SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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[ ] Definitive Proxy Statement
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SECURITY INCOME FUND
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(Name of Registrant as Specified In Its Charter)
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Security Income Fund
Notice of Special Meeting of Shareholders
of the Security Capital Preservation Fund
September 10, 1999
A Special Meeting of Shareholders of the Security Capital Preservation
Fund (the "Fund") will be held at the offices of Security Income Fund, 700
Harrison Street, Topeka, Kansas 66636, on September 10, 1999 at 9:30 a.m. (the
"Special Meeting"). The Fund is a series of Security Income Fund, an open-end
management investment company organized under the laws of the state of Kansas.
The Fund operates as a feeder fund in a master-feeder fund arrangement with a
corresponding master fund portfolio, the BT PreservationPlus Income Portfolio
(the "Portfolio"). As a feeder fund, the Fund seeks to achieve its investment
objective by investing all of its investable assets in the Portfolio, an
open-end management investment company organized as a trust under the laws of
the State of New York. The Portfolio shares the same investment objective and
policies of the Fund. As required by the Investment Company Act of 1940, as
amended (the "Act"), the Fund's voting rights with respect to the Portfolio
shares that it holds must be passed through to the Fund's own shareholders.
The Special Meeting is being held to consider and vote on the following
matters for the Fund, as indicated below and more fully described under the
corresponding Proposals in the Proxy Statement, and such other matters as may
properly come before the meeting or any adjournments thereof:
PROPOSAL 1: To approve or disapprove new investment
advisory agreements (the "New Advisory
Agreements") for the Fund:
A. To approve or disapprove a new
investment advisory agreement between
the Portfolio and Bankers Trust Company
("Bankers Trust") (the "New BT Advisory
Agreement").
B. To approve or disapprove a new
advisory agreement between the Portfolio
and Morgan Grenfell Inc. ("MGI") (the
"New MGI Advisory Agreement") to be
implemented within two years of the date
of the Special Meeting upon approval of
the members of the Portfolio's Boards of
Trustees who are not "interested
persons" thereof ("Independent
Trustees") (as defined in the Act).
C. To approve or disapprove a new
sub-investment advisory agreement (the
"New Sub-advisory Agreement," which
term, unless otherwise specified, is
included within the meaning of New
Advisory Agreements) between MGI and
either Bankers Trust or Morgan Grenfell
Investment Services Ltd. ("MGIS" and,
together with Bankers Trust and MGI, the
"Advisers") under which Bankers Trust or
MGIS, as applicable, may perform MGI's
responsibilities under the New MGI
Advisory Agreement with the Portfolio
upon approval of the Independent
Trustees of the Portfolio.
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PROPOSAL 2: To elect Trustees of the Portfolio to
hold office until their respective
successors have been duly elected and
qualified or until their earlier
resignation or removal.
PROPOSAL 3: To ratify or reject the selection of
Ernst & Young LLP as the independent
accountants for the Portfolio for the
current fiscal year.
The appointed proxies will vote in their discretion on any other
business as may properly come before the Special Meeting or any adjournment
thereof.
The New BT Advisory Agreement will contain substantially the same terms
and conditions, except for the dates of execution, effectiveness and initial
term, as the prior investment advisory agreement pursuant to which services were
provided to the Portfolio. As more fully discussed in the accompanying Proxy
Statement, approval of the New Advisory Agreements, which provide for the same
services to be provided at the same fees, is generally occasioned by the merger
of Circle Acquisition Corporation, a wholly-owned subsidiary of Deutsche Bank
A.G. ("Deutsche Bank"), with and into Bankers Trust Corporation, the parent
company of Bankers Trust. The New MGI Advisory Agreement described in Proposal
IB and the New Sub-advisory Agreement with Bankers Trust or MGIS, as applicable,
described in Proposal IC provide for the same services to be provided at the
same fees and will permit Deutsche Bank, upon the approval of the Independent
Trustees of the Portfolio, to simplify the organizational structure of its U.S.
mutual fund operations, enhance the efficiency of their administration and
promote consistency of internal controls, compliance and regulatory oversight.
The deferral in implementing the New MGI Advisory Agreement is needed to permit
Deutsche Bank a sufficient amount of time to plan, prepare and institute the
necessary arrangements for MGI to consolidate Deutsche Bank's U.S. mutual fund
operations.
The close of business on July 23, 1999 has been fixed as the record
date for the determination of the shareholders of the Fund entitled to notice
of, and to vote at, the Special Meeting. You are cordially invited to attend the
Special Meeting.
This notice and related proxy material are first being mailed to
shareholders on or about August 27, 1999. This proxy is being solicited by the
Board of Directors of the Security Income Fund at the request of the Portfolio.
By Order of the Board of Directors,
Amy J. Lee, Secretary
Topeka, Kansas
August 25, 1999
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WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE
IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF
THE PROXY CARD IS MAILED IN THE UNITED STATES.
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Security Income Fund
700 Harrison Street
Topeka, Kansas 66636
Proxy Statement for the Special Meeting of Shareholders
of the Security Capital Preservation Fund
September 10, 1999
This Proxy Statement and the accompanying Notice of Special Meeting of
Shareholders is being furnished in connection with the solicitation of proxies
by the Board of Directors of Security Income Fund (the "Company"), for use at
the special meeting of shareholders of the Security Capital Preservation Fund
(the "Fund") to be held at the offices of Security Income Fund, 700 Harrison
Street, Topeka, Kansas 66636, on September 10, 1999 at 9:30 a.m. (the "Special
Meeting"), and at any adjournments thereof. This Proxy Statement and
accompanying proxy card ("Proxy") are expected to be mailed to shareholders on
or about August 27, 1999.
The Special Meeting is being held to consider and vote on the matters
set forth in the Notice of Special Meeting of Shareholders that accompanies this
Proxy Statement, as described more fully under the corresponding Proposals
discussed herein, and such other matters as may properly come before the Special
Meeting or any adjournment thereof. The appointed proxies will vote on any other
business as may properly come before the Special Meeting or any such
adjournment.
Background Information
Master-Feeder Structure. The Fund operates as a feeder fund in a
master-feeder fund arrangement with a corresponding master fund portfolio, the
BT PreservationPlus Income Portfolio (the "Portfolio"). As a feeder fund, the
Fund seeks to achieve its investment objective by investing all of its
investable assets in the Portfolio, a series of BT Investment Portfolios, an
open-end management investment company organized as a trust under the laws of
the State of New York. The Portfolio has the same investment objective and
policies as the Fund, although the Portfolio invests directly in investment
securities and other investments.
As required by the Investment Company Act of 1940, as amended (the
"Act"), the Fund's voting rights with respect to the Portfolio shares that it
holds must be passed through to the Fund's own shareholders. The Board of
Directors of the Company is soliciting Proxies at the request of the Portfolio.
For simplicity, actions are described in this Proxy Statement as being taken by
the Fund, which is a series of the Company, although all actions are actually
taken by the Company on behalf of the Fund. Some actions described as taken by
or with respect to the Fund are actually actions to be taken by the Portfolio,
in which the Fund invests all of its assets, and on which the Fund votes as a
shareholder. Your vote and the vote of other shareholders of the Fund determines
how the Fund will vote with respect to the Portfolio. Other feeder funds of the
Portfolio also will vote in accordance with their respective charters and/or
other applicable requirements with respect to the Proposals set forth in this
Proxy Statement.
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BT PreservationPlus Income Portfolio. Bankers Trust Company ("Bankers
Trust"), a banking corporation organized under the laws of the State of New
York, located at 130 Liberty Street (One Bankers Trust Plaza), New York, New
York 10006, serves as the investment adviser, custodian and administrator of the
Portfolio. Bankers Trust is a wholly-owned subsidiary of BT Corporation, a
registered bank holding company organized under the laws of the State of New
York. ICC Distributors, Inc., located at Two Portland Square, Portland, Maine
04101, serves as the principal underwriter of the Portfolio.
