<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
BT INVESTMENT FUNDS
----------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
----------------------------------------------------------------------
(Name of Person(s) filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(I)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pur-
suant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
August 23, 1999
Dear Shareholder:
On June 4, 1999, Bankers Trust merged with Deutsche Bank A.G. As a result
of the merger, we are asking shareholders of BT Mutual Funds to approve new ad-
visory agreements. Enclosed is further information relating to these changes,
including a Questions & Answers section and proxy card(s).
Important information about the changes:
. The merger has no effect on the number of shares you own or the
value of those shares.
. The advisory fees payable under the new advisory agreements have
not increased.
. The investment objective and policies of your mutual fund invest-
ment have not changed.
In addition to the change in advisory agreements, shareholders are also be-
ing asked to approve other changes outlined in the enclosed Proxy Statement.
The Board of Trustees of your BT Mutual Fund believes that the proposals are
important and recommends that you read the enclosed materials carefully and
then vote for all proposals.
---
What you need to do:
. Read all enclosed materials including the Questions & Answers sec-
tion.
. Choose one of the following options to vote:
1. By Mail: Complete the enclosed proxy card and return in
postage-paid envelope provided.
2. By Telephone: Call the Toll-Free # on your proxy card.
3. By Internet: Logon to www.proxyvote.com.
4. Attend Shareholder Meeting (details enclosed).
Please note: if you own shares of more than one Fund, you will receive more
than one proxy card. Please sign and return each proxy card you receive.
Sincerely,
/s/Daniel O. Hirsch
Daniel O. Hirsch
Secretary
BT Mutual Funds
<PAGE>
QUESTIONS AND ANSWERS
IMPORTANT NEWS
FOR SHAREHOLDERS OF BT INVESTMENT FUNDS
Here is a brief overview of some matters affecting your Fund which require
a shareholder vote. We encourage you to read the full text of the enclosed
Proxy Statement, and to vote your shares.
Q. What has happened to require a shareholder vote?
A. On June 4, 1999, Bankers Trust became a subsidiary of Deutsche Bank
A.G. The combined entity now ranks as the fourth largest investment
manager in the world with $670-billion in assets in a full range of
active and index strategies.
To ensure that Bankers Trust or an affiliate may continue to serve as
investment adviser of the BT Mutual Funds, we are seeking shareholder
approval of new advisory agreements.
THE BOARD MEMBERS OF YOUR FUND RECOMMEND THAT YOU VOTE FOR THESE PRO-
POSALS.
Q. Why am I being asked to vote on the new advisory agreements?
A. The Investment Company Act, which regulates investment companies in
the United States such as your BT Mutual Fund, requires a shareholder
vote to approve a new advisory agreement following certain types of
business combinations. Each of the new advisory agreements became
effective immediately upon consummation of the merger and will
continue in effect only upon shareholder approval.
Q. How does the merger affect my BT Mutual Fund?
A. Your BT Mutual Fund and its respective investment objectives have not
changed as a result of the merger. You still own the same shares in
the same Fund as you did prior to the merger. Each of the new advisory
agreements contains substantially the same terms and conditions as the
agreement in effect prior to the merger, except for the dates of
execution and termination. If shareholders do not approve the new
advisory agreements, the agreements will no longer continue and the
governing Board of your Fund will take such action as they deem to be
in the best interests of the Fund, and their respective shareholders.
Q. Have the investment advisory fees remained the same?
A. Yes.
<PAGE>
Q. What are the benefits of the merger?
A. There are several potential positive aspects of the merger you may be
interested in. Most notably, the combined institution will be one of
the largest financial institutions in the world, as well as a leader
in a number of important categories, including asset management. The
financial strength of the combined institution coupled with the
increased breadth and depth of its resources and capabilities are
advantages the acquisition brings. Further, as a truly global
institution, the combined entity will be in a unique position to
provide coverage, services and products.
Q. How does the Board of Trustees of my BT Mutual Fund recommend that I
vote?
A. After careful consideration, the Board of Trustees of your BT Mutual
Fund recommends that you vote in favor of all the proposals on the
enclosed proxy card(s).
Q. Whom do I call for more information?
A. If you need more information, please call Shareholder Communications
Corporation, your Fund's information agent, at 1-800-732-6168.
Q. How can I vote my shares?
A. You may choose from one of the following options to vote your shares:
. By mail, with the enclosed proxy card(s) and return envelope.
. By telephone, with a toll-free call to the telephone number that
appears on your proxy card.
. Through the Internet, by using the Internet address located on
your proxy card and following the instructions on the site.
. In person at the shareholder meeting (see details enclosed in
proxy statement).
Q. Will my BT Mutual Fund pay for the proxy solicitation and legal costs
associated with this transaction?
A. No, Bankers Trust will bear these costs.
Q. What happens if I own shares in more than one BT Mutual Fund?
A. If you have more than one BT Mutual Fund in your name at the same
address, you will receive separate proxy cards for each Fund but only
one proxy statement for the account.
Please vote all issues on each proxy card that you receive. Thank you for
mailing your proxy card(s) promptly.
2
<PAGE>
BT INVESTMENT FUNDS
Quantitative Equity Fund
One South Street
Baltimore, Maryland 21202
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held September 21, 1999
A Special Meeting of shareholders of BT Investment Funds (the "Trust") will
be held at the offices of BT Alex. Brown Incorporated, One South Street, 30th
Floor, Baltimore, Maryland 21202 on September 21, 1999 at 11:00 a.m. (the "Spe-
cial Meeting"). The Trust is an open-end management investment company, orga-
nized under the laws of the Commonwealth of Massachusetts, that is comprised of
the Quantitative Equity Fund (the "Fund") and fifteen other series, which are
not addressed in the accompanying Proxy Statement ("Proxy Statement").
The Special Meeting is being held to consider and vote on the following
matters for the Fund, as indicated below and more fully described under the
corresponding Proposals in the Proxy Statement, and such other matters as may
properly come before the meeting or any adjournments thereof:
PROPOSAL I: To approve or disapprove new investment advisory
- ----------- agreements (each a "New Advisory Agreement" and
collectively the "New Advisory Agreements") for
the Trust:
A. To approve or disapprove a New Advisory
Agreement between the Trust and Bankers Trust
Company ("Bankers Trust").
B. To approve or disapprove a New Advisory
Agreement between the Trust and Morgan Grenfell
Inc. ("MGI") to be implemented within two years
of the date of the Special Meeting upon approval
of the members of the Trust's Board of Trustees
who are not "interested persons" ("Independent
Trustees") (as defined in the Investment Company
Act of 1940, as amended).
C. To approve or disapprove a new sub-invest-
ment advisory agreement (the "New Sub-advisory
Agreement," which term, unless otherwise speci-
fied, is included within the meaning of New Advi-
sory Agreements) among the Trust, MGI and Bankers
Trust under which Bankers Trust may perform cer-
tain of MGI's responsibilities, at MGI's expense,
under the New MGI Advisory Agreement with the
Trust upon approval of the Independent Trustees.
<PAGE>
PROPOSAL II: To elect Trustees of the Trust to hold office un-
- ------------ til their respective successors have been duly
elected and qualified or until their earlier res-
ignation or removal.
PROPOSAL III: To approve conversion of the Fund's structure
- ------------- from a stand-alone fund structure to a master-
feeder fund structure.
PROPOSAL IV: To ratify or reject the selection of
- ------------ PricewaterhouseCoopers LLP as the independent ac-
countants for the Fund's current fiscal year.
The appointed proxies will vote in their discretion on any other business
as may properly come before the Special Meeting or any adjournment thereof.
The New Advisory Agreements described in Proposals IA, IB and IC, respec-
tively, will contain substantially the same terms and conditions, except for
the parties and the dates of execution, effectiveness and initial term, as the
prior investment advisory agreements pursuant to which services were provided
to the Trust. In addition, the form of New Sub-advisory Agreement authorizes
the applicable investment adviser to adjust the duties, the amount of assets to
be managed and the fees paid to the investment subadviser with and upon the ap-
proval of the Board and the Independent Trustees. As more fully discussed in
the accompanying Proxy Statement, approval of the New Advisory Agreements,
which provide for the same services to be provided at the same fees, is gener-
ally occasioned by the merger of Circle Acquisition Corporation, a wholly owned
subsidiary of Deutsche Bank A.G. ("Deutsche Bank"), with and into Bankers Trust
Corporation, the parent company of Bankers Trust. MGI is, and as a result of
this transaction, Bankers Trust became, an indirect wholly owned subsidiary of
Deutsche Bank. The New Advisory Agreements with MGI described in Proposal IB
and the New Sub-advisory Agreement with Bankers Trust described in Proposal IC
will permit Deutsche Bank, upon the approval of the Independent Trustees, to
simplify the organizational structure of its U.S. mutual fund operations, en-
hance the efficiency of their administration and promote consistency of inter-
nal controls, compliance and regulatory oversight. The deferral in implementing
the New Advisory Agreements with MGI is needed to permit Deutsche Bank a suffi-
cient amount of time to plan, prepare and institute the necessary arrangements
for MGI to consolidate Deutsche Bank's U.S. mutual fund operations.
The close of business on July 22, 1999 has been fixed as the record date
for the determination of the shareholders of the Fund entitled to notice of,
and to vote at, the Special Meeting. You are cordially invited to attend the
Special Meeting.
2
<PAGE>
IF YOU HAVE ANY QUESTIONS CONCERNING THE PROXY STATEMENT OR THE PROCEDURES
TO BE FOLLOWED TO EXECUTE AND DELIVER A PROXY, PLEASE CONTACT SHAREHOLDER COM-
MUNICATIONS CORPORATION AT 1-800-732-6168.
This notice and related proxy material are first being mailed to sharehold-
ers on or about August 23, 1999. This proxy is being solicited on behalf of the
Board of Trustees of the Trust.
By Order of the Board of Trustees,
/s/Daniel O. Hirsch
Daniel O. Hirsch, Secretary
New York, New York
August 23, 1999
- --------------------------------------------------------------------------------
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING, PLEASE
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY
IN THE ENCLOSED ENVELOPE IN ORDER TO ASSURE REPRESENTATION OF YOUR
SHARES (UNLESS YOU ARE VOTING BY TELEPHONE OR THROUGH THE
INTERNET). NO POSTAGE NEED BE AFFIXED IF THE PROXY CARD IS MAILED
IN THE UNITED STATES.
- --------------------------------------------------------------------------------
3
<PAGE>
BT Investment Funds
Quantitative Equity Fund
One South Street
Baltimore, Maryland 21202
PROXY STATEMENT FOR THE SPECIAL MEETING OF SHAREHOLDERS
September 21, 1999
This Proxy Statement ("Proxy Statement") is being furnished in connection
with the solicitation of proxies by the Board of Trustees of BT Investment
Funds (the "Trust") with respect to the Quantitative Equity Fund (the "Fund")
for use at the special meeting of the Trust to be held at the offices of BT Al-
ex. Brown Incorporated, One South Street, 30th Floor, Baltimore, Maryland 21202
on September 21, 1999 at 11:00 a.m. (the "Special Meeting") and at any adjourn-
ments thereof. This Proxy Statement and accompanying proxy card(s) ("Proxy")
are expected to be mailed to shareholders on or about August 23, 1999.
The Trust is comprised of several series. The Fund is a separate series of
the Trust, along with fifteen other funds which are not addressed in this Proxy
Statement.
For simplicity, actions are described in this Proxy Statement as being
taken by the Fund, although all actions are actually taken by the Trust on be-
half of the Fund.
The Special Meeting is being held to consider and vote on the following
matters for the Fund, as indicated below and described more fully under the
corresponding Proposals discussed herein, and such other matters as may prop-
erly come before the meeting or any adjournments thereof:
PROPOSAL I: To approve or disapprove new investment advisory
- ----------- agreements (each a "New Advisory Agreement" and
collectively the "New Advisory Agreements") for
the Trust:
A. To approve or disapprove a New Advisory
Agreement between the Trust and Bankers Trust
Company ("Bankers Trust") (the "New BT Advisory
Agreement").
