o BT PYRAMID MUTUAL FUNDS o
BT INSTITUTIONAL ASSET
MANAGEMENT FUND
ANNUAL REPORT
-------------
MARCH o 1998
<PAGE>
BT Institutional Asset Management Fund
Table of Contents
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
Report of Independent Accountants 10
Asset Management Portfolio
Statement of Net Assets 11
Statement of Operations 14
Statements of Changes in Net Assets 15
Financial Highlights 15
Notes to Financial Statements 16
Report of Independent Accountants 19
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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>
BT Institutional Asset Management Fund
Letter to Shareholders
We are pleased to present you with this 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.
The Fund returned 34.34%* for the annual period ended March 31, 1998, as
compared to 30.13% for the Asset Allocation Index-Long Range**, 48.00% for the
S&P 500 Index**, and 11.98% for the Salomon Broad Investment Grade (BIG)
Index**. The Lipper Flexible Portfolio Average*** had a return of 28.72% for the
same period. Since its inception on September 16, 1993, the Fund delivered a
total return of 90.53% cumulatively, or 15.27% annualized, as of March 31, 1998.
MARKET ACTIVITY
U.S. MARKETS
Given the continued absence of inflation and evidence of a slower economic
growth environment, the Federal Reserve Board has opted not to officially change
monetary policy since raising rates on March 25, 1997. The positive Federal
budget outlook has supported this interest rate scenario, as the U.S. now has
the smallest deficit in thirty years, with signs of a surplus coming onto the
books later in 1998.
The Asian currency crisis, whose effect began to be felt in the fourth calendar
quarter, may have been the major factor both keeping interest rates low and
impacting the stock and bond markets during this annual period. The Far East
turmoil helped strengthen both the dollar and dollar-denominated securities. It
also created a flight to quality that benefited both U.S. Treasuries and
municipal bonds. Equity investors tended to turn their focus away from smaller,
growth-oriented stocks and toward large cap names and more value-oriented
stocks.
- -----------------------------------------
Objective
Seeks to provide a high total return with
reduced long-term risk by investing in
stocks, bonds and short term instruments.
- -----------------------------------------
As the first calendar quarter of 1998 progressed and it became clear that the
Asian problems would have limited effect on the U.S., investors grew more
confident with the co-existence of low inflation, reasonably good GDP growth,
low unemployment, and low interest rates. Growth stocks came back into favor, as
did the corporate and mortgage sectors of the bond market.
U.S. EQUITIES
1997 was an impressive year for the U.S. equity market, particularly in the
large capitalization sector. Having broken the 7,000 barrier in February 1997,
the Dow Jones Industrial Average reached the 8,000 milestone by the middle of
July. The trend continued, with the Dow closing above the 9,000 mark for the
first time on April 6, 1998, just after the close of the Funds' fiscal year. The
S&P 500 Index also reached record high levels. However, as was anticipated,
short-term volatility plagued the bull market for equities every step of the
way. Major contributors to this volatility were the rippling effects of
weakening currencies, failing economies, and uncertain markets in Southeast
Asia, which, in turn, led to the Dow Jones' largest single one day point loss on
October 27, 1997. For the calendar year, large capitalization stocks
outperformed small capitalization stocks, though the small cap stocks
outperformed from March through September 1997, due to a resurgence in
technology stocks. Small cap stocks underperformed in the fourth calendar
quarter.
- -----------------------------------------
Investment Instruments
Primarily common stocks, corporate and
government issued intermediate to long-
term bonds, various government agency
issued asset-backed securities and all
types of domestic and foreign securities
and money market instruments.
- -----------------------------------------
The new year began inconspicuously, as the equity markets continued to reconcile
the impact of events in Asia. Stable to rising overall market levels following
the volatile fourth quarter for all equity sectors helped settle investors'
desire for safe havens and more liquid names. This, together with sustained
strong U.S. economic conditions, few signs of inflation, and stable interest
rates, led to a robust rally among all segments of the stock market during the
first calendar quarter overall.
------------------------------------
Five Largest Common Stock Holdings
------------------------------------
Pfizer, Inc.
------------------------------------
BankAmerica Corp.
------------------------------------
General Electric Co.
------------------------------------
Merck & Co., Inc.
------------------------------------
Chase Manhattan Corp.
------------------------------------
U.S. BONDS
Favorable economic conditions, ebbing inflation worries, and foreign investors
seeking a safe haven supported the bond market's rally through most of the first
three quarters of the Funds' fiscal year. In the first calendar quarter of 1998,
the bond market traded in a broad range, with the ten-year Treasury between
5.30% and 5.74%. This variance was primarily due to a change in perception about
the impact of the Asian crisis on the U.S. economy and, thereby, on Federal
Reserve Board policy. While U.S. Treasuries had outperformed through most of the
fiscal year, in early 1998, diminished fears about the Asian situation led to
the corporate sector benefiting from low levels of new issue supply and the
mortgage sector benefiting from stable rates tempering pre-payment concerns.
3
<PAGE>
BT Institutional Asset Management Fund
Letter to Shareholders
Diversification of Portfolio Investments
By Asset Class as of March 31, 1998
(percentages are based on market value)
[PLOT POINTS APPEAR BELOW]
Stocks 65%
Short Term Instruments 7%
Bonds 28%
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.
- --------------------------------------------------------------------------------
------------------------------------------------
Five Largest Fixed Income Securities
------------------------------------------------
FNMA TBA, 7.50%, 9/01/21
------------------------------------------------
GNMA TBA, 7.50%, 9/01/21
------------------------------------------------
US Treasury Note, 6.625%, 3/31/02
------------------------------------------------
US Treasury Note, 6.125%, 11/15/27
------------------------------------------------
US Treasury Note, 5.375%, 2/15/01
------------------------------------------------
INTERNATIONAL MARKETS
Though still lagging the U.S., most of the world's developed markets outside of
Asia soared to new highs during the fiscal year, shaking off summer doldrums and
the initial gloom of Asia's financial and economic malaise. After assessing the
limited impact of Asian weakness on earnings of firms elsewhere in the world,
investor sentiment turned sharply positive. However, concerns were reignited in
Japan, where the combination of softer exports to the region and a further
weakening in the domestic economy has likely pushed the nation into recession.