PROPOSAL I
Approval Of New Advisory Agreements
The new investment advisory agreement between the Portfolio and Bankers
Trust (the "New BT Advisory Agreement") will contain substantially the same
terms and conditions, except for the dates of execution, effectiveness and
initial term, as the prior investment advisory agreement pursuant to which
services were provided to the Portfolio. As more fully discussed below, approval
of the new investment advisory agreements and sub-advisory agreement
(collectively, the "New Advisory Agreements"), which provide for the same
services to be provided at the same fees, is generally occasioned by a merger
pursuant to which Bankers Trust became an indirect subsidiary of Deutsche Bank,
A.G. ("Deutsche Bank"). The new advisory agreement between the Portfolio and
Morgan Grenfell Inc. ("MGI") (the "New MGI Advisory Agreement") and the new
sub-investment advisory agreement (the "New Sub-advisory Agreement") with either
Bankers Trust or Morgan Grenfell Investment Services, Ltd. ("MGIS" and, together
with Bankers Trust and MGI, the "Advisers"), as applicable, will permit Deutsche
Bank, upon the approval of the Independent Trustees of the Portfolio, to
simplify the organizational structure of its U.S. mutual fund operations,
enhance the efficiency of its administration and promote consistency of internal
controls, compliance and regulatory oversight. The deferral in implementing the
New MGI Advisory Agreement is needed to permit Deutsche Bank a sufficient amount
of time to plan, prepare and institute the necessary arrangements for MGI to
consolidate Deutsche Bank's U.S. mutual fund operations.
The Prior Advisory Agreement
Prior to June 4, 1999, Bankers Trust served as investment adviser to
the Portfolio pursuant to a separate investment advisory agreement between
Bankers Trust and the Portfolio (the "Prior Advisory Agreement"). The Prior
Advisory Agreement was initially approved by the Board of Trustees of the
Portfolio (the "Board"), including a majority of the Trustees who are not
"interested persons" ("Independent Trustees") of the Portfolio (as defined under
the Act).
The following table lists: (i) the date of the Prior Advisory
Agreement; (ii) the most recent date on which the Prior Advisory Agreement was
approved by the Portfolio's Trustees, including a majority of the Independent
Trustees, and by a majority of the shareholders; and (iii) the fee to be paid by
the Portfolio to Bankers Trust for services rendered pursuant to the Prior
Advisory Agreement.
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Date of Last Approval By Portfolio's
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Date of Prior Advisory Trustees Shareholders Fee*
Agreement
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4/28/93 (as amended 3/8/99 4/28/93 0.70%
6/10/98)
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* On August 1, 1999, Bankers Trust entered into a one-year agreement with the
Portfolio whereby Bankers Trust contractually waived all investment
advisory fees payable to it by the Portfolio.
The Merger. On November 30, 1998, BT Corporation, Deutsche Bank and
Circle Acquisition Corporation entered into an Agreement and Plan of Merger (the
"Merger Agreement"). Pursuant to the terms of the Merger Agreement, Circle
Acquisition Corporation, a wholly-owned New York subsidiary of Deutsche Bank,
merged with and into BT Corporation on June 4, 1999, with BT Corporation
continuing as the surviving entity (the "Merger"). Under the terms of the
Merger, each outstanding share of BT Corporation common stock was converted into
the right to receive $93 in cash, without interest. Since the Merger, BT
Corporation, along with its affiliates, has continued to offer the range of
financial products and services, including investment advisory services, that it
offered prior to the Merger.
As a result of the Merger, BT Corporation became a wholly-owned
subsidiary of Deutsche Bank. Deutsche Bank is a banking company with limited
liability organized under the laws of the Federal Republic of Germany. Deutsche
Bank is the parent company of a group consisting of banks, capital markets
companies, fund management companies, mortgage banks, a property finance
company, installment financing and leasing companies, insurance companies,
research and consultancy companies and other domestic and foreign companies
("Deutsche Bank Group"). At March 31, 1999 the Deutsche Bank Group had total
assets of US $727 billion. The Deutsche Bank Group's capital and reserves at
March 31, 1999 were US $19.6 billion.
Impact of the Merger on the Prior Advisory Agreement. Section 15(a) of
the Act provides, in pertinent part, that "[i]t shall be unlawful for any person
to serve or act as investment adviser of a registered investment company, except
pursuant to a written contract, which contract, whether with such registered
company or with an investment adviser of such registered company, has been
approved by the vote of a majority of the outstanding voting securities of such
registered company . . . ." Section 15(a)(4) of the Act further requires that
such written contract provide for automatic termination in the event of its
assignment. Section 2(a)(4) of the Act defines "assignment" to include any
direct or indirect transfer of a contract by the assignor.
While it may be argued otherwise, consummation of the Merger may have
resulted in an "assignment" of the Prior Advisory Agreement within the meaning
of the Act, terminating the agreement according to its terms and the Act as of
June 4, 1999. Specifically, as Bankers Trust is a wholly-owned subsidiary of BT
Corporation, the merger of Circle Corporation with and into BT Corporation could
be deemed to have resulted in an "assignment" of the Prior Advisory Agreement
with Bankers Trust.
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On May 25, 1999, Bankers Trust was granted an exemptive order (the
"Exemptive Order") by the Commission permitting implementation, without
obtaining prior shareholder approval, of the new investment advisory agreement
between the Portfolio and Bankers Trust (the "New BT Advisory Agreement") during
an interim period commencing on the date of the closing of the Merger and
continuing, for a period of up to 150 days, through the date on which the New
Advisory Agreement is approved or disapproved by the shareholders of the
Portfolio (the "Interim Period"). Under the terms of the Exemptive Order,
Bankers Trust was allowed to receive advisory fees during the Interim Period
pursuant to the New BT Advisory Agreement, provided that these fees would be
held in escrow pending shareholder approval of the New BT Advisory Agreement. In
accordance with the Exemptive Order, the advisory fees charged to the Portfolio
and paid under the New BT Advisory Agreement have been held in an
interest-bearing escrow account, and the Portfolio expects to continue to
deposit these fees in such account until approval of the New BT Advisory
Agreement by the shareholders of the Portfolio has been obtained. If the New BT
Advisory Agreement is not approved by the shareholders by the expiration of the
Interim Period, the fees held in escrow will be remitted to the Portfolio. As of
June 30, 1999, the amount in escrow totaled $2,025.45.
The Fund, as a shareholder of the Portfolio, is not being asked to
approve or disapprove the Merger or the Merger Agreement; rather, it is being
asked under this Proposal to approve and continue the New BT Advisory Agreement
and to approve the New Advisory Agreements for the Portfolio. Other than the
dates of execution, effectiveness, and initial term of the agreements, the New
BT Advisory Agreement, contain substantially the same terms and conditions as
the Prior Advisory Agreement, and the other New Advisory Agreements contain
substantially the same terms and conditions as the New BT Advisory Agreement.
The advisory fee rate charged to the Portfolio under the Prior Advisory
Agreement has continued to apply under the New BT Advisory Agreement, and would
continue to apply under the New MGI Advisory Agreement. MGI, and not the
Portfolio, would be solely responsible for paying the sub-advisory fees, which
may vary from time to time as approved by the Independent Trustees. In addition,
the Advisers have advised the Board that the Portfolio can expect to continue to
receive the same level and quality of services under the New Advisory Agreements
as it received under the Prior Advisory Agreement. The Advisers have represented
to the Board that in the event of any material change in the investment
management personnel of the Advisers responsible for providing services to the
Portfolio, the Advisers will apprise and consult with the Board to ensure that
the Board, including a majority of the Board's Independent Trustees, is
satisfied that the services provided by the Advisers will not be diminished in
scope and quality.
The New Advisory Agreements
The New Advisory Agreements, the form of which is attached to this
Proxy Statement as Exhibit A, became effective as of June 4, 1999, the date of
the consummation of the Merger. If shareholders approve the New Advisory
Agreements, each of the Agreements will remain in effect for an initial term of
two years from its effective date, and may be renewed annually thereafter by
specific approval of the Board or shareholders of the Portfolio, provided that
they are also approved by a majority of the Independent Trustees of the Board.
The terms and conditions of the New BT Advisory Agreement, other than its date
of execution, effectiveness and initial term, are substantially the same as
those of the Prior Advisory Agreement.
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Under the terms of the New Advisory Agreements, as under the Prior
Advisory Agreements, each of the Advisers agrees to furnish the Portfolio with
investment advisory and other services in connection with a continuous
investment program for the Portfolio, including investment research and
management with respect to all securities, investments, cash and cash
equivalents in the Portfolio. Subject to the supervision and control of the
Portfolio's Board, each of the Advisers agrees to (a) conform to all applicable
rules and regulations of the Commission, including all applicable provisions of
the Securities Act of 1933, as amended (the "1933 Act"), the Securities Exchange
Act of 1934, as amended, the Act and the Investment Advisers Act of 1940, as
amended (the "Advisers Act"), and will conduct its activities under the New
Advisory Agreements in accordance with applicable regulations of the Board of
Governors of the Federal Reserve System pertaining to the investment advisory
activities of bank holding companies and their subsidiaries, (b) provide the
services rendered by it in accordance with the Portfolio's investment objectives
and policies as stated in the Prospectus and Statement of Additional Information
of the Portfolio, as from time to time in effect, and the Portfolio's then
current registration statement on Form N-1A as filed with the Commission, (c)
place orders pursuant to its investment determinations for the Portfolio either
directly with the issuer or with any broker or dealer selected by it, (d)
determine from time to time what securities or other investments will be
purchased, sold or retained by the Portfolio, and (e) maintain books and records
with respect to the securities transactions of the Portfolio and render to the
Board of Trustees of the Trust such periodic and special reports as they may
request.
