September 30, 1999
[GRAPHIC OMITTED] BT Mutual Funds
BT PreservationPlus Fund
Annual Report
TRUST: BT PYRAMID MUTUAL FUNDS
INVESTMENT ADVISOR: BANKERS TRUST COMPANY
<PAGE>
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BT PreservationPlus Fund
Table of Contents
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Letter to Shareholders ........................................ 3
BT PreservationPlus Fund
Statement of Assets and Liabilities ........................ 7
Statement of Operations .................................... 8
Statements of Changes in Net Assets ........................ 9
Financial Highlights ....................................... 10
Notes to Financial Statements .............................. 11
Report ofIndependent Auditors .............................. 13
BT PreservationPlus Portfolio
Schedule of Portfolio Investments .......................... 14
Statement of Assets and Liabilities ........................ 17
Statement of Operations .................................... 17
Statements of Changes in Net Assets ........................ 18
Financial Highlights ....................................... 18
Notes to Financial Statements .............................. 19
Report of Independent Auditors ............................. 21
Proxy Results ................................................. 22
------------------------
The Fund is not insured by the FDIC and
is not a deposit, obligation of or
guaranteed by Bankers Trust Company. The
Fund is subject to investment risks,
including possible loss of principal
amount invested.
------------------------
2
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BT PreservationPlus Fund
Letter to Shareholders
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We are pleased to present you with this annual report for the year ended
September 30, 1999 for the BT PreservationPlus Fund (the "Fund"). It provides a
review of the market, the Portfolio, and our outlook. Included are a complete
financial summary of the Fund's operations and a listing of the Portfolio's
holdings.
The BT PreservationPlus Fund is the first SEC registered mutual fund
specifically designed as an investment alternative to traditional GIC commingled
funds and other stable value products. The Fund is open to investors in
participant-directed employee benefit plans that meet certain eligibility
criteria, including corporate 401(k), public 457, and not-for-profit 403(b)
plans.
MARKET ACTIVITY
Overall, the U.S. bond market was dominated by a dramatic increase in interest
rates during the twelve months ended September 30, 1999.
A myriad of political and economic events boosted the "spread sectors" but
lofted the U.S. yield curve across all maturities over the first six months of
the Fund's fiscal year, dragging down the performance of U.S. Treasury
securities.
o The birth of the Euro currency, Brazilian devaluation, NATO military action
in the Balkans, and heavy merger activity and booming debt origination in the
U.S., were just some of the factors that led to disappointing returns from
U.S. Treasuries. The Treasury market conceded to reduced concerns over
international turmoil and increased investor demand for the higher yields
offered by other fixed income sectors.
o In contrast, the corporate, mortgage and asset-backed sectors rallied, as
yield spreads tightened substantially with the return of liquidity to the
fixed income markets. The mortgage and corporate bond sectors reacted
favorably to three Federal Reserve Board easings, interest rate cuts in a
number of other countries, and better coordination of international monetary
policy. All three of the credit-dependent "spread sectors"--i.e. corporate,
mortgage, and asset-backed--flourished with declining implied volatilities,
subsiding refinancing worries, and a continuing reduction of liquidity
premiums.
During the second half of the Fund's fiscal year, virtually all of the U.S.
fixed income sectors were impacted by higher interest rates, renewed inflation
fears, and a reversal in Federal Reserve Board policy.
o To guard against the perceived risks of inflationary pressures brought on by
an improving global economy, a still strong U.S. economy, and an extremely
tight labor market, the Federal Reserve Board acted twice during the second
half of the Fund's fiscal year. The Fed raised the fed funds rate by 0.25%
each on June 30 and August 24. We believe the hike in rates marked a movement
from the low growth/low yield environment of 1998 to the medium growth/medium
yield arena of 1999.
o U.S. Treasury yields continued to move sharply higher. For example, the
5-year U.S. Treasury note rose 0.88% in the first half of the fiscal year and
increased another 0.66% in the second half.
o The "spread sectors" were impacted to an even greater degree, underperforming
U.S. Treasuries for the six months ended September 30, 1999. During the
second calendar quarter, yields on these sectors moved higher across all
maturities, as yield spreads came under pressure from increased new issue
offerings and concerns over prepayment volatility in the mortgage market.
During the third calendar quarter, yield spreads on corporate bonds widened,
as investors' concerns grew over the credit implications of increased
inflation and its effect on earnings, while yield spreads on asset-backed
securities tightened in September, as the new issue calendar failed to meet
earlier volume expectations. Mortgage securities' yields rose dramatically in
September, primarily due to higher interest rates and slower prepayments.
INVESTMENT REVIEW
Despite significant market volatility, the Fund met its objective of maintaining
a stable value per share and produced a high level of current income. The Fund's
NAV has remained steady at $10 per share every day since inception./1
The Portfolio is diversified across the major sectors of the investment grade
fixed income market. As of September 30, 1999, the Portfolio is allocated 41% to
corporate bonds, 25% to mortgage-backed securities, 2% to foreign bonds, 10% to
U.S. Treasuries/agencies, and 22% to cash equivalents. This allocation of fixed
income securities is intentionally weighted towards the corporate, asset-backed
and mortgage sectors, as these sectors have historically offered higher yields
than U.S. government securities. Additionally, the Fund has entered into Wrapper
Agreements that are intended to stabilize the Fund's NAV.
The Fund is the first SEC registered mutual fund to make use of Wrapper
Agreements to seek to maintain principal stability in the face of fluctuations
in values due to changes in yields. To date, we have negotiated four Wrapper
Agreements, each of which covers approximately one quarter of the fixed income
securities in the Portfolio covered by such Agreements. Generally speaking,
Wrapper Agreements are issued by insurance companies, banks and other financial
institutions. The Wrapper Agreements held by the Portfolio as of September 30,
1999 are issued by Bank of America NT&SA, National Westminster Bank PLC, Credit
Suisse Financial Products, and Transamerica Life Insurance & Annuity Co. This
continues to be a successful strategy for the Fund.
3
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BT PreservationPlus Fund
Letter to Shareholders
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<TABLE>
<CAPTION>
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Periods ended September 30, 1999 Cumulative Total Returns Average Annual Total Returns
- ---------------------------------------------------------------------------------------------------------------------------
Past 1 Since Past 1 Since
year inception/3 year inception/3
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<S> <C> <C> <C> <C>
BT PreservationPlus Fund Investment Class Shares/1
(inception 10/1/97) 5.50% 11.59% 5.50% 5.65%
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Lehman 1-3 Year Government/Corporate Index/2 3.34% 11.47% 3.34% 5.58%
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Wrapped Lehman Intermediate Index/2 6.19% 12.93% 6.19% 6.27%
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IBC First Tier Retail Money Fund Universe/2 4.52% 9.84% 4.52% 4.79%
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BT PreservationPlus Fund Institutional Class Shares/1
(inception 12/14/97) 5.66% 10.60% 5.66% 5.79%
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Lehman 1-3 Year Government/Corporate Index/2 3.34% 9.65% 3.34% 5.40%
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Wrapped Lehman Intermediate Index/2 6.05% 10.90% 6.05% 6.10%
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IBC First Tier Retail Money Fund Universe/2 4.52% 8.47% 4.52% 4.74%
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BT PreservationPlus Fund Institutional Service
Class Shares/1 (inception 4/1/98) 5.50% 8.48% 5.50% 5.60%
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Lehman 1-3 Year Government/Corporate Index/2 3.34% 8.09% 3.34% 5.32%
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Wrapped Lehman Intermediate Index/2 6.04% 9.25% 6.04% 6.07%
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IBC First Tier Retail Money Fund Universe/2 4.52% 7.13% 4.52% 4.68%
- ---------------------------------------------------------------------------------------------------------------------------
BT PreservationPlus Fund Service Class Shares/1
(inception 9/23/98) 5.25% 5.36% 5.25% 5.28%
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Lehman 1-3 Year Government/Corporate Index/2 3.34% 3.34% 3.34% 3.34%
- ---------------------------------------------------------------------------------------------------------------------------
Wrapped Lehman Intermediate Index/2 5.31% 5.31% 5.31% 5.31%
- ---------------------------------------------------------------------------------------------------------------------------
IBC First Tier Retail Money Fund Universe/2 4.52% 4.52% 4.52% 4.52%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
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1/ Performance quoted represents past performance. The Fund seeks to maintain a
constant $10.00 per share net asset value. The Fund is not a money market
fund, and there can be no assurance that it will be able to maintain a stable
share value. The Fund holds fixed income securities, money market
instruments, futures, options, and other instruments, and contracts with
financial institutions, such as insurance companies and banks that are
intended to stabilize the value per share. The Fund is not insured by the
FDIC and is not a deposit, obligation of, or guaranteed by Bankers Trust
Company. The Fund is subject to investment risks, including possible loss of
principal amount invested.