The crisis in Asia did devastate many of the emerging stock and bond markets in
the Pacific region as well as in Latin America and Russia.
Investors were particularly focused on Europe, where attractive valuations,
lower interest rates, and renewed economic growth pushed equity markets to
record levels. This backdrop, along with a trend in retirement planning away
from governmental paternalism and toward individual self-reliance, helped to
bolster an equity culture similar to that of the U.S. and U.K. The anticipated
success of European Economic and Monetary Union (EMU) further contributed to a
dramatic regional re-rating. The recent recommendation by the European Monetary
Institute and the German Bundesbank that EMU should proceed as scheduled in
January 1999 and that all eleven candidates should be approved was an important
landmark.
In Canada, consolidation in the banking industry and a slower growth rate, which
quelled fears of inflation, bolstered this equity market despite a currency
driven down by depressed commodity prices.
CASH
The U.S. dollar was strong versus most currencies, including the Japanese yen,
the German mark, and the British pound, during the annual period. Strong
domestic economic growth, controlled inflation, and the Federal Reserve Board on
hold--along with high volatility in Asia and Latin America--added to the
relative attractiveness of the U.S. currency.
INVESTMENT REVIEW
The Fund outperformed both the Asset Allocation Index-Long Range benchmark and
its Lipper category average. This strong relative performance was due primarily
to superior asset allocation.
Supported by favorable economic, fundamental, and sentiment factors, the Funds
remained overweighted in U.S. stocks virtually throughout the annual period. The
U.S. equity portion of the Funds' portfolios did not match S&P 500 Index
performance in the first half of the fiscal year, but did outperform in the
second half. Overall, as U.S. equities outperformed the most commonly used
international equities index, namely the MSCI EAFE Index**, for the twelve
months, such an allocation was the primary reason for the Funds' strong
performance. An increased allocation to equities in Continental Europe also
benefited the Funds, particularly in the second half of the fiscal year.## In
fact, most European markets outperformed the U.S. market by a wide margin during
the six months ending March 31, 1998.
An underweight position in bonds was supported by unfavorable valuations, by
interest rate measures, and by a weaker return forecast. The fixed income
portion of the Funds' portfolios matched the Salomon Broad Investment Grade
(BIG) Index# in the first half of the year and outperformed it in the second
half. Individual security selection in all asset classes remained strong.
As of March 31, 1998, the Fund's asset weightings were 55% in U.S. equities, 23%
in U.S. bonds, 5% in international bonds, 10% in international equities, and 7%
in Short Term Instruments.
MANAGER OUTLOOK
We remain positive with respect to equity markets in continental Europe. With
inflation in check and the impact of the Asian crisis still uncertain, we
believe that the Federal Reserve Board and the Bundesbank are likely to retain
their market-friendly policy stances
- ----------
* 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.
# The Salomon Broad Investment Grade Index covers an all-inclusive universe of
institutionally-traded U.S. Treasury, agency, mortgage and corporate
securities.
## Foreign investing involves special risks, including currency risk, increased
volatility of foreign securities and differences in auditing and other
financial standards.
4
<PAGE>
BT Institutional Asset Management Fund
Performance Comparison
for a while longer. Solid growth, low inflation and accommodating interest rates
should also continue to form an almost ideal backdrop for these markets. Thus,
we anticipate staying overweighted in these sectors for the near term.
We remain less sanguine, however, about longer-term prospects. In the U. S. ,
exceptionally strong domestic economic fundamentals will likely overwhelm the
downdraft from Asia, raising the risk of the economy overheating. In Continental
Europe, economic activity will likely gather momentum throughout the year,
fueled by monetary conditions and by a relaxation of fiscal policies. In short,
the environment is ripe, in our opinion, for an acceleration in European
domestic demand that should easily offset any negative impact from Asia.
Against this backdrop, central bank policies will likely become gradually more
restrictive in both the U.S. and core Europe, as 1998 progresses. We believe
that the Federal Reserve Board may increase rates, as inflation pressures build
by year-end. Europe has more room to grow before bumping against its capacity
constraints. Moreover, convergence of interest rates leading up to EMU actually
will require rate cuts in the peripheral countries in the near term.
Nevertheless, growing momentum in domestic demand is expected to push German
rates up by year-end as well. In this environment, we expect the U.S. Treasury
long-term bond yield to move back up accompanied as well by small rises in
European bond rates.
Equity markets, which have benefited from the stable U.S. monetary policy due in
large part to the turmoil in Asia, will likely turn sour should the Fed, in
fact, take action. European equities may suffer some ripple effect, though we
believe most, especially in the peripheral markets, will probably outperform the
U.S.
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 Fund
March 31, 1998
- --------------------------------------------------------------------------------
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
[GRAPH APPEARS HERE - SEE PLOT POINTS BELOW]
BT Institutional Asset Allocation S&P 500
Asset Management Fund Index--Long Range+ Index
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
- -------------------------------------
Total Return for the Period
Ended March 31, 1998
One Year Since 9/16/93*
34.34% 15.27%**
* 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.
