 404,500
35,000 Idaho Power Co., 8.00%, 3/15/04 39,616
760,000 Columbus Southern Power,
6.51%, 2/01/08 803,782
830,000 Consolidated Edison, 6.45%, 12/01/07 901,397
140,000 Potomac Edison Co., 8.00%, 6/01/24 157,633
210,000 U.S. West Capital Funding,
6.375%, 7/15/08 220,987
------------
2,527,915
------------
Total Non-Convertible Corporate Debt
(Cost $13,660,876) 13,960,321
------------
ASSET-BACKED SECURITY - 0.04%
215,000 Standard Credit Card Master Trust,
6.55%, 10/07/05 (Cost $214,876) 230,187
------------
FOREIGN DEBT - 0.06%
210,000 Guangdong International,
8.75%, 10/24/16 (c)(d) 108,473
125,000 Manitoba, (Province of), 6.125%, 1/19/04 131,005
95,000 New Zealand Government,
10.625%, 11/15/05 126,236
------------
Total Foreign Debt (Cost $429,342) 365,714
------------
U.S. GOVERNMENT AND AGENCIES - 4.13%
3,100,000 FHLB, 5.125%, 9/15/03 3,155,715
2,120,000 FNMA, 5.625%, 3/15/01 2,171,007
150,000 FNMA, 6.35%, 11/23/01 152,437
325,000 FNMA TBA, 8.625%, 11/10/04 338,409
690,000 FNMA TBA, 5.750%, 2/15/08 731,239
700,000 FNMA TBA, 6.00%, 4/01/08 707,438
1,400,000 FNMA TBA, 7.00%, 9/01/21 1,437,625
7,300,000 FNMA TBA, 7.50%, 9/01/21 7,826,660
6,200,000 FNMA TBA, 6.50%, 4/01/23 6,304,625
3,900,000 GNMA TBA 7.50% 9/01/21 4,040,844
------------
Total U.S. Government and Agencies
(Cost $26,360,044) 26,865,499
------------
Principal
Amount/Shares Description Value
- ------------- ----------- -----
U.S. TREASURY SECURITIES - 3.46%
$1,590,000 U.S. Treasury Bond, 8.125%, 8/15/19 $ 2,178,542
1,050,000 U.S. Treasury Bond, 7.625%, 11/15/22 1,397,814
570,000 U.S. Treasury Bond, 6.125%, 11/15/27 657,280
2,740,000 U.S. Treasury Bond, 5.50%, 8/15/28 2,962,204
840,000 U.S. Treasury Note, 5.875%, 11/30/01 876,621
260,000 U.S. Treasury Note, 6.25%, 8/31/02 277,388
2,420,000 U.S. Treasury Note, 5.750%, 4/30/03 2,561,804
1,665,000 U.S. Treasury Note, 5.25%, 8/15/03 1,739,539
70,000 U.S. Treasury Note, 7.25%, 8/15/04 80,347
820,000 U.S. Treasury Note, 7.00%, 7/15/06 955,813
1,200,000 U.S. Treasury Note, 5.50%, 2/15/08 1,298,252
6,888,000 U.S. Treasury Note, 5.625%, 5/15/08 7,534,826
------------
Total U.S. Treasury Securities (Cost $21,461,344) 22,520,430
------------
SHORT TERM INSTRUMENT - 61.33%
Mutual Fund - 7.63%
49,621,311 BT Institutional Cash Management Fund 49,621,312
------------
U.S. Government and Agency - 53.70% (a)
50,000,000 U.S. Treasury Bill, 5.005%, 10/01/98 50,000,000
9,830,000 U.S. Treasury Bill, 4.98%, 11/05/98 9,784,031
35,000,000 U.S. Treasury Bill, 5.16%, 11/19/98 34,763,711
43,065,000 U.S. Treasury Bill, 5.11%, 12/03/98 42,765,052
50,000,000 U.S. Treasury Bill, 4.43%, 12/31/98 49,470,000
50,000,000 U.S. Treasury Bill, 5.01%, 01/07/99 49,422,900
30,000,000 U.S. Treasury Bill, 5.015%, 1/28/99 29,570,610
50,000,000 U.S. Treasury Bill, 4.965%, 02/04/99 49,231,750
35,000,000 U.S. Treasury Bill, 4.94%, 2/11/99 34,442,695
------------
349,450,749
------------
Total Short Term Instruments (Cost $398,657,135) 399,072,061
------------
Total Investments (Cost $707,408,398) 108.16% $703,806,159
Liabilities in Excess of Other Assets (8.16)% (53,069,918)
------ ------------
Net Assets 100.00% $650,736,241
====== ============
* Non-income producing security
(a) Held as collateral for Futures Contracts
(b) Step-up Bond. On 8/15/99 this security will begin accruing interest at a
rate of 11.25% from then until maturity.
