<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
AARP MANAGED INVESTMENT PORTFOLIOS TRUST
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Declaration of Trust)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
PRELIMINARY COPY
September [ ], 1997
AARP MANAGED INVESTMENT PORTFOLIOS TRUST
IMPORTANT NEWS
FOR SCUDDER FUND SHAREHOLDERS
While we encourage you to read the full text of the enclosed Proxy
Statement, here's a brief overview of some matters affecting your Fund which
require a shareholder vote.
Q & A: QUESTIONS AND ANSWERS
Q. WHAT IS HAPPENING?
A. Scudder, Stevens & Clark, Inc. ("Scudder"), your Fund's investment manager,
has agreed to form an alliance with Zurich Insurance Company ("Zurich").
Zurich is a leading international insurance and financial services
organization. As a result of the proposed alliance, there will be a change
in ownership of Scudder. In order for Scudder to continue to serve as
investment manager of your Fund, it is necessary for the Fund's shareholders
to approve a new investment management agreement. A vote is also being
sought to approve a member services agreement with AARP Financial Services
Corporation that is substantially identical to the current member services
agreement. The following pages give you additional information about Zurich,
the proposed new investment management agreement, the proposed new member
services agreement and certain other matters. The most important matters to
be voted upon by you are approval of the new investment management agreement
and the election of Trustees. The Board members of your Fund, including
those who are not affiliated with the Fund or Scudder, recommend that you
vote FOR these proposals.
Q. WHY AM I BEING ASKED TO VOTE ON THE PROPOSED NEW
INVESTMENT MANAGEMENT AGREEMENT?
A. The Investment Company Act of 1940, which regulates investment companies
such as the Fund, requires a vote whenever there is a change in control of a
fund's investment manager. Zurich's alliance with Scudder will result in
such a change of control and requires shareholder approval of a new
investment management agreement with the Fund.
Q. HOW WILL THE SCUDDER-ZURICH ALLIANCE AFFECT ME AS A
FUND SHAREHOLDER?
A. Your Fund and your Fund's investment objective will not change. You will
still own the same shares in the same Fund. The terms of the new investment
management agreement are the same in all material respects as the current
investment management agreement. Similarly, the other service arrangements
between your Fund and Scudder will not be affected. You should continue to
receive the same level of services that you have come to expect over the
years. If shareholders do not approve the new investment management
agreement and member services agreement, the current investment management
agreement and member services agreement will terminate upon the closing of
the transaction and the Board of Trustees will take such action as it deems
to be in the best interests of your Fund and its shareholders.
Q. WHY HAS SCUDDER DECIDED TO ENTER INTO THIS ALLIANCE?
A. Scudder believes that the Scudder-Zurich alliance will enable Scudder to
enhance its capabilities as a global asset manager. Scudder further believes
that the alliance will enable it to enhance its
<PAGE> 3
ability to deliver the level of services currently provided to you and your Fund
and to fulfill its obligations under the new investment management agreement
consistent with current practices.
Q. WILL THE INVESTMENT MANAGEMENT AND MEMBER SERVICES FEES
BE THE SAME?
A. Yes, the fees paid by your Fund for these services will remain the same.
(Please note that Scudder, not the Funds, pays the Member Services fees.
This will not change).
Q. WILL I CONTINUE TO BE ABLE TO PURCHASE SHARES WITHOUT ANY SALES LOAD?
A. Yes, you will be able to continue to purchase shares of your Fund without
any sales load.
Q. WHAT OTHER MATTERS AM I BEING ASKED TO VOTE ON?
A. In order to save your Fund the expense of a subsequent meeting, a vote is
being sought for the amendment and restatement of the Declaration of Trust
applicable to your Fund to reflect regulatory and industry developments, and
for the revision of certain investment policies which can only be changed by
shareholder vote, to simplify and modernize such policies. In addition, a
vote is also being sought for granting the Trustees discretionary authority
to convert the Fund into a "master/feeder" structure, although there are no
current plans to effect such a conversion. You are also being asked to vote
for the ratification of the Board's selection of the Fund's accountants.
Q. HOW DO THE BOARD MEMBERS OF MY FUND RECOMMEND
THAT I VOTE?
A. After careful consideration, the Board members of your Fund, including those
who are not affiliated with the Fund or Scudder, recommend that you vote in
favor of all the proposals on the enclosed proxy card.
Q. WHOM DO I CALL FOR MORE INFORMATION?
A. Please call Shareholder Communications Corporation, your Fund's information
agent, at 1-800-733-8481 ext. 488.
Q. WILL THE FUND PAY FOR THE PROXY SOLICITATION AND LEGAL COSTS ASSOCIATED WITH
THIS TRANSACTION?
A. No, Scudder will bear these costs.
ABOUT THE PROXY CARD
If you have more than one account in the Fund in your name at the same
address, you will receive separate proxy cards for each account but only one
proxy statement for the Fund. Please vote all issues on each proxy card that you
receive.
THANK YOU FOR MAILING YOUR PROXY CARDS PROMPTLY.
<PAGE> 4
Two International Place
Boston, Massachusetts 02110
1-800-225-2470
AARP MANAGED INVESTMENT
PORTFOLIOS TRUST
September 2, 1997
Dear Shareholder:
On June 26, 1997, Scudder, Stevens & Clark ("Scudder") entered into an
agreement with Zurich Insurance Company ("Zurich") pursuant to which Scudder and
Zurich have agreed to form an alliance. Under the terms of the agreement, Zurich
will acquire a majority interest in Scudder, and Zurich Kemper Investments,
Inc., a Zurich subsidiary, will become part of Scudder. Scudder's name will be
changed to Scudder Kemper Investments, Inc. As a result of this transaction, it
is necessary for the shareholders of each of the funds for which Scudder acts as
investment manager, including your Fund, to approve a new investment management
agreement.
The following important facts about the transaction are outlined below:
- The transaction has no effect on the number of shares you own or the
value of those shares.
- The advisory fees and expenses paid by your Fund will not increase as a
result of this transaction. As is now the case, you will not pay sales
loads on purchases of shares of your Fund.
- The investment objective of your Fund will remain the same.
- The non-interested trustees of your Fund have carefully reviewed the
proposed transaction, and have concluded that the transaction should
cause no reduction in the quality of services provided to the Fund and
should enhance Scudder's ability to provide such services.
Shareholders are also being asked to approve certain other matters that
have been set forth in the Fund's Notice of Meeting. THE BOARD MEMBERS OF YOUR
FUND BELIEVE THAT EACH OF THE PROPOSALS SET FORTH IN THE NOTICE OF MEETING FOR
YOUR FUND IS IMPORTANT AND RECOMMEND THAT YOU READ THE ENCLOSED MATERIALS
CAREFULLY AND THEN VOTE FOR ALL PROPOSALS.
Since all of the funds for which Scudder acts as investment manager are
required to conduct shareholder meetings, if you own shares of more than one
fund, you will receive more than one proxy card. Please sign and return each
proxy card you receive.
Your vote is important. PLEASE TAKE A MOMENT NOW TO SIGN AND RETURN YOUR
PROXY CARD(S) IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE. If we do not receive
your executed proxy card(s) after a reasonable amount of time you may receive a
telephone call from our proxy solicitor, Shareholder Communications Corporation,
reminding you to vote your shares.
Respectfully,
Linda C. Coughlin
Chairman
SHAREHOLDERS ARE URGED TO SIGN THE PROXY CARD(S) AND RETURN IT IN THE
POSTAGE-PAID ENVELOPE TO ENSURE A QUORUM AT THE SPECIAL MEETING. YOUR VOTE IS
IMPORTANT REGARDLESS OF THE SIZE OF YOUR SHAREHOLDINGS.
<PAGE> 5
AARP MANAGED INVESTMENT PORTFOLIOS TRUST
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
Please take notice that a Special Meeting of Shareholders of AARP Managed
Investment Portfolios Trust (the "Trust"), the series of which are AARP
Diversified Income Portfolio and AARP Diversified Growth Portfolio (each a
"Fund" and, collectively, the "Funds") is to be held at [the offices of Scudder,
Stevens & Clark, Inc. ("Scudder"), 13th Floor, Two International Place,
Massachusetts 02110], on October 22, 1997, at 9:30 a.m., Eastern time, for the
following purposes:
(1) To approve or disapprove a new investment management agreement
between each Fund and Scudder;
(2) To approve or disapprove a new Member Services Agreement
between AARP Financial Services Corporation and Scudder;
(3) To elect Trustees;
(4) To approve or disapprove the Board's discretionary authority
to convert each Fund to a master/feeder fund structure through
a sale or transfer of assets or otherwise;
(5)(A) To approve or disapprove certain provisions of a proposed
Amended and Restated Declaration of Trust requiring a
two-thirds vote of shareholders;
(B) To approve or disapprove certain other provisions of a
proposed Amended and Restated Declaration of Trust requiring a
majority vote of shareholders;
(6) For each Fund, to approve or disapprove the revision of
certain fundamental investment policies; and
(7) To ratify or reject the selection of Price Waterhouse L.L.P.
as the independent accountants for each of the Funds for each
Fund's current fiscal year.
The appointed proxies will vote on any other business as may properly come
before the Special Meeting or any adjournments thereof.
Holders of record of shares of beneficial interest of each Fund at the
close of business on August 22, 1997 are entitled to vote at the Special Meeting
and at any adjournments thereof.
In the event that the necessary quorum to transact business or the vote
required to approve or reject any proposal is not obtained at the Special
Meeting with respect to the Trust or, where applicable, one or more Funds, the
persons named as proxies may propose one or more adjournments of the Special
Meeting in accordance with applicable law to permit further solicitation of
proxies. Any such adjournment as to a matter requiring, respectively, a
Trust-wide or a Fund by Fund vote will require the affirmative vote of the
holders of a majority of the Trust's (for a Trust-wide vote) or, where
applicable, the Fund's (for a Fund by Fund vote), shares present in person or by
proxy at the Special Meeting. The persons named as proxies will vote in favor of
such adjournment those proxies which they are entitled to vote in favor and will
vote against any such adjournment those proxies to be voted against that
proposal.
By Order of the Board of Trustees,
Kathryn L. Quirk,
Secretary
September , 1997
IMPORTANT--WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN
THE ENCLOSED ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE AND IS INTENDED FOR
YOUR CONVENIENCE. YOUR PROMPT RETURN OF THE ENCLOSED PROXY CARD MAY SAVE THE
NECESSITY AND EXPENSE OF FURTHER SOLICITATIONS TO ENSURE A QUORUM AT THE SPECIAL
MEETING. IF YOU CAN ATTEND THE SPECIAL MEETING AND WISH TO VOTE YOUR SHARES IN
PERSON AT THAT TIME, YOU WILL BE ABLE TO DO SO.
<PAGE> 6
AARP MANAGED INVESTMENT PORTFOLIOS TRUST
TWO INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Trustees (the "Board") of AARP Managed Investment
Portfolios Trust (the "Trust"), the series of which are the AARP Diversified
Income Portfolio and AARP Diversified Growth Portfolio (each a "Fund" and,
collectively, the "Funds"), for use at the Special Meeting of Shareholders, to
be held at [the offices of Scudder, Stevens & Clark, Inc. ("Scudder"), [ ]
Floor, Two International Place, Boston, Massachusetts 02110], on October 22,
1997 at 9:30 a.m., Eastern time, and at any and all adjournments thereof (the
"Special Meeting"). (In the descriptions of the various proposals below, the
word "fund" is sometimes used to mean investment companies or series thereof in
general, and not the Funds whose proxy statement this is.)
This Proxy Statement, the Notice of Special Meeting and the proxy card are
first being mailed to shareholders on or about September 2, 1997 or as soon as
practicable thereafter. Any shareholder giving a proxy has the power to revoke
it by mail (addressed to the Secretary at the principal executive office of the
Funds (c/o Scudder, Stevens & Clark, Inc., Two International Place, Boston,
Massachusetts 02110), or in person at the Special Meeting, by executing a
superseding proxy or by submitting a notice of revocation to the Fund. All
properly executed proxies received in time for the Special Meeting will be voted
as specified in the proxy or, if no specification is made, in favor of each
proposal referred to in the Proxy Statement.
The presence at any shareholders' meeting, in person or by proxy, of the
holders of a majority of the shares entitled to be cast of the Trust (for a
Trust-wide vote) or a Fund (for a Fund by Fund vote) shall be necessary and
sufficient to constitute a quorum for the transaction of business requiring,
respectively, Trust-wide or Fund by Fund voting. In the event that the necessary
quorum to transact business or the vote required to approve or reject any
proposal is not obtained at the Special Meeting with respect to one or more
Funds, the persons named as proxies may propose one or more adjournments of the
Special Meeting in accordance with applicable law to permit further solicitation
of proxies with respect to any proposal which did not receive the vote necessary
for its passage or to obtain a quorum with respect to those proposals for which
there is represented a sufficient number of votes in favor. Actions taken at the
Special Meeting will be effective irrespective of any adjournments with respect
to any other proposals. Any such adjournment as to a matter requiring,
respectively, a Trust-wide or a Fund by Fund vote will require the affirmative
vote of the holders of a majority of the Trust's (for a Trust-wide vote) or
Fund's (for a Fund by Fund vote) shares present in person or by proxy at the
Special Meeting. The persons named as proxies will vote in favor of such
adjournment those proxies which they are entitled to vote in favor and will vote
against any such adjournment those proxies to be voted against that proposal.
For purposes of determining the presence of a quorum for transacting business at
the Special Meeting, abstentions and broker "non-votes" will be treated as
shares that are present but which have not been voted. Broker non-votes are
proxies received by the Fund from brokers or nominees when the broker or nominee
has neither received instructions from the beneficial owner or other persons
entitled to vote nor has discretionary power to vote on a particular matter.
Accordingly, shareholders are urged to forward their voting instructions
promptly.
Proposals 1, 2, 5(B) and 6 each requires the affirmative vote of a
"majority of the outstanding voting securities" of each Fund. The terms
"majority of the outstanding voting securities" as defined in the Investment
Company Act of 1940, as amended (the "1940 Act"), and as used in this Proxy
Statement, means: the affirmative vote of the lesser of (1) 67% of the voting
securities of each Fund
<PAGE> 7
present at the meeting if more than 50% of the outstanding shares of the Fund
are present in person or by proxy or (2) more than 50% of the outstanding shares
of each Fund. Approval of Proposal 3 requires the affirmative vote of a
plurality of the shares of the Trust. The requisite vote for Proposals 4, 5(A)
and 5(B) is governed by the applicable Declaration of Trust. Approval of
Proposal 4 requires the affirmative vote of a majority of the shares of each
Fund. Approval of Proposal 5(A) requires the affirmative vote of two thirds of
shares of the Trust outstanding and entitled to vote, while approval of Proposal
5(B) requires the affirmative vote of a majority of the outstanding voting
securities, as defined above, of the Trust. Approval of Proposal 7 requires the
affirmative vote of a majority of the shares of each Fund voting.
Abstentions will have the effect of a "no" vote on all proposals. Broker
non-votes will have the effect of a "no" vote for Proposals 1, 2, 4 and 6, which
require the approval of a specified percentage of the outstanding shares of each
Fund and Proposals 5(A) and 5(B), which require the approval of a specified
percentage of the outstanding shares of the Trust, if such vote is determined on
the basis of obtaining the affirmative vote of more than 50% of the outstanding
shares of the Fund. Broker non-votes will not constitute "yes" or "no" votes,
and will be disregarded in determining the voting securities "present" if such
vote is determined on the basis of the affirmative vote of 67% of the voting
securities of the Fund, or the Trust, as the case may be, present at the Special
Meeting with respect to Proposals 1, 2, 4, 5(B) and 6.
Shareholders of each Fund will vote separately with respect to each of
Proposals 1, 2, 4, 6 and 7; and Shareholders of the Trust will vote together on
proposals 3, 5(A), and 5(B). The following table summarizes those voting
requirements:
<TABLE>
<CAPTION>
SHAREHOLDERS ENTITLED VOTE REQUIRED
TO VOTE FOR APPROVAL
------------------------------ ------------------------------
<S> <C> <C>
Proposal 1 Shareholders of each Fund vote Approved by a "majority of the
(Approval of new Investment separately outstanding voting securities"
Management Agreement) of each Fund
Proposal 2 Shareholders of each Fund vote Approved by a "majority of the
(Approval of new Member separately outstanding voting securities"
Services Agreement) of each Fund
Proposal 3 Shareholders of the Trust vote Each nominee must be elected
(Election of Trustees) together for each nominee by a plurality of the shares
(shareholders of all Funds voting at the Special Meeting
vote together as a single
class)
Proposal 4 Shareholders of each Fund vote Approved by a majority of the
(Approval of discretionary separately shares of each Fund
authority to convert to
master/feeder fund structure)
Proposal 5(A) Shareholders of the Trust vote Approved by the vote of two-
(Approval of a portion of the together (shareholders of all thirds of shares of the Trust
Amended and Restated Funds vote together as a outstanding and entitled to
Declaration of Trust) single class) vote
Proposal 5(B) Shareholders of the Trust vote Approved by a "majority of the
(Approval of a portion of the together (shareholders of all outstanding voting securities"
Amended and Restated Funds vote together as a of the Trust
Declaration of Trust) single class)
Proposal 6 Shareholders of each Fund vote Approved by a "majority of the
(Approval of the revision of separately outstanding voting securities"
certain fundamental investment of each Fund
policies)
</TABLE>
2
<PAGE> 8
<TABLE>
<CAPTION>
SHAREHOLDERS ENTITLED VOTE REQUIRED
TO VOTE FOR APPROVAL
------------------------------ ------------------------------
<S> <C> <C>
Proposal 7 Shareholders of each Fund vote Approved by a majority of the
(Ratification of selection of separately shares voting at the Special
Accountants) Meeting
</TABLE>
Holders of record of the shares of beneficial interest of each Fund at the
close of business on August 22, 1997 (the "Record Date"), as to any matter on
which they are entitled to vote, will be entitled to one vote per share on all
business of the Special Meeting. The table below sets forth the number of shares
outstanding for each Fund as of June 30, 1997.
<TABLE>
<CAPTION>
NUMBER OF SHARES OUTSTANDING
NAME OF FUND AS OF JUNE 30, 1997
- ------------------------------------------------------------------- ----------------------------
<S> <C>
AARP Diversified Income Portfolio 2,195,915.157
AARP Diversified Growth Portfolio 2,221,277.597
</TABLE>
The Trust provides periodic reports to all of its shareholders which
highlight relevant information including investment results and a review of
portfolio changes. You may receive an additional copy of the most recent annual
report for each Fund and a copy of any more recent semi-annual report, without
charge, by calling 800-225-5163 or writing the Fund, c/o Scudder, Stevens &
Clark, Inc., Two International Place, Boston, Massachusetts 02110.
