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###### Securities and Exchange Commission

          - [Investment Company Act Release No. 24966; 812-12332]

# AGENCY:

Securities and Exchange Commission (“Commission”).

# ACTION:

Notice of an application for an order under section 17(b) of the Investment Company Act of 1940 (the “Act”) for an exemption from section 17(a) of the Act. 

*Summary of the Application:*                     Applicants request an order to permit a series of a registered open-end management investment company to acquire all of the assets and stated liabilities of a series of another registered open-end management investment company. Because of certain affiliations, applicants may not rely on rule 17a-8 under the Act.                

*Applicants:*                     BT Investment Funds, on behalf of its underlying series Small Cap Fund (“Acquiring Fund”), and Morgan Grenfell Investment Trust, on behalf of its underlying series Smaller Companies Fund (“Acquiring Fund”) (the Acquiring Fund and the Acquired Fund collectively, the “Funds”), Deutsche Asset Management, Inc. (“DeAm, Inc.”), and Bankers Trust Company (“Bankers Trust”).                

*Filing Dates:*                     The application was filed on November 27, 2000. Applicants have agreed to file an amendment during the notice period, the substance of which is reflected in this notice.                

*Hearing or Notification of Hearing:*                     An order granting the application will be issued unless the Commission orders a hearing. Interested persons may request a hearing by writing to the Commission's Secretary and serving applicant with a copy of the request, personally or by mail. Hearing requests should be received by the Commission by 5:30 p.m. on May 24, 2001, and should be accompanied by proof of service on applicants, in the form of an affidavit or, for lawyers, a certificate of service. Hearing requests should state the nature of the writer's interest, the reason for the request, and the issues contested. Persons who wish to be                           ( print page 23282)                        notified of a hearing may request notification by writing to the Commission's Secretary.                

# ADDRESSES:

Secretary, Commission, 450  Fifth Street, NW., Washington, DC 20549-0609. Applicants, c/o Daniel O. Hirsch, Secretary, BT Investment Funds, One South Street, Baltimore, MD 21202.

# FOR FURTHER INFORMATION CONTACT:

Keith A. Gregory, Attorney-Adviser, at (202) 942-0611, or Mary Kay Frech, Branch Chief, at (202) 942-0564, (Division of Investment Management, Office of Investment Company Regulation).

# SUPPLEMENTARY INFORMATION:

The following is a summary of the application. The complete application may be obtained for a fee at the Commission's Public Reference Branch, 450  Fifth Street, NW., Washington, DC 20549-0102 (tel. 202-942-8090).

## Applicants' Representations

                    1. The Acquiring Fund is a series of BT Investment Funds, a Massachusetts business trust, which is registered as an open-end management investment company under the Act. The Acquiring Fund is a feeder fund in a master/feeder structure and as such invests all of its assets in a master portfolio, the Small Cap Portfolio (“Portfolio”).[1]                                          The Portfolio is also registered as an open-end management investment company under the Act. The Acquired Fund is a series fund of Morgan Grenfell Investment Trust (“MGIT”), a Delaware business trust, which is registered as an open-end management investment company under the Act.                

                    2. DeAm, Inc., a Delaware corporation, is registered as an investment adviser under the Investment Advisers Act of 1940 (“Advisers Act”). DeAm, Inc. serves as investment adviser to the Acquired Fund and as its administrator. Bankers Trust is incorporated in New York as a bank holding company and is currently exempt from registration as an investment adviser under the Advisers Act. Bankers Trust serves as investment adviser to the Portfolio and as administrator for the Acquiring Fund.[2]                                          Both Bankers Trust and DeAm, Inc. are indirect wholly owned subsidiaries of Deutsche Bank AG, an international commercial and investment-banking group that is incorporated in Germany.                

3. DeAm, Inc. owns, for its own account, more than 60% of the outstanding voting shares of the Acquired Fund. Deutsche Bank Securities Inc., an affiliate of DeAm, Inc., owns approximately 14% of the outstanding voting shares of the Acquired Fund.

4. On August 19, 1999 and August 17, 2000, the board of trustees of MGIT, on behalf of the Acquired Fund (the “Acquired Fund Board”), including all of the trustees who are not interested persons of the Acquired Fund, as defined in section 2(a)(19) of the Act (the “Independent Trustees”) approved an Agreement and Plan of Reorganization (the “Agreement”). The Agreement provides that the Acquiring Fund will acquire all of the assets and assume the stated liabilities of the Acquired Fund in exchange for shares of the Acquiring Fund (the “Reorganization”). Pursuant to the Agreement, each shareholder of the Acquired Fund will receive shares of the Acquiring Fund having an aggregate net asset value equal to the aggregate net asset value of the Acquired Fund shares held by that shareholder, determined as of the close of regular trading on the New York Stock Exchange on the day of the closing of the Reorganization, which is expected to be on or about May 31, 2001 (“Closing Date”). The valuation will be made in accordance with the procedures set forth in the then-current prospectuses and statements of additional information for the Funds. On or as soon as practicable after the Closing Date, the shares of the Acquiring Fund received by the Acquired Fund will be distributed pro rata to the shareholders of the Acquired Fund and the Acquired Fund will be liquidated.

5. Applicants state that the Funds have substantially similar investment objectives and policies. The Acquired Fund has two classes of shares, Institutional Class and Investment Class, each of which are sold without a sales charge and are not subject to distribution related fees or contingent deferred sales charges. The Acquiring Fund has one class of shares that are sold without a sales charge and are not subject to distribution related fees or contingent deferred sales charges. Applicants represent that the respective shareholders of the Acquiring Fund and the Acquired Fund have similar rights and obligations. No sales charges will be imposed upon shareholders of the Acquired Fund in connection with the Reorganization. The Boards determined that each Fund will bear its own expenses in connection with the Reorganization, except that DeAm, Inc. will be responsible for certain expenses, including expenses incurred in connection with the filing of the application.

