<PAGE>
As filed with the Commission on May 16, 2000
1933 Act File No. 333-_________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No.
BT INVESTMENT FUNDS
(Exact Name of Registrant as Specified in Charter)
One South Street, Baltimore, Maryland 21202
(Address of Principal Executive Offices)
(410) 895-3433
(Registrant's Telephone Number)
Daniel O. Hirsch, Esq. Copies to: Burton M. Leibert, Esq.
One South Street Willkie Farr & Gallagher
Baltimore, Maryland 21202 787 Seventh Ave
(Name and Address of Agent New York, New York 10019
for Service)
Title of Securities Being Registered:
Shares of beneficial interest, par value $.001 per share
No filing fee is due because the Registrant has previously registered an
indefinite number of its shares under the Securities Act of 1933, as amended,
pursuant to Rule 24f-2 under the Investment Company Act of 1940, as amended.
This Registration Statement relates to shares previously registered on Form N-1A
(File Nos. 33-07404, 811-4760).
Approximate Date of Proposed Public Offering:
As soon as practicable after this Registration Statement becomes effective.
It is proposed that this filing will become effective on June 14, 2000 pursuant
to Rule 488 under the Securities Act of 1933.
<PAGE>
Equity Appreciation -- Institutional Class
(a series of BT Pyramid Mutual Funds)
One South Street
Baltimore, MD 21202
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
SCHEDULED FOR JULY ---, 2000
This is the formal agenda for a Special Meeting and any adjournments thereof
(the "Meeting") of shareholders of your mutual fund. It tells you what matters
will be voted on and, in case you want to attend this Meeting in person, the
time and place of the Meeting.
To the shareholders of Equity Appreciation -- Institutional Class ("Equity
Fund"):
A Special Meeting of Equity Fund shareholders will be held at One South Street,
Baltimore, MD 21202 on July ___, 2000 at 10:30 a.m., Eastern Time, to consider
the following:
1. A proposal to approve an Agreement and Plan of Reorganization between
Equity Fund and Mid Cap ("Mid Cap Fund"). Under this Agreement, Equity
Fund would transfer all of its assets to Mid Cap Fund in exchange for
Institutional shares of Mid Cap Fund. These shares would be distributed
proportionately to you and the other shareholders of Equity Fund. Mid Cap
Fund would also assume Equity Fund's stated liabilities. Your Board of
Trustees recommends that you vote FOR this proposal.
2. Any other business that may properly come before the meeting.
Shareholders of record as of the close of business on June 2, 2000, are entitled
to vote at the Meeting and any related adjournments thereof.
Whether or not you expect to attend the Meeting, please complete, sign and
return the enclosed proxy card. You may also vote by calling the toll-free
number on your proxy card or by logging on to the Internet at
www.proxyvote.com. If shareholders do not return their proxies in sufficient
numbers, Equity Fund will incur additional costs to solicit proxies.
/s/Daniel O. Hirsch
Daniel O. Hirsch
Secretary
June __, 2000
<PAGE>
PROXY STATEMENT OF
EQUITY APPRECIATION -- INSTITUTIONAL CLASS
(a series of BT Pyramid Mutual Funds)
PROSPECTUS FOR
MID CAP-- INVESTMENT CLASS
(a series of BT Investment Funds)
This proxy statement and prospectus set forth concisely the information you
should know before voting on the proposed reorganization of Equity Appreciation,
One South Street, Baltimore, MD 21202, 1-800-730-1313 ("Equity Fund") into Mid
Cap, One South Street, Baltimore, MD 21202, 1-800-730-1313 ("Mid Cap Fund").
Please read it carefully and retain it for future reference.
Both Mid Cap Fund and Equity Fund (each a "Fund" and together the "Funds") are
open-end mutual funds investing in stocks and other equity fund securities of
medium-sized companies. The investment objective of both Funds is long term
capital growth.
Mid Cap Fund is a "feeder fund" that invests all of its assets in a "master
fund," the Capital Appreciation Portfolio, with the same investment objective as
Mid Cap Fund. Mid Cap Fund was formerly the Capital Appreciation Fund. The name
change is unrelated to the reorganization and was made to reflect the Fund's
focus on U.S. mid cap equities. References to Mid Cap Fund also apply to the
Capital Appreciation Portfolio where appropriate.
How the Reorganization Will Work
[_] A new class of Institutional shares of Mid Cap Fund will be created at the
time of the reorganization.
[_] Equity Fund will transfer all of its assets to Mid Cap Fund. Mid Cap Fund
will assume Equity Fund's stated liabilities.
[_] Mid Cap Fund will issue the Institutional shares to Equity Fund in an
aggregate amount equal to the value of the assets it receives, less the
stated liabilities it assumes, in the reorganization. These Institutional
shares will be distributed to Equity Fund's shareholders in proportion to
their holdings in Equity Fund on the reorganization date.
[_] Equity Fund will be liquidated and terminated, and you will be a
shareholder of Mid Cap Fund.
[_] The reorganization will be tax-free for federal income tax purposes.
An investment in Mid Cap is not a bank deposit and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
Like shares of all mutual funds, these securities have not been approved or
disapproved by the Securities and Exchange Commission nor has the Securities and
Exchange Commission passed upon the accuracy or adequacy of this prospectus.
Any representation to the contrary is a criminal offense.
<PAGE>
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------
Where to Get More Information
- - ----------------------------------------------------------------------------------------------------------------
<S> <C>
Prospectus of Mid Cap Fund dated 1/31/2000. In the same envelope as this proxy statement and
prospectus. Incorporated by reference into this proxy
statement and prospectus.
- - ---------------------------------------------------------
Mid Cap Fund's annual report to shareholders dated
9/30/99.
- - ----------------------------------------------------------------------------------------------------------------
Prospectus of Equity Fund dated 1/31/2000. On file with the Securities and Exchange Commission
- - ---------------------------------------------------------
Equity Fund's annual and semi-annual reports to ("SEC") and available at no charge by calling
shareholders dated 9/30/99 and 3/31/00, respectively. 1-800-730-1313 or by writing to us at the address shown
- - --------------------------------------------------------- below. Incorporated by reference into this proxy
A statement of additional information dated 6/__/2000 statement and prospectus.
contain additional information about both Mid Cap
Fund and Equity Fund.
- - ---------------------------------------------------------
Mid Cap Fund's semi-annual report to shareholders
dated 3/31/00.
- - ----------------------------------------------------------------------------------------------------------------
To ask questions about this proxy statement and Call our toll-free telephone number: 1-800-730-1313 or
prospectus. write to us at Service Center, P.O. Box 219210, Kansas
City, MO 64121-9210.
- - ----------------------------------------------------------------------------------------------------------------
</TABLE>
The date of this proxy statement and prospectus is June__, 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INTRODUCTION 1
SUMMARY 1
THE REORGANIZATION 4
CAPITALIZATION 7
ADDITIONAL INFORMATION ABOUT
THE FUNDS' BUSINESSES 8
BOARDS' EVALUATIONS AND RECOMMENDATIONS 8
VOTING RIGHTS AND REQUIRED VOTE 9
INFORMATION CONCERNING THE MEETING 9
OWNERSHIP OF SHARES OF THE FUNDS 10
EXPERTS 11
AVAILABLE INFORMATION 11
</TABLE>
Additional Information
A. Agreement and Plan of Reorganization between Mid Cap Fund and Equity Fund
(attached to this proxy statement and prospectus)
B. Annual report to shareholders dated September 30, 1999 of Mid Cap Fund
C. Prospectus dated January 31, 2000 of Mid Cap Fund
<PAGE>
INTRODUCTION
This proxy statement and prospectus is being used by the Board of Trustees of
Equity Fund to solicit proxies to be voted at a Special Meeting (the "Meeting")
of shareholders of Equity Fund, or any adjournment of the Meeting thereof. This
Meeting will be held at One South Street, Baltimore, MD 21202 on July __, 2000,
at 10:30 a.m., Eastern Time. The purpose of the Meeting is to consider a
proposal to approve an Agreement and Plan of Reorganization (the "Agreement")
providing for the reorganization of Equity Fund into Mid Cap Fund. This proxy
statement and prospectus and a proxy card are being mailed to Equity Fund's
shareholders on or about June ___, 2000.
Who is Eligible to Vote?
Equity Fund shareholders of record on June 2, 2000, are entitled to attend and
vote at the Meeting or any adjournments thereof. Each share of Equity Fund
outstanding on June 2, 2000, is entitled to one vote. Shares represented by
properly executed proxies, or shares voted by telephone or on the Internet,
unless revoked before or at the Meeting, will be voted according to
shareholders' instructions. If you sign a proxy card, but do not fill in a
vote, your shares will be voted to approve the Agreement. If any other business
comes before the Meeting, your shares will be voted at the discretion of the
persons named as proxies.
SUMMARY
The following is a summary. More complete information appears later in this
proxy statement and prospectus. You should read the entire proxy statement and
prospectus and the enclosed exhibits carefully because they contain details that
are not in the summary. The materials in the exhibits and the statements of
additional information dated January 31, 2000 for each of Mid Cap Fund and
Equity Fund, are hereby incorporated by reference into this proxy statement and
prospectus.
Comparison of Equity Fund and Mid Cap Fund
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------
Equity Fund Mid Cap Fund
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
General A diversified series of BT Pyramid Mutual A diversified series of BT Investment
Funds ("Pyramid Trust"). Pyramid Trust Funds ("Investment Trust"). Investment
is an open-end management investment Trust is an open-end management
company organized as a Massachusetts investment company organized as a
business trust. Massachusetts business trust.
- - -----------------------------------------------------------------------------------------------------------------
Investment Equity Fund is a stand-alone fund and Mid Cap Fund is a feeder fund in a
Structure invests directly in securities, as master-feeder structure, which means that
described below. it invests all of its assets in a master
portfolio, the Capital Appreciation
Portfolio. Capital Appreciation Portfolio
has the same investment objective as Mid Cap.
References to Mid Cap Fund in this proxy
statement include Capital Appreciation
Portfolio where appropriate.
- - -----------------------------------------------------------------------------------------------------------------
Net assets as of $xxx,xxx,xxx.xxx $x,xxx,xxx.xxx
June 2, 2000
- - -----------------------------------------------------------------------------------------------------------------
Investment Bankers Trust Company ("BT") is the BT is the investment adviser of the
Advisers investment adviser of Equity Fund. Capital Appreciation Portfolio.
- - -----------------------------------------------------------------------------------------------------------------
Control of investment BT is an indirect wholly owned subsidiary
advisers of Deutsche Bank A.G., an international
commercial and investment-banking group.
- - -----------------------------------------------------------------------------------------------------------------
Portfolio manager Mary P. Dugan is the portfolio manager for both Funds.
- - -----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------
Equity Fund Mid Cap Fund
- - -----------------------------------------------------------------------------------------------------------------
Investment objectives and policies
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Long-term capital growth.
Objective
- - -----------------------------------------------------------------------------------------------------------------
Principal Each Fund normally owns stock in approximately 100 medium-sized companies at any one
Investments time. They invest principally in stock and other securities with equity
characteristics such as trust or limited partnership interests, rights and warrants.
They may also invest in convertible securities when it is more advantageous than
investing in a company's common stock.
Each Fund may also invest up to 25% of its assets in stocks and other securities of
companies based outside the United States. Under normal conditions, this tactic
would not comprise a major element of either Fund's strategy.
- - -----------------------------------------------------------------------------------------------------------------
Equity Fund Securities Each Fund may invest in equity and equity-related securities, including common stock,
preferred stock, rights and warrants and convertible securities.
- - -----------------------------------------------------------------------------------------------------------------
Principal strategies Each Fund pursues a flexible investment program to achieve its objective. Neither
Fund is restricted to investments in specific market sectors. The Funds may invest
in any market sector and in any size company if BT identifies attractive long-term
prospects for capital growth. Nevertheless, both Funds attempt to match the
dollar-weighted average capitalization of the Funds' respective holdings to the
midpoint capitalization of the S&P Mid-Cap 400 Index.
BT considers many broad factors in assessing a potential candidate for investment for
each Fund including:
. competitive position within its industry;
. business prospects;
. management team;
. record of earnings growth;
. underlying asset value relative to industry peers;
. stock price relative to industry peers; and
. existence of reliable and liquid market for shares.
- - -----------------------------------------------------------------------------------------------------------------
Other investments
Illiquid securities Each Fund may invest up to 15% of its net assets in illiquid securities.
- - -----------------------------------------------------------------------------------------------------------------
Investment Each Fund may invest in other investment companies to the extent permitted by the
Companies Investment Company Act of 1940, as amended.
- - -----------------------------------------------------------------------------------------------------------------
Derivatives Each Fund may:
. Purchase and sell (write) put and call options on securities, securities indices
and currencies. These options may be traded on exchanges or over-the-counter.
. Enter into futures contracts on securities, securities indices and currencies, and
may purchase and write put and call options on these futures contracts.
. Enter into forward contracts on currencies.
. Each Fund may purchase and write securities and index options for both hedging
purposes and non-hedging purposes, but may enter into other options, futures and
forward contracts only for hedging purposes.
- - -----------------------------------------------------------------------------------------------------------------
Temporary defensive Each Fund may depart from its principal investment strategies in order to take a
positions temporary defensive position by investing up to 100% of its assets in common stocks
of larger companies, fixed income securities or short-term money market securities.
- - -----------------------------------------------------------------------------------------------------------------
Principal investment risks
- - -----------------------------------------------------------------------------------------------------------------
General You could lose money on your investment in either Fund. There is no guarantee
that either Fund will achieve its investment objective.
- - -----------------------------------------------------------------------------------------------------------------
</TABLE>
Page 7
<PAGE>
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------
Equity Fund Mid Cap Fund
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Management risk The value of each Fund's shares depends in part on the ability of BT to assess
economic conditions and investment opportunities. If BT's judgment about
the attractiveness of various investments proves to be incorrect, each Fund may
underperform its stated benchmark or competing investments.
- - -----------------------------------------------------------------------------------------------------------------
Stock market risk As with any equity growth fund, the value of your investment in either Fund will
fluctuate in response to stock market movements. An adverse event, such as an
unfavorable earnings report, may depress the value of a particular company's stock.
- - -----------------------------------------------------------------------------------------------------------------
Medium-sized company risk Both Funds' performance may be more volatile because they invest in medium-sized
company stocks. Industry-wide reversals have a greater impact on medium-sized
companies because they lack a large company's financial resources. In addition, it
may be harder to sell these stocks.
- - -----------------------------------------------------------------------------------------------------------------
Foreign investment risk To the extent either Fund holds shares of companies based outside the U.S., it faces
the risks inherent in foreign investing. Adverse political, economic or social
developments as well as incomplete information due to different reporting standards
could undermine the value of the Fund's investments or prevent it from realizing its
full value. Also, a decline in foreign currency relative to the value of the U.S.
dollar would depreciate the value of the investment to U.S. investors.
- - -----------------------------------------------------------------------------------------------------------------
<CAPTION> Buying, exchanging and redeeming shares
- - -----------------------------------------------------------------------------------------------------------------
Net asset value Each Fund calculates its net asset value per share (NAV) at the close of regular
trading on the New York Stock Exchange (NYSE) every day the Exchange is open for
business. Each Fund's portfolio securities are valued either based on market
quotations or, if market quotations are unavailable, at fair value, which involves
estimating a security's value based on information other than market quotations.
- - -----------------------------------------------------------------------------------------------------------------
Classes of shares Currently, each Fund only offers one class of shares, which is offered without a
sales charge. This proposed reorganization would create a new Institutional class of
Mid Cap Fund.
- - -----------------------------------------------------------------------------------------------------------------
Rule 12b-1 and service Neither Funds' shares are subject to any Rule 12b-1 or service fee.
fees
- - -----------------------------------------------------------------------------------------------------------------
Buying and selling shares Investors may purchase or redeem shares either from authorized brokers or directly
from either Fund.
- - -----------------------------------------------------------------------------------------------------------------
Minimum investment Currently the initial minimum investment If the proposed reorganization is
amounts for the Fund is $250,000 and the minimum approved, the minimum investment for the
subsequent investment is $25,000. newly created Institutional shares of Mid
Cap Fund will be $250,000 and $25,000 to
add to an account.
- - -----------------------------------------------------------------------------------------------------------------
Exchanging shares Each Fund's shares may be exchanged for shares of another Deutsche Asset Management
mutual fund up to four times a year (from the date of the first exchange).
- - -----------------------------------------------------------------------------------------------------------------
</TABLE>
Page 8
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of Mid Cap Fund or Equity Fund. The table also shows pro forma expenses
of shares of Mid Cap Fund following the proposed reorganization.
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------
For the year ended September 30, 1999 Mid Cap Fund
New Institutional Mid Cap Fund/1/ Equity Fund
Class (pro forma) Investment Class Institutional Class
- - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Management fees 0.65% 0.65% 0.65%
- - ------------------------------------------------------------------------------------------------------------------------
Distribution (12b-1) and/or service fees None None None
- - ------------------------------------------------------------------------------------------------------------------------
Other expenses 0.55% 1.23% 0.55%
- - ------------------------------------------------------------------------------------------------------------------------
Total annual fund operating expenses/1/ 1.20% 1.88% 1.20%
- - ------------------------------------------------------------------------------------------------------------------------
Less contractual fee waivers or expense
reimbursements (0.20)% (0.63)% (0.20)%
- - ------------------------------------------------------------------------------------------------------------------------
Net Expenses/2/ 1.00% 1.25% 1.00%
- - ------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ Information on the annual operating expenses reflects the expenses of both
Mid Cap Fund and the Capital Appreciation Portfolio, the master fund in
which Mid Cap Fund invests its assets. Mid Cap does not currently have an
Institutional Class.
/2/ The investment adviser and administrator have contractually agreed for the
16-month period from the Fund's fiscal year-end of September 30, 1999, to
waive their fees or reimburse expenses so that Equity Fund's total expenses
will not exceed 1.00% and Mid Cap Fund's expenses will not exceed 1.25%. The
new Institutional shares of Mid Cap Fund would be subject to the same
contractual obligation. BT will agree to waive its own fees and reimburse
other fund operating expenses so that the Institutional shares' expenses
will not exceed 1.00%.
- - --------------------------------------------------------------------------------
THE REORGANIZATION
Terms of the Reorganization
The Board of Trustees of each Fund has approved the Agreement, a copy of which
is attached as Exhibit A. The Agreement provides for reorganization on the
following terms:
[_] The net asset value of both Funds will be computed as of 4:00 p.m.,
Eastern Time, on the reorganization date.
[_] The reorganization is scheduled to occur at 5:00 p.m., Eastern Time, on
August ___, 2000, but may occur on a later date agreed to by the parties.
[_] In the reorganization, Equity Fund will transfer all of its assets to Mid
Cap Fund, and in exchange Mid Cap Fund will assume Equity Fund's stated
liabilities and issue Institutional shares as described below. Mid Cap Fund
will then transfer those assets to Capital Appreciation Portfolio in
exchange for a pro rata interest in Capital Appreciation Portfolio.
[_] Mid Cap Fund will issue Institutional shares to Equity Fund in an amount
equal to the value of the assets received by Mid Cap Fund, less the stated
liabilities assumed by Mid Cap Fund. These shares will immediately be
distributed by Equity Fund to Equity Fund's shareholders in proportion to
their holdings in Equity Fund on the reorganization date. As a result,
shareholders of Equity Fund will become Institutional shareholders of Mid
Cap Fund.
[_] After the reorganization is complete, Equity Fund will be terminated.
Page 9
<PAGE>
The following diagram shows how the reorganization will be carried out.
<TABLE>
<S> <C>
- - ----------------------- -------------------
Equity Fund transfers Capital Appreciation
its assets and stated Portfolio receives
liabilities to Mid Cap assets from from and
Fund (arrow) Mid Cap Fund (arrow) assumes liabilities
Transfers the Equity Fund of Equity Fund
assets and liabilities to
Capital Appreciation Portfolio
- - ----------------------- -------------------
Equity Fund Mid Cap Fund
shareholders receive Institutional Class
Mid Cap Fund (arrow) Equity Fund (arrow) shares are issued
Institutional Class receives these
shares shares and
distributes them to
its shareholders
- - ----------------------- -------------------
</TABLE>
Tax Status of the Reorganization
The reorganization will be tax-free for federal income tax purposes and will not
take place unless Equity Fund and Mid Cap Fund receive from Willkie Farr &
Gallagher, counsel to both Funds, a satisfactory opinion substantially to the
effect that:
[_] The transfer of Equity Fund's assets to Mid Cap Fund in exchange for
Institutional shares of Mid Cap Fund and the assumption by Mid Cap Fund of
Equity Fund's liabilities, followed by the distribution of such shares to
Equity Fund's shareholders and the termination of Equity Fund, will be a
"reorganization" within the meaning of Section 368(a)(1) of the Internal
Revenue Code of 1986 (the "Code"), and each fund will be "a party to a
reorganization" within the meaning of Section 368(b) of the Code;
[_] No gain or loss will be recognized by Equity Fund upon (1) the transfer of
all of its assets and the assumption of its stated liabilities by Mid Cap
Fund as described above or (2) the distribution by Equity Fund of Mid Cap
Fund Institutional shares to Equity Fund's shareholders;
[_] No gain or loss will be recognized by Mid Cap Fund upon the receipt of
Equity Fund's assets solely in exchange for the issuance of Mid Cap Fund
Institutional shares to Equity Fund and the assumption of all of Equity
Fund's stated liabilities by Mid Cap Fund;
[_] The basis of the assets of Equity Fund acquired by Mid Cap Fund will be, in
each instance, the same as the basis of those assets in the hands of Equity
Fund immediately before the transfer;
[_] The tax holding period of the assets of Equity Fund in the hands of Mid Cap
Fund will include Equity Fund's tax holding period for those assets;
[_] The shareholders of Equity Fund will not recognize gain or loss upon the
exchange of all their shares of Equity Fund solely for Mid Cap Fund
Institutional shares as part of the reorganization;
[_] The basis of Mid Cap Fund Institutional shares received by Equity Fund's
shareholders in the reorganization will be the same as the basis of the
shares of Equity Fund surrendered in exchange;
[_] The tax holding period of Mid Cap Fund Institutional shares received by
Equity Fund's shareholders will include, for each shareholder, the tax
holding period of the shares of Equity Fund surrendered in exchange,
provided that the Equity Fund shares were held as capital assets on the
date of the exchange;
[_] No gain or loss will be recognized by the Mid Cap Fund upon its
contribution of the assets of the Equity Fund to the Capital Appreciation
Portfolio solely in exchange for an interest in the Capital Appreciation
Portfolio;
Page 10
<PAGE>
[_] No gain or loss will be recognized by the Capital Appreciation Portfolio
upon the contribution by the Mid Cap Fund of the assets of the Equity Fund
to the Capital Appreciation Portfolio solely in exchange for an interest in
the Capital Appreciation Portfolio;
[_] The basis of the Capital Appreciation Portfolio in the assets of the Equity
Fund contributed to the Capital Appreciation Portfolio by the Mid Cap Fund
will be, in each instance, the same as the basis of those assets in the
hands of the Mid Cap Fund immediately prior to such contribution;
[_] The tax holding period of the Capital Appreciation Portfolio with respect
to the assets of the Equity Fund contributed by the Mid Cap Fund to the
Capital Appreciation Portfolio will, in each instance, include the Equity
Fund's and the Mid Cap Fund's tax holding periods for such assets;
[_] The basis of the interest in the Capital Appreciation Portfolio acquired by
the Mid Cap Fund as a result of its contribution to the Capital
Appreciation Portfolio of the assets of the Equity Fund will be the same as
the Mid Cap Fund's basis in such assets; and
[_] The tax holding period of the Mid Cap Fund with respect to its interest in
the Capital Appreciation Portfolio will include the Equity Fund's and the
Mid Cap Fund's tax holding periods for the assets of the Equity Fund
contributed to the Capital Appreciation Portfolio by the Mid Cap Fund.
If the reorganization is approved, to qualify as a tax-free reorganization, the
Equity Fund must distribute to its shareholders the Equity Fund's net investment
income and realized capital gains and losses through the date of the merger,
prior to the date of the reorganization. If this distribution were determined
as of the date of this proxy, the distribution would be approximately [5.4%] of
the current net asset value. This is equivalent to [$1.22 ]per share,
consisting of short-term gains of [$0.35] and long-term gains of [$0.87]. The
amount of the actual distribution per share may vary significantly from this
estimate depending primarily upon the extent of gains actually realized when
Equity Fund portfolio securities are sold, the extent of losses or credits that
offset those gains, and the number of Equity Fund shares outstanding. Stock
markets can be volatile, and the amount of the actual distribution per share is
likely to fluctuate from the estimated amount as the value of the Equity Fund's
holdings change.
