<PAGE>
As filed with the Securities and Exchange Commission
on December 28, 2000
Securities Act File No.
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / x /
---
Pre-Effective Amendment No. /____/ Post-Effective Amendment No. /____/
SCUDDER FUNDS TRUST
(Exact Name of Registrant as Specified in Charter)
Two International Place, Boston, Massachusetts 02110-4103
(Address of Principal Executive Offices) (Zip Code)
John Millette
Scudder Kemper Investments, Inc.
Two International Place
Boston, MA 02110-4103
(Name and Address of Agent for Service)
(617) 295-1000
(Registrant's Area Code and Telephone Number)
with copies to:
Caroline Pearson, Esq. Joseph R. Fleming, Esq.
Scudder Kemper Investments, Inc. Dechert
Two International Place Ten Post Office Square - South
Boston, MA 02110-4103 Boston, MA 02109-4603
Approximate Date of Proposed Public Offering:
As soon as practicable after this Registration Statement is declared effective.
Title of Securities Being Registered:
Shares of Beneficial Interest ($.01 par value)
of Scudder Short Term Bond Fund, a series of the Registrant
-------------------------------------------------------------------------------
It is proposed that this filing will become effective on January 27,
2001 pursuant to Rule 488 under the Securities Act of 1933.
--------------------------------------------------------------------------------
No filing fee is required because the Registrant has previously registered an
indefinite number of its shares under the Securities Act of 1933, as amended,
pursuant to Rule 24f-2 under the Investment Company Act of 1940, as amended.
<PAGE>
PART A
INFORMATION REQUIRED IN THE PROXY STATEMENT/PROSPECTUS
<PAGE>
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF
KEMPER SHORT-TERM U.S. GOVERNMENT FUND
Please take notice that a Special Meeting of Shareholders (the "Meeting")
of Kemper Short-Term U.S. Government Fund (the "Fund") will be held at the
offices of Scudder Kemper Investments, Inc., 13th Floor, Two International
Place, Boston, MA 02110-4103, on May 24, 2001, at 4:00 p.m., Eastern time, for
the following purposes:
Proposal 1: To elect Trustees of the Fund.
Proposal 2: To approve an Agreement and Plan of Reorganization for the
Fund (the "Plan"). Under the Plan, (i) all or substantially
all of the assets and all of the liabilities of the Fund
would be transferred to Scudder Short Term Bond Fund, (ii)
each shareholder of the Fund would receive shares of Scudder
Short Term Bond Fund of a corresponding class to those held
by the shareholder in the Fund in an amount equal to the
value of their holdings in the Fund, and (iii) the Fund
would then be terminated.
Proposal 3: To ratify the selection of Ernst & Young LLP as the
independent auditors for the Fund for the Fund's current
fiscal year.
The persons named as proxies will vote in their discretion on any other
business that may properly come before the Meeting or any adjournments or
postponements thereof.
Holders of record of shares of the Fund at the close of business on March
5, 2001 are entitled to vote at the Meeting and at any adjournments or
postponements thereof.
In the event that the necessary quorum to transact business or the vote
required to approve any Proposal is not obtained at the Meeting, the persons
named as proxies may propose one or more adjournments of the Meeting in
accordance with applicable law to permit further solicitation of proxies. Any
such adjournment as to a matter will require the affirmative vote of the holders
of a majority of the Fund's shares present in person or by proxy at the Meeting.
The persons named as proxies will vote FOR any such adjournment those proxies
which they are entitled to vote in favor of that Proposal and will vote AGAINST
any such adjournment those proxies to be voted against that Proposal.
By Order of the Board,
/s/ Philip J. Collora
Philip J. Collora
Secretary
March 6, 2001
IMPORTANT -- WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY CARD(S) AND RETURN
IT IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE (OR TO TAKE ADVANTAGE OF
THE ELECTRONIC OR TELEPHONIC VOTING PROCEDURES DESCRIBED ON THE PROXY CARD(S)).
YOUR PROMPT RETURN OF THE ENCLOSED PROXY CARD(S) (OR YOUR VOTING BY OTHER
AVAILABLE MEANS) MAY SAVE THE NECESSITY AND EXPENSE OF FURTHER SOLICITATIONS. IF
YOU WISH TO ATTEND THE MEETING AND VOTE YOUR SHARES IN PERSON AT THAT TIME, YOU
WILL STILL BE ABLE TO DO SO.
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
INTRODUCTION.................................................................... __
PROPOSAL 1: ELECTION OF TRUSTEES............................................... __
PROPOSAL 2: APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION................... __
SYNOPSIS........................................................... __
PRINCIPAL RISK FACTORS............................................. __
THE PROPOSED TRANSACTION........................................... __
PROPOSAL 3: RATIFICATION OR REJECTION OF THE SELECTION OF INDEPENDENT
AUDITORS........................................................... __
ADDITIONAL INFORMATION.......................................................... __
</TABLE>
<PAGE>
PROXY STATEMENT/PROSPECTUS
March [ ], 2001
Relating to the acquisition of the assets of
KEMPER SHORT-TERM U.S. GOVERNMENT FUND
222 South Riverside Plaza
Chicago, Illinois 60606
(800) [ ]
--------------------------
by and in exchange for shares of beneficial interest of
SCUDDER SHORT TERM BOND FUND,
a separate series of
SCUDDER FUNDS TRUST (the "Acquiring Trust")
Two International Place
Boston, Massachusetts 02110-4103
(800) [ ]
--------------------------
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to shareholders of
Kemper Short-Term U.S. Government Fund (the "Fund") in connection with three
proposals. Proposal 1 describes the election of Trustees and Proposal 3 proposes
the ratification of the selection of the Fund's auditors.
