<PAGE>
As filed with the Commission on February 2, 2000
1933 Act File No. 33-07404
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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 an indefinite number of shares has previously
registered pursuant to Rule 24f-2 under the Investment Company Act of 1940. 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 March 3, 2000.
<PAGE>
Smaller Companies Fund
(formerly Morgan Grenfell Smaller Companies Fund)
(a series of Morgan Grenfell Investment Trust)
One South Street
Baltimore, Maryland 21202
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
SCHEDULED FOR APRIL 7, 2000
This is the formal agenda for a Special Meeting, and any adjournments thereof,
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 Smaller Companies Fund ("MG Fund"):
A Special Meeting of MG Fund shareholders will be held at One South Street,
Baltimore, MD 21202 on April 7, 2000 at 10:00 a.m., Eastern Time, to consider
the following:
1. A proposal to approve an Agreement between MG Fund and Small Cap Fund (a BT
Investment Fund) ("BT Fund"). Under this Agreement, MG Fund would transfer
all of its assets to BT Fund in exchange for shares of BT Fund. These
shares would be distributed proportionately to you and the other
shareholders of the Institutional and Investment shares of MG Fund. BT
Fund would also assume MG 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 February 24, 2000 are
entitled to vote at the Meeting and any related adjournments thereof.
Whether or not you expect to attend the Special Meeting, please complete and
return the enclosed proxy card. If shareholders do not return their proxies in
sufficient numbers, MG Fund will incur additional costs to solicit proxies.
Daniel O. Hirsch
Secretary
March 7, 2000
<PAGE>
PROXY STATEMENT OF
SMALLER COMPANIES FUND
(formerly Morgan Grenfell Smaller Companies Fund)
(a series of Morgan Grenfell Investment Trust)
PROSPECTUS FOR
SMALL CAP FUND
(a series of BT Investment Funds)
This proxy statement and prospectus sets forth concisely the information you
should know before voting on the proposed reorganization of Smaller Companies
Fund, One South Street, Baltimore, Maryland 21202 ("MG Fund") into Small Cap
Fund, One South Street, Baltimore, MD 21202, (410) 895-5000 ("BT Fund"). Please
read it carefully and retain it for future reference.
Both BT Fund and MG Fund (each a "Fund" and together the "Funds") are open-end
mutual funds investing in stocks and other equity securities of small companies.
BT Fund's investment objective is long term capital growth and MG Fund's
investment objective is capital appreciation, with current income as a secondary
objective.
BT Fund is a "feeder-fund" that invests all of its assets in a "master-
portfolio," the Small Cap Portfolio. The BT Fund and its master portfolio have
the same investment objective. All references to the BT Fund apply to the Small
Cap Portfolio where appropriate.
How the Reorganization Will Work
[ ] MG Fund will transfer all of its assets to BT Fund. BT Fund will assume MG
Fund's stated liabilities.
[ ] BT Fund will issue shares to the Institutional class and the Investment
class of MG Fund in an amount equal to the value of the respective assets
of each class of shares received by BT Fund, less the respective
liabilities of each class of shares assumed by BT Fund in the
reorganization. These shares will be distributed to the respective class
of MG Fund's Institutional and Investment shareholders in proportion to
their holdings in the respective class of MG Fund on the reorganization
date.
[ ] The reorganization will be tax-free for federal income tax purposes.
[ ] MG Fund will be liquidated and terminated, and you will be a shareholder of
BT Fund.
An investment in BT Fund is not a bank deposit and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
The Securities and Exchange Commission has not approved or disapproved shares of
BT Fund or determined whether this prospectus is accurate or complete. Any
statement to the contrary is a crime.
<TABLE>
<CAPTION>
Where to Get More Information
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
Prospectus of BT Fund dated 1/31/2000. In the same envelope as this proxy statement and
prospectus. Incorporated by reference into this proxy
statement and prospectus.
- -----------------------------------------------------------
BT Fund's annual report to shareholders.
Prospectus of MG Fund dated 2/28/00. On file with the Securities and Exchange Commission
("SEC").
- -----------------------------------------------------------
MG Fund's annual and semi-annual reports to Documents are available at no charge by calling
shareholders. 1-800-407-7301.
- -----------------------------------------------------------
A statement of additional information dated 3/7/00. Incorporated by reference into this proxy statement
It contains additional information about both BT Fund prospectus.
and MG Fund. Call our toll-free telephone number: 1-800-550-6426 or
- ----------------------------------------------------------- write to us at Deutsche Asset Management Inc., P.O.
To ask questions about this proxy statement and Box 219165, Kansas City, MO 64121-9210.
prospectus.
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
The date of this proxy statement and prospectus is March 7, 2000.
<PAGE>
TABLE OF CONTENTS
Page
----
INTRODUCTION 1
SUMMARY 1
THE REORGANIZATION 5
CAPITALIZATION 8
COMPARISON OF BUSINESS TRUSTS UNDER
DELAWARE AND MASSACHUSETTS LAW 9
ADDITIONAL INFORMATION ABOUT
THE FUNDS' BUSINESSES 10
BOARDS' EVALUATION AND RECOMMENDATION 10
VOTING RIGHTS AND REQUIRED VOTE 11
INFORMATION CONCERNING THE MEETING 11
OWNERSHIP OF SHARES OF THE FUNDS 12
EXPERTS 13
AVAILABLE INFORMATION 13
EXHIBITS
A. Agreement and Plan of Reorganization between Small Cap Fund and Smaller
Companies Fund (attached to this proxy statement and prospectus).
B. Annual report to shareholders dated September 30, 1999. of Small Cap Fund.
C. Prospectus dated January 31, 2000 of Small Cap Fund.
<PAGE>
INTRODUCTION
This proxy statement and prospectus is being used by the Board of Trustees of MG
Fund to solicit proxies to be voted at a Special Meeting (the "Meeting") of
shareholders of MG Fund. This Meeting will be held at One South Street,
Baltimore, MD 21202 on April 7, 2000 at 10:00 a.m., Eastern Time. The purpose
of the Meeting is to consider a proposal to approve an Agreement providing for
the reorganization of MG Fund into BT Fund. This proxy statement and prospectus
and a proxy card are being mailed to MG Fund's shareholders on or about March 7,
2000.
Who is Eligible to Vote?
MG Fund shareholders of record on February 24, 2000 are entitled to attend and
vote at the Meeting or any adjournments thereof. Each Institutional and
Investment share of the MG Fund outstanding on February 24, 2000 is entitled to
one vote. Shares represented by properly executed proxies, 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. You should read the entire proxy statement 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 and February 28, 2000, respectively, for BT Fund and MG Fund
are hereby incorporated by reference into this proxy statement and prospectus.
During the first quarter of 2000 the BT Fund and the MG Fund will be renamed the
Small Cap Fund and the Smaller Companies Fund, respectively, and both will
become Deutsche Asset Management mutual funds.
Comparison of MG Fund to BT Fund
<TABLE>
<CAPTION>
MG Fund BT Fund
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
General A diversified series of Morgan Grenfell A diversified series of BT Investment
Investment Trust ("MG Trust"). MG Trust is Funds ("BT Trust"). BT Trust is an
an open-end management investment company open-end management investment company
organized as a Delaware business trust. organized as a Massachusetts business
trust.
- -------------------------------------------------------------------------------------------------------------------
Investment MG Fund invests directly in securities, as BT Fund is a feeder fund in a
Structure described below. master-feeder structure, which means that
it invests all of its assets in Small Cap
Portfolio ("BT Portfolio"). BT Portfolio
has the same investment objective as BT
Fund. All references to the BT Fund in
this proxy statement include BT Portfolio
where appropriate.
- -------------------------------------------------------------------------------------------------------------------
Net assets as of Institutional shares Investment shares
February 24, 2000 $______________ $__________ $_________________
- -------------------------------------------------------------------------------------------------------------------
Investment Deutsche Asset Management, Inc. is MG Bankers Trust Company ("Bankers Trust")
Advisers Fund's investment adviser. is the investment adviser of the BT
Portfolio in which the BT Fund invests.
- -------------------------------------------------------------------------------------------------------------------
Control of investment Deutsche Asset Management, Inc. and Bankers
advisers and subadvisers Trust are indirect wholly-owned
subsidiaries of Deutsche Bank A.G., an
international commercial and
investment-banking group.
- -------------------------------------------------------------------------------------------------------------------
Portfolio managers A portfolio management committee primarily John Callaghan, Mary P. Dugan and
made up of John Callaghan, Mary P. Dugan Audrey Jones are the portfolio
and Audrey Jones makes all of MG Fund's managers for BT Fund.
investment decisions.
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
MG Fund BT Fund
- -----------------------------------------------------------------------------------------------------------------
Investment objectives and policies
- -----------------------------------------------------------------------------------------------------------------
Investment Capital appreciation, with current income Long-term capital growth.
Objectives as a secondary objective.
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Principal MG Fund invests at least 65% of its total BT Fund normally owns stock in
Investments assets in the equity and equity related approximately 90 to 110 small companies
securities of U.S. small capitalization at any one time. The Fund focuses
companies. The Fund defines the small principally on companies with small
capitalization equity securities universe market capitalization within the market
as the bottom 20% of the total domestic capitalization range of the Russell 2000
equity market capitalization, (at the Index.
time of investment), using a minimum
market capitalization of $10 million. BT Fund may also invest up to 25% of its
assets in the stocks of non-U.S.
MG Fund may invest up to 35% of the companies and up to 35% of its assets in
Fund's total assets in investment grade large capitalization companies. Under
fixed income securities, securities of normal conditions, these two tactics
medium and large capitalization would not comprise major elements of its
companies, securities of foreign issuers strategy.
and in cash.
- -----------------------------------------------------------------------------------------------------------------
Equity Securities Each Fund may invest in equity and equity-related securities, including common stock,
preferred stock, rights and warrants and convertible securities.
- -----------------------------------------------------------------------------------------------------------------
Principal strategies MG Fund's portfolio management team The BT Fund invests for the long-term.
generally uses a "bottom-up" approach to It looks for small companies that have
picking stocks. This approach focuses on reached a pivotal point; companies that
individual stock selection rather than are ready to reap the benefits of
industry selection. The team uses an technological change, companies that have
active process, which combines financial begun to increase their market share,
analysis with company visits to evaluate companies that have completed a
management and strategies. turnaround or whose pace of growth is
starting to accelerate. Normally, their
share prices do not reflect their strong
prospects.
--------------------------------------------------------------------------------------
Each Fund looks for two financial attributes that set these companies apart:
. Evidence of above-average growth in revenues and earnings; and
. A balance sheet that can support this growth potential with sufficient working
capital and manageable levels of debt.
- -----------------------------------------------------------------------------------------------------------------
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 companies to the extent permitted by the
Investment Company Act of 1940.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
- --------------------------------------------------------------------------------
MG Fund BT Fund
- --------------------------------------------------------------------------------
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
positions strategies in order to take a 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.
- --------------------------------------------------------------------------------
Management risk The value of each Fund's shares depends
in part on the ability of its adviser to
assess economic conditions and investment
opportunities. If the adviser's judgment
about the attractiveness of various
investments proves to be incorrect, a
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.
- --------------------------------------------------------------------------------
Small company risk Both Funds' performance may be more
volatile because they invest in small
capitalization stocks. Smaller companies
may have limited product lines, markets
and financial resources. They may also
have shorter operating histories and more
volatile businesses. In addition, it may
be harder to sell these stocks,
particularly in large blocks, which can
reduce their selling price.
- --------------------------------------------------------------------------------
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 the full value of its investment.
Also, a decline in foreign currency relative to the
value of the U.S. dollar would depreciate the value
of the investment itself.
- --------------------------------------------------------------------------------
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,
Inc. (NYSE) (normally 4:00 p.m. Eastern
time) on each business day that the NYSE
is open. 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.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
Classes of shares MG Fund offers two classes of shares: BT Fund has only one class of shares,
Institutional shares and Investment which is offered without a sales charge.
shares. Both Institutional and Therefore, the same class of BT Fund
Investment shares are offered to the shares will be offered to MG Fund
public without a sales charge. Institutional and Investment shareholders
in this proxy statement and prospectus.
- ----------------------------------------------------------------------------------------------------------------
Rule 12b-1 and service Institutional shares are not subject to BT Fund shares are not subject to any
fees any Rule 12b-1 or service fee. The Rule 12b-1 or service fee.
Investment shares are subject to a
shareholder service fee of 0.25% of
average net assets.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
MG Fund BT Fund
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Buying and selling shares Institutional shares: Investors may Investors may purchase or redeem shares
purchase and redeem shares through either from authorized brokers or
brokers or by dealing directly with MG directly from BT Fund.
Fund.
Investment shares: Investors may purchase
shares only through their account
established with their service
organization.
- -----------------------------------------------------------------------------------------------------------------
Minimum investment Institutional shares--Initial: $250,000; Initial: $2,500
amounts Subsequent: $25,000 Subsequent: $250
Investment shares: Each service
organization may establish its own
minimums.
- -----------------------------------------------------------------------------------------------------------------
Exchanging shares Institutional shares: May be exchanged BT Fund shares may be exchanged for
for Institutional shares of any other shares of another Deutsche Asset
Deutsche Asset Management mutual fund in Management mutual fund up to four times a
amounts as low as $50,000, the minimum year (from the date of the first
amount required for an exchange. exchange).
Investment shares: May be exchanged for
Investment shares of any other Deutsche
Asset Management mutual fund, if your
service organization allows exchanges.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
BT Fund will waive the minimum investment amount for any MG Fund Investment
account that, immediately after the reorganization, contains less than the
minimum investment amount required for BT Fund.
4
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of BT Fund or Institutional or Investment shares of MG Fund. The table
also shows pro forma expenses of shares of BT Fund following the proposed
reorganization.