PROPOSAL 1: APPROVAL OF NEW
INVESTMENT MANAGEMENT AGREEMENT
INTRODUCTION
Scudder acts as the investment adviser to, and manager and administrator
for, each Fund pursuant to an investment management agreement entered into by
the Funds and Scudder (the "Current Investment Management Agreement") (Scudder
is sometimes referred to in this Proxy Statement as the "Investment Manager.")
On June 26, 1997, Scudder entered into a Transaction Agreement (the "Transaction
Agreement") with Zurich Insurance Company ("Zurich") pursuant to which Scudder
and Zurich have agreed to form an alliance. Under the terms of the Transaction
Agreement, Zurich will acquire a majority interest in Scudder, and Zurich Kemper
Investments, Inc. ("ZKI"), a Zurich subsidiary, will become part of Scudder.
Scudder's name will be changed to Scudder Kemper Investments, Inc. ("Scudder
Kemper"). The foregoing are referred to as the "Transactions." ZKI, a
Chicago-based investment adviser and the adviser to the Kemper funds, has
approximately $80 billion under management. The headquarters of Scudder Kemper
will be in New York. Edmond D. Villani, Scudder's Chief Executive Officer, will
continue as Chief Executive Officer of Scudder Kemper and will become a member
of Zurich's Corporate Executive Board.
Consummation of the Transactions would constitute an "assignment," as that
term is defined in the 1940 Act, of each Fund's Current Investment Management
Agreement with Scudder. As required by the 1940 Act, the Current Investment
Management Agreement provides for its automatic termination in the event of its
assignment. In anticipation of the Transactions, a new investment management
agreement (the "New Investment Management Agreement" together with the Current
Investment Management Agreement, the "Investment Management Agreement") between
the Funds and Scudder Kemper is being proposed for approval by shareholders of
each Fund. A copy of the form of the New Investment Management Agreement is
attached hereto as Exhibit A. THE NEW INVESTMENT MANAGEMENT AGREEMENT FOR THE
FUNDS IS ON THE SAME TERMS IN ALL MATERIAL RESPECTS AS THE CURRENT INVESTMENT
MANAGEMENT AGREEMENT. Conforming changes are being recommended to the New
Investment Management Agreement in order to promote consistency among all of the
funds currently advised by Scudder and to permit ease of administration. The
material terms of the Current Investment Management Agreement are described
under "Description of the Current Investment Management Agreement" below.
3
<PAGE> 9
BOARD OF TRUSTEES RECOMMENDATION
On August 20, 1997, the Board of the Trust, including Trustees who are not
parties to such agreement or "interested persons" (as defined under the 1940
Act) (the "Non-interested Trustees") of any such party, voted to approve the New
Investment Management Agreement and to recommend its approval to shareholders.
For information about the Board's deliberations and the reasons for its
recommendation, please see "Board of Trustees Evaluation" below.
The Board of the Trust recommends that its shareholders vote in favor of
the approval of the New Investment Management Agreement for the Funds.
BOARD OF TRUSTEES EVALUATION
On June 26, 1997, representatives of Scudder advised the Non-interested
Trustees of the Trust by means of a telephone conference call that Scudder had
entered into the Transaction Agreement. At that time, Scudder representatives
described the general terms of the proposed Transactions and the perceived
benefits for the Scudder organization and for its investment advisory clients.
Scudder subsequently furnished the Non-interested Trustees additional
information regarding the proposed Transactions, including information regarding
the terms of the proposed Transactions, and information regarding the Zurich and
ZKI organizations. In a series of subsequent telephone conference calls and
in-person meetings, the Non-interested Trustees discussed this information among
themselves and with representatives of Scudder and Zurich. They were assisted in
their review of this information by their independent legal counsel.
In the course of these discussions, Scudder advised the Non-interested
Trustees that it did not expect that the proposed Transactions would have a
material effect on the operations of the Funds or their shareholders. Scudder
has advised the Non-interested Trustees that the Transaction Agreement, by its
terms, does not contemplate any changes in the structure or operations of the
Funds. Scudder representatives have informed the Trustees, that Scudder intends
to maintain the separate existence of the funds that Scudder and ZKI manage in
their respective distribution channels. Scudder has also advised the
Non-interested Trustees that although it expects that various portions of the
ZKI organization would be combined with Scudder's operations, the senior
executives of Scudder overseeing those operations will remain largely unchanged.
It is possible, however, that changes in certain personnel currently involved in
providing services to the Funds may result from future efforts to combine the
strengths and efficiencies of both firms. In their discussions with the
Trustees, Scudder representatives also emphasized the strengths of the Zurich
organization and its commitment to provide the new Scudder Kemper organization
with the resources necessary to continue to provide high quality services to the
Funds and the other investment advisory clients of the new Scudder Kemper
organization.
The Board of the Trust was advised that Scudder intends to rely on Section
15(f) of the 1940 Act, which provides a non-exclusive safe harbor for an
investment adviser to an investment company or any of the investment adviser's
affiliated persons (as defined under the 1940 Act) to receive any amount or
benefit in connection with a change in control of the investment adviser so long
as two conditions are met. First, for a period of three years after the
transaction, at least 75% of the board members of the investment company must
not be "interested persons" of the investment company's investment adviser or
its predecessor adviser. On or prior to the consummation of the Transactions,
the Board, assuming the election of the nominees that you are being asked to
elect in "Proposal 2: Election of Trustees," would be in compliance with this
provision of Section 15(f). (See "Proposal 2: Election of Trustees"). Second, an
"unfair burden" must not be imposed upon the investment company as a result of
such transaction or any express or implied terms, conditions or understandings
applicable thereto. The term "unfair burden" is defined in Section 15(f) to
include any arrangement during the two-year period after the transaction whereby
the investment adviser, or any interested
4
<PAGE> 10
person of any such adviser, receives or is entitled to receive any compensation,
directly or indirectly, from the investment company or its shareholders (other
than fees for bona fide investment advisory or other services) or from any
person in connection with the purchase or sale of securities or other property
to, from or on behalf of the investment company (other than bona fide ordinary
compensation as principal underwriter for such investment company). No such
compensation agreements are contemplated in connection with the Transactions.
Scudder has undertaken to pay the costs of preparing and distributing proxy
materials to, and of holding the meeting of, the Funds' shareholders as well as
other fees and expenses in connection with the Transactions, including the fees
and expenses of legal counsel and consultants to the Funds and the
Non-interested Trustees.
During the course of their deliberations, the Non-interested Trustees
considered a variety of factors, including the nature, quality and extent of the
services furnished by Scudder to the Funds; the necessity of Scudder maintaining
and enhancing its ability to retain and attract capable personnel to serve the
Funds; the investment record of Scudder in managing the Funds; the increased
complexity of the domestic and international securities markets; Scudder's
profitability from advising the Funds; possible economies of scale; comparative
data as to investment performance, advisory fees and other fees, including
administrative fees, and expense ratios; the risks assumed by Scudder; the
advantages and possible disadvantages to the Funds of having an adviser of the
Funds which also serves other investment companies as well as other accounts;
possible benefits to Scudder from serving as manager to the Funds and from
affiliates of Scudder serving the Funds in various other capacities; current and
developing conditions in the financial services industry, including the entry
into the industry of large and well capitalized companies which are spending and
appear to be prepared to continue to spend substantial sums to engage personnel
and to provide services to competing investment companies; and the financial
resources of Scudder and the continuance of appropriate incentives to assure
that Scudder will continue to furnish high quality services to the Funds.
In addition to the foregoing factors, the Non-interested Trustees gave
careful consideration to the likely impact of the Transactions on the Scudder
organization. In this regard, the Non-interested Trustees considered, among
other things, the structure of the Transactions which affords Scudder executives
substantial autonomy over Scudder's operations and provides substantial equity
participation and incentives for many Scudder employees; Scudder's and Zurich's
commitment to Scudder's paying compensation adequate to attract and retain top
quality personnel; Zurich's strategy for the development of its asset management
business through Scudder; information regarding the financial resources and
business reputation of Zurich; and the complementary nature of various aspects
of the business of Scudder and the Zurich Kemper organization. Based on the
foregoing, the Non-interested Trustees concluded that the Transactions should
cause no reduction in the quality of services provided to the Funds and believe
that the Transactions should enhance Scudder's ability to provide such services.
The Non-interested Trustees considered the foregoing factors with respect to
each of the Funds.
On August 20, 1997, the Trustees of the Trust, including the Non-interested
Trustees of the Trust approved the New Investment Management Agreement.
INFORMATION CONCERNING THE TRANSACTIONS AND ZURICH
Under the Transaction Agreement, Zurich will pay $866.7 million in cash to
acquire two-thirds of Scudder's outstanding shares and will contribute ZKI to
Scudder for additional shares, following which Zurich will have a 79.1% fully
diluted equity interest in the combined business. Zurich will then transfer a
9.6% fully diluted equity interest in Scudder Kemper to a compensation pool for
the benefit of Scudder and ZKI employees, as well as cash and warrants on Zurich
shares for award to Scudder employees, in each case subject to five-year vesting
schedules. After giving effect to the Transactions, current Scudder stockholders
will have a 29.6% fully diluted equity interest in Scudder Kemper and Zurich
will have a 69.5% fully diluted interest in Scudder Kemper. Scudder's name will
be changed to Scudder Kemper Investments, Inc.
5
<PAGE> 11
The purchase price for Scudder or for ZKI in the Transactions is subject to
adjustment based on the impact to revenues of non-consenting clients, and will
be reduced if the annualized investment management fee revenues (excluding the
effect of market changes, but taking into account new assets under management)
from clients at the time of closing, as a percentage of such revenues as of June
30, 1997 (the "Revenue Run Rate Percentage"), is less than 90%.
At the closing, Zurich and the other stockholders of Scudder Kemper will
enter into a Second Amended and Restated Security Holders Agreement (the "New
SHA"). Under the New SHA, Scudder stockholders will be entitled to designate
three of the seven members of the Scudder Kemper board of directors and two of
the four members of an Executive Committee, which will be the primary
management-level committee of Scudder Kemper. Zurich will be entitled to
designate the other four members of the Scudder Kemper board and other two
members of the Executive Committee.
The names, addresses and principal occupations of the initial
Scudder-designated directors of Scudder Kemper are as follows: Lynn S. Birdsong,
345 Park Avenue, New York, New York, Managing Director of Scudder; Cornelia M.
Small, 345 Park Avenue, New York, New York, Managing Director of Scudder; and
Edmond D. Villani, 345 Park Avenue, New York, New York, President, Chief
Executive Officer and Managing Director of Scudder.
The names, addresses and principal occupations of the initial
Zurich-designated directors of Scudder Kemper are as follows: Lawrence W. Cheng,
Mythenquai 2, Zurich, Switzerland, Chief Investment Officer for Investments and
Institutional Asset Management and the corporate functions of Securities and
Real Estate for Zurich; Steven M. Gluckstern, Mythenquai 2, Zurich, Switzerland,
responsible for Reinsurance, Structured Finance, Capital Market Products and
Strategic Investments, and a member of the Corporate Executive Board of Zurich;
Rolf Hueppi, Mythenquai 2, Zurich, Switzerland, Chairman of the Board and Chief
Executive Officer of Zurich; and Markus Rohrbasser, Mythenquai 2, Zurich,
Switzerland, Chief Financial Officer and member of the Corporate Executive Board
of Zurich.
The initial Scudder-designated Executive Committee members will be Messrs.
Birdsong and Villani (Chairman). The initial Zurich-designated Executive
Committee members will be Messrs. Cheng and Rohrbasser.
The New SHA requires the approval of a majority of the Scudder-designated
directors for certain decisions, including changing the name of Scudder Kemper,
effecting an initial public offering before April 15, 2005, causing Scudder
Kemper to engage substantially in non-investment management and related
business, making material acquisitions or divestitures, making material changes
in Scudder Kemper's capital structure, dissolving or liquidating Scudder Kemper,
or entering into certain affiliated transactions with Zurich. The New SHA also
provides for various put and call rights with respect to Scudder Kemper stock
held by current Scudder employees, limitations on Zurich's ability to purchase
other asset management companies outside of Scudder Kemper, rights of Zurich to
repurchase Scudder Kemper stock upon termination of employment of Scudder Kemper
personnel, and registration rights for stock held by continuing Scudder
stockholders.
The Transactions are subject to a number of conditions, including approval
by Scudder stockholders; the Revenue Run Rate Percentages of Scudder and ZKI
being at least 75%; Scudder and ZKI having obtained director and shareholder
approvals from U.S.-registered funds representing 90% of assets of such funds
under management as of June 30, 1997; the absence of any restraining order or
injunction preventing the Transactions, or any litigation challenging the
Transactions that is reasonably likely to result in an injunction or
invalidation of the Transactions, and the continued accuracy of the
representations and warranties contained in the Transaction Agreement. The
Transactions are expected to close during the fourth quarter of 1997.
6
<PAGE> 12
The information set forth above concerning the Transactions has been
provided to the Trust by Scudder, and the information set forth below concerning
Zurich has been provided to the Trust by Zurich.
Founded in 1872, Zurich is a multinational, public corporation organized
under the laws of Switzerland. Its home office is located at Mythenquai 2, 8002
Zurich, Switzerland. Historically, Zurich's earnings have resulted from its
operations as an insurer as well as from its ownership of its subsidiaries and
affiliated companies (the "Zurich Insurance Group"). Zurich and the Zurich
Insurance Group provide an extensive range of insurance products and services,
and have branch offices and subsidiaries in more than 40 countries throughout
the world. Zurich Insurance Group is particularly strong in the insurance of
international companies and organizations. Over the past few years, Zurich's
global presence, particularly in the United States, has been strengthened by
means of selective acquisitions.
DESCRIPTION OF THE CURRENT INVESTMENT MANAGEMENT AGREEMENT
Under the Current Investment Management Agreement, Scudder provides the
Trust on behalf of each of its Funds with continuing investment management
services. The Investment Manager also determines which securities shall be
purchased, held, or sold, and what portion of each Fund's assets shall be held
uninvested, subject to the Trust's Declaration of Trust, By-Laws, investment
policies and restrictions, the provisions of the 1940 Act, and such policies and
instructions as the Trustees may determine.
The Current Investment Management Agreement provides that the Investment
Manager will provide portfolio management services, place portfolio transactions
in accordance with policies expressed in each Fund's registration statement, pay
each Fund's office rent, render significant administrative services on behalf of
each Fund (not otherwise provided by third parties) necessary for each Fund's
operating as an open-end investment company including, but not limited to,
preparing reports to and meeting materials for the Trust's Board of Trustees and
reports and notices to Fund shareholders; supervising, negotiating contractual
arrangements with, to the extent appropriate, and monitoring the performance of
various third-party and affiliated service providers to each Fund (such as each
Fund's transfer and pricing agents, fund accounting agent, custodian,
accountants and others) and other persons in any capacity deemed necessary or
desirable to Fund operations; preparing and making filings with the Securities
and Exchange Commission (the "SEC" or the "Commission") and other regulatory and
self-regulatory organizations, including but not limited to, preliminary and
definitive proxy materials, post-effective amendments to the Registration
Statement, semi-annual reports on Form N-SAR and notices pursuant to Rule 24f-2
under the 1940 Act; overseeing the tabulation of proxies by each Fund's transfer
agent; assisting in the preparation and filing of each Fund's federal, state and
local tax returns; preparing and filing each Fund's federal excise tax returns
pursuant to Section 4982 of the Internal Revenue Code of 1986, as amended;
providing assistance with investor and public relations matters; monitoring the
valuation of portfolio securities and the calculation of net asset value;
monitoring the registration of shares of each Fund under applicable federal and
state securities laws; maintaining or causing to be maintained for each Fund all
books, records and reports and any other information required under the 1940
Act, to the extent such books, records and reports and other information are not
maintained by each Fund's custodian or other agents of each Fund; assisting in
establishing accounting policies of each Fund; assisting in the resolution of
accounting issues that may arise with respect to each Fund's operations and
consulting with each Fund's independent accountants, legal counsel and each
Fund's other agents as necessary in connection therewith; establishing and
monitoring each Fund's operating expense budgets; reviewing each Fund's bills;
processing the payment of bills that have been approved by an authorized person;
assisting each Fund in determining the amount of dividends and distributions
available to be paid by each Fund to its shareholders, preparing and arranging
for the printing of dividend notices to shareholders, and providing the transfer
and dividend paying agent, the custodian, and the accounting agent with such
information as is required for such parties to effect the payment of
7
<PAGE> 13
dividends and distributions; and otherwise assisting each Fund in the conduct of
its business, subject to the direction and control of the Trust's Board of
Trustees.
The Current Investment Management Agreement also provides that the
Investment Manager is not required to pay any expenses of the Funds except those
expenses specifically allocated to the Investment Manager in the Current
Investment Management Agreement and under the Special Servicing Agreement
("Service Agreement") among the Investment Manager, the Trust, AARP Financial
Services Company, Scudder Service Corporation, Scudder Trust Company, Scudder
Investor Services, Inc., and the various funds in which the Trust's Funds may
invest ("Underlying Funds"). [Under the Service Agreement, the Investment
Manager is responsible for arranging all services pertaining to the operation of
the Trust including the services of Scudder Service Corporation and AARP
Financial Services Company to act as Shareholder Servicing Agent and Fund
Accounting Agent, respectively, for each Fund of the Trust.] Under the Current
Investment Management Agreement, the Investment Manager is not required to pay
any expenses of any activity primarily intended to result in the sale of Fund
securities if and to the extent that (i) the expenses are to be borne by a
principal underwriter acting as the distributor; (ii) the Fund has adopted a
Rule 12b-1 Plan providing for the assumption of some or all of those expenses;
or (iii) the expenses are required to be borne by Scudder pursuant to the
Investment Company Services Agreement dated October 9, 1984 among the American
Association of Retired Persons, AARP/Scudder Financial Management Company and
the Investment Manager.
Each Fund is responsible for other expenses, including organizational
expenses (including out-of-pocket expenses, but not including the Investment
Manager's overhead or employee costs); brokers' commissions or other costs of
acquiring or disposing of any portfolio securities of each Fund; legal, auditing
and accounting expenses; payment for portfolio pricing or valuation services to
pricing agents, accountants, bankers and other specialists, if any; taxes and
governmental fees; the fees and expenses of each Fund's transfer agent; expenses
of preparing share certificates and any other expenses, including clerical
expenses, of issuance, offering, distribution, sale, redemption or repurchase of
shares; the expenses of and fees for registering or qualifying securities for
sale; the fees and expenses of Non-interested Trustees; the cost of printing and
distributing reports, notices and dividends to current shareholders; and the
fees and expenses of each Fund's custodians, subcustodians, accounting agent,
dividend disbursing agents and registrars. Each Fund may arrange to have third
parties assume all or part of the expenses of sale, underwriting and
distribution of shares of each Fund. Each Fund is also responsible for expenses
of shareholders' and other meetings, the cost of responding to shareholders'
inquiries, and its expenses incurred in connection with litigation, proceedings
and claims and the legal obligation it may have to indemnify officers and
Trustees of the Trust with respect thereto. Each Fund is also responsible for
the maintenance of books and records which are required to be maintained by each
Fund's custodian or other agents of the Trust; telephone, telex, facsimile,
postage and other communications expenses; any fees, dues and expenses incurred
by each Fund in connection with membership in investment company trade
organizations; expenses of printing and mailing prospectuses and statements of
additional information of each Fund and supplements thereto to current
shareholders; costs of stationery; fees payable to the Investment Manager and to
any other Fund advisers or consultants; expenses relating to investor and public
relations; interest charges, bond premiums and other insurance expense; freight,
insurance and other charges in connection with the shipment of each Fund's
portfolio securities; and other expenses.