6. The Boards, including a majority of the Independent Trustees of each Fund, determined that the Reorganization is in the best interests of each Fund, and that the interests of the existing shareholders of each Fund would not be diluted as a result of the Reorganization. In assessing the Reorganization, the Boards considered various factors, including: (a) The terms and conditions of the Reorganization; (b) the tax-free nature of the Reorganization; (c) the substantially similar investment objectives, policies and restrictions of the Acquired Fund and the Acquiring Fund; and (d) the expense ratios for the Funds.

7. The Reorganization is subject to a number of conditions precedent, including that: (a) The shareholders of the Acquired Fund will have approved the Agreement; (b) the Funds will have received an opinion of tax counsel that the Reorganization will be tax-free for the Funds and their shareholders; (c) applicants will have received exemptive relief from the Commission for the Reorganization; and (d) a registration statement on Form N-14 will have been filed with the Commission and declared effective for the Acquired Fund. The Agreement and the transactions contemplated by it may be terminated and abandoned by resolutions of either Board at any time prior to the Closing Date. The Agreement may be terminated in the event that a material condition is not fulfilled, a material covenant is not fulfilled, or there is a material breach of the Agreement. Applicants agree not to make any material changes to the Agreement without prior Commission approval.

                    8. A registration statement on Form N-14 containing a combined prospectus/proxy statement was filed with the Commission on February 2, 2000. An amendment to the registration statement was filed with the Commission on March 30, 2001. A registration statement containing a combined prospectus/proxy statement will be mailed to Acquired Fund shareholders on or about April 30, 2001. A meeting of shareholders of the                           ( print page 23283)                        Acquired Fund will take place on or about May 24, 2001.                

## Applicants' Legal Analysis

1. Section 17(a) of the Act generally prohibits an affiliated person of a registered investment company, or an affiliated person of such a person, acting as principal, from selling any security to, or purchasing any security from, the company. Section 2(a)(3) of the Act defines an “affiliated person” of another person to include (a) any person directly or indirectly owning, controlling, or holding the power to vote 5% or more of the outstanding voting securities of the other person; (b) any person 5% or more of whose securities are directly or indirectly owned, controlled, or held with power to vote by the other person; (e) any person directly or indirectly controlling, controlled by, or under common control with the other person; and (d) if such other person is an investment company, any investment adviser of that company. Applicants state that the Funds may be deemed affiliated persons and thus the Reorganization may be prohibited by section 17(a).

2. Rule 17a-8 under the Act exempts from the prohibitions of section 17(a) mergers, consolidations, or purchases or sales of substantially all of the assets of registered investment companies that are affiliated persons, or affiliated persons of an affiliated person, solely by reason of having a common investment adviser, common directors, and/or common officers, provided that certain conditions set forth in the rule are satisfied.

3. Applicants state that they may not rely on rule 17a-8 because the Funds may be deemed to be affiliated for reasons other than those set forth in the rule. Applicants state that DeAm, Inc. owns more than 60% of the outstanding shares of the Acquired Fund. DeAm, Inc. is an affiliate of the Acquiring Fund because DeAm, Inc. and Bankers Trust, the adviser to the Acquiring Fund, are under the “common control” of Deutsche Bank AG. The Funds, therefore, might be deemed to be affiliated with each other for reasons other than those set forth in the rule.

4. Section 17(b) of the Act provides that the Commission may exempt a transaction from the provisions of section 17(a) of the Act if the evidence establishes that the terms of the proposed transaction, including the consideration to be paid or received, are reasonable and fair and do not involve overreaching on the part of any person concerned, and that the proposed transaction is consistent with the policy of each registered company concerned and with the general purposes of the Act.

5. Applicants request an order under section 17(b) of the Act exempting them from section 17(a) of the Act to the extent necessary to complete the Reorganization. Applicants submit that the Reorganization satisfies the standards of section 17(b) of the Act. Applicants state that the terms of the proposed Reorganization are fair and reasonable and do not involve overreaching and that the Funds have substantially similar investment objectives and policies. Applicants also state that the Boards, including a majority of the Independent Trustees, have found that participation in the Reorganization is in the best interests of each Fund, and that the interests of the existing shareholders will not be diluted as a result of the Reorganization. In addition, applicants state that the Reorganization will be based on the Funds' relative net asset values.

For the Commission, by the Division of Investment Management, pursuant to delegated authority.

Margaret H. McFarland,

Deputy Secretary.

# Footnotes

1.                             On March 8, 2001, the board of trustees of BT Investment Funds, on behalf of the Acquiring Fund (the “Acquiring Fund Board”), approved a conversion of the Acquiring Fund from a feeder fund in a master-feeder structure to a stand-alone, direct investment fund (the “Conversion”). If the Conversion occurs before the Reorganization (as defined below), the two stand-alone funds will merge. If the Reorganization occurs prior to the Conversion, the Acquired Fund will merge into the Acquiring Fund, and the Acquiring Fund will transfer the Acquired Fund's assets to the Portfolio.                    
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2.                             Bankers Trust will continue to serve as the investment adviser for the Portfolio until on or about April 30, 2001, at which time DeAm, Inc. will become investment adviser for the Portfolio. Under the new advisory agreement with DeAm, Inc., the services provided by DeAm, Inc. would be the same as under the current advisory agreement with Bankers Trust.                    
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[FR Doc. 01-11251 Filed 5-7-01; 8:45 am]

BILLING CODE 8010-01-M