In Proposal 2, shareholders are asked to vote on an Agreement and Plan of
Reorganization (the "Plan") pursuant to which all or substantially all of the
assets of the Fund would be acquired by Scudder Short Term Bond Fund, a fund
with similar investment characteristics and managed by the same investment
manager as the Fund, in exchange for shares of beneficial interest of Scudder
Short Term Bond Fund and the assumption by Scudder Short Term Bond Fund of all
of the liabilities of the Fund, as described more fully below (the
"Reorganization"). Shares of Scudder Short Term Bond Fund received would then be
distributed to the shareholders of the Fund in complete liquidation of the Fund.
As a result of the Reorganization, shareholders of the Fund will become
shareholders of Scudder Short Term Bond Fund and will receive shares of Scudder
Short Term Bond Fund in an amount equal to the value of their holdings in the
Fund as of the close of business on the business day preceding the closing of
the Reorganization (the "Valuation Date"). The closing of the Reorganization
(the "Closing") is contingent upon shareholder approval of the Plan. A copy of
the Plan is attached as Exhibit A. The Reorganization is expected to occur on or
about June 25, 2001.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES NOR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Proposals 1 and 2 arise out of a restructuring program proposed by Scudder
Kemper Investments, Inc. ("Scudder Kemper" or the "Investment Manager"), the
investment manager of both the Fund and Scudder Short Term Bond Fund, described
in more detail below. The restructuring program is designed to respond to
changing industry conditions and investor needs. Scudder Kemper seeks to
consolidate its fund line-up and offer all of the open-end funds it advises
under the "Scudder" name. In addition, Scudder Kemper anticipates changing its
name to "Zurich Scudder Investments, Inc." Scudder Kemper believes that the
combination of its open-end, directly-distributed funds (the "Scudder Funds")
with the
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<PAGE>
funds in the Kemper Family of Funds (the "Kemper Funds") will permit it to
streamline its administrative infrastructure and focus its distribution efforts.
The restructuring program will not result in any reduction in the services
currently offered to Kemper Funds shareholders.
Scudder Short Term Bond Fund is a diversified series of shares of
beneficial interest of the Acquiring Trust, which is an open-end management
investment company organized as a Massachusetts business trust. The Fund, which
is also diversified, is the only active series of shares of beneficial interest
of Kemper Short Term U.S. Government Fund (the "Acquired Trust"), an open-end
management investment company organized as a Massachusetts business trust. In
the descriptions of the Proposals below, the word "fund" is sometimes used to
mean an investment company or series thereof in general, and not the Fund whose
proxy statement this is. In addition, for simplicity, actions are described in
this Proxy Statement/Prospectus as being taken by either the Fund or Scudder
Short Term Bond Fund (which are collectively referred to as the "Funds" and each
referred to as a "Fund"), although all actions are actually taken by either the
Acquired Trust or the Acquiring Trust, on behalf of the applicable Fund.
This Proxy Statement/Prospectus sets forth concisely the information about
Scudder Short Term Bond Fund that a prospective investor should know before
investing and should be retained for future reference. For a more detailed
discussion of the investment objective, policies, restrictions and risks of
Scudder Short Term Bond Fund, see Scudder Short Term Bond Fund's prospectus
dated March 1, 2001, as supplemented from time to time, which is included in the
materials you received with this document and incorporated herein by reference
(meaning that it is legally part of this document). For a more detailed
discussion of the investment objective, policies, restrictions and risks of the
Fund, see the Fund's prospectus dated January 1, 2001, as supplemented from time
to time, which is also incorporated herein by reference and a copy of which may
be obtained upon request and without charge by calling or writing the Fund at
the telephone number or address listed above.
Also incorporated herein by reference is Scudder Short Term Bond Fund's
statement of additional information dated March 1, 2001, as supplemented from
time to time, which may be obtained upon request and without charge by calling
or writing Scudder Short Term Bond Fund at the telephone number or address
listed above. A Statement of Additional Information, dated [Date], containing
additional information about the Reorganization has been filed with the
Securities and Exchange Commission (the "SEC" or the "Commission") and is
incorporated by reference into this Proxy Statement/Prospectus. A copy of this
Statement of Additional Information is available upon request and without charge
by calling or writing Scudder Short Term Bond Fund at the telephone number or
address listed above. Shareholder inquiries regarding Scudder Short Term Bond
Fund may be made by calling (800) [ ] and shareholder inquiries regarding
the Fund may be made by calling (800) [ ]. The information contained in
this document concerning each Fund has been provided by, and is included herein
in reliance upon, that Fund.
The Board of Trustees that oversees the Fund is soliciting proxies from
shareholders of the Fund for the Special Meeting of Shareholders to be held on
May 24, 2001, at Scudder Kemper's offices, 13th Floor, Two International Place,
Boston, MA 02110-4103 at 4:00 p.m. (Eastern time), and at any and all
adjournments or postponements thereof (the "Meeting"). This Proxy
Statement/Prospectus, the Notice of Special Meeting and the proxy card(s) are
first being mailed to shareholders on or about March 6, 2001 or as soon as
practicable thereafter.
The Board of Trustees unanimously recommends that shareholders vote FOR the
nominees listed in Proposal 1, and FOR Proposals 2 and 3.
PROPOSAL 1: ELECTION OF TRUSTEES
At the Meeting, shareholders will be asked to elect eleven individuals to
constitute the Board of Trustees to oversee the Fund. Shareholders are being
asked to elect these individuals to the Board of Trustees in case the Plan, as
described under Proposal 2, is not approved by shareholders. However, if the
Plan is
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<PAGE>
approved, the current Board of Trustees of the Acquiring Trust will oversee the
operations of the combined fund (see "Synopsis - Other Differences Between the
Funds" under Proposal 2).