B. To approve or disapprove a New Advisory
Agreement between the Trust and Morgan Grenfell
Inc. ("MGI" and, together with Bankers
<PAGE>
Trust, the "Advisers") (the "New MGI Advisory
Agreement") to be implemented within two years of
the date of the Special Meeting upon approval of
the members of the Trust's Board of Trustees who
are not "interested persons" thereof ("Indepen-
dent Trustees") (as defined in the Investment
Company Act of 1940, as amended (the "Act")).
C. To approve or disapprove a new sub-invest-
ment advisory agreement (the "New Sub-advisory
Agreement," which term, unless otherwise speci-
fied, is included within the meaning of New Advi-
sory Agreements) among the Trust, MGI and Bankers
Trust under which Bankers Trust may perform cer-
tain of MGI's responsibilities, at MGI's expense,
under the New MGI Advisory Agreement with the
Trust upon approval of the Independent Trustees.
PROPOSAL II: To elect Trustees of the Trust to hold office
- ------------ until their respective successors have been duly
elected and qualified or until their earlier
resignation or removal.
PROPOSAL III: To approve conversion of the Fund's structure
- ------------- from a stand-alone fund structure to a master-
feeder fund structure.
PROPOSAL IV: To ratify or reject the selection of
- ------------ PricewaterhouseCoopers LLP as the independent
accountants for the Fund for the current fiscal
year.
The appointed proxies will vote on any other business as may properly come
before the Special Meeting or any adjournment thereof.
Among other proposals, the shareholders of the Trust are to consider the
election of Charles P. Biggar, S. Leland Dill, Martin J. Gruber, Richard Hale,
Richard J. Herring, Bruce E. Langton, Philip Saunders, Jr. and Harry Van
Benschoten (the "Trustee Nominees") as Trustees of the Trust. Messrs. Dill and
Saunders currently serve on the Board of the Trust (the "Board") and Drs. Her-
ring and Gruber and Messrs. Langton and Van Benschoten serve as Trustees of
various other investment companies within the Bankers Trust family of funds. To
ensure adherence by the Trust with Section 15(f) of the Act, only Mr. Hale will
be an "interested person" (within the meaning of Section 2(a)(19) of the Act)
of the Fund following the Merger (as defined herein) and the approval of the
New Advisory Agreements.
2
<PAGE>
Notice of the Special Meeting and a Proxy accompany this Proxy Statement.
Proxy solicitations will be made primarily by mail, but solicitations may also
be made by telephone, telegraph, through the Internet or in person by officers
or agents of the Fund. All costs of solicitation, including (a) printing and
mailing of this Proxy Statement and accompanying material, (b) the reimburse-
ment of brokerage firms and others for their expenses in forwarding solicita-
tion material to the beneficial owners of the Fund's shares, (c) payment to
Shareholder Communications Corporation for its services in soliciting proxies
and (d) supplementary solicitations to submit Proxies, will be borne by Bankers
Trust. If the Fund records votes by telephone or through the Internet, it will
use procedures designed to authenticate shareholders' identities, to allow
shareholders to authorize the voting of their shares in accordance with their
instructions, and to confirm that their instructions have been properly record-
ed. Proxies voted by telephone or through the Internet may be revoked at any
time before they are voted in the same manner that proxies voted by mail may be
revoked.
The Annual Report of the Fund containing audited financial statements for
the fiscal year ended December 31, 1998, as well as the Semi-Annual Report of
the Fund (each a "Report"), have previously been furnished to the Fund's share-
holders. An additional copy of each Report will be furnished without charge
upon request by writing to the Trust at the address set forth on the cover of
this Proxy Statement or by calling 1-800-730-1313.
If the enclosed Proxy is properly executed and returned in time to be voted
at the Special Meeting, the shares represented thereby will be voted in accor-
dance with the instructions marked on the Proxy. Shares of the Fund are enti-
tled to one vote each at the Special Meeting and fractional shares are entitled
to proportionate shares of one vote. If no instructions are marked on the Proxy
with respect to a specific Proposal, the Proxy will be voted "FOR" the approval
of such Proposal and in accordance with the judgment of the persons appointed
as proxies with respect to any other matter that may properly come before the
Special Meeting. Any shareholder giving a Proxy has the right to attend the
Special Meeting to vote his/her shares in person (thereby revoking any prior
Proxy) and also the right to revoke the Proxy at any time by written notice re-
ceived by the Fund prior to the time it is voted.
Bankers Trust will vote any shares in accounts as to which it has invest-
ment authority, and shares in any other accounts as to which Bankers Trust is
the agent of record, which are not otherwise represented in person or by proxy
at the Special Meeting. Bankers Trust will vote shares of the Fund over which
it has investment discretion in accord with its fiduciary and other legal obli-
gations, and in its discretion may consult with the beneficial owners or other
fiduciaries. Bankers Trust will vote shares of the Fund for which it is the
owner of record but does not have investment discretion, with respect to each
Proposal on which shareholders of the Fund are entitled to vote, which are not
otherwise represented in person
3
<PAGE>
or by proxy at the Special Meeting. These shares will be voted by Bankers
Trust for, against, or abstaining, in the same proportion as the votes cast by
holders of all shares in the Fund otherwise represented at the Special Meet-
ing. This practice is commonly referred to as "mirror" or "echo" voting.
In the event that a quorum is not present at the Special Meeting, or if a
quorum is present but sufficient votes to approve a Proposal are not received,
the persons named as proxies may propose one or more adjournments of the Spe-
cial Meeting to permit further solicitation of Proxies with respect to the
Proposal. In determining whether to adjourn the Special Meeting, the following
factors may be considered: the nature of the proposals that are the subject of
the Special Meeting, the percentage of votes actually cast, the percentage of
negative votes actually cast, the nature of any further solicitation and the
information to be provided to shareholders with respect to the reasons for the
solicitation. Any adjournment will require the affirmative vote of a majority
of those shares represented at the Special Meeting in person or by Proxy. The
persons named as proxies will vote those Proxies that they are entitled to
vote "FOR" any Proposal in favor of an adjournment and will vote those Proxies
required to be voted "AGAINST" any such Proposal against any adjournment. A
shareholder vote may be taken on one or more of the Proposals in the Proxy
Statement prior to any adjournment if sufficient votes have been received and
it is otherwise appropriate. A quorum of shareholders is constituted by the
presence in person or by proxy of the holders of a majority of the outstanding
shares of the Trust or the Fund (as applicable) entitled to vote at the Spe-
cial Meeting. For purposes of determining the presence of a quorum for trans-
acting business at the Special Meeting, abstentions and broker "non-votes"
(that is, proxies from brokers or nominees indicating that these persons have
not received instructions from the beneficial owner or other persons entitled
to vote shares on a particular matter with respect to which the brokers or
nominees do not have discretionary power) will be treated as shares that are
present but which have not been voted. (See "Vote Required" for a further dis-
cussion of abstentions and broker non-votes.)
Shareholders of record at the close of business on July 22, 1999 (the
"Record Date") are entitled to notice of, and to vote at, the Special Meeting.
As of the Record Date, 82,213.605 shares of the Fund were issued and outstand-
ing.
In order that your shares may be represented, you are requested to (unless
you are voting by telephone or through the Internet):
.indicate your instructions on the Proxy;
.date and sign the Proxy; and
.mail the Proxy promptly in the enclosed envelope.
4
<PAGE>
Beneficial Ownership of Shares of the Fund
Annex I attached hereto sets forth information as of the Record Date re-
garding the beneficial ownership of the Fund's shares by (i) the only persons
known by the Fund to beneficially own more than five percent of the outstand-
ing shares of the Fund, (ii) the Trustees and Trustee Nominees, (iii) the ex-
ecutive officers of the Fund, and (iv) the Trustees and executive officers of
the Fund as a group. The number of shares beneficially owned by each Trustee,
Trustee Nominee or executive officer is determined under rules of the Securi-
ties and Exchange Commission (the "Commission"), and the information is not
necessarily indicative of beneficial ownership for any other purpose. Under
these rules, beneficial ownership includes any shares as to which the individ-
ual has the sole or shared voting power or investment power and also any
shares which the individual has the right to acquire within 60 days of the
Record Date through the exercise of any stock option or other right. Unless
otherwise indicated, each person has sole investment and voting power (or
shares this power with his or her spouse) with respect to the shares set forth
in Annex I. The inclusion herein of any shares deemed beneficially owned does
not constitute an admission of beneficial ownership of the shares.
Background
The Fund. As indicated earlier, the Fund is a separate series of the
Trust. Bankers Trust, a banking corporation organized under the laws of the
State of New York, located at 130 Liberty Street (One Bankers Trust Plaza),
New York, New York 10006, serves as the investment adviser and custodian of
the Fund. Bankers Trust is a wholly owned subsidiary of Bankers Trust Corpora-
tion ("BT Corporation"), located at 130 Liberty Street (One Bankers Trust Pla-
za), New York, New York 10006, a registered bank holding company organized un-
der the laws of the State of New York. As discussed later in this Proxy State-
ment, as a result of the Merger (as defined herein), BT Corporation became a
wholly owned subsidiary of Deutsche Bank A.G. ("Deutsche Bank"), located at 31
West 52nd Street, New York, New York 10019. ICC Distributors, Inc., located at
Two Portland Square, Portland, Maine 04101 serves as the principal underwriter
of the Fund. ICC Distributors, Inc., is not affiliated with Bankers Trust,
Deutsche Bank or any of their affiliates.
5
<PAGE>
PROPOSALS IA, IB AND IC
APPROVAL OF NEW ADVISORY AGREEMENTS
The New Advisory Agreements will contain substantially the same terms and
conditions, except for the parties and the dates of execution, effectiveness
and initial term, as the prior investment advisory agreement pursuant to which
services were provided to the Fund. In addition, the form of New Sub-advisory
Agreement authorizes the applicable investment adviser to adjust the duties,
the amount of assets to be managed and the fees paid to the investment
subadviser with and upon the approval of the Board and the Independent Trust-
ees. As more fully discussed below, approval of the New Advisory Agreements,
which provide for the same services to be provided at the same fees, is gener-
ally occasioned by the Merger (as defined herein), pursuant to which Bankers
Trust became an indirect subsidiary of Deutsche Bank. The New MGI Advisory
Agreement described in Proposal IB and the New Sub-advisory Agreement with
Bankers Trust described in Proposal IC will permit Deutsche Bank, upon the ap-
proval of the Independent Trustees, to simplify the organizational structure
of its U.S. mutual fund operations, enhance the efficiency of their adminis-
tration and promote consistency of internal controls, compliance and regula-
tory oversight. The deferral in implementing the New MGI Advisory Agreement is
needed to permit Deutsche Bank a sufficient amount of time to plan, prepare
and institute the necessary arrangements for MGI to consolidate Deutsche
Bank's U.S. mutual fund operations.
The Prior Advisory Agreement
The Prior Advisory Agreement. Prior to June 4, 1999, Bankers Trust served
as investment adviser to the Fund (as discussed earlier) pursuant to an in-
vestment advisory agreement between Bankers Trust and the Trust (the "Prior
Advisory Agreement"). The Prior Advisory Agreement was initially approved by
the Board, including a majority of the Independent Trustees.
The date of the Prior Advisory Agreement was December 31, 1998. The Prior
Advisory Agreement was most recently approved by the Fund's Trustees on March
8, 1999. The advisory fee rate is 0.50%./1/
The Merger. On November 30, 1998, BT Corporation, Deutsche Bank and Circle
Acquisition Corporation entered into an Agreement and Plan of Merger (the
"Merger Agreement"). Pursuant to the terms of the Merger Agreement, Circle Ac-
quisition Corporation, a wholly owned New York subsidiary of Deutsche Bank,
merged with and into BT Corporation on June 4, 1999, with BT Corpora-
- -----------
1 The Fund first opened to investors on March 29, 1999. Therefore, fees were
not paid by the Fund to Bankers Trust for the prior fiscal year. The Fund's
total fund operating expenses are capped pursuant to an Expense Limitation
Agreement between Bankers Trust and the Trust. The fee rate shown does not
reflect the cap.