2/ In addition to the IBC Money Fund Averages, we use two alternative
benchmarks. The Lehman 1 to 3 Year Government/Corporate Index, our primary
benchmark, is a total return index consisting of all U.S. Government agency
securities, U.S. Government Treasury securities, and all investment grade
corporate debt securities with maturities of one to three years. We also have
changed our second benchmark from the Ryan Labs 5 Year GIC Index, comparing
our performance instead to the Wrapped Lehman Intermediate Index. This index
more closely reflects the market sectors in which the Fund invests. Indices
are unmanaged and investments cannot be made in an index.
3/ The benchmarks for the Since Inception time periods are calculated from
September 30, 1997 for the Investment Class, from December 31, 1997 for the
Institutional Class, from March 31, 1998 for the Institutional Service Class,
and from September 30, 1998 for the Service Class comparisons.
4
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BT PreservationPlus Fund
Letter to Shareholders
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By Theme as of September 30, 1999
(percentages are based on market value)
Foreign Debt 2% Other 2%
Financial Mortgage
Services 29% Backed 25%
Short-Term U.S. Utility 3%
Government U.S. Treasury 7%
3%
Industrial 7% Money Market Fund 22%
The Fund has maintained a high quality portfolio. The average credit quality of
investments in the Fund improved during the year from AA+ at March 31 to AAA at
the end of the fiscal year, as measured by Standard & Poor's. The average
quality of the issuers of the Wrapper Agreements at that time was AA-, as
measured by Standard & Poor's. The Fund's duration at September 30, 1999 stood
at 3.16 years.
MANAGER OUTLOOK
Economic momentum continues to build around the world. U.S. growth has shown
little sign of slowing; the expansions in Europe have picked up speed; and the
recoveries in Asia have been surprisingly vigorous. We expect such global growth
trends to intensify and accelerate in a self-reinforcing manner over the balance
of 1999 and into 2000. This brighter world economic picture should continue to
fuel the sale of U.S. Treasuries by foreign investors. At the same time, we
believe that shifts by foreign investors to comparatively riskier asset classes
should provide a lift to the corporate, mortgage, and asset-backed spread
sectors.
We do not believe that this rebound in growth is likely to result in any serious
build up of inflationary pressures in Europe and Asia because of the ample
economic slack that still exists in those regions. In the U.S., by contrast,
while inflation remains low currently, recent hikes in the prices of oil and
gold, together with other indications of persistent economic strength, suggest
that inflation may increase at some point in the near future. Furthermore, labor
markets remain drum tight, so the risks of economic overheating are more
palpable unless growth cools down fairly soon. We continue to doubt that such a
slowing is in the cards for the near term given the U.S. economy's strong
fundamentals. This, along with the Federal Reserve Board's "tightening bias"
stance declared on October 5, leads us to expect some additional Fed tightening
and gradually building inflationary pressures to impart a cautious tone in U.S.
financial markets.
Given this outlook, we anticipate fixed income yields to drift a bit higher and
yield spreads to widen over the near term, as Y2K and liquidity concerns arise.
These conditions should present us with attractive, but limited, opportunities
to invest new cash flows at higher yield spreads. Over the longer term, we
maintain a generally positive but cautious outlook for the U.S. fixed income
markets.
We will maintain our long-term perspective for the Fund, monitoring economic
conditions and how they affect the financial markets, as we seek to provide a
high level of current income while seeking to maintain a stable value per share.
Our strategy is to continue to focus on selecting the highest quality spread
sector assets at the maximum yield possible, while normally maintaining a 10%
cash allocation to provide liquidity. This liquidity facilitates effective
wrapper agreement management while maximizing the return volatility of the fixed
income securities.
We value your support of the PreservationPlus Fund and look forward to serving
your investment needs in the years ahead.
/s/ Eric Kirsch
/s/ John Axtell
/s/ Louis R. D'Arienzo
Eric Kirsch, John Axtell and Louis R. D'Arienzo
Portfolio Managers of the
PreservationPlus Portfolio
September 30, 1999
5
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BT PreservationPlus Fund
Performance Comparison
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<TABLE>
<S> <C>
Comparison of Change in BT PreservationPlus Fund Investment Class - $11,159
Value of a $10,000 ---------------------------------------------------
Investment in the BT Oct-97 10000
PreservationPlus Fund Mar-98 10284
Investment Class, Lehman, Sep-98 10576
IBC and Wrapped Lehman. Mar-99 10868
Sep-99 11159
- -----------------------------
Total Return for the Year Lehman 1-3 Year Government/Corporate Index - $11,147
Ended September 30, 1999 ----------------------------------------------------
One Year Since 10/1/97/1 Oct-97 10000
5.50% 5.65%/2 Mar-98 10313
Sep-98 10787
1/ The Fund's inception date. Mar-99 10951
2/ Annualized. Sep-99 11147
Investment return and principal IBC First Tier Money Market Universe - $10,984
value will fluctuate so that shares, ----------------------------------------------
when redeemed, may be worth Oct-97 10000
more or less than their original Mar-98 10251
cost. Sep-98 10506
- ----------------------------- Mar-99 10742
Sep-99 10984
Wrapped Lehman Intermediate Aggregate $11,293
---------------------------------------------
Oct-97 10000
Mar-98 10250
Sep-98 10625
Mar-99 10939
Sep-99 11293
Past performance is not indicative of future performance. The above graph
represents performance information of Investment Class Shares (the initial class
of shares). Performance of the other classes will vary based on differences in
fees and expenses. Performance figures assume the reinvestment of dividends and
capital gain distributions.
</TABLE>
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Average Annual Total Returns for the Periods Ended September 30, 1999
Inception Date One Year Since Inception
Investment Class 10/1/97 5.50% 5.65%
Institutional Class 12/14/97 5.66% 5.79%
Institutional Service Class 4/1/98 5.50% 5.60%
Service Class 9/23/98 5.25% 5.28%
Investment return and principal value will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
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6
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BT PreservationPlus Fund
Statement of Assets and Liabilities September 30, 1999
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<TABLE>
<S> <C>
Assets
Investment in BT PreservationPlus Portfolio, at Value .......................................... $ 340,755,684
Receivable for Shares of Beneficial Interest Subscribed ........................................ 338,805
Prepaid Expenses and Other ..................................................................... 258,011
Due from Bankers Trust ......................................................................... 15,099
-------------
Total Assets ...................................................................................... 341,367,599
-------------
Liabilities
Payable for Shares of Beneficial Interest Redeemed ............................................. 861,812
Dividend Payable ............................................................................... 3,311
Accrued Expenses and Other ..................................................................... 150,822
-------------
Total Liabilities ................................................................................. 1,015,945
-------------
Net Assets ........................................................................................ $ 340,351,654
=============
Composition of Net Assets
Paid-in Capital ................................................................................ $ 340,950,203
Net Unrealized Depreciation on Investments ..................................................... (5,516,504)
Accumulated Net Realized Loss on Investments ................................................... (2,291,364)
Unrealized Appreciation on Wrapper Agreements .................................................. 7,209,319
-------------
Net Assets ........................................................................................ $ 340,351,654
=============
Net Asset Value, Offering and Redemption Price Per Share (net assets divided by shares outstanding)
Investment Class Shares/1 ...................................................................... $ 10.00
Institutional Class Shares/2 ................................................................... $ 10.00
Institutional Service Class Shares/3 ........................................................... $ 10.00
Service Class Shares/4 ......................................................................... $ 10.00
</TABLE>
- ----------
1/ Net asset value, offering and redemption price per share (based on net assets
of $21,754,347 and 2,175,435 shares of beneficial interest outstanding; $.001
par value, unlimited number of shares of beneficial interest authorized).
2/ Net asset value, offering and redemption price per share (based on net assets
of $186,563,222 and 18,656,321 shares of beneficial interest outstanding;
$.001 par value, unlimited number of shares of beneficial interest
authorized).
3/ Net asset value, offering and redemption price per share (based on net assets
of $114,935,376 and 11,493,538 shares of beneficial interest outstanding;
$.001 par value, unlimited number of shares of beneficial interest
authorized).
4/ Net asset value, offering and redemption price per share (based on net assets
of $17,098,709 and 1,709,871 shares of beneficial interest outstanding; $.001
par value, unlimited number of shares of beneficial interest authorized).
See Notes to Financial Statements.