As discussed further below, Scudder Kemper commenced an initiative to
restructure and streamline the management and operations of the funds it
advises. In connection with that initiative, the Independent Trustees (as
defined below) of the two separate boards of Kemper Funds proposed to
consolidate into a single board. The eleven individuals who have been nominated
for election as Trustees of the Fund were nominated after careful consideration
by the present Board of Trustees. The nominees are listed below. Seven of the
nominees are currently Trustees of the Fund and three of the nominees are
currently trustees or directors of other Kemper Funds. One of the nominees,
although not currently a trustee or officer of any Kemper Fund, is a senior
executive officer of Scudder Kemper. These eleven nominees are also being
nominated for election as trustees or directors of most of the other Kemper
Funds. The proposed slate of nominees reflects an effort to consolidate the two
separate boards who have historically supervised different Kemper Funds. The
proposed consolidation is expected to provide administrative efficiencies to
both the Funds and Scudder Kemper.
The persons named as proxies on the enclosed proxy card(s) will vote for
the election of the nominees named below 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 commencing on July 1, 2001 and 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 governing documents of the Fund. 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 current Trustees may recommend. The following tables present
information about the nominees and the Trustees not standing for re-election.
Each nominee's or Trustee's date of birth is in parentheses after his or her
name. Unless otherwise noted, (i) each of the nominees and Trustees has engaged
in the principal occupation(s) noted in the following tables for at least the
most recent five years, although not necessarily in the same capacity, and (ii)
the address of each nominee is c/o Scudder Kemper Investments, Inc., 222 South
Riverside Plaza, Chicago, Illinois 60606.
Nominees for Election as Trustees:
--------------------------------------------------------------------------------
Year First
Name (Date of Birth), Principal Occupation and Affiliations Became a
Board
Member
--------------------------------------------------------------------------------
John W. Ballantine (2/16/46),/(1)/ Retired; formerly, First
Chicago NBD Corporation/The First National Bank of Chicago:
1996-1998 Executive Vice President and Chief Risk 1999
Management Officer; 1995-1996 Executive Vice President and
Head of International Banking.
--------------------------------------------------------------------------------
Lewis A. Burnham (1/8/33),/(1)/ Retired; formerly, Partner,
Business Resources Group; formerly, Executive Vice President, 1987
Anchor Glass Container Corporation.
--------------------------------------------------------------------------------
Linda C. Coughlin (1/1/52),*/(2)/ Managing Director, Scudder
Kemper. 2000
--------------------------------------------------------------------------------
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<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Donald L. Dunaway (3/8/37),/(1)/ Retired; formerly, Executive
Vice President, A.O. Smith Corporation (diversified 1987
manufacturer).
--------------------------------------------------------------------------------
James R. Edgar (7/22/46),/(3)/ Distinguished Fellow, University Nominee
of Illinois Institute of Government and Public Affairs;
Director, Kemper Insurance Companies (not affiliated with the
Kemper Funds); formerly, Governor, State of Illinois.
--------------------------------------------------------------------------------
William F. Glavin (8/30/58),*Managing Director, Scudder Nominee
Kemper.
--------------------------------------------------------------------------------
Robert B. Hoffman (12/11/36),/(1)/ Retired, formerly, Chairman,
Harnischfeger Industries, Inc. machinery for the mining and
paper industries); formerly, Vice Chairman and Chief
Financial Officer, Monsanto Company (agricultural, pharmaceutical
and nutritional/food products); formerly, Vice President, Head of
International 1987 Operations, FMC Corporation (manufacturer of 1987
machinery and chemicals); Director, Harnischfeger Industries, Inc.
--------------------------------------------------------------------------------
Shirley D. Peterson (9/3/41),/(1)/ Retired; formerly, President,
Hood College; formerly, Partner, Steptoe & Johnson (attorneys);
prior thereto, Commissioner, Internal Revenue Service; prior
thereto, Assistant Attorney General (Tax), U.S. Department of 1995
Justice; Director, Bethlehem Steel Corp.
--------------------------------------------------------------------------------
Fred B. Renwick (2/1/30),/(3)/ Professor of Finance, New York Nominee
University, Stern School of Business; Director, the Wartburg
Foundation; Chairman, Investment Committee of Morehouse College
Board of Trustees; Director, American Bible Society Investment
Committee; previously member of the Investment Committee of
Atlanta University Board of Trustees; formerly Director of
Board of Pensions Evangelical Lutheran Church in America.
--------------------------------------------------------------------------------
William P. Sommers (7/22/33),/(1)/ Consultant and Director,
SRI Consulting; prior thereto, President and Chief Executive
Officer, SRI International (research and development); prior
thereto, Executive Vice President, Iameter (medical information 1987
and educational service provider); prior thereto, Senior Vice
President and Director, Booz, Allen & Hamilton Inc. (management
consulting firm); Director, PSI Inc., Evergreen Solar, Inc. and
Litton Industries.
--------------------------------------------------------------------------------
John G. Weithers (8/8/33),/(3)/ Formerly, Chairman of the Board Nominee
and Chief Executive Officer, Chicago Stock Exchange; Director,
Federal Life Insurance Company; President of the Members of the
Corporation and Trustee, DePaul University.
--------------------------------------------------------------------------------
-4-
<PAGE>
* Interested person of the Fund, as defined in the Investment Company Act
of 1940, as amended (the "1940 Act").
/(1)/ Messrs. Ballantine, Burnham, Dunaway, Hoffman, Sommers and Ms. Peterson
serve as board members of 26 investment companies, with 45 portfolios
managed by Scudder Kemper.