The Investment Manager is responsible for the payment of the compensation
and expenses of all Trustees, officers and executive employees of each Fund
(including each Fund's share of payroll taxes) affiliated with the Investment
Manager and making available, without expense to each Fund, the services of such
Trustees, officers and employees as may duly be elected officers of the Trust
subject to their individual consent to serve and to any limitations imposed by
law. Each Fund is responsible for the fees and expenses (specifically including
travel expenses relating to Fund business) of Trustees not affiliated with the
Investment Manager. Under each Current Investment Management Agreement, the
Investment Manager also pays each Fund's share of payroll taxes, as
8
<PAGE> 14
well as expenses, such as travel expenses (or an appropriate portion thereof),
of Trustees and officers of the Trust who are directors, officers or employees
of the Investment Manager, except to the extent that such expenses relate to
attendance at meetings of the Board of Trustees of the Trust or any committees
thereof or advisers thereto, held outside Boston, Massachusetts or New York, New
York. During the Trust's most recent fiscal year, no compensation, direct or
otherwise (other than through fees paid to the Investment Manager), was paid or
became payable by the Trust to any of its officers or Trustees who were
affiliated with the Investment Manager.
The Investment Manager does not receive a fee for its services under the
Current Investment Management Agreement since the Investment Manager expects to
receive additional compensation under investment management agreements currently
in effect between the Investment Manager and the Underlying Funds due to growth
in the assets of the Underlying Funds resulting from investment in the
Underlying Funds by the Funds.
As of June 30, 1997, the AARP Diversified Income Portfolio had net assets
of 34,230,022.69 and the AARP Diversified Growth Portfolio had net assets of
$36,411,937.60.
The Current Investment Management Agreement further provides that the
Investment Manager shall not be liable for any error of judgment or mistake of
law or for any loss suffered by any Fund in connection with matters to which
such agreement relates, except a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Investment Manager in the
performance of its duties or from reckless disregard by the Investment Manager
of its obligations and duties under such agreement.
The Current Investment Management Agreement may be terminated without
penalty upon sixty (60) days' written notice by either party. Each Fund may
agree to terminate the Current Investment Management Agreement either by the
vote of a majority of the outstanding voting securities of the Fund, or by a
vote of the Board of Trustees. As stated above, the Current Investment
Management Agreement automatically terminates in the event of its assignment.
Scudder has acted as the Investment Manager for each Fund since each Fund
commenced operations as shown below. Also shown below is the date of the Current
Investment Management Agreement, the date when the Current Investment Management
Agreement was last approved by the Trustees and the shareholders of such Fund,
and the date to which the Current Investment Management Agreement was last
continued. The Current Investment Management Agreement was last submitted to
shareholders prior to its becoming effective, as required by the 1940 Act.
<TABLE>
<CAPTION>
DATE OF
CURRENT
INVESTMENT LAST APPROVED BY
COMMENCED MANAGEMENT ------------------------ DATE
NAME OF FUND OPERATIONS AGREEMENT TRUSTEES SHAREHOLDERS CONTINUED TO
- --------------------------------------- --------- ---------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
AARP Diversified Income Portfolio 2/1/97 2/1/97 8/20/97 1/30/97 8/31/98
Portfolio AARP Diversified Growth
Portfolio 2/1/97 2/1/97 8/20/97 1/30/97 8/31/98
</TABLE>
- ------------------------------
* An Investment Management Agreement which is changed from a prior agreement
solely to reduce the fee payable by the Fund does not require shareholder
approval prior to become effective. In those cases, the date shown for
shareholder approval may be later than the effective date.
9
<PAGE> 15
THE NEW INVESTMENT MANAGEMENT AGREEMENT
The New Investment Management Agreement for the Funds will be dated as of
the date of the consummation of the Transactions, which is expected to occur in
the fourth quarter of 1997, but in no event later than February 28, 1998. The
New Investment Management Agreement will be in effect for an initial term ending
on the same date as would the Current Investment Management Agreement but for
the Transactions, and may continue thereafter from year to year only if
specifically approved at least annually by the vote of "a majority of the
outstanding voting securities" of each Fund, or by the Board and, in either
event, the vote of a majority of the Noninterested Trustees cast in person at a
meeting called for such purpose. In the event that shareholders of each Fund do
not approve the New Investment Management Agreement, the Current Investment
Management Agreement will remain in effect until the closing of the
Transactions, at which time it would terminate. In such event, the Board such
Fund will take such action, if any, as it deems to be in the best interests of
such Fund and its shareholders. In the event the Transactions are not
consummated, Scudder will continue to provide services to each Fund in
accordance with the terms of the Current Investment Management Agreement for
such periods as may be approved at least annually by the Board, including a
majority of the Non-interested Trustees.
DIFFERENCES BETWEEN THE CURRENT AND NEW INVESTMENT MANAGEMENT AGREEMENT
The New Investment Management Agreement is substantially the same as the
Current Investment Management Agreement in all material respects, except for the
date of effectiveness. The principal changes that have been made are summarized
below. The New Investment Management Agreement reflects conforming changes that
have been made in order to promote consistency among all funds currently advised
by Scudder and to permit ease of administration.
For example, the New Investment Management Agreement clarifies that
purchase and sale opportunities that are suitable for more than one client of
the Investment Manager will be allocated by the Investment Manager in an
equitable manner. Other conforming changes include: the addition of language
memorializing that the Investment Manager's compensation is subject to the
Fund's expense limitation provisions; the addition of a provision acknowledging
the Investment Manager's ability to waive all or a portion of its fee; and the
addition of a provision replacing New York with Massachusetts as the
jurisdiction whose laws will govern the New Investment Management Agreement.
INVESTMENT MANAGER
Scudder is one of the most experienced investment counsel firms in the
United States. It was established in 1919 as a partnership and was restructured
as a Delaware corporation in 1985. The principal source of Scudder's income is
professional fees received from providing continuing investment advice. Scudder
provides investment counsel for many individuals and institutions, including
insurance companies, endowments, industrial corporations and financial and
banking organizations.
10
<PAGE> 16
Scudder is a Delaware corporation. Daniel Pierce* is the Chairman of the
Board of Scudder, Edmond D. Villani# is President and Chief Executive Officer of
Scudder, Stephen R. Beckwith#, Lynn S. Birdsong#, Nicholas Bratt#, E. Michael
Brown*, Mark S. Casady*, Linda C. Coughlin*, Margaret D. Hadzima*, Jerard K.
Hartman#, Richard A. Holt@, John T. Packard+, Kathryn L. Quirk#, Cornelia M.
Small# and Stephen A. Wohler* are the other members of the Board of Directors of
Scudder (see footnote for symbol key).+ The principal occupation of each of the
above named individuals is serving as a Managing Director of Scudder.
All of the outstanding voting and nonvoting securities of Scudder are held
of record by Stephen R. Beckwith, Juris Padegs#, Daniel Pierce and Edmond D.
Villani in their capacity as the representatives of the beneficial owners of
such securities (the "Representatives"), pursuant to a Security Holders'
Agreement among Scudder, the beneficial owners of securities of Scudder and such
Representatives. Pursuant to the Security Holders' Agreement, the
Representatives have the right to reallocate shares among the beneficial owners
from time to time. Such reallocations will be at net book value in cash
transactions. All Managing Directors of Scudder own voting and nonvoting stock
and all Principals of Scudder own nonvoting stock.
Directors, officers and employees of Scudder from time to time may enter
into transactions with various banks, including the Fund's custodian bank. It is
Scudder's opinion that the terms and conditions of those transactions will not
be influenced by existing or potential custodial or other Fund relationships.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of Scudder,
computes net asset value for each Fund. Scudder Service Corporation ("SSC"),
also a subsidiary of Scudder, is the transfer, shareholding and dividend-paying
agent for each Fund. Scudder Trust Company ("STC"), an affiliate of Scudder,
provides subaccounting and recordkeeping services for shareholder accounts in
certain retirement and employee benefit plans. The table below sets forth for
each Fund the respective fees paid to SFAC, SSC and STC during the last fiscal
year of each Fund.
<TABLE>
<CAPTION>
AGGREGATE FEE AGGREGATE FEE AGGREGATE FEE
PAID TO SFAC PAID TO SSC PAID TO STC
DURING LAST DURING LAST DURING LAST
NAME OF FUND FISCAL YEAR* FISCAL YEAR FISCAL YEAR FISCAL YEAR
- ----------------------------------------------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
AARP Diversified Income Portfolio 9/30/97 $15,625 $37,339 $ 0
AARP Diversified Growth Portfolio 9/30/97 $15,625 $37,993 $ 0
</TABLE>
- ------------------------------
* Since the Trust has not completed its first full year of operations, fee
information provided in the above table is estimated for the current fiscal
year based upon payments made during the period from February 1, 1997
(commencement of operations) through June 30, 1997.
SFAC, SSC and STC will continue to provide fund accounting, transfer
agency, subaccounting and recordkeeping services to the Funds under the current
arrangements if the New Investment Management Agreement is approved.
Exhibit B sets forth the fees and other information regarding other
investment companies advised by Scudder.
- ------------------------------
+
* Two International Place, Boston, Massachusetts
# 345 Park Avenue, New York, New York
+ 101 California Street, San Francisco, California
@ Two Prudential Plaza, 180 North Stetson, Suite 5400, Chicago, Illinois
11
<PAGE> 17
BROKERAGE COMMISSIONS ON PORTFOLIO TRANSACTIONS
To the maximum extent feasible, Scudder places orders for portfolio
transactions through Scudder Investor Services, Inc., Two International Place,
Boston, Massachusetts 02110 (the "Distributor") (a corporation registered as a
broker/dealer and a subsidiary of Scudder), which in turn places orders on
behalf of the Funds with issuers, underwriters or other brokers and dealers. In
selecting brokers and dealers with which to place portfolio transactions for a
Fund, Scudder will not consider sales of shares of funds currently advised by
ZKI, although it may place such transactions with brokers and dealers that sell
shares of funds currently advised by ZKI. The Distributor receives no
commissions, fees or other remuneration from the Funds for this service.
Allocation of portfolio transactions is supervised by Scudder.
REQUIRED VOTE
Approval of this Proposal as to any Fund requires the affirmative vote of a
"majority of the outstanding voting securities" of the Fund. The Trustees of the
Trust recommend that the shareholders of each Fund vote in favor of this
Proposal 1.
PROPOSAL 2: APPROVAL OR DISAPPROVAL OF
NEW MEMBER SERVICES AGREEMENT
AARP Financial Services Corporation ("AFSC") provides services to the
Trust, and to the Funds, pursuant to a Member Services Agreement ("Current
Agreement") with Scudder, Stevens & Clark, Inc. ("Scudder"), dated February 1,
1997. The Current Agreement was approved by shareholders of each Fund at a
meeting held January 30, 1997. By its terms, the Current Agreement has become
applicable to subsequently-established Funds of the Trusts, as well.
The Current Agreement provides that it may not be assigned by either party
and may be amended only with approval by a majority of the Trustees, a majority
of the Non-Interested Trustees and a majority of the outstanding voting
securities of each Fund. Because of the Transactions described in Proposal 1
would result in an assignment of the Current Agreement by Scudder, shareholders
are being asked to approve a new Member Services Agreement ("New Agreement")
that is substantially identical to the Current Agreement, except that the New
Agreement will be between AFSC and Scudder Kemper, instead of Scudder. The New
Agreement was approved by majorities of the Board of Trustees and of the
Non-Interested Trustees at a meeting held August 20, 1997. The form of New
Agreement is attached as Exhibit C and the descriptions of its terms in this
section is qualified in its entirety by reference to Exhibit C.
TERMS OF THE AGREEMENT
Under the Current Agreement and the New Agreement ("Agreements"), AFSC
provides advice and services to Scudder (or Scudder Kemper, as applicable,)
aimed at assuring that the Funds in the Trust and the various products and
services offered by the Trust are tailored to the needs of the AARP membership.
AFSC's services include: providing "seed money" for the Funds; making AARP
directors, officers and staff available to assist in operating the Trust and to
serve as Trustees and officers of the Trust; and facilitating communications
with the AARP membership by, among other things, providing the Trust with AARP
membership lists and access to AARP publications for advertising.
Under a separate Member Services Agreement between Scudder and AFSC,
Scudder pays AFSC monthly fees at an annual rate of .07 of 1% of the average
daily net assets of all Funds in AARP Cash Investment Funds, AARP Tax Free
Income Trust, AARP Income Trust and AARP Growth Trust ("Original Trusts"). Such
fees for any month with respect to assets in excess of $6 billion in those Funds
will be at the annual rate of .06 of 1% of the average daily net assets of the
Funds, while for any month in which assets of those Funds exceeds $16 billion,
the rate will be .05 of 1% for assets in excess of $16 billion. Recognizing that
assets of the Funds are invested in the Funds covered by the
12
<PAGE> 18
separate agreement regarding the Original Trusts, the Agreements provide that no
additional fee shall be paid to Scudder (or Scudder Kemper) regarding assets in
the Funds. Fees paid to AFSC under the separate agreement regarding the Original
Trusts for the fiscal year ended September 30, 1996 were $8,179,069.74.
Each of the Agreements provides that it will continue in effect from year
to year with respect to any particular Fund provided it is approved at least
annually by a majority of the Non-Interested Trustees with respect to that Fund
and by a majority of the Trustees or of that Fund's outstanding voting
securities. If the Agreement is not approved by a Fund, it will not take effect
with respect to that Fund, but will take effect for any Fund as to which it is
approved. Each Agreement may be terminated, on 60 days' notice and without
penalty, by AFSC, Scudder (or Scudder Kemper), by the Trustees, or, with respect
to any Fund or Trust, by vote of a majority of the outstanding voting securities
of that Fund or of each Fund of the Trust, as applicable.
In determining to approve the New Agreement and to recommend that
shareholders of the Trust also approve it, the Trustees reviewed the nature and
quality of services provided to the Trust by AFSC and the value of those
services to the Trust. In evaluating the level of fees paid and payable under
the Agreements, they also considered that benefits, in addition to the fees,
might flow to AFSC from its association with the Trust. They reviewed factors
that had led them to recommend the separate agreement to shareholders of the
Original Trusts for approval at the shareholders meeting of the Original Trusts
held January 13, 1994, to reapprove that agreement annually, and to approve the
Current Agreement, and considered whether any additional matters should be
reviewed, in light of subsequent experience.
REQUIRED VOTE
Approval of the New Agreement with respect to each Fund requires approval
by a majority of the outstanding voting securities of that Fund The Trustees of
the Trust recommend that shareholders of each Fund vote in favor of this
Proposal 2.
PROPOSAL 3: ELECTION OF TRUSTEES
At the Special Meeting, twelve Trustees are to be elected to constitute the
Board of the Trust. For election of Trustees at the Special Meeting, the Board
of Trustees has approved the nomination of the following individuals: Carole
Lewis Anderson, Adelaide Attard, Robert N. Butler, M.D., Esther Canja, Linda C.
Coughlin, Edgar R. Fiedler, Lt. Gen. Eugene P. Forrester, George L. Maddox, Jr.,
Robert J. Myers, James M. Schulz, Gordon Shillinglaw, and Jean Gleason
Stromberg.
The persons named as proxies on the enclosed proxy card will vote for the
election of the nominees named above unless authority to vote for any or all of
the nominees is withheld in the proxy. Each Trustee so elected will serve as a
Trustee of each Trust until the next meeting of shareholders, if any, called for
the purpose of electing Trustees and until the election and qualification of a
successor or until such Trustee sooner dies, resigns or is removed as provided
in the Declaration of Trust of the Trust.
Each of the nominees has indicated that he or she is willing to serve as a
Trustee. If any or all of the nominees should become unavailable for election
due to events not now known or anticipated, the persons named as proxies will
vote for such other nominee or nominees as the Trustees may recommend. The
following table sets forth certain information concerning the current Trustees
and the nominees. Unless otherwise noted, each of the Trustees and nominees has
engaged in the principal occupation listed in the following table for more than
five years, but not necessarily in the same capacity.
13
<PAGE> 19
NOMINEES:
<TABLE>
<CAPTION>
YEAR
FIRST
PRESENT OFFICE WITH THE TRUST, IF ANY, PRINCIPAL BECAME A
NAME (AGE) OCCUPATION OR EMPLOYMENT AND DIRECTORSHIPS TRUSTEE
- ------------------------------- ------------------------------------------------------------------------- --------
<S> <C> <C>
CAROLE LEWIS ANDERSON(52) Trustee. Principal, Suburban Capital Markets, Inc.; President, MASDUN 1995
- ------------------ Capital Advisors; Directors, VICORP Restaurants, Inc.; Trustee, Hasbro
Children's Foundation; Trustee, Mary Baldwin College (resigned 1997);
Member of the Board of Directors of Association for Corporate Growth
(resigned 1996) and CREW, Commercial Women in Real Estate (resigned,
1995). Ms. Anderson serves on the Boards of an additional 4 Trusts whose
Funds are advised by Scudder.
ADELAIDE ATTARD (67) Trustee. Gerontology Consultant; Member, New York City Department of 1984
- ------------------ Aging Advisory Council -- Appointed by Mayor; Board Member, American
Association on International Aging; Commissioner, County of Nassau, New
York, Dept. of Senior Citizen Affairs (resigned 1991); Chairperson,
Federal Council on Aging (resigned 1986). Ms. Attard serves on the Boards
of an additional 4 Trusts whose Funds are advised by Scudder.
ROBERT N. BUTLER, M.D. (70) Trustee. Director, International Longevity Center and Professor of 1984
- ------------------ Geriatrics and Adult Development; Chairman, Henry L. Schwartz Department
of Geriatrics and Adult Development, Mount Sinai Medical Center;
Director, National Institute on Aging, National Institute of Health
(resigned 1982). Dr. Butler serves on the Boards of an additional 4
Trusts whose Funds are advised by Scudder.
ESTHER CANJA (70)* Trustee. Vice President, American Association of Retired Persons; 1996
- ------------------ Trustee and Chair, AARP Group Health Insurance Plan; Board Liaison,
National Volunteer Leadership Network Advisory Committee; Chair, Board
Operations Committee; AARP State Director of Florida (resigned 1992). Ms.
Canja serves on the Boards of an additional 4 Trusts whose Funds are
advised by Scudder.