7
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BT PreservationPlus Fund
Statement of Operations For the year ended September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
Investment Income
<S> <C>
Income net of expenses allocated from BT PreservationPlus Portfolio ...... $ 16,199,262
------------
Expenses
Administration and Service Fees - Investment Class ....................... 47,122
Administration and Service Fees - Institutional Class .................... 180,759
Administration and Service Fees - Institutional Service Class ............ 80,733
Administration and Service Fees - Service Class .......................... 24,730
Shareholder Service Fee - Institutional Service Class .................... 121,203
Shareholder Service Fee - Service Class .................................. 24,730
Registration Fees ........................................................ 39,021
Printing and Shareholder Reports ......................................... 55,942
Trustees Fees ............................................................ 3,924
Professional Fees ........................................................ 37,091
Organization Expenses .................................................... 90,084
Miscellaneous ............................................................ 16,653
------------
Total Expenses ........................................................... 721,992
Less Fees Waived/Expenses Reimbursed by Bankers Trust
Investment Class ...................................................... (55,747)
Institutional Class ................................................... (205,687)
Institutional Service Class ........................................... (102,600)
Service Class ......................................................... (22,639)
------------
Net Expenses ............................................................. 335,319
------------
Net Investment Income ....................................................... 15,863,943
------------
Net Change in Unrealized Appreciation/Depreciation on:
Investments ........................................................... (9,468,496)
Wrapper Agreements .................................................... 11,590,701
Realized Loss from Investment Transactions ............................... (2,122,205)
------------
Net Realized and Unrealized Gain (Loss) on Investments and Wrapper Agreements --
------------
Net Increase in Net Assets from Operations .................................. $ 15,863,943
============
</TABLE>
See Notes to Financial Statements.
8
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BT PreservationPlus Fund
Statements of Changes in Net Assets
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<TABLE>
<CAPTION>
For the For the
year ended year ended
September 30, 1999 September 30, 1998
--------------------- -------------------
<S> <C> <C>
Increase (Decrease) in Net Assets from:
Operations
Net Investment Income .................................................. $ 15,863,943 $ 7,381,741
Net Change in Unrealized Appreciation/Depreciation on Investments ...... (9,468,496) 3,951,992
Net Change in Unrealized Appreciation/Depreciation on Wrapper Agreements 11,590,701 (4,943,878)
Net Realized Gain (Loss) from Investment Transactions .................. (2,122,205) 991,886
-------------- -----------
Net Increase in Net Assets from Operations ............................. 15,863,943 7,381,741
-------------- -----------
Distributions to Shareholders
Net Investment Income
Investment Class .................................................... (1,023,937) (528,312)
Institutional Class ................................................. (9,995,052) (5,716,544)
Institutional Service Class ......................................... (4,330,326) (1,136,465)
Service Class ....................................................... (514,628) (420)
Net Realized Gain/1
Investment Class .................................................... (90,966) --
Institutional Class ................................................. (874,487) --
Institutional Service Class ......................................... (284,725) --
Service Class ....................................................... (14,071) --
-------------- -----------
Total Distributions ....................................................... (17,128,192) (7,381,741)
-------------- -----------
Capital Transactions in Shares of Beneficial Interest
Net Increase Resulting from Investment Class Shares .................... 6,841,984 15,003,333
Net Increase Resulting from Institutional Class Shares ................. 25,244,841 162,192,860
Net Increase Resulting from Institutional Service Class Shares ......... 60,083,543 55,136,558
Net Increase Resulting from Service Class Shares ....................... 16,708,354 404,430
-------------- -----------
Net Increase from Capital Transactions in Shares of Beneficial Interest ... 108,878,722 232,737,181
-------------- -----------
Total Increase in Net Assets .............................................. 107,614,473 232,737,181
Net Assets
Beginning of Year ......................................................... 232,737,181 --
-------------- -----------
End of Year ............................................................... $ 340,351,654 $ 232,737,181
============== ============
</TABLE>
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1/ See Note 4 in Notes to Financial Statements.
See Notes to Financial Statements.
9
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BT PreservationPlus Fund
Financial Highlights
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Contained below are selected data for a share outstanding, total investment
return, ratios to average net assets and other supplemental data for the periods
indicated.
<TABLE>
<CAPTION>
Investment Class Shares Institutional Class Shares
---------------------------------- -------------------------------------
For the period For the period
For the October 1, 1997/1 For the December 14, 1997/1
year ended through year ended through
Sept. 30, 1999 Sept. 30, 1998 Sept. 30, 1999 Sept. 30, 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value, Beginning of Period .......... $10.00 $10.00 $10.00 $10.00
------ ------ ------ ------
Income from Investment Operations
Net Investment Income ...................... 0.54 0.56 0.55 0.46
Distributions to Shareholders
Net Investment Income ...................... (0.54) (0.56) (0.55) (0.46)
Net Realized Gains/3 ....................... (0.05) -- (0.05) --
Reverse Stock Split/3 ......................... 0.05 -- 0.05 --
------ ------ ------ ------
Net Asset Value, End of Period ............. $10.00 $10.00 $10.00 $10.00
====== ====== ====== ======
Total Investment Return ....................... 5.50% 5.76% 5.66% 5.91%/2
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) ... $21,754 $15,003 $186,563 $162,193
Ratios to Average Net Assets:
Net Investment Income ................... 5.43% 5.65% 5.53% 5.79%/2
Net Expenses, Including Expenses of the
PreservationPlus Portfolio ............ 0.55% 0.55% 0.40% 0.40%/2
Decrease Reflected in Above Expense Ratio
Due to Fees Waived/Expenses Reimbursed
by Bankers Trust ...................... 0.45% 0.51% 0.26% 0.50%/2
<CAPTION>
Institutional Service Class Shares Service Class Shares
---------------------------------- -------------------------------------
For the period For the period
For the April 1, 1998/1 For the September 23, 1998/1
year ended through year ended through
Sept. 30, 1999 Sept. 30, 1998 Sept. 30, 1999 Sept. 30, 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value, Beginning of Period .......... $10.00 $10.00 $10.00 $10.00
------ ------ ------ ------
Income from Investment Operations
Net Investment Income ...................... 0.54 0.28 0.51 0.01
Distributions to Shareholders
Net Investment Income ...................... (0.54) (0.28) (0.51 (0.01)
Net Realized Gains/3 ....................... (0.05) -- (0.05) --
Reverse Stock Split/3 ......................... 0.05 -- 0.05 --
------ ------ ------ ------
Net Asset Value, End of Period ................ $10.00 $10.00 $10.00 $10.00
====== ====== ====== ======
Total Investment Return ....................... 5.50% 5.78%/2 5.25 5.42%/2
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) ... $114,935 $55,137 $17,099 $404
Ratios to Average Net Assets:
Net Investment Income ................... 5.43% 5.66%/2 5.20 5.42%/2
Net Expenses, Including Expenses of the
PreservationPlus Portfolio ............ 0.55% 0.55%/2 0.80 0.80%/2
Decrease Reflected in Above Expense Ratio
Due to Fees Waived/Expenses Reimbursed
by Bankers Trust ...................... 0.28% 0.39%/2 0.38 0.43%/2
</TABLE>
- ----------
1/ Commencement of operations.
2/ Annualized.
3/ See Note 4 in Notes to Financial Statements.
See Notes to Financial Statements.
10
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BT PreservationPlus 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 PreservationPlus Fund (the
"Fund") is one of the funds offered to investors by the Trust.
The Fund offers four classes of shares to investors; Investment Class,
Institutional Class, Service Class and Institutional Service Class (the
"Classes"). All classes of shares have identical rights to earnings, assets and
voting privileges, except that each class has its own expenses and exclusive
voting rights with respect to matters affecting it.
The Investment, Institutional, Institutional Service, and Service Classes began
operations on October 1, 1997, December 14, 1997, April 1, 1998 and September
23, 1998, respectively.
The Fund seeks to achieve its investment objective by investing all of its
investable assets in the BT PreservationPlus Portfolio (the "Portfolio"). The
Portfolio is an open-end management investment company registered under the Act.
The value of such investment in the Portfolio reflects the Fund's proportionate
interest in the net assets of the Portfolio. At September 30, 1999, the Fund's
investment was approximately 100% of the Portfolio.
The financial statements of the Portfolio, including the Schedule of Portfolio
Investments, are contained elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
B. Security Transactions and Related Investment Income
The Fund earns income, net of expenses, on its investment in the Portfolio. All
of the net investment income and net realized and unrealized gains and losses
(including Wrapper Agreements) of the Portfolio are allocated pro rata among the
investors in the Portfolio on a daily basis.
Security transactions are accounted for on the trade date. Realized gains and
losses on investments sold are computed on the basis of identified cost. The
realized and unrealized gains and losses in the Statement of Operations
represent the Fund's pro-rata interest in the realized and unrealized gains and
losses of the Portfolio, including the offsetting valuation change of the
Wrapper Agreements.
C. Distributions
It is the Fund's policy to declare dividends daily and distribute them monthly
to shareholders from net investment income. Dividends payable to shareholders
are recorded by the Fund on the ex-dividend date. Distributions of net realized
short-term and long-term capital gains, if any, are made annually to the extent
they are not offset by capital loss carryforwards.
