o BT PYRAMID MUTUAL FUNDS o
BT INVESTMENT LIMITED TERM
U.S. GOVERNMENT SECURITIES FUND
SEMI-ANNUAL REPORT
------------------
MARCH o 1998
<PAGE>
BT Investment Limited Term U.S. Government Securities Fund
Table of Contents
Letter to Shareholders 3
BT Investment Limited Term U.S. Government Securities Fund
Statement of Assets and Liabilities 5
Statement of Operations 5
Statements of Changes in Net Assets 6
Financial Highlights 7
Notes to Financial Statements 8
Short/Intermediate U.S. Government Securities Portfolio
Statement of Net Assets 9
Statement of Operations 9
Statements of Changes in Net Assets 10
Financial Highlights 10
Notes to Financial Statements 11
--------------------
The Fund is not insured by the FDIC and is not a deposit, obligation of or
guaranteed byBankers Trust Company. The Fund is subject to investment risks,
including possible loss of principal amount invested.
--------------------
2
<PAGE>
BT Investment Limited Term U.S. Government Securities Fund
Letter to Shareholders
We are pleased to present you with this semi-annual report for the BT Investment
Limited Term U.S. Government Securities Fund, providing a review of the market,
the portfolio, and our outlook as well as a complete financial summary of the
Fund's operations and a listing of the Portfolio's holdings.
The BT Investment Limited Term U.S. Government Securities Fund (the "Fund")
returned 2.97%* for the six months ended March 31, 1998, as compared to 3.13%
for the Lehman 1-3 Year Government Obligations Index** and 3.13% for the Lipper
Short/Intermediate U.S. Government Funds Average***. Since its inception on
August 24, 1992, the Fund returned 31.58% cumulatively, or 5.02% annualized, as
of March 31, 1998. The Fund returned 6.91% for the year ended March 31, 1998.
For the 5-year period ended March 31, 1998, the Fund's annualized return was
4.94%.
MARKET ACTIVITY
For most of the semi-annual period, the bond market continued the bullish trend
which had been in place for much of 1997 and which had gained momentum early in
the fourth calendar quarter. Yields declined primarily due to an acceleration of
concerns that excess capacity in Asia would ultimately lead to pricing pressure
in the U.S. The strength of this sentiment offset evidence that domestic sources
of economic growth were strong enough to make easing of monetary policy by the
Federal Reserve Board unlikely. The Asian crisis also created a flight to
quality that benefited U. S. Treasuries, especially in October and November. In
addition, Asian countries were forced to sell short-term U.S. debt to defend
their currencies, which helped to further flatten the yield curve.
- ---------------------------------------
Objective
Seeks high level of current income with
the preservation of capital.
- ---------------------------------------
The bond market traded in a broad range during the first calendar quarter of
1998, primarily due to diminishing fears about the impact of the Asian crisis on
the U.S. economy and the seeming result, i.e. interest rate stability. The bond
market ended the month of March marginally lower, as oil prices recovered from
their ten-year low and as investor concerns regarding continued strong domestic
demand and a robust job market eased. In all, the combination of opposing forces
led to a flattening yield curve, as disinflationary pressures affected the
longer end of the curve while the shorter end of the curve remained anchored by
a Fed Funds target rate of 5.50%.
From September 30, 1997 through March 31, 1998, the 2-year Treasury bond yield
dropped 0.22%, and the 5-year Treasury bond yield rallied even more
dramatically, dropping 0.37%. This movement flattened the yield curve, narrowing
the 2 to 5 year spread from 0.21% at September 30, 1997 to 0.05% on March 31,
1998.
INVESTMENT REVIEW
The Fund underperformed its benchmark and its category average for the
semi-annual period. This underperformance can be attributed primarily to the
first half of the period, when we shortened the Fund's duration from 1.7 years
to 1.6 years in anticipation of the Federal Reserve Board raising short-term
interest rates in response to strong employment and economic data. However, the
widely anticipated move by the Federal Reserve Board remained on hold, with no
change in monetary policy, primarily as a result of the spreading effects of the
Asian financial crises. Interest rates, in fact, went down, and the Fund did not
fully participate in the market's rally during this period.