/(2)/ Ms. Coughlin serves as a board member of 52 investment companies with 97
portfolios managed by Scudder Kemper.
/(3)/ Messrs. Edgar, Renwick and Weithers serve as board members of 16
investment companies with 58 portfolios managed by Scudder Kemper.
Trustees Not Standing for Re-Election:
--------------------------------------------------------------------------------
Present Office with the Fund;
Principal Occupation or Employment
Name (Date of Birth) and Directorships
-------------------- -----------------
--------------------------------------------------------------------------------
Donald R. Jones (1/17/30) Trustee; Retired; Director, Motorola, Inc.
(manufacturer of electronic equipment and
components); formerly, Executive Vice President
and Chief Financial Officer, Motorola, Inc.
--------------------------------------------------------------------------------
Thomas W. Littauer (4/26/55)* Chairman, Trustee and Vice-President; Managing
Director, Scudder Kemper; formerly, Head of
Broker Dealer Division of Putnam Investment
Management; formerly, President of Client
Management Services for Fidelity Investments.
--------------------------------------------------------------------------------
* Interested person of the Fund, as defined in the 1940 Act.
Appendix 1 lists the number of shares of the Fund owned directly or
beneficially by the Trustees and by the nominees for election.
Responsibilities of the Board of Trustees -- Board and Committee Meetings
The primary responsibility of the Board is to represent the interests of
the shareholders of the Fund and to provide oversight of the management of the
Fund. The board that is proposed for election at this Meeting is comprised of
two individuals who are considered "interested" Trustees, and nine individuals
who have no affiliation with Scudder Kemper and who are not considered
"interested" Trustees (the "Independent Trustees"). The SEC has recently
proposed a rule that would require a majority of the board members of a fund to
be "independent" if the fund were to take advantage of certain exemptive rules
under the 1940 Act. If the proposed Board of Trustees is approved by
shareholders, more than 75% will be Independent Trustees. The Independent
Trustees have been selected and nominated solely by the current Independent
Trustees of the Fund.
The Trustees meet multiple times during the year to review the investment
performance of the Fund and other operational matters, including policies and
procedures designed to assure compliance with regulatory and other requirements.
Furthermore, the Independent Trustees review the fees paid to the Investment
Manager and its affiliates for investment advisory services and other
administrative and
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<PAGE>
shareholder services. The Trustees have adopted specific policies and guidelines
that, among other things, seek to further enhance the effectiveness of the
Independent Trustees in performing their duties. Many of these are similar to
those suggested in the Investment Company Institute's 1999 Report of the
Advisory Group on Best Practices for Fund Directors (the "Advisory Group
Report"). For example, the Independent Trustees select independent legal counsel
to work with them in reviewing fees, advisory and other contracts and overseeing
fund matters, and regularly meet privately with their counsel.
Currently, the Board of Trustees has an Audit Committee and a Nominating
and Governance Committee, the responsibilities of which are described below. In
addition, the Board has a Valuation Committee and a Contract Renewal Committee.
During calendar year 2000, the Board of Trustees met eight times. Each then
current Trustee attended 75% or more of the respective meetings of the Board and
the Committees (if a member thereof) held during calendar year 2000.
Audit Committee
The Audit Committee makes recommendations regarding the selection of
independent auditors for the Fund, confers with the independent auditors
regarding the Fund's financial statements, the results of audits and related
matters, and performs such other tasks as the full Board of Trustees deems
necessary or appropriate. As suggested by the Advisory Group Report, the Audit
Committee is comprised of only Independent Trustees, receives annual
representations from the auditors as to their independence, and has a written
charter that delineates the committee's duties and powers. Currently, the
members of the Audit Committee are Donald A. Dunaway (Chairman), Robert B.
Hoffman and Donald R. Jones. The Audit Committee held five meetings during
calendar year 2000.
Nominating and Governance Committee
The Board of Trustees has a Nominating and Governance Committee, comprised
of only Independent Trustees, that seeks and reviews candidates for
consideration as nominees for membership on the Board and oversees the
administration of the Fund's Governance Procedures and Guidelines. The
Nominating and Governance Committee has a written charter that delineates the
committee's duties and powers. Shareholders wishing to submit the name of a
candidate for consideration by the committee should submit their
recommendation(s) to the Secretary of the Fund. Currently, the members of the
Nominating and Governance Committee are Lewis A. Burnham (Chairman), John W.
Ballantine, Shirley D. Peterson and William P. Sommers. The Nominating and
Governance Committee held one meeting during calendar year 2000.
-6-
<PAGE>
Officers
The following persons are officers of the Fund:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
Name (Date of Birth) Present Office with the Fund; Year First Became an Officer/1/
-------------------- Principal Occupation or ----------------------------
Employment
----------
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mark S. Casady (10/15/26) President; Managing Director, 1998
Scudder Kemper; formerly,
Institutional Sales Manager of an
unaffiliated mutual fund distributor.
--------------------------------------------------------------------------------------------------------------------
Philip J. Collora (11/15/45) Vice President and Secretary; 1987
Attorney; Senior Vice President,
Scudder Kemper.
--------------------------------------------------------------------------------------------------------------------
Thomas W. Littauer (4/26/55) Vice President, Chairman and Trustee; 1998
Managing Director, Scudder Kemper,
Head of Broker Dealer Division of an
unaffiliated investment management firm
during 1997; prior thereto, President
of Client Management Services of an
unaffiliated investment management
firm from 1991 to 1996.
--------------------------------------------------------------------------------------------------------------------
Kathryn L. Quirk (12/3/52) Vice President; Managing Director, 1998
Scudder Kemper.