<TABLE>
<CAPTION>
The year ended September 30, 1999 for BT Fund MG Fund MG Fund
BT Fund BT Fund2 Institutional Investment
The year ended October 31, 1999 for MG Fund (pro forma) Shares shares
- ---------------------------------------------------------------------------------------------------------------------------
Shareholder fees None None None None
fees paid directly from your investment)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Annual Fund operating expenses before expense
limitation1
(expenses deducted from Fund assets)
(fees paid directly from your investment)
- ---------------------------------------------------------------------------------------------------------------------------
Management fees 0.65% 0.65% 1.00% 1.00%
- ---------------------------------------------------------------------------------------------------------------------------
Distribution (12b-1) and/or service fees None None None 0.25%
- ---------------------------------------------------------------------------------------------------------------------------
Other expenses 0.79% 0.79% 1.44% 1.51%
- ---------------------------------------------------------------------------------------------------------------------------
Total annual Fund operating expenses 1 1.44% 1.44% 2.44% 2.76%
- ---------------------------------------------------------------------------------------------------------------------------
Less fee waivers or expense reimbursements1 (0.19)% (0.19)% (1.19)% (1.26)%
- ---------------------------------------------------------------------------------------------------------------------------
Net Expenses 1.25% 1.25% 1.25% 1.50%
. Deutsche Asset Management, Inc. has agreed contractually to waive its own fees
and to reimburse other MG Fund expenses for the period ending February 28,
2001 so that MG Fund's expenses will not exceed 1.25% for Institutional shares
and 1.50% for Investment shares. BT has agreed contractually to waive its own
fees and reimburse other BT Fund expenses for the 16 months from BT Fund's
fiscal year end of September 30, 1999, so that BT Fund's expenses will not
exceed 1.25%. for the period ending January 31, 2001.
2 Information on the annual operating expenses reflects the expenses of both BT
Fund and BT Portfolio, the master portfolio into which BT Fund invests all of
its assets.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE REORGANIZATION
Terms of the Reorganization
The Board of each Fund has approved the Agreement and Plan of Reorganization
(the "Agreement"), a copy of which is attached as Exhibit A. The Agreement
provides for reorganization on the following terms:
[ ] The reorganization is scheduled to occur at 5:00 p.m., Eastern Time, on
April 28, 2000, but may occur on any later date before December 31, 2000.
[ ] In the reorganization, MG Fund will transfer all of its assets to BT Fund,
and in exchange BT Fund will assume MG Fund's stated liabilities and issue
shares as described below. BT Fund will then transfer those assets to BT
Portfolio in exchange for a pro rata interest in BT Portfolio.
[ ] BT Fund will issue shares to the Institutional class and the Investment
class of MG Fund in an amount equal to the value of the assets of each
class of shares received by BT Fund, less the respective liabilities of
each class of shares assumed by BT Fund, in the transaction. These shares
will immediately be distributed by MG Fund to the shareholders in each
class of MG Fund in proportion to their holdings in the respective class
of MG Fund on the reorganization date. As a result, Institutional and
Investment shareholders of MG Fund will become shareholders of BT Fund.
5
<PAGE>
[ ] The net asset value of both Funds will be computed as of 4:00 p.m.,
Eastern Time, on the reorganization date.
[ ] After the reorganization is complete, MG Fund will be terminated.
The following diagram shows how the reorganization will be carried out.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
MG Fund transfers the BT Fund receives assets
assets and stated (graphic of right-facing arrows) from and assumes
liabilities of each liabilities of each
share class to BT Fund class of MG Fund
- ------------------------- --------------------------
MG Fund Institutional MG Fund receives these BT Fund shares are
and Investment (graphic of shares and distributes (graphic of issued
shareholders receive BT left-facing them pro rata by class left-facing
Fund shares arrows) to its Institutional arrows)
and Investment
shareholders
- ------------------------- --------------------------
</TABLE>
Tax Status of the Reorganization
The reorganization will be tax-free for federal income tax purposes and will not
take place unless MG Fund and BT Fund receive from Willkie Farr & Gallagher,
counsel to BT Funds, a satisfactory opinion substantially to the effect that:
[ ] The transfer of MG Fund's assets to BT Fund in exchange for shares of BT
Fund and the assumption of MG Fund's stated liabilities, followed by the
distribution of such shares to MG Fund's shareholders and the termination
of MG 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 MG Fund upon (1) the transfer of all
of its assets to BT Fund as described above or (2) the distribution by MG
Fund of BT Fund shares to MG Fund's Institutional and Investment
shareholders;
[ ] No gain or loss will be recognized by BT Fund upon the receipt of MG Fund's
assets solely in exchange for the issuance of BT Fund shares to MG Fund and
the assumption of all of MG Fund's stated liabilities by BT Fund;
[ ] The basis of the assets of MG Fund acquired by BT Fund will be, in each
instance, the same as the basis of those assets in the hands of MG Fund
immediately before the transfer;
[ ] The tax holding period of the assets of MG Fund in the hands of BT Fund
will include MG Fund's tax holding period for those assets;
[ ] The shareholders of MG Fund will not recognize gain or loss upon the
exchange of all their shares of MG Fund solely for BT Fund shares as part
of the reorganization;
[ ] The basis of BT Fund shares received by MG Fund's Institutional or
Investment shareholders in the reorganization will be the same as the basis
of the Institutional or Investment shares of MG Fund surrendered in
exchange; and
[ ] The tax holding period of BT Fund shares received by MG Fund's
shareholders will include, for each shareholder, the tax holding period of
the Institutional or Investment shares of MG Fund surrendered in exchange,
provided that BT Fund shares were held as capital assets on the date of the
exchange.
6
<PAGE>
Reasons for the Proposed Reorganization
The Board of Trustees of MG Fund believes that the proposed reorganization will
be advantageous to the shareholders of MG Fund for several reasons. The Board
of Trustees considered the following matters, among others, in approving the
reorganization at a Meeting held on August 19, 1999.
Overlapping Investment Strategy and Market Niche. MG Fund and BT Fund both have
substantially similar investment objectives and investment strategies. Due to
the acquisition of Bankers Trust by Deutsche Bank A.G. on June 4, 1999, the same
portfolio management team is now managing both Funds and the same sales force is
now marketing both Funds. Because of the confusion which would be caused by
offering clients competing small cap funds, it is not advantageous to operate
and market MG Fund separately from BT Fund.
Master-Feeder Structure. The proposed reorganization would allow MG 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.
Investment Performance. BT Fund shares received in the reorganization will
provide MG Fund's shareholders with substantially the same investment advantages
as they currently have at a comparable level of risk. MG Fund's Board of
Trustees also considered the performance history of each Fund, which is shown in
the table below. For the comparable periods, BT Fund has outperformed MG Fund.
Moreover, since the same portfolio management team is currently managing both BT
Fund and MG Fund, any gaps in the performance of the two Funds is expected to
narrow and differ only based on fees. The Trustees further noted that due to
the overlapping investment strategy, market niche and the similar marketing
channels of these Funds, all shareholders may benefit by the possibility of
reduced expenses due to the combination of the Funds.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- ----------------------------------------------------------------------------------------------------------------------
MG Fund MG Fund BT Fund
Investment shares Institutional Shares
(Inception 07/11/97) (Inception 06/30/95) (Inception 10/21/93)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 year ended 11/30/99 27.82% 28.15% 47.73%
- ----------------------------------------------------------------------------------------------------------------------
3 years ended 11/30/99 N/A 11.81% 16.23%
- ----------------------------------------------------------------------------------------------------------------------
5 years ended 11/30/99 N/A N/A% 22.43%
- ----------------------------------------------------------------------------------------------------------------------
Inception through 11/30/99 10.29% 15.85% 21.44%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Possibility of Reduced Expenses. A combined Fund offers economies of scale that
may lead to better control over expenses than is currently possible,
particularly for MG Fund. Both Funds incur substantial costs for accounting,
legal, transfer agency services, insurance, and custodial and administrative
services. The Management fees and the Other expenses of BT Fund shares are
lower than those of MG Fund, on a gross basis. Taking into account current fee
waivers and expense reimbursements the total of BT Fund's Management fees and
Other expenses is lower than the total of MG Fund's Investment shares and equal
to the total of MG Fund's Institutional shares.
Benefits to BT Fund. The Board of Trustees of BT Fund considered that the
reorganization presents an excellent opportunity for BT 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 BT Fund and its shareholders.
Benefits to Advisers and Other Service Providers. The Boards of Trustees of
both Funds considered that the Funds' advisers, administrators and distributors
would also benefit from the reorganization. For example, the advisers and
administrators might benefit from economies of scale and therefore realize cost
savings from a consolidated portfolio management effort and from the need to
prepare prospectuses, reports and regulatory filings for a smaller number of
funds. The Trustees believe, however, that these savings will not amount to a
significant economic benefit.
7
<PAGE>
Additional Terms of Agreement
Conditions to Closing the Reorganization. The obligation of the Funds to
consummate the reorganization is subject to the satisfaction of certain
conditions under the Agreement (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 MG Fund, in
accordance with the provisions of MG 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. MG Fund or BT Fund may mutually agree to terminate
the Agreement (even if the shareholders of MG 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. Deutsche Bank A.G. has informed the Funds that
it will bear all costs of the reorganization, with the exception that MG 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 $5,000.00.
CAPITALIZATION
The following table sets forth the capitalization of each Fund as of December
31, 1999, 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 0.721 BT Fund shares being issued for each share of MG
Fund Institutional shares and approximately 0.717 BT Fund shares being issued
for each share of MG Fund Investment shares. If the reorganization is
consummated, 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 BT Fund and MG Fund
between December 31, 1999 and the reorganization date.
[ ] Changes in the amount of undistributed net investment income and net
realized capital gains of BT Fund and MG Fund during that period resulting
from income and distributions.
[ ] Changes in the accrued liabilities of BT Fund and MG Fund during the same
period.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Capitalization as BT Fund
Pro Forma Combined1 BT Fund MG Fund
of December 31, 1999 ---------------- ------------------
Institutional Investment
------------------ -------------------
<S> <C> <C> <C> <C>
Net assets $273,704,379 $265,829,012 $7,447,368 $427,999
- ----------
Net asset value per share $ 24.20 $ 24.20 $ 17.45 $ 17.34
- -------------------------
Shares outstanding 11,308,819 10,983,391 426,733 24,679
- ------------------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
1 If the reorganization had taken place on December 31, 1999, MG Fund
shareholders of Institutional shares would have received 307,742 shares of BT
Fund and MG Fund shareholders of Investment shares would have received 17,685
shares of BT Fund, which would have been available for distribution to the
shareholders of MG Fund.
It is impossible to predict how many shares of BT Fund will actually be received
and distributed by MG Fund on the reorganization date. The table should not be
relied upon to determine the amount of BT Fund shares that will actually be
received and distributed.
8
<PAGE>
COMPARISON OF BUSINESS TRUSTS UNDER DELAWARE AND MASSACHUSETTS LAW
BT Fund is organized as a Massachusetts business trust. MG Fund is organized as
a Delaware business trust. The following is a comparison of the laws of
Massachusetts and Delaware applicable to business trusts.
Limitation of Shareholders' and Funds' Liability. Delaware law provides that
- ------------------------------------------------
the shareholders of a Delaware business trust shall not be subject to liability
for the debts or obligations of the trust. Under Massachusetts law,
shareholders of a Massachusetts business trust (such as BT Fund) may, under
certain circumstances, be liable for the debts and obligations of that trust.
Although the risk of liability of shareholders of a Massachusetts business trust
who do not participate in the management of the trust may be remote, Delaware
statutory law may be considered to afford greater protection against potential
shareholder liability. Similarly, Delaware law provides that, to the extent
that a Delaware business trust issues multiple series of shares, each series
shall not be liable for the debts or obligations of any other series, another
potential, although remote, risk in the case of multiple series of a
Massachusetts business trust. While it is frequently assumed that a
Massachusetts business trust will only be liable for its own obligations, there
is no direct statutory or judicial support for that position.
Limitation of Trustee Liability. Delaware law provides that, except to the
- -------------------------------
extent otherwise provided in a trust's declaration of trust or by-laws, Trustees
will not be personally liable to any person (other than the business trust or a
shareholder thereof) for any act, omission or obligation of the business trust
or any trustee thereof. Delaware law also provides that a trustee's actions
under a Delaware business trust's declaration of trust or by-laws will not
subject the trustee to liability to the business trust or its shareholders if
the Trustee takes such action in good faith reliance on the provisions of the
business trust's declaration of trust or by-laws. The declaration of trust of a
Massachusetts business trust may limit the liability of a trustee who is not
also an officer of the trust for breach of fiduciary duty except for, among
other things, any act or omission not in good faith which involves intentional
misconduct or a knowing violation of law or any transaction from which such
trustee derives an improper direct or indirect financial benefit.
Shareholder Voting. Delaware law provides that a Delaware business trust's
- ------------------
declaration of trust or by-laws may set forth provisions related to voting in
any manner. This provision appears to permit shareholder voting through
computer or electronic media. For an investment company with a significant
number of shareholders with access to computer or electronic networks, the use
of such voting methods could significantly reduce the costs of shareholder
voting.
Declarations of Trust. Although neither a Delaware business trust nor a
- ---------------------
Massachusetts business trust is required to hold annual shareholder Meetings,
Delaware law affords to the Trustees the ability to adapt the Delaware business
trust to future contingencies without the necessity of holding a special
shareholder Meeting. The Trustees of a Delaware business trust may have the
power to amend the business trust's governing instrument to create a class or
series of shares of beneficial interest that was not previously outstanding; to
dissolve the business trust; to incorporate the Delaware business trust; to
merge or consolidate with another entity; to sell, lease, exchange, transfer,
pledge or otherwise dispose of all or any part of the business trust's assets;
to cause any series to become a separate trust; and to change the Delaware
business trust's domicile -- all without shareholder vote. Any exercise of
authority by the Trustees will be subject to applicable state and federal law.