As Mid Cap Fund shareholders, former Equity Fund shareholders will become liable
for taxes payable on their proportionate share of any taxable income and capital
gains recognized by Mid Cap Fund. These may include not only taxable income and
gains recognized after the reorganization, but also taxable income and capital
gains recognized but not distributed prior to the reorganization and taxable
income and capital gains attributable to pre-reorganization periods but not
recognized until after the reorganization.
Reasons for the Proposed Reorganization
The Board of Trustees of Equity Fund believes that the proposed reorganization
will be advantageous to the shareholders of Equity Fund for several reasons.
The Board of Trustees considered the following matters, among others, in
approving the reorganization at a meeting held on September 8, 1999.
Overlapping Investment Strategy and Market Niche. Equity Fund and Mid Cap Fund
have identical investment objectives and investment strategies. The same
portfolio management team currently manages both Funds and the same sales force
is now marketing both Funds. Because of the confusion that might be caused by
offering clients competing mid cap funds, it is not advantageous to operate and
market Equity Fund separately from Mid Cap Fund.
Master-Feeder Structure and Greater Diversification. The proposed
reorganization would allow Equity Fund to benefit from being part of a master-
feeder structure. As part of a master-feeder structure, the feeder fund may
benefit from economies of scale in portfolio management and administration and
the ability to participate in larger securities transactions. Shareholders of
both Funds may be better served by a combined fund offering greater
diversification at the portfolio level. To the extent that combining the Funds'
assets into a single fund creates a larger asset base, Mid Cap Fund can achieve
greater diversification after the reorganization than is currently possible for
either Fund. Greater diversification is expected to benefit the shareholders of
both Funds because it may reduce the negative effect that the adverse
performance of any one security may have on the performance of the entire
portfolio.
Investment Performance. Mid Cap Fund shares received in the reorganization will
provide Equity Fund's shareholders with substantially the same investment
advantages as they currently have at a comparable level of risk. Equity Fund's
Board of Trustees also considered the performance history of each Fund, which is
shown in the table below. As could be expected, the Funds have performed
similarly for the comparable periods. The Trustees further noted that due to
the overlapping investment strategy, market niche and the similar marketing
channels of these
Page 11
<PAGE>
Funds, all shareholders may benefit from the greater diversification and the
possibility of reduced expenses due to the combination of the Funds.
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS/1/
- - --------------------------------------------------------------------------------------------------
For the Period Ending Equity Fund - Institutional Class Mid Cap Fund - Investment Class
March 31, 2000 (Inception 10/12/93) (Inception 03/09/93)
- - --------------------------------------------------------------------------------------------------
<S> <C> <C>
1 year 70.01% 70.48%
- - --------------------------------------------------------------------------------------------------
3 years 40.62% 41.01%
- - --------------------------------------------------------------------------------------------------
5 years 28.37% 28.26%
- - --------------------------------------------------------------------------------------------------
Inception 22.76% 23.61%
- - --------------------------------------------------------------------------------------------------
</TABLE>
/1/ Past performance offers no indication of how the Fund will perform in the
future.
Possibility of Reduced Expenses. A combined fund offers economies of scale that
may lead to better control over expenses than is currently possible. Both Funds
incur substantial costs for accounting, legal, transfer agency services,
insurance, and custodial and administrative services. As shown in the Fees and
Expenses table, the Total Annual Fund Operating Expenses of the new Mid Cap Fund
Institutional Class are expected to be the same as those of Equity Fund.
Benefits to Mid Cap Fund. The Board of Trustees of Mid Cap Fund considered that
the reorganization presents an excellent opportunity for Mid Cap Fund to acquire
investment assets without the obligation to pay commissions or other transaction
costs that are normally associated with the purchase of portfolio securities.
This opportunity provides an economic benefit to Mid Cap Fund and its
shareholders.
Benefits to Advisers and Other Service Providers. The Board of Trustees of each
Fund considered that the Fund's advisers, administrators and distributors would
also benefit from the reorganization. For example, the advisers and
administrators might function more efficiently and therefore realize cost
savings from a consolidated portfolio management effort and from the need to
prepare fewer prospectuses, reports and regulatory filings. The Trustees
believe, however, that these savings will not amount to a significant economic
benefit.
Additional Terms of Agreement
Surrender of Share Certificates. Shareholders of Equity Fund whose shares are
represented by one or more share certificates should, before the reorganization
date, either surrender their certificates to Equity Fund or deliver to Equity
Fund a lost certificate affidavit, in the form and accompanied by any surety
bonds that Equity Fund may require (collectively, an "Affidavit"). On the
reorganization date, all certificates that have not been surrendered to the
transfer agent will be cancelled, will no longer evidence ownership of Equity
Fund's shares and, if not otherwise surrendered, will evidence ownership of Mid
Cap Fund Institutional shares. Shareholders may not redeem or transfer Mid Cap
Fund Institutional shares received in the reorganization until they have
surrendered their Equity Fund share certificates or delivered an Affidavit. Mid
Cap Fund will not issue share certificates in the reorganization.
Conditions to Closing the Reorganization. The obligation of Equity Fund to
consummate the reorganization is subject to the satisfaction of certain
conditions under the Agreement (see Agreement, paragraphs 6 and 7).
The obligation of Mid Cap Fund to consummate the reorganization is also subject
to the satisfaction of certain conditions under the Agreement including Equity
Fund having distributed to its shareholders for its taxable year ending on the
closing date of the Reorganization: (1) all of its investment company taxable
income (prior to reduction by any dividends paid deduction); (2) all of its net
capital gain, after reduction by any capital loss carry forward; and (3) all of
the excess of (i) its interest income excludable from federal
Page 12
<PAGE>
gross income over (ii) the related deductions disallowed under the Code (see
Agreement, paragraphs 6 and 7).
The obligations of both Funds are subject to, among other things, the approval
of the Agreement by the necessary vote of the outstanding shares of Equity Fund,
in accordance with the provisions of Equity Fund's declaration of trust and by-
laws. The Funds' obligations are also subject to several other conditions,
including the receipt of all consents, orders and permits necessary to
consummate the reorganization and the receipt of a favorable opinion of counsel
as to the federal income tax consequences of the reorganization.
Termination of Agreement. Equity Fund or Mid Cap Fund may mutually agree to
terminate the Agreement (even if the shareholders of Equity Fund have already
approved it) at any time before the reorganization date. Either Fund may also
terminate the Agreement if the other Fund has breached any representation,
warranty or agreement contained in the Agreement or if any condition to closing
the reorganization cannot or will not be met.
Expenses of the Reorganization. Equity Fund and Mid Cap Fund will bear their
own costs of the reorganization. Equity Fund will bear the fees and expenses
incurred in connection with its liquidation and termination. These liquidation
and termination fees are expected to aggregate approximately $5,000.
CAPITALIZATION
The following table sets forth the capitalization of each Fund as of March 31,
2000, and the pro forma combined capitalization of both Funds as if the
reorganization had occurred on that date. The table reflects pro forma exchange
ratios of approximately 1.422 Mid Cap Fund Institutional shares being issued for
each share of Equity Fund shares. If the reorganization is consummated as
proposed, the actual exchange ratios on the reorganization date may vary from
the exchange ratios indicated due to changes in any of a number of factors,
including:
[_] The market value of the portfolio securities of both Mid Cap Fund and
Equity Fund between March 31, 2000, and the reorganization date.
[_] Changes in the amount of undistributed net investment income and net
realized capital gains of Mid Cap Fund and Equity Fund during that period
resulting from income and distributions.
[_] Changes in the accrued liabilities of Mid Cap Fund and Equity Fund during
the same period.
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------
Mid Cap Fund
Capitalization as New Institutional Shares/1/ Mid Cap Fund Equity Fund
of March 31, 2000 Pro Forma
- - -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net assets $396,439,763 $44,407,694 $352,032,069
- - -----------------------------------------------------------------------------------------------------------
Net asset value per share $ 18.08 $ 18.08 $ 25.71
- - -----------------------------------------------------------------------------------------------------------
Shares outstanding $ 21,928,919 2,456,004 $ 13,694,033
- - -----------------------------------------------------------------------------------------------------------
</TABLE>
/1/ If the reorganization had taken place on March 31, 2000, Equity Fund shares
would have received 19,472,915 Institutional shares of Mid Cap Fund, which would
have been available for distribution to the shareholders of Equity Fund.
It is impossible to predict how many Institutional shares of Mid Cap Fund will
actually be received and distributed by Equity Fund on the reorganization date.
The table should not be relied upon to determine the amount of Mid Cap Fund
shares that will actually be received and distributed.
ADDITIONAL INFORMATION ABOUT THE FUNDS' BUSINESSES
Both Funds are organized as Massachusetts business trusts. The following table
shows where in each Fund's prospectus you can find additional information about
the business of that Fund.
Page 13
<PAGE>
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------
Type of Information Headings in Prospectuses
- - ------------------------------------------------------------------------------------------------------------------
Equity Fund Mid Cap Fund
- - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Risk/return summary Overview of Equity Appreciation - Overview of Mid Cap - Investment Class
Institutional Class
- - ------------------------------------------------------------------------------------------------------------------
Investment objectives/goals Goal
- - ------------------------------------------------------------------------------------------------------------------
Principal investment strategies Core Strategy, Investment Policies and Strategies
- - ------------------------------------------------------------------------------------------------------------------
Principal risks of investing in Principal Risks of Investing in the Fund, Who Should Consider Investing in
the Funds: narrative disclosure the Fund
- - ------------------------------------------------------------------------------------------------------------------
Principal risks of investing in Total Returns, After Fees and Expenses
the Funds: risk/return bar chart
and table
- - ------------------------------------------------------------------------------------------------------------------
Fee table Annual Fund Operating Expenses
- - ------------------------------------------------------------------------------------------------------------------
Body of prospectus A Detailed Look at Equity A Detailed Look at Mid Cap -
Appreciation - Institutional Class Investment Class
- - ------------------------------------------------------------------------------------------------------------------
Investment objectives, principal Objective, Strategy, Principal Investments, Investment Process, Risks
investment strategies and related
risks
- - ------------------------------------------------------------------------------------------------------------------
Management: investment Management of the Fund
adviser and portfolio manager
- - ------------------------------------------------------------------------------------------------------------------
Shareholder information: Calculating the Fund's Share Price
Pricing of fund shares
- - ------------------------------------------------------------------------------------------------------------------
Shareholder information: Buying and Selling Fund Shares
Purchase of fund shares
- - ------------------------------------------------------------------------------------------------------------------
Shareholder information: Dividends and Distributions, Tax Considerations
Dividends and distributions; tax
consequences
- - ------------------------------------------------------------------------------------------------------------------
Financial highlights Financial Highlights
Information
- - ------------------------------------------------------------------------------------------------------------------
</TABLE>
BOARDS' EVALUATION AND RECOMMENDATION
For the reasons described above, the Board of Trustees of Equity Fund, including
the Trustees who are not "interested persons" of either Fund or any of their
advisers ("Independent Trustees"), unanimously approved the reorganization at a
meeting held on September 8, 1999. In particular, the Trustees determined that
the reorganization was in the best interests of Equity Fund and that the
interests of Equity Fund's shareholders would not be diluted as a result of the
reorganization. Similarly, the Board of Trustees of Mid Cap Fund, including the
Independent Trustees, unanimously approved the reorganization at a meeting held
on September 8, 1999. The Board also determined that the reorganization was in
the best interests of Mid Cap Fund and that the interests of Mid Cap Fund's
shareholders would not be diluted as a result of the reorganization.
- - --------------------------------------------------------------------------------
Therefore, after careful consideration, the Board of Trustees of Equity Fund,
including the Independent Trustees, recommends that the shareholders of Equity
Fund vote "FOR" the proposal to approve the Agreement and Plan of
Reorganization.
- - --------------------------------------------------------------------------------
VOTING RIGHTS AND REQUIRED VOTE
Each share of Equity Fund outstanding on the Record Date is entitled to one
vote. Approval of the above proposal requires the affirmative vote of a
majority of the shares of Equity Fund outstanding and entitled to vote. For
this purpose, a majority of the outstanding shares of Equity Fund means the vote
of the lesser of:
(1) 67% or more of the shares present at the Meeting, if the holders of more
than 50% of the outstanding shares of the Equity Fund are represented in person
or by proxy, or
Page 14
<PAGE>
(2) more than 50% of the outstanding shares of Equity Fund.
Shares of Equity Fund represented in person or by proxy, including shares that
abstain or do not vote on the proposal, will be counted for purposes of
determining whether there is a quorum at the Meeting or any adjournment thereof.
These include proxies submitted by a broker or a nominee holding shares in
"street name" who indicates on the proxy card that it does not have
discretionary authority to vote on the proposal. Accordingly, an abstention
from voting or a "broker non-vote" has the same effect as a vote against the
proposal.
If the required approval of shareholders is not obtained, Equity Fund will
continue to engage in business as a separate mutual fund and the Board of
Trustees will consider what further action, if any, may be appropriate.
INFORMATION CONCERNING THE MEETING
Solicitation of Proxies
In addition to the mailing of these proxy materials, proxies may be solicited by
telephone, by fax, through the Internet or in person by the Trustees, officers
and employees of Equity Fund or by personnel of BT or ICC Distributors, Inc.,
the distributor of Equity Fund's shares.
Revoking Proxies
An Equity Fund shareholder signing and returning a proxy has the power to revoke
it at any time before it is exercised:
[_] By filing a written notice of revocation with Equity Fund's transfer agent,
or
[_] By returning before the time of the Meeting a duly executed proxy with a
later date than the proxy being revoked, or
[_] If a shareholder has executed a proxy but is present at the Meeting and
wishes to vote in person, by notifying the secretary of Equity Fund at the
Meeting at any time before the proxy is voted.
Simply attending the Meeting without voting, however, will not revoke a
previously executed and returned proxy.
Outstanding Shares and Quorum
As of June 2, 2000, [xxx,xxx.xxx] shares of Equity Fund were outstanding. Only
shareholders of record on June 2, 2000 (the "Record Date") are entitled to
notice of and to vote at the Meeting and any adjournments thereof. A majority
of the outstanding shares of Equity Fund that are entitled to vote will be
considered a quorum for the transaction of business.
Other Business
Equity Fund's Board of Trustees knows of no business to be presented for
consideration at the Meeting other than the proposal. If other business is
properly brought before the Meeting, proxies will be voted according to the best
judgment of the persons named as proxies.
Adjournments
Page 15
<PAGE>
If a quorum is not present in person or by proxy at the time any session of the
Meeting is called to order, the persons named as proxies may vote those proxies
that have been received to adjourn the meeting to a later date. If a quorum is
present but there are not sufficient votes in favor of the proposal, the persons
named as proxies may propose one or more adjournments of the meeting to permit
further solicitation of proxies concerning the proposal. Any adjournment will
require the affirmative vote of a majority of Equity Fund's shares present in
person or by proxy at the session of the Meeting to be adjourned. If an
adjournment of the Meeting is proposed because there are not sufficient votes in
favor of the proposal, the persons named as proxies will vote those proxies
favoring the proposal in favor of adjournment, and will vote those proxies
against the reorganization against adjournment.
Telephone and Internet Voting
Equity Fund may record votes over the telephone or through the Internet. In
doing so, 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 recorded. Proxies voted over the 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.
OWNERSHIP OF SHARES OF THE FUNDS
To the knowledge of the Funds, as of June 2, 2000, the following persons owned,
of record or beneficially, 5% or more of the outstanding shares of Mid Cap Fund
and Equity Fund (before the reorganization) and would own (after the
reorganization), 5% or more of the outstanding shares of Mid Cap Fund.
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------
Names and Addresses of Owners Equity Fund Mid Cap Fund Mid Cap Fund
of More Than 5% of Shares Shares Shares Institutional Shares
(before reorganization) (after reorganization)
- - ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- - -------------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------------
</TABLE>
As of June 2, 2000, the table reflects pro forma exchange ratios of
approximately [x.x] Mid Cap Fund Institutional Class shares being issued for
each Equity Fund share. If the reorganization is consummated, the actual
exchange ratios on the reorganization date may vary from the exchange ratios as
previously discussed.
As of June 2, 2000, the Trustees and Officers of Equity Fund and Mid Cap Fund,
each as a group, owned in the aggregate less than 1% of the outstanding shares
of their respective Funds.
Page 16
<PAGE>
EXPERTS
The financial statements and the financial highlights of Equity Fund as of
September 30, 1999, and for each of the periods then ended, and of Mid Cap Fund
as of September 30, 1999, and for each of the periods then ended, are
incorporated by reference into this proxy statement and prospectus. These
financial statements and highlights for each of Equity Fund and Mid Cap Fund
have been audited by PricewaterhouseCoopers LLP, independent accountants for
each Fund, as stated in the reports appearing in the respective Annual Report to
shareholders, that are incorporated by reference in the related statements of
additional information. These financial statements and highlights are included
in reliance upon the reports given upon the authority of such firm as an expert
in accounting and auditing.
AVAILABLE INFORMATION
Each Fund is subject to the informational requirements of the Securities
Exchange Act of 1934 and the Investment Company Act of 1940, as amended, and
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). These reports, proxy statements and
other information filed by the Funds can be inspected and copied (at prescribed
rates) at the public reference facilities of the Commission at 450 Fifth Street,
NW, Washington, D.C., and at the following regional offices: Chicago (500 West
Madison Street, Suite 1400, Chicago, Illinois) and New York (7 World Trade
Center, Suite 1300, New York, New York). Copies of such material can also be
obtained by e-mail at [email protected], or by writing the Public Reference
Branch, Office of Consumer Affairs and Information Services of the Commission at
450 Fifth Street, NW, Washington, D.C. 20549-0102, at prescribed rates. For
information on the Public Reference Section, call the Commission at 1-202-942-
8090. In addition, copies of these documents may be viewed on-screen or
downloaded from the EDGAR Database on the Commission's Internet site at
http://www.sec.gov.
<PAGE>
gross income over (ii) the related deductions disallowed under the Code (see
Agreement, paragraphs 6 and 7).
The obligations of both Funds are subject to, among other things, the approval
of the Agreement by the necessary vote of the outstanding shares of Equity Fund,
in accordance with the provisions of Equity Fund's declaration of trust and by-
laws. The Funds' obligations are also subject to several other conditions,
including the receipt of all consents, orders and permits necessary to
consummate the reorganization and the receipt of a favorable opinion of counsel
as to the federal income tax consequences of the reorganization.
Termination of Agreement. Equity Fund or Mid Cap Fund may mutually agree to
terminate the Agreement (even if the shareholders of Equity Fund have already
approved it) at any time before the reorganization date. Either Fund may also
terminate the Agreement if the other Fund has breached any representation,
warranty or agreement contained in the Agreement or if any condition to closing
the reorganization cannot or will not be met.
Expenses of the Reorganization. Equity Fund and Mid Cap Fund will bear their
own costs of the reorganization. Equity Fund will bear the fees and expenses
incurred in connection with its liquidation and termination. These liquidation
and termination fees are expected to aggregate approximately $5,000.
CAPITALIZATION
The following table sets forth the capitalization of each Fund as of March 31,
2000, and the pro forma combined capitalization of both Funds as if the
reorganization had occurred on that date. The table reflects pro forma exchange
ratios of approximately 1.422 Mid Cap Fund Institutional shares being issued for
each share of Equity Fund shares. If the reorganization is consummated as
proposed, the actual exchange ratios on the reorganization date may vary from
the exchange ratios indicated due to changes in any of a number of factors,
including:
[_] The market value of the portfolio securities of both Mid Cap Fund and
Equity Fund between March 31, 2000, and the reorganization date.
[_] Changes in the amount of undistributed net investment income and net
realized capital gains of Mid Cap and Equity Fund during that period
resulting from income and distributions.
[_] Changes in the accrued liabilities of Mid Cap Fund and Equity Fund during
the same period.
<TABLE>
<CAPTION>
Mid Cap Fund
Capitalization as New Institutional Shares/1/ Mid Cap Fund Equity Fund
of March 31, 2000 Pro Forma
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net assets $396,439,763 $44,407,694 $352,032,069
- - -----------------------------------------------------------------------------------------------------------
Net asset value per share $ 18.08 $ 18.08 $ 25.71
- - -----------------------------------------------------------------------------------------------------------
Shares outstanding $ 21,928,919 2,456,004 $ 13,694,033
- - -----------------------------------------------------------------------------------------------------------
</TABLE>
/1/ If the reorganization had taken place on March 31, 2000, Equity Fund shares
would have received 19,472,915 Institutional shares of Mid Cap Fund, which would
have been available for distribution to the shareholders of Equity Fund.
It is impossible to predict how many Institutional shares of Mid Cap Fund will
actually be received and distributed by Equity Fund on the reorganization date.
The table should not be relied upon to determine the amount of Mid Cap Fund
shares that will actually be received and distributed.
ADDITIONAL INFORMATION ABOUT THE FUNDS' BUSINESSES
Both Funds are organized as Massachusetts business trusts. The following table
shows where in each Fund's prospectus you can find additional information about
the business of that Fund.
Page 13
<PAGE>
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------
Type of Information Headings in Prospectuses
- - ------------------------------------------------------------------------------------------------------------------
Equity Fund Mid Cap Fund
- - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Risk/return summary Overview of Equity Fund Overview of Mid Cap
- - ------------------------------------------------------------------------------------------------------------------
Investment objectives/goals Goal
==================================================================================================================
Principal investment strategies Core Strategy, Investment Policies and Strategies
- - ------------------------------------------------------------------------------------------------------------------
Principal risks of investing in Principal Risks of Investing in the Fund, Who Should Consider Investing in
the Funds: narrative disclosure the Fund
- - ------------------------------------------------------------------------------------------------------------------
Principal risks of investing in
the Funds: risk/return bar chart Total Returns, After Fees and Expenses
and table
- - ------------------------------------------------------------------------------------------------------------------
Fee table Annual Fund Operating Expenses
- - ------------------------------------------------------------------------------------------------------------------
Body of prospectus A Detailed Look at Equity Fund A Detailed Look at Mid Cap Fund
==================================================================================================================
Investment objectives, principal
investment strategies and related Objective, Strategy, Principal Investments, Investment Process, Risks
risks
- - ------------------------------------------------------------------------------------------------------------------
Management: investment Management of the Fund
adviser and portfolio manager
- - ------------------------------------------------------------------------------------------------------------------
Shareholder information: Calculating the Fund's Share Price
Pricing of fund shares
- - ------------------------------------------------------------------------------------------------------------------
Shareholder information: Buying and Selling Fund Shares
Purchase of fund shares
- - ------------------------------------------------------------------------------------------------------------------
Shareholder information:
Dividends and distributions; tax Dividends and Distributions, Tax Considerations
consequences
- - ------------------------------------------------------------------------------------------------------------------
Financial highlights Financial Highlights
Information
- - ------------------------------------------------------------------------------------------------------------------
</TABLE>
BOARDS' EVALUATION AND RECOMMENDATION
For the reasons described above, the Board of Trustees of Equity Fund, including
the Trustees who are not "interested persons" of either Fund or any of their
advisers ("Independent Trustees"), unanimously approved the reorganization at a
meeting held on September 8, 1999. In particular, the Trustees determined that
the reorganization was in the best interests of Equity Fund and that the
interests of Equity Fund's shareholders would not be diluted as a result of the
reorganization. Similarly, the Board of Trustees of Mid Cap Fund, including the
Independent Trustees, unanimously approved the reorganization at a meeting held
on September 8, 1999. The Board also determined that the reorganization was in
the best interests of Mid Cap Fund and that the interests of Mid Cap Fund's
shareholders would not be diluted as a result of the reorganization.
- - -------------------------------------------------------------------------------
Therefore, after careful consideration, the Board of Trustees of Equity Fund,
including the Independent Trustees, recommends that the shareholders of Equity
Fund vote "FOR" the proposal to approve the Agreement and Plan of
Reorganization.
- - -------------------------------------------------------------------------------
VOTING RIGHTS AND REQUIRED VOTE
Each share of Equity Fund outstanding on the Record Date is entitled to one
vote. Approval of the above proposal requires the affirmative vote of a
majority of the shares of Equity Fund outstanding and entitled to vote. For
this purpose, a majority of the outstanding shares of Equity Fund means the vote
of the lesser of:
(1) 67% or more of the shares present at the Meeting, if the holders of more
than 50% of the outstanding shares of the Equity Fund are represented in person
or by proxy, or
Page 14
<PAGE>
(2) more than 50% of the outstanding shares of Equity Fund.