The Advisory Fees. The investment advisory fee rate charged to the
Portfolio under the New Advisory Agreements is the same as the investment
advisory fee rate charged under the Prior Advisory Agreement. As noted above,
the investment advisory fee payable under the New Sub-advisory Agreement would
be paid by MGI, not the Portfolio, and may vary from time to time, subject to
the approval of the Board, including a majority of its Independent Trustees.
As under the Prior Advisory Agreement, Bankers Trust or MGI, as
applicable, is paid a fee under the New Advisory Agreements for its services,
calculated daily and paid monthly, equal, on an annual basis, to 0.70% of the
Portfolio's average daily net assets.
Generally. If approved, the New Advisory Agreements, as applicable,
will remain in effect for an initial term of two years (unless sooner
terminated), and shall remain in effect from year to year thereafter if approved
annually (1) by the Board or by the holders of a majority of the Portfolio's
outstanding voting securities and (2) by a majority of the Independent Trustees
of the Board who are not parties to such contract or agreement, or "interested
persons" (as defined in the Act) of any such party. Like the Prior Advisory
Agreement, the New Advisory Agreements will terminate upon assignment by any
party and are terminable, without penalty, on 60 days' written notice by the
Board or by a "majority" vote of the shareholders of the Portfolio (as defined
in the Act) or upon 60 days' written notice by the applicable Adviser.
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The services of the Advisers are not deemed to be exclusive and nothing
in the New Advisory Agreements prevents them or their affiliates from providing
similar services to other investment companies and other clients (whether or not
their investment objectives and policies are similar to those of the Portfolio)
or from engaging in other activities. In addition, the Advisers are obligated to
pay expenses associated with providing the services contemplated by the New
Advisory Agreements. The Portfolio bears certain other expenses, including the
fees of the Board. The Portfolio also pays any extraordinary expenses incurred.
Under each New Advisory Agreement, the Adviser will exercise its best
judgment in rendering its advisory services. The Advisers shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Portfolio in connection with the matters to which the New Advisory Agreements
relate, provided that nothing therein shall be deemed to protect or purport to
protect the Advisers against any liability to the Portfolio or to its
shareholders to which the Advisers could otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence on their part in the
performance of their duties or by reason of the Advisers' reckless disregard of
their obligations and duties under the New Advisory Agreements.
The Advisers
Bankers Trust. Bankers Trust is the principal banking subsidiary of BT
Corporation. Bankers Trust is a bank and, therefore, not required to register as
an investment adviser under the Advisers Act. Bankers Trust provides a broad
range of commercial banking and financial services, including originating loans
and other forms of credit, accepting deposits and arranging financings. Bankers
Trust also engages in trading currencies, securities, derivatives and
commodities. In addition to providing investment advisory services to the
Portfolio, Bankers Trust serves as investment adviser to 31 other investment
companies and subadvises 34 other investment companies. (See Annex I for a
discussion of those investment companies advised by Bankers Trust that have
investment objectives similar to those of the Portfolio, together with
information regarding the fees charged to those companies.) As of March 31,
1999, Bankers Trust had over $313 billion of assets under management, including
$100,713 of assets in the Portfolio.
The names, business addresses and principal occupations of the current
directors and chief executive officer of Bankers Trust are set forth below.
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<S> <C>
Name and Address Principal Occupation
Josef Ackermann Chairman of the Board, Chief Executive Officer and
Deutsche Bank AG President, Bankers Trust; Member, Board of Managing
Taunusanlage 12 Directors, Deutsche Bank A.G.
D-60262 Frankfurt am Main
Federal Republic of Germany
Hans Angermueller Director, Bankers Trust; Of Counsel, Shearman & Sterling
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
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George B. Beitzel Director, Bankers Trust, Computer Task Group, Inc., Phillips
29 King Street Petroleum Company, and TIG Holdings, Inc.
Chappaqua, NY 10514-3432
William R. Howell Director, Bankers Trust, Exxon Corporation, Halliburton
J.C. Penney Company, Inc. Company, National Organization on Disability, National
P. O. Box 10001 Retail Federation, Southern Methodist University (Chairman),
Dallas, TX 75301-1109 and Warner-Lambert Company; Chairman Emeritus, J. C. Penney
Company, Inc.
Hermann-Josef Lamberti Director, Bankers Trust; Member, Board of Managing
Deutsche Bank A.G. Directors, Deutsche Bank A.G.
Taunusanlage 12
D-60262 Frankfurt am Main
Federal Republic of Germany
John A. Ross Director, Bankers Trust; Regional Chief Executive Officer,
Deutsche Bank Americas Holding Corp. Deutsche Bank Americas Holding Corp.
31 West 52nd Street
New York, New York 10019
Ronaldo H. Schmitz Director, Bankers Trust; Member, Board of Managing
Deutsche Bank A.G. Directors, Deutsche Bank A.G.
Taunusanlage 12
D-60262 Frankfurt am Main
Federal Republic of Germany
In addition to serving as investment adviser to the Portfolio, Bankers
Trust also serves as administrator, transfer agent and custodian of the
Portfolio. The Portfolio has entered into an Administration and Services
Agreement with Bankers Trust under which Bankers Trust provides administrative,
custody, transfer agency and shareholder services to the Portfolio in return for
a fee computed daily and paid monthly at an annual rate of 0.35% of the
Portfolio's average daily net assets.
MGI. MGI is a corporation organized under the laws of the State of
Delaware and is registered with the Commission under the Advisers Act. It is
located at 885 Third Avenue, 32nd Floor, New York, NY 10022. MGI provides a full
range of investment advisory services to institutional clients. MGI serves as
investment adviser to ten other investment companies. MGI is a subsidiary of
Morgan Grenfell Asset Management Ltd. ("MGAM"). MGAM is a wholly owned
subsidiary of Deutsche Morgan Grenfell Group PLC, an investment holding company
which is, in turn, a wholly owned subsidiary of Deutsche Bank. MGAM currently
manages approximately $16.5 billion for a wide range of pension, corporate,
insurance, local authority, government and private clients worldwide. (See Annex
II for a list of those investment companies that MGI advises that have
investment objectives similar to those of the Portfolio, together with the
information regarding the fees charged to those companies.)
<PAGE>
The names, business addresses and principal occupations of the current
directors and chief executive officer of MGI are set forth below. Except as
otherwise indicated, the business address of the individuals named below is 885
Third Avenue, 32nd Floor, New York, NY 10022 and their positions at MGI
constitute their principal occupation.
Name and Address Principal Occupation
David Westover Baldt Executive Vice President and Director, Morgan Grenfell Inc.
Joan A. Binstock Chief Operating Officer and Executive Vice President,
Morgan Grenfell Inc.
Audrey Mary Theresa Jones Executive Vice President, Director and Portfolio Manager,
Morgan Grenfell Inc.
Richard Marin President and Director, Morgan Grenfell Inc.; Managing
280 Park Avenue Director, Deutsche Bank, A.G.
New York, NY 10017
Robert H. Smith Director and Chairman, Morgan Grenfell Inc.; Chief
Executive Officer, Morgan Grenfell Asset Management;
Chairman and Chief Executive Officer, Morgan Grenfell
Development Capital
Steven Schneider Managing Director, Deutsche Bank A.G.
280 Park Avenue
New York, NY 10017
MGIS. MGIS is located at 20 Finsbury Circus, London, England and also
is registered as an investment adviser with the Commission. MGIS provides a full
range of international investment advisory services to institutional clients.
MGIS serves as investment adviser to 13 other investment companies. MGIS is a
subsidiary of MGAM. As of June 30, 1999, MGIS managed approximately $12.1
billion in assets. (See Annex II for a list of those investment companies that
MGIS advises that have investment objectives similar to those of the Portfolio,
together with the information regarding the fees charged to those companies.)
<PAGE>
The names, business addresses and principal occupations of the current
directors and chief executive officer of MGIS are set forth below. Except as
otherwise indicated, the business address of the individuals named below is 20
Finsbury Circus, London, England and their positions at MGIS constitute their
principal occupation.