ADDITIONAL INFORMATION ABOUT THE FUNDS' BUSINESSES
The following table shows where in each Fund's prospectus you can find
additional information about the business of the Fund.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Type of Information Headings in Prospectuses
MG Fund BT Fund
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Risk/return summary Overview of Smaller Companies Overview of Small Cap
- -------------------------------------------------------------------------------------------------------------------
Investment objectives/goals Goal
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Type of Information Headings in Prospectuses
MG Fund BT Fund
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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 Smaller Companies A Detailed Look at Small Cap
- -------------------------------------------------------------------------------------------------------------------
Investment objectives, principal
investment strategies and related Objective, Strategy, Principal Investments, Investment Process, Risks
risks
- -------------------------------------------------------------------------------------------------------------------
Management: investment
adviser and portfolio manager Management of the Fund
- -------------------------------------------------------------------------------------------------------------------
Shareholder information:
pricing of fund shares Calculating the Fund's Share Price
- -------------------------------------------------------------------------------------------------------------------
Shareholder information: Buying and Selling Fund Shares: Buying and Selling Fund
purchase of fund shares Shares
redemption of fund shares
--------------------------------------------------------------------------------
Institutional: Buying and Selling Shares Investment:
Through a Plan, Buying and Selling Shares Service Plan, Buying and
Through a Broker, Buying and Selling Shares Selling Shares Through your
Directly Service Organization
- -------------------------------------------------------------------------------------------------------------------
Shareholder information:
Dividends and distributions; tax Dividends and Distributions, Tax Considerations
consequences
- -------------------------------------------------------------------------------------------------------------------
Financial highlights information Financial Highlights
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
BOARDS' EVALUATION AND RECOMMENDATION
For the reasons described above, the Board of Trustees of MG 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 August 19, 1999. In particular, the Board determined that the
reorganization was in the best interests of MG Fund and that the interests of MG
Fund's shareholders would not be diluted as a result of the reorganization.
Similarly, the Board of Trustees of BT Fund, including the Independent Trustees,
approved the reorganization at a Meeting held on September 8, 1999. That Board
also determined that the reorganization was in the best interests of BT Fund and
that the interests of BT Fund's shareholders would not be diluted as a result of
the reorganization.
- --------------------------------------------------------------------------------
Therefore, after careful consideration, The Board of Trustees of MG Fund,
including the Independent Trustees, recommends that the shareholders of MG Fund
vote "FOR" the proposal to approve the Agreement and Plan of Reorganization.
- --------------------------------------------------------------------------------
VOTING RIGHTS AND REQUIRED VOTE
<PAGE>
Each share of MG 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 MG Fund outstanding and entitled to vote. For this purpose, a
majority of the outstanding shares of MG 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 MG Fund are present or represented by
proxy, or
(2) more than 50% of the outstanding shares of the MG Fund.
Shares of MG Fund represented in person or by proxy, including shares which
abstain or do not vote on the proposal, will be counted for purposes of
determining whether there is a quorum at the Meeting. These include proxies
submitted by a broker or 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, MG 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 MG Fund or by personnel of Deutsche Asset Management, Inc. or
ICC Distributors, Inc., the distributor of MG Fund's shares.
Revoking Proxies
A MG 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 MG 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 MG Fund at the
Meeting at any time before the proxy is voted.
Being present at the Meeting alone will not revoke a previously executed and
returned proxy.
Outstanding Shares and Quorum
As of February 24, 2000, [___________] Institutional shares and [_____________]
Investment shares of MG Fund were outstanding. Only shareholders of record on
February 24, 2000 (the "Record Date") are entitled to notice of and to vote at
the Meeting. A majority of the outstanding shares of MG Fund that are entitled
to vote will be considered a quorum for the transaction of business.
Other Business
MG 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
11
<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 MG 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
MG Fund may record votes over the telephone or through the Internet: by
telephone call the toll-free number on your proxy card, by Internet logon to
www.proxyvote.com. 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 February 24, 2000, the following persons
owned, of record or beneficially, 5% or more of the outstanding shares of BT
Fund and MG Fund (before the reorganization) and would own, (after the
reorganization), 5% or more of the outstanding shares of BT Fund.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
BT Fund BT Fund
MG Fund Shares Shares
Names and Addresses of Owners MG Fund Institutional (before (after
of More Than 5% of Shares Investment shares Shares reorganization) reorganization)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
4As of February 24, 2000, the table reflects pro forma exchange ratios of
approximately [ ____ ]BT Fund shares being issued for Institutional share of MG
Fund and approximately[ ____] BT Fund shares being issued for Investment shares
of MG. If the reorganization is consummated, the actual exchange ratios on the
reorganization date may vary from the exchange ratios as previously discussed.
As of February 24, 2000, the Trustees and officers of MG Fund and BT Fund, each
as a group, owned in the aggregate less than 1% of the outstanding shares of
their respective Funds.
12
<PAGE>
EXPERTS
The financial statements and the financial highlights of Smaller Companies Fund
at October 31, 1999 and for the periods then ended and of Small Cap Fund at
September 30, 1999 and for the periods then ended are incorporated by reference
into this proxy statement and prospectus. These financial statements and
financial highlights for each of MG Fund and BT Fund have been audited by[
], independent accountants, as stated in the reports appearing in the respective
Annual Report to shareholders. These financial statements and financial
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. 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 SEC at 450 Fifth Street, N.W., 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 Section of the SEC at 450
- ------------------
Fifth Street, N.W., Washington, D.C. 20549-0102. For information on the Public
Reference Section, call the SEC at 1-202-942-8090. In addition, copies of these
documents may be viewed on-screen or downloaded from the EDGAR Database on the
SEC's Internet site at http://www.sec.gov.
13
<PAGE>
FORM OF PROXY CARD
MORGAN GRENFELL INVESTMENT TRUST
SMALLER COMPANIES FUND
One South Street, Baltimore, Maryland
PROXY FOR THE SPECIAL MEETING OF STOCKHOLDERS
10:00 A.M., Eastern time, on Friday, April 7, 2000
The undersigned hereby appoints [ ] and [ ] 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 THE
SMALLER COMPANIES FUND. 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 March 7, 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-[ ]
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 the Institutional
and Investment shares of Smaller Companies Fund ("MG Fund") and Small Cap
Fund ("BT Fund"), pursuant to which: (a) the MG Fund would transfer all of
its assets to BT Fund in exchange for BT Fund's assumption of MG Fund's
liabilities and the issuance of shares of BT Fund to be distributed pro rata
to Institutional and Investment shares of MG Fund, and (b) MG Fund would be
terminated.
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>
March 7, 2000
Dear Shareholder,
Smaller Companies Fund
I am writing to let you know that a meeting will be held April 7, 2000 for
shareholders to vote on an important proposal for each class of shares of
Smaller Companies Fund (the "MG Fund"). As a shareholder in the MG Fund, you
have the opportunity to voice your opinion on this matter.
The Proposal
We are asking shareholders of the MG Fund to approve an agreement and plan of
reorganization between the MG Fund and the Small Cap Fund (the "BT Fund") to
allow the MG Fund to transfer all of its assets and liabilities to the BT Fund
in exchange for shares of the BT Fund.
What this means for your investment
o You will receive shares of the BT Fund equal to the total value of your
investment in the MG Fund
o The transaction will be tax-free for shareholders and for both funds
o Both funds have similar investment objectives and investment styles
o Both funds employee the same portfolio management team.
It is important for you to vote
This package contains information about the proposal, along with a proxy card
for you to vote by mail, unless you are voting by telephone or through the
Internet. Please take a moment to read the enclosed materials and cast your
vote using the proxy card. Your prompt vote will help save money. If a
majority of shareholders have not voted prior to the meeting, we must try to
obtain more votes with additional mailings or phone solicitations. Both of
these are costly processes.
The MG Fund's Board of Trustees, whose primary role is to protect your interests
as a shareholder, has reviewed the proposal. In the Trustees' opinion, the
proposal is fair and reasonable. THE TRUSTEES RECOMMEND THAT YOU VOTE FOR THE
PROPOSAL.
How to vote
CAST YOUR VOTE BY COMPLETING AND SIGNING THE PROXY CARD, UNLESS YOU ARE VOTING
BY TELEPHONE OR THROUGH THE INTERNET. PLEASE MAIL YOUR COMPLETED AND SIGNED
PROXY AS QUICKLY AS POSSIBLE, USING THE POSTAGE-PAID ENVELOPE PROVIDED.
PLEASE VOTE! YOUR VOTE IS EXTREMELY IMPORTANT, NO MATTER HOW MANY SHARES YOU
OWN.
Any questions?
Please call 1-800-407-7301 if you have any questions about the proposal or
voting procedures.
Sincerely,
/s/ Daniel O. Hirsch
Daniel O. Hirsch
Secretary
<PAGE>
EXHIBIT A
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 "BT
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 Small Cap Fund (the "Acquiring Fund"), a
series of the BT Trust, and (ii) Morgan Grenfell Investment Trust (the "MG
Trust"), a business trust organized under the laws of the State of Delaware with
its principal place of business at One South Street, Baltimore, Maryland 21202,
on behalf of Smaller Companies Fund (the "Acquired Fund"), a series of the MG
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 each class of shares of
the Acquired Fund to the Acquiring Fund in exchange for (a) the issuance of
shares of beneficial interest of the Acquiring Fund (collectively, the
"Acquiring Fund Shares" and each, an "Acquiring Fund Share") to each class of
shares of the Acquired Fund, and (b) the assumption by the Acquiring Fund of
certain scheduled liabilities of each class of shares 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 each class of shares of the Acquired Fund in
liquidation of each class of shares of the Acquired Fund and the termination of
each class of shares of the Acquired Fund, all upon the terms and conditions
hereinafter set forth in this Agreement.
WHEREAS, the MG Trust and the BT 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 the BT Trust has determined that the
exchange of all of the assets and certain of the liabilities of the Acquired
Fund for Acquiring Fund Shares 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;
WHEREAS, the Board of Trustees of the MG Trust has determined that the
exchange of all of the assets and certain of the liabilities of each class of
the Acquired Fund for Acquiring Fund Shares and the assumption of such
liabilities by 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.
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
Page 1
<PAGE>
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING FUND
SHARES 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 for each class
of shares of 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 class of shares 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 such class of shares of the 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 such class, including each class
of shares, 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 (except to
the extent sales may be limited by representations made in connection with
issuance of the tax opinion described in paragraph 8.6 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 for each class of shares
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 Deutsche Asset Management, Inc. ("DAMI"), 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 for each class of
shares liquidate and distribute pro rata by class to the Acquired Fund's
shareholders of record of such class 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 class of shares of the
Page 2
<PAGE>
Acquired Fund on the books of the Acquiring Fund to open accounts on the share
records of the Acquiring Fund in the name of the shareholders of the relevant
class 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 relevant class of Acquired Fund will simultaneously be cancelled
on the books of the Acquired Fund, although share certificates, if any,
representing interests in the relevant class of 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. 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. The 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
State of Delaware and in accordance with its governing documents.
2. VALUATION
2.1. The value of the assets of each class of shares of the Acquired Fund
to be transferred, and liabilities of each class of shares 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 Acquired Fund.
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 April 28, 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
Page 3
<PAGE>
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 Bankers Trust, 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 BT Trust or the MG 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 MG 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 MG 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 MG Trust and the Acquired Fund represent and warrant to the BT
Trust and the Acquiring Fund as follows:
(a) The Acquired Fund is a series of the MG Trust, which is a business
trust, validly existing and in good standing under the laws of the State of
Delaware 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 MG Trust is a registered open-end investment management company,
and its registration with the Securities and Exchange Commission (the
"Commission") as an investment
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company under the Investment Company Act of 1940, as amended (the "Investment
Company Act"), is in full force and effect;
(c) The MG 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;
(d) The MG 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 MG 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 MG 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 MG Trust and the Acquired Fund know of no facts which might
form the basis for the institution of such proceedings and neither the MG 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 MG Trust's ability to
consummate the transactions herein contemplated;
(f) The Statement of Assets and Liabilities of the Acquired Fund as of
October 31, 1999, has been audited by[,] 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 October 31, 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
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;
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(j) 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;
(k) At the Closing Date, the MG 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 "Securities Act"), other than as disclosed in writing to, and
acknowledged in writing by, the Acquiring Fund;
(l) The execution, delivery and performance of this Agreement has been duly
authorized by all necessary action on the part of the MG 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 and delivery
by the BT Trust on behalf of the Acquiring Fund, this Agreement will constitute
a valid and binding obligation of the MG 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;
(m) The information to be furnished by the MG 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;
(n) 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;
(o) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the MG Trust on
behalf of the Acquired Fund of the transactions contemplated by this Agreement;
(p) 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
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(q) The prospectus of the Acquired Fund dated February 28, 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 BT Trust and the Acquiring Fund represent and warrant to MG Trust
and the Acquired Fund as follows:
(a) The Acquiring Fund is a series of the BT 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 BT Trust is a registered open-end investment management company,
and its registration with the Commission as an investment company under the
Investment Company Act is in full force and effect;
(c) The current prospectus of and statement of additional information of
the BT Trust on behalf of the Acquiring Fund conform in all material respects to
the applicable requirements of the Securities Act and the Investment Company
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 BT Trust has, and at the Closing Date will have, good and
marketable title to the Acquiring Fund's assets;
(e) The BT 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;
(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 BT 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 BT Trust and the Acquiring Fund know of no facts which might form the
basis for the institution of such proceedings and neither the BT 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 BT 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[], independent accountants, and is in
accordance with generally accepted accounting principles consistently applied,
and such statement (copies of which have been furnished
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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) 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;
(1) The execution, delivery and performance of this Agreement has been duly
authorized by all necessary action, if any, on the part of the BT Trust's Board
of Trustees on behalf of the Acquiring Fund, and, assuming due authorization,
execution and delivery by the MG Trust on behalf of the Acquired Fund, this
Agreement will constitute a valid and binding obligation of the BT 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;
(m) 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;
(n) 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 in all
material respects and shall comply in all material respects with federal
securities and other laws and regulations applicable thereto;
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(o) The information contained in the Proxy Statement to be included 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 misleading; and
(p) The BT Trust, on behalf of the Acquiring Fund, agrees to use all
reasonable efforts to obtain the approvals and authorizations required by the
Securities Act, the Investment Company 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 MG 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 BT 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 MG 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 MG Trust, on behalf
of the Acquired Fund, and the BT 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
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shall be prepared in accordance with generally accepted accounting principles
consistently applied and shall be certified by the MG 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 MG 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 Securities
Act, the Securities Exchange Act of 1934 (the "Exchange Act"), and the
Investment Company Act in connection with the meeting of the Acquired Fund's
shareholders to consider approval of this Agreement and the transactions
contemplated herein.