6
<PAGE>
tion continuing as the surviving entity (the "Merger"). Under the terms of the
Merger, each outstanding share of BT Corporation common stock was converted
into the right to receive $93 in cash, without interest. Since the Merger, BT
Corporation, along with its affiliates, has continued to offer the range of
financial products and services, including investment advisory services, that
it offered prior to the Merger.
As a result of the Merger, BT Corporation became a wholly owned subsidiary
of Deutsche Bank. Deutsche Bank is a banking company with limited liability
organized under the laws of the Federal Republic of Germany. Deutsche Bank is
the parent company of a group consisting of banks, capital markets companies,
fund management companies, mortgage banks, a property finance company, in-
stallment financing and leasing companies, insurance companies, research and
consultancy companies and other domestic and foreign companies (the "Deutsche
Bank Group"). At March 31, 1999, the Deutsche Bank Group had total assets of
US $727 billion. The Deutsche Bank Group's capital and reserves at March 31,
1999, were US $19.6 billion.
Impact of the Merger on the Prior Advisory Agreements. Section 15(a) of
the Act provides, in pertinent part, that "[i]t shall be unlawful for any per-
son to serve or act as investment adviser of a registered investment company,
except pursuant to a written contract, which contract, whether with such reg-
istered company or with an investment adviser of such registered company, has
been approved by the vote of a majority of the outstanding voting securities
of such registered company . . . ." Section 15(a)(4) of the Act further re-
quires that such written contract provide for automatic termination in the
event of its assignment. Section 2(a)(4) of the Act defines "assignment" to
include any direct or indirect transfer of a contract by the assignor.
While it may be argued otherwise, consummation of the Merger may have re-
sulted in an "assignment" of the Prior Advisory Agreement within the meaning
of the Act, terminating the agreement according to its terms and the Act as of
June 4, 1999. Specifically, as Bankers Trust is a wholly owned subsidiary of
BT Corporation, the merger of Circle Acquisition Corporation with and into BT
Corporation could be deemed to have resulted in an "assignment" of the Prior
Advisory Agreement with Bankers Trust.
On May 25, 1999, Bankers Trust was granted an exemptive order (the
"Exemptive Order") by the Commission permitting implementation, without ob-
taining prior shareholder approval, of the New BT Advisory Agreement during an
interim period commencing on the date of the closing of the Merger and contin-
uing, for a period of up to 150 days, through the date on which the New BT Ad-
visory Agreement is approved or disapproved by the shareholders of the Fund
(the "Interim Period"). Under the terms of the Exemptive Order, Bankers Trust
was allowed to receive advisory fees during the Interim Period pursuant to
7
<PAGE>
the New BT Advisory Agreement, provided that these fees would be held in escrow
pending shareholder approval of the New BT Advisory Agreement. In accordance
with the Exemptive Order, the advisory fees charged to the Fund and paid to
Bankers Trust under the New BT Advisory Agreement have been held in an inter-
est-bearing escrow account and the Fund expects to continue to deposit these
fees in such account until approval of the New BT Advisory Agreement by the
shareholders of the Fund has been obtained. If the New BT Advisory Agreement is
not approved by the shareholders by the expiration of the Interim Period, the
fees held in escrow will be remitted to the Fund. As of June 30, 1999, the
amount in escrow totaled $0.00. The Fund's advisory fee is currently being
waived by Bankers Trust in order to remain under the limit established by the
Expense Limitation Agreement.
The shareholders of the Fund are not being asked to approve or disapprove
the Merger or the Merger Agreement; rather, they are being asked under these
Proposals to approve and continue the New BT Advisory Agreement and to approve
the New Advisory Agreements for the Fund. Other than the parties and the dates
of execution, effectiveness, and initial term of the agreement, the New Advi-
sory Agreements will contain substantially the same terms and conditions as the
Prior Advisory Agreement. In addition, the form of New Sub-advisory Agreement
authorizes the applicable investment adviser to adjust the duties, the amount
of assets to be managed and the fees paid to the investment subadviser with and
upon the approval of the Board and the Independent Trustees. The advisory fee
rate charged to the Fund under the Prior Advisory Agreement has continued to
apply under the New BT Advisory Agreement and would continue to apply under the
New MGI Advisory Agreement. MGI, and not the Trust, would be solely responsible
for paying the sub-advisory fees, which may vary from time to time as approved
by the Independent Trustees. The sub-advisory fees would be paid by MGI di-
rectly to the subadviser. In addition, the Advisers have advised the Fund that
it can expect to continue to receive the same level and quality of services un-
der the New Advisory Agreements as it received under the Prior Advisory Agree-
ment. The Advisers have represented to the Board that in the event of any mate-
rial change in the investment management personnel of the Advisers responsible
for providing services to the Fund, the Advisers will apprise and consult with
the Board to ensure that the Board, including a majority of the Board's Inde-
pendent Trustees, is satisfied that the services provided by the Advisers will
not be diminished in scope and quality.
The New Advisory Agreements
The New Advisory Agreements. The form of the New Advisory and Sub- advisory
Agreement is attached to this Proxy Statement as Exhibit A. If shareholders ap-
prove the New Advisory Agreements, each of the agreements will remain in effect
for an initial term of two years from its effective date, and may be renewed
annually thereafter by specific approval of the Board or shareholders of
8
<PAGE>
the Fund, provided that they are also approved by a majority of the Indepen-
dent Trustees. The terms and conditions of the New Advisory Agreements, other
than the parties and the dates of execution, effectiveness and initial term,
are substantially the same as those of the Prior Advisory Agreement. In addi-
tion, the form of New Sub-advisory Agreement authorizes the applicable invest-
ment adviser to adjust the duties, the amount of assets to be managed and the
fees paid to the investment subadviser with and upon the approval of the Board
and the Independent Trustees. The New BT Advisory Agreement and the New MGI
Advisory Agreement will be between the Trust and either Bankers Trust or MGI,
as applicable; the New Sub-advisory Agreement will be among the Trust, MGI (as
Adviser) and Bankers Trust (as subadviser). The New BT Advisory Agreement be-
came effective as of June 4, 1999, the date of the consummation of the Merger.
If the New MGI Advisory Agreement and/or the New Sub-advisory Agreement is
approved, Bankers Trust will continue to perform its advisory duties under the
New BT Advisory Agreement until the New MGI Advisory Agreement and/or the New
Sub-advisory Agreement is implemented. MGI, as Adviser, and Bankers Trust, as
subadviser, would perform its respective advisory duties and be paid its re-
spective advisory fees only upon implementation of the applicable New Advisory
Agreement.
Under the terms of the New Advisory Agreements, as under the Prior Advi-
sory Agreement, each of the Advisers agrees to furnish the Fund with invest-
ment advisory and other services in connection with a continuous investment
program for the Fund, including investment research and management with re-
spect to all securities, investments, cash and cash equivalents in the portfo-
lios. Subject to the supervision and control of the Board, each of the Advis-
ers agrees to (a) conform to all applicable rules and regulations of the Com-
mission, including all applicable provisions of the Securities Act of 1933, as
amended (the "1933 Act"), the Securities Exchange Act of 1934 (the "Exchange
Act"), the Act and the Investment Advisers Act of 1940, as amended (the "Ad-
visers Act"), and will conduct its activities under the New Advisory Agree-
ments in accordance with applicable regulations of the Board of Governors of
the Federal Reserve System pertaining to the investment advisory activities of
bank holding companies and their subsidiaries, (b) provide the services ren-
dered by it in accordance with the Fund's investment objectives and policies
as stated in the Prospectus and Statement of Additional Information of the
Fund, as from time to time in effect, and the Fund's then current registration
statement on Form N-1A as filed with the Commission and the then current of-
fering Memorandum if the Fund is not registered under the 1933 Act, (c) place
orders pursuant to its investment determinations for the Fund either directly
with the issuer or with any broker or dealer selected by it, (d) determine
from time to time what securities or other investments will be purchased, sold
or retained by the Fund, and (e) maintain books and records with respect to
the securities transactions of the Fund and render to the Board such periodic
and special reports as they may request.
9
<PAGE>
The Advisory Fee. The investment advisory fee rate charged to the Fund un-
der the New BT Advisory Agreement and the New MGI Advisory Agreement is the
same as the investment advisory fee rate charged under the Prior Advisory
Agreement. As noted above, the investment advisory fee payable under the New
Sub-advisory Agreement would be paid by MGI, not the Trust, and may vary from
time to time, subject to the approval of the Trust's Board, including a major-
ity of its Independent Trustees.
As under the Prior Advisory Agreement, Bankers Trust or MGI, as applicable,
is paid a fee under the New Advisory Agreements for its services, calculated
daily and paid monthly, equal, on an annual basis, to 0.50% of the Fund's aver-
age daily net assets.
Generally. If approved, the New Advisory Agreements, as applicable, will
remain in effect for an initial term of two years (unless sooner terminated),
and shall remain in effect from year to year thereafter if approved annually
(1) by the Board or by the holders of a majority of the Fund's outstanding vot-
ing securities and (2) by a majority of the Independent Trustees who are not
parties to such contract or agreement. Like the Prior Advisory Agreement, the
New Advisory Agreements will terminate upon assignment by any party and are
terminable, without penalty, on 60 days' written notice by the Board or by a
"majority" vote of the shareholders of the Fund (as defined in the Act) or upon
60 days' written notice by the applicable Adviser.
The services of the Advisers are not deemed to be exclusive and nothing in
the New Advisory Agreements prevents them or their affiliates from providing
similar services to other investment companies and other clients (whether or
not their investment objectives and policies are similar to those of the Fund)
or from engaging in other activities. In addition, the Advisers are obligated
to pay expenses associated with providing the services contemplated by the New
Advisory Agreements. The Trust bears certain other expenses including the fees
of the Board. The Trust also pays any extraordinary expenses incurred.
Under the New Advisory Agreements, each of the Advisers will exercise its
best judgment in rendering its advisory services. The Advisers shall not be li-
able for any error of judgment or mistake of law or for any loss suffered by
the Trust or the Fund in connection with the matters to which the New Advisory
Agreements relate, provided that nothing therein shall be deemed to protect or
purport to protect the Advisers against any liability to the Trust or the Fund
or to its shareholders to which the Advisers could otherwise be subject by rea-
son of willful misfeasance, bad faith or gross negligence on their part in the
performance of their duties or by reason of the Advisers' reckless disregard of
their obligations and duties under the New Advisory Agreements.
10
<PAGE>
The Advisers
Bankers Trust. Bankers Trust is the principal banking subsidiary of BT Cor-
poration. Bankers Trust is a bank and, therefore, not required to register as
an investment adviser under the Advisers Act. Bankers Trust provides a broad
range of commercial banking and financial services, including originating loans
and other forms of credit, accepting deposits and arranging financings. Bankers
Trust also engages in trading currencies, securities, derivatives and commodi-
ties. In addition to providing investment advisory services to the Fund, Bank-
ers Trust serves as investment adviser to 31 other investment companies and in-
vestment subadviser to 34 other investment companies. (See Annex II for a list
of those investment companies that Bankers Trust advises that have investment
objectives similar to those of the Fund, together with information regarding
the fees charged to those companies.) As of March 31, 1999, Bankers Trust had
over $313 billion of assets under management./2/
The names, business addresses and principal occupations of the current
chief executive officer and directors of Bankers Trust are set forth below.
<TABLE>
<CAPTION>
Name and Address Principal Occupation
- ------------------------------------------------------------------------------
<S> <C>
Josef Ackermann Chairman of the Board, Chief Executive
Deutsche Bank A.G. Taunusanlage 12 Officer and President, Bankers Trust
D-60262 Frankfurt am Main Federal Company; Member, Board of Managing
Republic of Germany Directors, Deutsche Bank A.G.
Hans Angermueller Shearman & Sterling, of counsel
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
George B. Beitzel Director, Computer Task Group, Inc.;
29 King Street Director, Phillips Petroleum Company;
Chappaqua, NY 10514-3432 Director, TIG Holdings Inc.