- -------------------------------------
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>
BT Institutional Asset Management Fund
Statement of Assets and Liabilities March 31, 1998
<TABLE>
<S><C>
Assets
Investment in Asset Management Portfolio, at Value $ 510,600,390
Receivable for Shares of Beneficial Interest Subscribed 851,353
Prepaid Expenses and Other 16,408
Due from Bankers Trust, net 6,110
---------------
Total Assets 511,474,261
---------------
Liabilities
Payable for Shares of Beneficial Interest Redeemed 14,642,431
Accrued Expenses and Other 33,995
---------------
Total Liabilities 14,676,426
---------------
Net Assets $ 496,797,835
===============
Composition of Net Assets
Paid-in Capital $ 402,023,912
Undistributed Net Investment Income 849,020
Undistributed Net Realized Gain from Investment, Foreign
Currency Transactions, Forward Foreign Currency Contracts
and Futures Contracts 72,302,734
Net Unrealized Appreciation/Depreciation on:
Investment, Forward Foreign Currency Contracts and Foreign
Currency Transactions 18,329,614
Futures Contracts 3,292,555
---------------
Net Assets $ 496,797,835
===============
Net Asset Value, Offering and Redemption Price Per Share
(net assets divided by shares outstanding) $ 14.50
===============
Shares Outstanding ($0.001 par value per share, unlimited
number of shares of beneficial interest authorized) 34,270,931
===============
</TABLE>
- --------------------------------------------------------------------------------
Statement of Operations For the year ended March 31, 1998
<TABLE>
<S><C>
Investment Income
Income Allocated from Asset Management Portfolio, net $ 10,772,493
---------------
Expenses
Administration and Services Fees 543,152
Printing and Shareholder Reports 27,506
Registration Fees 11,615
Professional Fees 10,105
Trustees Fees 7,900
Miscellaneous 5,701
---------------
Total Expenses 605,979
Less Expenses Absorbed by Bankers Trust (605,979)
---------------
Net Expenses --
---------------
Net Investment Income 10,772,493
---------------
Realized and Unrealized Gain on Investment, Foreign Currency
Transactions, Forward Foreign Currency Contracts, and
Futures Contracts
Net Realized Gain from:
Investment, Forward Foreign Currency Contracts and
Foreign Currency Transactions 55,509,835
Futures Contracts 23,577,584
Net Change in Unrealized Appreciation/Depreciation on:
Investment, Forward Foreign Currency Contracts and
Foreign Currency Transactions 10,997,398
Futures Contracts 4,986,461
---------------
Net Realized and Unrealized Gain on Investment, Foreign
Currency Transactions, Forward Foreign Currency Contracts
and Futures Contracts 95,071,278
---------------
Net Increase in Net Assets from Operations $ 105,843,771
===============
</TABLE>
See Notes to Financial Statements on Page 9
6
<PAGE>
BT Institutional Asset Management Fund
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the For the
year ended year ended
March 31, 1998 March 31, 1997
---------------- ----------------
<S><C>
Increase (Decrease) in Net Assets from:
Operations
Net Investment Income $ 10,772,493 $ 6,937,157
Net Realized Gain (Loss) from Investment, Forward Foreign Currency
Contracts, Foreign Currency Transactions and Futures Contracts 79,087,419 22,524,906
Net Change in Unrealized Appreciation/Depreciation on Investment,
Forward Foreign Currency Contracts, Foreign Currency Transactions
and Futures Contracts 15,983,859 (1,720,429)
--------------- ---------------
Net Increase in Net Assets from Operations 105,843,771 27,741,634
--------------- ---------------
Distributions to Shareholders
Net Investment Income (10,455,723) (8,414,757)
Net Realized Gain from Investment Transactions (30,108,358) (6,468,985)
--------------- ---------------
Total Distributions (40,564,081) (14,883,742)
--------------- ---------------
Capital Transactions in Shares of Beneficial Interest
Proceeds from Sales of Shares 203,101,614 125,920,140
Dividend Reinvestments 40,563,144 14,881,177
Cost of Shares Redeemed (82,461,234) (67,111,229)
--------------- ---------------
Net Increase from Capital Transactions in Shares of Beneficial Interest 161,203,524 73,690,088
--------------- ---------------
Total Increase in Net Assets 226,483,214 86,547,980
Net Assets
Beginning of Period 270,314,621 183,766,641
--------------- ---------------
End of Period (including undistributed net investment income of
$849,020 and $532,250, respectively) $ 496,797,835 $ 270,314,621
=============== ===============
</TABLE>
See Notes to Financial Statements on Page 9
7
<PAGE>
BT Institutional Asset Management 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 Institutional Asset Management Fund.
<TABLE>
<CAPTION
For the period
For the years ended September 16, 1993
March 31, (Commencement
--------------------------------------------- of Operations) to
1998 1997 1996 1995 March 31, 1994
------ ------ ------ ------ ------------------
<S><C>
Per Share Operating Performance:
Net Asset Value, Beginning of Period $12.05 $11.25 $9.99 $9.61 $10.00
------ ------ ----- ----- ------
Income from Investment Operations
Net Investment Income 0.37 0.38 0.41 0.36 0.11
Net Realized and Unrealized Gain (Loss) on
Investments, Foreign Currencies and
Futures Contracts 3.60 1.19 1.52 0.30 (0.44)
------ ------ ----- ----- ------
Total Income (Loss) from Investment Operations 3.97 1.57 1.93 0.66 (0.33)
------ ------ ----- ----- ------
Distributions to Shareholders
Net Investment Income (0.37) (0.45) (0.42) (0.28) (0.06)
Net Realized Gain from Investment
Transactions (1.15) (0.32) (0.25) -- --
------ ------ ----- ----- ------
Total Distributions (1.52) (0.77) (0.67) (0.28) (0.06)
------ ------ ----- ----- ------
Net Asset Value, End of Period $14.50 $12.05 $11.25 $9.99 $9.61
====== ====== ====== ===== ======
Total Investment Return 34.34% 14.31% 19.77% 7.13% (6.06)%
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) $496,798 $270,315 $183,767 $83,201 $75,021
Ratios to Average Net Assets:
Net Investment Income 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%*
Decrease Reflected in Above Expense Ratio
Due to Absorption of Expenses by
Bankers Trust 0.32% 0.36% 0.39% 0.43% 0.73%*
</TABLE>
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* Annualized
See Notes to Financial Statements on Page 9
8
<PAGE>
BT Institutional Asset Management Fund
Notes to Financial Statements
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 March 31, 1998, the Fund's investment was approximately 79% 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 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.
C. Dividends
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.
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. For
the year ended March 31, 1998, $1,987,719 of paid-in-capital was reclassified to
undistributed net realized gain.
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 distribute substantially
all of its taxable income to shareholders. Therefore, no federal income tax
provision is required.
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 0.15% of the Fund's average daily net assets. For
the year ended March 31, 1998, this fee aggregated $543,152.
