[Federal Register Volume 66, Number 89 (Tuesday, May 8, 2001)]
[Notices]
[Pages 23281-23283]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-11251]


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SECURITIES AND EXCHANGE COMMISSION

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


BT Investment Funds, et al.; Notice of Application

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.

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    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

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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.
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    \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. 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.
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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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    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

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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.
[FR Doc. 01-11251 Filed 5-7-01; 8:45 am]
BILLING CODE 8010-01-M