William R. Howell Chairman Emeritus, J.C. Penney Company,
J.C. Penney Company, Inc. Inc.; Director, Exxon Corporation;
P.O. Box 10001 Director, Halliburton Company; Director,
Dallas, TX 75301-1109 National Organization on Disability;
Director, National Retail Federation;
Director and Chairman, Southern
Methodist University Board of Trustees;
Director, Warner-Lambert Company;
Director, The Williams Companies, Inc.
Hermann-Josef Lamberti Deutsche Bank Member, Board of Managing Directors,
A.G. Taunusanlage 12 Deutsche Bank A.G.
D-60262 Frankfurt am Main Federal
Republic of Germany
- ------------------------------------------------------------------------------
</TABLE>
2 The Fund opened to investors on March 29, 1999, and had no assets under man-
agement as of March 31, 1999.
11
<PAGE>
<TABLE>
<CAPTION>
Name and Address Principal Occupation
- ------------------------------------------------------------------------
<S> <C>
John A. Ross Regional Chief Executive Officer,
Deutsche Bank A.G. Deutsche Bank Americas Holding Corp.
31 West 52nd Street
New York, NY 10019
Ronaldo H. Schmitz Member, Board of Managing Directors,
Deutsche Bank A.G. Taunusanlage 12 Deutsche Bank A.G.
D-60262 Frankfurt am Main Federal
Republic of Germany
- ------------------------------------------------------------------------
</TABLE>
In addition to serving as investment adviser to the Fund, Bankers Trust
also serves as administrator, transfer agent and custodian of the Fund. These
services will continue to be provided by Bankers Trust after approval of the
New Advisory Agreements./3/
MGI. MGI is a corporation organized under the laws of the State of Dela-
ware and is a registered investment adviser under the Advisers Act. It is lo-
cated at 885 Third Avenue, 32nd Floor, New York, NY 10022. MGI provides a full
range of investment advisory services to institutional clients. MGI serves as
investment adviser to ten other investment companies and as subadviser to five
other investment companies. MGI is a subsidiary of Morgan Grenfell Asset Man-
agement Ltd. ("MGAM") located at 20 Finsbury Circus, London, England, a wholly
owned subsidiary of Deutsche Morgan Grenfell Group PLC, located at 23 Great
Winchester Street, London, England, an investment holding company which is, in
turn, a wholly owned subsidiary of Deutsche Bank. MGAM currently manages ap-
proximately $16.5 billion for a wide range of pension, corporate, insurance,
local authority, government and private clients worldwide. (See Annex II for a
list of those investment companies that MGI advises that have investment ob-
jectives similar to those of the Fund, together with information regarding the
fees charged to those companies.)
- -----------
3 Because the Fund opened to investors on March 29, 1999, the Fund has not
had a full fiscal year and the Trust has not yet made payments to Bankers
Trust for these services for the Fund.
12
<PAGE>
The names, business addresses and principal occupations of the current di-
rectors and chief executive officer of MGI are set forth below. Except as oth-
erwise indicated, the business address of the individuals named below is 885
Third Avenue, 32nd Floor, New York, NY 10022 and their positions at MGI con-
stitute their principal occupation.
<TABLE>
<CAPTION>
Name and Address Principal Occupation
- -------------------------------------------------------------------
<S> <C>
Richard Marin* President and Director, Morgan Grenfell
280 Park Avenue Inc.; Managing Director, Bankers Trust
New York, NY 10017 Company
David Westover Baldt Executive Vice President and Director,
Morgan Grenfell Inc.
Joan A. Binstock Chief Operating Officer, Secretary,
Treasurer, and Director, Morgan Grenfell
Inc.
Audrey Mary Theresa Jones Executive Vice President, Portfolio
Manager and Director, Morgan Grenfell
Inc.
Robert H. Smith Chairman and Director, Morgan Grenfell
Inc.; Chief Executive Officer, Morgan
Grenfell Asset Management; Chairman and
Chief Executive Officer, Morgan Grenfell
Development Capital
Steven Schneider Managing Director, Bankers Trust Company
280 Park Avenue
New York, NY 10017
- -------------------------------------------------------------------
</TABLE>
* Mr. Marin beneficially owns 26.33% of the shares of the Fund.
Section 15(f) of the Act
Section 15(f) of the Act provides that when a change of control of an in-
vestment adviser to an investment company occurs, the investment adviser or
any of its affiliated persons may receive an amount or benefit in connection
therewith as long as two conditions are satisfied.
First, no "unfair burden" may be imposed on the investment company as a
result of the transaction relating to the change of control, or any express or
implied terms, conditions or understandings applicable thereto. As defined in
the Act, the term "unfair burden" includes any arrangement during the two (2)
year period after the change in control whereby the investment adviser (or
predecessor or successor adviser), or any "interested person" (as defined in
the Act) of such adviser, receives or is entitled to receive any compensation,
directly or indirectly, from the investment company or its security holders
(other than fees for bona fide investment advisory or other services), or from
any person in connection with the purchase or sale of other property to, or on
behalf of the investment company (other than fees for bona fide brokerage and
principal underwriting services). The Advisers have advised the Board that
there are no circum-
13
<PAGE>
stances arising from the Merger that might result in an "unfair burden" (within
the meaning of section 15(f) of the Act) being imposed on the Trust. After con-
ducting its reviews of the Advisers and of Bankers Trust's performance, and af-
ter reviewing materials specifically provided by Bankers Trust as a result of
the termination of the Prior Advisory Agreements and its request that the Board
approve the New Advisory Agreements, the Board was satisfied that it had re-
ceived and appropriately considered the relevant factors and, after consulta-
tion with counsel, the Board determined to approve the New Advisory Agreements.
The second condition is that, during the three (3) year period immediately
following the Merger, at least 75% of the members of the Board must not be "in-
terested persons" of the Advisers within the meaning of the Act. All current
members of the Board are not, and have continued not to be since the Merger,
"interested persons" of the Advisers.
Additional Information
On March 11, 1999, Bankers Trust announced that it had reached an agreement
with the United States Attorney's Office in the Southern District of New York
to resolve an investigation concerning inappropriate transfers of unclaimed
funds and related record-keeping problems that occurred between 1994 and early
1996. Bankers Trust pleaded guilty to misstating entries in the bank's books
and records and agreed to pay a $63.5 million fine to state and federal author-
ities. On July 26, 1999, the federal criminal proceedings were concluded with
Bankers Trust's formal sentencing. The events leading up to the guilty pleas
did not arise out of the investment advisory or mutual fund management activi-
ties of Bankers Trust or its affiliates.
As a result of the plea, absent an order from the Commission, Bankers Trust
would not be able to continue to provide investment advisory services to the
Fund. The Commission has granted Bankers Trust a temporary order under Section
9(c) of the Act to permit Bankers Trust and its affiliates to continue to pro-
vide investment advisory services to registered investment companies, and Bank-
ers Trust, pursuant to Section 9(c) of the Act, has filed an application for a
permanent order. On May 7, 1999, the Commission extended the temporary order
under Section 9(c) of the Act until the Commission takes final action on the
application for a permanent order or, if earlier, November 8, 1999. However,
there is no assurance that the Commission will grant a permanent order. If the
Commission refuses to grant a permanent order, shareholders will receive sup-
plemental proxy materials requesting approval to release any amounts held in
escrow up to the time of the refusal and such other action as deemed appropri-
ate by the Board.
14
<PAGE>
Recommendation of the Board
At a meeting of the Board held on March 8, 1999 called for the purpose of,
among other things, voting on approval of the New BT Advisory Agreement, the
Board, including the Independent Trustees, unanimously approved the New BT Ad-
visory Agreement. In reaching this conclusion, the Board obtained from BT Cor-
poration, Deutsche Bank and Bankers Trust such information as they deemed rea-
sonably necessary to approve Bankers Trust as investment adviser to the Trust.
Additionally, the Board considered a number of factors, including, among other
things, the continuity of the management of the Trust after the Merger; the
nature, scope and quality of services that Bankers Trust would likely provide
to the Fund; the quality of the personnel of Bankers Trust; Bankers Trust's
commitment to continue to provide these services in the future; the mainte-
nance of the identical advisory fee rates; and the fact that the New BT Advi-
sory Agreement contains substantially the same terms and conditions as the
Prior Advisory Agreement. Based on the factors discussed above and others, the
Board determined that the New BT Advisory Agreement is fair and reasonable and
in the best interest of the Fund and its shareholders.
At meetings of the Board held on July 15 and July 27, 1999 called for the
purpose of, among other things, discussing and voting on approval of the New
MGI Advisory Agreement and the New Sub-advisory Agreement, the Board obtained
from Deutsche Bank and MGI such information as it deemed reasonably necessary
to approve MGI as investment adviser to the Fund. Representatives of Deutsche
Bank and MGI made detailed presentations at the July 15th and July 27th meet-
ings with respect to, among other factors, the organizational structure, as-
sets under management, asset management services, financial condition and
business plan of MGI. The Board considered the same factors described above
for the New BT Advisory Agreement with regard to the New MGI Advisory Agree-
ment and the New Sub-advisory Agreement. The Board also considered a number of
other factors, including the capacity of MGI to perform its duties under the
New Advisory Agreements; the high degree of continuity of investment manage-
ment personnel expected to be available to the Fund because most of the per-
sonnel of Bankers Trust who provided services under the Prior Advisory Agree-
ment will be employed by MGI; the financial standings of Deutsche Bank and
MGI; the benefits to the Fund and the Trust from technological advances being
instituted by Deutsche Bank on a world-wide basis; the experience and expert-
ise of MGI as an investment adviser, as reflected in its amount of assets un-
der management, and the new organizational structure proposed to be created as
a component of the Merger and the benefits that may accrue to the shareholders
as a result thereof. With respect to the last factor, the Board considered
that the proposed organizational structure may simplify the organizational
structure of Deutsche Bank's U.S. mutual fund operations, enhance the effi-
ciency of their administration and promote consistency of internal controls,
compliance and regulatory oversight. Additionally, the eventual implementation
of the New MGI
15
<PAGE>
Advisory Agreement will provide the Fund and the Trust with an investment ad-
viser registered under the Advisers Act.
The Board was apprised that the deferral in implementing the New MGI Advi-
sory Agreement is needed to permit Deutsche Bank a sufficient amount of time to
plan, prepare and institute the necessary arrangements for MGI to consolidate
Deutsche Bank's U.S. mutual fund operations. The Advisers also emphasized to
the Board that the New MGI Advisory Agreement and the New Sub-advisory Agree-
ment would be implemented only upon the approval of the Independent Trustees
based on information they then deemed adequate and necessary to consider these
arrangements. At the July 27th meeting of the Board, a majority of the Board,
including a majority of the Independent Trustees, approved the New MGI Advisory
Agreement and the New Sub-advisory Agreement.
Based on the factors discussed above and others, the Board determined that
the New MGI Advisory Agreement and the New Sub-Advisory Agreement are fair and
reasonable and in the best interest of the shareholders.
In addition, at meetings held on March 24 and April 21, 1999 the Board, in-
cluding the Independent Trustees, also was apprised of the guilty pleas dis-
cussed above and the exemptive relief sought by Bankers Trust.
Therefore, after careful consideration, the Board, including the Indepen-
dent Trustees, recommends that the shareholders of the Fund vote "FOR" the ap-
proval of the New Advisory Agreements as set forth in these Proposals.
If the New BT Advisory Agreement is approved by the shareholders, it will
continue in effect as described above. If the New BT Advisory Agreement is not
approved by the shareholders, the advisory fees held in escrow with respect to
the New BT Advisory Agreement will be paid over to the Trust. In such event,
the Board will consider what other action is appropriate based upon the inter-
ests of the shareholders. If the New MGI Advisory Agreement and/or the New Sub-
advisory Agreement are not approved by the shareholders, the New BT Advisory
Agreement, if it has been approved by the shareholders, will continue in effect
in accordance with its terms while the Board considers whether and the extent
to which other action is appropriate based upon the interests of the sharehold-
ers.