Once we saw that the Fed was not tightening monetary policy again, we lengthened
duration to a neutral stance again toward the end of the first calendar quarter,
and the Fund did benefit from this yield curve positioning, biased for a flatter
curve. On March 31, 1998, the Fund had a duration of 1.7 years.
MANAGER OUTLOOK
For the near term, we anticipate that the bond market should continue to do
well, confident in the belief that the Federal Reserve Board is on hold, that
inflation remains at bay, and that economic expansion will continue. We remain
equally confident, however, that there are some clouds on the longer-term
horizon. In particular, we expect the economy to prove resilient to the Asian
downdraft, raising the prospect of an overheating labor market in the second
half of 1998. As it becomes clear that the economy is not cooling on its own,
the market may very well have to deal with the reality of Fed tightening. Of
course, the precise timing of shifts in market sentiment is impossible to nail
down in advance, but we still expect some upward pressure on interest rates and
a less friendly backdrop for bonds in the second half of the year.
- ------------------------------------------
Investment Instruments
Direct obligations issued or guaranteed by
the U.S. Government or its agencies and
instrumentalities, including repurchase
agreements collateralized by U.S.
Government obligations. The average
weighted maturity of securities will range
from two to five years.
- ------------------------------------------
We intend, then, to maintain a neutral to slightly longer than the benchmark
stance for the near term but to look for an opportunity to move shorter once
again should we see early indicators of inflation and rising interest rates.
We will also, of course, maintain our long-term perspective for the Fund, as we
seek to provide high levels of current income with the preservation of capital.
- ----------
* Performance quoted represents past performance and is not a guarantee of
future results. 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 Limited Term U.S. Government Securities Fund
Letter to Shareholders
Diversification of Portfolio Investments
By Asset Type as of March 31, 1998
(percentages are based on market value)
[PIE CHART APPEARS HERE]
Repurchase Agreement 15%
U.S. Treasury Notes 56%
U.S. Treasury Bills 25%
Government Agency Obligations 4%
We value your ongoing support of the BT Investment Limited Term U.S. Government
Securities Fund and look forward to serving your investment needs in the years
ahead.
/s/ Louis Hudson
________________
Louis Hudson
Portfolio Manager of the
Short/Intermediate Term U.S. Government Securities Portfolio
March 31, 1998
- -------------------------------------------------------------------------------
Performance Comparison
Comparison of Change in Value of a $10,000 Investment in the BT Investment
Limited Term U.S. Government Securities Fund and the Lehman 1-3 Year Govt. Bond
Index as of August 31, 1992.
- --------------------------------------
Total Return for the Period
Ended March 31, 1998
Six Months Since 8/24/92*
2.97% 5.02%**
* 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
Limited Term Lehman
U.S. Govt. 1-3 Year
Securities Fund Govt. Bond Index
Aug-92 10,000 10,000
Sep-92 10,111 10,094
Dec-92 10,044 10,115
Mar-93 10,310 10,333
Jun-93 10,404 10,448
Sep-93 10,613 10,592
Dec-93 10,666 10,659
Mar-94 10,597 10,607
Jun-94 10,614 10,607
Sep-94 10,630 10,714
Dec-94 10,659 10,714
Mar-95 10,958 11,070
Jun-95 11,307 11,421
Sep-95 11,440 11,591
Dec-95 11,704 11,876
Mar-96 11,742 11,921
Jun-96 11,846 12,046
Sep-96 11,996 12,247
Dec-96 12,224 12,479
Mar-97 12,273 12,559
Jun-97 12,556 12,838
Sep-97 12,743 13,090
Dec-97 12,991 13,176
Mar-98 13,158 13,369
Past performance is not indicative of future performance.