D. Federal Income Taxes
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code and distribute income to shareholders. Therefore, no federal income tax
provision is required. The Fund may periodically make reclassifications among
certain of its capital accounts as a result of differences in the
characterization and allocation of certain income and capital gains determined
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 each
fund and each class. Expenses directly attributable to a fund or class are
charged to that fund or class, while expenses which are attributable to all of
the Trust's funds or classes are allocated among them on the basis of relative
net assets.
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 agreement, Bankers Trust provides
administrative, custody, transfer agency and shareholder services to the Fund in
return for a fee computed daily and paid monthly at an annual rate of .25% of
average daily net assets for the Investment and Service classes and .10% of
average daily net assets for the Institutional and Institutional Service
classes.
The Service and Institutional Service Classes are also subject to shareholder
servicing fees in the maximum amount of .25% and .15% of average daily net
assets, respectively.
ICC Distributors, Inc. provides distribution services to the Fund.
Bankers Trust has voluntarily undertaken to waive its fees and reimburse
expenses of each Class, to the extent necessary to limit all expenses as
follows: Investment Class of Shares to .20% of the average daily net assets of
the Class, excluding expenses of the Portfolio and .55% of the average daily net
assets of the Class, including expenses of the Portfolio; Service Class of
Shares to .45% of the average daily net assets of the Class, excluding expenses
of the Portfolio and .80% of the average daily net assets of the Class,
including expenses of the Portfolio; Institutional Class of Shares to .05% of
the average daily net assets of the Class, excluding expenses of the Portfolio
and .40% of the average daily net assets of the Class, including expenses of the
Portfolio; and Institutional Service Class to .20% of the average daily net
assets of the Class, excluding expenses of the Portfolio and .55% of the average
daily net assets of the Class, including expenses of the Portfolio.
11
<PAGE>
- --------------------------------------------------------------------------------
BT PreservationPlus Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
Shareholder transaction expenses are charges paid when investors buy, redeem or
exchange Shares. Under normal circumstances, redemptions of Shares that are
directed by Plan participants are not subject to a redemption fee. Redemptions
of Shares that are not directed by Plan participants and that are made on less
than twelve months' prior written notice to the Fund are subject to a redemption
fee payable to the Fund of 2% of the proceeds of the redemption.
Bankers Trust was a wholly owned subsidiary of Bankers Trust Corporation ("BT
Corp."). On June 4, 1999, BT Corp. was acquired by Deutsche Bank AG ("Deutsche
Bank"). As a result of the transaction, Bankers Trust became an indirect
wholly-owned subsidiary of Deutsche Bank.
Note 3--Shares of Beneficial Interest
At September 30, 1999, there were an unlimited number of shares of beneficial
interest authorized. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
Investment Class Shares Institutional Class Shares
---------------------------------------------------- --------------------------------------------------------
For the For the period For the For the period
year ended October 1, 1997/1 through year ended December 14, 1997/1 through
September 30, 1999 September 30, 1998 September 30, 1999 September 30, 1998
---------------------------------------------------- --------------------------------------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sold ........... 1,850,751 $ 18,507,512 3,085,270 $ 30,852,705 5,332,928 $ 53,329,280 18,237,037 $182,370,372
Reinvested ..... 117,139 1,171,387 44,831 448,308 1,162,241 11,622,407 496,228 4,962,280
Stock Split/2 .. (9,097) -- -- -- (87,449) -- -- --
Redeemed ....... (1,283,691) (12,836,915) (1,629,768) (16,297,680) (3,970,685) (39,706,846) (2,513,979) (25,139,792)
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Increase ....... 675,102 $ 6,841,984 1,500,333 $ 15,003,333 2,437,035 $ 25,244,841 16,219,286 $162,192,860
========== ============ ========== ============ ========== ============ ========== ============
<CAPTION>
Institutional Service Class Shares Service Class Shares
---------------------------------------------------- --------------------------------------------------------
For the For the period For the For the period
year ended April 1, 1998/1 through year ended September 23, 1998/1 through
September 30, 1999 September 30, 1998 September 30, 1999 September 30, 1998
---------------------------------------------------- --------------------------------------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sold ........... 8,620,987 $86,209,870 6,774,020 $67,740,195 1,822,089 $18,220,889 40,443 $ 404,430
Reinvested ..... 483,386 4,833,857 91,836 918,362 52,812 528,121 -- --
Stock Split/2 .. (28,473) -- -- -- (1,407) -- -- --
Redeemed ....... (3,096,018) (30,960,184) (1,352,200) (13,521,999) (204,066) (2,040,656) -- --
---------- ----------- ---------- ----------- -------- ----------
Increase ....... 5,979,882 $60,083,543 5,513,656 $55,136,558 1,669,428 $16,708,354 40,443 $ 404,430
========== =========== ========== =========== ========= =========== ====== ===========
</TABLE>
- ----------
1/ Commencement of operations.
2/ See Note 4.
Note 4--Additional Distributions
In order to comply with requirements of the Internal Revenue Code applicable to
regulated investment companies, the Fund is required to distribute accumulated
net realized gains, if any, on an annual basis. When such distributions are
made, the immediate impact is a corresponding reduction in the net asset value
per share of each Class. Given the objective of the Fund to maintain a stable
net asset value of $10 per share, the Fund intends to declare a reverse stock
split immediately subsequent to any such distributions at a rate that will cause
the total number of shares held by each shareholder, including shares acquired
on reinvestment of that distribution, to remain the same as before the
distribution was paid and in effect reinstate a net asset value of $10 per
share.
On December 4, 1998, the Fund declared a capital gain distribution of $.05 per
share and a corresponding reverse stock split of .995 per share. There was no
effect on the value of the total holdings of each shareholder (assuming
reinvestment of such distributions) as a result of this
activity.
12
<PAGE>
- --------------------------------------------------------------------------------
BT PreservationPlus Fund
Report of Independent Auditors
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees
BT Pyramid Mutual Funds - BT PreservationPlus Fund
We have audited the accompanying statement of assets and liabilities of BT
PreservationPlus Fund (the "Fund") as of September 30, 1999, 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 periods indicated therein. 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 and financial highlights. 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 BT
PreservationPlus Fund at September 30, 1999, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and its financial highlights for each of the periods
indicated therein, in conformity with generally accepted accounting principles.