16
<PAGE>
PROPOSAL II
ELECTION OF BOARD OF TRUSTEES OF THE TRUST
Trustees constituting the entire Board of Trustees of the Trust are to be
elected at the Special Meeting to serve until their successors have been duly
elected and qualified or until their earlier resignation or removal. The
Trustee Nominees were recently selected by the Independent Trustees and
nominated by the full Board at a meeting held on July 27, 1999./4/ The names
and ages of the Trustee Nominees, their principal occupations during the past
five years and certain of their other affiliations are provided below. Of the
Trustee Nominees, S. Leland Dill and Philip Saunders, Jr. are currently
Trustees of the Trust. No Trustee or Trustee Nominee of the Trust serves or
will serve as an officer of the Trust. Each of the Trustee Nominees has agreed
to serve if elected at the Special Meeting. It is the intention of the persons
designated as proxies in the Proxy, unless otherwise directed therein, to vote
at the Special Meeting for the election of the Trustee Nominees named below as
the entire Board of Trustees of the Trust. If any Trustee Nominee is unable or
unavailable to serve, the persons named in the Proxies will vote the Proxies
for such other person as the Board may recommend.
The following table sets forth the name, age, position with the Trust, and
principal occupation of each Trustee Nominee:
TRUSTEE NOMINEES
<TABLE>
<CAPTION>
Position Principal Occupations During
Name and Age with Trust Last Five Years
- ------------------------------------------------------------------
<C> <C> <S>
Charles P. Biggar(1) Retired; formerly, Vice
Age: 68 President of International
Business Machines ("IBM") and
President of the National
Services and Field Engineering
Divisions of IBM.
S. Leland Dill(1)+ Trustee of Retired; Director, Coutts
Age: 69 Trust (U.S.A.) International;
since 1986 Trustee, Phoenix-Zweig Trust(4)
and Phoenix-Euclid Market
Neutral Fund(4); former Partner
of KPMG Peat Marwick; Director,
Vintners International Company
Inc.; Director, Coutts Trust
Holdings Ltd.; Director, Coutts
Group; General Partner,
Pemco(4).
Martin J. Gruber(2) Nomura Professor of Finance,
Age: 62 Leonard N. Stern School of
Business, New York University
(since 1964); Trustee, TIAA(4);
Trustee, SG Cowen Mutual
</TABLE>
- -----------
/4 /If the shareholders approve conversion of the Fund to a master-feeder fund
structure, as set forth in Proposal III, the Fund, upon conversion, will in-
vest in a master fund, whose Board will be identical in composition to the
proposed Board of the Trust.
17
<PAGE>
<TABLE>
<CAPTION>
Position Principal Occupations During
Name and Age with Trust Last Five Years
- ----------------------------------------------------------------------
<S> <C> <C>
Funds(4); Trustee, Japan Equity
Fund(4); Trustee, Taiwan Equity
Fund(4).
Richard Hale* Managing Director, Deutsche
Age: 54 Asset Management; Director,
Flag Investors Fund(4);
Managing Director, BT Alex.
Brown Incorporated; Director
and President, Investment
Company Capital Corp.
Richard J. Herring(2) Jacob Safra Professor of
Age: 53 International Banking,
Professor of Finance and Vice
Dean, The Wharton School,
University of Pennsylvania
(since 1972).
Bruce E. Langton(2) Retired; Trustee, Allmerica
Age: 68 Financial Mutual Funds (1994 to
present); Member, Pension &
Thrift Plans and Investment
Committee, Unilever U.S.
Corporation (1989 to
present)(3); Director, TWA
Pilots Directed Account Plan
and 401K Plan (1988 to
present)(4).
Philip Saunders, Jr.(1)+ Trustee of Principal, Philip Saunders
Age: 63 Trust Associates (Economic and
since 1986 Financial Analysis); Former
Director, Financial Industry
Consulting, Wolf and Company;
President, John Hancock Home
Mortgage Corporation; Senior
Vice President of Treasury and
Financial Services, John
Hancock Mutual Life Insurance
Company, Inc.
Harry Van Benschoten(2) Retired; Director, Canada Life
Age: 71 Insurance Corporation of New
York.
</TABLE>
- -----------
* "Interested Person" within the meaning of Section 2(a)(19) of the Act. Mr.
Hale is a Managing Director of Deutsche Asset Management, the U.S. asset
management unit of Deutsche Bank and its affiliates.
+ Member of the Audit Committee.
(1) Holds one other trusteeship in the Bankers Trust Fund Complex, as defined
herein.
(2) Holds two other trusteeships in the Bankers Trust Fund Complex, as defined
herein.
(3) A publicly held company with securities registered pursuant to Section 12
of the Exchange Act.
(4) An investment company registered under the Act.
The Board has established an Audit Committee that meets with the Trust's
independent accountants to review the financial statements of the Trust, the
adequacy of internal controls and the accounting procedures and policies of the
Trust, and reports on these matters to the Board. The Independent Trustees, who
constitute 100% of the membership of the current Board, select and nominate
18
<PAGE>
the new trustee nominees who are not "interested persons," as defined under
the Act, of the Trust. The Board does not have compensation committees. During
1998, the Board held six meetings and the Audit Committee held two meetings.
No Trustee attended less than 75% of the applicable meetings./5/
If Richard Hale is elected, he will not be a member of the Audit Commit-
tee.
The following table sets forth the compensation received by the Trustee
Nominees for their services to the Trust and Bankers Trust Fund Complex (as
defined below) during the calendar year ended December 31, 1998. In addition
to the fees listed below, the Trustees are also reimbursed for all reasonable
expenses incurred during the execution of their duties for the Trust and Bank-
ers Trust Fund Complex.*6
<TABLE>
<CAPTION>
Estimated
Aggregate Pension or Retirement Annual Total Compensation
Compensation Benefits Accrued as Benefits upon From the Complex*
Name of Trustee from the Trust Part of Trust Expenses Retirement Paid to Trustees
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Charles P. Biggar N/A N/A N/A $36,250
S. Leland Dill $14,485 N/A N/A $36,250
Martin J. Gruber N/A N/A N/A $36,250
Richard Hale N/A N/A N/A N/A
Richard J. Herring N/A N/A N/A $35,000
Bruce E. Langton N/A N/A N/A $35,000
Philip Saunders, Jr. $14,582 N/A N/A $36,250
Harry Van Benschoten N/A N/A N/A $36,250
</TABLE>
- ----------
* The "Bankers Trust Fund Complex" consists of the Trust and BT Institutional
Funds, BT Pyramid Mutual Funds, BT Advisor Funds and BT Insurance Funds
Trust (collectively, the "BT Funds"), as well as the portfolios into which
those series of the BT Funds which have a master-feeder fund structure in-
vest.
- ----------
/5 /The Fund was organized on December 9, 1998 by the Board. No other deci-
sions were made by the Board regarding the Fund during 1998.
/6 /The compensation paid by the Trust in 1998 to the Trustee Nominees was not
for services rendered to the Fund, as the Fund had no assets in 1998.
19
<PAGE>
The following table sets forth the names, ages, position with the Trust and
length of service in such position, and principal occupations during the past
five years, of the officers of the Trust.
<TABLE>
<CAPTION>
Name and Age Position with Trust and Principal Occupations
- ------------------------------------------------------------------------------
<C> <S>
John A. Keffer President and Chief Executive Officer since 1998; President,
Age: 57 Forum Financial Group L.L.C. and its affiliates; President,
ICC Distributors, Inc.*
Daniel O. Hirsch Secretary since 1998; Director, Deutsche Asset Management
Age: 45 since 1999; Director, BT Alex. Brown Incorporated and
Investment Company Capital Corporation, 1998-99; Associate
General Counsel, Office of General Counsel, United States
Securities and Exchange Commission, 1993-1998.
Charles A. Rizzo Treasurer since 1999; Vice President and Department Head,
Age: 41 Deutsche Asset Management since 1998; Senior Manager,
PricewaterhouseCoopers LLP 1993-98.
</TABLE>
- -----------
* Underwriter/distributor for the Trust. Mr. Keffer owns 100% of the shares of
ICC Distributors, Inc.
Recommendation of the Board
At a meeting of the Board held on July 27, 1999, the Board, based on a rec-
ommendation of the incumbent Independent Trustees, unanimously approved the
nomination of the Trustee Nominees. In reaching this conclusion, the Board ob-
tained from the Trustee Nominees such information as they deemed reasonably
necessary to approve the Trustee Nominees and considered a number of factors,
including, among other things: the nature, scope and quality of services that
the Trustee Nominees would likely provide to the Trust and the desirability of
maintaining adherence to Section 15(f) of the Act. Based on the factors dis-
cussed above and others, the Board determined that the election of the Trustee
Nominees is in the best interest of the Trust and its shareholders.
Therefore, after careful consideration, the Board, including the Indepen-
dent Trustees, recommend that the shareholders of the Trust vote "FOR" the
election of the Trustee Nominees as set forth in this Proposal.
If the Trustee Nominees are elected by the applicable shareholders, each
Trustee Nominee will serve until his successor is duly elected and qualified or
until his earlier resignation or removal. If the Trustee Nominees are not
elected, the Board will consider what action is appropriate based upon the in-
terests of the Trust's shareholders.
20
<PAGE>
PROPOSAL III
APPROVAL OF A MASTER-FEEDER FUND STRUCTURE FOR THE FUND
The Board, including the Independent Trustees, has approved, subject to
shareholder approval, the conversion of the structure of the Fund from that of
a stand-alone fund to a master-feeder fund structure. A master-feeder fund
structure is an arrangement whereby funds of one or more investment companies
(the "Feeder Funds") with different shareholder-related features and distribu-
tion policies, but having substantially the same investment objectives, poli-
cies and restrictions, combine their investments by investing all of their
investable assets in the same master fund (the "Master Fund"), which Master
Fund will have the same investment objectives, policies and restrictions as
the Feeder Funds. Accordingly, by investing in a Master Fund, a Feeder Fund
would continue to pursue its investment objectives and policies in substan-
tially the same manner as before, except that it would do so through its in-
vestment in the Master Fund rather than directly. The Master Fund, whose
shares may be offered to institutional investors in addition to being offered
to Feeder Funds, invests directly in the same type of investment securities
and other investments in which the Feeder Funds would have invested directly.
The expense ratios, yields and total returns of other investors in the Master
Fund may be different from those of the Fund due to differences in expenses.
A purpose of a master-feeder fund arrangement is to achieve operational
efficiencies through economies of scale, assuming that the assets of the Mas-
ter Fund are greater than the assets of any individual Feeder Fund, by achiev-
ing a lower ratio of operating expenses to net assets. There can be no assur-
ance that such economies of scale will be realized, however.
The master-feeder fund structure approved by the Board and submitted to
the shareholders for approval would permit the Fund to invest all of its
investable assets in the Quantitative Equity Portfolio (the "Portfolio"). The
Portfolio will be organized as a separate series of BT Investment Portfolios,
an open-end management investment company established as a trust under the
laws of the State of New York. The Portfolio will have substantially the same
investment objectives, policies and restrictions as the Fund.
If Proposal III is approved by the shareholders, the Fund would convert to
the master-feeder fund structure by exchanging all of its investable assets
for an interest in the Portfolio, which Portfolio interest would have the same
net asset value as the value of the assets transferred. The value of a share-
holder's investment in the Fund will be the same immediately after the Fund's
investment in the Portfolio as immediately before that investment. (Of course,
the value of a shareholder's investment in the Fund may fluctuate thereafter.)
21
<PAGE>
If the Fund is converted to a master-feeder structure, the Fund's voting
rights with respect to the Portfolio interest it would hold would be passed
through to the Fund's own shareholders, pursuant to the requirements of the Act
applicable to master-feeder arrangements.