On September 30, 1996, the Trust entered into a Distribution Agreement with
Edgewood Services, Inc. ("Edgewood"). Under the Distribution Agreement with the
Trust, pursuant to Rule 12b-1 of the 1940 Act, Edgewood, may seek reimbursement,
at an annual rate not exceeding 0.20% of the Fund's average daily net assets,
for expenses incurred in connection with any activities primarily intended to
result in the sale of the Fund's shares. For the year ended March 31, 1998,
there were no reimbursable expenses incurred under this agreement.
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. For the year
ended March 31, 1998, expenses of the Fund have been reduced by $605,979.
Certain officers of the Fund are also directors, officers and/or employees of
Edgewood. None of the officers so affiliated received compensation from 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 year 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
year ended year ended
March 31, 1998 March 31, 1997
----------------------- -----------------------
Shares Amount Shares Amount
-------- -------- -------- --------
Sold 14,789,248 $203,101,614 10,490,486 $125,920,140
Reinvested 3,040,333 40,563,144 1,255,355 14,881,177
Redeemed (5,985,067) (82,461,234) (5,647,355) (67,111,229)
----------- ------------ ---------- ------------
Net Increase 11,844,514 $161,203,524 6,098,486 $ 73,690,088
=========== ============ ========== ============
- -------------------------------------------------------------------------------
Federal Tax Information (unaudited)
13.01% of the ordinary income dividends paid by the BT Institutional Asset
Management Fund during the tax year ended March 31, 1998, qualified for the
Dividends Received Deduction. The Fund paid a long-term capital gain dividend of
$0.7600 during the tax year ended March 31, 1998. This dividend was classified
as 20% capital gain.
9
<PAGE>
BT Institutional Asset Management Fund
Report of Independent Accountants
To the Trustees of BT Pyramid Mutual Funds and the Shareholders
of BT Institutional Asset Management Fund:
We have audited the accompanying statement of assets and liabilities of the BT
Institutional Asset Management Fund (one of the Funds comprising BT Pyramid
Mutual Funds) as of March 31, 1998, and the related statement of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
four years in the period then ended and for the period September 16, 1993
(commencement of operations) to March 31, 1994. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1998, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the BT
Institutional Asset Management Fund as of March 31, 1998, the results of its
operations, the changes in its net assets and the financial highlights for each
of the periods referred to above, in conformity with generally accepted
accounting principles.
Coopers & Lybrand L.L.P.
Kansas City, Missouri
May 11, 1998
10
<PAGE>
Asset Management Portfolio
Statement of Net Assets March 31, 1998
Shares Description Value
------ ----------- -----
COMMON STOCKS - 41.36%
Aerospace - 0.16%
17,600 Boeing Co. $ 917,400
2,352 Raytheon Co.-Cl. A 133,783
------------
1,051,183
------------
Airlines - 0.44%
14,300 AMR Corp. (a) 2,047,581
6,800 Delta Air Lines, Inc. 804,100
------------
2,851,681
------------
Auto Related - 1.04%
28,500 Chrysler Corp. 1,184,531
53,000 Dana Corp. 3,083,938
36,900 General Motors Corp. 2,488,443
------------
6,756,912
------------
Banks - 3.30%
97,000 BankAmerica Corp. 8,014,625
54,900 BankBoston Corp. 6,052,725
46,400 Chase Manhattan Corp. 6,258,200
7,700 Citicorp 1,093,400
------------
21,418,950
------------
Beverages - 1.52%
37,200 Coca-Cola Co. 2,880,675
27,400 Coca-Cola Enterprises, Inc. 1,005,238
127,400 PepsiCo, Inc. 5,438,387
13,800 Seagram Company Ltd. 526,988
------------
9,851,288
------------
Chemicals and Toxic Waste - 1.74%
9,600 Air Products & Chemical Inc. 795,600
82,200 Du Pont (E.I.) de Nemours & Co. 5,589,600
84,500 Monsanto Co. 4,394,000
16,900 Solutia, Inc. 502,775
------------
11,281,975
------------
Computer Services - 1.38%
65,000 Cendant Corp. (a) 2,575,625
78,250 Cisco Systems, Inc. (a) 5,350,344
40,700 Seagate Technology Inc. (a) 1,027,675
------------
8,953,644
------------
Computer Software - 1.20%
11,400 BMC Software, Inc. (a) 955,463
55,275 Computer Associates International, Inc. 3,192,131
28,400 Microsoft Corp. (a) 2,541,800
35,625 Oracle Corp. (a) 1,124,414
------------
7,813,808
------------
Diversified - 1.61%
114,900 AlliedSignal, Inc. 4,825,800
14,100 SUPERVALU, Inc. 657,412
21,400 Textron, Inc. 1,647,800
36,200 United Technologies Corp. 3,341,713
------------
10,472,725
------------
Drugs - 3.18%
45,600 Lilly (Eli) & Co. 2,718,900
58,600 Merck & Co., Inc. 7,522,775
104,600 Pfizer, Inc. 10,427,313
------------
20,668,988
------------
Shares Description Value
------ ----------- -----
Electrical Equipment - 1.71%
48,400 Emerson Electric Co. $ 3,155,075