4
<PAGE
BT Investment Limited Term U.S. Government Securities Fund
Statement of Assets and Liabilities March 31, 1998 (unaudited)
<TABLE>
<S><C>
Assets
Investment in Short/Intermediate U.S. Government Securities Portfolio, at Value $ 58,453,904
Receivable for Shares of Beneficial Interest Subscribed 595
Prepaid Expenses 16,867
---------------
Total Assets 58,471,366
---------------
Liabilities
Due to Bankers Trust, net 10,303
Payable for Shares of Beneficial Interest Redeemed 9,305,183
Dividends Payable 9,138
Accrued Expenses and Other 16,310
---------------
Total Liabilities 9,340,934
---------------
Net Assets $ 49,130,432
===============
Composition of Net Assets
Paid-in Capital $ 48,792,590
Undistributed Net Realized Gain from Investment Transactions 55,066
Net Unrealized Appreciation on Investment 282,776
---------------
Net Assets $ 49,130,432
===============
Net Asset Value, Offering and Redemption Price Per Share (net assets divided by shares
outstanding) $ 9.89
===============
Shares Outstanding ($0.001 par value per share, unlimited number of shares of beneficial
interest authorized) 4,969,475
===============
</TABLE>
Statement of Operations For the six months ended March 31, 1998 (unaudited)
<TABLE>
<S><C>
Investment Income
Income Allocated from Short/Intermediate U.S. Government Securities Portfolio, net $ 1,647,092
---------------
Expenses
Administration and Services Fees 88,632
Registration Fees 5,731
Printing and Shareholder Reports 7,458
Professional Fees 5,482
Trustees Fees 4,164
Miscellaneous 1,966
---------------
Total Expenses 113,433
Less Expenses Absorbed by Bankers Trust (24,801)
---------------
Net Expenses 88,632
---------------
Net Investment Income 1,558,460
---------------
Realized and Unrealized Gain (Loss) on Investment
Net Realized Gain from Investment Transactions 362,987
Net Change in Unrealized Appreciation/Depreciation on Investment (220,370)
---------------
Net Realized and Unrealized Gain on Investment 142,617
---------------
Net Increase in Net Assets from Operations $ 1,701,077
===============
</TABLE>
See Notes to Financial Statements on Page 7
5
<PAGE>
BT Investment Limited Term U.S. Government Securities Fund
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the six
months ended For the
March 31, 1998 year ended
(unaudited) September 30, 1997
-------------- ------------------
<S><C>
Increase (Decrease) in Net Assets from:
Operations
Net Investment Income $ 1,558,460 $ 2,931,720
Net Realized Gain from Investment Transactions 362,987 135,150
Net Change in Unrealized Appreciation/Depreciation on Investment (220,370) 236,751
--------------- ---------------
Net Increase in Net Assets from Operations 1,701,077 3,303,621
--------------- ---------------
Distributions to Shareholders
Net Investment Income (1,558,460) (2,931,720)
--------------- ---------------
Total Distributions (1,558,460) (2,931,720)
--------------- ---------------
Capital Transactions in Shares of Beneficial Interest
Net Increase (Decrease) from Capital Transactions in Shares of
Beneficial Interest (8,118,053) 4,997,304
--------------- ---------------
Total Increase (Decrease) in Net Assets (7,975,436) 5,369,205
Net Assets
Beginning of Period 57,105,868 51,736,663
--------------- ---------------
End of Period $ 49,130,432 $ 57,105,868
=============== ===============
</TABLE>
See Notes to Financial Statements on Page 8
6
<PAGE>
BT Investment Limited Term U.S. Government Securities Fund
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 Investment Limited Term U.S. Government Securities Fund.