If the shareholders of the Fund approve Proposal III, the Fund would re-
ceive the same administrative and distribution services under the master-feeder
fund structure at the same fees as are currently provided to the Fund. If in
addition the shareholders of the Fund approve Proposals IA, IB and IC, the Fund
would receive the same investment advisory services at the same fee rates under
the New Advisory Agreements as are currently contemplated for the Fund; the New
Advisory Agreements would, however, be between the applicable Adviser and the
Portfolio, rather than the Trust. (If the shareholders of the Fund approve Pro-
posal III but not Proposals IA, IB or IC, the Board of the Trust and the Board
of the Portfolio will consider what other action is appropriate, as indicated
in the discussion of Proposals IA, IB and IC.) The current composition of the
Board of the Trust and the outcome of Proposal II, concerning the election of
the Trustee Nominees, would not be altered in any way by conversion to a mas-
ter-feeder fund structure. The outcome of Proposal IV concerning ratification
of the independent accountants of the Fund would not be altered in any way by
conversion of the Fund to a master-feeder fund structure.
The Fund may withdraw its investment in the Portfolio at any time if the
Board determines that it is in the best interest of the shareholders of the
Fund to do so or if the investment objectives, policies or restrictions of the
Portfolio changed so that they were inconsistent with the investment objec-
tives, policies or restrictions of the Fund. Upon any such withdrawal, the
Board would consider what other action might be taken, including the investment
of the investable assets of the Fund in another Master Fund or the retaining of
an investment adviser to directly invest the Fund's assets in accordance with
the Fund's investment objectives, policies and restrictions.
Under the Trust's Declaration of Trust, a shareholder vote is required to
sell or transfer substantially all of the assets of the Fund. As conversion to
a master-feeder fund structure contemplates an exchange of the Fund's
investable assets for an interest in the Portfolio, as described above, this
conversion requires, under a conservative interpretation of the Trust's Decla-
ration of Trust, the affirmative vote of a majority of the votes cast in person
or by proxy at the Special Meeting for the Fund.
At a meeting of the Board held on July 27, 1999 a majority of the Board,
including the Independent Trustees, approved (subject to shareholder approval)
the conversion of the Fund from a stand-alone fund structure to a master-feeder
fund structure. In reaching this conclusion, the Board considered a number of
factors, including the operational efficiencies expected to be obtained by
achiev-
22
<PAGE>
ing structural consistency with the other series in the Trust (all of which
presently operate as master-feeder funds); that the fees paid by the Trust for
the advisory, administrative and distributive services provided to the Fund
would remain the same; the economies of scale that may be realized through con-
version to a master-feeder fund structure; and the opportunity that the conver-
sion provides to pursue additional distribution outlets for the Fund. Based on
the factors discussed above and others, the Board determined that the conver-
sion of the Fund to a master-feeder fund structure is in the best interest of
the Fund and its shareholders.
Therefore, after careful consideration, the Board, including the Indepen-
dent Trustees, recommends that the shareholders of the Trust vote "FOR" the
conversion of the Fund to a master-feeder fund structure as set forth in this
Proposal.
If the conversion of the Fund to a master-feeder fund structure is ap-
proved, the Board will proceed to invest all of the investable assets of the
Fund in the Portfolio, as described above. If the conversion of the Fund to a
master-feeder fund structure is not approved, the Board will consider whether
any other action is appropriate in the interests of the shareholders.
23
<PAGE>
PROPOSAL IV
RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
ACCOUNTANTS FOR THE FUND
The Board, including a majority of the Independent Trustees, has approved
the selection of PricewaterhouseCoopers LLP to serve as independent accountants
for the Fund for the current fiscal year. PricewaterhouseCoopers LLP has served
as independent accountants of the Fund since the date of the Fund's inception
and has advised the Trust that they have no direct or indirect financial inter-
est in the Fund. Representatives of PricewaterhouseCoopers LLP are not expected
to be present at the Special Meeting and, thus, are not expected to make a
statement; however, one or more representatives will be available by telephone
to respond to appropriate questions posed by shareholders or management.
Therefore, after careful consideration, the Board, including the Indepen-
dent Trustees, recommends that the shareholders of the Trust vote "FOR" the
ratification of the independent accountants as set forth in this Proposal.
VOTE REQUIRED
Approval of Proposals IA, IB and IC with respect to the Fund's New Advisory
Agreements requires the affirmative vote of a "majority" of the outstanding
shares of the Fund. "Majority" (as defined in the Act) means (as of the Record
Date) the lesser of (a) 67% or more of the shares of the Fund present at the
special meeting, if the holders of more than 50% of the outstanding shares of
the Fund are present in person or by proxy, or (b) more than 50% of the out-
standing shares of the Fund present and voting at the special meeting. Because
abstentions and broker non-votes are treated as shares present but not voting,
any abstentions and broker non-votes will have the effect of votes against Pro-
posals IA, IB and IC, which requires the approval of a specified percentage of
the outstanding shares of the Fund.
Approval of Proposal II with respect to the Trustee Nominees requires the
affirmative vote of a plurality of the votes cast in person or by proxy at the
Special Meeting. Because abstentions and broker non-votes are not treated as
shares voted, abstentions and broker non-votes will have no impact on Proposal
II.
Approval of Proposal III with respect to the conversion of the Fund's
structure to a master-feeder structure requires the affirmative vote of a ma-
jority of the votes cast in person or by proxy at the Special Meeting. Because
abstentions and broker non-votes are not treated as shares voted, abstentions
and broker non-votes will have no impact on Proposal III.
24
<PAGE>
Approval of Proposal IV with respect to the selection of the independent
accountants of the Fund requires the affirmative vote of a majority of the
votes cast in person or by proxy at the Special Meeting for the Fund. Because
abstentions and broker non-votes are not treated as shares voted, abstentions
and broker non-votes will have no impact on Proposal IV.
- --------------------------------------------------------------------------------
THE BOARD, INCLUDING THE INDEPENDENT TRUSTEES, RECOMMENDS THAT THE
SHAREHOLDERS VOTE "FOR" APPROVAL OF PROPOSALS IA, IB, IC, II, III AND IV.
ANY UNMARKED PROXIES WILL BE SO VOTED.
- --------------------------------------------------------------------------------
The Board is not aware of any other matters that will come before the Spe-
cial Meeting. Should any other matter properly come before the Special Meeting,
it is the intention of the persons named in the accompanying Proxy to vote the
Proxy in accordance with their judgment on such matters.
SUBMISSION OF SHAREHOLDER PROPOSALS
The Fund does not hold regular shareholders' meetings. Shareholders wishing
to submit proposals for inclusion in a proxy statement for a subsequent share-
holders' meeting should send their written proposals to the Secretary of the
Trust at the address set forth on the cover of this Proxy Statement.
Proposals must be received at a reasonable time prior to the date of a
meeting of shareholders to be considered for inclusion in the materials for the
Fund's meeting. Timely submission of a proposal does not, however, necessarily
mean that such proposal will be included.
SHAREHOLDERS' REQUEST FOR SPECIAL MEETING
Shareholders holding at least 10% of the Fund's outstanding voting securi-
ties (as defined in the Act) may require the calling of a meeting of sharehold-
ers for the purpose of voting on the removal of any Trustee of the Fund. Meet-
ings of shareholders for any other purpose also shall be called by the Board
when requested in writing by shareholders holding at least 10% of the shares
then outstanding.
25
<PAGE>
IF YOU HAVE ANY QUESTIONS CONCERNING THE PROXY STATEMENT OR THE PROCEDURES
TO BE FOLLOWED TO EXECUTE AND DELIVER A PROXY, PLEASE CONTACT SHAREHOLDER COM-
MUNICATIONS CORPORATION AT 1-800-732-6168.
- --------------------------------------------------------------------------------
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE SPECIAL MEETING AND
WHO WISH TO HAVE THEIR SHARES VOTED ARE REQUESTED TO DATE AND SIGN THE
ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE, UNLESS THEY
ARE VOTING BY TELEPHONE OR THROUGH THE INTERNET.
- --------------------------------------------------------------------------------
By Order of the Board of Trustees,
/s/Daniel O. Hirsch
Daniel O. Hirsch, Secretary
August 23, 1999
- --------------------------------------------------------------------------------
THE BOARD OF TRUSTEES OF THE TRUST HOPES THAT SHAREHOLDERS WILL ATTEND
THE SPECIAL MEETING. WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED
TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE
ACCOMPANYING ENVELOPE (UNLESS YOU ARE VOTING BY TELEPHONE OR
THROUGH THE INTERNET).
- --------------------------------------------------------------------------------
26
<PAGE>
Annex I
(i) 5% Shareholders
<TABLE>
<CAPTION>
Name and Address of Beneficial Shares Beneficially Percent Ownership
Owner Owned of Outstanding Shares
- -----------------------------------------------------------------------------
<S> <C> <C>
BT Alex Brown Inc. 21,910.6050 26.65%
FBO 200-90001-14
PO Box 1346
Baltimore, MD 21203-1346
Jeremiah H. Chafkin 10,915.4250 13.27%
315 Pondfield Rd
Bronxville, NY 10708-4924
Ross C. Youngman 10,171.4650 12.37%
155 W 68th Street Apt 930
New York, NY 10023-5815
Merrilee M. Langton 6,463.5270 7.86%
99 Jordan Ln
Stamford, CT 06903-3915
Sid Hoots 5,000.0000 6.08%
301 E 22nd St. Apt 11F
New York, NY 10010-4822
BT Alex Brown Inc. 5,000.0000 6.08%
FBO 201-93658-12
PO Box 1346
Baltimore, MD 21203-1346
Strafe & Co. 4,633.9200 5.63%
FAO Newman Allen Self Directed
IRA A/C 2610109600
PO Box 160
Westerville, OH 43086-0160
(ii) Trustees and Trustee Nominees
Charles P. Biggar *
S. Leland Dill *
Martin J. Gruber *
Richard Hale *
Richard J. Herring *
Bruce E. Langton 6,463.5270 10.72%(1)
Philip Saunders, Jr. *
Harry Van Benschoten *
(iii) Executive Officers *
John A. Keffer *
Daniel O. Hirsch *
Charles Rizzo *
</TABLE>
- -----------
* Less than 1% of the Fund's outstanding shares.
(1) All shares are owned by Mr. Langton's spouse.
<PAGE>
Annex II
Quantitative Equity Fund
BANKERS TRUST
<TABLE>
<CAPTION>
Advisory
Fee as
Net Assets as of Percentage
Most Recently of Average
Completed Daily Net
Fiscal Year Assets
- -------------------------------------------------------------------------------
<S> <C> <C>
Equity 500 Index Portfolio:
Includes the following feeder funds: 0.08%
BT Institutional Equity 500 Index Fund..... $2,288,969,859.00
Scudder S & P 500 Index Fund............... $244,805,518.35
American Aadvantage S & P 500 Index Fund... $322,610,586.01
USAA S & P 500 Index Fund.................. $2,713,859,248.97
American Aadvantage S&P 500 Index Mileage
Fund..................................... $3,632,960.16
BT Investment Equity 500 Index Fund........ $929,474,411.08
American Skandia Trust--AST Bankers Trust
Enhanced 500 Portfolio..................... $452,128,871.00 NOTE E
Security Equity Fund--Enhanced Index Series
(Security Benefit)......................... $15,785,667.21 NOTE F
BT Insurance Equity 500 Index Fund........... $49,691,350.00 0.20%
American General Series Portfolio--MidCap
Index Fund (VALIC)......................... $814,774,297.65 NOTE A
American General Series Portfolio--Stock
Index Fund (VALIC)......................... $4,624,973,419.19 NOTE A
American General Series Portfolio Company 2--
Stock Index Fund (VALIC)................... $12,489,608.16 NOTE B
American General Series Portfolio Company 2--
MidCap Index Fund.......................... $6,585,995.57 NOTE B
EQ Advisors Trust--BT Equity 500 Index
Portfolio (Equitable)...................... $392,561,486.32 0.05%
Variable Insurance Products Fund II--Index
500 Portfolio (Fidelity)................... $4,624,170,180.40 At an annual
rate of
0.006% (0.6
basis points)
Fidelity Concord Street Trust--Spartan U.S.