Name and Address Principal Occupation
Neil P. Jenkins Chief Executive and Director, Morgan Grenfell Investment
Services Ltd.; Vice President, Morgan Grenfell Investment
Trust
Ian D. Kelson Director, Morgan Grenfell Investment Services Ltd. and
Morgan Grenfell Asset Management Ltd.
Alexander Tedder Director and Fund Manager, Morgan Grenfell Investment
Services Ltd.
Richard C. Wilson Director and Fund Manager, Morgan Grenfell Investment
Services Ltd.
Section 15(f) of the Act
Section 15(f) of the Act provides that when a change of control of an
investment adviser to an investment company occurs, the investment adviser or
any of its affiliated persons may receive an amount or benefit in connection
therewith as long as two conditions are satisfied.
First, no "unfair burden" may be imposed on the investment company as a
result of the transaction relating to the change of control, or any express or
implied terms, conditions or understandings applicable thereto. As defined in
the Act, the term "unfair burden" includes any arrangement during the two (2)
year period after the change in control whereby the investment adviser (or
predecessor or successor adviser), or any "interested person" (as defined in the
Act) of such adviser, receives or is entitled to receive any compensation,
directly or indirectly, from the investment company or its security holders
(other than fees for bona fide investment advisory or other services), or from
any person in connection with the purchase or sale of other property to, or on
behalf of the investment company (other than fees for bona fide brokerage and
principal underwriting services). Bankers Trust has advised the Board that there
are no circumstances arising from the Merger that might result in an "unfair
burden" (within the meaning of Section 15(f) of the Act) being imposed on the
Portfolio. After conducting its reviews of Bankers Trust's performance, and
after reviewing materials specifically provided by Bankers Trust as a result of
the termination of the Prior Advisory Agreement and its request that the Board
approve the new Advisory Agreement, the Board was satisfied that it had received
and appropriately considered the relevant factors and, after consultation with
counsel, the Board determined to approve the New Advisory Agreement.
<PAGE>
The second condition is that, during the three (3) year period
immediately following the Merger, at least 75% of the members of the Board must
not be "interested persons" of the Advisers within the meaning of the Act. All
current members of the Board are not, and have continued not to be since the
Merger, "interested persons" of the Advisers. If the current slate of Trustee
Nominees are elected, one (1) interested person will be a member of the Board.
Additional Information
On March 11, 1999, Bankers Trust announced that it had reached an
agreement with the United States Attorney's Office in the Southern District of
New York to resolve an investigation concerning inappropriate transfers of
unclaimed funds and related record-keeping problems that occurred between 1994
and early 1996. Bankers Trust pleaded guilty to misstating entries in the bank's
books and records and agreed to pay a $63.5 million fine to federal and state
authorities. On July 26, 1999, the federal criminal proceedings were concluded
with Bankers Trust 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 Commission, Bankers
Trust would not be able to continue to provide investment advisory services to
the Portfolio. The Commission has granted Bankers Trust a temporary order under
Section 9(c) of the Act to permit Bankers Trust and its affiliates to continue
to provide investment advisory services to registered investment companies, and
Bankers Trust, pursuant to Section 9(c) of the Act, has filed an application for
a permanent order. However, there is no assurance that the Commission will grant
a permanent order. If the Commission refuses to grant a permanent order,
shareholders will receive supplemental proxy materials requesting approval to
release any amounts held in escrow up to the time of the refusal and such other
action as deemed appropriate by the Board and the Board of Directors of the
Company.
Recommendation of the Portfolio's Board
At a meeting of the Board held on March 8, 1999 called for the purpose
of, among other things, voting on approval of the New BT Advisory Agreement, the
Board, including the Independent trustees, unanimously approved the New BT
Advisory Agreement. In reaching this conclusion, the Board obtained from BT
Corporation, Deutsche Bank and Bankers Trust such information as it deemed
reasonably necessary to approve Bankers Trust as investment adviser to the
Portfolio. Additionally, the Board considered a number of factors, including,
among other things, the continuity of the management of the Portfolio after the
Merger; the nature, scope and quality of services that Bankers Trust would
likely provide to the Portfolio; the quality of the personnel of Bankers Trust;
Bankers Trust's commitment to continue to provide these services in the future;
the maintenance of the identical advisory fee rates; and the fact that the New
BT Advisory Agreement contains substantially the same terms and conditions as
the Prior Advisory Agreement. Based on the factors discussed above and others,
the Board determined that the New BT Advisory Agreement is fair and reasonable
and in the best interest of the Portfolio and its shareholders.
<PAGE>
At a meeting of the Board held on July 15, 1999 called for the purpose
of, among other things, voting on approval of the New MGI Advisory Agreement and
the New Sub-advisory Agreement, a majority of the Board, including a majority of
the Independent Trustees, approved the New MGI Advisory Agreement and the New
Sub-advisory Agreement. In reaching this conclusion, the Board obtained from
Deutsche Bank, MGI and MGIS such information as they deemed reasonably necessary
to approve MGI and MGIS as investment advisers to the Portfolio. Representatives
of [Deutsche Bank,] MGI and MGIS made detailed presentations with respect to,
among other factors, the organizational structure, assets under management,
asset management services, financial conditions and business plans of MGI and
MGIS. The Board considered the same factors described above for the New BT
Advisory Agreement with regard to the New MGI Advisory Agreement and the New
Sub-advisory Agreement. The Board also considered a number of other factors,
including the capacity of MGI and MGIS to perform their duties under the New
Advisory Agreements; the high degree of continuity of investment management
personnel expected to be available to the Portfolio because most of the
personnel of Bankers Trust who provided services under the Prior Management
Agreement will be employed by MGI; the financial standings of Deutsche Bank, MGI
and MGIS; the benefits to the Portfolio from technological advances being
instituted by Deutsche Bank on a world-wide basis; the experience and expertise
of MGI and MGIS as investment advisers, as reflected in their amounts of assets
under management, and the new organizational structure proposed to be created as
a component of the Merger and the benefits that may accrue to the shareholders
as a result thereof. With respect to the last factor, the Board considered that
the proposed organizational structure may simplify the organizational structure
of Deutsche Bank's U.S. mutual fund operations, enhance the efficiency of its
administration and promote consistency of internal controls, compliance and
regulatory oversight. Additionally, the eventual implementation of the New MGI
Advisory Agreement will provide the Portfolio with an investment adviser
registered under the Advisers Act.
The Board was apprised that the deferral in implementing the New MGI
Advisory Agreement is needed to permit Deutsche Bank a sufficient amount of time
to plan, prepare and institute the necessary arrangements for MGI to consolidate
Deutsche Bank's U.S. mutual fund operations. The Advisers also emphasized to the
Board that the New MGI Advisory Agreement and the New Sub-advisory Agreement
would be implemented only upon the approval of the Independent Trustees based on
information they then deemed necessary to consider adequately these
arrangements.
Based on the factors discussed above and others, the Board determined
that the New MGI Advisory Agreement and the New Sub-Advisory Agreement are fair
and reasonable and in the best interest of the Portfolio and its shareholders.
In addition, at these meetings, the Board, including the Independent
Trustees, also were apprised of the guilty pleas discussed above and the
exemptive relief sought by Bankers Trust.
Therefore, after careful consideration, the Board, including the
Independent Trustees, recommend that the shareholders of the Fund vote "FOR" the
approval of the New Advisory Agreements as set forth in these Proposals.
<PAGE>
If the New BT Advisory Agreement is approved by the shareholders, the
agreement will continue in effect as described above. If the New BT Advisory
Agreement is not approved by the shareholders, the advisory fees held in escrow
with respect to that New BT Advisory Agreement will be paid over to the
Portfolio. In such event, the Board and the Board of Directors of the Company
will consider what other action is appropriate based upon the interests of the
shareholders of the Portfolio and the Fund, respectively. If the New MGI
Advisory Agreement and/or New Sub-advisory Agreement are not approved by the
shareholders, the New BT Advisory Agreement, if it has been approved by the
shareholders, will continue in effect in accordance with its terms while the
Board and the Board of Directors of the Company consider whether and the extent
to which other action is appropriate based upon the interests of the
shareholders of the Portfolio and the Fund, respectively.
PROPOSAL II
ELECTION OF BOARD OF TRUSTEES OF THE PORTFOLIO
Trustees constituting the entire Board of Trustees of the Portfolio are
to be elected at the Special Meeting to serve until their successors have been
duly elected and qualified or until their earlier resignation or removal. The
shareholders of the Fund are to consider the election of Charles P. Biggar, S.