<TABLE>
<CAPTION>
For the six For the years ended
months ended For the For the period December 31,
March 31, 1998 year ended January 1, 1996 to -----------------------
(unaudited) Sept. 30, 1997 Sept. 30, 1996* 1995 1994 1993
-------------- -------------- ------------------ ------ ------ ------
<S><C>
Per Share Operating Performance:
Net Asset Value, Beginning of Period $9.86 $9.80 $9.96 $9.61 $10.06 $9.93
Income fromInvestment Operations
Net Investment Income 0.26 0.53 0.38 0.57 0.44 0.41
Net Realized and Unrealized Gain (Loss)
from Investment Transactions 0.03 0.06 (0.14) 0.35 (0.45) 0.20
Total Income (Loss) from Investment Operations 0.29 0.59 0.24 0.92 (0.01) 0.61
Distributions to Shareholders
Net Investment Income (0.26) (0.53) (0.38) (0.57) (0.44) (0.41)
Net Realized Gain from Investment Transactions -- -- (0.02) -- -- (0.07)
Total Distributions (0.26) (0.53) (0.40) (0.57) (0.44) (0.48)
Net Asset Value, End of Period $9.89 $9.86 $9.80 $9.96 $9.61 $10.06
Total Investment Return 2.97% 6.22% 2.50% 9.81% (0.08)% 6.21%
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) $49,130 $57,106 $51,737 $29,870 $31,302 $3,462
Ratios to Average Net Assets:
Net Investment Income 5.28%** 5.44% 5.22%** 5.81% 4.69% 4.35%
Expenses, Including Expenses of the Short/
Intermediate U.S. Government Securities
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 0.12%** 0.15% 0.40%** 0.24% 0.34% 1.43%
</TABLE>
- ----------
* On February 9, 1996, the Board of Trustees approved the change of the Fund's
fiscal year end from December 31 to September 30.
** Annualized
See Notes to Financial Statements on Page 8
7
<PAGE>
BT Investment Limited Term U.S. Government Securities 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 Limited Term
U.S. Government Securities Fund (the "Fund") is one of the funds offered to
investors by the Trust. The Fund commenced operations and began offering shares
of beneficial interest on August 24, 1992. The Fund invests substantially all of
its assets in the Short/Intermediate U.S. Government Securities Portfolio (the
"Portfolio"). The Portfolio is an open-end management investment company
registered under the Act. The Fund seeks to achieve its investment objective by
investing all of its investable assets in the Portfolio. The value of such
investment in the Portfolio reflects the Fund's proportionate interest in the
net assets of the Portfolio. At March 31, 1998, the Fund's investment was
approximately 100% of the Portfolio.
The financial statements of the Portfolio, including the Statement of Net
Assets, are contained elsewhere in this report.
B. Investment Income
The Fund earns income, net of expenses, daily on its investment in the Portfolio
and is recorded 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.
C. Dividends
The Fund declares dividends daily and pays these dividends monthly from net
investment income. Dividends payable to shareholders are recorded by the Fund on
the ex-dividend date. Distributions of net realized short-term and long-term
capital gains, if any, will be made annually.
D. Federal Income Taxes
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code 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.
E. 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 .30% of the Fund's average daily net assets.
Amounts owed under the Administration and Services Agreement amounted to
$10,303, net of waived expenses of $4,601 at March 31, 1998.
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 Act, Edgewood may seek reimbursement, at an annual rate not
exceeding 0.20 of 1% of the Fund's average daily net assets, for expenses
incurred in connection with any activities primarily intended to result in the
sale of the Fund's shares. For the six months ended March 31, 1998, there were
no reimbursable expenses incurred under this agreement.
Bankers Trust has voluntarily undertaken to waive its fees and reimburse
expenses of the Fund, to the extent necessary, to limit all expenses to .30% of
the average daily net assets of the Fund, excluding expenses of the Portfolio
and .60% of the average daily net assets of the Fund, including expenses of the
Portfolio. For the six months ended March 31, 1998, expenses of the Fund have
been reduced by $24,801.
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.