(c) Security exempt from registration under Rule 144a of the Securities Act of
1933. This security may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
(d) Illiquid Security
The following abbreviations are used in the portfolio description:
FHLB -- Federal Home Loan Bank
FNMA -- Federal National Mortgage Association
GNMA -- Government National Mortgage Association
TBA -- To be announced
See Notes to Financial Statements on Pages 15 through 17 Asset
12
<PAGE>
- --------------------------------------------------------------------------------
Asset Management Portfolio
Statement of Assets and Liabilities September 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S><C>
Assets
Investments, at Value (Cost of $707,408,398) $703,806,159
Cash* 18,463,144
Receivable for Securities Sold 16,835,644
Interest Receivable 754,718
Forward Currency Exchange Contracts, net 193,347
Dividends Receivable and Other 302,475
------------
Total Assets 740,355,487
------------
Liabilities
Due to Bankers Trust 324,625
Payable for Securities Purchased 87,128,725
Accrued Expenses and Other 7,617
Variation Margin Payable* 2,158,279
------------
Total Liabilities 89,619,246
------------
Net Assets $650,736,241
============
Composition of Net Assets
Paid-in Capital $655,865,354
Net Unrealized Appreciation/Depreciation on Investments (5,129,113)
------------
Net Assets $650,736,241
============
</TABLE>
- ------------
* Includes foreign cash of $18,458,797, with a cost of $17,870,527.
- --------------------------------------------------------------------------------
Statement of Operations For the six month period ended September 30, 1998
(unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S><C>
Investment Income
Dividends (net of foreign withholding tax of $8,576) $ 1,902,292
Interest 10,429,871
------------
Total Investment Income 12,332,163
------------
Expenses
Advisory Fees 2,204,729
Administration and Services Fees 339,189
Professional Fees 5,127
Miscellaneous 3,321
Trustees Fees 1,121
------------
Total Expenses 2,553,487
Less Expenses Absorbed by Bankers Trust (518,352)
------------
Net Expenses 2,035,135
------------
Net Investment Income 10,297,028
------------
Realized and Unrealized Gain (Loss) on Investments, Foreign Currency
Transactions, Forward Foreign Currency Contracts and Futures Contracts
Net Realized Gain from:
Investments, Forward Foreign Currency Contracts and Foreign Currency
Transactions 1,877,506
Futures Transactions 12,776,790
Net Change in Unrealized Appreciation/Depreciation on:
Investments, Forward Foreign Currency Contracts and Foreign Currency
Transactions (32,166,522)
Futures Contracts (2,308,491)
------------
Net Realized and Unrealized Loss on Investments, Foreign Currencies,
Forward Foreign Currency Transactions and Futures Contracts (19,820,717)
------------
Net Decrease in Net Assets from Operations $ (9,523,689)
============
</TABLE>
See Notes to Financial Statements on Pages 15 through 17
13
<PAGE>
- --------------------------------------------------------------------------------
Asset Management Portfolio
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the six months ended For the year ended
September 30, 1998(+) March 31, 1998
------------------------ ------------------
<S><C>
Increase (Decrease) in Net Assets from:
Operations
Net Investment Income $ 10,297,028 $ 13,974,260
Net Realized Gain from Investments, Foreign Currency Transactions,
Forward Foreign Currency Contracts and Futures Contracts 14,654,296 101,389,267
Net Change in Unrealized Appreciation/Depreciation on Investments, Foreign
Currency Transactions, Forward Foreign Currency Contracts and Futures Contracts (34,475,013) 21,903,331
------------- -------------
Net Increase (Decrease) in Net Assets from Operations (9,523,689) 137,266,858
------------- -------------
Capital Transactions
Proceeds from Capital Invested 179,164,242 305,009,400
Value of Capital Withdrawn (168,276,734) (141,442,529)
------------- -------------
Net Increase in Net Assets from Capital Transactions 10,887,508 163,566,871
------------- -------------
Total Increase in Net Assets 1,363,819 300,833,729
Net Assets
Beginning of Period 649,372,422 348,538,693
------------- -------------
End of Period $ 650,736,241 $ 649,372,422
============= =============
</TABLE>
- ---------
(+) Unaudited
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
Contained below are selected ratios to average net assets and other supplemental
data for period indicated for the Asset Management Portfolio.