--------------------------------------------------------------------------------------------------------------------
Richard L. Vandenberg ([ ]) Vice President; Managing Director, 1997
Scudder Kemper; formerly, Executive
Vice President and Senior Portfolio
Manager with an unaffiliated
investment management firm.
--------------------------------------------------------------------------------------------------------------------
Linda J. Wondrack (9/12/64) Vice President; Senior Vice 1998
President, Scudder Kemper.
--------------------------------------------------------------------------------------------------------------------
John R. Hebble (6/27/58) Treasurer; Senior Vice President, 1998
Scudder Kemper.
--------------------------------------------------------------------------------------------------------------------
Brenda Lyons (2/21/63) Assistant Treasurer; Senior Vice 1998
President, Scudder Kemper.
--------------------------------------------------------------------------------------------------------------------
Caroline Pearson (4/1/62) Assistant Secretary; Senior Vice 1998
President, Scudder Kemper, formerly,
Associate, Dechert
--------------------------------------------------------------------------------------------------------------------
</TABLE>
_______________________
/1/ The President, Treasure and Secretary each holds office until the first
meeting of Trustees in each calendar year and until his or her successor
has been duly elected and qualified, and allother officers hold offices as
the Trustees permit in accordance with the By-laws of the Fund.
-7-
<PAGE>
<TABLE>
<S> <C> <C>
--------------------------------------------------------------------------------------------------------------------
Price & Rhoads (law firm) from 1989
-1997.
--------------------------------------------------------------------------------------------------------------------
Maureen E. Kane (2/14/62) Assistant Secretary; Vice President, 1998
Scudder Kemper; formerly, Assistant
Vice President of an unaffiliated
investment management firm; prior
thereto, Associated Staff Attorney
of an unaffiliated investment
management firm; Associate, Peabody
& Arnold (law firm).
--------------------------------------------------------------------------------------------------------------------
</TABLE>
Compensation of Trustees and Officers
The Fund pays the Independent Trustees a monthly retainer and an attendance
fee, plus expenses, for each Board meeting and committee meeting attended. As
reflected below, the Trustees currently serve as board members of various other
Kemper Funds. Scudder Kemper supervises the Fund's investments, pays the
compensation and expenses of its personnel who serve as Trustees and officers on
behalf of the Fund and receives a management fee for its services. Several of
the officers and Trustees are also officers, directors, employees or
stockholders of Scudder Kemper and participate in the fees paid to that firm,
although the Fund makes no direct payments to them.
To facilitate the restructuring of the boards of the Kemper Funds, certain
Independent Trustees agreed not to stand for re-election. Independent Trustees
of the Fund are not entitled to benefits under any pension or retirement plan.
However, the Board of each Kemper Fund determined that, particularly given the
benefits that would accrue to the Kemper Funds from the restructuring of the
boards, it was appropriate to provide the four Independent Trustees who were not
standing for re-election for various Kemper Funds a one-time benefit. The cost
of such benefit is being allocated among all the Kemper Funds, with Scudder
Kemper agreeing to bear one-half the cost of such benefit, given that Scudder
Kemper also benefits from administrative efficiencies of a consolidated board.
Mr. Jones, an Independent Trustee of the Fund who is not standing for
re-election, will receive such a one-time benefit. The amount received on behalf
of each fund for which he serves as a trustee ranges from $1,071 to $8,078.
The following Compensation Table provides in tabular form the following
data:
Column (1) All Trustees who receive compensation from the Fund.
Column (2) Aggregate compensation received by each Trustee from the Fund
during calendar year 2000.
Column (3) Total compensation received by each Trustee from funds advised
by Scudder Kemper (collectively, the "Fund Complex") during calendar year 2000.
Compensation Table
--------------------------------------------------------------------------------
Aggregate Compensation Total Compensation From
Name of Trustee from Fund Fund Complex/(2)(3)/
--------------------------------------------------------------------------------
John W. Ballantine
--------------------------------------------------------------------------------
Lewis A. Burnham
--------------------------------------------------------------------------------
Linda C. Coughlin
--------------------------------------------------------------------------------
Donald L. Dunaway
--------------------------------------------------------------------------------
Robert B. Hoffman
--------------------------------------------------------------------------------
Donald R. Jones
--------------------------------------------------------------------------------
Shirley D. Peterson
--------------------------------------------------------------------------------
William P. Sommers
--------------------------------------------------------------------------------
-8-
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
/(1)/ Includes deferred fees. Pursuant to deferred compensation agreements with
the Fund, deferred amounts accrue interest monthly at a rate equal to the yield
of Zurich Money Funds -- Zurich Money Market Fund. Total deferred fees
(including interest thereon) payable from the Fund to Mr. Dunaway are $_______.
/(2)/ Includes compensation for service on the boards of [ ] Kemper
trusts/corporations comprised of [ ] funds. Each trustee currently serves on the
boards of [ ] Kemper trusts/corporations comprised of [ ] funds.
/(3)/ Aggregate compensation does not reflect amounts paid to the Trustees for
special meetings in connection with the Scudder Kemper restructuring initiative.
Such amounts totaled [$_______, $_______, $_______, $_______, $_______, $_______
and $_______ for Messrs. Ballantine, Burnham, Dunaway, Hoffman, Jones, Sommers
and Ms. Peterson], respectively.
The Board of Trustees unanimously recommends
that the shareholders of the Fund vote FOR each nominee.