92,200 General Electric Co. 7,946,488
------------
11,101,563
------------
Electronics - 1.40%
51,400 Analog Devices, Inc. (a) 1,709,050
46,000 Intel Corp. 3,590,875
23,900 LSI Logic Corp. (a) 603,475
38,400 Motorola, Inc. 2,328,000
23,000 Xilinx, Inc. (a) 861,063
------------
9,092,463
------------
Entertainment - 0.30%
18,027 Disney (Walt) Co. 1,924,382
------------
Environment Control - 0.25%
47,000 U.S. Filter Corp. (a) 1,650,875
------------
Financial Services - 2.27%
29,900 Associates First Capital Corp.-Cl. A 2,362,100
72,000 Federal Home Loan Mortgage Corp. 3,415,500
41,100 First Data Corp. 1,335,750
39,400 MBNA Corp. 1,411,013
20,400 Merrill Lynch & Co., Inc. 1,693,200
10,900 T. Rowe Price Associates 767,087
62,949 Travelers Group, Inc. 3,776,940
------------
14,761,590
------------
Foods - 1.53%
44,500 Bestfoods 5,200,937
11,125 Corn Products International, Inc. (a) 399,109
59,500 Sara Lee Corp. 3,666,688
10,875 Sodexho Marriott Service 288,867
12,730 Tricon Global Restaurants, Inc. (a) 382,696
------------
9,938,297
------------
Healthcare - 0.97%
8,400 Abbott Laboratories 632,625
77,500 Johnson & Johnson 5,681,719
------------
6,314,344
------------
Hospital Supplies and Healthcare - 0.80%
36,700 Baxter International Inc. 2,023,088
19,800 Becton, Dickinson & Co. 1,347,637
54,600 U.S. Surgical Corp. 1,801,800
------------
5,172,525
------------
Hotel/Motel - 0.49%
43,500 Marriott International, Inc. (a) 1,617,656
43,500 Marriott International, Inc.-Cl. A (a) 1,557,844
------------
3,175,500
------------
Household Products - 1.14%
21,800 Clorox Co. 1,867,988
65,400 Procter & Gamble Co. 5,518,125
------------
7,386,113
------------
Insurance - 1.32%
42,450 American International Group, Inc. 5,346,047
14,600 General Re Corp. 3,221,125
------------
8,567,172
------------
See Notes to Financial Statements on Pages 16 thru 18
11
<PAGE>
Asset Management Portfolio
Statement of Net Assets March 31, 1998
Shares Description Value
------ ----------- -----
Metals - 0.16%
20,000 Alcan Aluminium Ltd. $ 625,000
21,600 Freeport-McMoRan Copper & Gold, Inc.-Cl. B 430,650
------------
1,055,650
------------
Office Equipment and Computers - 1.05%
38,200 Hewlett-Packard Co. 2,420,925
26,400 International Business Machines Corp. 2,742,300
15,900 Xerox Corp. 1,692,356
------------
6,855,581
------------
Oil Equipment and Services - 0.30%
25,400 Apache Corp. 933,450
13,200 Schlumberger Ltd. 999,900
------------
1,933,350
------------
Oil-Domestic - 1.03%
5,800 Atlantic Richfield Co. 456,025
16,927 Burlington Resources, Inc. 811,438
54,600 ENSCO International, Inc. 1,515,150
26,900 Noble Drilling Corp. (a) 822,131
14,300 Phillips Petroleum Co. 714,106
61,400 Unocal Corp. 2,375,413
------------
6,694,263
------------
Oil-International - 2.08%
8,700 Amoco Corp. 751,463
11,600 Chevron Corp. 931,625
41,900 Exxon Corp. 2,833,487
15,200 Mobil Corp. 1,164,700
65,600 Royal Dutch Petroleum Co. 3,726,900
68,000 Texaco, Inc. 4,097,000
------------
13,505,175
------------
Paper and Forest Products - 0.45%
29,400 Champion International Corp. 1,596,788
28,900 International Paper Co. 1,352,881
------------
2,949,669
------------
Printing and Publishing - 0.52%
44,500 McGraw-Hill Companies, Inc. 3,384,781
------------
Railroads - 0.35%
21,600 Burlington Northern Santa Fe 2,246,400
------------
Retail - 1.91%
72,539 Dollar General Corp. 2,806,343
31,200 Federated Department Stores, Inc. (a) 1,616,550
30,900 Lowe's Companies, Inc. 2,168,793
18,500 Nine West Group, Inc. (a) 455,563
26,400 Tiffany & Co. 1,285,350
80,000 Wal-Mart Stores, Inc. 4,065,000
------------
12,397,599
------------
Telecommunications - 1.75%
81,700 AT&T Corp. 5,361,563
58,700 Comcast Corp.-Cl. A 2,072,843
57,400 MCI Communications Corp. 2,841,300
15,700 Sprint Corp. 1,062,694
------------
11,338,400
------------
Shares Description Value
------ ----------- -----
Tobacco - 0.70%
109,100 Philip Morris Companies, Inc. $ 4,548,106
------------
Utility-Electric - 1.10%
16,900 American Electric Power Co. 849,225
11,900 Dominion Resources, Inc. 499,800
21,500 FirstEnergy Corp. 662,469
30,400 FPL Group, Inc. 1,953,200
36,400 PG&E Corp. 1,201,200
16,500 Public Service Enterprise Group, Inc. 624,937
33,900 Texas Utilities Co. 1,332,694
------------
7,123,525
------------
Utility-Gas, Natural Gas - 0.41%
46,000 Consolidated Natural Gas Co. 2,653,625
------------
Utility-Telephone - 1.80%
19,600 Ameritech Corp. 968,975
7,700 Bell Atlantic Corp. 789,250
17,800 BellSouth Corp. 1,202,613
41,200 Frontier Corp. 1,341,575
81,500 GTE Corp. 4,879,813
12,128 Lucent Technologies, Inc. 1,550,867
21,800 SBC Communications, Inc. 951,025
------------
11,684,118
------------
Total Common Stocks (Cost $246,624,793) 268,576,220
------------
Principal
Amount
- ---------
CORPORATE DEBT-NON CONVERTIBLE - 3.53%
Financial Services - 1.84%
$ 400,000 BankBoston Corp., 6.38%, 8/11/00 403,368
510,000 Chrysler Financial Corp., 6.11%, 7/28/99 511,571