Shares of Equity Fund represented in person or by proxy, including shares that
abstain or do not vote on the proposal, will be counted for purposes of
determining whether there is a quorum at the Meeting or any adjournment thereof.
These include proxies submitted by a broker or a nominee holding shares in
"street name" who indicates on the proxy card that it does not have
discretionary authority to vote on the proposal. Accordingly, an abstention
from voting or a "broker non-vote" has the same effect as a vote against the
proposal.
If the required approval of shareholders is not obtained, Equity Fund will
continue to engage in business as a separate mutual fund and the Board of
Trustees will consider what further action, if any, may be appropriate.
INFORMATION CONCERNING THE MEETING
Solicitation of Proxies
In addition to the mailing of these proxy materials, proxies may be solicited by
telephone, by fax, through the Internet or in person by the Trustees, officers
and employees of Equity Fund or by personnel of BT or ICC Distributors, Inc.,
the distributor of Equity Fund's shares.
Revoking Proxies
An Equity Fund shareholder signing and returning a proxy has the power to revoke
it at any time before it is exercised:
[_] By filing a written notice of revocation with Equity Fund's transfer agent,
or
[_] By returning before the time of the Meeting a duly executed proxy with a
later date than the proxy being revoked, or
[_] If a shareholder has executed a proxy but is present at the Meeting and
wishes to vote in person, by notifying the secretary of Equity Fund at the
Meeting at any time before the proxy is voted.
Simply attending the Meeting without voting, however, will not revoke a
previously executed and returned proxy.
Outstanding Shares and Quorum
As of June 2, 2000, [xxx,xxx,xxx] shares of Equity Fund were outstanding. Only
shareholders of record on June 2, 2000 (the "Record Date") are entitled to
notice of and to vote at the Meeting and any adjournments thereof. A majority
of the outstanding shares of Equity Fund that are entitled to vote will be
considered a quorum for the transaction of business.
Other Business
Equity Fund's Board of Trustees knows of no business to be presented for
consideration at the Meeting other than the proposal. If other business is
properly brought before the Meeting, proxies will be voted according to the best
judgment of the persons named as proxies.
Adjournments
Page 15
<PAGE>
If a quorum is not present in person or by proxy at the time any session of the
Meeting is called to order, the persons named as proxies may vote those proxies
that have been received to adjourn the meeting to a later date. If a quorum is
present but there are not sufficient votes in favor of the proposal, the persons
named as proxies may propose one or more adjournments of the meeting to permit
further solicitation of proxies concerning the proposal. Any adjournment will
require the affirmative vote of a majority of Equity Fund's shares present in
person or by proxy at the session of the Meeting to be adjourned. If an
adjournment of the Meeting is proposed because there are not sufficient votes in
favor of the proposal, the persons named as proxies will vote those proxies
favoring the proposal in favor of adjournment, and will vote those proxies
against the reorganization against adjournment.
Telephone and Internet Voting
Equity Fund may record votes over the telephone or through the Internet. In
doing so, 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 recorded. Proxies voted over the 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.
OWNERSHIP OF SHARES OF THE FUNDS
To the knowledge of the Funds, as of June 2, 2000, the following persons owned,
of record or beneficially, 5% or more of the outstanding shares of Mid Cap Fund
and Equity Fund (before the reorganization) and would own (after the
reorganization), 5% or more of the outstanding shares of Mid Cap Fund.
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------
Names and Addresses of Equity Fund Mid Cap Fund Mid Cap Fund
Owners of More Than Shares Shares Shares
5% of Shares (before reorganization) (after reorganization)
- - --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- - --------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------
</TABLE>
As of June 2, 2000, the table reflects pro forma exchange ratios of
approximately [x,x] Mid Cap Fund Institutional Class shares being issued for
each Equity Fund share. If the reorganization is consummated, the actual
exchange ratios on the reorganization date may vary from the exchange ratios as
previously discussed.
As of June 2, 2000, the Trustees and Officers of Equity Fund and Mid Cap Fund,
each as a group, owned in the aggregate less than 1% of the outstanding shares
of their respective Funds.
Page 16
<PAGE>
EXPERTS
The financial statements and the financial highlights of Equity Fund as of
September 30, 1999, and, for each of the years 1994 through 1999 in the period
then ended, and of Mid Cap Fund as of September 30, 1999, and for each of the
years 1994 through 1999 in the period then ended, are incorporated by reference
into this proxy statement and prospectus. These financial statements and
highlights for each of Equity Fund and Mid Cap Fund have been audited by
PricewaterhouseCoopers LLP, independent accountants for each Fund, as stated in
the reports appearing in the respective Annual Report to shareholders, that are
incorporated by reference in the related statement of additional information.
These financial statements and highlights are included in reliance upon the
reports given upon the authority of such firm as an expert in accounting and
auditing.
AVAILABLE INFORMATION
Each Fund is subject to the informational requirements of the Securities
Exchange Act of 1934 and the Investment Company Act of 1940, as amended, and
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). These reports, proxy statements and
other information filed by the Funds can be inspected and copied (at prescribed
rates) at the public reference facilities of the Commission at 450 Fifth Street,
NW, Washington, D.C., and at the following regional offices: Chicago (500 West
Madison Street, Suite 1400, Chicago, Illinois) and New York (7 World Trade
Center, Suite 1300, New York, New York). Copies of such material can also be
obtained by e-mail at [email protected], or by writing the Public Reference
Branch, Office of Consumer Affairs and Information Services of the Commission at
450 Fifth Street, NW, Washington, D.C. 20549-0102, at prescribed rates. For
information on the Public Reference Section, call the Commission at 1-202-942-
8090. In addition, copies of these documents may be viewed on-screen or
downloaded from the EDGAR Database on the Commission's Internet site at
http://www.sec.gov.
Page 17
<PAGE>
FORM OF PROXY CARD
BT Pyramid Mutual Funds
Equity Appreciation
One South Street, Baltimore, Maryland
PROXY FOR THE SPECIAL MEETING OF STOCKHOLDERS
10:30 A.M., Eastern time, on July__, 2000
The undersigned hereby appoints Daniel O. Hirsch and Amy M. Olmert to 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 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
Proposal I. All ABSTAIN votes will be counted only in determining the existence
of a quorum at the Special Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES WITH RESPECT TO
EQUITY APPRECIATION. THE BOARD OF TRUSTEES RECOMMENDS A VOTE "FOR" PROPOSAL I.
The appointed proxies will vote on any other business as may properly come
before the Special Meeting or any adjournment thereof.
Receipt of the notice and the Proxy Statement, dated June __, 2000 (the "Proxy
Statement"), is hereby acknowledged.
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
instructions.
To vote by Internet
1) Read the Proxy Statement and have the Proxy card below at hand.
2) Go to the Website www.proxyvote.com
-----------------
3) Enter the 12-digit control number set forth on the Proxy card and follow the
instructions.
<PAGE>
Please mark boxes in blue or black ink.
I. Approval of Agreement and Plan of Reorganization between Equity Appreciation
and Mid Cap, pursuant to which: (a) the Equity Appreciation would transfer
all of its assets to Mid Cap in exchange for Mid Cap's assumption of Equity
Appreciation's liabilities and the issuance of Mid Cap shares to be
distributed pro rata to Equity Appreciation shareholders, and (b) Equity
Appreciation Fund would be terminated.
FOR AGAINST ABSTAIN
II. Transact such other business as may properly come before the Special Meeting
and any adjournment or adjournments thererof.
FOR AGAINST ABSTAIN
_______________________________________________________________________________
PLEASE SIGN AND DATE BELOW AND MAIL THIS PROXY CARD PROMPLY USING THE ENCLOSED
ENVELOPE.
__________________________________
(Title or Authority)
__________________________________
(Signature)
__________________________________
(Signature)
Dated: [________________________], 2000
(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.)
_______________________________________________________________________________
YOUR VOTE IS IMPORTANT, PLEASE SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
<PAGE>
Exhibit A
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this ____th day of __________, 2000, among (i) BT Investment Funds (the
"Investment Trust"), a business trust organized under the laws of the
Commonwealth of Massachusetts with its principal place of business at One South
Street, Baltimore, Maryland 21202, on behalf of Mid Cap (the "Acquiring Fund"),
a series of the Investment Trust, and (ii) BT Pyramid Mutual Funds (the "Pyramid
Trust"), a business trust organized under the laws of the Commonwealth of
Massachusetts with its principal place of business at One South Street,
Baltimore, Maryland 21202, on behalf of Equity Appreciation (the "Acquired
Fund"), a series of Pyramid Trust.
This Agreement is intended to be and is adopted as a plan of reorganization
within the meaning of Section 368(a)(1) of the United States Internal Revenue
Code of 1986, as amended (the "Code"). The reorganization (the "Reorganization")
will consist of (i) the transfer of all of the assets of the Acquired Fund to
the Acquiring Fund in exchange for (a) the issuance of Institutional shares of
beneficial interest of the Acquiring Fund (collectively, the "Acquiring Fund
Shares" and each, an "Acquiring Fund Share") to the Acquired Fund, and (b) the
assumption by the Acquiring Fund of certain scheduled liabilities of the
Acquired Fund, and (ii) the distribution by the Acquired Fund, on the Closing
Date herein referred to or as soon thereafter as conveniently practicable, of
the Acquiring Fund Shares to the shareholders of the Acquired Fund in
liquidation of the Acquired Fund and the termination of the Acquired Fund, all
upon the terms and conditions hereinafter set forth in this Agreement.
WHEREAS, the Reorganization is intended to qualify as a reorganization
within the meaning of Section 368(a) of the Code;
WHEREAS, the Investment Trust and the Pyramid Trust are each registered
open-end management investment companies, and the Acquired Fund owns securities
that generally are assets of the character in which the Acquiring Fund is
permitted to invest;
WHEREAS, the Acquiring Fund is authorized to issue shares of beneficial
interest;
WHEREAS, the Board of Trustees of Pyramid Trust has determined that the
exchange of all of the assets and certain liabilities of the Acquired Fund for
shares of the Acquiring Fund is in the best interests of the Acquired Fund
shareholders and that the interests of the existing shareholders of the Acquired
Fund would not be diluted as a result of this transaction;
WHEREAS, the Board of Trustees of Investment Trust has determined that the
exchange of all of the assets of the Acquired Fund for shares of the Acquiring
Fund and the assumption by the Acquiring Fund of certain of the liabilities of
the Acquired Fund is in the best interests of the Acquiring Fund shareholders
and that the interests of the existing shareholders of the Acquiring Fund would
not be diluted as a result of this transaction.
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR INSTITUTIONAL CLASS
SHARES OF THE ACQUIRING FUND AND ASSUMPTION OF THE ACQUIRED FUND'S
SCHEDULED LIABILITIES AND LIQUIDATION AND TERMINATION OF THE ACQUIRED FUND.
1.1. Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein, the Acquired Fund agrees
to transfer its assets to the Acquiring Fund as set forth in paragraph 1.2 free
and clear of all liens and encumbrances, and the Acquiring Fund agrees in
exchange therefor: (i) to issue and deliver to the Acquired Fund the number of
Acquiring Fund Shares, including fractional Acquiring Fund Shares, determined by
dividing the value of the net assets of the Acquired Fund transferred to the
Acquiring Fund, computed in the manner and as of the time and date set forth in
paragraph 2.1, by the net asset value of one Acquiring Fund Share, computed in
the manner as of the time and date set forth in paragraph 2.2; and (ii) to
assume certain scheduled liabilities of the
<PAGE>
Acquired Fund, as set forth in paragraph 1.3. Such transactions shall take place
at the closing provided for in paragraph 3.1 (the "Closing").
1.2. (a) The assets of the Acquired Fund to be acquired by the Acquiring
Fund shall consist of all of the property of the Acquired Fund, including,
without limitation, all good will, all interests in the name of the Acquired
Fund, all other intangible property and all books and records of the Acquired
Fund.
(b) The Acquired Fund has provided the Acquiring Fund with a list of
all of the Acquired Fund's assets as of the date of execution of this Agreement.
The Acquired Fund reserves the right to sell any of these securities (in the
ordinary course of its business, except to the extent sales may be limited by
representations made in connection with the issuance of the tax opinion
described in paragraph 7.6 hereof ) but will not, without the prior approval of
the Acquiring Fund, acquire any additional securities other than securities of
the type in which the Acquiring Fund is permitted to invest.
1.3. The Acquired Fund will endeavor to discharge all the Acquired Fund's
known liabilities and obligations prior to the Closing Date. The Acquiring Fund
shall assume all liabilities, expenses, costs, charges and reserves reflected on
an unaudited Statement of Assets and Liabilities of the Acquired Fund prepared
by Bankers Trust Company, as administrator of the Acquired Fund, as of the
Valuation Date, in accordance with generally accepted accounting principles
consistently applied from the prior audited period. The Acquiring Fund shall
assume only those liabilities of the Acquired Fund reflected in that unaudited
Statement of Assets and Liabilities and shall not assume any other liabilities,
whether absolute or contingent, not reflected thereon.
1.4. On the Closing Date or as soon thereafter as is conveniently
practicable (the "Liquidation Date"), the Acquired Fund will liquidate and
distribute pro rata to the Acquired Fund's shareholders of record determined as
of the close of business on the Closing Date (the "Acquired Fund Shareholders"),
the Acquiring Fund Shares it receives pursuant to paragraph 1.1. Such
liquidation and distribution will be accomplished by the transfer of the
Acquiring Fund Shares then credited to the account of the Acquired Fund on the
books of the Acquiring Fund to names of the shareholders of the Acquired Fund
and representing the respective pro rata number of the Acquiring Fund Shares due
such shareholders. All issued and outstanding shares of the Acquired Fund will
simultaneously be cancelled on the books of the Acquired Fund, although share
certificates, if any, representing interests in the shares of the Acquired Fund
will represent a number of Acquiring Fund Shares after the Closing Date as
determined in accordance with paragraph 1.1. The Acquiring Fund shall not issue
certificates representing the Acquiring Fund Shares in connection with such
exchange.
1.5. Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund's transfer agent. The Acquiring Fund Shares will be issued in
the manner described in the Acquiring Fund's current prospectus and statement of
additional information.
1.6. Any transfer taxes payable upon issuance of the Acquiring Fund Shares
in a name other than the registered holder of the Acquired Fund shares on the
books of the Acquired Fund as of that time shall, as a condition of such
issuance and transfer, be paid by the person to whom such Acquiring Fund Shares
are to be issued and transferred.
1.7. Any reporting responsibility of the Acquired Fund is and shall remain
the responsibility of the Acquired Fund up to and including the Closing Date and
such later date on which the Acquired Fund is terminated.
1.8. Acquired Fund shall, following the Closing Date and the making of
all distributions pursuant to paragraph 1.4, be terminated under the laws of the
Commonwealth of Massachusetts and in accordance with its governing documents.
2. VALUATION
2.1. The value of the assets of the Acquired Fund to be transferred, and
liabilities of the Acquired Fund to be assumed, hereunder shall be the value of
such assets computed as of the close of regular trading on The New York Stock
Exchange, Inc. (the "NYSE") on the Closing Date (such time and date being
hereinafter called the "Valuation Date"), using the valuation procedures set
forth in the then current prospectus or statement of additional information of
the Acquiring Fund.
<PAGE>
2.2. The net asset value of the Acquiring Fund Shares shall be the value
computed as of the close of regular trading on the NYSE on the Valuation Date,
using the valuation procedures set forth in the then current prospectus or
statement of additional information of the Acquiring Fund.
2.3. All computations of value shall be made by Bankers Trust Company
("Bankers Trust") in accordance with its regular practice as pricing agent for
the Acquiring Fund.
3. CLOSING AND CLOSING DATE
3.1. The Closing Date shall be ____________ 2000, or such later date as the
parties may agree to in writing. All acts taking place at the Closing shall be
deemed to take place simultaneously as of the close of business on the Closing
Date unless otherwise provided. The Closing shall be held as of 5:00 p.m. at
the offices of Deutsche Asset Management, One South Street, Baltimore, Maryland
21202, or at such other time and/or place as the parties may agree.
3.2. The custodian for the Acquired Fund (the "Custodian") shall deliver at
the Closing a certificate of an authorized officer stating that: (a) the
Acquired Fund's assets have been delivered in proper form to the Acquiring Fund
on the Closing Date and (b) all necessary transfer taxes including all
applicable federal and state stock transfer stamps, if any, shall have been
paid, or provision for payment shall have been made, in conjunction with the
delivery of portfolio securities.
3.3. In the event that on the Valuation Date (a) the NYSE or another
primary trading market for portfolio securities of the Investment Trust or the
Pyramid Trust shall be closed to trading or trading thereon shall be restricted
or (b) trading or the reporting of trading on the NYSE or elsewhere shall be
disrupted so that accurate appraisal of the value of the net assets of the
parties hereto is impracticable, the Closing Date shall be postponed until the
first business day after the day when trading shall have been fully resumed and
reporting shall have been restored.
3.4. The Acquired Fund shall deliver to the Acquiring Fund at the Closing a
list of the names, addresses, taxpayer identification numbers and backup
withholding and nonresident alien withholding status of the Acquired Fund
Shareholders and the number and percentage ownership of outstanding full and
fractional shares owned by each such shareholder immediately prior to the
Closing, certified on behalf of the Acquired Fund by the President or a Vice
President of the Pyramid Trust. The Acquiring Fund shall issue and deliver a
confirmation evidencing the Acquiring Fund Shares to be credited to the Acquired
Fund's account on the Closing Date to the Secretary of the Pyramid Trust on
behalf of the Acquired Fund, or provide evidence satisfactory to the Acquired
Fund that such Acquiring Fund Shares have been credited to the Acquired Fund's
account on the books of the Acquiring Fund. At the Closing, each party shall
deliver to the other such bills of sale, checks, assignments, share
certificates, if any, receipts or other documents as such other party or its
counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES
4.1. The Pyramid Trust and the Acquired Fund represent and warrant to the
Investment Trust and the Acquiring Fund as follows:
(a) The Acquired Fund is a series of the Pyramid Trust, which is a business
trust, validly existing and in good standing under the laws of the Commonwealth
of Massachusetts and has the power to own all of its properties and assets and,
subject to approval by the shareholders of the Acquired Fund, to perform its
obligations under this Agreement. The Acquired Fund is not required to qualify
to do business in any jurisdiction in which it is not so qualified or where
failure to qualify would subject it to any material liability or disability. The
Acquired Fund has all necessary federal, state and local authorizations to own
all of its properties and assets and to carry on its business as now being
conducted;
(b) The Pyramid Trust is a registered open-end investment management
company, and its registration with the Securities and Exchange Commission (the
"Commission") as an investment company under the Investment Company Act of 1940,
as amended (the "1940 Act"), is in full force and effect;
(c) The Pyramid Trust is not, and the execution, delivery and performance
of this Agreement with respect to the Acquired Fund will not result, in a
material violation of its Declaration of Trust or By-laws or of any agreement,
indenture, instrument, contract, lease or other undertaking with respect to the
Acquired Fund to which the Pyramid Trust is a party or by which it is bound;
<PAGE>
(d) The Pyramid Trust has no material contracts or other commitments (other
than this Agreement) with respect to the Acquired Fund which will be terminated
with liability to the Pyramid Trust or to the Acquired Fund prior to the Closing
Date;
(e) No material litigation or administrative proceeding or investigation of
the same, before any court or governmental body, is presently pending or, to the
best of its knowledge, threatened against the Pyramid Trust with respect to the
Acquired Fund or any of the Acquired Fund's properties or assets, except as
previously disclosed in writing to, and acknowledged in writing by, the
Acquiring Fund. The Pyramid Trust and the Acquired Fund know of no facts which
might form the basis for the institution of such proceedings and neither the
Pyramid Trust nor the Acquired Fund is a party to or subject to the provisions
of any order, decree or judgment of any court or governmental body which
materially and adversely affects the Acquired Fund's business or the Pyramid
Trust's ability to consummate the transactions herein contemplated;
(f) The Statement of Assets and Liabilities of the Acquired Fund as of
September 30, 1999, has been audited by PricewaterhouseCoopers LLP, independent
accountants, and is in accordance with generally accepted accounting principles
consistently applied, and such statement (copies of which have been furnished to
each of the other parties hereto) fairly reflects the financial condition of the
Acquired Fund as of such date, and there are no known contingent liabilities of
the Acquired Fund as of such date not disclosed therein;
(g) Since September 30, 1999, there has not been any material adverse
change in the Acquired Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business, or any
incurrence by the Acquired Fund of indebtedness maturing more than one year from
the date that such indebtedness was incurred, except as otherwise disclosed to
and accepted by each of the other parties hereto. For the purposes of this
subparagraph (g), a decline in net asset value per share of the Acquired Fund
shall not constitute a material adverse change;
(h) At the Closing Date, all federal and other tax returns and reports of
the Acquired Fund required by law then to have been filed by such dates shall
have been filed, and all federal and other taxes shown as due on such returns
and reports shall have been paid so far as due, or provision shall have been
made for the payment thereof and, to the best of the Acquired Fund's knowledge,
no such return is currently under audit and no assessment has been asserted with
respect to such returns;
(i) For each taxable year of its operation, the Acquired Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as a
regulated investment company and has elected to be treated as such and will
qualify as such for its final taxable year ending on the Closing Date;
(j) For each taxable year of its operation, the Acquired Fund has met the
requirement of Section 851(g) of the Code for qualification and treatment as a
separate corporation and will qualify and be treated as such for its final
taxable year ending on the Closing Date;
(k) All issued and outstanding shares of the Acquired Fund are, and at the
Closing Date will be, duly and validly issued and outstanding, fully paid and
non-assessable. All of the issued and outstanding shares of the Acquired Fund
will, at the time of Closing, be held by the persons and in the amounts set
forth in the records of the transfer agent as provided in paragraph 3.4. The
Acquired Fund does not have outstanding any options, warrants or other rights to
subscribe for or purchase any shares of the Acquired Fund, nor is there
outstanding any security convertible into any shares of the Acquired Fund;
(l) At the Closing Date, the Pyramid Trust with respect to the Acquired
Fund, will have good and marketable title to the assets to be transferred to the
Acquiring Fund pursuant to paragraph 1.1 and full right, power and authority to
sell, assign, transfer and deliver such assets hereunder and, upon delivery and
payment for such assets, the Acquiring Fund will acquire good and marketable
title thereto, subject to no restrictions on the full transfer thereof,
including such restrictions as might arise under the Securities Act of 1933, as
amended (the "1933 Act"), other than as disclosed in writing to, and
acknowledged in writing by, the Acquiring Fund;
(m) The execution, delivery and performance of this Agreement has been duly
authorized by all necessary action on the part of the Pyramid Trust's Board of
Trustees on behalf of the Acquired Fund, and, subject to the approval of the
Acquired Fund shareholders, assuming due authorization, execution
<PAGE>
and delivery by the Investment Trust on behalf of the Acquiring Fund, this
Agreement will constitute a valid and binding obligation of the Pyramid Trust
with respect to the Acquired Fund, enforceable in accordance with its terms,
subject as to enforcement, to bankruptcy, insolvency, reorganization, moratorium
and other laws relating to or affecting creditors' rights and to general equity
principles;
(n) The information to be furnished by the Pyramid Trust on behalf of the
Acquired Fund for use in no-action letters, applications for exemptive orders,
registration statements, proxy materials and other documents which may be
necessary in connection with the transactions contemplated hereby shall be
accurate and complete in all material respects and shall comply in all material
respects with federal securities and other laws and regulations thereunder
applicable thereto;
(o) The proxy statement of the Acquired Fund (the "Proxy Statement") to be
included in the registration statement on Form N-14 of the Acquiring Fund (the
"Registration Statement") (other than information therein that relates to the
Acquiring Fund and supplied in writing by the Acquiring Fund for inclusion
therein) will, on the effective date of the Registration Statement and on the
Closing Date, not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not materially misleading;
(p) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the Pyramid Trust on
behalf of the Acquired Fund of the transactions contemplated by this Agreement;
(q) All of the issued and outstanding shares of beneficial interest of the
Acquired Fund have been offered for sale and sold in conformity with all
applicable federal and state securities laws, except as may have been previously
disclosed in writing to the Acquiring Fund; and
(r) The prospectus of the Acquired Fund dated January 31, 2000, and any
amendments or supplements thereto, previously furnished to the Acquiring Fund,
does not contain any untrue statements of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which such statements were made,
not materially misleading.