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 and
tax basis and holding periods as of the Closing Date, certified by MG Trust's
Treasurer or Assistant Treasurer on behalf of the Acquired Fund;
6.3 MG Trust on behalf of the Acquired Fund and BT 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; and
6.4. Each Merging Fund shall have received on the Closing Date a favorable
opinion of Willkie Farr & Gallagher, counsel to the Acquiring Fund, in a form
satisfactory to Daniel O.
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Hirsch, Secretary of the Merging Funds, covering the following points:
(i) the Acquired Fund is a series of MG Trust and the Acquiring Fund is a
series of BT Trust (collectively, the "Trusts" and individually, the
"Trust"), each of which is a business trust validly existing and in
good standing under the laws of the State of Delaware and the
Commonwealth of Massachusetts, respectively and has the power, under
its Declaration of Trust, to own all of its properties and assets and
to carry on its business as described in its current prospectus and
statement of additional information;
(ii) this Agreement has been duly authorized, executed and delivered by
each Trust on behalf of its respective Merging Fund and, assuming that
the Prospectus, the Registration Statement and the Proxy Statement
comply with the Securities Act, the Exchange Act and the Investment
Company Act and the rules and regulations thereunder and in the case
of BT Trust, assuming due authorization, execution and delivery of the
Agreement by MG Trust on behalf of the Acquired Fund, is a valid and
binding obligation of BT Trust enforceable against each Trust on
behalf of its respective Merging Fund in accordance with its terms,
and, in the case of MG Trust, assuming due authorization execution and
delivery of the Agreement by BT Trust on behalf of the Acquiring Fund,
is a valid and binding obligation of MG Trust enforceable against
itself in accordance with its terms, both opinions subject as to
enforcement to bankruptcy, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors' rights generally and to
general equity principles;
(iii) the execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, result
in a material violation of the Declaration of Trust or By-laws of each
Trust;
(iv) to the knowledge of such counsel, no consent, approval, authorization
or order of any court or governmental authority of the United States,
the State of Delaware or The Commonwealth of Massachusetts, as
applicable, is required for the consummation by each Trust of the
transactions contemplated herein, except such as have been obtained
under the Securities Act, the Exchange Act and the Investment Company
Act, and such as may be required under state securities laws;
(v) such counsel may rely, as to matters governed by the laws of the State
of Delaware or The Commonwealth of Massachusetts, as applicable, on an
opinion of Massachusetts counsel and/or certificates of Officers or
Trustees of the BT Trust or the MG Trust on behalf of its Merging
Fund. Such opinion also shall include such other matters incident to
the transaction contemplated hereby as each Trust on the behalf of its
respective Merging Fund may reasonably request. Finally, such opinion
need not opine with respect to the applicability of Section 17(a)
under the 1940 Act or Rule 17a-8 thereunder;
(vi) with respect to each Merging Fund , such opinions may state that such
counsel does not express any opinion or belief as to the financial
statements or other financial data or as to the information relating
to the other Merging Fund contained or incorporated
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by reference in the Proxy Statement or Registration Statement, and
that such opinion is solely for the benefit of MG Trust and BT Trust,
as applicable and their respective trustees and officers;
(vii) The Acquiring Fund shares to be issued to the Acquired Fund and
delivered to the Acquired Fund shareholders as provided by this
Agreement are duly authorized and upon such delivery will be validly
issued and outstanding and fully paid and non-assessable and no
shareholder of the Acquiring Fund has any preemptive rights to
subscription or purchase in respect thereof.
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 MG 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
Securities 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 Securities 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
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of (1) its interest income excludable 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 BT Trust and the MG Trust with respect to the
relevant Merging Fund and satisfactory to Daniel O. Hirsch, as Secretary of each
of the Trust, 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;
(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; and
(h) The tax holding period of the Acquiring Fund Shares received by the
Acquired Fund shareholders will include, for each shareholder, the tax holding
period for the shares of
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beneficial interest of the Acquired Fund surrendered in exchange therefor,
provided that the Acquired Fund shares were held as capital assets on the date
of the exchange.
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. The parties have been informed by Deutsche Asset Management Inc. .
that Deutsche Asset Management Inc.. will pay for all expenses incurred in
connection with the Reorganization except that the Acquired Fund shall be liable
for its fees and expenses incurred in connection with its liquidation and
termination.
9. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
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 4.1and
4.2 and 5.2 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 MG Trust on behalf of the Acquired
Fund and the BT Trust on behalf of the Acquiring Fund; (ii) any party 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.
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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 MG
Trust on behalf of the Acquired Fund and the BT Trust on behalf of the Acquiring
Fund; provided, however, that following the meeting of the Acquired Fund
shareholders called by the MG 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 MG Trust on behalf of the
Acquired Fund and the BT 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 State of Delaware.
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 BT Trust and the
MG Trust shall not be binding upon any of their respective Trustees,
shareholders, nominees, officers, agents or employees personally, but bind only
the trust property of the BT Trust or the MG Trust, as the case may be, as
provided in the trust instruments of the BT Trust and the MG Trust,
respectively. The execution and delivery of this Agreement have been authorized
by the Trustees of each of the BT Trust and the MG Trust, and this Agreement has
been executed by authorized officers of the BT Trust and the MG 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
Page 15
<PAGE>
to impose any liability on any of them personally, but shall bind only the trust
property of the BT Trust and the MG Trust, as the case may be, as provided in
the Declaration of Trust of the BT Trust and the MG Trust, respectively.
Page 16
<PAGE>
IN 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
SMALL CAP FUND
By: ______________________ By: __________________________
Name: Daniel O. Hirsch
Title: Secretary Name: _________________________
Title: _______________________
Attest: MORGAN GRENFELL INVESTMENT TRUST
on behalf of SMALLER COMPANIES FUND
By: ______________________ By: __________________________
Name: Daniel O. Hirsch
Title: Secretary Name: _________________________
Title: _______________________
Page 17
<PAGE>
EXHIBIT B
[GRAPHIC OMITTED] SEPTEMBER 30, 1999
BT Mutual Funds
SmallCap Fund
Annual Report
TRUST: BT INVESTMENT FUNDS
INVESTMENT ADVISOR: BANKERS TRUST COMPANY
<PAGE>
- --------------------------------------------------------------------------------
Small Cap Fund
Table of Contents
- --------------------------------------------------------------------------------
Letter to Shareholders .......................................................3
Small Cap 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
Small Cap 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 by Bankers Trust Company. The Fund is subject to investment risks,
including possible loss of principal amount invested.
----------
2
<PAGE>
- --------------------------------------------------------------------------------
Small Cap Fund
Letter to Shareholders
- --------------------------------------------------------------------------------
We are pleased to present you with this annual report for the Small Cap 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
Small capitalization growth stocks experienced significant volatility throughout
the twelve months ended September 30, 1999. Small 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 small cap
sector lagged, 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
small cap sector, as measured by the Russell 2000 Index, returned 8.25%, far
outperforming the S&P 500 return of 0.36% for the same six months. In fact,
small capitalization stocks, and small capitalization growth stocks in
particular, were the best performing U.S. equity sector for the six months ended
September 30, 1999. While small cap stocks still underperformed large caps for
the fiscal year, the growth segment within the small cap sector outperformed
both large cap and mid 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 small cap growth stocks as well
as in the broader equity markets, followed by an even more pronounced recovery
quickly thereafter.
o 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.
o The small 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.
o After the February sell-off, March witnessed a rebound in the small 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.
Still, investors' preference for larger, more liquid names remained.
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.
o 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.
o This broadening of the stock market also included strong performance by
smaller and mid-sized companies as worries about world economies abated.
o 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.
o 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.
o 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.
o 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.
o Financial markets grew concerned that synchronized global growth would lead
to inflation.
o Against this backdrop, the Federal Reserve Board raised the fed funds rate by
another 0.25% on August 24.
o 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, small cap companies exhibited strong earnings
growth, positive fundamentals, and attractive relative valuations. In fact,
small cap relative P/E ratios as compared to large cap P/E ratios were, as of
September 30, 1999, still at multi-decade lows.
INVESTMENT REVIEW
The Fund significantly outperformed its benchmarks for the twelve month period,
particularly well worth noting given the extremely high volatility in the small
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 two
best performing sectors, i.e. technology and health care. Also having a positive
impact on relative performance were underweight positions in the energy,
financial services, and materials & processing sectors. In the first quarter of
1999, technology continued to be one of the top performing sectors and the Fund
remained overweight there.
- --------------------------------------------------------------------------------
Ten Largest Stock Holdings
- --------------------------------------------------------------------------------
Mercury Interactive Corp. 3.70% Pinnacle Systems, Inc. 1.84%
Calpine Corp. 2.60% Medical Manager Corp. 1.81%
ATMI, Inc. 2.12% Transwitch Corp. 1.74%
Micrel, Inc. 2.01% T-HQ, Inc. 1.68%
Hispanic Broadcasting Corp. 1.92% Pacific Sunwear of California 1.64%
- --------------------------------------------------------------------------------
3
<PAGE>
Small Cap Fund
- --------------------------------------------------------------------------------
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>
Small Cap Fund1
(inception 10/21/93) 46.52% 23.72% 149.41% 189.31% 46.52% 7.35% 20.06% 19.58%
- --------------------------------------------------------------------------------------------------------------------
Russell 2000 Index2 19.07% 28.43% 79.30% 79.36% 19.07% 8.70% 12.39% 10.38%
- --------------------------------------------------------------------------------------------------------------------
Russell 2000 Growth Index2 32.63% 22.97% 77.50% 74.02% 32.63% 7.14% 12.16% 9.81%
- --------------------------------------------------------------------------------------------------------------------
Lipper Small Cap Growth
Average/3 43.76% 33.58% 105.33% 103.88% 43.76% 9.58% 15.03% 12.41%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Diversification of Portfolio Investments
By Theme as of September 30, 1999
(percentages are based on market value)
New Consumer 8%
New Healthcare Paradigm 4%
Energizing the Globe 11%
Our Stengthening Financial Structure 5%
Stores of Value 5%
Miscellaneous/1 18%
Client Server Computing 5%
Managing the Information Age 4%
The Ubiquitous Semiconductor 9%
Cash 15%
America's Changing Leisure Time 7%
Special Situations 5%
Life on the Net 4%
- - ----------
1/ Includes themes with weightings of less than 4%.
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 energy and technology helped during the second
quarter of 1999, but its underweight positions in such top performing
value-oriented sectors as autos & transportation, materials & processing, and
utilities detracted from Fund performance. During the third calendar quarter,
energy and technology, where the Fund remained overweight, continued to
outperform, and 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 stay
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 small cap stocks in general. Small cap fundamentals remain
strong, 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:
o focus on companies that offer compelling valuations relative to their growth
rates
o focus on companies that have strong, consistent earnings and revenue growth
o use extensive fundamental research to identify attractive investment
opportunities in unrecognized growth companies and sectors
o strictly adhere to our sell discipline to help mitigate risk, and
o 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
markets as we seek long-term capital growth.
/s/ Mary P. Dugan /s/ Audrey M.T. Jones /s/ John P. Callaghan
Mary P. Dugan, Audrey M.T. Jones, and John P. Callaghan
Portfolio Managers of the
Small Cap 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
Russell 2000 Index is a capitalization weighted index which is comprised of
2000 of the smallest stocks in the Russell 3000 Index. The Russell 2000
Growth Index is comprised of securities in the Russell 2000 Index with a
greater than average growth orientation.
3/ Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper, Inc. as falling into the respective
categories indicated. These figures do not reflect sales charges.
4
<PAGE>
- --------------------------------------------------------------------------------
Small Cap Fund
Performance Comparison
- --------------------------------------------------------------------------------
Comparison of Change in
Value of a $10,000
Investment in the
Small Cap Fund and the
Russell 2000 Index since
October 31, 1993.
- --------------------------------------------
Total Return for the Year
Ended September 30, 1999
One Year Five Year Since 10/21/931
46.52% 20.06%/2 19.58%/2
1/ The Fund's inception date.
2/ Annualized.
Investment return and principal
value will fluctuate so that shares,
when redeemed, may be worth more
or less than their original cost.