400,000 CP Limited Partnership, 6.92%, 12/10/04 400,558
2,400,000 Ford Motor Credit Co., 6.25%, 11/08/00 2,415,625
600,000 Great Westem Financial Corp., 6.375%,
7/01/00 603,369
940,000 IBM Credit Corp, 5.875%, 8/25/99 941,814
1,375,000 KFW International Finance, 8.20%, 6/01/06 1,558,909
600,000 Lehman Brothers Holdings-Ser. E, 6.30%,
8/11/99 602,058
675,000 Meditrust, 7.114%, 8/15/04 (d) 671,858
880,000 NationsBank Corp., 7.00%, 9/15/01 904,721
765,000 Paine Webber Group, Inc., 9.25%, 12/15/01 835,345
850,000 Salomon, Inc., 7.50%, 2/01/03 890,420
930,000 Vesta Capital Trust I, 8.525%, 1/15/27 (d) 1,030,435
225,000 Wharf International Finance Ltd., 7.625%,
3/13/07 199,193
------------
11,969,244
------------
Foreign Industrial - 0.05%
19,000 Celulosa Arauco y Constitu, 6.75%, 12/15/03 18,655
320,000 Celulosa Arauco y Constitu, 6.95%, 9/15/05 312,917
------------
331,572
------------
Industrial - 1.61%
300,000 Allied Waste North America, 10.25%,
12/01/06 335,250
335,000 Avalon Properties, Inc., 6.875%, 12/15/07 335,281
760,000 Columbus Southern Power, 6.51%, 2/01/08 757,568
95,000 Conmed Corp., 9.00%, 3/15/08 (d) 96,900
See Notes to Financial Statements on Pages 16 thru 18
12
<PAGE>
Asset Management Portfolio
Statement of Net Assets March 31, 1998
Principal
Amount Description Value
- --------- ----------- -----
$ 830,000 Consolidated Edison, 6.45%, 12/01/07 $ 836,611
470,000 Dime Capital Trust, 9.33%, 5/06/27 531,322
270,000 Empress River Casino Finance, 10.75%,
4/01/02 294,300
555,000 Federated Department Stores, Inc., 7.00%,
2/15/28 550,655
20,000 Federated Department Stores, Inc., 8.50%,
6/15/03 21,864
530,000 First Industrial LP, 7.00%, 12/01/06 535,297
190,000 Hutchison Whampoa Finance, 6.988%,
8/01/37 (d) 180,025
625,000 Laidlaw, Inc., 6.65%, 10/01/04 630,953
430,000 Loewen Group International, Inc.-Ser. 4, 8.25%,
10/15/03 457,323
290,000 Marriott International, Series A, 6.75%,
12/15/03 295,457
125,000 Marriott International, Series B, 7.875%,
4/15/05 135,330
800,000 Merck & Co., 5.76%, 5/03/37 821,918
530,000 Mutual Life Insurance Co., 0.00%,
8/15/24 (c) (d) 688,997
750,000 News America, Inc., 6.625%, 1/09/08 (d) 737,925
330,000 Revlon Consumer Products, 8.625%, 2/01/08 (d) 334,950
215,000 Standard Credit Card Master Trust, 6.55%,
10/07/05 219,537
520,000 Tenet Healthcare Corp., 8.625%, 12/01/03 553,829
485,000 Tenet Healthcare Corp., 9.625%, 9/01/02 526,226
535,000 Texas Instruments, Inc., 6.75%, 7/15/99 540,703
------------
10,418,221
------------
Utility - 0.03%
35,000 Idaho Power Co., 8.00%, 3/15/04 38,008
140,000 Potomac Edison Co., 8.00%, 6/01/24 150,183
------------
188,191
------------
Total Corporate Debt Non-Convertible (Cost $22,438,726) 22,907,228
------------
FOREIGN DEBT - 0.33%
210,000 Guangdong International, 8.75%, 10/24/16(d) 192,750
125,000 Manitoba, 6.125%, 1/19/04 125,250
365,000 National Australia Bank, 6.60%, 12/10/07 366,482
995,000 New Zealand Government, 8.75%, 12/15/06 1,165,682
95,000 New Zealand Government, 10.625%, 11/15/05 121,067
250,000 Tenaga Nasional Berhad, 7.50%, 11/01/25 (d) 194,256
------------
Total Foreign Debt (Cost $2,117,202) 2,165,487
------------
U.S. GOVERNMENT AND AGENCIES - 2.68%
700,000 FNMA TBA, 6.00%, 4/01/08 689,938
2,500,000 FNMA TBA, 6.50%, 4/01/23 2,475,000
1,400,000 FNMA TBA, 7.00%, 9/01/21 1,415,313
7,500,000 FNMA TBA, 7.50%, 9/01/21 7,694,534
690,000 FNMA, 5.75%, 2/15/08 682,316
325,000 FNMA, 8.625%, 11/10/04 334,258
150,000 FNMA, Global Bond, 6.35%, 11/23/01 150,633
3,900,000 GNMA TBA, 7.50%, 9/01/21 4,003,596
------------
Total U.S. Government and Agencies (Cost $17,417,355) 17,445,588
------------
Principal
Amount/Shares Description Value
- ------------- ----------- -----
U.S. TREASURY SECURITIES - 2.98%
$ 1,050,000 U.S. Treasury Bond, 7.625%, 11/15/22 $ 1,263,939
1,300,000 U.S. Treasury Bond, 8.125%, 8/15/19 1,626,823
2,890,000 U.S. Treasury Note, 5.375%, 2/15/01 2,873,285
2,685,000 U.S. Treasury Note, 5.50%, 2/15/08 2,652,689
2,020,000 U.S. Treasury Note, 7.00%, 7/15/06 2,183,491
460,000 U.S. Treasury Note, 5.50%, 2/28/03 457,339
910,000 U.S. Treasury Note, 5.75%, 9/30/99 912,136
840,000 U.S. Treasury Note, 5.875%, 11/30/01 845,776
2,810,000 U.S. Treasury Note, 6.125%, 11/15/27 2,882,010
260,000 U.S. Treasury Note, 6.25%, 8/31/02 265,727
3,190,000 U.S. Treasury Note, 6.625%, 3/31/02 3,296,662
70,000 U.S. Treasury Note, 7.25%, 8/15/04 75,731
------------
Total U.S. Treasury Securities (Cost $19,408,830) 19,335,608
------------
SHORT TERM INSTRUMENTS - 48.65%
Mutual Fund - 5.59%
36,330,332 BT Institutional Cash Management Fund 36,330,332
------------
Repurchase Agreement - 6.43%
41,746,461 Open Repurchase agreement with Goldman 41,746,461
------------
Sachs dated 3/31/98, 5.85%, principal and
interest in the amount of $41,753,247, due
4/01/98 (collateralized by U.S. Treasury Bonds,
par value of $34,820,000, coupon rate of
10.75%, due 2/15/03, value of $42,712,303).