LINDA C. COUGHLIN*(45) Chairman of the Board and Trustee. Managing Director of Scudder, Stevens 1991
- ------------------ & Clark, Inc.; Director, New Canaan Nature Center and Women Express, Inc.
Ms. Coughlin serves on the Boards of an additional 4 Trusts whose Funds
are advised by Scudder.
</TABLE>
14
<PAGE> 20
<TABLE>
<CAPTION>
YEAR
FIRST
PRESENT OFFICE WITH THE TRUST, IF ANY, PRINCIPAL BECAME A
NAME (AGE) OCCUPATION OR EMPLOYMENT AND DIRECTORSHIPS TRUSTEE
- ------------------------------- ------------------------------------------------------------------------- --------
<S> <C> <C>
EDGAR R. FIEDLER* (68) Trustee. Senior Fellow and Economic Counsellor, The Conference Board, 1984
- ------------------ Inc.; Formerly Assistant Secretary of the Treasury for Economic Policy;
Director, The Stanley Works; Harris Insight Funds; Emerging Mexico Fund;
and Director, Zurich-American Insurance Company (resigned 1997). Mr.
Fiedler serves on the Boards of an additional 8 Trusts or Corporations
whose Funds are advised by Scudder.
LT. GEN. EUGENE P. FORRESTER Trustee. Lt. General (Retired), U.S. Army; International Trade 1984
(71) ------------------ Counselor; Consultant. Lt. Gen. Forrester serves on the Boards of an
additional 4 Trusts whose Funds are advised by Scudder.
GEORGE L. MADDOX, JR. (72) Trustee. Professor Emeritus and Director, Long Term Care Resources 1984
- ------------------ Program, Duke University Medical Center; Professor Emeritus of Sociology,
Departments of Sociology and Psychiatry, Duke University. Mr. Maddox
serves on the Boards of an additional 4 Trusts whose Funds are advised by
Scudder.
ROBERT J. MYERS (85) Trustee. Trustee: NASL Series Trust, Inc. and North American Funds, 1984
- ------------------ Inc.; Member, Prospective Payment Assessment Commission; Chairman,
Commission on Railroad Retirement Reform (resigned 1990); Deputy
Commissioner, Social Security Administration (resigned 1982); Member,
National Commission on Social Security (resigned 1981); Executive
Director, National Commission on Social Security Reform (resigned 1983);
Mr. Myers serves on the Boards of an additional 4 Trusts whose Funds are
advised by Scudder.
JAMES H. SCHULZ (61) Trustee. Professor of Economics and Kirstein Professor of Aging Policy, 1984
- ------------------ Policy Center on Aging, Florence Heller School, Brandeis University. Mr.
Schulz serves on the Boards of an additional 4 Trusts whose Funds are
advised by Scudder.
</TABLE>
15
<PAGE> 21
<TABLE>
<CAPTION>
YEAR
FIRST
PRESENT OFFICE WITH THE TRUST, IF ANY, PRINCIPAL BECAME A
NAME (AGE) OCCUPATION OR EMPLOYMENT AND DIRECTORSHIPS TRUSTEE
- ------------------------------- ------------------------------------------------------------------------- --------
<S> <C> <C>
GORDON SHILLINGLAW (72) Trustee. Professor Emeritus of Accounting, Columbia University Graduate 1984
- ------------------ School of Business. Mr. Shillinglaw serves on the Boards of an additional
8 Trusts or Corporations whose Funds are advised by Scudder.
JEAN GLEASON STROMBERG (54) Trustee. Consultant; Director, Financial Institutions Issues, U.S. 1997
- ------------------ General Accounting Office (resigned 1997); Partner, Fulbright & Jaworski
(law firm) (resigned 1996). Ms. Gleason serves on the Boards of an
additional 4 Trusts whose Funds are advised by Scudder.
</TABLE>
- ------------------------------
* Trustees considered by the Trust and its counsel to be "interested persons"
(as defined in the 1940 Act) of the Trust, its investment manager or AARP
because of their employment by the Investment Manager or AARP and, in some
cases, holding offices with the Trust. Prior to the Transaction Agreement
entered into between Scudder and Zurich, Mr. Fiedler was considered not to be
an interested person of the Trust; however, because of his former relationship
with Zurich-American Insurance Company, a subsidiary of Zurich, the Trust
treats Mr. Fiedler as an interested person of the Trust under the 1940 Act.
CURRENT TRUSTEES NOT STANDING FOR RE-ELECTION:
<TABLE>
<CAPTION>
YEAR FIRST
PRESENT OFFICE WITH THE TRUST, IF ANY, PRINCIPAL BECAME A
NAME (AGE) OCCUPATION OR EMPLOYMENT AND DIRECTORSHIPS TRUSTEE
- ---------------------------- ---------------------------------------------------------------------------- ----------
<S> <C> <C>
HORACE B. DEETS* (59) Vice Chairman of the Board and Trustee. Executive Director, American 1988
- ------------------ Association of Retired Persons. Mr. Deets serves on the Boards of an
additional 4 Trusts whose Funds are advised by Scudder.
CUYLER W. FINDLAY* (64) Trustee. Advisory Managing Director of Scudder, Stevens & Clark, Inc. Mr. 1984
- ------------------ Findlay serves on the Boards of an additional 4 Trusts whose Funds are
advised by Scudder.
</TABLE>
- ------------------------------
* Trustees considered by the Trust and its counsel to be "interested persons"
(as defined in the 1940 Act) of the Trust, its investment manager or AARP
because of their employment by the Investment Manager or AARP and, in some
cases, holding offices with the Trust.
16
<PAGE> 22
As of June 30, 1997, no nominees to or Trustees of the Trust owned directly
or beneficially any shares of the Funds.
To the best of the Trust's knowledge, as of June 30, 1997, no person owned
beneficially more than 5% of any Fund's outstanding shares except as stated
above.
RESPONSIBILITIES OF THE BOARD -- BOARD AND COMMITTEE MEETINGS
The Board of Trustees of the Trust is responsible for the general oversight
of Fund business. A majority of the Board's members are not affiliated with
Scudder or AARP. These Non-interested Trustees have primary responsibility for
assuring that each Fund is managed in the best interests of its shareholders.
The Board of Trustees meets at least quarterly to review the investment
performance of each Fund and other operational matters, including policies and
procedures designated to assure compliance with various regulatory requirements.
At least annually, the Non-interested Trustees review the fees paid to the
Investment Manager and its affiliates for investment advisory services and other
administrative and shareholder services. In this regard, they evaluate, among
other things, each Fund's investment performance, the quality and efficiency of
the various other services provided, costs incurred by the Investment Manager
and its affiliates, and comparative information regarding fees and expenses of
competitive funds. They are assisted in this process by the Fund's independent
public accountants and by independent legal counsel selected by the
Non-interested Trustees. In addition, the Non-interested Trustees from time to
time have established and served on task forces and subcommittees focusing on
particular matters such as investment, accounting and shareholder service
issues.
The Board of the Trust has both an Audit Committee and a Committee on
Independent Trustees, the responsibilities of which are described below.
AUDIT COMMITTEE
The Board of the Trust has an Audit Committee consisting of the
Non-interested Trustees. The Audit Committee reviews with management and the
independent accountants for each Fund, among other things, the scope of the
audit and the controls of each Fund and its agents, reviews and approves in
advance the type of services to be rendered by independent accountants,
recommends the selection of independent accountants for each Fund to the Board
and, in general, considers and reports to the Board on matters regarding each
Fund's accounting and bookkeeping practices.
COMMITTEE ON INDEPENDENT TRUSTEES
The Board of the Trust has a Committee on Independent Trustees consisting
of all the Non-interested Trustees. The Committee is charged with the duty of
making all nominations for Non-interested Trustees and consideration of other
related matters. Shareholders' recommendations as to nominees received by
management are referred to the Committee for its consideration and action.
The following chart sets forth the number of meetings of the Board, the
Audit Committee and the Committee on Independent Trustees of each Trust during
the fiscal year 1996. Each then current Trustee attended at least 75% of the
total number of meetings of each Board and committee on which they served as
regular members that were held during that period, except Mr. Deets who attended
60% of the meetings of the Board and Executive Committee of AARP Growth Trust.
17
<PAGE> 23
NUMBER OF BOARD AND COMMITTEE MEETINGS HELD
DURING THE FISCAL YEAR 1996
<TABLE>
<CAPTION>
BOARD OF TRUSTEES AUDIT COMMITTEE COMMITTEE ON INDEPENDENT
MEETINGS MEETINGS TRUSTEES MEETINGS
--------------------------- --------------------------- ---------------------------
<S> <C> <C>
5 1 2
</TABLE>
EXECUTIVE OFFICERS
The following persons are Executive Officers of the Trust:
<TABLE>
<CAPTION>
YEAR
FIRST
PRESENT OFFICE WITH THE TRUST; BECAME AN
NAME (AGE) PRINCIPAL OCCUPATION OR EMPLOYMENT(1) OFFICER(2)
- ----------------------------- ------------------------------------------------------------- ---------
<S> <C> <C>
Thomas W. Joseph (58) Vice President; Principal of Scudder, Stevens & Clark, Inc. 1996
David S. Lee (63) Vice President and Assistant Treasurer; Managing Director of 1996
Scudder, Stevens & Clark, Inc.
Thomas F. McDonough (50) Vice President and Assistant Secretary; Principal of Scudder, 1996
Stevens & Clark, Inc.
Pamela A. McGrath (43) Vice President and Treasurer; Managing Director of Scudder, 1996
Stevens & Clark, Inc.
Edward J. O'Connell (52) Vice President and Assistant Treasurer; Principal of Scudder, 1996
Stevens & Clark, Inc.
James W. Pasman (45) Vice President; Principal of Scudder Stevens & Clark, Inc. 1996
Kathryn L. Quirk (44) Vice President and Secretary; Managing Director of Scudder, 1996
Stevens & Clark, Inc.
Howard S. Schneider (40) Vice President; Managing Director of Scudder, Stevens & 1996
Clark, Inc.
Cornelia M. Small (53) President; Managing Director of Scudder Stevens & Clark, Inc. 1996
</TABLE>
- ------------------------------
(1) Unless otherwise stated, all of the Executive Officers have been associated
with their respective companies for more than five years, although not
necessarily in the same capacity.
(2) The President, Treasurer and Secretary each holds office until his or her
successor has been duly elected and qualified, and all other officers hold
offices in accordance with the By-laws of the Trust.
COMPENSATION OF TRUSTEES AND OFFICERS
Scudder supervises each Fund's investments, pays the compensation and
certain expenses of its personnel who serve as Trustees and officers of each
Trust and receives a management fee for its services. Several of each Trust's
officers and Trustees are also officers, Directors, employees or shareholders of
Scudder and participate in the fees paid to that firm, although such Trust makes
no direct payments to them other than for reimbursement of travel expenses in
connection with their attendance at Trustees' and committee meetings.
The following Compensation Table provides in tabular form the following
data:
Column (1) All Trustees who receive compensation from the Trust.
Column (2) Estimated aggregate compensation received by each Trustee
of the Trust for the current fiscal year.
Column (3) Total compensation received by each Trustee from funds
managed by Scudder (collectively, the "Fund Complex") during the calendar
year 1996.
The Trustees do not receive any pension or retirement benefits from any
Trust.
18
<PAGE> 24
COMPENSATION TABLE
<TABLE>
<CAPTION>
(2)
AGGREGATE COMPENSATION
----------------------- (3)
TOTAL COMPENSATION FROM
(1) AARP MANAGED INVESTMENT THE TRUST AND FUND
NAME OF TRUSTEE PORTFOLIOS TRUST* COMPLEX PAID TO TRUSTEE
------------------------------- ----------------------- -----------------------
<S> <C> <C>
Carole L. Anderson $ 2,167 $ 17,380)
(9 funds
Adelaide Attard $ 2,167 $ 25,730)
(9 funds
Robert N. Butler, M.D. $ 1,017 $ 23,727)
(9 funds
Edgar R. Fiedler $ 2,167 $ 108,083**
(20 funds)
Eugene P. Forrester $ 2,327 $ 19,665)
(9 funds
George L. Maddox, Jr. $ 2,327 $ 19,665)
(9 funds
Robert L. Myers $ 2,327 $ 28,610)
(9 funds
James H. Schulz $ 2,167 $ 26,000)
(9 funds
Gordon Shillinglaw $ 2,327 $ 119,918)
(19 funds
</TABLE>
- ------------------------------
* Since the Trust, the series of which are AARP Diversified Income Portfolio
and AARP Diversified Growth Portfolio, has not completed its first full year
of operations, compensation information provided in the above table is
estimated for the current fiscal year based upon payments made during the
period from February 1, 1997 (commencement of operations) through June 30,
1997.
** Mr. Fiedler received $40,927 through a deferred compensation program. As of
December 31, 1996, Mr. Fiedler had a total of $420,490 accrued in a deferred
compensation program for serving on the Board of Directors of Scudder
Institutional Fund, Inc. and Scudder Fund, Inc. over a period of several
years.
REQUIRED VOTE
Election of each of the listed nominees for Trustee requires the
affirmative vote of a plurality of the votes of the Trust cast at the Special
Meeting in person or by proxy. This means that the twelve nominees receiving the
largest number of votes will be elected. The Trustees of the Trust recommend
that the shareholders of the Trust vote in favor of each of the nominees listed
in this Proposal 3.
PROPOSAL 4: APPROVAL OR DISAPPROVAL OF
THE BOARD'S DISCRETIONARY AUTHORITY TO
CONVERT EACH FUND TO A MASTER-FEEDER STRUCTURE
If this Proposal 4 is approved by shareholders, the Board could determine
that the objectives of a Fund would be achieved more efficiently, while
retaining its current distribution arrangements, by investing in a master fund
in a master/feeder structure as described below, and in that case cause the Fund
to do so without further approval by shareholders. While converting a Fund to a
master/feeder fund structure may be desirable given the right opportunity, there
are no current plans to effect such a conversion.
A master/feeder fund structure is one in which a fund (a feeder fund),
instead of investing directly in a portfolio of securities, invests all of its
investment assets in another investment company (the master fund) with
substantially the same investment objectives and policies as the feeder. Such a
structure permits the pooling of assets of two or more feeder funds in the
master fund in an effort to achieve possible economies of scale and efficiencies
in portfolio management, while preserving separate identities, management and/or
distribution channels at the feeder fund level. An existing investment company
could convert to a feeder by selling all of its investments, which involves
19
<PAGE> 25
brokerage and other transaction costs and the realization of taxable gain or
loss, or by contributing its assets to the master fund and avoiding transaction
costs and, if proper procedures are followed, the realization of taxable gain or
loss.
Under the Trust's Declaration of Trust, the affirmative vote of a majority
of the shares of a Fund is required to sell or transfer substantially all of the
assets of the Fund. One way to convert a Fund to a master/feeder fund structure
is through a sale or transfer of assets. Thus, approval of the Board's
discretionary authority to convert a Fund to a master/feeder fund structure
through a sale or transfer of assets requires, under a conservative
interpretation of the Trust's Declaration of Trust, the affirmative vote of a
majority of the shares of the Fund. In addition, because of the special
provisions of the 1940 Act relating to a "fund of funds," regulatory approval
would be required for any Fund to convert to a master/feeder structure. There is
no assurance that such approval, if sought, would be granted.
A master fund must have the identical investment objective and
substantially the same investment policies as its feeder funds. This means that
the assets of the master fund are invested in the same types of securities in
which its feeder funds are authorized to invest.
Management of the Trust believes that, generally, the larger the pool of
assets being managed the more efficiently and cost-effectively it can be
managed. Because a master fund pools the assets of multiple feeder funds, it
provides an effective means of creating larger asset pools. Whether the Board
would exercise its discretionary authority to convert a Fund to a master/feeder
fund structure would depend upon the existence of appropriate opportunities to
pool the Fund's assets with those of other feeder funds. The primary motivation
for considering a master/feeder fund structure would be to seek to achieve
possible economies of scale and efficiencies in portfolio management, while
preserving separate identities, management and distribution channels at the
feeder level. The Trustees' decision to convert a Fund would be based upon their
determination that it would be in the best interests of both the Fund and its
shareholders.
A feeder fund can withdraw its investment in a master fund at any time if
its board determines that it is in the best interests of the shareholders to do
so or if the investment policies or restrictions of the master fund were changed
so that they were inconsistent with the policies and restrictions of the feeder
fund. Upon any such withdrawal, the board of the fund would consider what action
might be taken, including the investment of all of the assets of the fund in
another pooled investment entity having substantially the same investment
objectives and policies as the fund or the investment of the fund's assets
directly in accordance with its investment objective and policies.
REQUIRED VOTE
Shareholders of each Fund will vote separately with respect to this
Proposal 4. Approval of this Proposal 4 by a Fund requires the affirmative vote
of a majority of the shares of the Fund. The Trustees of the Trust recommend
that shareholders of each Fund vote in favor of this Proposal 4.
PROPOSAL 5: APPROVAL OR DISAPPROVAL OF
AN AMENDED AND RESTATED DECLARATION OF TRUST
Changes in regulatory developments in the investment company industry have
occurred since the current form of the Trust's Declaration of Trust was adopted.
Because consummation of the Transactions described in Proposal 1 requires the
holding of this Special Meeting, the Trustees of the Trust have determined to
seek at the same time shareholder approval of an Amended and Restated
Declaration of Trust ("Restated Declaration") designed to reflect these changes
and developments. The Restated Declaration also includes other changes of a
minor or clarifying nature. The principal changes in the current Declaration of
Trust that would be effected by shareholder approval of the Restated Declaration
are described below. A copy of the Restated Declaration is attached to this
proxy statement as Exhibit D.
20
<PAGE> 26
PROPOSAL 5(A): CHANGES TO THE CURRENT DECLARATION OF
TRUST THAT REQUIRE THE VOTE OF TWO-THIRDS OF THE
TRUST'S SHARES THAT ARE OUTSTANDING AND ENTITLED TO VOTE
MASTER/FEEDER STRUCTURE. A new Section 2.2(i) would be added to give the
Trustees the express power to accomplish each Fund's objective by investing all
or a portion of its assets in another investment company in a "master/feeder"
structure, by transferring assets of the Fund to the other investment company or
otherwise, without further shareholder approval. This section of the Restated
Declaration would grant to the Trustees power which is similar to that included
in Proposal 4, but differs from it as described in the next paragraph.
A master/feeder structure is described in Proposal 4. Management of the
Trust believes the Trustees currently have the power to enter into a
master/feeder structure, although a conservative interpretation of the current
Declaration of Trust is that shareholder approval is required for the transfer
of substantially all of a Fund's assets to a master fund to accomplish that
objective. Such a vote is not required to sell all of a Fund's portfolio
securities and to purchase its interest in the master fund with the proceeds.