The Fund is a participant with other affiliated entities in a revolving credit
facility ("the revolver") and a discretionary demand line of credit facility
collectively ("the credit facilities") in the amounts of $50,000,000 and
$100,000,000 respectively. A commitment fee of .07% per annum on the average
daily amount of the available commitment is payable on a calendar quarter basis,
and apportioned equally amongst all participants. Amounts borrowed under the
credit facilities will bear interest at a rate per annum equal to the Federal
Funds Rate plus .45%. No amounts were drawn down or outstanding under the credit
facilities as of 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:
For the For the
six months ended year ended
March 31, 1998 (unaudited) September 30, 1997
-------------------------- ------------------------
Shares Amount Shares Amount
----------- ------------ ---------- -----------
Sold 957,936 $ 9,476,466 2,309,983 $22,661,137
Reinvested 150,085 1,484,937 287,967 2,832,604
Redeemed (1,928,706) (19,079,456) (2,085,611) (20,496,437)
----------- ------------ ---------- -----------
Net Increase (Decrease) (820,685) $ (8,118,053) 512,339 $ 4,997,304
=========== ============ ========== ===========
See Notes to Financial Statements on Page 11
8
<PAGE>
Short/Intermediate U.S. Government Securities Portfolio
Statement of Net Assets March 31, 1998 (unaudited)
Principal
Amount Description Value
--------- ----------- -----
U.S. GOVERNMENT AND AGENCY
OBLIGATIONS - 3.94%
$ 1,150,000 FHLMC, 6.07%, 9/21/00 $ 1,160,776
1,140,000 FNMA, 5.86%, 11/07/00 1,142,853
-----------
Total U.S. Government and Agency Obligations
(Cost $2,290,254) 2,303,629
-----------
U.S. TREASURY NOTES - 55.62%
1,380,000 U.S. Treasury Notes, 6.625%, 3/31/02 1,426,142
2,250,000 U.S. Treasury Notes, 5.875%, 8/31/99 2,258,429
3,870,000 U.S. Treasury Notes, 5.75%, 9/30/99 3,879,080
980,000 U.S. Treasury Notes, 5.375%, 1/31/00 976,478
8,220,000 U.S. Treasury Notes, 5.375%, 2/15/01 8,172,457
4,360,000 U.S. Treasury Notes, 5.50%, 3/31/00 4,354,550
11,510,000 U.S. Treasury Notes, 5.50%, 3/31/03 11,448,839
-----------
Total U.S. Treasury Notes
(Cost $32,558,837) 32,515,975
-----------
Principal
Amount Description Value
--------- ----------- -----
SHORT-TERM INSTRUMENTS - 40.34%
Repurchase Agreement - 14.76%
$ 8,627,829 Repurchase Agreement with Goldman
Sachs, dated 3/31/98, 5.85%. Principal
and Interest in the Amount of $8,629,231,
due 4/1/98. (Collateralized by U.S.
Treasury Notes, Par Value $6,130,000,
13.75%, due 8/15/04, Value of $8,897,083)
(Cost $8,627,829) $ 8,627,829
-----------
U.S. TREASURY BILL - 25.58%
15,000,000 U.S. Treasury Bill, 5.26%, 4/23/98
(Cost $14,951,141) 14,951,141
-----------
Total Short Term Instruments
(Cost $23,578,970) 23,578,970
-----------
Total Investments (Cost $58,428,061) 99.90% 58,398,574
Other Assets in Excess of Liabilities 0.10% 57,630
------- -----------
Net Assets 100.00% $58,456,204
======= ===========
- ----------
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
- -------------------------------------------------------------------------------
Statement of Operations For the six months ended March 31, 1998 (unaudited)
Investment Income
Interest $ 1,735,979
-------------
Expenses
Advisory Fees 74,068
Administration and Service Fees 14,814
Professional Fees 10,392
Trustees Fees 1,045
Miscellaneous Expenses 281
-------------
Total Expenses 100,600
Less Expenses Absorbed by Bankers Trust (11,718)
-------------
Net Expenses 88,882
-------------
Net Investment Income 1,647,097
-------------
Realized and Unrealized Gain (Loss) on Investments
Net Realized Gain from Investment Transactions 365,152
Net Change in Unrealized Appreciation Depreciation
on Investments (220,370)
-------------
Net Realized and Unrealized Gain on Investments 144,782
-------------
Net Increase in Net Assets from Operations $ 1,791,879
=============
See Notes to Financial Statements on Page 11
9
<PAGE>