U.S. Government and Agency - 36.63% (b)
30,000,000 U.S. Treasury Bill, 5.07%, 8/20/98 29,400,750
8,840,000 U.S. Treasury Bill, 5.15%, 4/30/98 8,803,111
50,000,000 U.S. Treasury Bill, 5.25%, 4/02/98 49,993,014
20,000,000 U.S. Treasury Bill, 5.26%, 4/23/98 19,935,711
130,000,000 U.S. Treasury Bill, 5.35%, 4/16/98 129,710,208
------------
237,842,794
------------
Total Short Term Instruments (Cost $315,930,688) 315,919,587
------------
Total Investments (Cost $623,937,594) 99.53% 646,349,718
Other Assets in Excess of Liabilities 0.47% 3,022,704
------- ------------
Net Assets 100.00% $649,372,422
======= ============
- ----------
(a) Non-income producing security
(b) Held as collateral for Futures Contracts
(c) Step-up Bond Security. On 8/15/99 this security will begin accruing interest
at a rate of 11.25% from then until maturity.
(d) 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.
The following abbreviations are used in the portfolio description:
FNMA -- Federal National Mortgage Association
GNMA -- Government National Mortgage Association
TBA -- To be announced
See Notes to Financial Statements on Pages 16 thru 18
13
<PAGE>
Asset Management Portfolio
Statement of Operations For the year ended March 31, 1998
<TABLE>
<S><C>
Investment Income
Dividends (net of foreign withholding tax of $16,738) $ 3,593,003
Interest 13,202,469
---------------
Total Investment Income 16,795,472
---------------
Expenses
Advisory Fees 3,056,313
Administration and Services Fees 470,202
Professional Fees and Other 24,367
Trustees Fees 2,200
---------------
Total Expenses 3,553,082
Less Expenses Absorbed by Bankers Trust (731,870)
---------------
Net Expenses 2,821,212
---------------
Net Investment Income 13,974,260
---------------
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 70,908,602
Futures Transactions 30,480,665
Net Change in Unrealized Appreciation/Depreciation on:
Investments, Forward Foreign Currency Contracts and
Foreign Currency Transactions 10,992,220
Futures Contracts 10,911,111
---------------
Net Realized and Unrealized Gain on Investments, Foreign Currencies,
Forward Foreign Currency Transactions and Futures Contracts 123,292,598
---------------
Net Increase in Net Assets from Operations $ 137,266,858
===============
</TABLE>
See Notes to Financial Statements on Pages 16 thru 18
14
<PAGE>
Asset Management Portfolio
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the For the
year ended year ended
March 31, 1998 March 31, 1997
---------------- ----------------
<S><C>
Increase (Decrease) in Net Assets from:
Operations
Net Investment Income $ 13,974,260 $ 9,037,347
Net Realized Gain from Investments, Foreign Currency Transactions, Forward
Foreign Currency Contracts and Futures Transactions 101,389,267 29,068,603
Net Change in Unrealized Appreciation/Depreciation on Investments, Foreign
Currency Transactions, Forward Foreign Currency Contracts and Futures Contracts 21,903,331 (1,730,893)
--------------- ---------------
Net Increase in Net Assets from Operations 137,266,858 36,375,057
--------------- ---------------
Capital Transactions
Proceeds from Capital Invested 305,009,400 166,792,562
Value of Capital Withdrawn (141,442,529) (94,771,334)
--------------- ---------------
Net Increase in Net Assets from Capital Transactions 163,566,871 72,021,228
--------------- ---------------
Total Increase in Net Assets 300,833,729 108,396,285
Net Assets
Beginning of Period 348,538,693 240,142,408
--------------- ---------------
End of Period $ 649,372,422 $ 348,538,693
=============== ===============
</TABLE>
- -------------------------------------------------------------------------------
Financial Highlights
Contained below are selected ratios to average net assets and other
supplemental data for the periods indicated for the Asset Management
Portfolio.
<TABLE>
<CAPTION>
For the period
For the years ended September 16, 1993
March 31, (Commencement
---------------------------------------------- of Operations) to
1998 1997 1996 1995 March 31, 1994
------ ------ ------ ------ ------------------
<S><C>
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) $649,372 $348,539 $240,142 $96,529 $36,283
Ratios to Average Net Assets:
Net Investment Income 2.97% 3.12% 3.99% 3.78% 2.83%
Expenses 0.60% 0.60% 0.60% 0.60% 0.60%*
Decrease Reflected in Above Expense Ratio
Due to Absorption of Expenses by Bankers
Trust 0.16% 0.16% 0.17% 0.19% 0.33%*
Portfolio Turnover Rate 199% 137% 154% 92% 56%
Average Commission Paid Per Share+ $0.0307 $0.0466 -- -- --
</TABLE>
* Annualized
+ For fiscal years beginning on or after September 1, 1995, the Portfolio is
required to disclose its average commission rate per share for security
trades on which commissions are charged.
See Notes to Financial Statements on Pages 16 thru 18
15
<PAGE>
Asset Management Portfolio
Notes to Financial Statements
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 an open-end
management investment company. The Portfolio was organized on June 9, 1992 as an
unincorporated trust under the laws of New York 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 a
security traded on that exchange prior to the time when the Portfolio assets are
valued. Short-term obligations with remaining maturities of 60 days or less are
valued at amortized cost. Other short-term debt securities are valued on a
mark-to-market basis until such time as they reach a remaining maturity of 60
days, whereupon they will be valued at amortized cost using their value on the
61st day. All other securities and other assets are valued at their fair value
as determined in good faith under procedures established by and under the
general supervision of the Trustees.
C. Security Transactions and Net Investment 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 accretion of 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 the 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 deposit either in cash or securities an amount equal to
a certain percentage of the contract amount. Subsequent 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
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code. Therefore, no federal income tax provision is required.
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.
16
<PAGE>
Asset Management Portfolio
Notes to Financial Statements
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 0.10% of the Portfolio's average daily net
assets. Amount owed under the Administration and Services Agreement amounted to
$42,467, net of waived expenses of $10,994.