4.2. The Investment Trust and the Acquiring Fund represent and warrant to
Pyramid Trust and the Acquired Fund as follows:
(a) The Acquiring Fund is a series of the Investment Trust, which is a
business trust, validly existing and in good standing under the laws of The
Commonwealth of Massachusetts and has the power to own all of its properties and
assets and to perform its obligations under this Agreement. The Acquiring Fund
is not required to qualify to do business in any jurisdiction in which it is not
so qualified or where failure to qualify would subject it to any material
liability or disability. The Acquiring Fund has all necessary federal, state and
local authorizations to own all of its properties and assets and to carry on its
business as now being conducted;
(b) The Investment Trust is a registered open-end investment management
company, and its registration with the Commission as an investment company under
the 1940 Act is in full force and effect;
(c) The current prospectus of and statement of additional information of
the Investment Trust on behalf of the Acquiring Fund conform in all material
respects to the applicable requirements of the 1933 Act and the 1940 Act and the
rules and regulations of the Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not materially misleading;
(d) The Investment Trust has, and at the Closing Date will have, good and
marketable title to the Acquiring Fund's assets;
(e) The Investment Trust is not, and the execution, delivery and
performance of this Agreement on behalf of the Acquiring Fund will not result,
in a material violation of its Declaration of Trust or By-laws or of any
agreement, indenture, instrument, contract, lease, or other undertaking with
respect to the Acquiring Fund to which the Investment Trust is a party or by
which it is bound;
<PAGE>
(f) No material litigation or administrative proceeding or investigation of
the same, before any court or governmental body, is presently pending or, to the
best of its knowledge, threatened against the Investment Trust with respect to
the Acquiring Fund or any of the Acquiring Fund's properties or assets, except
as previously disclosed in writing to, and acknowledged in writing by, the
Acquired Fund. The Investment Trust and the Acquiring Fund know of no facts
which might form the basis for the institution of such proceedings and neither
the Investment Trust nor the Acquiring Fund is a party to or subject to the
provisions of any order, decree or judgment of any court or governmental body
which materially and adversely affects the Acquiring Fund's business or the
Investment Trust's ability on behalf of the Acquiring Fund to consummate the
transactions contemplated herein;
(g) The Statement of Assets and Liabilities of the Acquiring Fund as of
September 30, 1999 has been audited by PricewaterhouseCoopers LLP, independent
accountants, and is in accordance with generally accepted accounting principles
consistently applied, and such statement (copies of which have been furnished to
each of the other parties hereto) fairly reflects the financial condition of the
Acquiring Fund as of such date, and there are no known contingent liabilities of
the Acquiring Fund as of such date not disclosed therein;
(h) Since September 30, 1999, there has not been any material adverse
change in the Acquiring Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business, or any
incurrence by the Acquiring Fund of indebtedness maturing more than one year
from the date that such indebtedness was incurred, except as otherwise disclosed
to and accepted by the Acquired Fund. For the purposes of this subparagraph (h),
a decline in net asset value per share of the Acquiring Fund shall not
constitute a material adverse change;
(i) At the Closing Date, all federal and other tax returns and reports of
the Acquiring Fund required by law then to have been filed by such dates shall
have been filed, and all federal and other taxes shown as due on said returns
and reports shall have been paid so far as due, or provision shall have been
made for the payment thereof and, to the best of the Acquiring Fund's knowledge,
no such return is currently under audit and no assessment has been asserted with
respect to such returns;
(j) For each taxable year of its operations, the Acquiring Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as a
regulated investment company and has elected to be treated as such and will
qualify as such on the Closing Date;
(k) For each taxable year of its operation, the Acquiring Fund has met
the requirements of Section 851(g) of the Code for qualification and treatment
as a separate corporation and will qualify and be treated as such on the Closing
Date;
(l) At the date hereof, all issued and outstanding shares of the Acquiring
Fund are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or purchase
any shares of the Acquiring Fund, nor is there outstanding any security
convertible into shares of the Acquiring Fund;
(m) The execution, delivery and performance of this Agreement has been duly
authorized by all necessary action, if any, on the part of the Investment
Trust's Board of Trustees on behalf of the Acquiring Fund, and, assuming due
authorization, execution and delivery by the Pyramid Trust on behalf of the
Acquired Fund, this Agreement will constitute a valid and binding obligation of
the Investment Trust on behalf of the Acquiring Fund, enforceable in accordance
with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights and to general equity principles;
(n) The Acquiring Fund Shares to be issued and delivered to the Acquired
Fund, for the account of the Acquired Fund shareholders, pursuant to the terms
of this Agreement, will at the Closing Date have been duly authorized and, when
so issued and delivered, will be duly and validly issued Acquiring Fund Shares
and will be fully paid and non-assessable;
(o) The information to be furnished by the Acquiring Fund for use in no-
action letters, applications for exemptive orders, registration statements,
proxy materials and other documents which may be necessary in connection with
the transactions contemplated hereby shall be accurate and complete
<PAGE>
in all material respects and shall comply in all material respects with federal
securities and other laws and regulations applicable thereto;
(p) The information contained in the Proxy Statement and in the
Registration Statement (other than information therein that relates to the
Acquired Fund and supplied in writing by the Acquired Fund for inclusion
therein) will, on the effective date of the Registration Statement and on the
Closing Date, not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not materially misleading; and
(q) The Investment Trust, on behalf of the Acquiring Fund, agrees to use
all reasonable efforts to obtain the approvals and authorizations required by
the 1933 Act, the 1940 Act and such of the state Blue Sky or securities laws as
it may deem appropriate in order to continue the Acquiring Fund's operations
after the Closing Date.
5. COVENANTS OF EACH OF THE PARTIES
5.1. The Pyramid Trust, on behalf of the Acquired Fund, will operate its
business in the ordinary course between the date hereof and the Closing Date. It
is understood that such ordinary course of business will include the declaration
and payment of customary dividends and distributions and any other dividends and
distributions necessary or advisable (except to the extent distributions that
are not customary may be limited by representations made in connection with the
issuance of the tax opinion described in paragraph 7.6 hereof), in each case
payable either in cash or in additional shares.
5.2. The Investment Trust, on behalf of the Acquiring Fund, will operate
its business in the ordinary course between the date hereof and the Closing
Date. It is understood that such ordinary course of business will include the
declaration and payment of customary dividends and distributions and any other
dividends and distributions necessary or advisable, in each case payable either
in cash or in additional shares.
5.3. The Pyramid Trust will call a meeting of the Acquired Fund's
shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated herein.
5.4. The Acquired Fund covenants that the Acquiring Fund Shares to be
issued hereunder are not being acquired for the purpose of making any
distribution thereof other than in accordance with the terms of this Agreement.
5.5. The Acquired Fund will assist the Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requests concerning the beneficial
ownership of the Acquired Fund's shares.
5.6. Subject to the provisions of this Agreement, the Pyramid Trust, on
behalf of the Acquired Fund, and the Investment Trust, on behalf of the
Acquiring Fund, each will take, or cause to be taken, all action, and do or
cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.
5.7. The Acquired Fund shall furnish to the Acquiring Fund on the Closing
Date the Statement of Assets and Liabilities of the Acquired Fund as of the
Closing Date, which statement shall be prepared in accordance with generally
accepted accounting principles consistently applied and shall be certified by
the Pyramid Trust's Treasurer or Assistant Treasurer. As promptly as
practicable, but in any case within 60 days after the Closing Date, the Acquired
Fund shall furnish to the Acquiring Fund, in such form as is reasonably
satisfactory to the Acquiring Fund, a statement of the earnings and profits of
the Acquired Fund for federal income tax purposes, and of any capital loss
carryovers and other items that will be carried over to the Acquiring Fund as a
result of Section 381 of the Code, and which statement will be certified by the
Treasurer of the Pyramid Trust.
5.8. The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus"),
which will include the Proxy Statement referred to in paragraph 4.1(n), all to
be included in the Registration Statement, in compliance with the 1933 Act, the
Securities Exchange Act of 1934 (the "1934 Act"), and the 1940 Act in connection
with the meeting of the Acquired Fund's shareholders to consider approval of
this Agreement and the transactions contemplated herein.
<PAGE>
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND AND THE ACQUIRING
FUND (collectively, the "MERGING FUNDS" and individually, the "MERGING
FUND")
The obligations of the Merging Funds to consummate the transactions
provided for herein shall be subject, at their election, to the performance by
each of the Merging Funds of all of the obligations to be performed by them
hereunder on or before the Closing Date and, in addition thereto, the following
further conditions:
6.1. All representations and warranties made in this Agreement by or on
behalf of the Merging Funds shall be true and correct in all material respects
as of the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date;
6.2. The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets and liabilities showing the federal tax
basis and holding periods as of the Closing Date, certified by Pyramid Trust's
Treasurer or Assistant Treasurer on behalf of the Acquired Fund; and
6.3. Pyramid Trust on behalf of the Acquired Fund and Investment Trust on
behalf of the Acquiring Fund shall have delivered to the Acquiring Fund and the
Acquired Fund, respectively, on the Closing Date a certificate executed in its
name by its President or Vice President and Treasurer or Assistant Treasurer, in
form and substance satisfactory to the respective Merging Funds and dated as of
the Closing Date, to the effect that the representations and warranties made in
this Agreement by or on behalf of each Merging Fund are true and correct at and
as of the Closing Date, except as they may be affected by the transactions
contemplated by this Agreement.
7. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH OF THE PARTIES
If any of the conditions set forth below do not exist on or before the Closing
Date with respect to either party hereto, the other party to this Agreement
shall, at its option, not be required to consummate the transactions
contemplated by this Agreement:
7.1. This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
the Acquired Fund in accordance with the provisions of the Pyramid Trust's
Declaration of Trust and By-laws and certified copies of the votes evidencing
such approval shall have been delivered to the Acquiring Fund. Notwithstanding
anything herein to the contrary, no party hereto may waive the conditions set
forth in this paragraph 7.1;
7.2. On the Closing Date, no action, suit or other proceeding shall be
pending or threatened before any court or governmental agency in which it is
sought to restrain or prohibit, or obtain damages or other relief in connection
with, this Agreement or the transactions contemplated herein;
7.3. All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky and securities authorities, including "no-
action" positions of and exemptive orders from such federal and state
authorities) deemed necessary by either party hereto to permit consummation, in
all material respects, of the transactions contemplated hereby shall have been
obtained, except where failure to obtain any such consent, order or permit would
not involve a risk of a material adverse effect on the assets or properties of
any party hereto, provided that any party may for itself waive any of such
conditions;
7.4. The Registration Statement shall have become effective under the 1933
Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending, threatened
or contemplated under the 1933 Act;
7.5. The Acquired Fund shall have distributed to its shareholders all of
its investment company taxable income, as defined in Section 852(b)(2) of the
Code (prior to reduction by any dividends paid deduction), and all of its net
capital gain, as such term is used in Section 852(b)(3)(C) of the Code, after
reduction by any capital loss carryforward, and all of the excess of (1) its
interest income excludable
<PAGE>
from gross income under Section 103(a) of the Code over (2) the deductions
disallowed under Sections 265 and 171(a)(2) of the Code, in each case for its
taxable year ending on the Closing Date.
7.6. The parties shall have received a favorable opinion of Willkie Farr &
Gallagher, addressed to the Investment Trust and the Pyramid Trust with respect
to the relevant Merging Fund and satisfactory to Daniel O. Hirsch, as Secretary
of the Merging Funds, substantially to the effect that for federal income tax
purposes:
(a) The acquisition by the Acquiring Fund of all of the assets of the
Acquired Fund solely in exchange for the issuance of Acquiring Fund Shares
to the Acquired Fund and the assumption of certain scheduled Acquired Fund
liabilities by the Acquiring Fund, followed by the distribution by the
Acquired Fund, in liquidation of the Acquired Fund, of Acquiring Fund
Shares to the shareholders of the Acquired Fund in exchange for their
Acquired Fund shares of beneficial interest and the termination of the
Acquired Fund, will constitute a reorganization within the meaning of
Section 368(a)(1) of the Code, and the Acquired Fund and the Acquiring Fund
will each be "a party to a reorganization" within the meaning of Section
368(b) of the Code;
(b) No gain or loss will be recognized by the Acquired Fund upon (i)
the transfer of all of its assets to the Acquiring Fund solely in exchange
for the issuance of Acquiring Fund Shares to the Acquired Fund and the
assumption of certain scheduled Acquired Fund liabilities by the Acquiring
Fund and (ii) the distribution by the Acquired Fund of such Acquiring Fund
Shares to the shareholders of the Acquired Fund;
(c) No gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of the Acquired Fund solely in exchange for the
issuance of Acquiring Fund Shares to the Acquired Fund and the assumption
of certain scheduled Acquired Fund liabilities by the Acquiring Fund;
<PAGE>
(d) The basis of the assets of the Acquired Fund acquired by the
Acquiring Fund will be, in each instance, the same as the basis of those
assets in the hands of the Acquired Fund immediately prior to the transfer;
(e) The tax holding period of the assets of the Acquired Fund in the
hands of the Acquiring Fund will, in each instance, include Acquired Fund's
tax holding period for those assets;
(f) The shareholders of the Acquired Fund will not recognize gain or
loss upon the exchange of all of their shares of beneficial interest of the
Acquired Fund solely for Acquiring Fund Shares as part of the transaction;
(g) The basis of the Acquiring Fund Shares received by the Acquired
Fund shareholders in the transaction will be the same as the basis of the
shares of beneficial interest of the Acquired Fund surrendered in exchange
therefor;
(h) The tax holding period of Acquiring Fund Shares received by the
Acquired Fund shareholders will include, for each shareholder, the tax
holding period for the shares of beneficial interest of the Acquired Fund
surrendered in exchange therefor, provided that such Acquired Fund shares
were held as capital assets on the date of the exchange;
(i) No gain or loss will be recognized by the Acquiring Fund upon its
contribution of the assets of the Acquired Fund to the Capital Appreciation
Portfolio solely in exchange for an interest in the Capital Appreciation
Portfolio;
(j) No gain or loss will be recognized by the Capital Appreciation
Portfolio upon the contribution by the Acquiring Fund of the assets of the
Acquired Fund to the Capital Appreciation Portfolio solely in exchange for
an interest in the Capital Appreciation Portfolio;
(k) The basis of the Capital Appreciation Portfolio in the assets of
the Acquired Fund contributed to the Capital Appreciation Portfolio by the
Acquiring Fund will be, in each instance, the same as the basis of those
assets in the hands of the Acquiring Fund immediately prior to such
contribution;
(l) The tax holding period of the Capital Appreciation Portfolio with
respect to the assets of the Acquired Fund contributed by the Acquiring
Fund to the Capital Appreciation Portfolio will, in each instance, include
the Acquired Fund's and the Acquiring Fund's tax holding periods for such
assets;
(m) The basis of the interest in the Capital Appreciation Portfolio
acquired by the Acquiring Fund as a result of its contribution to the
Capital Appreciation Portfolio of the assets of the Acquired Fund will be
the same as the Acquiring Fund's basis in such assets; and
(n) The tax holding period of the Acquiring Fund with respect to its
interest in the Capital Appreciation Portfolio will include the Acquired
Fund's and the Acquiring Fund's tax holding periods for the assets of the
Acquired Fund contributed to the Capital Appreciation Portfolio by the
Acquiring Fund.
Notwithstanding anything herein to the contrary, no party hereto may waive in
any material respect the conditions set forth in this paragraph 7.6.
7.7 Each of the Acquiring Fund and the Acquired Fund agrees to make and
provide representations with respect to itself that are reasonably necessary to
enable Willkie Farr & Gallagher to deliver an opinion substantially as set forth
in paragraph 7.6.
8. BROKERAGE FEES AND EXPENSES
8.1. Each party hereto represents and warrants to each other party hereto,
that there are no brokers or finders entitled to receive any payments in
connection with the transactions provided for herein.
8.2. Shareholders of each of Acquired Fund and Acquiring Fund will bear
their respective expenses, if any, incurred in connection with the transactions.
9. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
<PAGE>
9.1. The parties hereto agree that no party has made any representation,
warranty or covenant not set forth herein or referred to in paragraphs 4.1 and
4.2 and 5.1 through 5.8 hereof and that this Agreement constitutes the entire
agreement between the parties.
9.2. The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated hereunder.
10. TERMINATION
10.1. This Agreement may be terminated at any time prior to the Closing
Date by: (i) the mutual agreement of the Pyramid Trust on behalf of the
Acquired Fund and the Investment Trust on behalf of the Acquiring Fund; (ii)
any party hereto in the event that the other party hereto shall materially
breach any representation, warranty or agreement contained herein to be
performed at or prior to the Closing Date; or (iii) a condition herein expressed
to be precedent to the obligations of the terminating party has not been met and
it reasonably appears that it will not or cannot be met. 10.2. In the event of
any such termination, there shall be no liability for damages on the part of any
party hereto or their respective Trustees or officers to any other party, but
each shall bear the expenses incurred by it incidental to the preparation and
carrying out of this Agreement.
11. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as may be
mutually agreed upon in writing by the authorized officers of the Pyramid Trust
on behalf of the Acquired Fund and the Investment Trust on behalf of the
Acquiring Fund; provided, however, that following the meeting of the Acquired
Fund shareholders called by the Pyramid Trust pursuant to paragraph 5.3 of this
Agreement, no such amendment may have the effect of changing the provisions for
determining the number of the Acquiring Fund Shares to be issued to the Acquired
Fund shareholders under this Agreement to the detriment of such shareholders
without their further approval.
12. NOTICES
Any notice, report, statement or demand required or permitted by any provisions
of this Agreement shall be in writing and shall be given by prepaid telegraph,
telecopy or certified mail addressed to the Pyramid Trust on behalf of the
Acquired Fund and the Investment Trust on behalf of the Acquiring Fund at One
South Street, Baltimore, MD 21202.
13. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY
13.1. The article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.2. This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
13.3. This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts.
13.4. This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other parties hereto. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm, corporation or other entity, other than the parties hereto and
their respective successors and assigns, any rights or remedies under or by
reason of this Agreement.
13.5. It is expressly agreed that the obligations of the Investment Trust
and the Pyramid Trust shall not be binding upon any of their respective
Trustees, shareholders, nominees, officers, agents or employees personally, but
shall bind only the trust property of the Investment Trust or the Pyramid Trust,
as the case may be, as provided in the trust instruments of the Investment Trust
and the Pyramid Trust, respectively. The execution and delivery of this
Agreement have been authorized by the Trustees of
<PAGE>
each of the Investment Trust and the Pyramid Trust, and this Agreement has been
executed by authorized officers of the Investment Trust and the Pyramid Trust on
behalf of the Acquired Fund and the Acquiring Fund, respectively, acting as
such, and neither such authorization by such Trustees nor such execution and
delivery by such officers shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but shall
bind only the trust property of the Investment Trust and the Pyramid Trust, as
the case may be, as provided in the Declaration of Trust of the Investment Trust
and the Pyramid Trust, respectively.
WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed by its President or Vice President and attested by its Secretary or
Assistant Secretary.
Attest: BT INVESTMENT FUNDS on behalf of
MID CAP
By: _______________________ By: _______________________________
Name: Daniel O. Hirsch Name: John Y. Keffer
Title: Secretary Title: President
Attest: BT PYRAMID FUNDS on behalf of
EQUITY APPRECIATION
By:________________________ By: _______________________________
Name: Daniel O. Hirsch Name: John Y. Keffer
Title: Secretary Title: President
<PAGE>
EXHIBIT B
September 30, 1999
BT Mutual Funds
Capital Appreciation Fund
Annual Report
TRUST: BT INVESTMENT FUNDS
INVESTMENT ADVISOR: BANKERS TRUST COMPANY
- - -------------------------------------------------------------------------------
Capital Appreciation Fund
Table of Contents
- - -------------------------------------------------------------------------------
Letter to Shareholders .................................................. 3
Capital Appreciation Fund
Statement of Assets and Liabilities .................................... 6
Statement of Operations ................................................ 6
Statements of Changes in Net Assets .................................... 7
Financial Highlights ................................................... 7
Notes to Financial Statements .......................................... 8
Report of Independent Accountants ...................................... 9
Tax Information ........................................................ 9
Capital Appreciation Portfolio
Schedule of Portfolio Investments ... .................................. 10
Statement of Assets and Liabilities .................................... 12
Statement of Operations ................................................ 12
Statements of Changes in Net Assets .................................... 13
Financial Highlights ................................................... 13
Notes to Financial Statements .......................................... 14
Report of Independent Accountants ...................................... 15
Proxy Results ........................................................... 16
-------------------
The Fund is not insured by the FDIC and is not a deposit, obligation of or
guaranteed byBankers Trust Company. The Fund is subject to investment risks,
including possible loss of principal amount invested.
-------------------
- - --------------------------------------------------------------------------------
Page 1
<PAGE>
2
- - -------------------------------------------------------------------------------
Capital Appreciation Fund
Letter to Shareholders
- - -------------------------------------------------------------------------------
We are pleased to present you with this annual report for the Capital
Appreciation Fund (the "Fund"), providing a review of the markets, the
Portfolio, and our outlook as well as a complete financial summary of the Fund's
operations and a listing of the Portfolio's holdings.
MARKET ACTIVITY
Mid capitalization growth stocks experienced significant volatility throughout
the twelve months ended September 30, 1999. Mid cap relative performance also
diverged rather dramatically from the first half of this fiscal year to the
second. For the first half, equities in general were strong, but the mid cap
sector lagged the S&P 500 Index, as concerns over both foreign and domestic
economies kept investor preference toward large-capitalization stocks. During
the second half of the fiscal year, equities in general produced lackluster
performance, and the mid cap sector, as measured by the S&P 400 Mid Cap Index,
returned 4.57%, far outperforming the S&P 500 return of 0.36% for the same six
months. While mid cap stocks still underperformed large caps for the fiscal
year, the mid cap sector did outperform small cap stocks for the twelve months.
The first half of the Fund's fiscal year began in October 1998 with a
continuation of the summer's sharp sell off in mid cap growth stocks as well as
in the broader equity markets, followed by an even more pronounced recovery
quickly thereafter.
. The U.S. stock markets reacted favorably to three Federal Reserve Board
easings in the fall of 1998, interest rate cuts in a number of other
countries, better coordination of international monetary policy, receding
concerns of a global credit crunch, positive earnings reports, and an ongoing
strong U.S. economy with low inflation and healthy consumer spending. This
market recovery was particularly apparent in the sharp improvement of
internet-related stocks.
. The mid cap market rally that began in mid-October continued into the first
quarter of 1999, only to become subject to fears and uncertainty again in
February. Ironically, a very positive economic and broader market environment
raised concerns that, at best, the Federal Reserve Board was on hold with
respect to interest rates and, perhaps, may act to raise rates at the first
sign of inflation.
. After the February sell-off, March witnessed a rebound in the mid cap equity
market once again, as subsequent economic reports pointed to a continuation of
economic growth with little or no evidence of inflation. Investors continued
to be attracted to companies and industries exhibiting strong growth trends,
such as those in the technology and internet sectors.
The second half of the Fund's fiscal year began with a sharp shift in investor
preference from larger, growth and technology-oriented names to smaller, value
and more economically cyclical stocks, following economic data indicating that
the worst of the Asian financial crisis was apparently over.
. The combination of expectations of improving fundamentals as well as low
valuations for long-ignored economically sensitive stocks, such as those in
the paper, chemical and steel industries, served to propel these value-
oriented stocks at the expense of larger company growth stocks during both
April and May.
- - --------------------------------------------------------------------------------
Page 2
<PAGE>
. This broadening of the stock market also included strong performance by
smaller and mid-sized companies as worries about world economies abated.
. Still, market volatility continued throughout the second calendar quarter, as
strong economic data led the Federal Reserve Board to officially shift in
mid-May from a neutral stance to a bias toward raising interest rates.
Additional economic data released throughout the quarter continued to show
robust U.S. economic growth with little sign of inflation.
. Investors began to believe that the Federal Reserve Board would raise rates
in a limited manner rather than make a series of increases, and equity
markets reflected this optimism toward the end of June with broad-based
strength.
. On June 30, the Federal Reserve Board did, in fact, increase the fed funds
rate by 0.25% and signaled it would be resuming its neutral stance.
The third calendar quarter witnessed weakness across all U.S. equity sectors on
renewed fears of further interest rate increases.
. Economic data pointed to a still robust U.S. economy, a slight uptick in the
rate of wage growth, and stronger global economic growth in Europe, Asia, and
even Japan.
. Financial markets grew concerned that synchronized global growth would lead
to inflation.
. Against this backdrop, the Federal Reserve Board raised the fed funds rate by
another 0.25% on August 24.
. In September, the U.S. equity markets continued to be volatile and nervous,
as the U.S. economy remained vibrant and economic momentum continued to build
around the world.