The express grant to the Trustees of the power in the Restated Declaration to
enter into a master/feeder structure would remove any doubt as to the Trustees'
power to transfer assets to a master fund without shareholder approval, and
differs from the approval of entry into a master/feeder structure sought in
Proposal 4 primarily in that a power contained in any trust's declaration of
trust is effective in perpetuity unless the declaration of trust is amended or
terminated. Thus, if Proposal 4 is approved but if it were concluded in the
future that the approval had lapsed due to the passage of time, the power of the
Trustees to enter into a master/feeder structure would nevertheless continue
under proposed Section 2.2(i) of the Restated Declaration, if approved.
SHAREHOLDER VOTING. Under the Restated Declaration, shareholders would
continue to have the same rights as they now have to elect and remove Trustees,
to further amend the Restated Declaration and to vote on certain other matters.
Section 5.9 would be amended to eliminate shareholder voting under the
Declaration with respect to investment advisory or management contracts and Rule
12b-1 plans; each of these matters must be voted on under provisions of the 1940
Act or the rules thereunder, and a separate requirement in the Trust's governing
instrument is unnecessary. The Restated Declaration would also eliminate
shareholder voting on a merger, consolidation, sale of assets or incorporation
of the Trust. Although the Trustees ordinarily would not expect to take such an
action without shareholder approval, there are situations, as with a very small,
uneconomical fund, a sufficient number of whose shareholders cannot be located,
where Trustee action alone would be in the best interest of shareholders.
REQUIRED VOTE
Approval of this Proposal 5(A) requires the vote of two-thirds of the
shares of the Trust outstanding and entitled to vote. If the shareholders of the
Trust fail to approve this Proposal 5(A), neither the Restated Declaration, if
approved, nor the Trust's current Declaration of Trust would be amended as
described in this Proposal 5(A). The Trustees of the Trust recommend that the
shareholders of the Trust vote in favor of this Proposal 5(A).
PROPOSAL 5(B): CHANGES TO THE TRUST'S CURRENT DECLARATION
OF TRUST THAT REQUIRE A MAJORITY VOTE
REDEMPTION OF CERTAIN SHAREHOLDERS' INTERESTS. A new subparagraph (b)
would be added to Section 6.6 to give the Trustees the power to redeem a
shareholder's interest if the shareholder has previously been involved in
fraudulent securities transactions. The Trustees anticipate that this power
would be exercised only if they believed it was likely that the shareholder
might contemplate a fraudulent redemption or take other action to the detriment
of other shareholders.
21
<PAGE> 27
All other minor and clarifying changes which would be effected by approval
of the Restated Declaration are included in this Proposal 5(B).
REQUIRED VOTE
Approval of this Proposal 5(B) requires the affirmative vote of a majority
of the outstanding voting securities of the Trust, as defined above. The
Trustees of the Trust recommend that shareholders of the Trust vote in favor of
the approval of this Proposal 5(B).
If this Proposal 5(B) is approved with respect to any Trust, the Restated
Declaration will be adopted for that Trust. The Restated Declaration (or the
current Declaration of Trust) of each Trust will include new Section 2.2(i) and
the amendments to Section 5.9 only if Proposal 5(A) is also adopted for that
Trust.
PROPOSAL 6: APPROVAL OR DISAPPROVAL OF THE REVISION OF
CERTAIN FUNDAMENTAL INVESTMENT POLICIES
The 1940 Act requires an investment company to have adopted certain
specified investment policies which can be changed only by a shareholder vote.
Those policies are often referred to as "fundamental" policies. In the past,
fundamental policies were adopted by the Trusts on behalf of their Funds, and in
some cases amended by vote of the shareholders of the affected Fund, in order to
reflect regulatory, business or industry conditions which were in effect at the
time the particular action was taken. Because of the opportunity afforded by
this Special Meeting, there has been a review of each Fund's fundamental
policies with the goal of simplifying, modernizing and making consistent as far
as possible the fundamental policies of all open-end investment companies
managed by Scudder.
This Proposal seeks shareholder approval of changes which are intended to
accomplish that goal. The proposed changes to each Fund's fundamental policies
are discussed in detail below. Please refer to the proposed policies as set
forth in Exhibit E.
Each of the fundamental policies proposed for adoption with respect to each
Fund is in an area in which the 1940 Act requires that the Fund adopt a
fundamental policy. Except for the policy on borrowing as discussed below, none
of the proposed policies differs from the respective Fund's current comparable
policy in a material way, although the formulation of the policy may differ from
the current one in the interest of uniformity and simplicity. The policies with
respect to diversification, the issuance of senior securities, and the
underwriting of securities issued by others differ from the current policies of
each Fund in that the requirements of the 1940 Act, which of course apply, are
not spelled out in detail.
Shareholders will be asked to vote on each proposed fundamental policy
separately on the enclosed proxy card.
PROPOSAL 6.1: DIVERSIFICATION
Each Fund is a "diversified" fund under the 1940 Act. Under its current
diversification policy, each Fund, with respect to 75% of the value of its total
assets, may not purchase more than 10% of the voting securities of any one
issuer or invest more than 5% of the value of its total assets in the securities
of any one issuer, with exceptions for U.S. Government securities, cash and cash
equivalents and securities of other investment companies. This restriction is
substantially identical to the definition of a diversified fund under the 1940
Act. Accordingly, the proposed statement that each Fund has elected to be
classified as a diversified Fund represents no substantive change in the current
diversification policy for any of the Funds.
22
<PAGE> 28
PROPOSAL 6.2: BORROWING
The current policy of each Fund prohibits borrowing money, except as a
temporary measure for extraordinary or emergency purposes and not for investment
purposes and except in connection with reverse repurchase agreements, provided
that the Fund maintains asset coverage of 300% for all borrowings. Under the
proposed policy, each Fund would not be limited to borrowing for temporary or
emergency purposes; however, if the Trustees determine with respect to any Fund
to permit borrowing for other purposes, which they currently do not intend to
do, the applicable Fund's disclosure documents would be amended to disclose that
fact. Although the Trustees do not currently intend to permit a Fund to borrow
for investment leverage purposes, such borrowings would increase the Fund's
volatility and the risk of loss in a declining market. Borrowings under reverse
repurchase agreements are now permitted, and would be permitted under the
proposed policy. The 1940 Act requires borrowings to have 300% asset coverage,
which requirement would, therefore, remain unchanged under the proposed policy.
Accordingly, therefore, except as stated above, the borrowing policy of each
Fund would not be changed by adoption of the proposed policy.
PROPOSAL 6.3: SENIOR SECURITIES
The current policy of each Fund prohibits the issuance of senior
securities, except in connection with permitted indebtedness and except in
connection with the issuance of separate classes or series of shares. The
issuance of separate classes or series of shares are not deemed to involve the
issuance of senior securities under current policies of the Commission or its
staff. Accordingly, management of the Trust believes that it is not necessary to
specify those exceptions in the Funds' fundamental policies with regard to
senior securities because they are permitted under the 1940 Act.
PROPOSAL 6.4: CONCENTRATION
Each current policy in effect prohibits the purchase of securities if it
would result in more than 25% of the market value of the Fund's total assets
being invested in securities of one or more issuers having their principal
business activities in the same industry, except for U.S. Government securities
and securities of underlying funds. In the case of each Fund, what constitutes
an industry for the purposes of this restriction is included in the policy
itself. While the 1940 Act does not define what constitutes "concentration" in
an industry, the staff of the Commission takes the position that investment of
more than 25% of a fund's assets in an industry constitutes concentration. If a
fund concentrates in an industry, it must at all times have more than 25% of its
assets invested in that industry, and if its policy is not to concentrate, as is
the case with each of the Funds, it may not invest more than 25% of its assets
in the applicable industry, unless, in either case, the fund discloses the
specific conditions under which it will change from concentrating to not
concentrating or vice versa. A fund is permitted to adopt reasonable definitions
of what constitutes an industry, or it may use standard classifications
promulgated by the Commission, or some combination thereof. Because a fund may
create its own reasonable industry classifications, management of the Trust
believes that it is not necessary to include such matters in the fundamental
policy of a Fund, and that the adoption of the proposed concentration policy
would make no substantive change in the current concentration policy of any
Fund. In addition, the current concentration policy of each Fund would be
clarified to indicate that each Fund may invest more than 25% of its assets in
an underlying fund and may invest in an underlying fund which concentrates in a
particular industry.
PROPOSALS 6.5 THROUGH 6.8: OTHER POLICIES
Each of the other proposed fundamental policies regarding underwriting of
securities (Proposal 6.5), investment in real estate (Proposal 6.6), purchase of
physical commodities (Proposal 6.7) and lending (Proposal 6.8) is substantially
identical to the current comparable policy of each Fund except that these
policies have been reworded or clarified.
23
<PAGE> 29
REQUIRED VOTE
Approval of the proposed fundamental policies with respect to any Fund
requires the affirmative vote of a majority of the outstanding voting
securities, as defined above, of that Fund. If the shareholders of any Fund fail
to approve any proposed fundamental policy, the current such policy will remain
in effect. The Trustees of the Trust recommend that the shareholders of each
Fund vote in favor of this Proposal 6.
PROPOSAL 7: RATIFICATION OR REJECTION
OF THE SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Trustees of the Trust, including a majority of the
Non-interested Trustees, has selected Price Waterhouse L.L.P. to act as
independent accountants for each of the Funds for each Fund's current fiscal
year. Price Waterhouse L.L.P. are independent accountants and have advised the
Funds that they have no direct financial interest or material indirect financial
interest in the Funds. One or more representatives of Price Waterhouse L.L.P.
are expected to be present at the Special Meeting and will have an opportunity
to make a statement if they so desire. Such representatives are expected to be
available to respond to appropriate questions posed by shareholders or
management.
REQUIRED VOTE
Ratification of the selection of independent accountants requires the
affirmative vote of a majority of the votes cast at the Special Meeting in
person or by proxy. The Trustees of the Trust recommend that the shareholders of
the Funds vote in favor of this Proposal 7.
ADDITIONAL INFORMATION
GENERAL
The cost of preparing, printing and mailing the enclosed proxy and proxy
statement and all other costs incurred in connection with the solicitation of
proxies, including any additional solicitation made by letter, telephone or
telegraph, will be paid by Scudder. In addition to solicitation by mail, certain
officers and representatives of the Trust, officers and employees of Scudder and
certain financial services firms and their representatives, who will receive no
extra compensation for their services, may solicit proxies by telephone,
telegram or personally.
Shareholder Communications Corporation ("SCC") has been engaged to assist
in the solicitation of proxies. As the Special Meeting date approaches, certain
shareholders of each Fund may receive a telephone call from a representative of
SCC if their vote has not yet been received. Authorization to permit SCC to
execute proxies may be obtained by telephonic or electronically transmitted
instructions from shareholders of each Fund. Proxies that are obtained
telephonically will be recorded in accordance with the procedures set forth
below. The Trustees believe that these procedures are reasonably designed to
ensure that the identity of the shareholder casting the vote is accurately
determined and that the voting instructions of the shareholder are accurately
determined.
In all cases where a telephonic proxy is solicited, the SCC representative
is required to ask for each shareholder's full name, address, social security or
employer identification number, title (if the shareholder is authorized to act
on behalf of an entity, such as a corporation), and the number of shares owned
and to confirm that the shareholder has received the proxy statement card in the
mail. If the information solicited agrees with the information provided to SCC,
then the SCC representative has the responsibility to explain the process, read
the proposals listed on the proxy card, and ask for the shareholder's
instructions on each proposal. The SCC representative, although he or she is
permitted to answer questions about the process, is not permitted to recommend
to the shareholder how to vote, other than to read any recommendation set forth
in the proxy statement. SCC will record the shareholder's instructions on the
card. Within 72 hours, the shareholder will be sent a letter or
24
<PAGE> 30
mailgram to confirm his or her vote and asking the shareholder to call SCC
immediately if his or her instructions are not correctly reflected in the
confirmation.
If the shareholder wishes to participate in the Special Meeting, but does
not wish to give his or her proxy by telephone, the shareholder may still submit
the proxy card originally sent with the proxy statement or attend in person.
Should shareholders require additional information regarding the proxy or
replacement proxy cards, they may contact SCC toll-free at 1-800-733-8481 ext.
488. Any proxy given by a shareholder, whether in writing or by telephone, is
revocable.
PROPOSALS OF SHAREHOLDERS
Shareholders wishing to submit proposals for inclusion in a proxy statement
for a shareholder meeting subsequent to the Special Meeting, if any, should send
their written proposals to the Secretary of the Trust, c/o Scudder, Stevens &
Clark, Inc., 345 Park Avenue, New York, New York 10154 within a reasonable time
before the solicitation of proxies for such meeting. The timely submission of a
proposal does not guarantee its inclusion.
OTHER MATTERS TO COME BEFORE THE SPECIAL MEETING
The Board of Trustees is not aware of any matters that will be presented
for action at the Special Meeting other than the matters set forth herein.
Should any other matters requiring a vote of shareholders arise, the proxy in
the accompanying form will confer upon the person or persons entitled to vote
the shares represented by such proxy the discretionary authority to vote the
shares as to any such other matters in accordance with their best judgment in
the interest of the Trust and/or Fund.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES.
By order of the Board of Trustees,
Kathryn L. Quirk
Secretary
25
<PAGE> 31
EXHIBIT A
MASTER FORM
OF
NEW INVESTMENT MANAGEMENT AGREEMENT
26
<PAGE> 32
EXHIBIT B
INVESTMENT OBJECTIVES AND ADVISORY FEES
FOR FUNDS ADVISED BY SCUDDER, STEVENS & CLARK, INC.
<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
- -------------------------- ----------------------------------------------- ------------------- --------------
<S> <C> <C> <C>
MONEY MARKET
Scudder U.S. Treasury Safety, liquidity, and stability of capital 0.500% of 398,597,054
Money Fund and, consistent therewith, current income. net assets
Scudder Cash Investment Stability of capital while maintaining 0.500% to 1,430,623,516
Trust liquidity of capital and providing current $250 million
income from money market securities. 0.450% next
$250 million
0.400% next
$500 million
0.350% thereafter
Scudder Money Market High level of current income consistent with 0.250% of 384,509,425**
Series preservation of capital and liquidity by net assets
investing in a broad range of short-term money
market instruments.
Scudder Government Money High level of current income consistent with 0.250% of 36,794,563**
Market Series preservation of capital and liquidity by net assets
investing exclusively in obligations issued or
guaranteed by the U.S. Government or its
agencies or instrumentalities and in certain
repurchase agreements.
TAX FREE MONEY MARKET
Scudder Tax Free Money Income exempt from regular federal income taxes 0.500% to 220,245,241
Fund and stability of principal through investments $500 million
in municipal securities. 0.480% thereafter
Scudder Tax Free Money High level of current income consistent with 0.250% of 79,695,218**
Market Series preservation of capital and liquidity exempt net assets
from federal income tax by investing primarily
in high quality municipal obligations.
Scudder California Tax Stability of capital and the maintenance of a 0.500% of 68,695,680
Free Money Fund constant net asset value of $1.00 per share net assets
while providing California tax payers income
exempt from both California personal and
regular federal income tax through investment
in high quality, short-term tax-exempt
California municipal securities.
Scudder New York Tax Stability of capital and income exempt from New 0.500% of 59,538,652
Free Money Fund York state and New York City personal income net assets
taxes and regular federal income tax through
investment in high quality, short-term
municipal securities in New York.
TAX FREE
Scudder Limited Term Tax High level of income exempt from regular 0.600% of 123,660,431
Free Fund federal income tax consistent with a high net assets
degree of principal stability.
</TABLE>
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
** Program assets as of 7/31/97.
27
<PAGE> 33
<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
- -------------------------- ----------------------------------------------- ------------------- --------------
<S> <C> <C> <C>
Scudder Medium Term Tax High level of income exempt from regular 0.600% to 650,504,081
Free Fund federal income tax and limited principal $500 million
fluctuation through investment primarily in 0.500% thereafter
high grade intermediate term municipal
securities.
Scudder Managed Income exempt from regular federal income tax 0.550% to 737,422,861
Municipal Bonds primarily through investments in high-grade $200 million
long-term municipal securities. 0.500% next
$500 million
0.475% thereafter
Scudder High Yield Tax High level of income, exempt from regular 0.650% to 293,101,021
Free Fund federal income tax, from an actively managed $300 million
portfolio consisting primarily of investment 0.600% thereafter
grade municipal securities.
Scudder California Tax Income exempt from both California state 0.625% to 288,576,041
Free Fund personal income tax and regular federal income $200 million
tax primarily through investment grade 0.600% thereafter
municipal securities.
Scudder Massachusetts A high level of income exempt from both 0.600% of 65,505,088
Limited Term Tax Free Massachusetts personal income tax and regular net assets
Fund federal income tax as is consistent with a high
degree of price stability.
Scudder Massachusetts A high level of income exempt from both 0.600% of 329,842,169
Tax Free Fund Massachusetts personal income tax and regular net assets
federal income tax through investment primarily
in long-term investment-grade municipal
securities in Massachusetts.
Scudder New York Tax Income exempt from New York state and New York 0.625% to 180,647,157
Free Fund City personal income taxes and regular federal $200 million
income tax through investment primarily in 0.600% thereafter
long-term investment-grade municipal securities
in New York.
Scudder Ohio Tax Free Income exempt from Ohio personal income tax and 0.600% of 84,109,009
Fund regular federal income tax through investment net assets
primarily in investment-grade municipal
securities in Ohio.
Scudder Pennsylvania Tax Income exempt from Pennsylvania personal income 0.600% of 74,177,997
Free Fund tax and regular federal income tax through net assets
investment primarily in investment-grade
municipal securities in Pennsylvania.
Scudder Short Term Bond High level of income consistent with a high 0.600% to 1,468,170,885
Fund degree of principal stability through $500 million
investments primarily in high quality 0.500% next
short-term bonds. $500 million
0.450% next
$500 million
0.400% next
$500 million
0.375% next
$1 billion
0.350% thereafter
</TABLE>
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
** Program assets as of 7/31/97.
28
<PAGE> 34
<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
- -------------------------- ----------------------------------------------- ------------------- --------------
<S> <C> <C> <C>
Scudder Zero Coupon 2000 High investment returns over a selected period 0.600% of 25,440,414
Fund as is consistent with investment in U.S. net assets
Government securities and the minimization of
reinvestment risk.
Scudder GNMA Fund High current income and safety of principal 0.650% to 383,008,164
primarily from investment in U.S. Government $200 million
mortgage-backed GNMA securities. 0.600% next
$300 million
0.550% thereafter
Scudder Income Fund A high level of income, consistent with the 0.650% to 578,519,502
prudent investment of capital, through a $200 million
flexible investment program emphasizing 0.600% next
high-grade bonds. $300 million
0.550% thereafter
Scudder High Yield Bond A high level of current income and capital 0.700% of 73,523,094
Fund appreciation through investment primarily in net assets
below investment-grade domestic debt
securities.
GLOBAL INCOME
Scudder Global Bond Fund Total return with an emphasis on current income 0.750% to 217,403,907
by investing primarily in high-grade bonds $1 billion
denominated in foreign currencies and the U.S. 0.700% thereafter
dollar.