<TABLE>
<CAPTION>
For the For the period
six months For the years ended September 16, 1993
ended March 31, (Commencement
Sept. 30, --------------------------------- of Operations) to
1998(+) 1998 1997 1996 1995 March 31, 1994
---------- ---- ---- ---- ---- ------------------
<S><C>
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) $651,069 $649,372 $348,539 $240,142 $96,529 $36,283
Ratios to Average Net Assets:
Net Investment Income 3.03%* 2.97% 3.12% 3.99% 3.78% 2.83%*
Expenses 0.60%* 0.60% 0.60% 0.60% 0.60% 0.60%*
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses by
Bankers Trust 0.15%* 0.16% 0.16% 0.17% 0.19% 0.33%*
Portfolio Turnover Rate 57% 199% 137% 154% 92% 56%
</TABLE>
- ---------
(+) Unaudited
* Annualized
See Notes to Financial Statements on Pages 15 through 17
14
<PAGE>
- --------------------------------------------------------------------------------
Asset Management Portfolio
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
Note 1--Organization and Significant Accounting Policies
A. Organization
The Asset Management Portfolio (the "Portfolio") is registered under the
Investment Company Act of 1940 ("the Act"), as amended, as open-end management
investment company. The Portfolio was organized on June 9, 1992 and commenced
operations on September 16, 1993.
The Declaration of Trust permits the Board of Trustees (the "Trustees") to issue
beneficial interests in the Portfolio.
B. Security Valuation
The Portfolio's investments listed or traded on National Stock Exchanges or
other domestic or foreign exchanges are valued based on the closing price of the
security traded on that exchange prior to the time when the Portfolio assets are
valued. Short-term debt securities are valued at market value until such time as
they reach a remaining maturity of 60 days, whereupon they are 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,
less foreign taxes withheld, if any, is recorded on the ex-dividend date or upon
receipt of ex-dividend notification in the case of certain foreign securities.
Interest income is recorded on the accrual basis and includes amortization of
premium and discount on investments. Expenses are recorded as incurred. Realized
gains and losses from securities transactions are recorded on the identified
cost basis.
All of the net investment income and realized and unrealized gains and losses
from the security and foreign currency 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 Advisers, 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. Foreign Currency Transactions
The books and records of the Asset Management Portfolio are maintained in U.S.
dollars. All assets and liabilities initially expressed in foreign currencies
are converted into U.S. dollars at prevailing exchange rates. Purchases and
sales of investment securities, dividend and interest income, and certain
expenses are translated at the rates of exchange prevailing on the respective
dates of such transactions.
F. Forward Foreign Currency Contracts
The Portfolio may enter into forward foreign currency contracts for the purpose
of settling specific purchases or sales of securities denominated in a foreign
currency or with respect to the Portfolio's investments. The net U.S. dollar
value of foreign currency underlying all contractual commitments held by the
Portfolio and the resulting unrealized appreciation or depreciation are
determined using prevailing exchange rates. With respect to forward foreign
currency contracts, losses in excess of amounts recognized in the Statement of
Operations may arise due to changes in the value of the foreign currency or if
the counterparty does not perform under the contract.
G. Option Contracts
The Portfolio may enter into option contracts. Upon the purchase of a put option
or a call option by a Portfolio, the premium paid is recorded as an investment,
and marked-to-market daily to reflect the current market value. When a purchased
option expires, the Portfolio will realize a loss in the amount of the cost of
the option. When the Portfolio enters into a closing sale transaction, the
Portfolio 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 Portfolio 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 Portfolio exercises a call
option, the cost of the security which the Portfolio purchases upon exercise
will be increased by the premium originally paid.
H. Futures Contracts
The Portfolio may enter into financial futures contracts which are contracts to
buy a standard quantity of securities at a specified price on a future date. The
Portfolio is required to make initial margin deposits either in cash or
securities in amount equal to a certain percentage of the contract amount.
Variation margin payments are made or received by the Portfolio each day,
dependent on the daily fluctuations in the value of the underlying security, and
are recorded for financial statement purposes as unrealized gains or losses by
the Portfolio.
Futures contracts are valued at the settlement price established each day by the
board of trade or exchange on which they are traded.
I. Federal Income Taxes
The Portfolio is considered a Partnership under the Internal Revenue Code.
Therefore, no federal income tax provision is necessary.