Throughout the annual period, mid cap companies exhibited strong earnings
growth, positive fundamentals, and attractive relative valuations. In fact, mid
cap relative valuations as compared to large cap stocks were, as of September
30, 1999, still at multi-decade lows.
INVESTMENT REVIEW
The Fund significantly outperformed its benchmark for the twelve month period,
particularly well worth noting given the extremely high volatility in the mid
cap equity market during this annual period. Specific stock selection and sector
positioning bolstered Fund performance.
For example, in the fourth quarter of 1998, the Fund was overweight in the best
performing sector, i.e. technology, and underweight in the worst performing
sector, i.e. energy. In the first quarter of 1999, the Fund held an overweight
position in two of the top four performing sectors-communications services and
technology. Also benefiting performance were underweight positions in the three
poorest performing sectors for the first quarter-capital goods, utilities, and
basic materials.
The Fund's relative performance was impacted negatively by investors' sharp
shift from growth to value stocks in April and May. More specifically, the
Fund's overweight positions in technology and energy helped during the second
quarter of 1999, but its underweight positions in such top performing
value-oriented sectors as capital goods and basic materials detracted from Fund
3
- - -------------------------------------------------------------------------------
Capital Appreciation Fund
- - --------------------------------------------------------------------------------
Page 3
<PAGE>
Letter to Shareholders
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Periods ended September 30, 1999 Cumulative Total Returns Average Annual Total Returns
- - --------------------------------------------------------------------------------------------------------------
Past 1 Past 3 Past 5 Since Past 1 Past 3 Past 5 Since
year years years inception year years years inception
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Capital Appreciation Fund/1/
(inception 3/9/93) 47.05% 49.32% 140.50% 182.95% 47.05% 14.30% 19.19% 17.14%
- - --------------------------------------------------------------------------------------------------------------
S&P Midcap 400 Index/2/ 25.50% 63.56% 134.51% 154.92% 25.50% 17.82% 18.59% 15.27%
- - --------------------------------------------------------------------------------------------------------------
Lipper MidCap Growth Average/3/ 41.88% 74.11% 161.32% 107.71% 41.88% 19.93% 20.86% 17.06%
</TABLE>
performance. During the third calendar quarter, energy and technology, where the
Fund remained overweight, continued to outperform, as did the communications
services sector where the Fund is also overweight. In addition, the
value-oriented sectors that did well in the previous quarter now underperformed.
Thus the Fund's underweighting in these poorer performing sectors had a positive
effect.
MANAGER OUTLOOK
The U.S. continues to experience tight labor markets, although signs of
inflation remain scant. Internationally, few inflationary pressures are expected
due to the economic capacity that exists. Stronger economic growth abroad may
weigh on U.S. financial markets, as synchronized global growth raises the fear
of overheating in the U.S. However, we continue to believe that a cycle of
full-blown overheating in the U.S. economy is unlikely due to the slack still
remaining in overseas markets. We also expect the Federal Reserve Board to
remain vigilant on the inflation front.
Although we anticipate future periods of volatility in the marketplace while
global and domestic economic and political events run their course, we remain
optimistic regarding mid cap stocks in general. Mid cap fundamentals remain
solid, earnings growth healthy, and relative valuations attractive. We expect
strong third quarter earnings to be reported shortly and, to date, have seen a
relative scarcity of negative earnings preannouncements.
Given the recent high volatility in the stock market, it is also important to
keep in mind that we remain disciplined in our process, and we continue to:
. focus on companies that offer compelling valuations relative to their growth
rates
. focus on companies that have strong, consistent earnings and revenue growth
. use extensive fundamental research to identify attractive investment
opportunities in unrecognized growth companies and sectors
. strictly adhere to our sell discipline to help mitigate risk, and
. use the volatility of the marketplace to our investors' advantage by
initiating or adding to positions on weakness.
It is important to remember that investors should take a long-term view when
investing in this segment of the market, as returns can be volatile in the short
term.
We will continue to monitor economic conditions and their effect on financial
- - --------------------------------------------------------------------------------
Page 4
<PAGE>
markets as we seek capital growth over the long term.
#Capital Appreciation FundLetter to Shareholders
Mary P. Dugan, Audrey M. T. Jones, and John P. Callaghan
Portfolio Managers of the
Capital Appreciation Portfolio
September 30, 1999
1/Performance quoted represents past performance.
Investment return and principal value will fluctuate, so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
During the period the Fund waived certain fees and expenses. Had these fees
and expenses not been waived, the Fund's return would have been lower.
2/Indices are unmanaged, and investments cannot be made in an index. The S&P
MidCap 400 Index consists of 400 domestic stocks chosen for market size,
liquidity and industry group representation.
3/Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services, Inc. as falling
into the respective categories indicated. These figures do not reflect sales
charges.
4
- - -------------------------------------------------------------------------------
Capital Appreciation Fund
Letter to Shareholders
- - -------------------------------------------------------------------------------
Diversification of Portfolio Investments
By Theme as of September 30, 1999
(percentages are based on market value)
Telecommunications 6% Client Server Computing 7%
New Healthcare Paradigm 4% Managing the
Information Age 6%
Stores of Value 4% The Ubiquitous
Semiconductor
Energizing the 6%
Globe 8%
Our Strengthening
Financial Structure
4% Cash 11%
New Consumer 8%
Interactive
Media 5%
America's Changing
Leisure Time 11% Special Situations 9%
Miscellaneous/1 5% Life Sciences
Revolution 6%
1/Includes themes with weightings of less than 4%.
- - --------------------------------------------------------------------------------
Page 5
<PAGE>
Ten Largest Stock Holdings
- - -------------------------------------------------------------------------------
Univision Communications, Inc. 2.75%
................................................................................
Maxim Integrated Products 2.66%
................................................................................
Allergan, Inc. 2.60%
................................................................................
Northeast Utilities 2.52%
................................................................................
Scientific-Atlanta, Inc. 2.40%
................................................................................
Lexmark International Group, Inc. - Class A 2.24%
................................................................................
Network Appliance, Inc. 2.04%
................................................................................
BJ Services, Co. 1.89%
................................................................................
Citrix Systems, Inc. 1.87%
................................................................................
Pe Corp. - Pe Biosystems Group 1.78%
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Performance Comparison
- - -------------------------------------------------------------------------------
Comparison of Change in
Value of a $10,000
Investment in the Capital
Appreciation Fund and the
S&P MidCap 400 Index
since March 31, 1993.
Total Return for the Year
Ended September 30, 1999
One Year Five Years Since 3/9/93/1
47.05% 19.19%/2 17.14%/2
1/The Fund's inception date.
2/Annualized.
Investment return and principal value may fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
[GRAPHIC OMITTED]
Capital Appreciation Fund - $28,235 S&P MidCap 400 Index - $25,492
Mar-93 10000 Mar-93 10000
Sep-93 11838 Sep-93 10747
Mar-94 11409 Mar-94 10614
Sep-94 11728 Sep-94 10920
Mar-95 12857 Mar-95 11498
Sep-95 16813 Sep-95 13734
Mar-96 16786 Mar-96 14788
Sep-96 18890 Sep-96 15657
Mar-97 15919 Mar-97 16358
Sep-97 21655 Sep-97 21779
Mar-98 23318 Mar-98 24380
- - --------------------------------------------------------------------------------
Page 6
<PAGE>
Sep-98 19201 Sep-98 20460
Mar-99 26202 Mar-99 24379
Sep-99 28235 Sep-99 25492
Past performance is not indicative of future performance. Performance figures
assume the reinvestment of dividends and capital gain distributions.
5
- - -------------------------------------------------------------------------------
Capital Appreciation Portfolio
Statement of Assets and Liabilities September 30, 1999
- - -------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets
Investment in Capital Appreciation Portfolio, at Value...................... $28,740,545
Due from Bankers Trust...................................................... 20,561
Prepaid Expenses and Other.................................................. 15,958
----------
28,777,064
----------
Liabilities
Payable for Shares of Beneficial Interest................................... 11,000
Accrued Expenses and Other.................................................. 34,061
----------
Total Liabilities............................................................ 45,061
----------
Net Assets................................................................... $28,732,003
==========
Composition of Net Assets
Paid-in Capital............................................................ $16,063,468
Accumulated Net Realized Gain from Investment Transactions.................. 7,721,310
Net Unrealized Appreciation on Investments.................................. 4,947,225
----------
Net Assets................................................................... $28,732,003
==========
Net Asset Value, Offering and Redemption Price Per Share (net assets divided
by shares outstanding)....................................................... 14.77
==========
Shares Outstanding ($0.001 par value per share, unlimited number of shares of
beneficial interest authorized).............................................. 1,945,242
==========
</TABLE>
- - --------------------------------------------------------------------------------
Statement of Operations For the year ended September 30, 1999
- - --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Income
Net Investment Income Allocated from Capital Appreciation Portfolio.......... $ 17,564
----------
Expenses
Administration and Services Fees............................................. 162,423
Professional Fees........................................................... 32,602
Printing and Shareholder Reports............................................. 28,672
Registration Fees............................................................ 5,466
Trustees Fees................................................................ 5,271
Miscellaneous............................................................... 7,561
</TABLE>
- - --------------------------------------------------------------------------------
Page 7
<PAGE>
<TABLE>
<S> <C>
----------
Total Expenses............................................................... 241,995
Less Fees Waived/Expenses Reimbursed by Bankers Trust......................... (79,572)
----------
Net Expenses................................................................. 162,423
----------
Expenses in Excess of Income................................................... (144,859)
----------
Realized and Unrealized Gain on Investment
Net Realized Gain from Investment Transactions................................ 8,027,605
Net Change in Unrealized Appreciation/Depreciation on Investment.............. 1,426,125
----------
Net Realized and Unrealized Gain on Investment................................. 9,453,730
----------
Net Increase in Net Assets from Operations..................................... $ 9,308,871
==========
</TABLE>
See Notes to Financial Statements.
6
- - -------------------------------------------------------------------------------
Capital Appreciation Fund
Statements of Changes in Net Assets
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
year ended year ended
September 30, 1999 September 30, 1998
--------------------- ---------------------
<S> <C> <C>
Increase (Decrease) in Net Assets from:
Operations
Expenses in Excess of Income............................................ $ (144,859) $ (272,218)
Net Realized Gain from Investment Transactions.......................... 8,027,605 4,677,566
Net Change in Unrealized Appreciation/Depreciation on Investment........ 1,426,125 (8,470,353)
------------ ------------
Net Increase (Decrease) in Net Assets from Operations.................... 9,308,871 (4,065,005)
------------ ------------
Distributions to Shareholders
Net Realized Gain from Investment Transactions.......................... (3,057,167) (7,936,407)
------------ ------------
Capital Transactions in Shares of Beneficial Interest
Proceeds from Sales of Shares........................................... 9,866,222 57,990,982
Dividend Reinvestments.................................................. 1,940,215 4,263,959
Cost of Shares Redeemed................................................. (14,822,874) (73,759,183)
------------ ------------
Net Decrease from Capital Transactions in Shares of Beneficial Interest (3,016,437) (11,504,242)
------------ ------------
Total Increase (Decrease) in Net Assets.................................. 3,235,267 (23,505,654)
Net Assets
Beginning of Year........................................................ 25,496,736 49,002,390
------------ ------------
End of Year.............................................................. $ 28,732,003 $ 25,496,736
============ ============
</TABLE>
- - -------------------------------------------------------------------------------
Financial Highlights
- - -------------------------------------------------------------------------------
Contained below are selected data for a share outstanding, total investment
return, ratios to average net assets and other supplemental data for the periods
indicated for the Capital Appreciation Fund.
<TABLE>
<CAPTION>
For the period For the
For the years ended September 30, Jan. 1, 1995 year ended
-------------------------------------- to Sept. 30, Dec. 31,
1999 1998 1997 1996 1995/2 1994
-------- --------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
- - --------------------------------------------------------------------------------
Page 8
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value, Beginning of Period............. $ 11.38 $ 15.72 $ 16.79 $ 16.83 $ 12.10 $ 11.72
------- -------- ------- ------- -------- ---------
Income (Loss) from Investment Operations
Expenses in Excess of Income.................... (0.07) (0.12) (0.13) (0.10) (0.07) (0.04)
Net Realized and Unrealized Gain (Loss) from
Investment Transactions......................... 4.99 (1.58) 2.13 1.89 4.80 0.42
------- -------- ------- ------- -------- ---------
Total Income (Loss) from Investment Operations... 4.92 (1.70) 2.00 1.79 4.73 0.38
------- -------- ------- ------- -------- ---------
Distributions to Shareholders
Net Realized Gain from Investment Transactions.. (1.53) (2.64) (3.07) (1.83) -- --
------- -------- ------- ------- -------- ---------
Net Asset Value, End of Period................... $ 14.77 $ 11.38 $ 15.72 $ 16.79 $ 16.83 $ 12.10
======= ======== ======= ======= ======== =========
Total Investment Return.......................... 47.05% (11.42)% 14.64% 12.35% 39.09% 3.24%
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted)........ $28,732 $ 25,497 $49,002 $67,385 57,380 $ 42,737
Ratios to Average Net Assets:
Expenses in Excess of Income................... (0.58)% (0.70)% (0.77)% (0.66)% (0.65)%/1 (0.57)%
Expenses, Including Expenses of the Capital
Appreciation Portfolio........................ 1.25% 1.25% 1.25% 1.25% 1.25%/1 1.25%
Decrease Reflected in Above Expense Ratio
Due to Fees Waived/Expenses Reimbursed
by Bankers Trust.............................. 0.63% 0.39% 0.29% 0.26% 0.32%/1 0.54%
</TABLE>
- - ------------------
1/Annualized.
2/Board of Trustees approved the change of the fiscal year end from December 31
to September 30.
See Notes to Financial Statements.
7
- - -------------------------------------------------------------------------------
Capital Appreciation Fund
Notes to Financial Statements
- - -------------------------------------------------------------------------------
Note 1--Organization and Significant Accounting Policies
A. Organization
BT Investment Funds (the "Trust") is registered under the Investment Company Act
of 1940 (the "Act"), as amended, as an open-end management investment company.
The Trust was organized on July 21, 1986, as a business trust under the laws of
the Commonwealth of Massachusetts. The Capital Appreciation Fund (the "Fund") is
one of the funds offered to investors by the Trust. The Fund began operations on
March 9, 1993. The Fund seeks to achieve its investment objective by investing
substantially all of its assets in the Capital Appreciation Portfolio (the
"Portfolio"). The Portfolio is an open-end management investment company
registered under the Act. The value of the investment in the Portfolio reflects
the Fund's proportionate interest in the net assets of the Portfolio. At
September 30, 1999, the Fund's investment was approximately 100% of the
Portfolio.
The financial statements of the Portfolio, including a list of assets held are
contained elsewhere in this report and should be read in conjunction with the
Fund's financial statements.
B. Valuation
Valuation of securities by the Portfolio is discussed in Note 1B of the
Portfolio's Notes to Financial Statements.
C. Investment Income
The Fund earns income, net of expenses, daily on its investment in the
Portfolio. All of the net investment income and realized and unrealized gains
and losses from the security transactions of the Portfolio are allocated pro
rata among the investors in the Portfolio at the time of such determination.
- - --------------------------------------------------------------------------------
Page 9
<PAGE>
D. Distributions
It is the Fund's policy to declare and distribute dividends quarterly to
shareholders from net investment income, if any. Dividends and distributions
payable to shareholders are recorded by the Fund on the ex-dividend date.
Distributions of net realized short-term and long-term capital gains, if any,
earned by the Fund are also made annually to the extent they are not offset by
any capital loss carryforwards.
E. Federal Income Taxes
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and distribute substantially
all of its taxable income to shareholders. Therefore, no federal income tax
provision is required. The Fund may periodically make reclassifications among
certain of its capital accounts as a result of the differences in the
characterization and allocation of certain income and capital gain distributions
determined annually in accordance with federal tax regulations which may differ
from generally accepted accounting principles.
F. Other
The Trust accounts separately for the assets, liabilities, and operations of
each fund. Expenses directly attributable to a fund are charged to that fund,
while expenses which are attributable to all of the Trust's funds are allocated
among them. Investment transactions are accounted for on the trade date basis.
Realized gains and losses are determined on the identified cost basis.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements. Actual results could
differ from those estimates.
Note 2--Fees and Transactions with Affiliates
The Fund has entered into an Administration and Services Agreement with Bankers
Trust Company ("Bankers Trust"). Under this Agreement, Bankers Trust provides
administrative, custody, transfer agency and shareholder services to the Fund in
return for a fee computed daily and paid monthly at an annual rate of .65% of
the Fund's average daily net assets.
Bankers Trust has voluntarily undertaken to waive its fees and reimburse
expenses of the Fund, to the extent necessary, to limit all expenses to .65% of
the average daily net assets of the Fund, excluding expenses of the Portfolio,
and 1.25% of the average daily net assets of the Fund, including expenses of the
Portfolio.
ICC Distributors, Inc., provides distribution services to the Fund.
Bankers Trust was a wholly owned subsidiary of Bankers Trust Corporation ("BT
Corp."). On June 4, 1999, BT Corp. was acquired by Deutsche Bank AG ("Deutsche
Bank"). As a result of the transaction, Bankers Trust became an indirect
wholly-owned subsidiary of Deutsche Bank.
Note 3--Shares of Beneficial Interest
At September 30, 1999, there were an unlimited number of shares of beneficial
interest authorized. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
For the For the
year ended year ended
September 30, 1999 September 30, 1998
--------------------------------- -------------------------
Shares Amount Shares Amount
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
</TABLE>
- - --------------------------------------------------------------------------------
Page 10
<PAGE>
Sold................... 707,455 $ 9,866,222 4,302,213 $ 57,990,982
Reinvested............. 173,543 1,940,215 361,352 4,263,959
Redeemed .............. (1,175,938) (14,822,874) (5,540,913) (73,759,183)
---------- ------------ ---------- ------------
Net Decrease........... (294,940) $ (3,016,437) (877,348) $(11,504,242)
========== ============ ========== ============
8
- - -------------------------------------------------------------------------------
Capital Appreciation Fund
Report of Independent Accountants
- - -------------------------------------------------------------------------------
To the Trustees of BT Investment Funds and
Shareholders of Capital Appreciation Fund:
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
the Capital Appreciation Fund (one of the funds comprising BT Investment Funds,
hereafter referred to as the "Fund") at September 30, 1999, and the results of
its operations, the changes in its net assets and the financial highlights for
each of the fiscal periods presented, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at September 30, 1999 by correspondence with the
transfer agent, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
November 16, 1999
- - -------------------------------------------------------------------------------
Tax Information (Unaudited For the Year Ended September 30, 1999)
- - -------------------------------------------------------------------------------
The Fund paid long term capital gains during the year ending September
30, 1999 in the amount of $2,917,297. In addition, of the ordinary distributions
made during the year ending September 30, 1999, $0.04 per share qualify for the
dividends received deduction available to corporate shareholders. #Capital
Appreciation Portfolio Schedule of Portfolio Investments September 30, 1999
Shares Description Value
________________________________________________________________________________
Page 11
<PAGE>
9
- - -------------------------------------------------------------------------------
Capital Appreciation Portfolio
Schedule of Portfolio Investments September 30, 1999
- - -------------------------------------------------------------------------------
Shares Description Value
- - -------- ------------- ----------
COMMON STOCKS - 89.4%
America's Changing Leisure Time - 10.6%
6,200 Clear Channel Communications, Inc./1 ........ $ 495,225
9,200 Harley-Davidson, Inc. ....................... 460,575
6,700 Hispanic Broadcasting Corp./1 ............... 510,037
16,700 Mandalay Resort Group, Inc./1 ............... 329,825
10,100 Royal Caribbean Cruises Ltd. ................ 454,500
9,700 Univision Communications, Inc./1 ............ 789,337
----------
3,039,499
----------
America's Industrial Renaissance - 2.2%
4,900 Black & Decker Corp. ........................ 223,869
4,400 SPX Corp. ................................... 399,300
----------
623,169
----------
Client Server Computing - 6.6%
1,700 BMC Software, Inc./1 ........................ 121,656
8,700 Citrix Systems, Inc/1 ....................... 538,856
8,000 Lexmark International Group, Inc. - Class A1 644,000
8,200 Network Appliance, Inc./1 ................... 587,325
----------
1,891,837
----------
Energizing The Globe - 8.2%
10,600 Apache Corp. ................................ 457,788
17,100 BJ Services Co./1 ........................... 543,994
4,900 Cooper Cameron Corp. ........................ 184,975
7,200 Devon Energy Corp. .......................... 298,350
15,400 Noble Drilling Corp./1 ...................... 336,875
13,000 Sante Fe International Corp. ................ 280,312
________________________________________________________________________________
Page 12
<PAGE>
6,300 Smith International, Inc./1 ................. 255,150
----------
2,357,444
----------
Flourishing In The Managed Care
Environment - 0.9%
9,000 Trigon Healthcare, Inc. ..................... 259,875
----------
Interactive Media - 4.9%
7,800 General Instrument Corp./1 .................. 375,375
13,900 Scientific-Atlanta, Inc. .................... 688,919
9,100 USA Networks, Inc./1 ........................ 352,625
----------
1,416,919
----------
Life On The Net - 2.1%
3,600 Etoys, Inc./1 ............................... 239,625
4,100 Infospace.com, Inc./1 ....................... 168,612
5,700 PSINet, Inc./1 .............................. 205,022
---------
613,259
---------
Life Sciences Revolution - 5.9%
6,800 Allergan, Inc. .............................. 748,000
6,800 Genzyme Corp./1 ............................. 306,425
3,200 Immunex Corp./1 ............................. 138,800
7,100 Pe Corp. - Pe Biosystems Group .............. 512,975
---------
1,706,200
---------
Shares Description Value
- - -------- ------------- ----------
Managing The Information Age - 6.4%
6,400 Flextronics International1 .................. 372,400
12,100 Maxim Integrated Products, Inc./1 ........... 763,434
2,800 Portal Software, Inc./1 ..................... 108,500
2,800 Redback Networks ............................ 302,400
3,900 Sanmina Corp./1 ............................. 301,762
---------
1,848,496
---------
New Consumer - 7.7%
10,500 Abercrombie & Fitch Co. - Class A/1 ........ 357,656
7,200 Circuit City Stores, Inc. ................... 303,750
1,665 Gucci Group NV .............................. 139,027
13,800 Jones Apparel Group, Inc./1 ................. 396,750
10,400 Tommy Hilfiger Corp./1 ...................... 293,150
7,000 Williams-Sonoma, Inc./1 ..................... 339,938
10,300 Zale Corp./1 ................................ 394,619
---------
2,224,890
---------
New Health Paradigm - 4.3%
28,900 IVAX Corp. .................................. 474,850
3,400 MiniMed, Inc./1 ............................. 334,050
8,600 Stryker Corp. ............................... 439,675
---------
________________________________________________________________________________
Page 13
<PAGE>
1,248,575
---------
Our Strengthening Financial Structure - 4.1%
2,200 AMBAC Financial Group ....................... 104,225
9,975 Charter One Financial, Inc. ................. 230,672
14,700 Concord EFS, Inc./1 ......................... 303,188
12,200 Dime Bancorp, Inc. .......................... 213,500
16,300 North Fork Bancorp .......................... 317,850
---------
1,169,435
---------
Return To Home Ownership - 0.4%
3,300 Linens 'N Things, Inc./1 .................... 111,375
---------
Special Situations - 9.4%
9,100 Allegheny Energy, Inc. ...................... 289,494
11,400 American Water Works Co., Inc. .............. 329,887
5,000 Bowater, Inc. ............................... 262,500
12,400 Energy East Corp. ........................... 294,500
3,800 Intuit, Inc./1 .............................. 333,094
39,200 Northeast Utilities Corp./1 ................. 720,301
13,384 Outdoor Systems, Inc./1 ..................... 478,478
---------
2,708,254
---------
Stores of Value - 3.8%
12,700 BJ's Wholesale Club/1 ....................... 375,444
17,100 Family Dollar Stores, Inc. .................. 361,238
12,200 TJX Companies, Inc. ......................... 342,362
---------
1,079,044
---------
Telecommunications - 5.8%
11,600 American Tower Corp. - Class A .............. 226,925
2,400 E-Tek Dynamics, Inc./1 ...................... 130,200
5,076 Global Crossing Ltd./1 ...................... 134,514
4,500 Newbridge Networks Corp./1 .................. 117,281
7,000 Qwest Communications International, Inc./1 .. 206,938
5,200 Voicestream Wireless Corp./1 ................ 320,938
5,200 Western Wireless Corp. - Class A/1 .......... 233,188
7,600 WinStar Communications, Inc./1 .............. 296,875
---------
1,666,859
---------
See Notes to Financial Statements.