Ernst & Young, LLP
Philadelphia, Pennsylvania
November 8, 1999
13
<PAGE>
- --------------------------------------------------------------------------------
BT PreservationPlus Portfolio
Schedule of Portfolio Investments September 30, 1999
- --------------------------------------------------------------------------------
Principal
Amount Security Value
------ -------- -----
CORPORATE DEBT - 47.3%
Financial Services - 32.9%
ABN Amro Bank,
$1,000,000 7.55%, 6/28/06 ................................. $ 1,024,060
200,000 7.125%, 6/18/07 ................................ 196,773
200,000 Abbey National, PLC, 6.69%, 10/17/05 ............. 194,836
2,000,000 ACCMT 1996 - A A1, 6.00%, 11/15/05 ............... 1,973,390
550,000 American Express Credit Card,,
5.95% 5/17/04 .................................. 534,359
2,000,000 American Express Master Trust,
7.60%, 8/15/02 ................................. 2,045,310
1,000,000 American General Finance,
5.90%, 1/15/03 ................................. 974,210
1,000,000 AMXMT 98 - 1 A, 5.90%, 4/15/04 ................... 981,205
1,000,000 Asian Development Bank,
5.75%, 5/19/03 ................................. 979,699
1,000,000 Associates Corp., 9.125%, 4/1/00 ................. 1,015,717
2,000,000 AT&T Master Trust 1995 - 2A,
5.95%, 10/17/02 ................................ 1,997,410
Bank America Corp.,
300,000 7.50%, 10/15/02 ................................ 306,736
400,000 7.125%, 5/12/05 ................................ 401,678
300,000 Bear Stearns Co., 6.15%, 3/2/04 .................. 289,159
3,000,000 California Infrastructure PG&E -
Class A6, 6.38%, 9/25/08 ....................... 2,936,835
2,000,000 California Infrastructure PG&E -
Class A7, 6.42%, 9/25/08 ....................... 1,969,450
1,000,000 Capital Auto Receivables Asset Trust,
5.68%, 8/15/04 ................................. 987,555
2,000,000 Capital One - 4, 5.43%, 1/15/07 .................. 1,926,150
500,000 Carco Auto Loan
Master Trust, 5.78%, 3/15/02 ................... 491,967
2,000,000 CCIMT 98 - 6 A, 5.85%, 4/10/03 ................... 1,988,050
650,000 CCIMT 95 - 9 A, 5.80%, 5/15/06 ................... 627,721
1,500,000 CHAMT 98 - 3 A, 6.00%, 4/15/03 ................... 1,477,627
2,000,000 Chase Manhattan Corp, 7.125%, 2/1/07 ............. 2,000,840
1,000,000 Chase Manhattan Credit Card Master
Trust - Class A, 6.30%, 4/15/03 ................ 1,002,615
250,000 Chase Credit Card M/T, 6.66%, 1/15/07 ............ 249,916
300,000 Chem MT 96 - 3 A, 7.09%, 2/15/09 ................. 301,218
200,000 Chrysler Financial Corp., 6.95%, 3/25/02 ......... 203,151
CIT Group,
500,000 5.50%, 2/15/04 ................................. 470,684
150,000 7.125%, 10/15/04 ............................... 149,895
Citibank Credit Card Master Trust -
Class A,
1,000,000 5.75%, 1/15/03 ................................. 994,325
1,000,000 5.875%, 3/10/11 ................................ 923,225
1,000,000 CNA Financial, 6.45%, 1/15/08 .................... 931,335
1,000,000 COMED 1998 - 1 A5, 5.44%, 3/25/07 ................ 948,625
90,000 Commercial Credit Co, 7.375%, 3/15/02 ............ 92,328
2,000,000 DHMT 1998 - 1 A, 5.90%, 5/25/06 .................. 1,952,470
Discover Card Master Trust - Class A,
1,000,000 5.60%, 5/15/03 ................................. 963,125
2,000,000 5.80%, 9/16/03 ................................. 1,993,740
1,000,000 5.85%, 1/17/06 ................................. 975,225
2,000,000 6.20%, 5/16/06 ................................. 1,968,850
748,867 EQCC Home Equity Loan Trust,
6.54%, 4/15/11 ................................. 750,826
1,000,000 Federal National Mortgage Assoc.,
5.98%, 9/15/08 ................................. 963,750
3,000,000 First Bank Corporate Card Master
Trust - Class A, 6.40%, 2/15/03 ................ 2,999,295
300,000 First Union National Bank,
7.125%, 10/15/06 ............................... 299,046
Principal
Amount Security Value
------ -------- -----
$2,000,000 First USA Credit Master Trust 97 - 2,
5.511%, 1/17/07 ................................ 1,993,590
First USA Credit Card Master Trust -
Class A,
5,000,000 6.42%, 3/17/05 ................................. 5,005,675
1,000,000 5.28%, 9/18/06 ................................. 952,395
3,000,000 Ford Credit Auto Loan Master Trust -
Class A, 6.50%, 8/15/02 ........................ 3,010,575
Ford Motor Credit,
375,000 9.00%, 9/15/01 ................................. 392,297
2,000,000 6.00%, 1/14/03 ................................. 1,954,850
4,000,000 5.15%, 10/15/02 ................................ 4,017,405
250,000 6.70%, 7/16/04 ................................. 248,846
500,000 General Electric Capital Corp.,
8.625%, 6/15/08 ................................ 553,250
2,000,000 General Motors Accept Corp.,
5.895%, 12/17/01 ............................... 2,001,600
GMAC,
1,300,000 6.875%, 7/15/01 ................................ 1,313,116
500,000 6.625%, 1/10/02 ................................ 501,633
1,000,000 6.75%, 3/15/03 ................................. 1,000,521
1,000,000 7.125%, 5/1/03 ................................. 1,010,662
Goldman Sachs Group,
175,000 6.65%, 5/15/09 ................................. 166,696
200,000 7.35%, 10/1/09 ................................. 200,520
150,000 Heller Financial, 6.00%, 3/19/04 ................ 143,958
Household Finance Co.,
1,000,000 8.375%, 11/15/01 ............................... 1,034,785
400,000 6.00%, 5/1/04 .................................. 385,146
250,000 Household Netherlands BV,
6.20%, 12/1/03 ................................. 242,842
200,000 International Lease Finance Corp.,
6.375%, 2/15/02 ................................ 199,672
1,000,000 J.P. Morgan, 6.70%, 11/1/07 ...................... 974,540
250,000 John Deere Capital, 6.00%, 2/15/09 ............... 234,293
120,000 KFW International Finance,
8.20%, 6/1/06 .................................. 127,114
400,000 Lehman Brothers, 7.25%, 4/15/03 .................. 401,515
Lehman Brothers Holdings,
400,000 6.125%, 7/15/03 ................................ 386,657
195,000 7.00%, 5/3/05 .................................. 194,203
MBNA Master Credit Card Trust - Class A,
1,000,000 6.60%, 1/15/03 ................................. 1,005,165
3,000,000 6.55%, 1/15/07 ................................. 2,994,405
850,000 5.90%, 8/15/11 ................................. 790,419
MBNA Master Credit,
250,000 6.40%, 8/15/11 ................................. 250,086
250,000 7.00%, 2/15/12 ................................. 247,188
2,000,000 MBNA Master Credit Card Trust,
5.37%, 6/15/06 ................................. 1,990,870
2,000,000 McDonald's Corp., 6.50%, 8/1/07 .................. 1,947,564
1,000,000 Mellon Financial, 6.375%, 2/15/10 ................ 935,839
Merrill Lynch & Co.,
1,000,000 6.00%, 2/12/03 ................................. 978,474
500,000 6.875%, 3/1/03 ................................. 502,168
Morgan Stanley Group,
750,000 8.33%, 1/15/07 ................................. 795,838
1,250,000 6.875%, 3/1/07 ................................. 1,226,691
1,000,000 NationsBank, 5.75%, 3/15/01 ...................... 991,327
3,000,000 NationsBank Credit Card Master
Trust - Class A, 6.00%, 12/15/05 ............... 2,939,775
1,000,000 Norwest Corp., 8.15%, 11/1/01 .................... 1,033,439
Premier Auto Trust - Class A,
2,000,000 5.96%, 10/8/02 ................................. 1,986,670
750,000 5.82%, 12/6/02 ................................. 744,311
1,000,000 5.19%, 4/8/03 .................................. 976,355
See Notes to Financial Statements.
14
<PAGE>
- --------------------------------------------------------------------------------
BT PreservationPlus Portfolio
Schedule of Portfolio Investments September 30, 1999
- --------------------------------------------------------------------------------
Principal
Amount Security Value
------ -------- -----
$2,000,000 Prime Credit Card Master Trust,
6.75%, 11/15/05 ............................... $ 2,010,550
1,000,000 Providian Master Trust, 6.25%, 6/15/07 ........... 995,275
2,000,000 Rockwell International, 6.15%, 1/15/08 ........... 1,892,420
2,000,000 Salomon Smith Barney, 7.98%, 3/1/00 .............. 2,017,940
1,000,000 SCAMT 98-1 A, 5.80%, 8/15/05 ..................... 993,965
Sears Credit Account Master Trust -
Class A,
1,000,000 6.05%, 1/16/08 ................................. 987,625
500,000 5.65%, 3/15/09 ................................. 482,202
200,000 Society National Bank, 7.25%, 6/1/05 ............. 202,621
2,700,000 Standard Credit Card Master Trust Class A,
5.95%, 10/7/04 ................................. 2,638,670
150,000 Transamerica Finance Corp,
6.125%, 11/1/01 ................................ 147,709
2,000,000 Toyota Auto Lease Trust - Class A,
6.35%, 9/25/00 ................................. 1,995,620
500,000 Toyota Motor Credit, 5.50%, 12/15/08 ............. 452,475
------------
112,256,393
------------
Industrial - 8.5%
1,000,000 Abbott Labs, 6.40%, 12/1/06 ...................... 994,780
2,000,000 American Home Product,
7.70%, 2/15/00 ................................. 2,013,270
600,000 Amoco Canada, 7.25%, 12/1/02 ..................... 613,185
2,000,000 Anheuser Busch, 9.00%, 12/1/09 ................... 2,313,252
1,000,000 BP America, Inc., 7.875%, 5/15/02 ................ 1,035,657
150,000 Cambell, 6.15%, 12/1/02 .......................... 148,678