Leland Dill, Martin J. Gruber, Richard Hale, Richard J. Herring, Bruce E.
Langston, Philip Saunders , Jr. and Harry Van Benschoten (the "Trustee
Nominees") as Trustees of the Portfolio. The Trustee Nominees were recently
selected by the Independent Trustees of the Board and nominated by the full
Board at a meeting held on July 15, 1999 and July 27, 1999. The names and ages
of the Trustee Nominees, their principal occupations during the past five years
and certain of their other affiliations are provided below. Of the Trustee
Nominees, Charles Biggar, Leland Dill and Philip Saunders, Jr. are currently
Trustees of the Portfolio. No Trustee or Trustee Nominee of the Portfolio serves
or will serve as an officer of the Portfolio.
Each of the Trustee Nominees has agreed to serve if elected at the
Special Meeting. It is the intention of the persons designated as proxies in the
Proxy, unless otherwise directed therein, to vote at the Special Meeting for the
election of the Trustee Nominees named below as the entire Board of Trustees of
the Portfolio. If any Trustee Nominee is unable or unavailable to serve, the
persons named in the Proxies will vote the Proxies for such other person as the
Board may recommend.
The following table sets forth the names, ages, position with the
Portfolio, and principal occupation of each Trustee Nominee; each Trustee
Nominee is proposed to be elected as such for the Portfolio.
<PAGE>
TRUSTEE NOMINEES
Position with
Name, and Age Trust/Portfolios Principal Occupations During Last Five Years
Charles P. Biggar+ Trustee of Retired; formerly, Vice President of International Business Machines
Age: 68 Portfolios Since ("IBM") and President of the National Services and Field Engineering
Inception Divisions of IBM.
S. Leland Dill+ Trustee of Trust Retired; Director, Coutts (U.S.A.) International; Director,
Age: 69 since 1986 and Phoenix-Zweig Trust and Phoenix-Euclid Market Neutral Fund; former
Trustee of Partner of KPMG Peat Marwick; Director, Vintners International
Portfolios Company Inc.; Director, Coutts Trust Holdings Ltd.; Director, Coutts
since inception of Group; General Partner, Pemco(3).
each Portfolio
Martin J. Gruber Nomura Professor of Finance, Leonard N. Stern School of Business,
Age: 62 New York University (since 1964); Trustee, TIAA(4); Trustee, SG
Cowan Mutual Funds(4); Trustee, Japan Equity Fund(4); Trustee,
Taiwan Equity Fund(4).
Richard Hale* Managing Director, Deutsche Asset Management; Director, Flag
Age: 54 Investors Fund; Managing Director, BT Alex. Brown Incorporated;
Director and President, Investment Company Capital Corp.
Richard J. Herring Jacob Safra Professor of International Banking, Professor of Finance
Age: 53 and Vice Dean, The Wharton School, University of Pennsylvania (since
1972).
Bruce E. Langton Retired; Trustee, Allmerica Financial Mutual Funds (1994 to
Age: 68 present); member, Pension & Thrift Plans and Investment Committee,
Unilever U.S. Corporation (1989 to present)(3); Director,
TWA Pilots Directed Account Plan and 401K Plan (1988 to present)(4).
Philip Saunders, Jr.+ Trustee of Trust Principal, Phillip Saunders Associates (Economic and Financial
Age: 63 since 1986 and Analysis); Former Director, Financial Industry Consulting, Wolf and
Trustee of company; President, John Hancock Home Mortgage Corporation; Senior
Portfolios Vice President of Treasury and Financial Services, John Hancock
since inception of Mutual Life Insurance Company, Inc.
each Portfolio
Harry Van Benschoten+ Retired; Director, Canada Life Insurance Corporation of New York.
Age: 71
* "Interested Person" within the meaning of Section 2(a)(19) of the Act.
Mr. Hale is a Managing Director of Deutsche Asset Management, the U.S.
asset management unit of Deutsche Bank and its affiliates.
+ Member of the Audit Committee.
(1) Holds one other trusteeship in the Bankers Trust Fund Complex, as defined
herein.
(2) Holds two other trusteeships in the Bankers Trust Fund Complex, as
defined herein.
(3) A publicly held company with securities registered pursuant
to Section 12 of the Exchange Act.
(4) An investment company registered under the Act.
The Board has established an Audit Committee that meets with the
Portfolio's independent accountants to review the financial statements of the
Portfolio, the adequacy of internal controls and the accounting procedures and
policies of the Portfolio, and reports on these matters to the Board. The Board
has established a Nominating Committee comprised of all of the Independent
Trustees of the Board, which is responsible for the selection and nomination of
Trustees that are not "interested persons," as defined under the Act, of the
Portfolio. The Board does not have a compensation committee. During 1998, the
Portfolio's Board held four meetings, the Audit Committee held two meetings, and
the Nominating Committee held no meetings. No Trustee attended less than 75% of
the applicable meetings.
<PAGE>
If Richard Hale is elected, he will not be a member of the Audit or
Nominating Committees.
The following table sets forth the compensation received by the Trustee
Nominees for their services to the Portfolio and the Bankers Trust Fund Complex
(as defined below) during the most recent fiscal year. In addition to the fees
listed below, the Trustees of the Portfolio are also reimbursed for all
reasonable expenses incurred during the execution of their duties for the
Portfolio and the Bankers Trust Fund Complex.
- - ------------------------- --------------- ------------------------ --------------------- ---------------------------
Aggregate Pension or Retirement
Compensation Benefits Accrued as Estimated Annual Total Compensation From
from the Part of Portfolio Benefits upon the Complex*
Name of Trustee Portfolio Expenses Retirement Paid to Trustees
- - ------------------------- --------------- ------------------------ --------------------- ---------------------------
Charles P. Biggar N/A N/A N/A $36,250
- - ------------------------- --------------- ------------------------ --------------------- ---------------------------
S. Leland Dill N/A N/A N/A $36,250
- - ------------------------- --------------- ------------------------ --------------------- ---------------------------
Martin J. Gruber N/A N/A N/A $36,250
- - ------------------------- --------------- ------------------------ --------------------- ---------------------------
Richard Hale N/A N/A N/A N/A
- - ------------------------- --------------- ------------------------ --------------------- ---------------------------
Richard J. Herring N/A N/A N/A
- - ------------------------- --------------- ------------------------ --------------------- ---------------------------
Bruce E. Langton N/A N/A N/A $35,000
- - ------------------------- --------------- ------------------------ --------------------- ---------------------------
Philip Saunders, Jr. N/A N/A N/A $35,000
- - ------------------------- --------------- ------------------------ --------------------- ---------------------------
Harry Van Benschoten N/A N/A N/A $36,250
- - ------------------------- --------------- ------------------------ --------------------- ---------------------------
* The "Bankers Trust Fund Complex" consists of the Cash Management Portfolio, BT
Investment Portfolios, Intermediate Tax Free Portfolio, Tax Free Money
Portfolio, NY Tax Free Money Portfolio, Treasury Money Portfolio, International
Equity Portfolio, Capital Appreciation Portfolio, Asset Management Portfolio, BT
Investment Funds, BT Institutional Funds, BT Pyramid Mutual Funds, BT Advisor
Funds and BT Insurance Funds Trust.
The following table sets forth the names, ages, position with the
Portfolio and length of service in such position, and principal occupations
during the past five years of the officers of the Portfolio.
Name and Age Position with Portfolio and Principal Occupations
John A. Keffer President and Chief Executive Officer since December 1998; President, Forum
Age: 57 Financial Group L.L.C. and its affiliates President, ICC Distributors, Inc.*
Daniel O. Hirsch Secretary since December 1998; Director, Deutsche Asset Management (Americas)
Age: 45 since July 1998; Associate General Counsel, Office of General Counsel, United
States Securities and Exchange Commission, 1993-1998.
Charles Rizzo Treasurer since July 1998; Vice President and Department Head, Deutsche Asset
Age: 42 Management (Americas) since April 1998; Senior Manager, PricewaterhouseCoopers
LLP from October 1993 to April 1998.
- - ------------------
* Underwriter/distributor of the Portfolio.