- --------------------------------------------
Small Cap Fund - $28,931 Russell 2000 Index - $17,936
- -------------------------- ----------------------------
Oct-93 10000 Oct-93 10000
Mar-94 10375 Mar-94 9735
Sep-94 11451 Sep-94 10004
Mar-95 14107 Mar-95 10272
Sep-95 18263 Sep-95 12345
Mar-96 21049 Mar-96 13256
Sep-96 23074 Sep-96 13967
Mar-97 17517 Mar-97 13933
Sep-97 27217 Sep-97 18602
Mar-98 26987 Mar-98 19788
Sep-98 19745 Sep-98 15063
Mar-99 26616 Mar-99 16570
Sep 99 28931 Sep 99 17936
Past performance is not indicative of future performance. Performance figures
assume the reinvestment of dividends and capital gain distributions.
5
<PAGE>
- --------------------------------------------------------------------------------
Small Cap Fund
Statement of Assets and Liabilities September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets
Investment in Small Cap Portfolio, at Value .............................................. $ 215,304,983
Receivable for Shares of Beneficial Interest Subscribed .................................. 1,300,011
Prepaid Expenses and Other ............................................................... 27,468
-------------
Total Assets ................................................................................ 216,632,462
-------------
Liabilities
Due to Bankers Trust ..................................................................... 65,906
Payable for Shares of Beneficial Interest Redeemed ....................................... 251,632
Accrued Expenses and Other ............................................................... 42,624
-------------
Total Liabilities ........................................................................... 360,162
-------------
Net Assets .................................................................................. $ 216,272,300
=============
Composition of Net Assets
Paid-in Capital .......................................................................... $ 145,324,751
Accumulated Net Realized Gain from Investment Transactions ............................... 31,982,126
Net Unrealized Appreciation on Investment ................................................ 38,965,423
-------------
Net Assets .................................................................................. $ 216,272,300
=============
Net Asset Value, Offering and Redemption Price Per Share (net assets divided by
shares outstanding) ......................................................................... $ 21.89
=============
Shares Outstanding ($0.001 par value per share, unlimited number of shares
of beneficial interest authorized) ....................................................... 9,881,175
=============
</TABLE>
- --------------------------------------------------------------------------------
Statement of Operations For the year ended September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Income
Expenses in Excess of Income Allocated from Small Cap Portfolio, net ..................... $ (188,887)
-------------
Expenses
Administration and Services Fees ......................................................... 1,327,846
Printing and Shareholder Reports ......................................................... 37,734
Professional Fees ........................................................................ 36,988
Registration Fees ........................................................................ 20,442
Trustees Fees ............................................................................ 6,013
Miscellaneous ............................................................................ 8,737
-------------
Total Expenses ........................................................................... 1,437,760
Less Fees Waived/Expenses Reimbursed by Bankers Trust .................................... (105,550)
-------------
Net Expenses .......................................................................... 1,332,210
-------------
Expenses in excess of income ................................................................ (1,521,097)
-------------
Realized and Unrealized Gain on Investment
Net Realized Gain from Investment Transactions ........................................... 49,022,740
Net Change in Unrealized Appreciation/Depreciation on Investment ......................... 30,229,250
-------------
Net Realized and Unrealized Gain on Investment .............................................. 79,251,990
-------------
Net Increase in Net Assets from Operations .................................................. $ 77,730,893
=============
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
- --------------------------------------------------------------------------------
Small Cap 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 ............................................. $ (1,521,097) $ (2,042,216)
Net Realized Gain from Investment Transactions ........................... 49,022,740 3,536,499
Net Change in Unrealized Appreciation/Depreciation on Investment ......... 30,229,250 (73,838,071)
-------------- --------------
Net Increase (Decrease) in Net Assets from Operations ....................... 77,730,893 (72,343,788)
-------------- --------------
Distributions to Shareholders
Net Realized Gain from Investment Transactions ........................... (593,090) (11,612,132)
In Excess of Net Realized Gains from Investment Transactions ............. -- (13,960,209)
-------------- --------------
Total Distributions ......................................................... (593,090) (25,572,341)
-------------- --------------
Capital Transactions in Shares of Beneficial Interest
Proceeds from Sales of Shares ............................................ 162,501,561 299,805,325
Dividend Reinvestments ................................................... 422,175 17,676,714
Cost of Shares Redeemed .................................................. (196,099,298) (333,578,059)
-------------- --------------
Net Decrease from Capital Transactions in Shares of Beneficial Interest ..... (33,175,562) (16,096,020)
-------------- --------------
Total Increase (Decrease) in Net Assets ..................................... 43,962,241 (114,012,149)
Net Assets
Beginning of Year ........................................................... 172,310,059 286,322,208
-------------- --------------
End of Year ................................................................. $ 216,272,300 $ 172,310,059
============== ==============
</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 Small Cap Fund.
<TABLE>
<CAPTION>
For the years ended
September 30,
--------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value, Beginning of Period ...................... $ 14.96 $ 23.68 $ 21.66 $ 18.50 $ 11.60
-------- -------- -------- -------- --------
Income from Investment Operations
Expenses in Excess of Income ........................... (0.15) (0.18) (0.14) (0.12) (0.04)
Net Realized and Unrealized Gain (Loss)
on Investment ....................................... 7.13 (6.24) 3.58 4.65 6.94
-------- -------- -------- -------- --------
Total Income (Loss) from Investment Operations ............ 6.98 (6.42) 3.44 4.53 6.90
-------- -------- -------- -------- --------
Distributions to Shareholders
Net Realized Gain from Investment Transactions ......... (0.05) (1.04) (1.42) (1.37) --
In Excess of Net Realized Gains ........................ -- (1.26) -- -- --
-------- -------- -------- -------- --------
Total Distributions ....................................... (0.05) (2.30) (1.42) (1.37) --
-------- -------- -------- -------- --------
Net Asset Value, End of Period ............................ $ 21.89 $ 14.96 $ 23.68 $ 21.66 $ 18.50
======== ======== ======== ======== ========
Total Investment Return ................................... 46.52% (28.38)% 17.90% 26.41% 59.48%
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) ............... $216,272 $172,310 $286,322 $242,236 $122,935
Ratios to Average Net Assets:
Expenses in Excess of Income ........................ (0.74)% (0.87)% (0.89)% (0.70)% (0.46)%
Expenses, Including Expenses of the
Small Cap Portfolio ............................... 1.25% 1.25% 1.25% 1.25% 1.25%
Decrease Reflected in Above Expense Ratio Due to
Fees Waived/Expenses Reimbursed by Bankers Trust .. 0.21% 0.19% 0.03% 0.22% 0.34%
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
- -------------------------------------------------------------------------------
Small Cap 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 Small Cap Fund (the "Fund") is one of the
funds offered to investors by the Trust. The Fund began operations on October
21, 1993. The Fund seeks to achieve its investment objective by investing
substantially all of its assets in the Small Cap 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.
D. Distributions
It is the Fund's policy to declare and distribute dividends quarterly to
shareholders from net investment income. 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
will be 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 to distribute
substantially all of its taxable income to shareholders. The Fund may
periodically make reclassifications among certain of its capital accounts as a
result of the timing and characterization of certain income and capital gains
distributions determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles.
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:
For the year ended For the year ended
September 30, 1999 September 30, 1998
--------------------------- ---------------------------
Shares Amount Shares Amount
------ ------ ------ ------
Sold 8,607,904 $ 162,501,561 15,646,669 $ 299,805,325
Reinvested 24,817 422,175 1,021,185 17,676,714
Redeemed (10,266,076) (196,099,298) (17,243,267) (333,578,059)
----------- ------------ ----------- ------------
Net Decrease (1,633,355) $ (33,175,562) (575,413) $ (16,096,020)
=========== ============= =========== =============
8
<PAGE>
- --------------------------------------------------------------------------------
Small Cap Fund
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Trustees of BT Investment Funds and
Shareholders of Small Cap 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 Small Cap 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 made ordinary distributions during the year ending September 30, 1999,
of which $0.02 per share qualify for the dividends received deduction available
to corporate shareholders.
9
<PAGE>
- --------------------------------------------------------------------------------
Small Cap Portfolio
Schedule of Portfolio Investments September 30, 1999
- --------------------------------------------------------------------------------
Shares Description Value
------ ----------- -----
Common Stocks - 85.6%
America's Changing Leisure Time - 6.2%
83,700 Championship Auto Racing/1 .................... $ 2,176,200
91,700 Cinar Corp. - Class B Sub Mg/1 ................ 2,773,925
54,200 Hispanic Broadcasting Corp./1 ................. 4,125,975
35,800 P.F. Changs China Bistro, Inc./1 .............. 774,175
84,050 T-HQ, Inc./1 .................................. 3,624,656
-------------
13,474,931
-------------
Client-Server Computing - 5.2%
90,800 BEA Systems, Inc./1 ........................... 3,206,375
123,500 Mercury Interactive Corp./1 ................... 7,973,469
-------------
11,179,844
-------------
Energizing The Globe - 11.1%
103,800 BJ Services Co./1 ............................. 3,302,138
65,900 Calpine Corp./1 ............................... 5,605,619
44,000 Cooper Cameron Corp./1 ........................ 1,661,000
65,900 Devon Energy Corp. ............................ 2,730,731
174,100 Global Industries, Ltd./1 ..................... 1,414,563
111,000 Noble Drilling Corp./1 ........................ 2,428,125
113,300 Sante Fe International ........................ 2,443,031
54,700 Smith International, Inc./1 ................... 2,215,350
83,300 Tidewater, Inc. ............................... 2,124,150
-------------
23,924,707
-------------
Flourishing In The Managed
Care Environment - 3.2%
163,200 Caremark Rx/1 ................................. 918,000
78,500 Medical Manager Corp./1 ....................... 3,905,375
76,000 Trigon Healthcare, Inc./1 ..................... 2,194,500
-------------
7,017,875
-------------
Interactive Media - 3.0%
58,500 ANTEC Corp./1 ................................. 3,107,812
72,000 Polycom Corp./1 .............................. 3,431,250
-------------
6,539,062
-------------
Life On The Net - 4.3%
38,300 Art Technology Group/1 ........................ 1,457,794
26,400 Cheap Tickets, Inc./1 ......................... 854,700
45,600 Infospace.com, Inc./1 ......................... 1,875,300
78,500 Insight Communications/1 ...................... 2,247,062
39,700 Interworld Corp. .............................. 1,434,162
55,200 National Info. Consortium/1 ................... 1,362,750
-------------
9,231,768
-------------
Life Sciences Revolution - 3.2%
45,900 Alkermes, Inc./1 .............................. 1,322,494
176,600 Cell Genesys, Inc./1 .......................... 1,390,725
95,800 Enzon, Inc./1 ................................. 2,921,900
175,300 Nanogen, Inc./1 ............................... 1,270,925
-------------
6,906,044
-------------
Managing The Information Age - 3.9%
21,200 Check Point Software/1 ........................ 1,790,075
50,500 Dendrite International/1 ...................... 2,386,125
11,000 Emulex Corp./1 ................................ 944,625
21,100 Investment Technology Group, Inc. ............. 485,300
71,600 Whittman-Hart, Inc./1 ......................... 2,776,737
-------------
8,382,862
-------------
<PAGE>
Shares Description Value
------ ----------- -----
Move to Outsourcing - 1.5%
20,900 Bisys Group, Inc./1 ........................... $ 980,341
32,250 Eagle USA Airfreight, Inc./1 .................. 965,484
28,300 US Freightways Corp. .......................... 1,340,713
-------------
3,286,538
-------------
New Consumer - 8.3%
72,800 Ann Taylor Stores Corp./1 ..................... 2,975,700
60,750 Fossil Inc./1 ................................. 1,644,047
57,200 K-Swiss ....................................... 1,805,375
126,300 Pacific Sunwear of California1 ................ 3,540,347
111,500 Too, Inc. ..................................... 2,000,031
55,900 Williams-Sonoma, Inc./1 ....................... 2,714,644
82,200 Zale Corp./1 .................................. 3,149,288
-------------
17,829,432
-------------
New Health Care Paradigm - 5.5%
66,900 Accredo Health, Inc./1 ........................ 2,107,350
20,000 ANDRX Corp./1 ................................. 1,170,625
139,300 IVAX Corp./1 .................................. 2,298,450
54,600 Medquist, Inc./1 .............................. 1,825,688
73,200 Resmed, Inc./1 ................................ 2,420,175
80,000 Sonosight, Inc./1 ............................. 2,090,000
-------------
11,912,288
-------------
Our Strengthening Financial Structure - 5.1%
94,900 Annuity and Life Re (Holdings) ................ 2,360,637
84,100 Banks United Corp., - Class A ................ 2,722,737
30,000 Golden State Bank ............................. 538,125
130,200 Labranche & Company ........................... 1,456,613
80,366 Legg Mason, Inc. .............................. 3,079,022
66,200 Mutual Risk Management Ltd. ................... 810,950
-------------
10,968,084
-------------
Productivity Enhancement - 2.5%
73,300 Cognex Corp./1 ................................ 2,212,744
100,800 Pairgain Technologies/1 ....................... 1,285,200
52,800 Symantec Corp./1 .............................. 1,899,150
-------------
5,397,094
-------------
Return to Home Ownership - 0.4%
26,300 Linens 'N Things, Inc./1 ...................... 887,625
-------------
Revaluation of Real Estate - 0.1%
8,600 LNR Property Corp. ............................ 175,225
-------------
Special Situations - 5.2%
68,900 Armco, Inc./1 ................................. 482,300
120,900 Atlantic Coast Airlines, Inc./1 ............... 2,145,975
75,400 CSK Auto Corp./1 .............................. 1,644,662
93,400 Pinnacle Systems, Inc./1 ...................... 3,957,825
16,200 Rayonier, Inc. ................................ 680,400
96,300 Universal Foods Corp./1 ....................... 2,208,881
-------------
11,120,043
-------------
Stores of Value - 4.8%
52,900 99 Cents Only Stores/1 ........................ 1,911,013
65,300 American Eagle Outfitters/1 ................... 3,162,969
62,500 Ames Department Stores, Inc./1 ................ 1,992,188
107,700 BJ's Wholesale Club, Inc./1 ................... 3,183,881
-------------
10,250,051
-------------
See Notes to Financial Statements.