Short/Intermediate U.S. Government Securities Portfolio
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the
six months ended For the
March 31, 1998 year ended
(unaudited) September 30, 1997
---------------- ------------------
<S><C>
Increase (Decrease) in Net Assets from:
Operations
Net Investment Income $ 1,647,097 $ 3,093,331
Net Realized Gain from Investment Transactions 365,152 135,146
Net Change in Unrealized Appreciation/Depreciation on Investments (220,370) 236,751
--------------- ---------------
Net Increase in Net Assets from Operations 1,791,879 3,465,228
--------------- ---------------
Capital Transactions
Proceeds from Capital Invested 10,970,878 24,970,677
Value of Capital Withdrawn (11,466,790) (23,499,793)
--------------- ---------------
Net Increase (Decrease) in Net Assets from Capital Transactions (495,912) 1,470,884
--------------- ---------------
Total Increase in Net Assets 1,295,967 4,936,112
Net Assets
Beginning of Period 57,160,237 52,224,125
--------------- ---------------
End of Period $ 58,456,204 $ 57,160,237
=============== ===============
</TABLE>
- -------------------------------------------------------------------------------
Financial Highlights
Contained below are selected supplemental data and ratios to average net
assets for the periods indicated for the Short/Intermediate U.S. Government
Securities Portfolio.
<TABLE>
<CAPTION>
For the
six-months For the years ended
ended For the For the period December 31,
March 31, 1998 year ended January 1, 1996 to --------------------------
(unaudited) Sept. 30, 1997 Sept. 30, 1996* 1995 1994 1993
-------------- -------------- ------------------ ------- ------- -------
<S><C>
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) $58,456 $57,160 $52,224 $55,178 $47,721 $17,729
Ratios to Average Net Assets:
Net Investment Income 5.56%** 5.73% 5.46%** 6.09% 4.91% 4.25%
Expenses 0.30%** 0.30% 0.30%** 0.30% 0.30% 0.30%
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses by
Bankers Trust 0.04%** 0.04% 0.05%** 0.05% 0.09% 0.25%
Portfolio Turnover Rate 247% 383% 314% 246% 202% 267%
</TABLE>
- ----------
* On February 9,1996, the board of Trustees approved the change of the
Portfolio's fiscal year end from December 31 to September 30.
** Annualized
See Notes to Financial Statements on Page 11
10
<PAGE>
Short/Intermediate U.S. Government Securities Portfolio
Notes to Financial Statements (unaudited)
Note 1--Organization and Significant Accounting Policies
A. Organization
The Short/Intermediate U.S. Government Securities Portfolio (the "Portfolio") is
registered under the Investment Company Act of 1940 (the "Act"), as amended, as
an open-end management investment company. The Portfolio was organized on
December 11, 1991 as an unincorporated trust under the laws of New York and
commenced operations on August 24, 1992. The Declaration of Trust permits the
Board of Trustees (the "Trustees") to issue beneficial interests in the
Portfolio.
B. Security Valuation
The Portfolio's investments are carried at fair market value as determined by an
independent pricing service at the end of each business day. Short-term
obligations with remaining maturities of 60 days or less are valued at amortized
cost which, with accrued interest, approximates value. Securities for which
quotations are not available are stated at fair value as determined in good
faith under procedures established by and under the general supervision of the
Board of Trustees.
C. Security Transactions and Investment Income
Security transactions are accounted for on a trade date basis. Interest income
is recorded on the accrual basis and includes amortization of premium and
accretion of discount on investments. Expenses are recorded on the accrual
basis. 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 securities transactions of the Portfolio are allocated pro rata based
on ownership percentage among the investors in the Portfolio at the time of such
determination.