<PAGE>
Recommendation of the Portfolio's Board
At a meeting of the Board held on July 15, 1999, the Board, based on a
recommendation of the incumbent Independent Trustees, unanimously approved the
nomination of the Trustee Nominees. In reaching this conclusion, the Portfolio's
Board obtained from the Trustee Nominees such information as they deemed
reasonably necessary to approve the Trustee Nominees and considered a number of
factors, including, among other things: alignment of the members of the Board
with the boards of trustees of certain other investment companies in the Bankers
Trust Fund Complex; the nature, scope and quality of services that the Trustee
Nominees would likely provide to the Portfolio; and the desirability of
maintaining compliance with Section 15(f) of the Act. Based on the factors
discussed above and others, the Portfolio's Board determined that the election
of the Trustee Nominees is in the best interest of the Portfolio and its
shareholders.
Therefore, after careful consideration, the Board, including the
Independent Trustees, recommends that the shareholders of the Fund vote "FOR"
the election of the Trustee Nominees as set forth in this Proposal.
If the Trustee Nominees are elected by the shareholders, each Trustee
Nominee will serve until his successor is duly elected and qualified or until
his or her earlier resignation or removal. If the Trustee Nominees are not
elected, the Board of the Portfolio will consider what action is appropriate
based upon the interests of the shareholders of the Portfolio.
PROPOSAL III
RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS
INDEPENDENT ACCOUNTANTS FOR THE PORTFOLIO
The Portfolio's Board including a majority of the Independent Trustees,
have approved the selection of Ernst & Young LLP to serve as independent
accountants for the Portfolio for the current fiscal year. Ernst & Young LLP has
served as independent accountants of the Portfolio since the Portfolio's
inception and has advised the Portfolio that they have no direct or indirect
financial interest in the Portfolio. One or more representatives of Ernst &
Young LLP are expected to be available by telephone at the Special Meeting and
will have an opportunity to respond to appropriate questions posed by
shareholders or management.
<PAGE>
Therefore, after careful consideration, the Board, including the
Independent Trustees, recommends that the shareholders of the Fund vote "FOR"
the selection of Ernst & Young LLP as independent accountants for the Portfolio
as set forth in this Proposal.
VOTING
Proxy Solicitation
Notice of the Special Meeting and a Proxy accompany this Proxy
Statement. Proxy solicitations will be made primarily by mail, but solicitations
may also be made by telephone, telegraph, through the Internet or in person by
officers or agents of the Portfolio. All costs of solicitation, including (a)
printing and mailing of this Proxy Statement and accompanying material, (b) the
reimbursement of brokerage firms and others for their expenses in forwarding
solicitation material to the beneficial owners of the Funds' shares, (c) payment
to Shareholder Services Corp. for its services in soliciting proxies and (d)
supplementary solicitations to submit Proxies, will be borne by Bankers Trust.
Shareholder Voting
If the enclosed Proxy is properly executed and returned in time to be
voted at the Special Meeting, the shares represented thereby will be voted in
accordance with the instructions marked on the Proxy. Each Fund share is
entitled to one vote each at the Special Meeting and fractional shares are
entitled to proportionate shares of one vote. If no instructions are marked on
the Proxy with respect to a specific Proposal, the Proxy will be voted "FOR" the
approval of such Proposal and in accordance with the judgment of the persons
appointed as proxies upon any other matter that may properly come before the
Special Meeting. Any shareholder giving a Proxy has the right to attend the
Special Meeting to vote his/her shares in person (thereby revoking any prior
Proxy) and also the right to revoke the Proxy at any time by written notice
received by the Fund prior to the time it is voted.
In the event that a quorum is not present at the Special Meeting, or if
a quorum is present but sufficient votes to approve a Proposal are not received,
the persons named as proxies may propose one or more adjournments of the Special
Meeting to permit further solicitation of Proxies with respect to the Proposal.
In determining whether to adjourn the Special Meeting, the following factors may
be considered: the nature of the proposals that are the subject of the Special
Meeting, the percentage of votes actually cast, the percentage of negative votes
actually cast, the nature of any further solicitation and the information to be
provided to shareholders with respect to the reasons for the solicitation. Any
adjournment will require the affirmative vote of a majority of those shares
represented at the Special Meeting in person or by Proxy. The persons named as
proxies will vote those Proxies that they are entitled to vote "FOR" any
Proposal in favor of an adjournment and will vote those Proxies required to be
voted "AGAINST" any such Proposal against any adjournment. A shareholder vote
may be taken on one or more of the Proposals in the Proxy Statement prior to any
adjournment if sufficient votes have been received and it is otherwise
appropriate. A quorum of shareholders is constituted by the presence in person
or by proxy of the holders of a majority of the outstanding shares of the Fund
entitled to vote at the Special Meeting. For purposes of determining the
presence of a quorum for transacting business at the Special Meeting,
abstentions and broker "non-votes" (that is, proxies from brokers or nominees
indicating that these persons have not received instructions from the beneficial
owner or other persons entitled to vote shares on a particular matter with
respect to which the brokers or nominees do not have discretionary power) will
be treated as shares that are present but which have not been voted. (See "Vote
Required" for a discussion of abstentions and broker non-votes.)
<PAGE>
Shareholders of record at the close of business on July 23, 1999 (the
"Record Date") are entitled to notice of, and to vote at, the Special Meeting.
As of the Record Date, there were 2,517,055.487 shares of the Fund issued and
outstanding.
In order that your shares may be represented, you are requested to:
. indicate your instructions on the Proxy;
. date and sign the Proxy; and
. mail the Proxy promptly in the enclosed envelope.
Vote Required
In view of the master-feeder structure discussed earlier, approval of
Proposals IA, IB, and IC with respect to the Portfolio's New Advisory Agreements
requires the affirmative vote of a "majority" of the outstanding shares of the
Portfolio's various feeder funds as shareholders of the Portfolio. "Majority"
(as defined in the Act) means (as of the Record Date) the lesser of (a) 67% or
more of the shares of the Portfolio present at the Special Meetings of
shareholders of the various feeder funds, if the holders of more than 50% of the
outstanding shares of the Portfolio are present in person or by proxy, or (b)
more than 50% of the outstanding shares of the Portfolio. Because abstentions
and broker non-votes are treated as shares present but not voting, any
abstentions and broker non-votes will have the effect of votes against Proposals
IA, IB, and IC which requires the approval of a specified percentage of the
outstanding shares of the Portfolio.
Approval of Proposal II with respect to the Trustee Nominees of the
Portfolio requires the affirmative vote of a plurality of the votes cast in
person or by proxy at the Special Meetings of shareholders of the various feeder
funds of BT Investment Portfolios' various Portfolios, voting collectively.
Because abstentions and broker non-votes are not treated as shares voted,
abstentions and broker non-votes will have no impact on Proposal II.
Approval of Proposal III with respect to the selection of the
independent accountants of the Portfolio requires the affirmative vote of a
majority of the votes cast in person or by proxy at the Special Meetings of
shareholders of all the Portfolio's various feeder funds. Because abstentions
and broker non-votes are not treated as shares voted, abstentions and broker
non-votes will have no impact on Proposal III.
Beneficial Ownership of Shares of the Fund
As of July 23, 1999, Security Benefit Life Insurance Company, 700
Harrison Street, Topeka, Kansas 66636, beneficially owned 2,494,412.958 shares
(99.1%) of the Fund. Unless otherwise indicated, Security Benefit Life Insurance
Company has sole investment and voting power with respect to these shares. The
inclusion herein of any shares deemed beneficially owned does not constitute an
admission of beneficial ownership of the shares.
<PAGE>
Collectively, the Directors and officers of the Company own less than 1% of the
Fund's outstanding shares.
- - --------------------------------------------------------------------------------
The Board, including the Independent Trustees, recommends that the shareholders
vote "FOR" approval of Proposals IA, IB, IC, II, and III. Any unmarked Proxies
will be so voted.
- - --------------------------------------------------------------------------------
The Board of Trustees of the Trust is not aware of any other matters
that will come before the Special Meeting. Should any other matter properly come
before the Special Meeting, it is the intention of the persons named in the
accompanying Proxy to vote the Proxy in accordance with their judgment on such
matters.
SUBMISSION OF SHAREHOLDER PROPOSALS
The Fund does not hold regular shareholders' meetings. Shareholders
wishing to submit proposals for inclusion in a proxy statement for a subsequent
shareholders' meeting should send their written proposals to the Secretary of
the Company at the address set forth on the cover of this Proxy Statement.
Proposals must be received at a reasonable time prior to the date of a
meeting of shareholders to be considered for inclusion in the materials for the
Fund's meeting. Timely submission of a proposal does not, however, necessarily
mean that such proposal will be included. Persons named as proxies for any
subsequent shareholders' meeting will vote in their discretion with respect to
proposals submitted on an untimely basis.