100,000 Caterpillar, 7.25%, 9/15/09 ...................... 100,567
Conoco,
250,000 5.90%, 4/15/04 ................................. 241,930
360,000 6.35%, 4/15/09 ................................. 343,204
300,000 DaimlerChrysler, 7.20%, 9/1/09 ................... 301,480
1,000,000 Diageo Captial PLC, 6.125%, 8/15/05 .............. 962,676
2,000,000 Dupont, 9.15%, 4/15/00 ........................... 2,035,664
GTE Southwest,
1,000,000 6.54%, 12/1/05 ................................. 984,024
1,000,000 6.23%, 1/1/07 .................................. 961,590
2,000,000 Hanson Overseas, 6.75%, 9/15/05 .................. 1,967,610
IBM Corp,
125,000 5.10%, 11/10/03 ................................ 119,161
300,000 5.375%, 2/1/09 ................................. 270,588
1,000,000 Lucent Technologies, Inc.,
5.50%, 11/15/08 ................................ 910,640
750,000 Mattel, Inc., 6.125%, 7/15/05 .................... 699,769
1,000,000 Proctor & Gamble, 5.25%, 9/15/03 ................. 957,170
150,000 Rohm & Haas Co, 6.95%, 7/15/04 ................... 150,531
500,000 Sears Roebuck, 6.125%, 1/15/06 ................... 469,093
2,000,000 Sears Roebuck Acceptance Corp.,
7.00%, 6/15/07 ................................. 1,949,518
1,000,000 Sony Corp., 6.125%, 3/4/03 ....................... 989,680
1,000,000 TCI Communications, Inc.,
8.65%, 9/15/04 ................................. 1,077,380
1,500,000 Texaco Capital, Inc., 8.50%, 2/15/03 ............. 1,579,433
1,000,000 TRW, 6.05%, 1/15/05 .............................. 948,085
200,000 United Technology Corp,
7.00%, 9/15/06 ................................ 201,505
Wal-Mart Stores,
300,000 6.875%, 8/10/09 ................................ 301,089
1,890,000 9.10%, 7/15/00 ................................. 1,935,970
100,000 6.50%, 6/1/03 .................................. 100,216
1,000,000 Walt Disney Co., 6.75%, 3/30/06 .................. 993,005
250,000 Weyerhaeuser Co., 7.25%, 7/1/13 .................. 249,871
------------
28,920,271
------------
Principal
Amount Security Value
------ -------- -----
Utility - 3.2%
$1,000,000 AT&T Corp., 5.625%, 3/15/04 ...................... $ 959,688
375,000 Atlantic Richfield, 5.55%, 4/15/03 ............... 364,361
1,000,000 Central & Southwest Corp.,
7.25%, 10/1/04 . ............................... 1,018,835
800,000 Chesapeake & Potomac Telephone,
7.125%, 1/15/02 ................................ 811,616
2,000,000 Consolidated Natural Gas,
6.625%, 12/1/08 ................................ 1,924,790
200,000 Cox Communications, 6.15%, 8/1/03 ................ 193,724
1,000,000 GTE North, Inc., 5.65%, 11/15/08 ................. 909,115
400,000 Illinois Power, 5.54%, 6/25/09 ................... 371,354
400,000 MCI Worldcom, 6.25%, 8/15/03 ..................... 393,212
385,000 Peco Energy Transition Trust,
6.05%, 3/1/09 .................................. 370,591
1,000,000 VF Corp., 9.50%, 5/1/01 .......................... 1,045,814
1,000,000 Virginia Electric Power, 6.75%, 2/1/07 ........... 973,420
1,000,000 Wisconsin Electric Power,
7.25%, 8/1/04 .................................. 1,026,588
570,000 Wisconsin Power & Light,
7.00%, 6/15/07 ................................. 568,296
------------
10,931,404
------------
Other - 2.7%
2,000,000 Federal Farm Credit Bank,
5.233%, 5/17/01 ................................ 1,992,742
Interamerican Development Bank,
200,000 6.125%, 10/4/02 ................................ 199,692
1,000,000 6.125%, 3/8/06 ................................. 979,468
750,000 5.375%, 11/18/08 ............................... 683,977
1,000,000 International Bank for Reconstruction
& Development, 5.625%, 3/17/03 ................. 980,350
2,000,000 Sallie Mae, 5.441%, 6/8/01 ....................... 1,989,912
2,000,000 Superior Wholesale Inventory Fin Tr,
5.505%, 5/15/06 ................................ 1,991,250
160,000 Whitman Corp., 6.00%, 5/1/04 ..................... 154,798
150,000 Xerox Capital Europe PLC,
5.875%, 5/15/04 ................................ 143,794
------------
9,115,983
------------
Total Corporate Debt
(Cost $165,584,577) ......................................... 161,224,051
------------
FOREIGN DEBT - 2.2%
150,000 Ahold Finance USA, 6.25%, 5/1/09 ................. 139,188
1,000,000 Alberta Providence, 9.25%, 4/1/00 ................ 1,018,540
1,000,000 Canada Government, 5.25%, 11/5/08 ................ 913,060
125,000 Corp Andina de Fomento,
7.75%, 3/1/04 .................................. 125,400
275,000 Deutsche Ausgleichsbank,
6.50%, 9/15/04 ................................. 274,562
300,000 Dresdner Bank, 6.625%, 9/15/05 ................... 289,109
125,000 HSBC Americas, 6.625%, 3/1/09 .................... 117,205
200,000 HSBC Holding PLC, 7.50%, 7/15/09 ................. 198,703
350,000 Italy Global Bond, 6.00%, 9/27/03 ................ 344,787
350,000 Kingdom of Sweden, 6.50%, 3/4/03 ................. 352,698
200,000 National Westminister Bank,
7.375%, 10/1/09 ................................ 199,230
150,000 Nippon Telegraph & Telephone,
6.00%, 3/25/08 ................................. 140,133
Province of Ontario,
500,000 7.375%, 1/27/03 ................................ 513,900
1,000,000 6.00%, 2/21/06 ................................. 964,620
Province of Quebec,
500,000 7.00%, 1/30/07 ................................. 501,735
150,000 5.75%, 2/15/09 ................................. 137,289
See Notes to Financial Statements.
15
<PAGE>
- --------------------------------------------------------------------------------
BT PreservationPlus Portfolio
Schedule of Portfolio Investments September 30, 1999
- --------------------------------------------------------------------------------
Principal
Amount Security Value
------ -------- -----
$ 75,000 Republic of Chile, 6.875%, 4/28/09 ............... $ 71,119
550,000 Republic of Finland, 7.875%, 7/28/04 ............. 584,677
300,000 Republic of Ireland, 7.875%, 12/1/01 ............. 309,570
150,000 Republic of Portugal, 5.75%, 10/8/03 ............. 146,326
150,000 Santander Financial Issuances,
7.00%, 4/1/06 .................................. 145,377
125,000 Westdeutsche Landesbank NY,
6.05%, 1/15/09 ................................. 114,254
------------
Total Foreign Debt
(Cost $7,841,705) ........................................... 7,601,482
------------
MORTGAGE-BACKED SECURITIES - 27.8%
150,000 FHLMC, 6.625%, 9/15/09 ........................... 149,485
FHLMC Gold,
500,000 5.75%, 3/15/09 ................................. 468,121
927,445 5.50%, 11/1/13 ................................. 873,821
928,938 6.00%, 12/1/13 ................................. 894,464
151,082 7.50%, 4/1/27 .................................. 152,022
267,540 7.50%, 6/1/27 .................................. 269,204
65,527 7.50%, 10/1/27 ................................. 65,935
2,821,015 6.50%, 12/1/28 ................................. 2,709,634
2,984,736 6.00%, 12/1/28 ................................. 2,789,744
FHLMC TBA,
1,000,000 7.50%, 5/1/07 .................................. 1,015,620
1,000,000 6.00%, 4/1/08 .................................. 962,495
3,000,000 6.50%, 11/1/08 ................................. 2,945,610
2,000,000 6.00%, 11/1/08 ................................. 2,001,864
4,000,000 7.50%, 5/1/22 .................................. 4,021,228
4,000,000 7.00%, 3/1/23 .................................. 3,934,980
3,000,000 6.50%, 11/1/23 ................................. 2,879,985
2,000,000 6.00%, 11/1/24 ................................. 1,866,240
FNCL,
699,189 6.50%, 1/1/14 .................................. 686,080
959,067 7.00%, 2/1/14 .................................. 958,166
985,969 6.00%, 12/1/28 ................................. 919,416
995,740 6.50%, 12/1/28 ................................. 955,602
980,553 6.00%, 12/15/28 ................................ 909,768
866,372 7.00%, 1/1/29 .................................. 852,313
2,465,493 6.50%, 2/1/29 .................................. 2,363,792
2,475,754 6.50%, 2/1/29 .................................. 2,373,629
2,494,817 6.50%, 2/1/29 .................................. 2,391,907
964,148 7.00%, 3/1/29 .................................. 947,276
3,991,809 6.00%, 7/1/29 .................................. 3,722,363
FNMA,
1,000,000 6.50%, 8/15/04 ................................. 1,005,078
425,534 6.50%, 5/1/05 .................................. 420,169
395,829 6.50%, 6/1/05 .................................. 390,839
1,000,000 5.25%, 1/15/09 ................................. 903,120
345,935 7.00%, 9/1/12 .................................. 346,032
2,078,724 8.00%, 5/1/17 .................................. 2,124,130
311,963 8.50%, 1/1/20 .................................. 323,652
7,000,000 7.00%, 9/1/21 .................................. 6,881,840
4,000,000 7.50%, 9/1/21 .................................. 4,013,728
1,390,916 8.00%, 12/1/21 ................................. 1,421,299
4,000,000 6.50%, 4/1/23 .................................. 3,837,480
385,476 8.00%, 12/1/23 ................................. 393,896
287,247 8.50%, 8/1/25 .................................. 298,010
849,326 6.50%, 10/1/27 ................................. 815,261
FNMA TBA,
1,000,000 7.00%, 9/1/06 .................................. 999,370
1,000,000 7.50%, 9/1/06 .................................. 1,015,307
2,000,000 6.00%, 4/1/08 .................................. 1,923,740