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 0.65% of the Portfolio's
average daily net assets. At March 31, 1998 amounts owed under the Advisory
Agreement amounted to $276,035 net of waived expenses $71,460.
Bankers Trust has voluntarily undertaken to waive its fees and reimburse
expenses of the Portfolio, to the extent necessary, to limit all expenses to
0.60% of the average daily net assets of the Portfolio. For the year ended March
31, 1998, expenses of the Portfolio have been reduced by $731,870.
On September 30, 1996, the Trust entered into a Distribution Agreement with
Edgewood Services, Inc. ("Edgewood").
Certain officers of the Portfolio are also directors, officers and/or employees
of Edgewood. None of the officers so affiliated received compensation for
services as officers of the Portfolio.
The Portfolio may invest in the BT Institutional Cash Management Fund ("the
Fund"), an open-end management investment company managed by Bankers Trust
Company ("the Company"). The Fund is offered as a cash management option to the
Portfolio and other accounts managed by the Company. Distributions from the Fund
to the Portfolio as of March 31, 1998 amounted to $1,449,948 and are included in
interest income. Additionally, $153,556 is reflected as interest income
receivable at March 31, 1998.
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 amongst all participants. Amounts borrowed under
the credit facility 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 year ended March 31, 1998.
Note 3--Purchases and Sales of Investment Securities
At March 31, 1998 amounts owed for securities purchased was $16,499,398. The
aggregate cost of purchases and proceeds from sales of investments, other than
short-term obligations, for the year ended March 31, 1998 were $571,095,543 and
$573,551,175, respectively. For Federal income tax purposes, the tax basis of
investments held at March 31, 1998 was $626,283,095. The aggregate gross
unrealized appreciation for all investments was $21,268,479 and the aggregate
gross unrealized depreciation for all investments was $1,201,856. On March 31,
1998, the Asset Management Portfolio had a payable of $16,499,398 for securities
purchased.
17
<PAGE>
Asset Management Portfolio
Notes to Financial Statements
Note 4--Futures Contracts
A summary of obligations under these financial instruments at March 31, 1998 is
as follows:
<TABLE>
<CAPTION>
Unrealized
Appreciation
Type of Futures Expiration Contracts Position Market Value (Depreciation)(US$)
- ------------------------- --------------- ----------- ---------- ------------- -------------------
<S><C>
S&P 500 June 1998 442 Long $ 122,710,250 $ 5,881,390
S&P 500 September 1998 100 Short 28,060,000 (1,008,100)
CAC 40 Year Futures June 1998 256 Long 31,841,228 2,936,943
US Treasury Futures June 1998 805 Long 90,461,875 (567,322)
USLong Bond 20 Year June 1998 100 Short 12,025,000 (31,850)
US Long Bond 20 Year September 1998 100 Long 11,996,875 32,993
Dax Index Future June 1998 90 Long 24,898,644 1,137,132
Japanese Bond Futures June 1998 30 Long 29,325,324 146,152
FTSE 100 Index June 1998 55 Long 1,960,191 76,045
----------- ------------- ------------
Total 1,978 $ 353,279,387 $ 8,603,383
=========== ============= ============
</TABLE>
At March 31, 1998, the portfolio segregated sufficient securities to cover
margin on open futures contracts.
Note 5--Open Forward Foreign Currency
Contracts A summary of obligations under these financial instruments at March
31, 1998 is as follows:
<TABLE>
<CAPTION>
Net Unrealized
Appreciation
Contracts to Deliver In Exchange For Settlement Date Value (US$) (Depreciation)(US$)
- --------------------------------- ------------------------- --------------- ------------ -------------------
Purchases
- --------------------------------------------------------------------------------------------------------------------
<S><C>
German Deutschemark 13,515,000 U.S. Dollars $ 7,489,609 4/6/98 $ 7,313,312 $ (176,297)
French Franc 174,571,000 U.S. Dollars 28,853,995 4/6/98 28,206,657 (647,338)
British Pound 3,249,000 U.S. Dollars 5,357,601 4/6/98 5,428,104 70,503
Japanese Yen 1,394,485,000 U.S. Dollars 11,124,731 4/6/98 10,471,465 (653,266)
------------
Total Net Unrealized Depreciation $ (1,406,398)
------------
</TABLE>
Note 6--Net Assets
At March 31, 1998 net assets consisted of:
Paid-in Capital $620,026,522
Net Unrealized Appreciation on Investments,
Futures, Foreign Currencies and Forward
Foreign Currency Contracts $ 29,345,900
------------
$649,372,422
============
18
<PAGE>
Asset Management Portfolio
Report of Independent Accountants
To the Trustees and Holders of Beneficial Interest of the Asset Management
Portfolio:
We have audited the accompanying statement of net assets of the Asset Management
Portfolio as of March 31, 1998, and the related statement of operations for the
year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
four years in the period then ended and for the period September 16, 1993
(commencement of operations) to March 31, 1994. These financial statements and
financial highlights are the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1998, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Asset Management Portfolio as of March 31, 1998, the results of its operations,
the changes in its net assets, and the financial highlights for each of the
periods referred to above, in conformity with generally accepted accounting
principles.
Coopers & Lybrand L.L.P.
Kansas City, Missouri
May 11, 1998
19
<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
EDGEWOOD SERVICES, INC.
Clearing Operations
P.O. Box 897
Pittsburgh, PA 15230-0897
Custodian and Transfer Agent
BANKERS TRUST COMPANY
130 Liberty Street
New York, NY 10006
Independent Accountants
COOPERS & LYBRAND L.L.P.
1100 Main Street, Suite 900
Kansas City, MO 64105
Counsel
WILLKIE FARR & GALLAGHER
153 East 53rd Street
New York, NY 10022
-----------------------------
For information on how to invest, shareholder account information and current
price and yield information, please contact your relationship manager or the BT
Mutual Fund Service Center at (800) 368-4031. This must be preceded or
accompanied by a current prospectus for the Fund.
-----------------------------
STA482200 (5/98)