PROPOSAL 2: APPROVAL OF AGREEMENT
AND PLAN OF REORGANIZATION
I. SYNOPSIS
Introduction
The Board of Trustees, including all of the Independent Trustees, approved
the Plan at a meeting held on November 29, 2000. Subject to its approval by the
shareholders of the Fund, the Plan provides for (a) the transfer of all or
substantially all of the assets and all of the liabilities of the Fund to
Scudder Short Term Bond Fund in exchange for Class A, Class B and Class C
shares of Scudder Short Term Bond Fund; (b) the distribution of such shares to
the shareholders of the Fund in complete liquidation of the Fund; and (c) the
termination of the Fund. As a result of the Reorganization, each shareholder of
the Fund will become a shareholder of Scudder Short Term Bond Fund, a fund with
similar investment characteristics and managed by the same investment manager as
the Fund. Immediately after the Reorganization, each shareholder of the Fund
will hold shares of the class of shares of Scudder Short Term Bond Fund that
corresponds to the class of shares of the Fund held by that shareholder on the
Valuation Date, having an aggregate net asset value equal to the aggregate net
asset value of such shareholder's shares of the Fund on the Valuation Date.
Scudder Kemper is the investment manager of both Funds. If the
Reorganization is completed, the Fund's shareholders will continue to enjoy all
of the same shareholder privileges as they currently enjoy, such as access to
professional service representatives, exchange privileges and automatic dividend
reinvestment. Services provided to the Class A, Class B and Class C shareholders
of Scudder Short Term Bond Fund following the Reorganization will be identical
to those currently provided to shareholders of the corresponding class of the
Fund. See "Purchase, Redemption and Exchange Information."
Background of the Reorganization
The Reorganization is part of a broader restructuring program to respond to
changing industry conditions and investor needs. The mutual fund industry has
grown dramatically over the last ten years.
-9-
<PAGE>
During this period of rapid growth, investment managers expanded the range of
fund offerings that are available to investors in an effort to meet the growing
and changing needs and desires of an increasingly large and dynamic group of
investors. With this expansion has come increased complexity and competition
among mutual funds, as well as the potential for increased confusion among
investors. The group of funds advised by Scudder Kemper has followed this
pattern.
As a result, Scudder Kemper has sought ways to restructure and streamline
the management and operations of the funds it advises by consolidating all of
the retail mutual funds that it currently sponsors into a single product line
offered under the "Scudder" name. Scudder Kemper believes, and has advised the
boards, that further reducing the number of funds it advises and adding the
classes of shares currently offered on all Kemper Funds to the Scudder Funds
will benefit fund shareholders. Scudder Kemper has, therefore, proposed the
combination of many Scudder Funds and Kemper Funds that have similar or
compatible investment objectives and policies. Scudder Kemper believes that the
larger funds, along with the fewer number of funds, that result from these
combinations may help to enhance investment performance and increase efficiency
of operations. The restructuring program will not result in any changes in the
shareholder services currently offered to shareholders of the Kemper Funds.
Most of the Scudder Funds have recently adopted a new fee structure for
certain administrative services. Under this fee structure, in exchange for
payment by a fund of a single administrative fee rate, Scudder Kemper provides
or pays for substantially all services that the fund normally requires for its
operations, other than those provided under the fund's investment management
agreement and certain other expenses. This administrative fee enables investors
to determine with greater certainty the expense level that a fund will
experience, and, for the term of the administration agreement, transfers
substantially all of the risk of increased costs to Scudder Kemper. Likewise,
Scudder Kemper receives all of the benefits of economies of scale from increases
in asset size or decreased operating expenses. As part of the restructuring
effort, Scudder Kemper has proposed extending this administrative fee structure
to those funds currently offered under the Kemper name.
The fund consolidations and the consolidation of the boards currently
overseeing the Kemper Funds (see Proposal 1 above) are expected to have a
positive impact on Scudder Kemper, as well. These changes are likely to result
in reduced costs (and the potential for increased profitability) for Scudder
Kemper in advising or servicing funds.
Reasons for the Proposed Reorganization; Board Approval
Since receiving Scudder Kemper's proposals on May 24, 2000, the Independent
Trustees have conducted a thorough review of all aspects of the proposed
restructuring program. They have been assisted in this regard by their
independent counsel and by independent consultants with special expertise in
financial and mutual fund industry matters. In the course of discussions with
representatives of Scudder Kemper, the Independent Trustees have requested, and
Scudder Kemper has accepted, numerous changes designed to protect and enhance
the interests of shareholders. See "The Proposed Transaction - Board Approval of
the Proposed Transaction" below.
In determining whether to recommend that the shareholders of the Fund
approve the Reorganization, the Board of Trustees considered that:
. Given the Fund's relative small size and Scudder Kemper's commitment
to a streamlined family of funds, the Reorganization would allow
shareholders to continue their investment in a comparable fund and
will be effected on a tax-free basis, as opposed to liquidation,
which would be a taxable transaction.
-10-
<PAGE>
. The combined fund would adopt the lower fee schedule of the two Funds'
investment advisory agreements.
. The fixed fee rate under the Administration Agreement is expected to
be, in the case of Class A shares, less than the estimated applicable
operating expenses such class would otherwise pay. In the case of
Class B shares and Class C shares, the fixed fee rate under the
Administration Agreement is expected to be higher than the estimated
current operating expenses such classes would otherwise pay; however,
due to the combined fund's lower investment advisory fee, the overall
expense ratio for Class B and Class C shares is expected to be lower
than the overall expense ratio that would otherwise apply to such
classes.
. It is a condition of the Reorganization that each Fund receive an
opinion of tax counsel that the transaction would be a tax-free
transaction.
. Although the Fund agreed to pay the estimated costs of the
Reorganization allocated to Class A shares and a portion of the
estimated costs of the Reorganization allocated to Class B shares,
management has estimated that such allocated costs will be recoverable
from lower overall expense rates within six months of completion of
the Reorganization. Scudder Kemper agreed to pay all of the estimated
costs of the Reorganization allocated to Class C shares, a portion of
the estimated costs of the Reorganization allocated to Class B shares
and all of the costs of the Reorganization that exceed estimated
costs.