10
<PAGE>
- --------------------------------------------------------------------------------
Small Cap Portfolio
Schedule of Portfolio Investments September 30, 1999
- --------------------------------------------------------------------------------
Shares Description Value
------ ----------- -----
Telecommunications - 2.8%
20,300 Harmonic Lightwaves, Inc./1 ................... $ 2,655,494
56,300 Viatel, Inc./1 ................................ 1,664,369
42,000 WinStar Communications, Inc./1 ................ 1,640,625
-------------
5,960,488
-------------
The Ubiquitous Semiconductor - 9.3%
29,800 Alpha Industries, Inc./1 ..................... 1,680,906
122,300 ATMI, Inc./1 ................................. 4,563,319
26,100 Credence Systems Corp./1 ..................... 1,171,237
58,900 DII Group, Inc./1 ............................ 2,072,544
80,400 Lattice Semiconductor Corp. .................. 2,386,875
99,800 Micrel, Inc./1 ............................... 4,328,825
65,550 Transwitch Corp./1 ........................... 3,736,350
-------------
19,940,056
-------------
Total Common Stocks (Cost $147,187,050) .................. 184,384,017
-------------
Shares Description Value
------ ----------- -----
Short Term Instrument - 17.3%
Mutual Fund
37,204,894 Institutional Cash Management Fund
(Cost $37,204,894) .......................... $ 37,204,894
-------------
Total Investments (Cost $184,391,944) ........... 102.9% 221,588,911
Liabilities in Excess of Other Assets ........... (2.9)% (6,283,901)
----- -------------
Net Assets ...................................... 100.0% $ 215,305,010
===== =============
- -------------
1/ Non-Income Producing Security.
See Notes to Financial Statements.
11
<PAGE>
- --------------------------------------------------------------------------------
Small Cap Portfolio
Statement of Assets and Liabilities September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets
Investments, at Value (Cost of $184,391,944) ....................... $221,588,911
Receivable for Fund Shares Sold .................................... 979,955
Receivable for Securities Sold ..................................... 4,323,575
Dividends and Interest Receivable1 ................................. 151,440
------------
Total Assets .......................................................... 227,043,881
------------
Liabilities
Payable for Securities Purchased ................................... 11,601,729
Due to Bankers Trust ............................................... 100,068
Accrued Expenses and Other ......................................... 37,074
------------
Total Liabilities ..................................................... 11,738,871
------------
Net Assets ............................................................ $215,305,010
============
Composition of Net Assets
Paid-in Capital .................................................... $178,108,043
Net Unrealized Appreciation on Investments ......................... 37,196,967
------------
Net Assets ............................................................ $215,305,010
============
</TABLE>
1/ Includes $146,899 from the Portfolio's investment in the Institutional Cash
Management Fund.
- --------------------------------------------------------------------------------
Statement of Operations For the year ended September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Income
Dividends .......................................................... $ 1,037,663
------------
Expenses
Advisory Fees ...................................................... 1,290,625
Administration and Services Fees ................................... 204,425
Professional Fees .................................................. 32,843
Trustees Fees ...................................................... 6,147
Miscellaneous ...................................................... 1,643
------------
Total Expenses ..................................................... 1,535,683
Less Fees Waived/Expenses Reimbursed by Bankers Trust .............. (309,133)
------------
Net Expenses .................................................... 1,226,550
------------
Expenses in Excess of Investment Income ............................... (188,887)
------------
Realized and Unrealized Gain on Investments
Net Realized Gain from Investment Transactions ..................... 49,022,746
Net Change in Unrealized Appreciation/Depreciation on Investments .. 30,229,254
------------
Net Realized and Unrealized Gain on Investments ....................... 79,252,000
------------
Net Increase in Net Assets from Operations ............................ $ 79,063,113
============
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
- --------------------------------------------------------------------------------
Small Cap 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
Expenses in Excess of Investment Income ............................... $ (188,887) $ (523,836)
Net Realized Gain from Investment Transactions ........................ 49,022,746 3,536,500
Net Change in Unrealized Appreciation/Depreciation on Investments ..... 30,229,254 (73,816,547)
------------- -------------
Net Increase (Decrease) in Net Assets from Operations .................... 79,063,113 (70,803,883)
------------- -------------
Capital Transactions
Proceeds from Capital Invested ........................................ 160,986,273 320,120,726
Value of Capital Withdrawn ............................................ (198,015,755) (361,923,813)
------------- -------------
Net Decrease in Net Assets from Capital Transactions ..................... (37,029,482) (41,803,087)
------------- -------------
Total Increase (Decrease) in Net Assets .................................. 42,033,631 (112,606,970)
Net Assets
Beginning of Year ........................................................ 173,271,379 285,878,349
------------- -------------
End of Year .............................................................. $ 215,305,010 $ 173,271,379
============= =============
</TABLE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
Contained below are selected ratios to average net assets and other supplemental
data for the periods indicated for the Small Cap Portfolio.
<TABLE>
<CAPTION>
For the years ended September 30,
-------------------------------------------------------------
1999 1998 1997 1996 1995
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Income from Investment Operations
Supplemental Data and Ratios:
Net Assets, End of Period (000s omitted) ..... $215,305 $173,271 $285,878 $245,615 $123,828
Ratios to Average Net Assets:
Net Investment Income (Expenses in
Excess of Investment Income) ............ (0.09)% (0.22)% (0.24)% (0.05)% 0.19%
Expenses .................................. 0.60% 0.60% 0.60% 0.60% 0.60%
Decrease Reflected in Above Expense
Ratio Due to Fees Waived/Expenses
Reimbursed by Bankers Trust ............. 0.15% 0.17% 0.17% 0.17% 0.19%
Portfolio Turnover Rate ...................... 159% 182% 188% 159% 161%
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
- --------------------------------------------------------------------------------
Small Cap Portfolio
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 1--Organization and Significant Accounting Policies
A. Organization
The Small Cap 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 August 6, 1993 as an
unincorporated trust under the laws of New York and began operations on October
21, 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 and expenses are recorded
on the accrual basis. Interest income includes amortization of premium and
discount on investments. Realized gains and losses from securities transactions
are recorded by 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 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 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.
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 $854,409 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
$294,641,612 and $344,889,776, respectively.
The tax basis of investments held at September 30, 1999 was $184,507,934. The
aggregate gross unrealized appreciation for all investments was $44,802,597 and
the aggregate gross unrealized depreciation for all investments was $7,721,620.
14
<PAGE>
- --------------------------------------------------------------------------------
Small Cap Portfolio
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Trustees and Holders of Beneficial Interest of
Small Cap 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 Small Cap 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.
PricewaterhouseCoopers LLP
Baltimore, Maryland
November 16, 1999
15
<PAGE>
- --------------------------------------------------------------------------------
Small Cap 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 7,590,046 12,987
Messr Dill 7,590,046 12,987
Messr Hale 7,590,046 12,987
Messr Langton 7,590,046 12,987
Messr Saunders 7,590,046 12,987
Messr Van Benschoten 7,590,046 12,987
Dr. Gruber 7,590,046 12,987
Dr. Herring 7,590,046 12,987
2. To approve the New Investment Advisory Agreement with Bankers Trust Company.
For Against Abstain
--------- ------- -------
7,596,993 1,445 4,595
3. To approve the New Investment Advisory Agreement with Morgan Grenfell, Inc.
For Against Abstain
--------- ------- -------
7,575,992 22,557 4,484
4. To approve the New Investment Sub-advisory Agreement with Bankers Trust
Company.
For Against Abstain
--------- ------- -------
7,596,993 1,445 4,595
5. To ratify the selection of PricewaterhouseCoopers LLP as the independent
accountants of the Fund and its corresponding Portfolio.
For Against Abstain
--------- ------- -------
7,592,466 8,466 2,101
16
<PAGE>
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<PAGE>
This page intentionally left blank.
<PAGE>
This page intentionally left blank.
<PAGE>
[Graphic Omitted] Bankers Trust
Architects of Value
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.
Small Cap Fund CUSIP #055922769
BT Investment Funds 498ANN (9/99)
Distributed by:
ICC Distributors, Inc.
Two Portland Square
Portland, ME 04101
<PAGE>
EXHIBIT C
Deutsche Asset Management
Mutual Fund
Prospectus
January 31, 2000
Investment Class
Small Cap
formerly a BT Mutual Fund
<TABLE>
<S> <C>
[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 A Member of the
Exchange Commission passed upon the accuracy or Deutsche Bank Group [/]
adequacy of this prospectus. Any representation to the
contrary is a criminal offense.]
</TABLE>
<PAGE>
Overview
- --------------------------------------------------------------------------------
of Small Cap--Investment Class
Goal: The Fund invests for long-term capital growth.
Core Strategy: The Fund invests primarily in stocks and other equity securities
of smaller U.S. companies.
INVESTMENT POLICIES AND STRATEGIES
The Fund invests all of its assets in a master portfolio with the same
investment goal as the Fund. The Fund, through the master portfolio, seeks to
achieve that goal by investing in stocks and other equity securities of
companies with small market capitalizations. The Fund searches for small
companies whose share price does not reflect its prospects by looking at
factors such as the company's financial strength and technological
opportunities.
- --------------------------------------------------------------------------------
Small Cap--Investment Class
Overview of Small 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 Small 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>
- --------------------------------------------------------------------------------
2
<PAGE>
Overview of Small 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 we have selected could perform poorly;
. Small company stock returns could trail stock market returns generally
because of the liquidity risks specific to small company investing: greater
share-price volatility and fewer buyers for small company shares in periods
of economic or stock market stress. Such lack of liquidity may accelerate a
prevailing downward price trend 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 fluctuation 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 medium-sized company stocks.
Diversifying your investments may improve your long-run investment return and
lower the volatility of your overall investment portfolio.
On September 8, 1999, the Board of Trustees of the Small Cap fund voted to
recommend the reorganization of the Morgan Grenfell Smaller Companies Fund into
Small Cap fund. The merger requires the approval of the Morgan Grenfell Smaller
Companies Fund's shareholders. A special meeting of shareholders will be held
for this purpose. If shareholders approve the merger, shares of Morgan Grenfell
Smaller Companies Fund will be converted to shares of Small Cap.
An investment in Small Cap is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
- --------------------------------------------------------------------------------
3
<PAGE>
Overview of Small 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 the Fund began selling shares on October 20, 1993 (its
inception date). The table compares the Fund's average annual return with the
Russell 2000 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 stocks--costs that are reflected in the
Fund's results.
- --------------------------------------------------------------------------------
The Russell 2000 Index is a widely accepted benchmark of small company stock
performance. It is a model, not an actual portfolio and is a subset of the
Russell 3000 Index, which measures the performance of the 3,000 largest U.S.
companies based on total market capitalization. The Russell 2000 tracks the
2000 smallest companies in the Russell 3000 Index. As of May 31, 1999, the
Russell 2000 Index represents approximately 8% of the total market
capitalization of the Russell 3000 Index. As of June 30, 1999, the average
market capitalization was approximately $526.4 million; the median market
capitalization was approximately $428.0 million. The largest company in the
index had an approximate market capitalization of $1,349.8 million.
Year-by-Year Returns
(each full calendar year since inception)
[CHART APPEARS HERE]
1994 19.31%
1995 58.57%
1996 6.90%
1997 13.16%
1998 6.15%
1999 44.75%
Since inception, the Fund's highest return in any calendar quarter was 30.11%
(third quarter 1997) and its lowest quarterly return was -24.39% (third quarter
1998). Past performance offers no indication of how the Fund will perform in
the future.
PERFORMANCE FOR PERIOD ENDED 12/31/99
<TABLE>
<CAPTION>
Average Annual Returns
1 Year 5 Year Since Inception
(October 21, 1993)/1/
<S> <C> <C> <C>
Small Cap -
Investment
Class 44.75% 24.13% 23.41%
------------------------------------------------------
Russell 2000
Index 21.26% 16.69% 12.99%
------------------------------------------------------
</TABLE>
/1/ The Russell 2000 Index is calcu-
lated from October 31, 1993.
- --------------------------------------------------------------------------------
4
<PAGE>
Overview of Small 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
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 Small Cap 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 months 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 the fee
waivers and reimbursements.
ANNUAL FEES AND EXPENSES
<TABLE>
<CAPTION>
Percentage of average
daily net assets/1/
<S> <C> <C>
Management Fees 0.65%
---------------------------------------------------
Distribution and
Service (12b-1)
Fees None
---------------------------------------------------
Other Expenses 0.81%
---------------------------------------------------
Total Fund
Operating
Expenses 1.46%
---------------------------------------------------
Less: Fee Waivers
or Expense
Reimbursements (0.21)%/2/
---------------------------------------------------
Net Expenses 1.25%
---------------------------------------------------
</TABLE>
Expense Example/3/
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C>
$127 $434 $771 $1,723
---------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
5
<PAGE>
A detailed look
- --------------------------------------------------------------------------------
at Small Cap--Investment Class
OBJECTIVE
Small Cap--Investment Class seeks long-term capital growth. Under normal
circumstances, the Fund invests at least 65% of its total assets in the stock
and other securities with equity characteristics of companies with market
capitalizations, at the time we first purchase the shares, within the market
capitalization range of the Russell 2000 Index.