Scudder International Income primarily by investing in high-grade 0.850% to 235,993,183
Bond Fund international bonds and protection and possible $1 billion
enhancement of principal value by actively 0.800% thereafter
managing currency, bond market and maturity
exposure and by security selection.
Scudder Emerging Markets High current income and, secondarily, long-term 1.000% of 304,607,984
Income Fund capital appreciation by investing primarily in net assets
high-yielding debt securities issued in
emerging markets.
ASSET ALLOCATION
Scudder Pathway Current income and, secondarily, long-term There will be no 13,928,759***
Conservative Portfolio growth of capital by investing substantially in fee as the Manager
bond mutual funds, but will have some exposure will receive a fee
to equity mutual funds. from the underlying
funds.
Scudder Pathway Balanced Balance of growth and income by investing in a There will be no 167,721,722
Portfolio mix of money market, bond and equity mutual fee as the Manager
funds. will receive a fee
from the underlying
funds.
Scudder Pathway Growth Long-term growth of capital by investing There will be no 42,234,535***
Portfolio predominantly in equity mutual funds designed fee as the Manager
to provide long-term growth. will receive a fee
from the underlying
funds.
</TABLE>
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
** Program assets as of 7/31/97.
29
<PAGE> 35
<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
- -------------------------- ----------------------------------------------- ------------------- --------------
<S> <C> <C> <C>
Scudder Pathway Maximize total return by investing in a select There will be no 8,983,598***
International mix of established international and global fee as the Manager
Portfolio Scudder Funds. will receive a fee
from the underlying
funds.
U.S. GROWTH AND INCOME
Scudder Balanced Fund A balance of growth and income from a 0.700% of 109,541,542
diversified portfolio of equity and fixed net assets
income securities and long-term preservation of
capital through a quality oriented investment
approach designed to reduce risk.
Scudder Growth and Long-term growth of capital, current income and 0.600% to 4,186,481,205
Income Fund growth of income primarily from common stocks, $500 million
preferred stocks and securities convertible 0.550% next
into common stocks. $500 million
0.500% next
$500 million
0.475% next
$500 million
0.450% next
$1 billion
0.425% next
$1.5 billion
0.405% thereafter
U.S. GROWTH
Scudder Large Company Maximize long-term capital appreciation through 0.750% to 1,651,459,797
Value Fund (formerly a value driven investment program emphasizing $500 million
Scudder Capital Growth common stocks and preferred stocks. 0.650% next
Fund) $500 million
0.600% next
$500 million
0.550% thereafter
Scudder Value Fund Long-term growth of capital through investment 0.700% of 88,874,292
in undervalued equity securities. net assets
Scudder Small Company Long-term growth of capital by investing 0.750% of 41,187,186
Value Fund primarily in undervalued equity securities of net assets
small U.S. companies.
Scudder Micro Cap Fund Long-term growth of capital by investing 0.750% of 72,048,339***
primarily in a diversified portfolio of U.S. net assets
micro-cap common stocks.
Scudder Classic Growth Long-term growth of capital while keeping the 0.700% of 33,867,066
Fund value of its shares more stable than other net assets
growth mutual funds.
Scudder Large Company Long-term growth of capital through investment 0.700% of 221,253,633
Growth Fund (formerly primarily in the equity securities of seasoned, net assets
Scudder Quality Growth financially strong U.S. growth companies.
Fund)
</TABLE>
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
** Program assets as of 7/31/97.
30
<PAGE> 36
<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
- -------------------------- ----------------------------------------------- ------------------- --------------
<S> <C> <C> <C>
Scudder Development Fund Long-term growth of capital by investing 1.000% to 861,564,138
primarily in equity securities of emerging $500 million
growth companies. 0.950% next
$500 million
0.900% thereafter
Scudder 21st Century Long-term growth of capital by investing 1.000% of 20,942,531***
Growth Fund primarily in the securities of emerging growth net assets
companies poised to be leaders in the 21st
century.
GLOBAL GROWTH
Scudder Global Fund Long-term growth of capital through investment Effective 9/11/97: 1,604,465,769
in a diversified portfolio of marketable 1.000% to
foreign and domestic securities, primarily $500 million
equity securities. 0.950% next
$500 million
0.900% next
$500 million
0.850% thereafter
Institutional Long-term growth of capital primarily through a 0.900% of 17,897,508
International Equity diversified portfolio of marketable foreign net assets
Portfolio equity securities.
Scudder International Long-term growth of capital and current income 1.000% of 25,631,898***
Growth and Income Fund primarily from foreign equity securities net assets
Scudder International Long-term growth of capital primarily through a 0.900% to 2,583,030,686
Fund diversified portfolio of marketable foreign $500 million
equity securities. 0.850% next
$500 million
0.800% next
$1 billion
0.750% next
$1 billion
0.700% thereafter
Scudder Global Discovery Above-average capital appreciation over the 1.100% of 350,829,980
Fund long- term by investing primarily in the equity net assets
securities of small companies located
throughout the world.
Scudder Emerging Markets Long-term growth of capital primarily through 1.25% of 75,793,693
Growth Fund equity investments in emerging markets around net assets
the globe.
Scudder Gold Fund Maximum return consistent with investing in a 1.000% of 163,932,814
portfolio of gold-related equity securities and net assets
gold.
Scudder Greater Europe Long-term growth of capital through investment 1.000% of 120,300,058
Growth Fund primarily in the equity securities of European net assets
companies.
Scudder Pacific Long-term growth of capital primarily through 1.100% of 329,391,540
Opportunities Fund investment in the equity securities of Pacific net assets
Basin companies, excluding Japan.
</TABLE>
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
** Program assets as of 7/31/97.
31
<PAGE> 37
<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
- -------------------------- ----------------------------------------------- ------------------- --------------
<S> <C> <C> <C>
Scudder Latin America Long-term capital appreciation through Effective 9/11/97: 621,914,690
Fund investment primarily in the securities of Latin 1.250% to
American issuers. $1 billion
1.150% thereafter
The Japan Fund, Inc. Long-term capital appreciation through 0.850% to 385,963,962
investment primarily in equity securities of $100 million
Japanese companies. 0.750% next
$200 million
0.700% next
$300 million
0.650% thereafter
CLOSED-END FUNDS
The Argentina Fund, Inc. Long-term capital appreciation through Advisor: 117,596,046
investment primarily in equity securities of Effective 11/1/97:
Argentine issuers. 1.100% of
net assets
Sub-Advisor:
Paid by Advisor.
0.160% of
net assets
The Brazil Fund, Inc. Long-term capital appreciation through 1.200% to 417,981,869
investment primarily in equity securities of $150 million
Brazilian issuers. 1.050% next
$150 million
1.000% thereafter
Effective 10/29/97:
1.200% to
$150 million
1.050% next
$150 million
1.000% next
$200 million
0.900% thereafter
Administrator:
Receives an annual
fee of $50,000
</TABLE>
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
** Program assets as of 7/31/97.
32
<PAGE> 38
<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
- -------------------------- ----------------------------------------------- ------------------- --------------
<S> <C> <C> <C>
The Korea Fund, Inc. Long-term capital appreciation through Advisor: 661,690,073
investment primarily in equity securities of 1.150% to
Korean issuers. $50 million
1.100% next
$50 million
1.000% next
$250 million
0.950% next
$400 million
0.900% thereafter
Sub-Advisor -
Daewoo:
Paid by Advisor.
0.2875% to
$50 million
0.275% next
$50 million
0.250% next
$250 million
0.2375% next
$400 million
0.225% thereafter
The Latin America Dollar High level of current income and, secondarily, 1.200% of 94,748,606
Income Fund, Inc. capital appreciation through investment net assets
principally in dollar-denominated Latin
American debt instruments.
Montgomery Street Income High level of current income consistent with 0.500% to 198,465,822
Securities, Inc. prudent investment risks through a diversified $150 million
portfolio primarily of debt securities. 0.450% next
$50 million
0.400% thereafter
Scudder New Asia Fund, Long-term capital appreciation through 1.250% to 133,363,686
Inc. investment primarily in equity securities of $75 million
Asian companies. 1.150% next
$125 million
1.100% thereafter
Scudder New Europe Fund, Long-term capital appreciation through 1.250% to 266,418,730
Inc. investment primarily in equity securities of $75 million
companies traded on smaller or emerging 1.150% next
European markets and companies that are viewed $125 million
as likely to benefit from changes and 1.100% thereafter
developments throughout Europe.
Scudder Spain and Long-term capital appreciation through Advisor: 75,127,194
Portugal Fund, Inc. investment primarily in equity securities of 1.000% of
Spanish & Portuguese issuers. net assets
Administrator:
0.200% of
net assets
Scudder World Income High income and, consistent therewith, capital 1.200% of 54,488,637
Opportunities Fund, appreciation. net assets
Inc.
</TABLE>
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
** Program assets as of 7/31/97.
33
<PAGE> 39
<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
- -------------------------- ----------------------------------------------- ------------------- --------------
<S> <C> <C> <C>
INSURANCE PRODUCTS
Balanced Portfolio Balance of growth and income consistent with 0.475% of 88,342,837
long-term preservation of capital through a net assets
diversified portfolio of equity and fixed
income securities.
Bond Portfolio High level of income consistent with a high 0.475% of 65,769,421
quality portfolio of debt securities. net assets
Capital Growth Portfolio Long-term capital growth from a portfolio 0.475% to 440,481,308
consisting primarily of equity securities. $500 million
0.450% thereafter
Global Discovery Above-average capital appreciation over the 0.975% of 16,757,264
Portfolio long- term by investing primarily in the equity net assets
securities of small companies located
throughout the world.
Growth and Income Long-term growth of capital, current income and 0.475% of 91,091,547
Portfolio growth of income. net assets
International Portfolio Long-term growth of capital primarily through 0.85% to 726,038,527
diversified holdings of marketable foreign $500 million
equity investments. 0.75% thereafter
Money Market Portfolio Stability of capital and, consistent therewith, 0.370% of 97,785,626
liquidity of capital and current income. net assets
AARP FUNDS
AARP High Quality Money Current income and liquidity, consistent with 0.350% to 412,126,193
Fund maintaining stability and safety of principal, $2 billion
through investment in high quality securities. 0.330% next
$2 billion
0.300% next
$2 billion
0.280% next
$2 billion
0.260% next
$3 billion
0.250% next
$3 billion
0.240% thereafter
INDIVIDUAL FUND FEE
0.100% of
net assets
</TABLE>
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
** Program assets as of 7/31/97.
34
<PAGE> 40
<TABLE>
<CAPTION>
PROGRAM
FUND OBJECTIVE FEE RATE ASSETS*
- -------------------------- ----------------------------------------------- ------------------- --------------
<S> <C> <C> <C>
AARP Balanced Stock and Long-term growth of capital and income, 0.350% to 403,139,939
Bond Fund consistent with a stable share price, through $2 billion
investment in a combination of stocks, bonds 0.330% next
and cash reserves. $2 billion
0.300% next
$2 billion
0.280% next
$2 billion
0.260% next
$3 billion
0.250% next
$3 billion
0.240% thereafter
INDIVIDUAL FUND FEE
0.190% of
net assets
AARP Capital Growth Fund Long-term capital growth, consistent with a 0.350% to 826,136,713
stable share price, through investment $2 billion
primarily in common stocks and securities 0.330% next
convertible into common stocks. $2 billion
0.300% next
$2 billion
0.280% next
$2 billion
0.260% next
$3 billion
0.250% next
$3 billion
0.240% thereafter
INDIVIDUAL FUND FEE
0.320% of
net assets
AARP Global Growth Fund Long-term growth of capital, consistent with a 0.350% to 77,651,978
stable share price, through investment $2 billion
primarily in a diversified portfolio of equity 0.330% next
securities of corporations worldwide. $2 billion
0.300% next
$2 billion
0.280% next
$2 billion
0.260% next
$3 billion
0.250% next
$3 billion
0.240% thereafter
INDIVIDUAL FUND FEE
0.550% of
net assets
</TABLE>
- ---------------
* Program assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
** Program assets as of 7/31/97.
35
<PAGE> 41
EXHIBIT C
FORM OF NEW MEMBER SERVICES AGREEMENT
36
<PAGE> 42
EXHIBIT D
Following are proposed amendments, other than non-material clarifying or
correcting changes, to be included in the Trust's Amended and Restated
Declaration of Trust, as described in the proxy statement. Additions are shown
in BOLD TYPE and deletions by a [ ].
Unless otherwise indicated with respect to particular provisions, the
adoption of the Amended and Restated Declaration of Trust requires an
affirmative vote of a majority of the outstanding voting securities of the Trust
as defined in the Investment Company Act of 1940, as amended.
PROPOSED AMENDMENTS TO BE INCLUDED IN THE
AMENDED AND RESTATED DECLARATION OF TRUST
[ ] DATED , 1997
Section 2.2. Investments.
The Trustees shall have the power:
(i) TO INVEST, THROUGH A TRANSFER OF CASH, SECURITIES AND OTHER ASSETS
OR OTHERWISE, ALL OR A PORTION OF THE TRUST PROPERTY, OR TO SELL ALL OR A
PORTION OF THE TRUST PROPERTY AND INVEST THE PROCEEDS OF SUCH SALES, IN
ANOTHER INVESTMENT COMPANY THAT IS REGISTERED UNDER THE 1940 ACT.2++
SECTION 2.12. ELECTION AND TERM.
[ ] Except for the Trustees named herein or appointed to fill vacancies
pursuant to Section 2.14 hereof, the Trustees shall be elected by the
Shareholders owning of record a plurality of the Shares voting at a meeting of
Shareholders. Such a meeting shall be held on a date fixed by the Trustees.
Except in the event of resignation or removals pursuant to Section 2.13 hereof,
each Trustee shall hold office until such time as less than a majority of the
Trustees holding office have been elected by Shareholders, AND THEREAFTER UNTIL
THE HOLDING OF A SHAREHOLDERS' MEETING AS REQUIRED BY THE NEXT FOLLOWING
SENTENCE. In such event the Trustees then in office will call a Shareholders'
meeting for the election of Trustees. Except for the foregoing circumstances,
the Trustees shall continue to hold office and may appoint successor Trustees.
SECTION 2.16. SHAREHOLDER VOTE, ETC. NOT REQUIRED.
EXCEPT TO THE EXTENT SPECIFICALLY PROVIDED TO THE CONTRARY IN THIS
DECLARATION, THE TRUSTEES MAY EXERCISE EACH OF THE POWERS GRANTED TO THEM IN
THIS DECLARATION WITHOUT THE VOTE, APPROVAL OR AGREEMENT OF THE SHAREHOLDERS,
UNLESS SUCH A VOTE, APPROVAL OR AGREEMENT IS REQUIRED BY THE 1940 ACT OR
APPLICABLE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
Section 5.9. Voting Powers.
The Shareholders shall have power to vote only (i) for the election of
Trustees as provided in Section 2.12; (ii) for the removal of Trustees as
provided in Section 2.13; (iii) with respect to any [ ] amendment of this
Declaration to the extent and as provided in Section 8.3; [ ] (IV) to the same
extent as the stockholders of Massachusetts business corporation as to whether
or not a court action, proceeding or claim should or should not be brought or
maintained derivatively or as a class action on behalf of the Trust or any
Series or Class thereof or the Shareholders (provided, however, that a
Shareholder of a particular Series or Class shall not be entitled to BRING a
derivative or class action on behalf of any other Series or Class (or
Shareholder of any other Series or Class) of the Trust); [ ] AND (V) with
respect to such additional matters relating to the Trust as may be required by
this Declaration, the By-laws or any registration of the [ ] TRUST as an
investment company under the 1940 Act with the Commission (or any successor
agency) or as the Trustees may consider necessary or desirable. Each whole Share
shall be entitled to one vote as to any matter on which it is entitled to vote
and each fractional Share shall be entitled to a proportionate fractional vote,
except
- ------------------------------
++ Adoption of this Section 2.2(i) requires the affirmative vote of two-thirds
of the shares of the Trust outstanding and entitled to vote.
37
<PAGE> 43
that the Trustees may, in conjunction with the establishment of any Series or
Class of Shares, establish or reserve the right to establish conditions under
which the several Series or Classes shall have separate voting rights or[ ] no
voting rights. There shall be no cumulative voting in the election of Trustees.
Until Shares are issued, the Trustees may exercise all rights of Shareholders
and may take any action required by law, this Declaration or the By-laws to be
taken by Shareholders. The By-laws may include further provisions for
Shareholders' votes and meetings and related matters.sec.
SECTION 6.2. PRICE.
[ ] Shares shall be redeemed at their net asset value, WHICH MAY BE
REDUCED BY ANY REDEMPTION FEE AUTHORIZED BY THE TRUSTEES, determined as set
forth in Section 7.1 hereof as of such time as the Trustees shall have
theretofore prescribed by resolution. In the absence of such resolution, the
redemption price of Shares deposited shall be the net asset value of such Shares
next determined as set forth in Section 7.1 hereof after receipt of such
application.
Section 6.6. [ ] Redemption of Shareholder's Interest.
The Trust shall have the right at any time without prior notice to the
Shareholder to redeem Shares of any Shareholder for their then current net asset
value per Share if
(a) at such time the Shareholder owns Shares having an aggregate net asset
value of less than an amount set from time to time by the Trustees subject to
such terms and conditions as the Trustees may approve, and subject to the
Trust's giving general notice to all Shareholders of its intention to avail
itself of such right, either by publication in the Trust's registration
statement, if any, or by such other means as the Trustees may determine, OR [ ]
(B) [ ] THE TRUSTEES BELIEVE THAT IT IS IN THE BEST INTEREST OF THE TRUST
TO DO SO BECAUSE OF PRIOR INVOLVEMENT BY THE SHAREHOLDER IN FRAUDULENT ACTS
RELATING TO SECURITIES TRANSACTIONS.
SECTION 7.2. DISTRIBUTIONS TO SHAREHOLDERS.
[ ] The Trustees shall from time to time distribute ratably among the
Shareholders of the Trust or a Series such proportion of the net profits,
surplus (including paid-in surplus), capital, or assets of the Trust or such
Series held by the Trustees as they may deem proper. Such distributions may be
made in cash or property (including without limitation any type of obligations
of the Trust or such Series or any assets thereof), and the Trustees may
distribute ratably among the Shareholders additional Shares of the Trust or such
Series issuable hereunder in such manner, at such times, and on such terms as
the Trustees may deem proper. Such distributions may be among the Shareholders
of record at the time of declaring a distribution or among the Shareholders of
record at such other date or time or dates or times as the Trustees shall
determine. The Trustees may in their discretion determine that, solely for the
purposes of such distributions, Outstanding Shares shall exclude Shares for
which orders have been placed subsequent to a specified time on the date the
distribution is declared or on the next preceding day if the distribution is
declared as of a day on which Boston banks are not open for business, all as
described in the registration statement under the Securities Act of 1933. The
Trustees may always retain from the net profits such amount as they may deem
necessary to pay the debts or expenses of the Trust or the Series or to meet
obligations of the Trust or the Series, or as they may deem desirable to use in
the conduct of its affairs or to retain for future requirements or extensions of
the business. The Trustees may adopt and offer to Shareholders such dividend
reinvestment plans, cash dividend payout plans or related plans as the Trustees
shall deem appropriate. THE ABOVE PROVISIONS MAY BE MODIFIED TO THE EXTENT
REQUIRED BY A PLAN ADOPTED BY THE TRUSTEES TO ESTABLISH CLASSES OF SHARES OF THE
TRUST OR OF A SERIES.