Equity Index Fund.......................... $17,202,394,585.66 At an annual
rate of
0.006% (0.6
basis points)
Pacific Select Fund--Equity Index Portfolio
(Pacific Mutual)........................... $1,808,280,989.82 NOTE C
AARP U.S. Stock Index Fund (Scudder)......... $464,922,428.55 NOTE D
</TABLE>
<PAGE>
NOTE A) A monthly fee computed at the annual rate of 0.03% of the average daily
net asset values of the portion of the Small Cap Value Fund portfolio that BT
manages. With respect to the Stock Index Fund, VALIC shall pay to Bankers
Trust, a monthly fee computed at the annual rate of 0.02% of the first $2 bil-
lion and 0.01% of average daily net asset values on the excess over $2 billion.
VALIC shall pay Bankers Trust, a monthly fee computed at the annual rate of
0.03% of the first $300 million and 0.02% of average daily net asset values on
the excess over $300 million of the Mid Cap Index Fund, and 0.03% of the first
$150 million and 0.02% of average daily net asset values on the excess over
$150 million of the Small Cap Index Fund.
NOTE B) A monthly fee computed at the annual rate of 0.03% of the average daily
net asset values of the portion of the Small Cap Value Fund portfolio that BT
manages. With respect to the Stock Index Fund, VALIC shall pay to Bankers
Trust, a monthly fee computed at the annual rate of 0.02% of the first $2 bil-
lion and 0.01% of average daily net asset values on the excess over $2 billion.
VALIC shall pay Bankers Trust, a monthly fee computed at the annual rate of
0.03% of the first $300 million and 0.02% of average daily net asset values on
the excess over $300 million of the Mid Cap Index Fund, and 0.03% of the first
$150 million and 0.02% of average daily net asset values on the excess over
$150 million of the Small Cap Index Fund.
NOTE C) A fee is paid at the beginning of each calendar quarter, based on an
annual percentage of the combined daily net assets of the Equity Index and
Small-Cap Index Portfolios, according to the following schedule, subject to a
minimum annual fee of $100,000: 0.08% on first $100 million; 0.04% on next $100
million; 0.02% on excess.
NOTE D) The fee paid to the Sub-Adviser is calculated on a quarterly basis and
depends on the level of total assets in the AARP U.S. Stock Index Fund. The fee
rate decreases as the level of total assets for the Fund increases. The fee
rate for each level of assets is: 0.07% of the first $100 million of average
daily net assets, 0.03% of such assets in excess of $100 million, and 0.01% of
such assets in excess of $200 million with a minimum annual fee of $75,000.
NOTE E) An annual rate of .17% of the portion of average daily net assets of
the Portfolio not in excess of $300 million; plus .13% of the portion of the
net assets over $300 million.
NOTE F) An annual rate of .20% of the combined average daily net assets of the
Enhanced Index Funds of $100 million or less; and an annual rate of .15% of the
combined average daily net assets of the Enhanced Index Funds of more than $100
million but less than $300 million; and an annual rate of .13% of the combined
average daily net assets of the Enhanced Index Funds of more than $300 million.
Subject to the following minimum fees: (I) in the first year from the date the
Enhanced Index Series of Security Equity Fund is seeded (the "Seeding Date"),
no minimum fee; (ii) in the second year from the Seeding Date, $100,000 minimum
and (iii) in the third year from the Seeding Date and each year thereafter,
II-2
<PAGE>
$200,000 minimum. If at the end of the second year from the Seeding Date the
total amount of the fees paid by the Advisor to the Sub-Advisor for services to
the Enhanced Index Funds is collectively less than $100,000, then the Advisor
will pay any such difference in a lump-sum to the Dub-Advisor. If at the end of
the third year from the Seeding Date, and each year thereafter that this Agree-
ment is in effect, the total amount of the fees paid by the Advisor to the Sub-
Advisor for services to the Enhanced Index Funds is collectively less than
$200,000, then the Advisor will pay any such difference in a lump-sum to the
Sub-Advisor.
MORGAN GRENFELL INC.
None.
II-3
<PAGE>
EXHIBIT A
[FORM OF INVESTMENT ADVISORY AND SUB-ADVISORY AGREEMENT]
AGREEMENT made as of [ ] by and between [Trust Name], a (state of or-
ganization) (herein called the "Trust") and [ ] (herein called the "Invest-
ment Adviser") [and [ ] (herein called the "Investment Subadviser")].
WHEREAS, the Trust is registered as an open-end management investment com-
pany under the Investment Company Act of 1940;
WHEREAS, the Trust desires to retain the Investment Adviser to render in-
vestment advisory and other services to the Trust with respect to certain of
its series of shares of beneficial interests as may currently exist or be cre-
ated in the future (each, a "Fund") as listed on Exhibit A hereto, and the In-
vestment Adviser is willing to so render such services on the terms hereinafter
set forth;
[WHEREAS, the Investment Adviser desires to retain the Investment
Subadviser to perform certain of the Investment Adviser's duties under this
Agreement, and the Investment Subadviser is willing to so render such services
on the terms hereinafter set forth;](/1/)
NOW, THEREFORE, this Agreement
W I T N E S S E T H:
In consideration of the promises and mutual covenants herein contained, it
is agreed between the parties hereto as follows:
1. Appointment. The [Trust] [Investment Adviser] hereby appoints the [In-
vestment Adviser] [Investment Subadviser] to act as [investment adviser] [in-
vestment subadviser] to each Fund for the period and on the terms set forth in
this Agreement. The [Investment Adviser] [Investment Subadviser] accepts such
appointment and agrees to render the services herein set forth for the compen-
sation herein provided.
2. Management. Subject to the supervision of the [Board of Trustees of the
Trust] [Investment Adviser], the [Investment Adviser] [Investment Subadviser]
will provide a continuous investment program for the Fund, including investment
research and management with respect to all securities, investments, cash and
cash equivalents in the Fund. The [Investment Adviser] [Investment Subadviser]
will determine from time to time what securities and other investments will be
purchased, retained or sold by each Fund. The [Investment Adviser] [Investment
- -----------
1. Contained in the form of Investment Sub-advisory Agreement only.
<PAGE>
Subadviser] will provide the services rendered by it hereunder in accordance
with the investment objective(s) and policies of each Fund as stated in the
Fund's then-current prospectus and statement of additional information (or the
Fund's then current registration statement on Form N-1A as filed with the Se-
curities and Exchange Commission (the "SEC") and the then-current offering
memorandum if the Fund is not registered under the Securities Act of 1933, as
amended ("1933 Act"). The [Investment Adviser] [Investment Subadviser] further
agrees that:
(a) it will conform with all applicable rules and regulations of the SEC
(herein called the "Rules") and with all applicable provisions of the 1933
Act; as amended, the Securities Exchange Act of 1934, as amended (the "1934
Act"), the Investment Company Act of 1940, as amended (the "1940 Act"); and
the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and
will, in addition, conduct its activities under this Agreement in accordance
with applicable regulations of the Board of Governors of the Federal Reserve
System pertaining to the investment advisory activities of bank holding compa-
nies and their subsidiaries;
(b) it will place orders pursuant to its investment determinations for
each Fund either directly with the issuer or with any broker or dealer se-
lected by it. In placing orders with brokers and dealers, the [Investment Ad-
viser] [Investment Subadviser] will use its reasonable best efforts to obtain
the best net price and the most favorable execution of its orders, after tak-
ing into account all factors it deems relevant, including the breadth of the
market in the security, the price of the security, the financial condition and
execution capability of the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a continuing ba-
sis. Consistent with this obligation, the [Investment Adviser] [Investment
Subadviser] may, to the extent permitted by law, purchase and sell portfolio
securities to and from brokers and dealers who provide brokerage and research
services (within the meaning of Section 28(e) of the 1934 Act) to or for the
benefit of any fund and/or other accounts over which the [Investment Adviser]
[Investment Subadviser] or any of its affiliates exercises investment discre-
tion. Subject to the review of the [Trust's Board of Trustees] [Investment Ad-
viser] from time to time with respect to the extent and continuation of the
policy, the [Investment Adviser] [Investment Subadviser] is authorized to pay
to a broker or dealer who provides such brokerage and research services a com-
mission for effecting a securities transaction which is in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction if the [Investment Adviser] [Investment Subadviser] deter-
mines in good faith that such commission was reasonable in relation to the
value of the brokerage and research services provided by such broker or deal-
er, viewed in terms of either that particular transaction or the overall re-
sponsibilities of the [Investment Adviser] [Investment Subadviser] with re-
spect to the accounts as to which it exercises investment discretion; and
EX-2
<PAGE>
(c) it will maintain books and records with respect to the securities
transactions of each Fund and will render to the [Trust's Board of Trustees]
[Investment Adviser] such periodic and special reports as the Board may re-
quest.
3. [Subject to the provisions of this Agreement, the duties of the Invest-
ment Subadviser, the portion of portfolio assets that the Subadviser shall
manage, and the fees to be paid the Investment Subadviser by the Investment
Adviser under and pursuant to this Agreement may be adjusted from time to time
by the Investment Adviser with and upon the approval of the Board and the mem-
bers of the Trust's Board of Trustees who are not "interested persons," as de-
fined in the Act].(/2/)
4. Services Not Exclusive. The investment advisory services rendered by
the [Investment Adviser] [Investment Subadviser] hereunder are not to be
deemed exclusive, and the [Investment Adviser] [Investment Subadviser] shall
be free to render similar services to others so long as its services under
this Agreement are not impaired thereby.
5. Books and Records. In compliance with the requirements of Rule 31a-3 of
the Rules under the 1940 Act, the [Investment Adviser] [Investment Subadviser]
hereby agrees that all records which it maintains for the Trust are the prop-
erty of the Trust and further agrees to surrender promptly to the [Trust] [In-
vestment Adviser] any of such records upon request of the [Trust] [Investment
Adviser]. The [Investment Adviser] [Investment Subadviser] further agrees to
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the rec-
ords required to be maintained by Rule 31a-1 under the 1940 Act and to comply
in full with the requirements of Rule 204-2 under the Advisers Act pertaining
to the maintenance of books and records.
6. Expenses. During the term of this Agreement, the [Investment Adviser]
[Investment Subadviser] will pay all expenses incurred by it in connection
with its activities under this Agreement other than the cost of purchasing se-
curities (including brokerage commissions, if any) for the Fund.
7. Compensation. For the services provided and the expenses assumed pursu-
ant to this Agreement, The [Trust] [Investment Adviser] will pay the [Invest-
ment Adviser] [Investment Subadviser], and the [Investment Adviser] [Invest-
ment Subadviser] will accept as full compensation therefor, fees, computed
daily and payable monthly, on an annual basis equal to the percentage set
forth on Exhibit A hereto of that Fund's average daily net assets.
- -----------
2. Provision contained in the form of Investment Sub-advisory Agreement on-
ly.
EX-3
<PAGE>
8. Limitation of Liability of the [Investment Adviser] [Investment
Subadviser]: Indemnification.
(a) The [Investment Adviser] [Investment Subadviser] shall not be liable
for any error of judgment or mistake of law or for any loss suffered by a Fund
in connection with the matters to which this Agreement relates, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of com-
pensation for services or a loss resulting from willful misfeasance, bad faith
or gross negligence on the part of the [Investment Adviser] [Investment
Subadviser] in the performance of its duties or from reckless disregard by it
of its obligations and duties under this Agreement;
(b) Subject to the exceptions and limitations contained in Section 7(c) be-
low:
(i) the [Investment Adviser] [Investment Subadviser] (hereinafter re-
ferred to as a "Covered Person") shall be indemnified by the respective
Fund to the fullest extent permitted by law, against liability and against
all expenses reasonably incurred or paid by him in connection with any
claim, action, suit or proceeding in which he becomes involved, as a party
or otherwise, by virtue of his being or having been the [Investment Advis-
er] [Investment Subadviser] of the Fund, and against amounts paid or in-
curred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall apply
to all claims, actions, suits or proceedings (civil, criminal or other,
including appeals), actual or threatened while in office or thereafter,
and the words "liability" and "expenses" shall include, without limita-
tion, attorneys' fees, costs, judgments, amounts paid in settlement,
fines, penalties and other liabilities.