For these reasons, as more fully described below under "The Proposed
Transaction -- Board Approval of the Proposed Transaction," the Board of
Trustees, including the Independent Trustees, has concluded that:
. the Reorganization is in the best interests of the Fund and its
shareholders; and
. the interests of the existing shareholders of the Fund will not be
diluted as a result of the Reorganization.
Accordingly, the Trustees unanimously recommend approval of the Plan
effecting the Reorganization. If the Plan is not approved, the Fund will
continue in existence unless other action is taken by the Trustees.
Investment Objectives, Policies and Restrictions of the Funds
This Section will help you compare the investment objectives and policies
of the Fund and Scudder Short Term Bond Fund. Please be aware that this is only
a summary. More complete information can be found in the Funds' prospectuses.
The investment objective of Scudder Short Term Bond Fund is to provide high
income while managing its portfolio in a way that is consistent with maintaining
a high degree of stability of shareholders' capital. The investment objective of
the Fund is to seek high current income and preservation of capital. There can
be no assurance that either Fund will achieve its investment objective.
Both Funds emphasize short-term high quality debt securities. The Fund,
however, under normal circumstances, must invest at least 65% of its total
assets in U.S. government securities and historically has been fully invested in
U.S. government securities. Scudder Short Term Bond Fund, on the other hand,
invests at least 65% of its total assets in a blend of U.S. government
securities and other high-quality non-U.S. government securities (i.e. debt
securities rated AAA or AA by Standard & Poor's Rating Services or Aaa or Aa by
Moody's Investor Service, Inc.), and historically has held only a portion of its
assets in U.S. government securities. See "Comparative Considerations" on the
next page.
The U.S. government securities in which each Fund invests include those
issued by such government's agencies and instrumentalities, as well as, for the
Fund, repurchase agreements of U.S. government securities. Each Fund may invest
in other types of income-producing securities, such as
-11-
<PAGE>
mortgage- and asset-backed securities, and corporate bonds, although
historically, the Fund has not invested in such securities. Mortgage and
asset-backed securities may represent a substantial portion of Scudder Short
Term Bond Fund's assets because of their potential to offer high yields while
also meeting its quality policies. Also, unlike the Fund, Scudder Short Term
Bond Fund may invest in bonds of foreign issuers, including foreign governments,
although, generally, most of the securities in which it invests are from U.S.
issuers.
Although the Fund has not historically done so, it may invest up to 35% of
its total assets in non-U.S. government investment-grade bonds, including up to
10% of its total assets in "high yield" or "junk" bonds (i.e., grade BB/Ba and
below). Scudder Short Term Bond Fund could invest up to 35% of its total assets
in bonds of the third and/or fourth highest rating categories, which are still
considered investment-grade, but may not buy any junk bonds. The dollar-weighted
average effective maturity of each Fund is generally less than three years. The
Funds are permitted to use various types of derivatives (contracts whose value
is based on, for example, indices, commodities or securities), although the
Investment Manager does not intend to use them as principal investments, and
might not use them at all.
In deciding which types of securities to buy and sell for the Funds, the
Investment Manager typically weighs a number of factors, including economic
outlooks, possible interest rate movements and changes in supply and demand
within the bond market. In choosing individual bonds for Scudder Short Term Bond
Fund, the Investment Manager considers how they are structured and uses
independent analysis of issuers' creditworthiness. In deciding which types of
government bonds to buy and sell for the Fund, the Investment Manager first
considers the relative attractiveness of Treasuries compared to other U.S.
government and agency securities and determines allocations for each, based on a
number of factors, such as interest rate outlooks and changes in supply and
demand within the bond market. If the Investment Manager decides to purchase
corporate bonds for the Fund, it uses independent analysis to look for
established companies with histories of dependable dividend payments and stable
or growing prices. The Fund and Scudder Short Term Bond Fund have different
portfolio managers.
The Funds' fundamental investment restrictions, as such restrictions are
set forth in each Fund's statement of additional information, are identical.
Fundamental investment restrictions may not be changed without the approval of
Fund shareholders. Certain differences exist, however, between the Funds'
non-fundamental investment restrictions (which may be changed by the board
without shareholder approval), as such restrictions are set forth in each Fund's
statement of additional information. For instance, Scudder Short Term Bond Fund
may lend portfolio securities in an amount not greater than 5% of its total
assets, while the Fund may do so in an amount not greater than one-third of its
total assets. In addition, while only the Fund has a stated investment
restriction limiting investment in illiquid securities to 15% of net assets,
both Funds are subject to such a limitation under applicable regulations.
Investors should refer to each Fund's statement of additional information for a
more detailed description of the Fund's investment policies and restrictions.
Portfolio Turnover
The portfolio turnover rate for Scudder Short Term Bond Fund, i.e., the
ratio of the lesser of annual sales or purchases to the monthly average value of
the portfolio (excluding from both the numerator and the denominator securities
with maturities at the time of acquisition of one year or less), for the fiscal
year ended December 31, 2000 was [ ]%. The portfolio turnover rate for the Fund
for the fiscal year ended August 31, 2000 was 283%. A higher portfolio turnover
rate involves greater brokerage and transaction expenses to a fund and may
result in the realization of net capital gains, which would be taxable to
shareholders when distributed.
-12-
<PAGE>
Comparative Considerations
The portfolio characteristics of the combined Fund after the Reorganization
will reflect the blended characteristics of the Fund and Scudder Short Term Bond
Fund. The following characteristics are as of ____, 2000 for both Funds and also
reflect the blended characteristics of both Funds after the Reorganization as of
that same date.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
Avg. Avg. Percentage Percentage Portfolio Quality(4)
Maturity Duration Invested in Invested in
Yield(1) (Years)(2) (Years)(2) U.S. Non-U.S.