- - --------------------------------------------------------------------------------
Shareholders who do not expect to be present at the Special Meeting and who wish
to have their shares voted are requested to date and sign the enclosed Proxy and
return it in the enclosed envelope. No postage is required if mailed in the
United States.
- - --------------------------------------------------------------------------------
By Order of the Board of Directors,
Amy J. Lee, Secretary
August 25, 1999
- - --------------------------------------------------------------------------------
Shareholders are encouraged to attend the Special Meeting. Whether or not you
plan to attend, you are urged to complete, date, sign and return the enclosed
Proxy in the accompanying envelope.
- - --------------------------------------------------------------------------------
<PAGE>
Annex I
[TO COME]
<PAGE>
Annex II
[TO COME]
<PAGE>
EXHIBIT A
[FORM OF INVESTMENT ADVISORY AND SUB-ADVISORY AGREEMENT]
AGREEMENT made as of [_________________] by and between [Trust Name], a
(state of organization) (herein called the "Trust") and [________________]
(herein called the "Investment Adviser") [and [______________] (herein called
the "Investment Subadviser")].
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940;
WHEREAS, the Trust desires to retain the Investment Adviser to render
investment advisory and other services to the Trust with respect to certain of
its series of shares of beneficial interests as may currently exist or be
created in the future (each, a "Fund") as listed on Exhibit A hereto, and the
Investment Adviser is willing to so render such services on the terms
hereinafter set forth;
[WHEREAS, the Investment Adviser desires to retain the Investment
Subadviser to perform certain of the Investment Adviser's duties under this
Agreement, and the Investment Subadviser is willing to so render such services
on the terms hereinafter set forth;]
NOW, THEREFORE, this Agreement
W I T N E S S E T H:
In consideration of the promises and mutual covenants herein contained,
it is agreed between the parties hereto as follows:
1. Appointment. The [Trust] [Investment Adviser] hereby appoints the
[Investment Adviser] [Investment Subadviser] to act as [investment adviser]
[investment subadviser] to each Fund for the period and on the terms set forth
in this Agreement. The [Investment Adviser] [Investment Subadviser] accepts such
appointment and agrees to render the services herein set forth for the
compensation herein provided.
2. Management. Subject to the supervision of the [Board of Trustees of
the Trust] [Investment Adviser], the [Investment Adviser] [Investment
Subadviser] will provide a continuous investment program for the Fund, including
investment research and management with respect to all securities, investments,
cash and cash equivalents in the Fund. The [Investment Adviser] [Investment
Subadviser] will determine from time to time what securities and other
investments will be purchased, retained or sold by each Fund. The [Investment
Adviser] [Investment Subadviser] will provide the services rendered by it
hereunder in accordance with the investment objective(s) and policies of each
Fund as stated in the Fund's then-current prospectus and statement of additional
information (or the Fund's then current registration statement on Form N-1A as
filed with the Securities and Exchange Commission (the "SEC") and the
then-current offering memorandum if the Fund is not registered under the
Securities Act of 1933, as amended ("1933 Act"). The [Investment Adviser]
[Investment Subadviser] further agrees that:
<PAGE>
(a) it will conform with all applicable rules and regulations of the
SEC (herein called the "Rules") and with all applicable provisions of the 1933
Act; as amended, the Securities Exchange Act of 1934, as amended (the "1934
Act"), the Investment Company Act of 1940, as amended (the "1940 Act"); and the
Investment Advisers Act of 1940, as amended (the "Advisers Act"), and will, in
addition, conduct its activities under this Agreement in accordance with
applicable regulations of the Board of Governors of the Federal Reserve System
pertaining to the investment advisory activities of bank holding companies and
their subsidiaries;
(b) it will place orders pursuant to its investment determinations for
each Fund either directly with the issuer or with any broker or dealer selected
by it. In placing orders with brokers and dealers, the [Investment Adviser]
[Investment Subadviser] will use its reasonable best efforts to obtain the best
net price and the most favorable execution of its orders, after taking into
account all factors it deems relevant, including the breadth of the market in
the security, the price of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of the commission, if
any, both for the specific transaction and on a continuing basis. Consistent
with this obligation, the [Investment Adviser] [Investment Subadviser] may, to
the extent permitted by law, purchase and sell portfolio securities to and from
brokers and dealers who provide brokerage and research services (within the
meaning of Section 28(e) of the 1934 Act) to or for the benefit of any fund
and/or other accounts over which the [Investment Adviser] [Investment
Subadviser] or any of its affiliates exercises investment discretion. Subject to
the review of the [Trust's Board of Trustees] [Investment Adviser] from time to
time with respect to the extent and continuation of the policy, the [Investment
Adviser] [Investment Subadviser] is authorized to pay to a broker or dealer who
provides such brokerage and research services a commission for effecting a
securities transaction which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if the
[Investment Adviser] [Investment Subadviser] determines in good faith that such
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the overall responsibilities of the [Investment
Adviser] [Investment Subadviser] with respect to the accounts as to which it
exercises investment discretion; and
(c) it will maintain books and records with respect to the securities
transactions of each Fund and will render to the [Trust's Board of Trustees]
[Investment Adviser] such periodic and special reports as the Board may request.
3. Services Not Exclusive. The investment advisory services rendered by
the [Investment Adviser] [Investment Subadviser] hereunder are not to be deemed
exclusive, and the [Investment Adviser] [Investment Subadviser] shall be free to
render similar services to others so long as its services under this Agreement
are not impaired thereby.
4. Books and Records. In compliance with the requirements of Rule 31a-3
of the Rules under the 1940 Act, the [Investment Adviser] [Investment
Subadviser] hereby agrees that all records which it maintains for the Trust are
the property of the Trust and further agrees to surrender promptly to the
[Trust] [Investment Adviser] any of such records upon request of the [Trust]
[Investment Adviser]. The [Investment Adviser] [Investment Subadviser] further
agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
the records required to be maintained by Rule 31a-1 under the 1940 Act and to
comply in full with the requirements of Rule 204-2 under the Advisers Act
pertaining to the maintenance of books and records.
<PAGE>
5. Expenses. During the term of this Agreement, the [Investment
Adviser] [Investment Subadviser] will pay all expenses incurred by it in
connection with its activities under this Agreement other than the cost of
purchasing securities (including brokerage commissions, if any) for the Fund.
6. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, [_________] will pay the [Investment Adviser]
[Investment Subadviser], and the [Investment Adviser] [Investment Subadviser]
will accept as full compensation therefor, fees, computed daily and payable
monthly, on an annual basis equal to the percentage set forth on Exhibit A
hereto of that Fund's average daily net assets.
7. Limitation of Liability of the [Investment Adviser]
[Investment Subadviser]: Indemnification.
(a) The [Investment Adviser] [Investment Subadviser] shall not be
liable for any error of judgment or mistake of law or for any loss suffered by a
Fund in connection with the matters to which this Agreement relates, except a
loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the [Investment Adviser] [Investment
Subadviser] in the performance of its duties or from reckless disregard by it of
its obligations and duties under this Agreement;
(b) Subject to the exceptions and limitations contained in Section
7(c) below:
(i) the [Investment Adviser] [Investment Subadviser] (hereinafter
referred to as a "Covered Person") shall be indemnified by the respective Fund
to the fullest extent permitted by law, against liability and against all
expenses reasonably incurred or paid by him in connection with any claim,
action, suit or proceeding in which he becomes involved, as a party or
otherwise, by virtue of his being or having been the [Investment Adviser]
[Investment Subadviser] of the Fund, and against amounts paid or incurred by him
in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall
apply to all claims, actions, suits or proceedings (civil, criminal or other,
including appeals), actual or threatened while in office or thereafter, and the
words "liability" and "expenses" shall include, without limitation, attorneys'
fees, costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
<PAGE>
(c) No indemnification shall be provided hereunder to a Covered
Person:
(i) who shall have been adjudicated by a court or body before
which the proceeding was brought (A) to be liable to the [Trust] [Investment
Adviser] or to one or more Funds' investors by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office, or (B) not to have acted in good faith in the reasonable
belief that his action was in the best interest of a Fund; or
(ii) in the event of a settlement, unless there has been a
determination that such Covered Person did not engage in willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office;
(A) by the court or other body approving the settlement; or
(B) by at least a majority of those Trustees who are neither
Interested Persons of the Trust nor are parties to the matter based upon a
review of readily available facts (as opposed to a full trial-type inquiry); or
(C) by written opinion of independent legal counsel based
upon a review of readily available facts (as opposed to a full trial-type
inquiry); provided, however, that any investor in a Fund may, by appropriate
legal proceedings, challenge any such determination by the Trustees or by
independent counsel.