(c) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before which
the proceeding was brought (A) to be liable to the [Trust] [Investment Ad-
viser] or to one or more Funds' investors by reason of willful misfea-
sance, bad faith, gross negligence or reckless disregard of the duties in-
volved in the conduct of his office, or (B) not to have acted in good
faith in the reasonable belief that his action was in the best interest of
a Fund; or
(ii) in the event of a settlement, unless there has been a determina-
tion that such Covered Person did not engage in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in
the conduct of his office;
(A) by the court or other body approving the settlement; or
EX-4
<PAGE>
(B) by at least a majority of those Trustees who are neither Inter-
ested Persons of the Trust nor are parties to the matter based upon a re-
view of readily available facts (as opposed to a full trial-type inquiry);
or
(C) by written opinion of independent legal counsel based upon a re-
view of readily available facts (as opposed to a full trial-type inquiry);
provided, however, that any investor in a Fund may, by appropriate legal
proceedings, challenge any such determination by the Trustees or by inde-
pendent counsel.
(d) The rights of indemnification herein provided may be insured against
by policies maintained by the [Trust] [Investment Adviser], shall be severa-
ble, shall not be exclusive of or affect any other rights to which any Covered
Person may now or hereafter be entitled, shall continue as to a person who has
ceased to be a Covered Person and shall inure to the benefit of the successors
and assigns of such person. Nothing contained herein shall affect any rights
to indemnification to which Trust personnel and any other persons, other than
a Covered Person, may be entitled by contract or otherwise under law.
(e) Expenses in connection with the preparation and presentation of a de-
fense to any claim, suit or proceeding of the character described in subsec-
tion (b) of this Section 7 may be paid by the [Trust] [Investment Adviser] on
behalf of the respective Fund from time to time prior to final disposition
thereto upon receipt of an undertaking by or on behalf of such Covered Person
that such amount will be paid over by him to the [Trust] [Investment Adviser]
on behalf of the respective Fund if it is ultimately determined that he is not
entitled to indemnification under this Section 7; provided, however, that ei-
ther (i) such Covered Person shall have provided appropriate security for such
undertaking or (ii) the [Trust] [Investment Adviser] shall be insured against
losses arising out of any such advance payments, or (iii) either a majority of
the Trustees who are neither Interested Persons of the Trust nor parties to
the matter, or independent legal counsel in a written opinion, shall have de-
termined, based upon a review of readily available facts as opposed to a tri-
al-type inquiry or full investigation, that there is reason to believe that
such Covered Person will be entitled to indemnification under this Section 7.
9. Duration and Termination. This Agreement shall be effective as to a
Fund as of the date the Fund commences investment operations after this Agree-
ment shall have been approved by the Board of Trustees of the Trust with re-
spect to that Fund and the Investor(s) in the Fund in the manner contemplated
by Section 15 of the 1940 Act and, unless sooner terminated as provided here-
in, shall continue until the second anniversary of such date. Thereafter, if
not terminated, this Agreement shall continue in effect as to such Fund for
successive periods of 12 months each, provided such continuance is specifi-
cally approved at least annually (a) by the vote of a majority of those mem-
bers of the Board of Trustees of the Trust who are not parties to this Agree-
ment or Interested Persons of any such
EX-5
<PAGE>
party, cast in person at a meeting called for the purpose of voting on such
approval, or (b) by Vote of a Majority of the Outstanding Voting Securities of
the Trust; provided, however, that this Agreement may be terminated by the
Trust at any time, without the payment of any penalty, by the Board of Trust-
ees of the Trust, by Vote of a Majority of the Outstanding Voting Securities
of the Trust on 60 days' written notice to the [Investment Adviser] [Invest-
ment Subadviser], or by the [Investment Adviser] [Investment Subadviser] as to
the [Trust] [Investment Adviser] at any time, without payment of any penalty,
on 90 days' written notice to the [Trust] [Investment Adviser]. This Agreement
will immediately terminate in the event of its assignment (as used in this
Agreement, the terms "Vote of a Majority of the Outstanding Voting Securi-
ties," "Interested Person" and "Assignment" shall have the same meanings as
such terms have in the 1940 Act and the rules and regulatory constructions
thereunder.)
10. Amendment of this Agreement. No material term of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of a material term of
this Agreement shall be effective with respect to a Fund, until approved by
Vote of a Majority of the Outstanding Voting Securities of that Fund.
11. Representations and Warranties. The [Investment Adviser] [Investment
Subadviser] hereby represents and warrants as follows:
(a) [The [Investment Adviser] [Investment Subadviser] is exempt from
registration under the 1940 Act:]
(b) The [Investment Adviser] [Investment Subadviser] has all requisite
authority to enter into, execute, deliver and perform its obligations un-
der this Agreement;
(c) This Agreement is legal, valid and binding, and enforceable in ac-
cordance with its terms; and
(d) The performance by the [Investment Adviser] [Investment
Subadviser] of its obligations under this Agreement does not conflict with
any law to which it is subject.
12. Covenants. The [Investment Adviser] [Investment Subadviser] hereby
covenants and agrees that, so long as this Agreement shall remain in effect:
(a) The [Investment Adviser] [Investment Subadviser] shall remain ei-
ther exempt from, or registered under, the registration provisions of the
Advisers Act; and
(b) The performance by the [Investment Adviser] [Investment
Subadviser] of its obligations under this Agreement shall not conflict
with any law to which it is then subject.
EX-6
<PAGE>
13. Notices. Any notice required to be given pursuant to this Agreement
shall be deemed duly given if delivered or mailed by registered mail, postage
prepaid, (a) to the Investment Adviser, Mutual Funds Services, 130 Liberty
Street (One Bankers Trust Plaza), New York, New York 10006 , [(b) to the
Subadviser, [Address] or ](c) to the Trust, c/o BT Alex. Brown, Incorporated,
One South Street, Baltimore, Maryland 21202.
14. Waiver. With full knowledge of the circumstances and the effect of its
action, the [Investment Adviser] [Investment Subadviser] hereby waives any and
all rights which it may acquire in the future against the property of any in-
vestor in a Fund, other than shares in that Fund, which arise out of any action
or inaction of the [Trust] [Investment Adviser] under this Agreement.
15. Miscellaneous. The captions in this Agreement are included for conve-
nience of reference only and in no way define or delimit any of the provisions
hereof or otherwise affect their construction or effect. If any provision of
this Agreement shall be held or made invalid by a court decision, statute, rule
or otherwise, the remainder of this Agreement shall not be affected thereby.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and shall be governed by the
laws of the , without reference to principles of conflicts of law. The
------
Trust is organized under the laws of pursuant to a dated . No
------- ------ -----
Trustee, officer or employee of the Trust shall be personally bound by or lia-
ble hereunder, nor shall resort be had to their private property for the satis-
faction of any obligation or claim hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
[SIGNATORIES]
EX-7
<PAGE>
EXHIBIT A
TO
INVESTMENT ADVISORY AGREEMENT
MADE AS OF /
BETWEEN
[Trust Name] AND [ ]
Investment
Fund Advisory Fee
- ---- ------------
EX-8
<PAGE>
CUSIP #055922652
<PAGE>
FORM OF PROXY CARD
<TABLE>
<CAPTION>
<S> <C>
[BANKERS TRUST LOGO] BT Investment Funds
Deutsche Banc Alex.Brown Quantitative Equity Fund
MUTUAL FUND SERVICES
MS 1-18-8 One South Street
Baltimore, Maryland 21202
One South Street PROXY FOR THE SPECIAL MEETING OF STOCKHOLDERS
Baltimore, Maryland 21202-3220 11:00 a.m., Eastern time, on September 21, 1999
The undersigned hereby
appoints Daniel O. Hirsch and Amy
M. Olmert and each of them, with
full power of substitution, as
proxies of the undersigned to vote
all shares of stock that the
undersigned is entitled in any
capacity to vote at the
above-stated special meeting, and
at any and all adjournments or
postponements thereof (the
"Special Meeting"), on the matters
set forth on this Proxy Card, and,
in their discretion, upon all matters
incident to the conduct of the Special
Meeting and upon such other matters as
may properly be brought before the
Special Meeting. This proxy revokes all
prior proxies given by the undersigned.
ALL PROPERLY EXECUTED
PROXIES WILL BE VOTED AS DIRECTED.
IF NO INSTRUCTIONS ARE INDICATED
ON A PROPERLY EXECUTED PROXY, THE
PROXY WILL BE VOTED FOR APPROVAL
OF PROPOSALS IA, IB, IC, II, III
AND IV. ALL ABSTAIN VOTES WILL BE
COUNTED IN DETERMINING THE
EXISTENCE OF A QUORUM AT THE
SPECIAL MEETING AND, FOR PROPOSALS
IA, IB AND IC, AS VOTES AGAINST
THE APPLICABLE PROPOSAL.
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF TRUSTEES WITH RESPECT TO YOUR
FUND. THE BOARD OF TRUSTEES RECOMMENDS A
VOTE FOR PROPOSALS IA, IB, IC, II, III
AND IV.
UNLESS VOTING BY TELEPHONE OR INTERNET,
PLEASE SIGN AND DATE BELOW AND MAIL THIS
PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
To vote by Telephone
1) Read the Proxy Statement and have the Proxy card below at hand.
2) Call 1-800-690-6903.
3) Enter the 12-digit control number set forth on the Proxy card and follow the
simple instructions.
To vote by Internet
1) Read the Proxy Statement and have the Proxy card below at hand.
2) Go to Website www.proxyvote.com.
3) Enter the 12-digit control number set forth on the Proxy card and follow the
simple instructions.
DO NOT RETURN YOUR PROXY CARD IF YOU VOTE BY
PHONE OR INTERNET.
TO VOTE, MARK BLOCKS IN BLUE OR BLACK INK AS
FOLLOWS:
KEEP THIS PORTION FOR YOUR RECORDS.
</TABLE>
<PAGE>
DETACH AND RETURN THIS PORTION ONLY.
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
QUANTITATIVE EQUITY FUND
YOUR VOTE IS IMPORTANT. PLEASE SIGN, DATE AND MAIL THIS PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
(Joint owners should EACH sign. Please sign EXACTLY as your name(s) appears on
this card. When signing as attorney, trustee, executor, administrator, guardian
or corporate officer, please give your FULL title below.)
Vote on Trustees
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
II. Election of Messrs. (01) Biggar, [] For All [] Withhold All [] For All Except To withhold
(02) Dill, (03) Hale, (04) Langton, authority
(05) Saunders, and (06) Van Benschoten to vote, mark
and Drs. (07) Gruber and (08) Herring "For All
as Trustees of the Board. Except" and
write the
nominee's
number on the
line below.
__________________
Vote on Proposals
IA. Approval of New III. Conversion of the [] FOR [] AGAINST [] ABSTAIN
Investment Advisory Fund's structure
Agreement with from a stand-alone
Bankers Trust Company fund structure to a
master-feeder fund
[] FOR [] AGAINST [] ABSTAIN structure. [] FOR [] AGAINST [] ABSTAIN
IB. Approval of New IV. Ratification of
Investment Advisory the selection of
Agreement with PricewaterhouseCoopers
Morgan Grenfell Inc. LLP as the independent
[] FOR [] AGAINST [] ABSTAIN accountants of the Fund. [] FOR [] AGAINST [] ABSTAIN
IC. Approval of
New Investment
Sub-advisory
Agreement with The appointed proxies will vote on any
Bankers Trust other business as may properly come before
Company [] FOR [] AGAINST [] ABSTAIN the Special Meeting or any adjournment thereof.
Receipt of the Notice and the Proxy
Statement is hereby acknowledged.
- ------------------------------------------------- --------------------------------------
- ------------------------------------------------- --------------------------------------
Signature (Please sign within box) Date Signature (Joint Owners) Date
</TABLE>
2