D. Repurchase Agreements
The Portfolio may enter into repurchase agreements with financial institutions
deemed to be creditworthy by the Portfolio's Investment Adviser, subject to the
seller's agreement to repurchase such securities at a mutually agreed upon
price. Securities purchased subject to repurchase agreements are deposited with
the Portfolio's custodian and pursuant to the terms of the repurchase agreement
must have an aggregate market value greater than or equal to the repurchase
price plus accrued interest at all times. If the value of the underlying
securities falls below the value of the repurchase price plus accrued interest,
the Portfolio will require the seller to deposit additional collateral by the
next business day. If the request for additional collateral is not met, or the
seller defaults on its repurchase obligation, the Portfolio maintains the right
to sell the underlying securities at market value and may claim any resulting
loss against the seller. However, in the event of default or bankruptcy by the
seller, realization and/or retention of the collateral may be subject to legal
proceedings.
E. Federal Income Taxes
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code. Therefore, no federal income tax provision is required.
F. Other
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements. Actual results could
differ from those estimates.
Note 2--Fees and Transactions with Affiliates
The Portfolio has entered into an Administration and Services Agreement with
Bankers Trust Company ("Bankers Trust"). Under this Administration and Services
Agreement, Bankers Trust provides administrative, custody, transfer agency and
shareholder services to the Portfolio in return for a fee computed daily and
paid monthly at an annual rate of .05% of the Portfolio's average daily net
assets. Amounts owed under the Administration and Services Agreement amounted to
$2,491 at March 31, 1998.
The Portfolio has entered into an Advisory Agreement with Bankers Trust. Under
this Advisory Agreement, the Portfolio pays Bankers Trust an advisory fee
computed daily and paid monthly at an annual rate of .25% of the Portfolio's
average daily net assets. Accrued Advisory Fees amounted to $10,499, net of
reimbursable expenses of $1,956 at March 31, 1998.
Bankers Trust has voluntarily undertaken to waive its fees and reimburse
expenses of the Portfolio to the extent necessary, to limit all expenses to .30%
of the average daily net assets of the Portfolio. For the six months ended March
31, 1998, expenses of the Portfolio have been reduced by $11,718.
Certain officers of the Portfolio are also directors, officers and/or employees
of Edgewood Services, Inc., distributor of the BT Pyramid Mutual Fund. None of
the officers so affiliated received compensation for services as officers of the
Portfolio. Similarly, none of the Portfolio's officers received compensation
from the Portfolio.
The Portfolio is a participant with other affiliated entities in a revolving
credit facility ("the revolver")and a discretionary demand line of credit
facility collectively ("the credit facilities") in the amounts of $50,000,000
and $100,000,000 respectively. A commitment fee of .07% per annum on the average
daily amount of the available commitment is payable on a calendar quarter basis
and apportioned equally amongst all participants. Amounts borrowed under the
credit facilities will bear interest at a rate per annum equal to the Federal
Funds Rate plus .45%. No amounts were drawn down or outstanding under the credit
facilities as of and for the period ended March 31, 1998.
Note 3--Purchases and Sales of Investment Securities
The aggregate cost of purchases and proceeds from sales of long-term U.S.
Government obligations for the six months ended March 31, 1998 were $120,195,204
and $138,628,740, respectively. Additionally, at March 31, 1998 payable for
securities purchased amounted to $4,752,953.
The tax basis of investments held at March 31, 1998 was $58,428,061. The
aggregate gross unrealized appreciation for all investments was $39,687 and the
aggregate gross unrealized depreciation for all investments was $69,174.
Note 4--Net Assets
At March 31, 1998 Net Assets consisted of:
Paid-in Capital $58,485,691
Net Unrealized Appreciation on Investments (29,487)
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$58,456,204
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11
<PAGE>
BT PYRAMID MUTUAL FUNDS
BT INVESTMENT LIMITED TERM U.S. GOVERNMENT SECURITIES 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
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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.
--------------------
STA461100 (5/98)