J. 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 entered into an Administration and Services Agreement with Bankers
Trust Company ("Bankers Trust"). Under this Administration and Services
Agreement, Bankers Trust provides administrative, custody, transfer agency and
shareholder services to the Portfolio in return for a fee computed daily and
paid monthly at an annual rate of .10% of the Portfolio's average daily net
assets.
The Portfolio entered into an Advisory Agreement with Bankers Trust. Under this
Advisory Agreement, the Portfolio pays Bankers Trust an
15
<PAGE>
- --------------------------------------------------------------------------------
Asset Management Portfolio
Notes to Financial Statements (continued) (unaudited)
- --------------------------------------------------------------------------------
advisory fee computed daily and paid monthly at an annual rate of .65% of the
Portfolio's average daily net assets.
Bankers Trust has voluntarily undertaken to waive and reimburse expenses of the
Portfolio, to the extent necessary, to limit all expenses to .60% of the average
daily net assets of the Portfolio.
The Trust 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 Trust and
other accounts managed by the Company. At September 30, 1998, the Asset
Management Portfolio had interest income receivable from the Fund in the amounts
of $7,325. Additionally, distributions from the Fund to the Trust as of
September 30, 1998 amounted to $1,171,804 and are included in income.
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 among 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 six-month period ended September 30,
1998.
Note 3--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-month period ended September 30, 1998,
were $182,244,647 and $182,608,493, respectively.
The tax basis of investments held at September 30, 1998, was $709,753,900.
The aggregate gross unrealized appreciation for all investments was
$22,373,557 and the aggregate gross unrealized depreciation for all investments
was $25,975,796.
16
<PAGE>
- --------------------------------------------------------------------------------
Asset Management Portfolio
Notes to Financial Statements (continued) (unaudited)
- --------------------------------------------------------------------------------
Note 4--Futures Contracts
A summary of obligations under these financial instruments at September 30, 1998
is as follows:
<TABLE>
<CAPTION>
Unrealized
Appreciation
Type of Futures Expiration Contracts Position Market Value (Depreciation)
- --------------- ---------- --------- -------- ------------ --------------
<S><C>
S&P 500 December 1998 378 Long $ 96,957,000 $(2,683,800)
US Treasury Note Futures December 1998 1349 Long 163,819,187 9,580,007
CAC 40 Year Futures December 1998 856 Long 24,666,000 (929,176)
German Bond Futures December 1998 99 Long 16,979,048 405,302
Gilt Futures December 1998 36 Long 7,085,623 263,176
Japanese Bond Futures December 1998 33 Long 33,545,974 996,197
French Bond Futures December 1998 54 Long 5,328,357 131,679
- ------------------------ ----- ------------ -----------
Total 2,805 $348,381,189 $ 7,763,385
===== ============ ===========
</TABLE>
Note 5--Open Forward Foreign Currency Contracts
A summary of obligations under these financial instruments at September 30, 1998
is as follows:
<TABLE>
<CAPTION>
Net Unrealized
Appreciation
Contracts to Deliver In Exchange For Settlement Date Value (US$) (Depreciation)(US$)
- ---------------------------------------------------------------------------------------------------------------
<S><C>
Purchases
German Deutschemark 2,878,000 U.S. Dollars $1,649,047 10/6/98 $1,725,730 $ 76,682
British Pound 3,517,000 U.S. Dollars 5,867,587 10/6/98 5,973,976 106,389
Japanese Yen 284,935,000 U.S. Dollars 2,076,090 10/6/98 2,086,366 10,276
- ---------------------------------------------------------------------------------------------------------------
Total Net Unrealized Appreciation $193,347
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
17
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<PAGE>
BT PYRAMID MUTUAL FUNDS
BT INSTITUTIONAL ASSET MANAGEMENT FUND
Investment Advisor and Administrator of the Portfolio
BANKERS TRUST COMPANY
130 Liberty Street
New York, NY 10006
Distributor
ICC DISTRIBUTORS, INC.
P.O. Box 7558
Portland, ME 04112-9892
Custodian and Transfer Agent
BANKERS TRUST COMPANY
130 Liberty Street
New York, NY 10006
Independent Accountants
PRICEWATERHOUSECOOPERS LLP
250 West Pratt Street
Baltimore, MD 21201
Counsel
WILLKIE FARR & GALLAGHER
787 7th Avenue
New York, NY 10019
--------------------------------
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 report must be preceded or
accompanied by a current prospectus for the Fund.
--------------------------------
BT Pyramid Institutional Asset Management Fund CUSIP #055847404
STA482100 (9/98)