The Fund invests for capital growth, not income; any dividend or interest in-
come is incidental to the pursuit of its goal. While we give priority to capi-
tal 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 invest for the long term. We are looking for small companies that have
reached a pivotal point--companies that are ready to reap the benefits of
technological change, companies that have begun to increase their market share,
companies that have completed a turnaround or whose pace of growth is starting
to accelerate. Normally, their share prices do not reflect their strong
prospects--most investors have not yet discovered them. Two financial
attributes set these companies apart:
. evidence of above-average growth in revenues and earnings; and
. a balance sheet that can support this growth potential with sufficient
working capital and manageable levels of debt.
- --------------------------------------------------------------------------------
"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 90 to 110 small companies at any
one time. The Fund focuses principally on companies with market caps, at the
time we purchase the stock, within the market capitalization range of the
Russell 2000 Index.
The Fund may also invest up to 25% of its assets in the stocks of non-U.S.
companies and up to 35% of its assets in large capitalization stocks. Under
normal conditions, these two tactics would not comprise major elements of its
strategy.
INVESTMENT PROCESS
The Fund's process begins with a methodical search for industries poised to do
well. Before identifying individual companies, we seek to identify the
industries that are undergoing positive change or that stand to benefit from
broad demographic and cultural trends.
Once we have identified a likely industry, the exhaustive search begins for the
most promising small companies within the industry. The Fund's research team
meets frequently with the managements of investment candidates to gather a
first-hand impression of their prospects. The team's investigative work relies
on the analytical and forecasting tools that we have long applied and are
continuously enhancing. The work demands intensive research: visits to a
company's plants and frequent contact with its management, suppliers, customers
and competitors.
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.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
6
<PAGE>
A Detailed Look at Small Cap--Investment Class
RISKS
Below we set forth some of the prominent risks associated with investing in
small 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. To
minimize this risk, we monitor each of the stocks in the Fund for the following
signs of negative change:
. decelerating revenue or earnings growth;
. loss of market share;
. increasing levels of debt or decreasing levels of cash flow and working
capital; and
. a stock price that lags behind competitors'.
Small Company Risk. Small 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 also pose added risk. Industrywide reversals have had a
greater impact on small companies, since they lack a large company's financial
resources. Finally, small company stocks are typically less liquid than large
company stocks: when things are going poorly, it is harder to find a buyer for
a small company's shares.
Foreign Investment Risk. To the extent that the Fund holds the stocks of
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 Risks
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 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
- --------------------------------------------------------------------------------
7
<PAGE>
A Detailed Look at Small Cap--Investment Class
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 Managers. The following portfolio managers are responsible for the
day-to-day management of the master portfolio's investments:
John P. Callaghan
. Co-Portfolio Manager of the master portfolio since 1999.
. Portfolio Manager at Deutsche Asset Management, Inc. from 1997 to present,
Odyssey Partners from 1996 to 1997 and Weiss Peck & Greer from 1993 to 1996.
. AB in Economics from Harvard College and MBA from Harvard Business School.
Mary P. Dugan, CFA
. Co-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.
Audrey M. T. Jones, CFA
. Co-Portfolio Manager of the master portfolio since 1999.
. Portfolio Manager at Deutsche Asset Management, Inc. from 1986 to present.
. BBA in Finance/Accounting from Pace University Lubin School of Business.
Other Services. Bankers Trust provides the 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 request for cash dividends and distributions from the Fund;
. answering your questions on the Fund's investment performance or
administration;
. sending proxy reports and updated prospectus information to you; and
. collecting your executed proxies.
Service agents 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
- --------------------------------------------------------------------------------
8
<PAGE>
A Detailed Look at Small Cap--Investment Class
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," the Small Cap Portfolio. The Fund and its
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 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. Price changes in the securities the Fund owns may
ultimately affect the price of Fund shares the next time 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.
- --------------------------------------------------------------------------------
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.
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 your 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>
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.
Transaction Tax Status
Your sale of shares Capital gains or losses
owned
more than one year
------------------------------------------------
Your sale of shares Gains treated as ordinary
owned income; losses subject to
for one year or less special rules
------------------------------------------------
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.
- --------------------------------------------------------------------------------
9
<PAGE>
A Detailed Look at Small Cap--Investment Class
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
application that accompanies this
prospectus. (You may obtain
additional applications by calling
the Service Center.) Mail the
completed application along with a
check payable to Small Cap--498.
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. 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.
- --------------------------------------------------------------------------------
10
<PAGE>
A Detailed Look at Small Cap--Investment Class
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: Small Cap--498
</TABLE>
Refer to your account statement for the account name and 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 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.
- --------------------------------------------------------------------------------
11
<PAGE>
A Detailed Look at Small Cap--Investment Class
. 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.
- --------------------------------------------------------------------------------
12
<PAGE>
A Detailed Look at the Small 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 dividends 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 year ended September 30,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net Asset Value,
Beginning of Year $14.96 $23.68 $21.66 $18.50 $11.60
-------------------------------------------------------------------------------------
Income from Investment
Operations
Expenses in Excess of
Income (0.15) (0.18) (0.14) (0.12) (0.04)
-------------------------------------------------------------------------------------
Net Realized and
Unrealized Gain (Loss)
on Investment 7.13 (6.24) 3.58 4.65 6.94
-------------------------------------------------------------------------------------
Total Income (Loss) from
Investment Operations 6.98 (6.42) 3.44 4.53 6.90
-------------------------------------------------------------------------------------
Distributions to
Shareholders
-------------------------------------------------------------------------------------
Net Realized Gain from
Investment Transactions (0.05) (1.04) (1.42) (1.37) --
-------------------------------------------------------------------------------------
In Excess of Net
Realized Gains -- (1.26) -- -- --
-------------------------------------------------------------------------------------
Total Distributions (0.05) (2.30) (1.42) (1.37) --
-------------------------------------------------------------------------------------
Net Asset Value, End of
Period $21.89 $14.96 $23.68 $21.66 $18.50
-------------------------------------------------------------------------------------
Total Investment Return 46.52% (28.38)% 17.90% 26.41% 59.48%
-------------------------------------------------------------------------------------
Supplemental Data and
Ratios:
Net Assets, End of
Period (000s Omitted) $216,272 $172,310 $286,322 $242,236 $122,935
-------------------------------------------------------------------------------------
Ratios to Average Net
Assets:
Expenses in Excess of
Income (0.74)% (0.87)% (0.89)% (0.70)% (0.46)%
-------------------------------------------------------------------------------------
Expenses, Including
Expenses of the Small
Cap Portfolio 1.25% 1.25% 1.25% 1.25% 1.25%
-------------------------------------------------------------------------------------
Decrease Reflected in
Above Expense Ratio Due
to Fees Waived/Expenses
Reimbursed by Bankers
Trust 0.21% 0.19% 0.03% 0.22% 0.34%
-------------------------------------------------------------------------------------
Portfolio Turnover
Rate/1/ 159% 182% 188% 159% 161%
-------------------------------------------------------------------------------------
</TABLE>
/1/The portfolio turnover rate is the rate for the master portfolio into
which the Fund invests all of its assets.
- --------------------------------------------------------------------------------
13
<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 the Fund, write to us at:
Service Center
P.O. Box 219210
Kansas City, MO 64121-9210
or call our toll-free number at 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.
Small Cap--Investment Class
BT Investment Funds
Distributed by:
ICC Distributors, Inc. CUSIP
Two Portland Square #055922769
Portland, ME 04101 498PRO (1/00)
811-4760
14
<PAGE>
SMALL CAP FUND
STATEMENT OF ADDITIONAL INFORMATION
March 7, 2000
This statement of additional information is not a prospectus, but expands upon
and supplements the information contained in the prospectus of Small Cap Fund,
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
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 into the statement of additional information dated January 31, 2000 of
BT Investment Funds on behalf of the Small Cap Fund, and the statement of
additional information dated February 28, 2000, of Morgan Grenfell Investment
Trust on behalf of seven separate investment portfolios of the Trust, including
Smaller Companies Fund. Small Cap Fund and Smaller Companies Fund are referred
to collectively as the "Funds".
<PAGE>
ADDITIONAL INFORMATION ABOUT
SMALL CAP FUND AND
SMALLER COMPANIES FUND
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>
MORGAN GRENFELL BT INVESTMENT FUNDS
INVESTMENT TRUST SAI dated January 31, 2000
SAI dated February 28, 2000
- ---------------------------------------------------------------------------------------------------------------
Fund history ORGANIZATION OF THE TRUST
- ---------------------------------------------------------------------------------------------------------------
Description of each Fund and ADDITIONAL INFORMATION INVESTMENT OBJECTIVES,
its investments, strategies, ON FUND INVESTMENTS AND POLICIES AND RESTRICTIONS:
polices and risks STRATEGIES AND RELATED Investment Objectives
RISKS Investment Policies
Additional Risk Factors
INVESTMENT RESTRICTIONS Investment Restrictions
- ---------------------------------------------------------------------------------------------------------------
Management of the Funds, TRUSTEES AND OFFICERS MANAGEMENT OF THE TRUST
including the Board of Trustees, AND THE PORTFOLIOS:
Officers and Trustee compensation Trustees of the Trust and Portfolios
Officers of the Trust and Portfolios
Trustee Compensation Table
- ---------------------------------------------------------------------------------------------------------------
Control persons, principal TRUSTEES AND OFFICERS MANAGEMENT OF THE TRUST
holders of securities and AND THE PORTFOLIOS:
management ownership GENERAL INFORMATION Trustee Compensation Table
ABOUT THE TRUST
- ---------------------------------------------------------------------------------------------------------------
Investment advisory and other INVESTMENT ADVISORY MANAGEMENT OF THE TRUST
services: investment adviser, AND OTHER SERVICES AND THE PORTFOLIOS:
distributor and other service Investment Adviser
providers SERVICE PLAN Administrator
Distributor
ADDITIONAL INFORMATION Service Agent
Custodian and Transfer Agent
Counsel and Independent
Accountants
- ---------------------------------------------------------------------------------------------------------------
Brokerage allocation and other PORTFOLIO TRANSACTIONS INVESTMENT OBJECTIVES,
practices POLICIES AND RESTRICTIONS:
Portfolio Transactions and
Brokerage Commissions
- ---------------------------------------------------------------------------------------------------------------
Shares of beneficial interest GENERAL INFORMATION ORGANIZATION OF THE TRUST
ABOUT THE TRUST
- ---------------------------------------------------------------------------------------------------------------
Purchase, redemption and pricing PURCHASE AND REDEMPTION VALUATION OF SECURITIES;
of shares OF SHARES REDEMPTIONS AND PURCHASES IN-IN-KIND:
Purchase 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>
MORGAN GRENFELL BT INVESTMENT FUNDS
INVESTMENT TRUST SAI dated January 31, 2000
SAI dated February 28, 2000
- ----------------------------------------------------------------------------------------------------------------
Taxation of the Funds TAXES TAXATION:
Dividends and Distributions
Taxation of the Fund
Taxation of the Portfolio
Foreign Securities
Other Taxation
- ----------------------------------------------------------------------------------------------------------------
Calculation of performance data PERFORMANCE INFORMATION PERFORMANCE INFORMATION:
Standard Performance Information
Comparison of Fund Performance
Economic and Market Information
- ----------------------------------------------------------------------------------------------------------------
Financial statements FINANCIAL STATEMENTS: FINANCIAL STATEMENTS:
This section incorporates by This section incorporates by
reference Morgan Grenfell reference Small Cap Fund's annual
Investment Trust's annual report report dated September 30, 1999.
dated October 31, 1999.
- ----------------------------------------------------------------------------------------------------------------
</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.
(a) 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/
(b) By-Laws; /1/
(c) Not applicable
(d) Form of Agreement and Plan of Reorganization, filed herewith;
(e) 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/
(f) Bonus or Profit Sharing Contracts - Not applicable;
(g) 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/
(h) Administration and Services Agreement dated Oct. 28, 1992; /8/
(i) Exhibit D to the Administration and Services Agreement as of
October 28, 1992, as revised December 23,1999; /12/
(ii) Agreement to Provide Shareholder Services for BT Preservation Plus
Income Fund as of June 10, 1998; /5/
(iii) Shareholder Services Plan for BT Preservation Plus Income Fund as
of June 10, 1998; /5/
(iv) Expense Limitation Agreement dated September 30, 1999 on behalf of
Intermediate Tax Free Fund, Capital Appreciation Fund, Small Cap
Fund; /13/
<PAGE>
(v) Expense Limitation Agreement dated October 31, 1999 on behalf of
International Equity Fund, Latin American Equity Fund and Pacific
Basin Equity Fund; /13/
(vi) Expense Limitation Agreement dated June 4, 1999, on behalf of
BT Investment Lifecycle Long Range Fund, BT Investment Lifecycle
Mid Range Fund, and BT Investment Lifecycle Short Range Fund; /13/
(vii) Expense Limitation Agreement dated June 4, 1999 on behalf of Cash
Management Fund, Tax Free Money Fund, NY Tax Free Money Fund, Treasury
Money Fund and Quantitative Equity Fund; /12/.
(viii) Expense Limitation Agreement dated September 30, 1999 on behalf of
Preservation Plus Income Fund; /13/
(i) Legal Opinion - Not applicable;
(j) Consent of Independent Accountants - Not applicable
(k) Omitted Financial Statements - Not applicable;
(l) Initial Capital Agreements - Not applicable;
(m) Rule 12b-1 Plans - Not applicable;
(n) Financial Data Schedules - Not applicable
(o) Rule 18f-3 Plan; /13/
(p) Power of Attorney; /11/.
___________________________________
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.
<PAGE>
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 No. 67 to Registrant's
Registration Statement as filed with the Commission on January 31, 2000.