(d) The rights of indemnification herein provided may be insured
against by policies maintained by the [Trust] [Investment Adviser], shall be
severable, shall not be exclusive of or affect any other rights to which any
Covered Person may now or hereafter be entitled, shall continue as to a person
who has ceased to be a Covered Person and shall inure to the benefit of the
successors and assigns of such person. Nothing contained herein shall affect any
rights to indemnification to which Trust personnel and any other persons, other
than a Covered Person, may be entitled by contract or otherwise under law.
(e) Expenses in connection with the preparation and presentation
of a defense to any claim, suit or proceeding of the character described in
subsection (b) of this Section 7 may be paid by the [Trust] [Investment Adviser]
on behalf of the respective Fund from time to time prior to final disposition
thereto upon receipt of an undertaking by or on behalf of such Covered Person
that such amount will be paid over by him to the [Trust] [Investment Adviser] on
behalf of the respective Fund if it is ultimately determined that he is not
entitled to indemnification under this Section 7; provided, however, that either
(i) such Covered Person shall have provided appropriate security for such
undertaking or (ii) the [Trust] [Investment Adviser] shall be insured against
losses arising out of any such advance payments, or (iii) either a majority of
the Trustees who are neither Interested Persons of the Trust nor parties to the
matter, or independent legal counsel in a written opinion, shall have
determined, based upon a review of readily available facts as opposed to a
trial-type inquiry or full investigation, that there is reason to believe that
such Covered Person will be entitled to indemnification under this Section 7.
<PAGE>
8. Duration and Termination. This Agreement shall be effective as to a
Fund as of the date the Fund commences investment operations after this
Agreement shall have been approved by the Board of Trustees of the Trust with
respect to that Fund and the Investor(s) in the Fund in the manner contemplated
by Section 15 of the 1940 Act and, unless sooner terminated as provided herein,
shall continue until the second anniversary of such date. Thereafter, if not
terminated, this Agreement shall continue in effect as to such Fund for
successive periods of 12 months each, provided such continuance is specifically
approved at least annually (a) by the vote of a majority of those members of the
Board of Trustees of the Trust who are not parties to this Agreement or
Interested Persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval, or (b) by Vote of a Majority of the
Outstanding Voting Securities of the Trust; provided, however, that this
Agreement may be terminated by the Trust at any time, without the payment of any
penalty, by the Board of Trustees of the Trust, by Vote of a Majority of the
Outstanding Voting Securities of the Trust on 60 days' written notice to the
[Investment Adviser] [Investment Subadviser], or by the [Investment Adviser]
[Investment Subadviser] as to the [Trust] [Investment Adviser] at any time,
without payment of any penalty, on 90 days' written notice to the [Trust]
[Investment Adviser]. This Agreement will immediately terminate in the event of
its assignment (as used in this Agreement, the terms "Vote of a Majority of the
Outstanding Voting Securities," "Interested Person" and "Assignment" shall have
the same meanings as such terms have in the 1940 Act and the rules and
regulatory constructions thereunder.)
9. Amendment of this Agreement. No material term of this Agreement may
be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of a material term of this
Agreement shall be effective with respect to a Fund, until approved by Vote of a
Majority of the Outstanding Voting Securities of that Fund.
10. Representations and Warranties. The [Investment Adviser]
[Investment Subadviser] hereby represents and warrants as follows:
(a) [The [Investment Adviser] [Investment Subadviser] is exempt
from registration under the 1940 Act:]
(b) The [Investment Adviser] [Investment Subadviser] has all
requisite authority to enter into, execute, deliver and perform its obligations
under this Agreement;
(c) This Agreement is legal, valid and binding, and enforceable
in accordance with its terms; and
(d) The performance by the [Investment Adviser] [Investment
Subadviser] of its obligations under this Agreement does not conflict with any
law to which it is subject.
11. Covenants. The [Investment Adviser] [Investment Subadviser] hereby
covenants and agrees that, so long as this Agreement shall remain in effect:
(a) The [Investment Adviser] [Investment Subadviser] shall remain
either exempt from, or registered under, the registration provisions of the
Advisers Act; and
(b) The performance by the [Investment Adviser] [Investment
Subadviser] of its obligations under this Agreement shall not conflict with any
law to which it is then subject.
<PAGE>
12. Notices. Any notice required to be given pursuant to this Agreement
shall be deemed duly given if delivered or mailed by registered mail, postage
prepaid, (a) to the Investment Adviser, Mutual Funds Services, 130 Liberty
Street (One Bankers Trust Plaza), New York, New York 10006 , [(b) to the
Subadviser, [Address] or ](c) to the Trust, c/o BT Alex. Brown, Incorporated,
One South Street, Baltimore, Maryland 21202.
13. Waiver. With full knowledge of the circumstances and the effect of
its action, the [Investment Adviser] [Investment Subadviser] hereby waives any
and all rights which it may acquire in the future against the property of any
investor in a Fund, other than shares in that Fund, which arise out of any
action or inaction of the [Trust] [Investment Adviser] under this Agreement.
14. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby.
This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and shall be governed by the
laws of the ______________________________, without reference to principles of
conflicts of law. The Trust is organized under the laws of
_________________________________ pursuant to a ______________ dated
______________. No Trustee, officer or employee of the Trust shall be personally
bound by or liable hereunder, nor shall resort be had to their private property
for the satisfaction of any obligation or claim hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
[SIGNATORIES]
<PAGE>
EXHIBIT A
TO
[INVESTMENT ADVISORY/SUB-ADVISORY AGREEMENT] AGREEMENT
MADE AS OF ____________________
BETWEEN
[Trust Name] AND [______________]
Fund Investment Advisory Fee
<PAGE>
FORM OF PROXY CARD
<PAGE>
FORM OF PROXY CARD
Security Income Fund
Security Capital Preservation Fund
700 Harrison Street
Topeka, Kansas 66636
PROXY FOR THE SPECIAL MEETING OF STOCKHOLDERS
9:30 a.m., Central time, on September 10, 1999
The undersigned hereby appoints John D. Cleland, Donald A. Chubb, Jr.
and James R. Schmank, and each of them, with full power of substitution, as
proxies of the undersigned to vote all shares of stock that the undersigned is
entitled in any capacity to vote at the above-stated special meeting, and at any
and all adjournments or postponements thereof (the "Special Meeting"), on the
matters set forth on this Proxy Card, and, in their discretion, upon all matters
incident to the conduct of the Special Meeting and upon such other matters as
may properly be brought before the Special Meeting. This proxy revokes all prior
proxies given by the undersigned.
All properly executed proxies will be voted as directed. If no
instructions are indicated on a properly executed proxy, the proxy will be voted
FOR approval of Proposals IA, IB, IC, II and III. All ABSTAIN votes will be
counted in determining the existence of a quorum at the Special Meeting, and for
Proposals IA, IB and IC, as votes "Against" the Proposals.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS WITH RESPECT TO THE
SECURITY CAPITAL PRESERVATION FUND.
THE BOARD OF TRUSTEES OF THE PORTFOLIO
RECOMMENDS A VOTE FOR PROPOSALS IA, IB, IC, II AND III.
Please mark boxes in blue or black ink.
IA. Approval of New Investment Advisory Agreement with Bankers Trust Company FOR AGAINST ABSTAIN
- - ----------------------------------------------------------------------------------------------------------------------
IB. Approval of New Investment Advisory Agreement with Morgan Grenfell Inc. FOR AGAINST ABSTAIN
IC. Approval of New Investment Sub-advisory Agreement with [Bankers Trust Company] FOR AGAINST ABSTAIN
[Morgan Grenfell Investment Services Ltd.]
- - ----------------------------------------------------------------------------------------------------------------------
PLEASE SIGN AND DATE ON THE REVERSE SIDE AND MAIL THIS PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
<PAGE>
II. Election of Messrs. Biggar, Dill, Hale, Langton,
Saunders, and Van Benschoten and Drs. Gruber and Herring FOR AGAINST ABSTAIN
as Trustees of the Board.
Instruction: To withhold the authority to vote for any individual
nominee(s), strike a line through the nominee's name in
the list above.
III. Ratification of the selection of FOR AGAINST ABSTAIN
Ernst & Young LLP as the independent accountants of the Portfolio.
</TABLE>
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 August 25, 1999, is hereby
acknowledged.
----------------------------------------
(Title or Authority)
----------------------------------------
(Signature)
----------------------------------------
(Signature)
Dated: [_______________________], 1999
(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.