10
- - -------------------------------------------------------------------------------
Capital Appreciation Portfolio
Schedule of Portfolio Investments September 30, 1999
- - -------------------------------------------------------------------------------
________________________________________________________________________________
Page 14
<PAGE>
Shares Description Value
- - -------- ------------- ----------
The Ubiquitous Semiconductor - 6.1%
1,500 Broadcom Corp. - Class A/1 .............. 163,500
8,400 Linear Technology Corp. ................. 493,763
4,800 National Semiconductor Corp./1 .......... 146,400
4,600 Novellus Systems, Inc./1 ................ 310,212
11,200 Teradyne, Inc./1 ........................ 394,800
2,900 Vitesse Semiconductor Corp./1 ........... 247,587
----------
1,756,262
----------
Total Common Stocks (Cost $20,408,257) ............ 25,721,392
----------
Shares Description Value
- - -------- ------------- ----------
SHORT TERM INSTRUMENT - 16.6
Mutual Fund
4,748,393 Institutional Cash Management Fund
(Cost $4,748,393) .................... 4,748,393
----------
Total Investments (Cost $25,156,650)........ 106.0% 30,469,785
Liabilities in Excess of Other Assets....... (6.0)% (1,729,213)
-------- ------------
Net Assets.................................. 100.0% $28,740,572
======== ============
- - ------------
1/Non-Income Producing Security.
See Notes to Financial Statements.
11
- - --------------------------------------------------------------------------------
Capital Appreciation Portfolio
Statement of Assets and Liabilities September 30, 1999
- - --------------------------------------------------------------------------------
Assets
Investments, at Value (Cost $25,156,650) ........................ $30,469,785
Receivable for Shares of Beneficial Interest Subscribed 110,000
Receivable for Securities Sold .................................. 115,883
Dividends and Interest Receivable1 .............................. 25,010
Other Assets .................................................... 314
-----------
Total Assets ....................................................... 30,720,992
-----------
Liabilities
Payable for Securities Purchased ................................ 1,941,053
________________________________________________________________________________
Page 15
<PAGE>
Due to Bankers Trust ............................................ 7,235
Accrued Expenses and Other ...................................... 32,132
-----------
Total Liabilities .................................................. 1,980,420
-----------
Net Assets ......................................................... $28,740,572
===========
Composition of Net Assets
Paid-in Capital ................................................. $23,427,437
Net Unrealized Appreciation on Investments ...................... 5,313,135
-----------
Net Assets ......................................................... $28,740,572
===========
- - --------------
1/Includes $18,744 from the Portfolio's investment in the Institutional Cash
Management Fund.
- - -------------------------------------------------------------------------------
Statement of Operations For the year ended September 30, 1999
- - -------------------------------------------------------------------------------
Investment Income
Dividends ....................................................... $ 167,342
----------
Expenses
Advisory Fees ................................................... 158,218
Professional Fees ............................................... 34,771
Administration and Services Fees ................................ 24,963
Trustees Fees ................................................... 5,983
Miscellaneous ................................................... 1,643
----------
Total Expenses .................................................. 225,578
Less Fees Waived/Expenses Reimbursed by Bankers Trust ........... (75,800)
----------
Net Expenses ................................................. 149,778
----------
Net Investment Income ............................................ 17,564
Realized and Unrealized Gain on Investments
Net Realized Gain from Investment Transactions .................. 8,027,612
----------
Net Change in Unrealized Appreciation/Depreciation on Investments 1,426,127
----------
Net Realized and Unrealized Gain on Investments ................... 9,453,739
----------
Net Increase in Net Assets from Operations ........................ $9,471,303
==========
See Notes to Financial Statements.
12
________________________________________________________________________________
Page 16
<PAGE>
- - -------------------------------------------------------------------------------
Capital Appreciation Portfolio
Statements of Changes in Net Assets
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
year ended year ended
September 30, 1999 September 30, 1998
------------------- -------------------
<S> <C> <C>
Increase (Decrease) in Net Assets from:
Operations
Net Investment Income/(Expenses in Excess of Income)............... $ 17,564 $ (19,921)
Net Realized Gain from Investment Transactions..................... 8,027,612 4,677,569
Net Change in Unrealized Appreciation/Depreciation on Investments 1,426,127 (8,470,353)
------------ ------------
Net Increase (Decrease) in Net Assets from Operations............... 9,471,303 (3,812,705)
------------ ------------
Capital Transactions
Proceeds from Capital Invested..................................... 10,983,174 62,320,016
Value of Capital Withdrawn......................................... (17,403,228) (81,789,768)
------------ ------------
Net Decrease in Net Assets from Capital Transactions................ (6,420,054) (19,469,752)
------------ ------------
Total Increase (Decrease) in Net Assets............................. 3,051,250 (23,282,457)
Net Assets
Beginning of Year................................................... 25,689,322 48,971,779
------------ ------------
End of Year......................................................... $ 28,740,572 $ 25,689,322
============ ============
</TABLE>
- - -------------------------------------------------------------------------------
Financial Highlights
- - -------------------------------------------------------------------------------
Contained below are selected ratios to average net assets and other supplemental
data for periods indicated for the Capital Appreciation Portfolio.
<TABLE>
<CAPTION>
For the period For the
For the years ended September 30, Jan. 1, 1995 year ended
---------------------------------- to Sept. 30, Dec. 31,
1999 1998 1997 1996 1995/2 1994
---- ---- ---- ---- ------ ----
Supplemental Data and Ratios:
<S> <C> <C> <C> <C> <C> <C>
Net Assets, End of Period (000s omitted) ................ $28,741 $25,689 $48,972 $68,385 $149,888 $ 73,634
Ratios to Average Net Assets:
Net Investment Income (Expenses in
Excess of Income)................................... 0.07% (0.05)% (0.12)% (0.01)% 0.01%/1 0.08%
Expenses 0.60% 0.60% 0.60% 0.60% 0.60%/1 0.60%
Decrease Reflected in Above Expense Ratio.............
Due to Fees Waived/Expenses Reimbursed
by Bankers Trust.................................... 0.31% 0.26% 0.21% 0.17% 0.18%/1 0.23%
Portfolio Turnover Rate.................................. 155% 145% 167% 271% 125% 157%
</TABLE>
- - -------------------------------------------------------------------------------
1/ Annualized.
2/ The Board of Trustees approved the change of the fiscal year end
from December 31 to September 30.
See Notes to Financial Statements.
________________________________________________________________________________
Page 17
<PAGE>
13
- - -------------------------------------------------------------------------------
Capital Appreciation Portfolio
Notes to Financial Statements
- - -------------------------------------------------------------------------------
Note 1--Organization and Significant Accounting Policies
A. Organization
The Capital Appreciation Portfolio (the "Portfolio") is registered under the
Investment Company Act of 1940 (the "Act"), as amended, as an open-end
management investment company. The Portfolio was organized on October 28, 1992,
as an unincorporated trust under the laws of New York and began operations on
March 9, 1993. The Declaration of Trust permits the Board of Trustees (the
"Trustees") to issue beneficial interests in the Portfolio.
B. Security Valuation
The Portfolio's investments listed or traded on National Stock Exchanges or
other domestic or foreign exchanges are valued based on their closing price.
Short-term debt securities are valued at market value until such time as they
reach a remaining maturity of 60 days, whereupon they are valued at amortized
cost using their value on the 61st day. All other securities and other assets
are valued at their fair value as determined in good faith under procedures
established by and under the general supervision of the Trustees.
C. Security Transactions and Investment Income
Security transactions are accounted for on a trade date basis. Dividend income
is recorded on the ex-dividend date. Interest income is recorded on the accrual
basis and includes amortization of premium and discount on investments. Realized
gains and losses from securities transactions are recorded on the identified
cost basis.
All of the net investment income and realized and unrealized gains and losses
from the securities transactions of the Portfolio are allocated pro rata among
the investors in the Portfolio at the time of such determination.
D. Federal Income Taxes
The Portfolio is considered a Partnership under the Internal Revenue Code.
Therefore, no federal income tax provision is necessary.
E. Other
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements. Actual results could
differ from those estimates.
Note 2--Fees and Transactions with Affiliates
The Portfolio has entered into an Administration and Services Agreement with
Bankers Trust Company ("Bankers Trust"). Under this Administration and Services
agreement, Bankers Trust provides administrative, custody, transfer agency and
shareholder services to the Portfolio in return for a fee computed daily and
paid monthly at an annual rate of .10% of the Portfolio's average daily net
assets.
The Portfolio has entered into an Advisory Agreement with Bankers Trust. Under
this Advisory Agreement, Bankers Trust manages the Portfolio in accordance with
the Portfolio's investment objective and stated investment policies in return
for a fee computed daily and paid monthly at an annual rate of .65% of the
Portfolio's average daily net assets.
Bankers Trust has voluntarily undertaken to waive its fees and reimburse
expenses of the Portfolio, to the extent necessary, to limit all expenses to
.60% of the average daily net assets of the Portfolio.
________________________________________________________________________________
Page 18
<PAGE>
The Portfolio may invest in the Institutional Cash Management Fund (the "Fund"),
an open-end management investment company managed by Bankers Trust Company (the
"Company"). The Fund is offered as a cash management option to the Portfolio and
other accounts managed by the Company. Distributions from the Fund to the
Portfolio as of September 30, 1999 amounted to $94,224 and are included in
dividend income.
At September 30, 1999, the Portfolio was a participant with other affiliated
entities in a revolving credit facility in the amount of $100,000,000, which
expires April 29, 2000. A commitment fee of .10% per annum on the average daily
amount of the available commitment is payable on a quarterly basis and
apportioned equally among all participants. On October 8, 1999, the revolving
credit facility was increased to $150,000,000. No amounts were drawn down or
outstanding under the credit facility for the year ended September 30, 1999.
Bankers Trust was a wholly owned subsidiary of Bankers Trust Corporation ("BT
Corp."). On June 4, 1999, BT Corp.. was acquired by Deutsche Bank AG ("Deutsche
Bank"). As a result of the transaction, Bankers Trust became an indirect
wholly-owned subsidiary of Deutsche Bank.
Note 3--Purchases and Sales of Investment Securities
The aggregate cost of purchases and proceeds from sales of investments, other
than short-term obligations, for the year ended September 30, 1999 were
$36,272,244 and $44,432,186, respectively.
The tax basis of investments held at September 30, 1999, was $25,161,901. The
aggregate gross unrealized appreciation for all investments was $5,910,701 and
the aggregate gross unrealized depreciation for all investments was $602,817.
14
- - -------------------------------------------------------------------------------
Capital Appreciation Portfolio
Report of Independent Accountants
- - -------------------------------------------------------------------------------
To the Trustees and Holders of Beneficial Interest of
Capital Appreciation Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Capital Appreciation Portfolio
(hereafter referred to as the "Portfolio") at September 30, 1999, and the
results of its operations, the changes in its net assets and the financial
highlights for each of the fiscal periods presented, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolio's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
________________________________________________________________________________
Page 19
<PAGE>
PricewaterhouseCoopers LLP
Baltimore, Maryland
November 16, 1999
15
- - -------------------------------------------------------------------------------
Capital Appreciation Fund
Proxy Results (unaudited)
- - -------------------------------------------------------------------------------
For the year ended September 30, 1999, the Bankers Trust Funds shareholders
voted on the following proposals at the annual meeting of shareholders on
October 8, 1999 or as adjourned. The description of each proposal and number of
shares voted are as follows:
1. To elect the Bankers Trust Funds Board of Trustees.
Shares Shares Voted
Voted Withheld
For Authority
--------- ------------
Messr Biggar 1,136,747 29,887
Messr Dill 1,136,747 29,887
Messr Hale 1,136,747 29,887
Messr Langton 1,136,747 29,887
Messr Saunders 1,136,747 29,887
Messr Van Benschoten 1,137,149 29,485
Dr. Gruber 1,137,149 29,485
Dr. Herring 1,137,149 29,485
2. To approve the New Investment Advisory Agreement with Bankers Trust Company.
For Against Abstain
--------- ------- -------
1,157,984 -- 8,650
3. To approve the New Investment Advisory Agreement with Morgan Grenfell, Inc.
For Against Abstain
--------- ------- -------
1,157,582 4,365 4,687
4. To approve the New Investment Sub-advisory Agreement with Bankers Trust
Company.
For Against Abstain
--------- ------- -------
1,157,582 4,365 4,687
5. To ratify the selection of PricewaterhouseCoopers LLP as the independent
accountants of the Fund and its corresponding Portfolio.
________________________________________________________________________________
Page 20
<PAGE>
For Against Abstain
--------- ------- -------
1,137,763 28,871 --
16
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[graphic omitted]
For information on how to invest, shareholder account information and current
price and yield information, please contact your relationship manager or write
to us at:
BT Service Center
P.O. Box 419210
Kansas City, MO 64141-6210
or call our toll-free number: 1-800-730-1313
This report must be preceded or accompanied by a current prospectus for the
Fund.
________________________________________________________________________________
Page 21
<PAGE>
Capital Appreciation Fund CUSIP #055922819
BT Investment Funds 465ANN (9/99)
Distributed by:
ICC Distributors, Inc.
Two Portland Square
Portland, ME 04101
________________________________________________________________________________
Page 22
<PAGE>
Deutsche Asset Management
Exhibit C
Mutual Fund
Prospectus
January 31, 2000
Investment Class
Mid Cap
formerly Capital Appreciation Fund, a BT Mutual Fund
[Like shares of all mutual funds,
these securities have not been
approved or disapproved by the
Securities and Exchange Commission A Member of the
nor has the Securities and Deutsche Bank Group [/]
Exchange Commission passed upon
the accuracy or adequacy of this
prospectus. Any representation to
the contrary is a criminal offense.]
<PAGE>
Overview
- - --------------------------------------------------------------------------------
of Mid Cap--Investment Class
Goal: The Fund seeks long-term capital growth.
Core Strategy: The Fund invests primarily in the stocks and other equity
securities of medium-sized U.S. companies with strong growth potential.
INVESTMENT POLICIES AND STRATEGIES
The Fund invests all of its assets in a master portfolio with the same goal as
the Fund. The Fund, through the master portfolio, seeks to achieve that goal by
investing in stocks and other equity securities of medium-sized companies with
strong growth prospects. Companies are selected based on factors such as the
company's business prospects, its record of earnings growth and its stock price
relative to industry peers.
- - --------------------------------------------------------------------------------
Mid Cap--Investment Class
Overview of Mid Cap--Investment Class
<TABLE>
<S> <C>
Goal........................................................................ 3
Core Strategy............................................................... 3
Investment Policies and Strategies.......................................... 3
Principal Risks of Investing in the Fund.................................... 4
Who Should Consider Investing in the Fund................................... 4
Total Returns, After Fees and Expenses...................................... 5
Annual Fund Operating Expenses.............................................. 6
</TABLE>
A Detailed Look at Mid Cap-- Investment Class
<TABLE>
<S> <C>
Objective.................................................................. 7
Strategy................................................................... 7
Principal Investments...................................................... 7
Investment Process......................................................... 7
Risks...................................................................... 8
Management of the Fund..................................................... 8
</TABLE>
<TABLE>
<S> <C>
Calculating the Fund's Share Price.......................................... 10
Performance Information..................................................... 10
Dividends and Distributions................................................. 10
Tax Considerations.......................................................... 10
Buying and Selling Fund Shares.............................................. 11
Financial Highlights........................................................ 14
</TABLE>
- - --------------------------------------------------------------------------------
3
<PAGE>
Overview of Mid Cap--Investment Class
PRINCIPAL RISKS OF INVESTING IN THE FUND
An investment in the Fund could lose money, or the Fund's performance could
trail that of other investments. For example:
. Stocks that the investment adviser has selected could perform poorly;
. Medium-sized company stock returns could trail stock market returns generally
because of risks specific to medium-sized company investing, i.e., greater
share price volatility and fewer buyers for medium-sized company shares in
periods of economic or stock market stress. Such risks may hurt the prices of
the stocks in the Fund's portfolio and limit the Fund's ability to exit from
an unsuccessful investment; or
. The stock market could decline or could underperform other investments.
WHO SHOULD CONSIDER INVESTING IN THE FUND
You should consider investing in the Fund if you are seeking long-term capital
growth. There is, of course, no guarantee that the Fund will realize its goal.
Moreover, you should be willing to accept greater short-term fluctuations in
the value of your investment than you would typically experience investing in
bond or money market funds.
You should not consider investing in the Fund if you are pursuing a short-term
financial goal, if you seek regular income or if you cannot tolerate
fluctuations in the value of your investments.
The Fund by itself does not constitute a balanced investment program. It can,
however, afford you exposure to investment opportunities not available to
someone who invests in large company and small company stocks.
On September 8, 1999, the Board of Trustees of Mid Cap fund voted to recommend
the reorganization of Equity Appreciation fund, a separate Deutsche Asset
Management mutual fund, into Mid Cap fund. The merger requires the approval of
Equity Appreciation fund's shareholders. A special meeting of shareholders will
be held for this purpose. If shareholders approve the merger, shares of Equity
Appreciation will be converted to shares of Mid Cap.
An investment in Mid Cap is not a bank deposit and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
- - --------------------------------------------------------------------------------
4
<PAGE>
Overview of Mid Cap--Investment Class
TOTAL RETURNS, AFTER FEES AND EXPENSES
The bar chart and table on this page can help you evaluate the potential risks
and rewards of investing in the Fund by showing changes in the Fund's
performance year to year. The bar chart shows the Fund's actual return for each
full calendar year since it began selling shares on March 9, 1993 (its
inception date). The table compares the Fund's average annual return with the
Standard & Poor's (S&P) Mid-Cap 400 Index over the last one and five years, and
since inception. The Index is a passive measure of stock market returns. It
does not factor in the costs of buying, selling and holding stock--costs that
are reflected in the Fund's results.
- - --------------------------------------------------------------------------------
The S&P Mid-Cap 400 Index is a widely accepted benchmark of medium-sized
company stock performance. The Index is a model, not an actual portfolio, that
tracks the performance of 400 publicly held medium-sized U.S. companies.
Year-by-Year Returns
(the full calendar year since inception)
[CHART]
1994 3.24
1995 37.43
1996 8.68
1997 14.46
1998 18.51
1999 49.68
Since inception, the Fund's highest return in any calendar quarter was 29.95%
(fourth quarter 1999) and its lowest quarterly return was -19.58% (third
quarter 1998). Past performance offers no indication of how the Fund will
perform in the future.
PERFORMANCE FOR PERIOD ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
1 Year 5 Year Since
Inception
(March 9,
1993)/1/
<S> <C> <C> <C>
Mid Cap--Investment
Class 49.68% 24.84% 21.03%
----------------------------------------------
S&P Mid-Cap 400
Index 14.72% 23.05% 17.68%
----------------------------------------------
</TABLE>
/1/ The S&P Mid-Cap 400 Index is cal-
culated from February 28, 1993.
- - --------------------------------------------------------------------------------
5
<PAGE>
Overview of Mid Cap--Investment Class
ANNUAL FUND OPERATING EXPENSES
(expenses paid from Fund assets)
The Annual Fees and Expenses table to the right describes the fees and expenses
that you may pay if you buy and hold shares of the Fund.
Expense Example. The example below illustrates the expenses you would have
incurred on a $10,000 investment in the Fund. It assumes that the Fund earned
an annual return of 5% over the periods shown, that the Fund's operating
expenses remained the same and you sold your shares at the end of the period.
You may use this hypothetical example to compare the Fund's expense history
with other funds./1/ Your actual costs may be higher or lower.
- - --------------------------------------------------------------------------------
/1/Information on the annual operating expenses reflects the expenses of both
the Fund and the Capital Appreciation Portfolio, the master portfolio into
which the Fund invests all of its assets. (A further discussion of the
relationship between the Fund and the master portfolio appears in the
"Organizational Structure" section of this prospectus.)
/2/The investment adviser and administrator have agreed, for the 16-month
period from the Fund's fiscal year end of September 30, 1999, to waive their
fees or reimburse expenses so that total expenses will not exceed 1.25%.
/3/For the first 16 months, the expense example takes into account fee waivers
and reimbursements.
ANNUAL FEES AND EXPENSES
<TABLE>
<CAPTION>
Percentage of Average
Daily Net Assets/1/
<S> <C>
Management Fees 0.65%
-----------------------------------------------
Distribution and
Service (12b-1) Fees None
-----------------------------------------------
Other Expenses 1.23%
-----------------------------------------------
Total Fund Operating
Expenses 1.88%/2/
-----------------------------------------------
Less: Fee Waiver or
Expense Reimbursements (0.63)%
-----------------------------------------------
Net Expenses 1.25%
-----------------------------------------------
</TABLE>
Expense Example/3/
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C>
$127 $509 $937 $2,132
----------------------------------------------------------------------------------------------------------
</TABLE>
- - --------------------------------------------------------------------------------
6
<PAGE>
A detailed look
- - --------------------------------------------------------------------------------
at Mid Cap--Investment Class
OBJECTIVE
Mid Cap--Investment Class seeks long-term capital growth. Under normal
circumstances, the Fund invests the majority of its assets in the stock and
other securities with equity characteristics of U.S. companies with market
capitalizations, at the time we first purchase the shares, within the market
capitalization range of the S&P Mid-Cap 400 Index. We believe these companies
contain the greatest concentration of businesses with significant growth
prospects.
The Fund invests for capital growth, not income; any dividend or interest
income is incidental to the pursuit of its goal. While we give priority to
capital growth, we cannot offer any assurance of achieving this goal. The
Fund's goal is not a fundamental policy. We must notify shareholders before we
change it, but we do not require their approval to do so.
STRATEGY
We pursue a flexible investment program to achieve the Fund's objective. We are
not restricted to investments in specific market sectors. We may invest in any
market sector and in any size company if we have identified an opportunity with
attractive long-term prospects for capital growth. Nevertheless, we attempt to
match the dollar-weighted average capitalization of the Fund's holdings to the
midpoint capitalization of the S&P Mid-Cap 400 Index.
We consider many broad factors in assessing a potential candidate for
investment, including generally:
. competitive position within its industry;
. business prospects;
. management team;
. record of earnings growth;
. underlying asset value relative to industry peers;
. stock price relative to industry peers; and
. whether a reliable and liquid market for its shares exists.
- - --------------------------------------------------------------------------------
"Market capitalization" or "market cap" provides an estimate of a company's
value. It is calculated by multiplying the total number of a company's
outstanding shares by the share's current price.
PRINCIPAL INVESTMENTS
The Fund normally owns stock in approximately 100 medium-sized companies at any
one time. The Fund focuses primarily in stock and other securities with equity
characteristics. The Fund focuses principally on companies with market caps, at
the time we purchase the stock, within the market capitalization range of the
S&P Mid-Cap 400 Index. It may also invest in convertible securities when it is
more advantageous than investing in a company's common stock.
The Fund may also invest up to 25% of its assets in stocks and other securities
of companies based outside the United States. Under normal conditions, this
tactic would not comprise a major element of its strategy.
INVESTMENT PROCESS
The Fund's process begins with a methodical search for companies (in any
industry) that show attractive long-term prospects for growth. The research
team relies on information gleaned from a variety of sources and perspectives,
including broad trends such as lifestyle and technological changes, industry
cycles and regulatory changes, quantitative screening and individual company
analysis. Companies are screened to identify those with strong business
fundamentals (i.e., high growth, low debt, high return-on-equity) and technical
strength. Measures of this strength include the extent of management's
ownership of a company's shares, the extent of ownership by mutual funds and
other large professional investors, estimates of future earnings by investment
analysts who follow the stock and the extent that actual earnings have deviated
from analysts' estimates in the recent past. The list of candidates is narrowed
down through meetings with company and industry contacts, attendance at
conferences focusing on emerging growth companies, reviews of research and
industry publications and investment analyst contacts.
- - --------------------------------------------------------------------------------
Convertible securities are bonds or preferred stock that give purchasers the
right of exchange for a specified number of shares of a company's common stock
at specified prices within a certain period of time. Purchasers receive regular
interest payments until they exercise their exchange right.
- - --------------------------------------------------------------------------------
7
<PAGE>
A Detailed Look at Mid Cap--Investment Class
Temporary Defensive Position. We may from time to time adopt a temporary
defensive position in response to extraordinary adverse political, economic or
stock market events. We may invest up to 100% of the Fund's assets in the
common stock of larger companies, in fixed-income securities, or short-term
money market securities. To the extent we adopt such a position and over the
course of its duration, the Fund may not meet its goal of long-term capital
growth.