Inasmuch as the computation of net income and gains for Federal income tax
purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted to give the
- ------------------------------
sec. Amendment of this Section 5.9 as set forth above requires the affirmative
vote of two-thirds of the shares of the Trust outstanding and entitled to
vote.
38
<PAGE> 44
Trustees the power in their discretion to distribute for any fiscal year as
ordinary dividends and as capital gains distributions, respectively, additional
amounts sufficient to enable the Trust or the Series to avoid or reduce
liability for taxes.
SECTION 8.3. AMENDMENT PROCEDURE.
(a) [ ] This Declaration may be amended by a vote of the holders of a
majority of the Shares outstanding and entitled to vote. Amendments shall be
effective upon the taking of action as provided in this section or at such later
time as shall be specified in the applicable vote or instrument. The Trustees
may also amend this Declaration without the vote or consent of Shareholders if
they deem it necessary to conform this Declaration to the requirements of
applicable federal or state laws or regulations or the requirements of the
regulated investment company provisions of the Internal Revenue Code (including
those provisions of such Code relating to the retention of the exemption from
federal income tax with respect to dividends paid by the Trust out of interest
income received on Municipal Bonds), but the Trustees shall not be liable for
failing so to do. The Trustees may also amend this Declaration without the vote
or consent of Shareholders if they deem it necessary or desirable to change the
name of the Trust, TO SUPPLY ANY OMISSION, TO CURE, CORRECT OR SUPPLEMENT ANY
AMBIGUOUS, DEFECTIVE OR INCONSISTENT PROVISION HEREOF, or to make any other
changes in the Declaration which do not materially adversely affect the rights
of Shareholders hereunder.
Section 8.4. [ ] Merger, Consolidation and Sale of Assets.
The Trust or any Series thereof may merge or consolidate with any other
corporation, association, trust or other organization or may sell, lease or
exchange all or substantially all of the Trust Property or the property of any
Series, including its good will, upon such terms and conditions and for such
consideration when and as authorized [ ] BY AN INSTRUMENT IN WRITING SIGNED BY
A MAJORITY OF THE TRUSTEES.**
SECTION 8.5. [ ] INCORPORATION.
WHEN AUTHORIZED BY AN INSTRUMENT IN WRITING SIGNED BY A MAJORITY OF THE
TRUSTEES, the Trustees may cause to be organized or assist in organizing a
corporation or corporations under the laws of any jurisdiction or any other
trust, partnership, association or other organization to take over all of the
Trust Property or the property of any Series or to carry on any business in
which the Trust or the Series shall directly or indirectly have any interest,
and to sell, convey and transfer the Trust Property or the property of any
Series to any such corporation, trust, association or organization in exchange
for the Shares or securities thereof or otherwise, and to lend money to,
subscribe for the Shares or securities of, and enter into any contracts with any
such corporation, trust, partnership, association or organization, or any
corporation, partnership, trust, association or organization in which the Trust
or the Series holds or is about to acquire shares or any other interest. The
[ ] TRUSTEES may also cause a merger or consolidation between the Trust or any
Series or any successor thereto and any such corporation, trust, partnership,
association or other organization if and to the extent permitted by law, as
provided under the law then in effect. Nothing contained herein shall be
construed as requiring approval of Shareholders for the Trustees to organize or
assist in organizing one or more corporations, trusts, partnerships,
associations or other organizations and selling, conveying or transferring a
portion of the Trust Property to such organization or entities.++
- ------------------------------
** Amendment of this Section 8.4 as set forth above requires the affirmative
vote of two-thirds of the shares of the Trust outstanding and entitled to
vote.
++ Amendment of this Section 8.5 as set forth above requires the affirmative
vote of two-thirds of the shares of the Trust outstanding and entitled to
vote.
39
<PAGE> 45
EXHIBIT E
AARP MANAGED INVESTMENT PORTFOLIOS TRUST
AARP DIVERSIFIED INCOME PORTFOLIO
AARP DIVERSIFIED GROWTH PORTFOLIO
6.1 Each Fund has elected to be classified as a diversified series of an
open-end investment company.
In addition, each Fund will not:
6.2 borrow money, except as permitted under the Investment Company Act of 1940,
as amended, and as interpreted or modified by regulatory authority having
jurisdiction, from time to time;
6.3 issue senior securities, except as permitted under the Investment Company
Act of 1940, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time;
6.4 engage in the business of underwriting securities issued by others, except
to the extent that the Fund may be deemed to be an underwriter in connection
with the disposition of portfolio securities;
6.5 concentrate its investments in investment companies, as the term
"concentrate" is used in the Investment Company Act of 1940, as amended and
interpreted by regulatory authority having jurisdiction from time to time;
except that the Fund may concentrate in an underlying fund. However, the
Fund may invest in an underlying fund which concentrates its investments in
a particular industry;
6.6 purchase or sell real estate, which term does not include securities of
companies which deal in real estate or mortgages or investments secured by
real estate or interests therein, except that the Fund reserves freedom of
action to hold and to sell real estate acquired as a result of the Fund's
ownership of securities;
6.7 purchase physical commodities or contracts relating to physical commodities;
or
6.8 make loans to other persons, except (i) loans of portfolio securities, and
(ii) to the extent that entry into repurchase agreements and the purchase of
debt instruments or interests in indebtedness in accordance with the Fund's
investment objective and policies may be deemed to be loans.
40
<PAGE> 46
NAME OF TRUST
345 PARK AVENUE
NEW YORK, NEW YORK 10154
, 199
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
INVESTMENT MANAGEMENT AGREEMENT
Ladies and Gentlemen:
[Name of Trust] (the "Trust") has been established as a Massachusetts
business trust to engage in the business of an investment company. Pursuant to
the Trust's Declaration of Trust, as amended from time-to-time (the
"Declaration"), the Board of Trustees has divided the Trust's shares of
beneficial interest, par value $ per share, (the "Shares") into
separate series, or funds (each a "Fund" and, collectively, the "Funds"). Series
may be abolished and dissolved, and additional series established, from time to
time by action of the Trustees.
The Trust, on behalf of the Funds, has selected you to act as the sole
investment manager of the Funds and for each series that may subsequently be
authorized by the Trustees (unless otherwise provided at the time and subject to
such conditions and amendments to this Agreement as shall be mutually agreed
upon), and to provide certain other services, as more fully set forth below, and
you have indicated that you are willing to act as such investment manager and to
perform such services under the terms and conditions hereinafter set forth.
Accordingly, the Trust on behalf of the Funds agrees with you as follows:
1. Delivery of Documents. The Trust engages in the business of investing
and reinvesting the assets of the Funds in the manner and in accordance with the
investment objectives, policies and restrictions specified in the currently
effective Prospectus (the "Prospectus") and Statement of Additional Information
(the "SAI") relating to each Fund included in the Trust's Registration Statement
on Form N-1A, as amended from time to time, (the "Registration Statement") filed
by the Trust under the Investment Company Act of 1940, as amended, (the "1940
Act") and the Securities Act of 1933, as amended. Copies of the documents
referred to in the preceding sentence have been furnished to you by the Trust.
The Trust has also furnished you with copies properly certified or authenticated
of each of the following additional documents related to the Trust and the Fund:
(a) The Declaration dated , 19 , as amended to date.
(b) By-Laws of the Trust as in effect on the date hereof (the
"By-Laws").
(c) Resolutions of the Trustees of the Trust and the shareholders of
the Funds selecting you as investment manager and approving the form of
this Agreement.
(d) Establishment and Designation of Series of Shares of Beneficial
Interest dated , 19 relating to the Funds.
The Trust will furnish you from time to time with copies, properly
certified or authenticated, of all amendments of or supplements, if any, to the
foregoing, including the Prospectus, the SAI and the Registration Statement.
2. Portfolio Management Services. As manager of the assets of the Funds,
you shall provide continuing investment management of the assets of the Funds in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended (the "Code"), relating to regulated
investment companies and all rules and regulations thereunder; and all other
applicable federal and state laws and regulations of which you have knowledge;
subject always to policies and instructions
41
<PAGE> 47
adopted by the Trust's Board of Trustees. In connection therewith, you shall use
reasonable efforts to manage each Fund so that it will qualify as a regulated
investment company under Subchapter M of the Code and regulations issued
thereunder. The Funds shall have the benefit of the investment analysis and
research, the review of current economic conditions and trends and the
consideration of long-range investment policy generally available to your
investment advisory clients. In managing the Funds in accordance with the
requirements set forth in this section 2, you shall be entitled to receive and
act upon advice of counsel to the Trust or counsel to you. You shall also make
available to the Trust promptly upon request all of a Fund's investment records
and ledgers as are necessary to assist the Trust in complying with the
requirements of the 1940 Act and other applicable laws. To the extent required
by law, you shall furnish to regulatory authorities having the requisite
authority any information or reports in connection with the services provided
pursuant to this Agreement which may be requested in order to ascertain whether
the operations of the Trust are being conducted in a manner consistent with
applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Funds and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
each Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Trust's Board of Trustees periodic reports on the
investment performance of the Funds and on the performance of your obligations
pursuant to this Agreement, \and you shall supply such additional reports and
information as the Trust's officers or Board of Trustees shall reasonably
request.
3. Administrative Services. In addition to the portfolio management
services specified above in section 2, you shall furnish at your expense for the
use of the Funds such office space and facilities in the United States as the
Funds may require for their reasonable needs, and you (or one or more of your
affiliates designated by you) shall render to the Trust administrative services
on behalf of the Funds necessary for operating as open-end investment companies
and not provided by persons not parties to this Agreement including, but not
limited to, preparing reports to and meeting materials for the Trust's Board of
Trustees and reports and notices to Fund shareholders; supervising, negotiating
contractual arrangements with, to the extent appropriate, and monitoring the
performance of, accounting agents, custodians, depositories, transfer agents and
pricing agents, accountants, attorneys, printers, underwriters, brokers and
dealers, insurers and other persons in any capacity deemed to be necessary or
desirable to Fund operations; preparing and making filings with the Securities
and Exchange Commission (the "SEC") and other regulatory and self-regulatory
organizations, including, but not limited to, preliminary and definitive proxy
materials, post-effective amendments to the Registration Statement, semi-annual
reports on Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act;
overseeing the tabulation of proxies by the Funds' transfer agent; assisting in
the preparation and filing of each Fund's federal, state and local tax returns;
preparing and filing each Fund's federal excise tax return pursuant to Section
4982 of the Code; providing assistance with investor and public relations
matters; monitoring the valuation of portfolio securities; monitoring the
registration of Shares of each Fund under applicable federal and state
securities laws; maintaining or causing to be maintained for each Fund all
books, records and reports and any other information required under the 1940
Act, to the extent that such books, records and reports and other information
are not maintained by the Fund's custodian or other agents of the Fund;
assisting in establishing the accounting policies of each Fund; assisting in the
resolution of accounting issues that may arise with respect to each Fund's
operations and consulting with each Fund's independent accountants, legal
counsel and other agents as necessary in connection therewith; establishing and
monitoring each Fund's operating expense budgets; reviewing each Fund's bills;
processing the payment of bills that have been approved by an authorized person;
assisting each Fund in determining the amount of dividends and distributions
available to be paid by each Fund to its shareholders, preparing and
42
<PAGE> 48
arranging for the printing of dividend notices to shareholders, and providing
the transfer and dividend paying agent, the custodian, and the accounting agent
with such information as is required for such parties to effect the payment of
dividends and distributions; and otherwise assisting the Trust as it may
reasonably request in the conduct of each Fund's business, subject to the
direction and control of the Trust's Board of Trustees. Nothing in this
Agreement shall be deemed to shift to you or to diminish the obligations of any
agent of a Fund or any other person not a party to this Agreement which is
obligated to provide services to the Fund.
[ ] [AARP U.S. STOCK INDEX FUND ONLY][In rendering the services required
under this Agreement, you may, subject to the legally required approval of the
Trust, its shareholders and Trustees, cause such services to be provided by a
registered investment adviser or bank (together with Bankers Trust Company, the
"Subadvisor") exempt from the registration requirements under the Investment
Advisers Act of 1940, as amended, (the "Advisers Act") and receive other
assistance from such Subadvisor pursuant to an agreement or agreements and may
contract with such other parties as you deem appropriate to obtain information,
advice and management services and other assistance, provided that such services
shall not be deemed to render such party a registered investment adviser, but
any fees, compensation or expenses to be paid to any such party shall be paid by
you, and no obligation shall be incurred on the Trust's behalf in any respect.
[ ] [AARP U.S. STOCK INDEX FUND ONLY][You hereby acknowledge that the
employment of a Subadvisor or other service providers hereunder shall not
relieve you of any of your obligations under this Agreement, including your
obligations under section 7 of this Agreement. Further, you acknowledge that for
purposes of this Agreement, the acts of such Subadvisor or other service
provider shall be deemed to be acts of you, the Manager.
4. Allocation of Charges and Expenses. Except as otherwise specifically
provided in this section 4, you shall pay the compensation and expenses of all
Trustees, officers and executive employees of the Trust (including each Fund's
share of payroll taxes) who are affiliated persons of you, and you shall make
available, without expense to the Funds, the services of such of your directors,
officers and employees as may duly be elected officers of the Trust, subject to
their individual consent to serve and to any limitations imposed by law. You
shall provide at your expense the portfolio management services described in
section 2 hereof and the administrative services described in section 3 hereof.
You shall not be required to pay any expenses of a Fund other than those
specifically allocated to you in this section 4 [AARP MANAGED INVESTMENT
PORTFOLIOS TRUST ONLY] [and under the terms of the Special Servicing Agreement
dated , 1997 ("Special Servicing Agreement") among you, the
Trust, AARP Financial Services Company, Scudder Fund Accounting Corporation,
Scudder Service Corporation, Scudder Trust Company, Scudder Investor Services,
Inc. and the various funds in which the Portfolios may invest (the "Underlying
Funds")]. In particular, but without limiting the generality of the foregoing,
you shall not be responsible, except to the extent of the reasonable
compensation of such of a Fund's Trustees and officers as are directors,
officers or employees of you whose services may be involved, for the following
expenses of each Fund: organization expenses of the Fund (including
out-of-pocket expenses, but not including your overhead or employee costs); fees
payable to you and to any other Fund advisors or consultants; legal expenses;
auditing and accounting expenses; maintenance of books and records which are
required to be maintained by the Fund's custodian or other agents of the Trust;
telephone, telex, facsimile, postage and other communications expenses; taxes
and governmental fees; fees, dues and expenses incurred by the Fund in
connection with membership in investment company trade organizations; fees and
expenses of the Fund's accounting agent, custodians, subcustodians, transfer
agents, dividend disbursing agents and registrars; payment for portfolio pricing
or valuation services to pricing agents, accountants, bankers and other
specialists, if any; expenses of preparing share certificates and, except as
provided below in this section 4, other expenses in connection with the
issuance, offering, distribution, sale, redemption or repurchase of securities
issued by the Fund; expenses relating to investor and public relations; expenses
and fees of registering or qualifying Shares of the Fund for sale; interest
charges,
43
<PAGE> 49
bond premiums and other insurance expense; freight, insurance and other charges
in connection with the shipment of the Fund's portfolio securities; the
compensation and all expenses (specifically including travel expenses relating
to Trust business) of Trustees, officers and employees of the Trust who are not
affiliated persons of you; brokerage commissions or other costs of acquiring or
disposing of any portfolio securities of the Fund; expenses of printing and
distributing reports, notices and dividends to shareholders; expenses of
printing and mailing Prospectuses and SAIs of the Fund and supplements thereto;
costs of stationery; any litigation expenses; indemnification of Trustees and
officers of the Trust; costs of shareholders' and other meetings; and travel
expenses (or an appropriate portion thereof) of Trustees and officers of the
Trust who are directors, officers or employees of you to the extent that such
expenses relate to attendance at meetings of the Board of Trustees of the Trust
or any committees thereof or advisors thereto held outside of Boston,
Massachusetts or New York, New York.
[AARP MANAGED INVESTMENT PORTFOLIOS TRUST ONLY][Except as provided in the
Special Servicing Agreement,] you shall not be required to pay expenses of any
activity which is primarily intended to result in sales of Shares of a Fund if
and to the extent that (i) such expenses are required to be borne by a principal
underwriter which acts as the distributor of the Fund's Shares pursuant to an
underwriting agreement which provides that the underwriter shall assume some or
all of such expenses, or (ii) the Trust on behalf of the Fund shall have adopted
a plan in conformity with Rule 12b-1 under the 1940 Act providing that the Fund
(or some other party) shall assume some or all of such expenses, or (iii) such
expenses are required to be borne by Scudder pursuant to section 4 of the
Investment Company Services Agreement, dated as of , among American
Association of Retired Persons, AARP/Scudder Financial Management Company, and
us. You shall be required to pay such of the foregoing sales expenses as are not
required to be paid by the principal underwriter pursuant to the underwriting
agreement or are not permitted to be paid by the Fund (or some other party)
pursuant to such a plan.
5. Management Fee. [AARP MANAGED INVESTMENT PORTFOLIOS TRUST ONLY] [As
you expect to receive additional compensation under the investment management
agreements currently between you and the Underlying Funds due to growth in the
assets of the Underlying Funds resulting from investments in the Underlying
Funds by the Portfolios, you shall not be paid a fee for services described in
sections 2 and 3 hereof.]
[FOR ALL TRUSTS EXCEPT FOR AARP MANAGED INVESTMENT PORTFOLIOS TRUST] For
all services to be rendered, payments to be made and costs to be assumed by you
as provided in sections 2, 3 and 4 hereof, the Trust on behalf of the Funds
shall pay you on the last day of each month the unpaid balance of a fee composed
of an asset charge in two parts.
(a) The asset charge for each calendar day of each year shall be equal to
the total of 1/365th ( 1/366th in each leap year) of the amount computed in
accordance with paragraphs (b) and (c) below. The computation shall be made for
each such day on the basis of net assets as of the close of business of the full
business day one (1) business day prior to the day for which the computation is
being made. In the case of the suspension of the computation of net asset value,
the asset charge for each day during such suspension shall be computed as of the
close of business on the last full business day on which the net assets were
computed. As used herein, "net assets" as of the close of a full business day
shall include all transactions in shares of each Fund recorded on the books of
each Fund for that day.