<PAGE>
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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant, BT INVESTMENT FUNDS, on behalf of its series, Small Cap Fund, 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 2nd day of February, 2000.
BT INVESTMENT FUNDS
By: /s/ Daniel O. Hirsch
--------------------------------
Daniel O. Hirsch, Secretary
February 2, 2000
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement on Form N-14 has been signed below by the following persons in the
capacities and on the date indicated:
NAME TITLE DATE
By: /s/ DANIEL O. HIRSCH Secretary February 2, 2000
- --------------------------- (Attorney in Fact
Daniel O. Hirsch For the Persons Listed Below)
/s/ JOHN Y. KEFFER* President and
- --------------------------- Chief Executive Officer
John Y. Keffer
/s/ CHARLES A. RIZZO* Treasurer (Principal
- --------------------------- Financial and Accounting Officer)
Charles A. Rizzo
/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
<PAGE>
/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
* By Power of Attorney. Incorporated by reference to Post-Effective Amendment
No. 64 of BT Investment Funds as filed with the Commission on October 22, 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 on the 2nd day of February,
2000.
BT INVESTMENT PORTFOLIOS
By: /s/ Daniel O. Hirsch
--------------------------------
Daniel O. Hirsch, Secretary
February 2, 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.
NAME TITLE DATE
By: /s/ DANIEL O. HIRSCH Secretary February 2, 2000
- --------------------------- (Attorney in Fact
Daniel O. Hirsch For the Persons Listed Below)
/s/ JOHN Y. KEFFER* President and
- --------------------------- Chief Executive Officer
John Y. Keffer
/s/ CHARLES A. RIZZO* Treasurer (Principal
- --------------------------- Financial and Accounting Officer)
Charles A. Rizzo
/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
<PAGE>
/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
* By Power of Attorney. Incorporated by reference to Post-Effective Amendment
No. 64 of BT Investment Funds as filed with the Commission on October 22, 1999.
<PAGE>
EXHIBIT A
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 "BT
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 Small Cap Fund (the "Acquiring Fund"), a
series of the BT Trust, and (ii) Morgan Grenfell Investment Trust (the "MG
Trust"), a business trust organized under the laws of the State of Delaware with
its principal place of business at One South Street, Baltimore, Maryland 21202,
on behalf of Smaller Companies Fund (the "Acquired Fund"), a series of the MG
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 each class of shares of
the Acquired Fund to the Acquiring Fund in exchange for (a) the issuance of
shares of beneficial interest of the Acquiring Fund (collectively, the
"Acquiring Fund Shares" and each, an "Acquiring Fund Share") to each class of
shares of the Acquired Fund, and (b) the assumption by the Acquiring Fund of
certain scheduled liabilities of each class of shares 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 each class of shares of the Acquired Fund in
liquidation of each class of shares of the Acquired Fund and the termination of
each class of shares of the Acquired Fund, all upon the terms and conditions
hereinafter set forth in this Agreement.
WHEREAS, the MG Trust and the BT 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 the BT Trust has determined that the
exchange of all of the assets and certain of the liabilities of the Acquired
Fund for Acquiring Fund Shares 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;
WHEREAS, the Board of Trustees of the MG Trust has determined that the
exchange of all of the assets and certain of the liabilities of each class of
the Acquired Fund for Acquiring Fund Shares and the assumption of such
liabilities by 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.
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
Page 1
<PAGE>
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING FUND
SHARES 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 for each class
of shares of 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 class of shares 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 such class of shares of the 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 such class, including each class
of shares, 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 (except to
the extent sales may be limited by representations made in connection with
issuance of the tax opinion described in paragraph 8.6 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 for each class of shares
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 Deutsche Asset Management, Inc. ("DAMI"), 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 for each class of
shares liquidate and distribute pro rata by class to the Acquired Fund's
shareholders of record of such class 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 class of shares of the
Page 2
<PAGE>
Acquired Fund on the books of the Acquiring Fund to open accounts on the share
records of the Acquiring Fund in the name of the shareholders of the relevant
class 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 relevant class of Acquired Fund will simultaneously be cancelled
on the books of the Acquired Fund, although share certificates, if any,
representing interests in the relevant class of 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. 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. The 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
State of Delaware and in accordance with its governing documents.
2. VALUATION
2.1. The value of the assets of each class of shares of the Acquired Fund
to be transferred, and liabilities of each class of shares 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 Acquired Fund.
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 April 28, 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
Page 3
<PAGE>
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 Bankers Trust, 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 BT Trust or the MG 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 MG 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 MG 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 MG Trust and the Acquired Fund represent and warrant to the BT
Trust and the Acquiring Fund as follows:
(a) The Acquired Fund is a series of the MG Trust, which is a business
trust, validly existing and in good standing under the laws of the State of
Delaware 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 MG Trust is a registered open-end investment management company,
and its registration with the Securities and Exchange Commission (the
"Commission") as an investment
Page 4
<PAGE>
company under the Investment Company Act of 1940, as amended (the "Investment
Company Act"), is in full force and effect;
(c) The MG 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;
(d) The MG 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 MG 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 MG 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 MG Trust and the Acquired Fund know of no facts which might
form the basis for the institution of such proceedings and neither the MG 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 MG Trust's ability to
consummate the transactions herein contemplated;
(f) The Statement of Assets and Liabilities of the Acquired Fund as of
October 31, 1999, has been audited by[,] 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 October 31, 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
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;
Page 5
<PAGE>
(j) 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;
(k) At the Closing Date, the MG 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 "Securities Act"), other than as disclosed in writing to, and
acknowledged in writing by, the Acquiring Fund;
(l) The execution, delivery and performance of this Agreement has been duly
authorized by all necessary action on the part of the MG 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 and delivery
by the BT Trust on behalf of the Acquiring Fund, this Agreement will constitute
a valid and binding obligation of the MG 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;
(m) The information to be furnished by the MG 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;
(n) 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;
(o) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the MG Trust on
behalf of the Acquired Fund of the transactions contemplated by this Agreement;
(p) 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
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(q) The prospectus of the Acquired Fund dated February 28, 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 BT Trust and the Acquiring Fund represent and warrant to MG Trust
and the Acquired Fund as follows:
(a) The Acquiring Fund is a series of the BT 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 BT Trust is a registered open-end investment management company,
and its registration with the Commission as an investment company under the
Investment Company Act is in full force and effect;
(c) The current prospectus of and statement of additional information of
the BT Trust on behalf of the Acquiring Fund conform in all material respects to
the applicable requirements of the Securities Act and the Investment Company
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 BT Trust has, and at the Closing Date will have, good and
marketable title to the Acquiring Fund's assets;
(e) The BT 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;
(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 BT 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 BT Trust and the Acquiring Fund know of no facts which might form the
basis for the institution of such proceedings and neither the BT 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 BT 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[], independent accountants, and is in
accordance with generally accepted accounting principles consistently applied,
and such statement (copies of which have been furnished
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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) 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;
(1) The execution, delivery and performance of this Agreement has been duly
authorized by all necessary action, if any, on the part of the BT Trust's Board
of Trustees on behalf of the Acquiring Fund, and, assuming due authorization,
execution and delivery by the MG Trust on behalf of the Acquired Fund, this
Agreement will constitute a valid and binding obligation of the BT 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;
(m) 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;
(n) 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 in all
material respects and shall comply in all material respects with federal
securities and other laws and regulations applicable thereto;
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(o) The information contained in the Proxy Statement to be included 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 misleading; and
(p) The BT Trust, on behalf of the Acquiring Fund, agrees to use all
reasonable efforts to obtain the approvals and authorizations required by the
Securities Act, the Investment Company 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 MG 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 BT 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 MG 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 MG Trust, on behalf
of the Acquired Fund, and the BT 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
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shall be prepared in accordance with generally accepted accounting principles
consistently applied and shall be certified by the MG 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 MG 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 Securities
Act, the Securities Exchange Act of 1934 (the "Exchange Act"), and the
Investment Company Act in connection with the meeting of the Acquired Fund's
shareholders to consider approval of this Agreement and the transactions
contemplated herein.
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 and
tax basis and holding periods as of the Closing Date, certified by MG Trust's
Treasurer or Assistant Treasurer on behalf of the Acquired Fund;
6.3 MG Trust on behalf of the Acquired Fund and BT 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; and
6.4. Each Merging Fund shall have received on the Closing Date a favorable
opinion of Willkie Farr & Gallagher, counsel to the Acquiring Fund, in a form
satisfactory to Daniel O.
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Hirsch, Secretary of the Merging Funds, covering the following points:
(i) the Acquired Fund is a series of MG Trust and the Acquiring Fund is a
series of BT Trust (collectively, the "Trusts" and individually, the
"Trust"), each of which is a business trust validly existing and in
good standing under the laws of the State of Delaware and the
Commonwealth of Massachusetts, respectively and has the power, under
its Declaration of Trust, to own all of its properties and assets and
to carry on its business as described in its current prospectus and
statement of additional information;
(ii) this Agreement has been duly authorized, executed and delivered by
each Trust on behalf of its respective Merging Fund and, assuming that
the Prospectus, the Registration Statement and the Proxy Statement
comply with the Securities Act, the Exchange Act and the Investment
Company Act and the rules and regulations thereunder and in the case
of BT Trust, assuming due authorization, execution and delivery of the
Agreement by MG Trust on behalf of the Acquired Fund, is a valid and
binding obligation of BT Trust enforceable against each Trust on
behalf of its respective Merging Fund in accordance with its terms,
and, in the case of MG Trust, assuming due authorization execution and
delivery of the Agreement by BT Trust on behalf of the Acquiring Fund,
is a valid and binding obligation of MG Trust enforceable against
itself in accordance with its terms, both opinions subject as to
enforcement to bankruptcy, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors' rights generally and to
general equity principles;
(iii) the execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, result
in a material violation of the Declaration of Trust or By-laws of each
Trust;
(iv) to the knowledge of such counsel, no consent, approval, authorization
or order of any court or governmental authority of the United States,
the State of Delaware or The Commonwealth of Massachusetts, as
applicable, is required for the consummation by each Trust of the
transactions contemplated herein, except such as have been obtained
under the Securities Act, the Exchange Act and the Investment Company
Act, and such as may be required under state securities laws;
(v) such counsel may rely, as to matters governed by the laws of the State
of Delaware or The Commonwealth of Massachusetts, as applicable, on an
opinion of Massachusetts counsel and/or certificates of Officers or
Trustees of the BT Trust or the MG Trust on behalf of its Merging
Fund. Such opinion also shall include such other matters incident to
the transaction contemplated hereby as each Trust on the behalf of its
respective Merging Fund may reasonably request. Finally, such opinion
need not opine with respect to the applicability of Section 17(a)
under the 1940 Act or Rule 17a-8 thereunder;
(vi) with respect to each Merging Fund , such opinions may state that such
counsel does not express any opinion or belief as to the financial
statements or other financial data or as to the information relating
to the other Merging Fund contained or incorporated
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by reference in the Proxy Statement or Registration Statement, and
that such opinion is solely for the benefit of MG Trust and BT Trust,
as applicable and their respective trustees and officers;
(vii) The Acquiring Fund shares to be issued to the Acquired Fund and
delivered to the Acquired Fund shareholders as provided by this
Agreement are duly authorized and upon such delivery will be validly
issued and outstanding and fully paid and non-assessable and no
shareholder of the Acquiring Fund has any preemptive rights to
subscription or purchase in respect thereof.
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 MG 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
Securities 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 Securities 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
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of (1) its interest income excludable 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 BT Trust and the MG Trust with respect to the
relevant Merging Fund and satisfactory to Daniel O. Hirsch, as Secretary of each
of the Trust, 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;
(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; and
(h) The tax holding period of the Acquiring Fund Shares received by the
Acquired Fund shareholders will include, for each shareholder, the tax holding
period for the shares of
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beneficial interest of the Acquired Fund surrendered in exchange therefor,
provided that the Acquired Fund shares were held as capital assets on the date
of the exchange.
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. The parties have been informed by Deutsche Asset Management Inc. .
that Deutsche Asset Management Inc.. will pay for all expenses incurred in
connection with the Reorganization except that the Acquired Fund shall be liable
for its fees and expenses incurred in connection with its liquidation and
termination.
9. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
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 4.1and
4.2 and 5.2 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 MG Trust on behalf of the Acquired
Fund and the BT Trust on behalf of the Acquiring Fund; (ii) any party 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.
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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 MG
Trust on behalf of the Acquired Fund and the BT Trust on behalf of the Acquiring
Fund; provided, however, that following the meeting of the Acquired Fund
shareholders called by the MG 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 MG Trust on behalf of the
Acquired Fund and the BT 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 State of Delaware.
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 BT Trust and the
MG Trust shall not be binding upon any of their respective Trustees,
shareholders, nominees, officers, agents or employees personally, but bind only
the trust property of the BT Trust or the MG Trust, as the case may be, as
provided in the trust instruments of the BT Trust and the MG Trust,
respectively. The execution and delivery of this Agreement have been authorized
by the Trustees of each of the BT Trust and the MG Trust, and this Agreement has
been executed by authorized officers of the BT Trust and the MG 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
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<PAGE>
to impose any liability on any of them personally, but shall bind only the trust
property of the BT Trust and the MG Trust, as the case may be, as provided in
the Declaration of Trust of the BT Trust and the MG Trust, respectively.
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IN 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
SMALL CAP FUND
By: ______________________ By: __________________________
Name: Daniel O. Hirsch
Title: Secretary Name: _________________________
Title: _______________________
Attest: MORGAN GRENFELL INVESTMENT TRUST
on behalf of SMALLER COMPANIES FUND
By: ______________________ By: __________________________
Name: Daniel O. Hirsch
Title: Secretary Name: _________________________
Title: _______________________
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