RISKS
Below we set forth some of the prominent risks associated with investing in
medium-sized companies, as well as investing in general. Although we attempt to
assess the likelihood that these risks may actually occur and to limit them, we
make no guarantee that we will succeed.
Primary Risks
Market Risk. Although individual stocks can outperform their local markets,
deteriorating market conditions might cause an overall weakness in the stock
prices of the entire market.
Stock Selection Risk. A risk that pervades all investing is the risk that the
securities an investor has selected will not perform to expectations. The Fund
follows a disciplined selling process to try to lessen this risk. First, we may
sell a security if one or more of the following conditions take place:
. There is a material change in the company's fundamentals;
. The stock underperforms its industry peer group by 15% or more; or
. The stock price reaches our expectations.
Medium-Sized Company Risk. Medium-sized company stocks tend to experience
steeper price fluctuations--down as well as up--than the stocks of larger
companies. A shortage of reliable information--the same information gap that
creates opportunity--can pose added risk. Industrywide reversals have had a
greater impact on medium-sized companies, since they usually lack a large
company's financial resources. Medium-sized company stocks are typically less
liquid than large company stocks: when things are going poorly, it is harder to
find a buyer for a medium-sized company's shares.
- - --------------------------------------------------------------------------------
Portfolio Turnover. The portfolio turnover rate measures the frequency that the
master portfolio sells and replaces the securities it holds within a given
period. Historically, this Fund has had a high portfolio turnover rate. High
turnover can increase the Fund's transaction costs, thereby lowering its
returns. It may also increase your tax liability.
Foreign Investment Risk. To the extent that the Fund holds companies based
outside the United States, it faces the risks inherent in foreign investing.
Adverse political, economic or social developments could undermine the value of
the Fund's investments or prevent the Fund from realizing their full value.
Financial reporting standards for companies based in foreign markets differ
from those in the United States. Since the "numbers" themselves sometimes mean
different things, we devote much of our research effort to understanding and
assessing the impact of these differences upon a company's financial condition.
Finally, the currency of the country in which the Fund has invested could
decline relative to the value of the U.S. dollar, which would decrease the
value of the investment to U.S. investors.
Secondary Risk
Pricing Risk. When price quotations for securities are not readily available,
we determine their value by the method that most accurately reflects their
current worth in the judgment of the Board of Trustees. This procedure implies
an unavoidable risk, the risk that our prices are higher or lower than the
prices that the securities might actually command if we sold them. If we have
valued the securities too highly, you may end up paying too much for Fund
shares when you buy. If we underestimate their price, you may not receive the
full market value for your Fund shares when you sell.
MANAGEMENT OF THE FUND
Deutsche Asset Management is the marketing name for the asset management
activities of Deutsche Bank A.G., Deutsche Funds Management, Bankers Trust
Company, DB Alex. Brown LLC, Deutsche Asset Management, Inc., and Deutsche
Asset Management Investment Services Limited.
Board of Trustees. The Fund's shareholders, voting in proportion to the number
of shares each owns, elect a Board of Trustees, and the Trustees supervise all
of the Fund's activities on their behalf.
Investment Adviser. Under the supervision of the Board of Trustees, Bankers
Trust Company, with headquarters at 130 Liberty Street, New York, NY 10006,
acts as the Fund's investment adviser. Bankers Trust is an indirect wholly-
owned subsidiary of Deutsche Bank A.G. As investment adviser, Bankers Trust
makes the Fund's investment decisions. It buys and sells securities for the
Fund and conducts the research that
- - --------------------------------------------------------------------------------
8
<PAGE>
A Detailed Look at Mid Cap--Investment Class
leads to the purchase and sale decisions. The investment adviser received a
fee of 0.65% of the Fund's average daily net assets for its services in the
last fiscal year. The investment adviser reimbursed a portion of its fee
during the period.
As of September 30, 1999, Bankers Trust had total assets under management of
approximately $285 billion. Bankers Trust is dedicated to servicing the needs
of corporations, governments, financial institutions, and private clients and
has invested retirement assets on behalf of the nation's largest corporations
and institutions for more than 50 years. The scope of the firm's capability is
broad: it is a leader in both the active and passive quantitative investment
disciplines and maintains a major presence in stock and bond markets
worldwide.
At a special meeting of shareholders held in 1999, shareholders of the Fund
approved a new investment advisory agreement with Deutsche Asset Management,
Inc. (formerly Morgan Grenfell Inc.). The new investment advisory agreement
may be implemented within two years of the date of the special meeting upon
approval of a majority of the members of the Board of Trustees who are not
"interested persons," generally referred to as independent trustees.
Shareholders of the Fund also approved a new sub-investment advisory agreement
among the Trust, Deutsche Asset Management, Inc. and Bankers Trust under which
Bankers Trust may perform certain of Deutsche Asset Management, Inc.'s
responsibilities, at Deutsche Asset Management, Inc.'s expense, upon approval
of the independent trustees, within two years of the date of the special
meeting. Under the new investment advisory agreement and new sub-advisory
agreement, the compensation paid and the services provided would be the same
as those under the existing advisory agreement with Bankers Trust.
Deutsche Asset Management, Inc. is located at 885 Third Avenue, 32nd Floor,
New York, New York 10022. The firm provides a full range of investment
advisory services to institutional clients. It serves as investment adviser to
11 other investment companies and as sub-adviser to five other investment
companies.
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
authorities. 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
activities of Bankers Trust or its affiliates.
As a result of the plea, absent an order from the SEC, Bankers Trust would not
be able to continue to provide investment advisory services to the Fund. The
SEC has granted a temporary order to permit Bankers Trust and its affiliates
to continue to provide investment advisory services to registered investment
companies. There is no assurance that the SEC will grant a permanent order.
Portfolio Manager. The following portfolio manager is responsible for the day-
to-day management of the master portfolio's investments:
Mary P. Dugan, CFA
. Portfolio Manager of the master portfolio since 1999.
. Portfolio Manager in the investment adviser's small cap group from 1994 to
1999.
. Securities Analyst at Fred Alger Management from 1992 to 1994 and at Dean
Witter Reynolds from 1989 to 1992.
. BA from the University of Rochester and MBA from New York University's Stern
School of Business.
Other Services. Bankers Trust provides administrative services--such as
portfolio accounting, legal services and others--for the Fund. In addition,
Bankers Trust--or your service agent--performs the functions necessary to
establish and maintain your account. In addition to setting up the account and
processing your purchase and sale orders, these functions include:
. keeping accurate, up-to-date records for your individual Fund account;
. implementing any changes you wish to make in your account information;
. processing your requests for cash dividends and distributions from the Fund;
. answering your questions on the Fund's investment performance or
administration;
- - -------------------------------------------------------------------------------
9
<PAGE>
A Detailed Look at Mid Cap--Investment Class
. sending proxy reports and updated prospectus information to you; and
. collecting your executed proxies.
Service agents may include brokers, financial advisors or any other bank,
dealer or other institution that has a sub-shareholder servicing agreement with
Bankers Trust. Service agents may charge additional fees to investors only for
those services not otherwise included in the Bankers Trust servicing agreement,
such as cash management or special trust or retirement-investment reporting.
Organizational Structure. The Fund is a "feeder fund" that invests all of its
assets in a "master portfolio," Capital Appreciation Portfolio. The Fund and
the master portfolio have the same investment objective. The master portfolio
is advised by Bankers Trust, an indirect wholly-owned subsidiary of Deutsche
Bank A.G.
The master portfolio may accept investments from other feeder funds. The
feeders bear the master portfolio's expenses in proportion to their assets.
Each feeder can set its own transaction minimums, fund-specific expenses, and
other conditions. This arrangement allows the Fund's Trustees to withdraw the
Fund's assets from the master portfolio if they believe doing so is in the
shareholders' best interests. If the Trustees withdraw the Fund's assets, they
would then consider whether the Fund should hire its own investment adviser,
invest in a different master portfolio or take other action.
CALCULATING THE FUND'S SHARE PRICE
We calculate the daily price of the Fund's shares (also known as the "Net Asset
Value" or "NAV") in accordance with the standard formula for valuing mutual
fund shares at the close of regular trading on the New York Stock Exchange
every day the Exchange is open for business.
The formula calls for deducting all of the Fund's liabilities from the total
value of its assets--the market value of the securities it holds, plus its cash
reserves--and dividing the result by the
- - --------------------------------------------------------------------------------
The Exchange is open every week, Monday through Friday, except when the
following holidays are celebrated: New Year's Day, Martin Luther King, Jr. Day
(the third Monday in January), Presidents' Day (the third Monday in February),
Good Friday, Memorial Day (the last Monday in May), Independence Day (July
4th), Labor Day (the first Monday in September), Thanksgiving Day (the fourth
Thursday in November) and Christmas Day.
number of shares outstanding. (Note that prices for securities that trade on
foreign exchanges can change significantly on days when the New York Stock
Exchange is closed and you cannot buy or sell Fund shares. Such price changes
in the securities the Fund owns may ultimately affect the price of Fund shares
the next time the NAV is calculated.)
We value the securities in the Fund at their stated market value if price
quotations are available. When price quotes for a particular security are not
readily available, we determine their value by the method that most accurately
reflects their current worth in the judgment of the Board of Trustees. You can
find the Fund's daily share price in the mutual fund listings of most major
newspapers.
PERFORMANCE INFORMATION
The Fund's performance can be used in advertisements that appear in various
publications. It may be compared to the performance of various indexes and
investments for which reliable performance data is available. The Fund's
performance may also be compared to averages, performance rankings, or other
information prepared by recognized mutual fund statistical services.
DIVIDENDS AND DISTRIBUTIONS
Dividends and capital gains distributions, if any, are paid annually. We
automatically reinvest all dividends and any capital gains, unless you elect to
receive distributions in cash.
TAX CONSIDERATIONS
The Fund does not ordinarily pay income taxes. You and other shareholders pay
taxes on the income or capital gains from the Fund's holdings. Your taxes will
vary from year to year, based on the amount of capital gains distributions and
dividends paid out by the Fund. You owe the taxes whether you receive cash or
choose to have distributions and dividends reinvested. Distributions and
dividends usually create the following tax liability:
<TABLE>
<CAPTION>
Transaction Tax Status
<S> <C>
Income dividends Ordinary income
-------------------------------------------
Short-term capital gains
distributions Ordinary income
-------------------------------------------
Long-term capital gains
distributions Capital gains
-------------------------------------------
</TABLE>
- - --------------------------------------------------------------------------------
10
<PAGE>
A Detailed Look at Mid Cap--Investment Class
Every year your Fund will send you information on the distributions for the
previous year. In addition, if you sell your Fund shares you may have a
capital gain or loss.
<TABLE>
<CAPTION>
Transaction Tax Status
<S> <C>
Your sale of shares Capital gains or
owned more than one year losses
--------------------------------------------
Your sale of shares Gains treated as
owned for one year or ordinary income;
less losses subject to
special rules
--------------------------------------------
</TABLE>
The tax considerations for tax deferred accounts or non-taxable entities will
be different.
Because each investor's tax circumstances are unique and because the tax laws
are subject to change, we recommend that you consult your tax advisor about
your investment.
BUYING AND SELLING FUND SHARES
Contacting the Mutual Fund Service Center of Deutsche Asset Management
<TABLE>
<S> <C>
By phone 1-800-730-1313
By mail P.O. Box 219210
Kansas City, MO 64121-9210
By overnight 210 West 10th Street, 8th floor
mail Kansas City, MO 64105-1716
</TABLE>
Retirement Service Center
<TABLE>
<S> <C>
By phone 1-800-677-7596
By mail P.O. Box 219210
Kansas City, MO 64121-9210
By overnight 210 West 10th Street, 8th floor
mail Kansas City, MO 64105-1716
</TABLE>
Our representatives are available to assist you personally Monday through
Friday, 9:00 a.m. to 7:00 p.m., Eastern time each day the New York Stock
Exchange is open for business. You can reach the Service Center's automated
assistance line 24 hours a day, 7 days a week.
Minimum Account Investments
<TABLE>
<S> <C>
Initial purchase: Minimum amount:
A standard account $2,500
A retirement account $ 500
An automatic investment plan account $1,000
Subsequent purchase:
A standard account $ 250
A retirement account $ 100
An automatic investment plan account $ 100
Account balance:
Non-retirement account $1,000
Retirement account None
</TABLE>
The Fund and its service providers reserve the right to, from time to time in
their discretion, waive or reduce the investment minimums.
How to Open Your Fund Account
<TABLE>
<S> <C>
By mail Complete and sign the account ap-
plication that accompanies this
prospectus. (You may obtain addi-
tional applications by calling the
Service Center.) Mail the completed
application along with a check payable
to Mid Cap--465.
By wire Call the Service Center to set up a
wire account.
</TABLE>
Please note that your account cannot become activated until we receive a
completed application via mail or fax.
If this is your first investment through a tax-sheltered retirement plan, such
as an IRA, you will need a special application form. This form is available
from your service agent, or by calling the Retirement Service Center at 1-800-
677-7596.
Two Ways to Buy and Sell Shares in Your Account
MAIL:
Buying: Send your check, payable to the Fund you have selected, to the Service
Center. The addresses are shown under "Contacting the Mutual Fund Service
Center of Deutsche Asset Management." Be sure to include the fund number and
your account number (see your account statement) on your check.
- - -------------------------------------------------------------------------------
11
<PAGE>
A Detailed Look at Mid Cap--Investment Class
Please note that we cannot accept starter checks or third-party checks. If you
are investing in more than one fund, make your check payable to "Deutsche Asset
Management (Mutual Funds)" and include your account number, the names and
numbers of the funds you have selected, and the dollar amount or percentage you
would like invested in each fund.
Selling: Send a signed letter to the Service Center with your name, your fund
number and account number, the fund's name, and either the number of shares you
wish to sell or the dollar amount you wish to receive. You must leave at least
$1,000 invested in your account to keep it open. Unless exchanging into another
Deutsche Asset Management mutual fund, you must submit a written authorization
to sell shares in a retirement account.
WIRE:
Buying: You may buy shares by wire only if your account is authorized to do so.
Please note that you or your service agent must call the Service Center at 1-
800-730-1313 to notify us in advance of a wire transfer purchase. Inform the
Service Center representative of the amount of your purchase and receive a
trade confirmation number. Instruct your bank to send payment by wire using the
wire instructions noted below. All wires must be received by 4:00 p.m. Eastern
time the next business day.
<TABLE>
<S> <C>
Routing No: 021001033
Attn: Deutsche Asset Management/
Mutual Funds
DDA No: 00-226-296
FBO: (Account name)
(Account number)
Credit: Mid Cap--465
</TABLE>
Refer to your account statement for the account name, number and fund number.
Selling: You may sell shares by wire only if your account is authorized to do
so. For your protection, you may not change the destination bank account over
the phone. To sell by wire, contact your service agent or the Service Center at
1-800-730-1313. Inform the Service Center representative of the amount of your
redemption and receive a trade confirmation number. The minimum redemption by
wire is $1,000. We must receive your order by 4:00 p.m. Eastern time to wire
your account the next business day.
Important Information about Buying and Selling Shares
. You may buy and sell shares of a fund through authorized service agents as
well as directly from us. The same terms and conditions apply. Specifically,
once you place your order with a service agent, it is considered received by
the Service Center. It is then your service agent's responsibility to
transmit the order to the Service Center by the next business day. You should
contact your service agent if you have a dispute as to when your order was
placed with the fund. Your service agent may charge a fee for buying and
selling shares for you.
. You may place orders to buy and sell over the phone by calling your service
agent or the Service Center at 1-800-730-1313. If you pay for shares by check
and the check fails to clear, or if you order shares by phone and fail to pay
for them by 4:00 p.m. Eastern time the next business day, we have the right
to cancel your order, hold you liable or charge you or your account for any
losses or fees a fund or its agents have incurred. To sell shares, you must
state whether you would like to receive the proceeds by wire or check.
. After we or your service agent receives your order, we buy or sell your
shares at the next price calculated on a day the New York Stock Exchange is
open for business.
. We accept payment for shares only in U.S. dollars by check, bank or Federal
Funds wire transfer, or by electronic bank transfer. Please note that we
cannot accept starter checks or third-party checks.
. The payment of redemption proceeds (including exchanges) for shares of a fund
recently purchased by check may be delayed for up to 15 calendar days while
we wait for your check to clear.
. We process all sales orders free of charge.
. Unless otherwise instructed, we normally mail a check for the proceeds from
the sale of your shares to your account address the next business day but
always within seven days.
. You can exchange all or part of your shares for shares in another Deutsche
Asset Management mutual fund up to four times a year (from the date of the
first exchange). When you exchange shares, you are selling shares in one fund
to purchase shares in another. Before buying shares through an exchange, you
should obtain a copy of that fund's prospectus
- - --------------------------------------------------------------------------------
12
<PAGE>
A Detailed Look at Mid Cap--Investment Class
and read it carefully. You may order exchanges over the phone only if your
account is authorized to do so.
Please note the following conditions:
. The accounts between which the exchange is taking place must have the same
name, address and taxpayer ID number.
. You may make the exchange by phone, letter or wire, if your account has the
exchange by phone feature.
. If you are maintaining a taxable account, you may have to pay taxes on the
exchange.
. You will receive a written confirmation of each transaction from the
Service Center or your service agent.
. We reserve the right to close your account on 30 days' notice if it fails to
meet minimum balance requirements for any reason other than a change in
market value.
. If you sell shares by mail or wire, you may be required to obtain a
signature guarantee. Please contact your service agent or the Service Center
for more information.
. We remit proceeds from the sale of shares in U.S. dollars (unless the
redemption is so large it is made "in-kind").
. We do not issue share certificates.
. Selling shares of trust accounts and business or organization accounts may
require additional documentation. Please contact your service agent or the
Service Center for more information.
. During periods of heavy market activity, you may have trouble reaching the
Service Center by telephone. If this occurs, you should make your request by
mail.
. We reserve the right to reject purchases of Fund shares (including
exchanges) for any reason. We will reject purchases if we conclude that the
purchaser may be investing only for the short-term or for the purpose of
profiting from day to day fluctuations in the Fund's share price.
. We reserve the right to reject purchases of Fund shares (including
exchanges) or to suspend or postpone redemptions at times when both the New
York Stock Exchange and the Fund's custodian are closed.
Special Shareholder Services
To help make investing with us as easy as possible, and to help you build your
investment, we offer the following special services. You can obtain further
information about these programs by calling the Service Center at 1-800-730-
1313.
. Regular Investments: You can make regular investments of $100 or more
automatically from your checking account bi-weekly, monthly, quarterly, or
semi-annually.
. Regular Withdrawals: You can arrange regular monthly, quarterly, semi-annual
and annual sales of shares in your account. The minimum transaction is $100,
and the account must have a balance of at least $10,000 to qualify.
. Account Statements and Fund Reports: We or your service agent will furnish
you with a written confirmation of every transaction that affects your
account balance. You will also receive monthly statements reflecting the
balances in your account. We will send you a report every six months on your
fund's overall performance, its current holdings and its investing
strategies.
- - -------------------------------------------------------------------------------
13
<PAGE>
A Detailed Look at Mid Cap--Investment Class
The table below provides a picture of the Fund's financial performance for the
past five years. The information selected reflects financial results for a
single Fund share. The total returns in the table represent the rate of return
that an investor would have earned on an investment in the Fund (assuming
reinvestment of all interest income and distributions). This information has
been audited by PricewaterhouseCoopers LLP whose report, along with the Fund's
financial statements, is included in the Fund's annual report. The annual
report is available free of charge by calling the Service Center at 1-800-730-
1313.
Financial Highlights
<TABLE>
<CAPTION>
For the
period For the
January 1, year
For the year ended September 30, 1995 to ended
1999 1998 1997 1996 September 30, December 31,
1995/1/ 1994
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net Asset Value,
Beginning of Period $11.38 $15.72 $16.79 $16.83 $12.10 $11.72
---------------------------------------------------------------------------------------------------
Income (Loss) from
Investment Operations
Expenses in Excess of
Income (0.07) (0.12) (0.13) (0.10) (0.07) (0.04)
---------------------------------------------------------------------------------------------------
Net Realized and
Unrealized Gain (Loss)
from Investment
Transactions 4.99 (1.58) 2.13 1.89 4.80 0.42
---------------------------------------------------------------------------------------------------
Total Income (Loss) from
Investment Operations 4.92 (1.70) 2.00 1.79 4.73 0.38
---------------------------------------------------------------------------------------------------
Distributions to
Shareholders
Net Realized Gains from
Investment Transactions (1.53) (2.64) (3.07) (1.83) -- --
---------------------------------------------------------------------------------------------------
Net Asset Value, End of
Period $14.77 $11.38 $15.72 $16.79 $16.83 $12.10
---------------------------------------------------------------------------------------------------
Total Investment Return 47.05% (11.42)% 14.64% 12.35% 39.09% 3.24%
---------------------------------------------------------------------------------------------------
Supplemental Data and
Ratios:
Net Assets, End of
Period (000s omitted) $28,732 $25,497 $49,002 $67,385 $57,380 $42,737
---------------------------------------------------------------------------------------------------
Ratios to Average Net
Assets:
Expenses in Excess of
Income (0.58)% (0.70)% (0.77)% (0.66)% (0.65)%/2/ (0.57)%
---------------------------------------------------------------------------------------------------
Expenses, Including
Expenses of the Capital
Appreciation Portfolio 1.25% 1.25% 1.25% 1.25% 1.25%/2/ 1.25%
---------------------------------------------------------------------------------------------------
Decrease Reflected in
Above Expense Ratio Due
to Fees Waived/Expenses
Reimbursed by Bankers
Trust 0.63% 0.39 0.29 0.26% 0.32%/2/ 0.54%
---------------------------------------------------------------------------------------------------
Portfolio Turnover
Rate/3/ 155% 145% 167% 271% 125% 157%
---------------------------------------------------------------------------------------------------
</TABLE>
/1/The Board of Trustees approved the change of the fiscal year end from De-
cember 31 to September 30.
/2/Annualized.
/3/The portfolio turnover rate is the rate for the master portfolio into which
the Fund invests all of its assets.
- - --------------------------------------------------------------------------------
14
<PAGE>
This page intentionally left blank
<PAGE>
Additional information about the Fund's investments and performance is
available in the Fund's annual and semi-annual reports to shareholders. In
the Fund's annual report, you will find a discussion of the market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year.
You can find more detailed information about the Fund in the current
Statement of Additional Information, dated January 31, 2000, which we have
filed electronically with the Securities and Exchange Commission (SEC) and
which is incorporated by reference. To receive your free copy of the
Statement of Additional Information, the annual or semi-annual report, or
if you have questions about investing in a Fund, write to us at:
Service Center
P.O. Box 219210
Kansas City, MO 64121-9210
Or call our toll-free number: 1-800-730-1313
You can find reports and other information about each Fund on the EDGAR
Database on the SEC's website (http://www.sec.gov), or you can get copies
of this information, after payment of a duplicating fee, by electronic
request at [email protected] or by writing to the Public Reference Section
of the SEC, Washington, D.C. 20549-0102. Information about each Fund,
including its Statement of Additional Information, can be reviewed and
copied at the SEC's Public Reference Room in Washington, D.C. For
information on the Public Reference Room, call the SEC at 202-942-8090.
Mid Cap--Investment Class
BT Investment Funds
Distributed by:
ICC Distributors, Inc. CUSIP
Two Portland Square #055922819
Portland, ME 04101 465PRO (1/00)
811-4760
<PAGE>
MID CAP
STATEMENT OF ADDITIONAL INFORMATION
June __, 2000
This statement of additional information is not a prospectus, but expands upon
and supplements the information contained in the prospectus of Mid Cap, dated
January 31, 2000. This statement of additional information should be read in
conjunction with the prospectus.
Additional copies of the prospectus may be obtained by writing to the Fund at
the Service Center, P.O. Box 219210, Kansas City, MO, 64121-9210 or by
telephoning the Fund toll free at 800-730-1313.
This statement of additional information is accompanied by and incorporated by
reference to the statement of additional information dated January 31, 2000 of
BT Investment Funds on behalf of Mid Cap and the statement of additional
information dated January 31, 2000 of BT Pyramid Mutual Funds on behalf of the
Equity Appreciation. Mid Cap and Equity Appreciation are referred to
collectively as the "Funds".
<PAGE>
ADDITIONAL INFORMATION ABOUT
MID CAP AND
EQUITY APPRECIATION
The following table shows where in each Fund's statement of additional
information (SAI) you can find additional information about each Fund.