2,000,000 6.50%, 4/1/23 .................................. 1,962,490
Principal
Amount/
Shares Security Value
------ -------- -----
GNMA,
$ 385,470 9.00%, 11/15/20 ................................ $ 405,707
579,160 8.00%, 5/15/22 ................................. 592,866
211,519 8.50%, 2/15/23 ................................. 220,179
297,051 8.50%, 4/15/23 ................................. 309,212
226,093 8.50%, 8/15/28 ................................. 235,207
573,712 6.50%, 10/15/28 ................................ 548,429
339,791 6.50%, 11/15/28 ................................ 324,817
40,437 6.50%, 1/15/29 ................................. 38,655
GNMA TBA,
1,000,000 6.50%, 5/1/08 .................................. 982,182
2,000,000 8.00%, 8/1/21 .................................. 2,044,990
6,000,000 7.00%, 9/1/21 .................................. 5,891,220
5,000,000 7.50%, 9/1/21 .................................. 5,017,160
1,000,000 6.00%, 4/25/23 ................................. 928,120
3,000,000 6.50%, 6/25/23 ................................. 2,868,735
------------
Total Mortgage-Backed Securities
(Cost $95,269,754) .......................................... 94,563,684
------------
U.S. TREASURY SECURITIES - 8.0%
U.S. Treasury Note,
5,900,000 5.75%, 11/15/00 ................................ 5,916,616
6,000,000 5.25%, 5/31/01 ................................. 5,966,250
6,450,000 5.75%, 8/15/03 ................................. 6,431,863
200,000 5.875%, 2/15/04 ................................ 200,797
2,100,000 5.25%, 5/15/04 ................................. 2,052,750
6,125,000 7.25%, 5/15/04 ................................. 6,461,875
150,000 6.50%, 5/15/05 ................................. 153,621
------------
Total U.S. Treasury Securities
(Cost $27,393,454) 27,183,772
------------
SHORT-TERM INSTRUMENTS - 28.5%
Mutual Fund - 25.5%
86,823,751 Institutional Cash Management Fund ............... 86,823,751
------------
U. S. Government - 3.0%
10,500,000 U.S. Treasury Bill, 4.64%, 12/16/99 .............. 10,396,260
------------
Total Short-Term Instruments
(Cost $97,220,011) .......................................... 97,220,011
------------
Total Investments
(Cost $393,309,502) ...................................113.8% 387,793,000
------------
Wrapper Agreements/1 - 2.7%
Bank of America NT & SA ....................................... 2,437,050
National Westminster Bank PLC ................................. 2,079,222
Credit Suisse Financial Products .............................. 2,082,868
Transamerica Life Insurance & Annuity Co. ..................... 2,453,865
------------
Total Wrapper Agreements ...................................... 9,053,005
=============
Liabilities in Excess of Other Assets ..................(16.5)% (56,090,212)
----- -------------
Net Assets .............................................100.0% $340,755,793
===== =============
- ----------
The following abbreviations are used in portfolio descriptions:
FHLMC - Federal Home Loan Mortgage Corp.
FNMA - Federal National Mortgage Asscociation
FNCL - Federal National Mortgage Association Class Loan
GNMA - Government National Mortgage Association
TBA - To be announced securities. TBA's represent firm commitments of the
Portfolio for securities authorized for issuance but not yet actually i
ssued.
1/ Wrapper Agreements - Each Wrapper Agreement obligates the wrapper provider to
maintain the book value of a portion of the Portfolio's assets up to a
specified maximum dollar amount, upon the occurrence of certain specified
events.
See Notes to Financial Statements.
16
<PAGE>
- --------------------------------------------------------------------------------
BT PreservationPlus Portfolio
Statement of Assets and Liabilities September 30, 1999
- --------------------------------------------------------------------------------
Assets
Investment at Value (Cost $393,309,502) ....................... $387,793,000
Interest Receivable ........................................... 3,128,082
Due from Bankers Trust ........................................ 3,573
Wrapper Agreements ............................................ 9,053,005
------------
Total Assets .................................................... 399,977,660
------------
Liabilities
Payable for Securities Purchased .............................. 59,048,825
Accrued Expenses and Other .................................... 173,042
------------
Total Liabilities ............................................... 59,221,867
------------
Net Assets ...................................................... $340,755,793
============
- --------------------------------------------------------------------------------
Statement of Operations For the year ended September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
Investment Income
<S> <C>
Interest Income .............................................................. $ 15,920,396
Credited Rate Interest ....................................................... 1,298,837
------------
Total Investment Income ........................................................ 17,219,233
------------
Expenses
Advisory Fees ................................................................ 940,438
Wrapper Fees ................................................................. 331,595
Administration and Service Fees .............................................. 145,708
Professional Fees ............................................................ 28,298
Trustees Fees ................................................................ 3,252
Miscellaneous ................................................................ 1,643
------------
Total Expenses ............................................................... 1,450,934
Less Fees Waived/Expenses Reimbursed by Bankers Trust ........................ (430,972)
------------
Net Expenses ................................................................... 1,019,962
------------
Net Investment Income .......................................................... 16,199,271
------------
Net Realized and Unrealized Gain (Loss) on Investments and Wrapper Agreements
Net Change in Unrealized Appreciation/Depreciation on:
Investments ................................................................ (9,468,496)
Wrapper Agreements ......................................................... 11,590,701
Realized Loss from Investment Transactions ................................... (2,122,205)
------------
Net Realized and Unrealized Gain (Loss) on Investments and Wrapper Agreements .. --
------------
Net Increase in Net Assets from Operations ..................................... $ 16,199,271
============
</TABLE>
See Notes to Financial Statements.
17
<PAGE>
- --------------------------------------------------------------------------------
BT PreservationPlus Portfolio
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
year ended year ended
September 30, 1999 September 30, 1998/1
------------------ ------------------
<S> <C> <C>
Increase (Decrease) in Net Assets from:
Operations
Net Investment Income .................................................. $ 16,199,271 $ 7,494,607
Net Change in Unrealized Appreciation/Depreciation on Investments ...... (9,468,496) 3,951,992
Net Change in Unrealized Appreciation/Depreciation on Wrapper Agreements 11,590,701 (4,943,878)
Net Realized Gain (Loss) on Investments ................................ (2,122,205) 991,886
------------- -------------
Net Increase in Net Assets from Operations ................................ 16,199,271 7,494,607
------------- -------------
Capital Transactions
Proceeds from Capital Invested ......................................... 210,131,938 287,696,652
Value of Capital Withdrawn ............................................. (118,126,797) (62,639,878)
------------- -------------
Net Increase in Net Assets from Capital Transactions ...................... 92,005,141 225,056,774
------------- -------------
Total Increase in Net Assets .............................................. 108,204,412 232,551,381
Net Assets
Beginning of Year ......................................................... 232,551,381 --
------------- -------------
End of Year ............................................................... $ 340,755,793 $ 232,551,381
============= =============
</TABLE>
- ----------
1/ PreservationPlus Portfolio commenced operation on October 1, 1997.
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
Contained below are selected ratios and supplemental data for the periods
indicated for the BT PreservationPlus Portfolio.
<TABLE>
<CAPTION>
For the For the
year ended year ended
September 30, 1999 September 30, 1998/1
------------------ --------------------
<S> <C> <C>
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) ................... $ 340,756 $ 232,551
Ratios to Average Net Assets:
Net Investment Income ................................... 5.57% 5.80%
Expenses ................................................ 0.35% 0.35%
Decrease Reflected in the Above Expense Ratio Due
to Fees Waived/Expenses Reimbursed by Bankers Trust ... 0.15% 0.19%
Portfolio Turnover Rate .................................... 291% 428%
</TABLE>
- ----------
1/ PreservationPlus Portfolio commenced operation on October 1, 1997.
See Notes to Financial Statements.