(b) The base fee rate part of the fee shall be based on the average daily
net assets of all funds within the AARP Investment Program from Scudder (the
"Program"), including any new fund which may be organized in the future. The
base fee rate will be the percent of Program net assets as set forth in the
following table.
44
<PAGE> 50
BASE FEE RATE
<TABLE>
<CAPTION>
PROGRAM ASSETS ANNUAL RATE AT EACH
(BILLIONS) ASSET LEVEL
--------------------------------------------------- -------------------
<S> <C>
First $2 0.35%
Next $2 0.33
Next $2 0.30
Next $2 0.28
Next $3 0.26
Next $3 0.25
Over $14 0.24
</TABLE>
The portion of the base fee rate which each Fund shall bear will be the
same percentage of the base fee rate as its net assets are to the total net
assets of all the Program funds.
(c) The fund fee rate part of the fee shall be [0.10 percent per annum of
net assets of AARP High Quality Money Fund, of AARP Cash Investment Funds; 0.12
percent per annum of net assets of AARP GNMA and U.S. Treasury Fund, 0.19
percent per annum of net assets of AARP High Quality Bond Fund, 0.28 percent per
annum of net assets of AARP Bond Fund for Income, of AARP Income Trust; 0.10
percent per annum of net assets of AARP High Quality Tax Free Money Fund and
0.19 percent per annum of net assets of AARP Insured Tax Free General Bond Fund,
of AARP Tax Free Income Trust; and, 0.19 percent per annum of net assets of AARP
Balanced Stock and Bond Fund, 0.19 percent per annum of net assets of AARP
Growth and Income Fund, 0.55 percent per annum of net assets of AARP Global
Growth Fund, 0.32 percent per annum of net assets of AARP Capital Growth Fund,
0.60 percent per annum of the net assets of AARP International Stock Fund, 0.55
percent per annum of the net assets of AARP Small Company Stock Fund, and 0.00
percent per annum of the net assets of AARP U.S. Stock Index Fund, of AARP
Growth Trust.]
The value of net assets of the Trust or any Fund shall be determined
pursuant to the applicable provisions of the Declaration, By-Laws and
Registration Statement of the Trust. If, pursuant to such provisions, the
determination of net asset value for any Fund is suspended for any particular
business day, then for the purposes of this paragraph 5, the value of the net
assets of that series of the Trust as last determined shall be deemed to be the
value of the net assets as of the close of the New York Stock Exchange, or as of
such other time as the value of the net assets of the portfolio of that Fund may
lawfully be determined, on that day. If the determination of the net asset value
of the shares of any Fund of the Trust has been suspended pursuant to the
Declaration, By-Laws or Registration Statement of the Trust for a period
including such month, your compensation payable at the end of such month shall
be computed on the basis of the value of the net assets of the Trust as last
determined (whether during or prior to such month). If a Fund determines the net
asset value of its portfolio more than once on any day, then the last such
determination thereof on that day shall be deemed to be the sole determination
thereof on that day for the purposes of this section 5.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of a Fund's expenses, as if such waiver or
limitation were fully set forth herein.]
6. Avoidance of Inconsistent Position; Services Not Exclusive. In
connection with purchases or sales of portfolio securities and other investments
for the account of a Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for each Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of a Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
45
<PAGE> 51
Your services to the Trust and each Fund pursuant to this Agreement are not
to be deemed to be exclusive and it is understood that you may render investment
advice, management and services to others. In acting under this Agreement, you
shall be an independent contractor and not an agent of the Trust or a Fund.
Whenever a Fund and one or more other accounts or investment companies advised
by the Manager have available funds for investment, investments suitable and
appropriate for each shall be allocated in accordance with procedures believed
by the Manager to be equitable to each entity. Similarly, opportunities to sell
securities shall be allocated in a manner believed by the Manager to be
equitable. Each Fund recognizes that in some cases this procedure may adversely
affect the size of the position that may be acquired or disposed of for the
Fund.
7. Limitation of Liability of Manager. As an inducement to your
undertaking to render services pursuant to this Agreement, the Trust agrees that
you shall not be liable under this Agreement 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, provided that nothing in this Agreement shall
be deemed to protect or purport to protect you against any liability to the
Trust, a Fund or its shareholders to which you would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in the performance
of your duties, or by reason of your reckless disregard of your obligations and
duties hereunder. Any person, even though also employed by you, who may be or
become an employee of and paid by a Fund shall be deemed, when acting within the
scope of his or her employment by the Fund, to be acting in such employment
solely for the Fund and not as your employee or agent.
8. Duration and Termination of This Agreement. This Agreement shall
remain in force until August 31, 1998, and continue in force from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually (a) by the vote of a majority of the Trustees who are not parties
to this Agreement or interested persons of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
by the Trustees of the Trust, or, with respect to each Fund, by the vote of a
majority of the outstanding voting securities of such Fund of the Trust. The
aforesaid requirement that continuance of this Agreement be "specifically
approved at least annually" shall be construed in a manner consistent with the
1940 Act and the rules and regulations thereunder and any applicable SEC
exemptive order therefrom.
This Agreement may be terminated with respect to a Fund at any time,
without the payment of any penalty, by the vote of a majority of the outstanding
voting securities of the Fund or by the Trust's Board of Trustees on 60 days'
written notice to you, or by you on 60 days' written notice to the Trust. This
Agreement shall terminate automatically in the event of its assignment.
9. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement shall be
effective until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
10. Limitation of Liability for Claims. The Declaration, a copy of which,
together with all amendments thereto, is on file in the Office of the Secretary
of The Commonwealth of Massachusetts, provides that the name "AARP
Trust" refers to the Trustees under the Declaration collectively as Trustees and
not as individuals or personally, and that no shareholder of any Fund of the
Trust, or Trustee, officer, employee or agent of the Trust, shall be subject to
claims against or obligations of the Trust or of any Fund of the Trust to any
extent whatsoever, but that the Trust estate only shall be liable.
You are hereby expressly put on notice of the limitation of liability as
set forth in the Declaration and you agree that the obligations assumed by the
Trust on behalf of each Fund pursuant to this Agreement shall be limited in all
cases to the applicable Fund and its assets, and you shall not seek satisfaction
of any such obligation from the shareholders or any shareholder of the Fund or
any other series of the Trust, or from any Trustee, officer, employee or agent
of the Trust. You understand that
46
<PAGE> 52
the rights and obligations of each Fund, or series, under the Declaration are
separate and distinct from those of any and all other series.
11. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
In interpreting the provisions of this Agreement, the definitions contained
in Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of The
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner which would cause a
Fund to fail to comply with the requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Trust on behalf of the Funds.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
[NAME OF TRUST], on behalf of
[Name(s) of AARP Fund(s)]
By:
------------------------------------
President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By:
------------------------------------
Managing Director
47
<PAGE> 53
SCUDDER KEMPER INVESTMENTS, INC.
2 INTERNATIONAL PLACE
BOSTON, MA 02110
, 1997
AARP Financial Services Corp.
c/o American Association of Retired Persons
601 E Street, N.W.
Washington, DC 20049
MEMBER SERVICES AGREEMENT
Ladies and Gentlemen:
Reference is made to the Omnibus Agreement, dated as of October 9, 1984,
between American Association of Retired Persons ("AARP") and us; the Partnership
Agreement, dated as of October 9, 1984, between you and us; and the Investment
Company Service Agreement (the "ICS Agreement"), dated as of October 9, 1984,
among AARP, AARP/Scudder Financial Management Company (the "Partnership") and
us. Capitalized terms used herein without definition shall have the meanings
assigned thereto in the ICS Agreement.
This Agreement constitutes the agreement required to be entered into by you
and us pursuant to Section 5 of the ICS Agreement and referred to as the "Member
Services Agreement" therein.
We hereby agree with you as follows:
1. You agree to provide us with such advice and services relating to
investment by members of AARP in the AARP Managed Investment Portfolios
Trust established as a Massachusetts business trust to engage in the
business of an investment management company (the "Fund"), and any separate
portfolios of the Fund, created from time to time by action of the Trustees
(each a "Portfolio" and, collectively, the "Portfolios"), as we shall from
time to time reasonably request, including advice and services as to
product design of the Fund and Portfolios, the development of new products
and services for the Fund and Portfolios and such other information as will
assist us in tailoring the Fund and Portfolios best to meet the investment
objectives and needs of the AARP membership, based upon your analysis
thereof. You agree to contribute or cause to be contributed certain
resources to the Fund and Portfolios to assist in the organization and
operation of the Fund and Portfolios, including "seed money" for the Fund
and assistance in monitoring our activities and the services provided by
Scudder and other agents of the Fund and Portfolios. You agree to make
available certain of your directors, officers and staff to assist in the
operation of the Fund and Portfolios, and, subject to their individual
consent, to serve as directors and officers of the Fund. You also agree to
facilitate communications with and the provision of services to the AARP
membership by analyzing the needs of AARP members and recommending the
appropriate services and methods of communication for the purpose of
disseminating information and providing services relating to the Account
and the Services. For this purpose, you will arrange that there be made
available to us, in accordance with AARP's policies and practices,
membership lists of AARP and of AARP's publications and access to
advertising space in AARP publications. Further, AARP and we have agreed to
grant to the Partnership the right and license to do business under the
name "AARP/Scudder Financial Management Company," and each of AARP and we
have agreed to grant to the Fund a license to use certain of our respective
service marks.
2. As you expect to receive additional compensation under the Member
Services Agreement currently between you and the Underlying Funds, you
shall not be paid a fee for services described in Section 1 hereof.
3. Nothing herein shall be construed as constituting you as an agent
of us or of the Fund.
48
<PAGE> 54
4. This Agreement shall become effective as of the date hereof and
shall remain in effect, with respect to each Portfolio of the Fund, until
August 31, 1998 and shall continue in effect thereafter with respect to
each Portfolio so long as such continuance is specifically approved at
least annually by the affirmative vote of (i) a majority of the members of
the Trustees of the Fund who are not interested persons of the Fund, you or
us, cast in person at a meeting called for the purpose of voting on such
approval; and (ii) the Trustees of the Fund or, with respect to each
Portfolio of the Fund, the holders of a majority of the outstanding voting
securities of such Portfolio. In the event that the Trustees or security
holders of fewer than all of the Portfolios of a Fund, fail to approve this
Agreement in the manner described in the preceding sentence, this Agreement
shall remain in effect only with respect to such Portfolio as do so approve
this Agreement. This Agreement may, on 60 days' written notice, be
terminated at any time without the payment of any penalty by us, or by the
Trustees to the Fund or by vote of holders of a majority of the outstanding
voting securities of each Portfolio, as to a Fund, or the Portfolio, as to
that Portfolio, or by you.
5. This Agreement may not be transferred, assigned, sold or in any
manner hypothecated or pledged by either party hereto. It may be amended as
to any Portfolio by mutual agreement, but only after authorization of such
amendment by the affirmative vote of (i) the holders of a majority of the
outstanding voting securities of such Portfolio; and (ii) the Trustees of
the Fund, including a majority of the Trustees of the Fund who are not
interested persons of the Fund, the Partnership, you or us, cast in person
at a meeting called for the purpose of voting on such approval.
6. This Agreement shall be construed in accordance with the laws of
the State of New York, provided, however, that nothing herein shall be
construed as being inconsistent with the Investment Company Act of 1940, as
amended. As used herein the terms "interested persons," "assignments" and
"vote of a majority of the outstanding voting securities" shall have the
meanings set forth in the Investment Company Act of 1940, as amended.
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart hereof and return the same to us.
Very truly yours,
SCUDDER KEMPER INVESTMENTS, INC.
By:
--------------------------------------
Managing Director
49
<PAGE> 55
The foregoing Agreement is hereby accepted as of the date first written
above.
AARP FINANCIAL SERVICES CORP.
By:
--------------------------------------
Title:
Accepted:
AARP MANAGED INVESTMENT
PORTFOLIOS TRUST
By:
--------------------------------------
Title: President
50
<PAGE> 56
PROXY AARP DIVERSIFIED GROWTH PORTFOLIO PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
SPECIAL MEETING OF SHAREHOLDERS -- OCTOBER 22, 1997
The undersigned hereby appoints [ ], [ ] and [ ] and each of
them, the proxies of the undersigned, with the power of substitution to each of
them, to vote all shares of the Fund which the undersigned is entitled to vote
at the Special Meeting of Shareholders of the Fund to be held at the offices of
Scudder, Stevens & Clark, Inc., Two International Place, Boston, Massachusetts
02110, on October 22, 1997 at 9:30 a.m., eastern time, and at any adjournments
thereof.
UNLESS OTHERWISE SPECIFIED IN THE SQUARES PROVIDED, THE UNDERSIGNED'S VOTE
WILL BE CAST FOR EACH NUMBERED ITEM LISTED BELOW.
The Board members of your Fund, including those who are not affiliated with
the Fund, Scudder or AARP, recommend that you vote FOR each item.
1. To approve the new Investment Management Agreement between the Fund and
Scudder Kemper Investments, Inc.;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. To approve the new Member Services Agreement between AARP Financial Services
Corporation and Scudder Kemper Investments, Inc.;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. The election of Trustees;
[ ] FOR all nominees listed below
(except as marked to the contrary below)
[ ] WITHHOLD AUTHORITY
to vote for all nominees listed below
Nominees: Carole Lewis Anderson, Adelaide Attard, Robert N. Butler, M.D., Esther
Canja, Linda C. Coughlin, Edgar R. Fiedler, Lt. Gen. Eugene P. Forrester, George
L. Maddox, Jr., Robert J. Meyers, James H. Schulz, Gordon Shillinglaw, and Jean
Gleason Stromberg.
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
------------------------------------------------------------
(continued on other side)
<PAGE> 57
4. To approve the Board's discretionary authority to convert the Fund to a
master/feeder fund structure through a sale or transfer of assets or
otherwise;
[ ] FOR [ ] AGAINST [
] ABSTAIN
5(A). To approve certain provisions of the Amended and Restated Declaration of
Trust;
[ ] FOR [ ] AGAINST [
] ABSTAIN
5(B). To approve certain provisions of the Amended and Restated Declaration of
Trust;
[ ] FOR [ ] AGAINST [
] ABSTAIN
6. To approve changes to certain of the fundamental investment policies and
restrictions.
<TABLE>
<S> <C> <C> <C>
6.1 diversification; 6.3 senior 6.5 underwriting of 6.7 commodities;
6.2 borrowing; securities; securities; 6.8 lending.
6.4 concentration; 6.6 investment in real estate;
</TABLE>
TO VOTE AGAINST OR ABSTAIN WITH RESPECT TO A PARTICULAR PROPOSED CHANGE,
REFER TO THE PROXY STATEMENT FOR THE CHANGES APPLICABLE TO THE FUND AND
WRITE THE NUMBER OF THE SUB-PROPOSAL ON THE LINE BELOW.
---------------------------------------------------------------------------
7. Ratification of the selection of Price Waterhouse L.L.P. as the Fund's
independent accountants.
[ ] FOR [ ] AGAINST [
] ABSTAIN
The proxies are authorized to vote in their discretion on any other business
which may properly come before the meeting and any adjournments thereof.
Please sign exactly as your name or names
appear. When signing as attorney,
executor, administrator, trustee or
guardian, please give your full title as
such.
------------------------------------------
(Signature of Shareholder)
------------------------------------------
(Signature of joint owner, if any)
Dated __________________________________________ ,
1997
PLEASE SIGN AND RETURN PROMPTLY IN ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED.
<PAGE> 58
PROXY AARP DIVERSIFIED INCOME PORTFOLIO PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
SPECIAL MEETING OF SHAREHOLDERS -- OCTOBER 22, 1997
The undersigned hereby appoints [ ], [ ] and [ ] and each of
them, the proxies of the undersigned, with the power of substitution to each of
them, to vote all shares of the Fund which the undersigned is entitled to vote
at the Special Meeting of Shareholders of the Fund to be held at the offices of
Scudder, Stevens & Clark, Inc., Two International Place, Boston, Massachusetts
02110, on October 22, 1997 at 9:30 a.m., eastern time, and at any adjournments
thereof.
UNLESS OTHERWISE SPECIFIED IN THE SQUARES PROVIDED, THE UNDERSIGNED'S VOTE
WILL BE CAST FOR EACH NUMBERED ITEM LISTED BELOW.
The Board members of your Fund, including those who are not affiliated with
the Fund, Scudder or AARP, recommend that you vote FOR each item.
1. To approve the new Investment Management Agreement between the Fund and
Scudder Kemper Investments, Inc.;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. To approve the new Member Services Agreement between AARP Financial Services
Corporation and Scudder Kemper Investments, Inc.;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. The election of Trustees;
[ ] FOR all nominees listed below
(except as marked to the contrary below)
[ ] WITHHOLD AUTHORITY
to vote for all nominees listed below
Nominees: Carole Lewis Anderson, Adelaide Attard, Robert N. Butler, M.D., Esther
Canja, Linda C. Coughlin, Edgar R. Fiedler, Lt. Gen. Eugene P. Forrester, George
L. Maddox, Jr., Robert J. Meyers, James H. Schulz, Gordon Shillinglaw, and Jean
Gleason Stromberg.
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
------------------------------------------------------------
(continued on other side)
<PAGE> 59
4. To approve the Board's discretionary authority to convert the Fund to a
master/feeder fund structure through a sale or transfer of assets or
otherwise;
[ ] FOR [ ] AGAINST [
] ABSTAIN
5(A). To approve certain provisions of the Amended and Restated Declaration of
Trust;
[ ] FOR [ ] AGAINST [
] ABSTAIN
5(B). To approve certain provisions of the Amended and Restated Declaration of
Trust;
[ ] FOR [ ] AGAINST [
] ABSTAIN
6. To approve changes to certain of the fundamental investment policies and
restrictions.
<TABLE>
<S> <C> <C> <C>
6.1 diversification; 6.3 senior 6.5 underwriting of 6.7 commodities;
6.2 borrowing; securities; securities; 6.8 lending.
6.4 concentration; 6.6 investment in real estate;
</TABLE>
TO VOTE AGAINST OR ABSTAIN WITH RESPECT TO A PARTICULAR PROPOSED CHANGE,
REFER TO THE PROXY STATEMENT FOR THE CHANGES APPLICABLE TO THE FUND AND
WRITE THE NUMBER OF THE SUB-PROPOSAL ON THE LINE BELOW.
---------------------------------------------------------------------------
7. Ratification of the selection of Price Waterhouse L.L.P. as the Fund's
independent accountants.
[ ] FOR [ ] AGAINST [
] ABSTAIN
The proxies are authorized to vote in their discretion on any other business
which may properly come before the meeting and any adjournments thereof.
Please sign exactly as your name or names
appear. When signing as attorney,
executor, administrator, trustee or
guardian, please give your full title as
such.
------------------------------------------
(Signature of Shareholder)
------------------------------------------
(Signature of joint owner, if any)
Dated __________________________________________ ,
1997
PLEASE SIGN AND RETURN PROMPTLY IN ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED.