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------
TYPE OF INFORMATION HEADINGS IN SAI
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BT INVESTMENT FUNDS, MID CAP BT PYRAMID MUTUAL FUNDS,
formerly Capital Appreciation Fund EQUITY APPRECIATION
SAI dated January 31, 2000 Formerly BT Investment Equity
Appreciation Fund
SAI dated January 31, 2000
- - -----------------------------------------------------------------------------------------------------------------
Fund history ORGANIZATION OF THE TRUST
- - -----------------------------------------------------------------------------------------------------------------
Description of each Fund and INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS:
investments, strategies, policies Investment Objectives
and risks Investment Policies
Futures Contracts and Options on Futures Contracts
Additional Risk Factors
Investment Restrictions
- - -----------------------------------------------------------------------------------------------------------------
Management of the Funds, MANAGEMENT OF THE TRUST MANAGEMENT OF THE TRUST:
including the Board of Trustees, AND THE PORTFOLIOS: Trustees of the Trust
Officers and Trustee compensation Trustees of the Trust Officers of the Trust
Trustees of the Portfolio Trustee Compensation Table
Officers of the Trust and Portfolio
Trustee Compensation Table
- - -----------------------------------------------------------------------------------------------------------------
Control persons, principal MANAGEMENT OF THE TRUST MANAGEMENT OF THE TRUST:
holders of securities and AND THE PORTFOLIOS: Trustee Compensation Table
management ownership Trustee Compensation Table
- - -----------------------------------------------------------------------------------------------------------------
Investment advisory and other MANAGEMENT OF THE TRUST MANAGEMENT OF THE TRUST:
services: investment adviser, AND THE PORTFOLIOS: Investment Adviser
distributor and other service Investment Adviser Administrator
providers Administrator Distributor
Distributor Service Agent
Service Agent Custodian and Transfer Agent
Custodian and Transfer Agent Use of Name
Banking Regulatory Matters Banking Regulatory Matters
Counsel and Independent Counsel and Independent
Auditors Auditors
- - -----------------------------------------------------------------------------------------------------------------
Brokerage allocation and other INVESTMENT OBJECTIVE, INVESTMENT OBJECTIVE,
Practices POLICES AND RESTRICTIONS: POLICIES AND RESTRICTIONS:
Portfolio Transactions and Brokerage Commissions
Brokerage Commissions
- - -----------------------------------------------------------------------------------------------------------------
Shares of beneficial interest ORGANIZATION OF THE TRUST
- - -----------------------------------------------------------------------------------------------------------------
Purchase, redemption and pricing VALUATION OF SECURITIES; VALUATION OF SECURITIES;
of shares REDEMPTIONS AND REDEMPTIONS AND PURCHASES
PURCHASES IN-KIND: IN-KIND:
Purchase of Shares Purchase of Shares
Redemption of Shares Redemption of Shares
Redemptions and Purchases In-
Kind
Trading in Foreign Securities
- - -----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------
TYPE OF INFORMATION HEADINGS IN SAI
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BT INVESTMENT FUNDS, MID CAP BT PYRAMID MUTUAL FUNDS,
SAI dated January 31, 2000 EQUITY APPRECIATION
SAI dated January 31, 2000
- - ----------------------------------------------------------------------------------------------------------------
Taxation of the Funds TAXATION: TAXATION:
Dividends and Distributions Dividends and Distributions
Taxation of the Fund Taxation of the Fund
Taxation of the Portfolios Foreign Securities
Foreign Securities Other Taxation
Other Taxation
- - ----------------------------------------------------------------------------------------------------------------
Calculation of performance data PERFORMANCE INFORMATION:
Standard Performance Information
Comparison of Fund Performance
Economic and Market Information
- - ----------------------------------------------------------------------------------------------------------------
Financial statements FINANCIAL STATEMENTS:
This section incorporates by reference Investment Equity Appreciation's and
Mid Cap's annual report each dated September 30, 1999.
- - ----------------------------------------------------------------------------------------------------------------
</TABLE>
FINANCIAL HIGHLIGHTS
The financial highlights table for Mid Cap, which is intended to help you
understand the Mid Cap's financial performance for the past five years, is
included in the Mid Cap's prospectus dated January 31, 2000, which is included
herewith and incorporated herein by reference.
Pro Forma Financial Statements/(1)/
Pro Forma Combined Condensed Statement of Assets and Liabilities (unaudited)
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------
Pro Forma Pro Forma
March 31, 2000 Mid Cap Equity Appreciation Adjustments Combined
- - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investments at Value $44,413,470 $352,616,706 -- $397,030,176
- - ------------------------------------------------------------------------------------------------------------------------
Cash -- -- -- --
- - ------------------------------------------------------------------------------------------------------------------------
Other Assets
Less Liabilities ($5,776) ($584,637) $ -- /(2)/ ($590,413)
- - ------------------------------------------------------------------------------------------------------------------------
Total Net Assets $44,407,694 $352,032,069 $ -- $396,439,763
- - ------------------------------------------------------------------------------------------------------------------------
Net Assets:
- - ------------------------------------------------------------------------------------------------------------------------
Shares Outstanding 2,456,004 13,694,033 5,778,882 21,928,919
- - ------------------------------------------------------------------------------------------------------------------------
Net Asset Value Per
Share $ 18.08 25.71 -- $ 18.08
- - ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Pro Forma Combined Condensed Statement of Operations (unaudited)
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------
For the Six Months Ended
March 31, 2000 Mid Cap Fund Equity Fund Pro Forma Adjustments Pro Forma Combined
- - --------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Investment Income
Allocated from Mid Cap
Portfolio $ 30,258 -- -- $ 30,258
- - --------------------------------------------------------------------------------------------------------------------------
Interest and Dividend Income -- $ 1,047,214 -- 1,047,214
- - --------------------------------------------------------------------------------------------------------------------------
Total Investment Income: $ 1,077,472
- - --------------------------------------------------------------------------------------------------------------------------
EXPENSES:
- - --------------------------------------------------------------------------------------------------------------------------
Management Fees $ 116,061 $ 1,410,162 -- 1,526,223
- - --------------------------------------------------------------------------------------------------------------------------
Trustees Fees 1,995 2,150 (2,150)/(3)/ 1,995
- - --------------------------------------------------------------------------------------------------------------------------
All Other Expenses 18,870 25,240 ( )/(2)/ 44,110
- - --------------------------------------------------------------------------------------------------------------------------
Total Expenses before Reductions 136,926 1,437,552 (2,150) 1,572,328
- - --------------------------------------------------------------------------------------------------------------------------
Expense Reductions (20,865) (208,122) (228,987)
- - --------------------------------------------------------------------------------------------------------------------------
Expenses, net 116,061 1,229,430 (2,150) 1,343,341
- - --------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) (85,803) (182,216) 2,150 (265,869)
- - --------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized
Gain (Loss) on Investments:
- - --------------------------------------------------------------------------------------------------------------------------
Net Realized Gain (Loss)
from Investments 5,319,828 24,721,772 30,041,600
- - --------------------------------------------------------------------------------------------------------------------------
Net Unrealized Appreciation
(Depreciation) of 10,271,756 78,186,926 88,458,682
Investments
- - --------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets from
Operations $15,505,781 $102,726,482 $ 2,150 $118,234,413
- - --------------------------------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS - March 31, 2000
1. These financial statements set forth the unaudited pro forma condensed
Statement of Assets and Liabilities as of March 31, 2000 and the unaudited
pro forma condensed Statement of Operations for the six month period ended
March 31, 2000 for Mid Cap and Equity Appreciation, as adjusted, giving
effect to the reorganization as if it had occurred as of the beginning of
the period. These statements have been derived from the books and records
utilized in calculating daily net asset value for each Fund.
2. Represents an estimation for a one-time proxy, legal, accounting and other
costs of the Reorganization of $_________ and $_____________ to be borne by
Mid Cap and Equity Appreciation, respectively.
3. Reduction in trustee fees resulting from the Reorganization.
Pro Forma Combined Schedule of Portfolio/Fund Investments
As of March 31, 2000 (unaudited)
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------
Capital Equity
Appreciation Appreciation Pro Forma Capital Equity
Portfolio Fund Combined Appreciation Appreciation
Description Par/Share Par/Share Par/Share Portfolio Fund Market
of Securities Amount Amount Amount Market Value Value
- - --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- - --------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------
Total
Investment
Portfolio/Fund
100%
- - --------------------------------------------------------------------------------------------------
Investment
Portfolio/Fund:
Total Cost
- - --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PART C - OTHER INFORMATION
ITEM 15. Indemnification
The response to this Item 15 is incorporated by reference to Item 25 of Post-
Effective Amendment No. 38 to the Registrant's Registration Statement on Form N-
1A ("Registration Statement") as filed with the Securities and Exchange
Commission ("SEC") on April 29, 1996.
Item, 16. Exhibits:
1) Declaration of Trust dated July 21, 1986; 1
(i) Supplement to Declaration of Trust dated October 20, 1986; (1)
(ii) Second Supplement to Declaration of Trust dated May 16, 1988; (1)
2) By-Laws; (1)
3) Not applicable
4) Form of Agreement and Plan of Reorganization filed herewith.
5) Not Applicable
6) Investment Advisory Agreement dated December 31, 1998; (9)
(i) Investment Advisory Agreement dated June 4, 1999; (13)
7) Distribution Agreement dated August 11, 1998; (5)
(ii) Appendix A dated December 9, 1998 to Distribution Agreement; (7)
(iii) Appendix A dated December 23, 1999 to Distribution Agreement; (12)
8) Bonus or Profit Sharing Contracts - Not applicable;
9) Custodian Agreement dated July 1, 1996; 2
(i) Amendment No. 2 to Exhibit A of the Custodian Agreement dated
October 8, 1997; (3)
(ii) Amendment No. 3 to Exhibit A of the Custodian Agreement dated
June 10, 1998; (7)
(iii) Amendment No. 4 to Exhibit A of the Custodian Agreement dated
December 9, 1998; (7)
(iv) Cash Services Addendum to Custodian Agreement dated December 18,
1997; (4)
(v) Amendment No. 5 to Exhibit A of the Custodian Agreement dated
December 23, 1999; (12)
(10) Not Applicable.
(11) Opinion of Willkie Farr & Gallagher concerning the tax matters and
consequences to shareholders discussed in the prospectus will be filed
with the definitive.
(12) Not Applicable
(13) Administration and Services Agreement dated October 28, 1992; (8)
(i) Exhibit D to the Administration and Services Agreement as of
October 28, 1992; (7)
(ii) Agreement to Provide Shareholder Services for BT PreservationPlus
Income Fund as of June 10, 1998; (5)
(iii) Shareholder Services Plan for BT PreservationPlus Income Fund as
of June 10, 1998; (5)
(iv) Expense Limitation Agreement dated September 30, 1998 on behalf
of Intermediate Tax Free Fund, International Equity Fund, Capital
Appreciation Fund, Pacific Basin Equity Fund, Latin American
Equity Fund, Small Cap Fund, International Small Company Equity
Fund and Global Emerging Markets Equity Fund; (6)
(v) Expense Limitation Agreement dated December 31, 1998 on behalf of
Cash Management Fund, Tax Free Money Fund, NY Tax Free Money
Fund, Treasury Money Fund and Quantitative Equity Fund; (9)
(vi) Expense Limitation Agreement dated March 31, 1999, on behalf of
BT Investment Lifecycle Long Range Fund, BT Investment Lifecycle
Mid Range Fund, and BT Investment Lifecycle Short Range Fund;
(10)
(vii) Amended Expense Limitation Agreement dated December 31, 1998 on
behalf of Cash Management Fund, Tax Free Money Fund, NY Tax Free
Money Fund, Treasury Money Fund and Quantitative Equity Fund;(12)
(viii) Exhibit D to the Administration and Services Agreement as of
October 28, 1992, as revised December 23, 1999 Fund; (12)
(14) Consent of Independent Accountants filed herewith;
(15) Not Applicable;
(16) Power of attorney is incorporated by reference herein; (12)
<PAGE>
___________________________________
1. Incorporated by reference to Post-Effective Amendment No. 34 to Registrant's
Registration Statement on Form N-1A ("Registration Statement") as filed
with the Securities and Exchange Commission ("Commission") on July 31,
1995.
2. Incorporated by reference to Post-Effective Amendment No. 44 to Registrant's
Registration Statement as filed with the Commission on July 1, 1997.
3. Incorporated by reference to Post-Effective Amendment No. 46 to Registrant's
Registration Statement as filed with the Commission on January 28, 1998.
4. Incorporated by reference to Post-Effective Amendment No. 50 to Registrant's
Registration Statement as filed with the Commission on June 30, 1998.
5. Incorporated by reference to Post-Effective Amendment No. 55 to Registrant's
Registration Statement as filed with the Commission on November 25, 1998.
6. Incorporated by reference to Post-Effective Amendment No. 56 to Registrant's
Registration Statement as filed with the Commission on January 28, 1999.
7. Incorporated by reference to Post-Effective Amendment No. 57 to Registrant's
Registration Statement as filed with the Commission on February 8, 1999.
8. Incorporated by reference to Post-Effective Amendment No. 29 to
Registrant's Registration Statement as filed with the Commission on
November 8, 1993.
9. Incorporated by reference to Post-Effective Amendment No. 60 to
Registrant's Registration Statement as filed with the Commission on March
15, 1999.
10. Incorporated by reference to Post-Effective Amendment No. 63 to
Registrant's Registration Statement as filed with the Commission on July
29, 1999.
11. Incorporated by reference to Post-Effective Amendment No. 64 to
Registrant's Registration Statement as filed with the Commission on
October 22, 1999.
12. Incorporated by reference to Post-Effective Amendment to No. 66 to
Registrant's Registration Statement as filed with the Commission on
December 23, 1999.
13. Incorporated by reference to Post-Effective Amendment to No. 67 to
Registrant's Registration Statement as filed with the Commission on
January 28, 2000.
Item 17. Undertakings.
The undersigned Registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus which is
part of this registration statement by any person or party which is
deemed to be an underwriter within the meaning of Rule 145(c) under
the Securities Act of 1933, the reoffering prospectus will contain the
information called for by the applicable registration form for
reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other items of the applicable form.
The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as part of an amendment to the
registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the Securities
Act of 1933, each post-effective amendment shall be deemed to be a new
registration statement for the securities offered therein, and the
offering of the securities at that time shall be deemed to be the
initial bona fide offering of them.
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form N-14 of our reports dated November 16, 1999, relating to the
financial statements and financial highlights which appear in the September 30,
1999 Annual Report to Shareholders of the Capital Appreciation Fund and the
September 30, 1999 Annual Report to Shareholders of the BT Investment Equity
Appreciation Fund, which are also incorporated by reference into the
Registration Statement. We also consent to the references to us under the
heading "Experts" in such Registration Statement and under the heading
"Representations and Warranties" in the Agreement and Plan of Reorganization
included in such Registration Statement.
PricewaterhouseCoopers LLP
Baltimore, Maryland
May 15, 2000
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant, BT Investment Funds, on behalf of its series Mid Cap, has duly
caused this Registration Statement on Form N-14 to be signed on its behalf by
the undersigned, duly authorized, in the City of Baltimore and the State of
Maryland on this 16/th/ day of May, 2000.
BT INVESTMENT FUNDS
By: /s/ Daniel O. Hirsch
Daniel O. Hirsch, Secretary
May 16, 2000
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement on Form N-14 has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
- - ---------- ------ ----
<S> <C> <C>
By: /s/ DANIEL O. HIRSCH Secretary May 16, 2000
Daniel O. Hirsch Attorney in Fact
For the Persons Listed Below)
/s/ JOHN Y. KEFFER* President and
John Y. Keffer Chief Executive Officer
/s/ CHARLES A. RIZZO* Treasurer (Principal
Charles A. Rizzo Financial and Accounting Officer)
/s/ CHARLES P. BIGGAR* Trustee
Charles P. Biggar
/s/ S. LELAND DILL* Trustee
S. Leland Dill
/s/ MARTIN J. GRUBER* Trustee
Martin J. Gruber
/s/ RICHARD T. HALE* Trustee
Richard T. Hale
/s/ RICHARD J. HERRING* Trustee
Richard J. Herring
/s/ BRUCE T. LANGTON* Trustee
Bruce T. Langton
/s/ PHILIP SAUNDERS, JR.* Trustee
Philip Saunders, Jr.
/s/ HARRY VAN BENSCHOTEN* Trustee
Harry Van Benschoten
</TABLE>
*By Power of Attorney. Incorporated by reference to Post-Effective Amendment
No. 66 of BT Investment Funds as filed with the SEC on December 23, 1999.
<PAGE>
SIGNATURES
BT INVESTMENT PORTFOLIOS has duly caused this Registration Statement on Form
N-14 to be signed on its behalf by the undersigned, thereto duly authorized, in
the City of Baltimore and the State of Maryland and the 16/th/ day of May, 2000.
BT INVESTMENT PORTFOLIOS
By: /s/ Daniel O. Hirsch
Daniel O. Hirsch, Secretary
May 16, 2000
This Registration Statement on Form N-14 of BT Investment Funds has been signed
below by the following persons in the capacities indicated with respect to BT.
INVESTMENT PORTFOLIOS.
<TABLE>
<CAPTION>
NAME TITLE DATE
- - ---- ----- ----
<S> <C> <C>
By: /s/ DANIEL O. HIRSCH Secretary May 16, 2000
Daniel O. Hirsch Attorney in Fact
For the Persons Listed Below)
/s/ JOHN Y. KEFFER* President and
John Y. Keffer Chief Executive Officer
/s/ CHARLES A. RIZZO* Treasurer (Principal
Charles A. Rizzo Financial and Accounting Officer)
/s/ CHARLES P. BIGGAR* Trustee
Charles P. Biggar
/s/ S. LELAND DILL* Trustee
S. Leland Dill
/s/ MARTIN J. GRUBER* Trustee
Martin J. Gruber
/s/ RICHARD T. HALE* Trustee
Richard T. Hale
/s/ RICHARD J. HERRING* Trustee
Richard J. Herring
/s/ BRUCE T. LANGTON* Trustee
Bruce T. Langton
/s/ PHILIP SAUNDERS, JR.* Trustee
Philip Saunders, Jr.
/s/ HARRY VAN BENSCHOTEN* Trustee
Harry Van Benschoten
</TABLE>
*By Power of Attorney. Incorporated by reference to Post-Effective Amendment
No. 66 of BT Investment Funds as filed with the SEC on December 23, 1999.
<PAGE>
PROPOSED RESOLUTIONS RELATING TO THE REORGANIZATION OF
BT INVESTMENT EQUITY APPRECIATION FUND, A SERIES OF BT
PYRAMID MUTUAL FUNDS ("Equity Appreciation Fund") INTO
CAPITAL APPRECIATION FUND, A SERIES OF BT INVESTMENT FUNDS
("Capital Appreciation Fund")
(To be voted on by the Boards of BT INVESTMENT FUNDS and
BT PYRAMID MUTUAL FUNDS ("Trusts"))
RESOLVED, that the transfer of substantially all of the assets of Equity
Appreciation Fund to the Capital Appreciation Fund in exchange solely
for the shares of common stock of the Capital Appreciation Fund and
the discharge by the Equity Appreciation Fund and assumption by the
Capital Appreciation Fund of the stated liabilities of the Equity
Appreciation Fund, the distribution of shares of the Capital
Appreciation Fund to the shareholders of the Equity Appreciation Fund
in liquidation of the Equity Appreciation Fund, (the "Reorganization")
be, and it hereby is authorized and approved, and that the officers of
the Trusts be, and each of them hereby is, authorized to take such
actions and to execute such documents as such officer may deem
necessary or appropriate in order to effectuate the Reorganization,
subject to shareholder approval of and satisfaction of the terms and
conditions of the Reorganization Agreement as defined in the next
succeeding resolution;
FURTHER RESOLVED, that the Agreement and Plan of Reorganization by and
between the Equity Appreciation Fund and the Capital Appreciation Fund
providing for the Reorganization (the "Reorganization Agreement"), in
substantially the form presented to this meeting, with such changes
and additions as any officer of the Equity Appreciation Fund, on the
advice of counsel or otherwise, may approve, such approval being
conclusively proven by the execution of the Reorganization Agreement
by such officer, be and it hereby is approved; that the officers of
the Equity Appreciation Fund be, and each of them hereby is, subject
to shareholder approval of the Reorganization Agreement, authorized to
execute and deliver the Reorganization Agreement and any related
documents; and that the execution by the Equity Appreciation Fund of
the Reorganization Agreement and any related documents, and the
transactions contemplated thereby and any and all acts necessary in
connection therewith, the necessity and desirability thereof being
conclusively proven by the action taken by the appropriate officers of
the Equity Appreciation Fund on behalf of the Equity Appreciation Fund
be, and it hereby is,
<PAGE>
authorized, approved and directed, subject in all cases to shareholder
approval of the Reorganization Agreement;
FURTHER RESOLVED, that participation by the Equity Appreciation Fund in the
Reorganization is in the best interests of such Fund and that the
interests of existing shareholders of the Equity Appreciation Fund
will not be diluted as a result of the effecting of such transactions
by the Equity Appreciation Fund; and that the Board has considered the
following factors in making this determination: (i) the terms and
conditions of the Reorganization Agreement and whether the
Reorganization would result in dilution of shareholder interests, (ii)
the costs estimated to be incurred by the Equity Appreciation Fund as
a result of the Reorganization, (iii) efficiencies as a result of
being part of a larger fund, (iv) marketing advantages due to longer
term and better performance and (v) the tax consequences of the
Reorganization;
FURTHER RESOLVED, that the Board of Trustees, having considered the
recommendation of fund management, has determined that the name of the
merged Fund be, and hereby is, changed to Mid Cap Fund;
FURTHER RESOLVED, that a Special Meeting of Shareholders of the Trusts be,
and it hereby is, called to be held at__________ on _______________,
for the shareholders to consider and take action on the approval of
the terms of an Agreement and Plan of Reorganization between the
Equity Appreciation Fund and the Capital Appreciation Fund and the
transactions contemplated therein, and such other matters as may
properly come before said meeting or any adjournment or adjournments
thereof; and that it is hereby recommended that such shareholders
approve the Reorganization Agreement at said meeting;
FURTHER RESOLVED, that the officers of the Equity Appreciation Fund be, and
each of them hereby is authorized to prepare and file the form of
notice of shareholders' meeting, proxy statement and proxy card
(collectively "Proxy Materials"), relating to the Reorganization and
such other matters as any officer of the Equity Appreciation Fund may
deem appropriate with the Securities and Exchange Commission as part
of the registration statement on Form N-14 of the Capital Appreciation
Fund; and that the officers of the Equity Appreciation Fund be, and
each of them hereby is, authorized to mail the Proxy Materials to
shareholders of the Equity Appreciation Fund;
FURTHER RESOLVED, that the close of business on ____________, be, and it
hereby is fixed as the record date for the determination of
shareholders of the Equity Appreciation Fund who shall be entitled
<PAGE>
to notice of and to vote at the Special Meeting of Shareholders or any
adjournment or adjournments thereof;
FURTHER RESOLVED, that Amy M. Olmert and Daniel O. Hirsch and each or
either of them be, and they hereby are, designated to appear, vote and
act as proxies, with powers of substitution, on behalf of the
shareholders of the Equity Appreciation Fund at the Special Meeting of
Shareholders or at any adjournment or adjournments thereof, and to do
all things, execute all documents and perform all acts as fully as
could be done if said shareholders whom they represent were personally
present;
FURTHER RESOLVED, that Amy M. Olmert and Daniel O. Hirsch be, and each of
them hereby is, appointed inspector of election in connection with the
Special Meeting of Shareholders;
FURTHER RESOLVED, that the proper officers of the Equity Appreciation Fund
be, and each of them hereby is, authorized and directed, on behalf of
such Fund, to take all action and execute all documents which they may
deem necessary or appropriate, the necessity or propriety thereof
being conclusively proven by the action taken by such officer, to
completely liquidate and terminate said funds under the laws of the
State of Massachusetts and under federal law in conjunction with the
Reorganization, including satisfying any legal or other obligations in
connection therewith; and
FURTHER RESOLVED, that the proper officers of the Equity Appreciation Fund
be, and each of them hereby is, authorized and directed, for and on
behalf of such Fund to take all action, execute all documents, and
make any filings with the Securities and Exchange Commission or the
states, which they may deem to be necessary or appropriate, the
necessity or propriety thereof being conclusively proven by the action
taken by such officer, to effectuate each of the foregoing resolutions
and to carry out the purposes thereof.