18
<PAGE>
- --------------------------------------------------------------------------------
BT PreservationPlus Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 1--Organization and Significant Accounting Policies
A. Organization
The BT PreservationPlus Portfolio (the "Portfolio") is registered under the
Investment Company Act of 1940 (the "Act"), as amended, as an open-end
management investment company. The Portfolio was organized and began operations
on October 1, 1997 as an unincorporated trust under the laws of New York. The
Declaration of Trust permits the Board of Trustees (the "Trustees") to issue
beneficial interests in the Portfolio.
B. Security Valuation
Debt securities (other than short-term debt obligations maturing in 60 days or
less), including listed securities and securities for which price quotations are
available, will normally be valued on the basis of market valuations furnished
by a pricing service. Such market valuations may represent the last quoted price
on the securities' major trading exchange or quotes received from dealers or
market makers in the relevant securities or may be determined through the use of
matrix pricing. In matrix pricing, pricing services may use various pricing
models involving comparable securities, historic relative price movements,
economic factors and dealer quotations. Over-the-counter securities are normally
valued at the bid price. Short-term debt obligations and money market securities
maturing in 60 days or less are valued at amortized cost. Securities for which
market quotations are not readily available are valued by Bankers Trust pursuant
to procedures adopted by the Portfolio's Board of Trustees.
Wrapper Agreements generally will be equal to the difference between the Book
Value and Market Value (plus the crediting rate adjustment) on the applicable
covered assets and will either be reflected as an asset or liability of the
Portfolio. The Portfolio's Board of Trustees, in performing its fair value
determination of the Portfolio's Wrapper Agreements, considers the
creditworthiness and the ability of Wrapper Providers to pay amounts due under
the Wrapper Agreements.
C. Security Transactions and Interest Income
Security transactions are accounted for on a trade date basis. Interest income
is recorded on an accrual basis and includes amortization of premium and
discount on investments. Realized gains and losses from security transactions
are recorded on an identified cost basis. The credited rate interest represents
the actual interest earned on covered assets under the Portfolio's Wrapper
Agreements plus or minus an adjustment for an amount receivable from or payable
to the wrapper provider based on fluctuation in the market value of covered
assets.
All of the net investment income and net realized and unrealized gains and
losses (including the Wrapper Agreements) of the Portfolio are allocated pro
rata to the investors in the Portfolio on a daily basis.
D. TBA Purchase Commitments
The Portfolio may enter into "TBA" (to be announced) purchase commitments to
purchase securities for a fixed price at a future date, typically not exceeding
45 days. TBA purchase commitments may be considered securities in themselves,
and involve a risk of loss if the value of the security to be purchased declines
prior to settlement date. Unsettled TBA purchase commitments are valued at the
current market value of the underlying securities, according to the procedures
described under "Security Valuation" above.
E. Federal Income Taxes
The Portfolio is considered a partnership under the Internal Revenue Code.
Therefore, no federal income tax provision is necessary.
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 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.
The Portfolio has entered into an Advisory Agreement with Bankers Trust. Under
this agreement, the Portfolio pays Bankers Trust an advisory fee computed daily
and paid monthly at an annual rate of .35% of the Portfolio's average daily net
assets, less advisor fees paid for the pro rata amount due to investment in the
Institutional Cash Management Fund.
Bankers Trust has voluntarily undertaken to waive its fees and reimburse
expenses of the Portfolio, to the extent necessary, to limit all expenses to
.35% of the average daily net assets of the Portfolio.
The Portfolio may invest in the Institutional Cash Management Fund (the "Fund"),
an open-end management investment company managed by Bankers Trust. The Fund is
offered as a cash management option to the Portfolio and other accounts managed
by Bankers Trust. Distributions from the Fund to the Portfolio for the year
ended September 30, 1999 amounted to $2,951,834.
At September 30, 1999, the Portfolio was a participant with other affiliated
entities in a revolving credit facility in the amount of $100,000,000, which
expires April 29, 2000. A commitment fee of .10% per annum on the average daily
19
<PAGE>
- --------------------------------------------------------------------------------
BT PreservationPlus Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
amount of the available commitment is payable on a quarterly basis and
apportioned equally among all participants. On October 8, 1999, the revolving
credit facility was increased to $150,000,000. No amounts were outstanding under
the credit facility for the year ended September 30, 1999.
Bankers Trust was a wholly owned subsidiary of Bankers Trust Corporation ("BT
Corp."). On June 4, 1999, BT Corp. was acquired by Deutsche Bank AG ("Deutsche
Bank"). As a result of the transaction, Bankers Trust became an indirect
wholly-owned subsidiary of Deutsche Bank.
Note 3--Purchases and Sales of Investment Securities
The aggregate cost of purchases and proceeds from sales of investments, other
than short-term obligations, for the year ended September 30, 1999, were
$845,562,428 and $744,984,453, respectively. For federal income tax purposes,
the tax basis of investments held at September 30, 1999, was $394,943,913. The
aggregate gross unrealized appreciation was $463,318, and the aggregate gross
unrealized depreciation for all investments was $7,614,231 as of September 30,
1999.
Note 4--Wrapper Agreements
The Portfolio will enter into Wrapper Agreements with insurance companies, banks
or other financial institutions ("Wrapper Providers") that are rated, at the
time of purchase, in one of the top two long-term rating categories by Moody's
or S&P. A wrapper agreement is a derivative instrument that is designed to
protect the portfolio from investment losses and under most circumstances permit
the Fund to maintain a constant NAV per share. There is no active trading market
for Wrapper Agreements, and none is expected to develop; therefore, they are
considered illiquid.
A default by the issuer of a Portfolio Security or a Wrapper Provider on its
obligations might result in a decrease in the value of the Portfolio assets. The
Wrapper Agreements generally do not protect the Portfolio from loss if an issuer
of Portfolio Securities defaults on payments of interest or principal.
Additionally, a Fund shareholder may realize more or less than the actual
investment return on the Portfolio Securities depending upon the timing of the
shareholder's purchases and redemption of Shares, as well as those of other
shareholders.
20
<PAGE>
- --------------------------------------------------------------------------------
BT PreservationPlus Portfolio
Report of Independent Auditors
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees
BT PreservationPlus Portfolio
We have audited the accompanying statement of assets and liabilities, including
the schedule of portfolio investments, of BT PreservationPlus Portfolio (the
"Portfolio") as of September 30, 1999, the related statement of operations for
the year then ended and the statements of changes in net assets and the
financial highlights for each of two years in period then ended. 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 and financial highlights. Our procedures included confirmation of
securities owned as of September 30, 1999, by correspondence with the
Portfolio's 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 BT
PreservationPlus Portfolio at September 30, 1999, the results of its operations
for the year then ended, and the changes in its net assets and its financial
highlights for each of the two years in the period then ended, in conformity
with generally accepted accounting principles.
Ernst & Young, LLP
Philadelphia, Pennsylvania
November 8, 1999
21
<PAGE>
- --------------------------------------------------------------------------------
BT PreservationPlus Fund
Proxy Results (unaudited)
- --------------------------------------------------------------------------------
BT Preservation Plus Fund shareholders voted on the following proposals at the
annual meeting of shareholders on October 8, 1999 or as adjourned. The
description of each proposal and number of shares voted are as follows:
1. To elect the Bankers Trust Funds Board of Trustees.
Shares Shares Voted
Voted Withheld
For Authority
---------- ------------
Messr Biggar 17,837,613 --
Messr Dill 17,837,613 --
Messr Hale 17,837,613 --
Messr Langton 17,837,613 --
Messr Saunders 17,837,613 --
Messr Van Benschoten 17,837,613 --
Dr. Gruber 17,837,613 --
Dr. Herring 17,837,613 --
2. To approve the New Investment Advisory Agreement with Bankers Trust Company.
For Against Abstain
-------- ------- --------
17,837,613 -- --
3. To approve the New Investment Advisory Agreement with Morgan Grenfell, Inc.
For Against Abstain
-------- ------- --------
17,837,613 -- --
4. To approve the New Investment Sub-advisory Agreement with Bankers Trust
Company.
For Against Abstain
-------- ------- --------
17,837,613 -- --
5. To ratify the selection of Ernst & Young LLP as the independent accountants
of the Fund and its corresponding Portfolio.
For Against Abstain
-------- ------- --------
17,837,613 -- --
22
<PAGE>
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<PAGE>
[Bankers Trust LOGO]
For information on how to invest, shareholder account information and current
price and yield information, please contact your relationship manager or write
to us at: BT Service Center
P.O. Box 419210
Kansas City, MO 64141-6210
or call our toll-free number: 1-800-730-1313
This report must be preceded or accompanied by a current prospectus for the
Fund.
BT PreservationPlus Fund PreservationPlus CUSIP #055847834
BT Pyramid Mutual Funds #055847842
#055847826
#055847818
COMBPPANN (9/99)
Distributed by:
ICC Distributors, Inc.
Two Portland Square
Portland, ME 04101