Government Government
Securities(3) Securities(3)
----------------------------------
BBB or Below Unrated
above BBB
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fund
Scudder Short Term
Bond Fund
New (Pro forma)(5)
---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The yield provided for the Fund represents the yield for its Class A shares
and the yield provided for Scudder Short Term Bond Fund represents the yield for
its Class S shares, for the 30 days ended ____________, 2000. The yield is
computed by dividing the net investment income per share earned during a
specified one month or 30-day period by the maximum offering price per share on
the last day of the period. In the case of the Class S shares of Scudder Short
Term Bond Fund, the maximum offering price was calculated using the up-front
sales charge [and the current expense ratio] applicable to the Fund's Class A
shares. The pro forma yield reflects the Class A shares up-front sales charge
and estimated expense ratio of the combined Fund, giving effect to the
Reorganization, and, therefore, is not necessarily indicative of the actual
yield to any particular shareholder. The yield for other classes of shares would
vary.
(2) Both dollar-weighted average maturity and duration reflect the sensitivity
of a Fund to interest rate fluctuations. The average dollar-weighted maturity of
a Fund is the dollar-weighted average of the stated maturities of all debt
instruments held by the Fund. Duration is the weighted present value of
principal and interest payments expressed in years and may more accurately
measure a Fund's sensitivity to incremental changes in interest rates than
average maturity. Other factors being equal (e.g., portfolio quality), a Fund
with a longer maturity and duration reacts more strongly to interest rate
changes than a Fund with a shorter maturity and duration. For example, a Fund
with a duration of five (5) years is expected to experience a price decrease of
roughly five percent (5%) for each percent increase in interest rates while a
comparable Fund with a duration of four (4) years is expected to experience a
price decrease of roughly four percent (4%) for the same change in interest
rates.
(3) Each Fund invests in short-term high quality debt securities. The Fund,
however, historically has invested all of its assets in U.S. government
securities, whereas Scudder Short Term Bond Fund historically has invested only
a portion of its assets in U.S. government securities. Scudder Short Term Bond
Fund invests in a mix of U.S. government securities and other high quality
non-U.S. government securities. See "Investment Objectives, Policies and
Restrictions of the Funds" for a more detailed description.
(4) Represents the higher of ratings by Moody's and S&P. See [Annex A] to the
Statement of Additional Information for a general description of Moody's and
S&P's ratings.
(5) Reflects the blended characteristics of the Fund and Scudder Short Term Bond
Fund as of ______________, 2000.
Performance
The following table shows how the returns of the Fund and Scudder Short
Term Bond Fund over different periods average out. For context, the table also
includes broad-based market indices (which, unlike the Funds, do not have any
fees or expenses). The performances of both Funds and the index vary over time,
and past performance is not necessarily indicative of future results. All
figures assume reinvestment of dividends and distributions.
Average Annual Total Return
for the Periods Ended December 31, 2000
[Insert Table]
-13-
<PAGE>
For management's discussion of Scudder Short Term Bond Fund's performance
for the fiscal year ended December 31, 2000, please refer to Exhibit B.
Investment Manager; Fees and Expenses
Each Fund retains the investment management firm of Scudder Kemper,
pursuant to separate contracts, to manage its daily investment and business
affairs, subject to the policies established by each Fund's Trustees. Scudder
Kemper is a Delaware corporation located at Two International Place, Boston,
Massachusetts 02110-4103.
Pursuant to separate contracts, both Funds pay the Investment Manager a
graduated investment management fee, although the fee rates and breakpoints
differ. The fee is graduated so that increases in a Fund's net assets may result
in a lower annual fee rate and decreases in its net assets may result in a
higher annual fee rate. As of December 31, 2000, Scudder Short Term Bond Fund
had total net assets of $[ ]. For the fiscal year ended December 31, 2000,
Scudder Short Term Bond Fund paid the Investment Manager a fee of [ ]% of its
average daily net assets. As of August 31, 2000, the Fund had total net assets
of $163,397,000. For the fiscal year ended August 31, 2000, the Fund paid the
Investment Manager a fee of .55% of its average daily net assets.
The fee schedule for the combined fund after the Reorganization will be
identical to the current fee schedule for Scudder Short Term Bond Fund.
Currently the fee schedules for the Fund and Scudder Short Term Bond Fund are as
follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Fund Scudder Short Term Bond Fund
---------------------------------------------------------------------------------------------------------
Average Daily Net Assets Fee Rate Average Daily Net Assets Fee Rate
------------------------ -------- ------------------------ --------
<S> <C> <C> <C>
First $250 Million 0.55% First $1.5 billion 0.450%
Next $750 million 0.52% Next $500 million 0.425%
Next $1.5 billion 0.50% Next $1 billion 0.400%
Next $2.5 billion 0.48% Next $1 billion 0.385%
Next $2.5 billion 0.45% Next $1 billion 0.370%
Next $2.5 billion 0.43% Next $1 billion 0.355%
Next $2.5 billion 0.41% Over $6 billion 0.340%
Over $12.5 billion 0.40%
---------------------------------------------------------------------------------------------------------
</TABLE>
Based upon the Fund's average net assets for the twelve-month period ended
September 30, 2000, the effective advisory fee rate for the Fund was .55%. Based
upon each Fund's average net assets for the twelve-month period ended September
30, 2000, the effective advisory fee rate for Scudder Short Term Bond Fund after
the Reorganization would be 0.45% of average daily net assets.
Administrative Fee
Scudder Short Term Bond Fund has entered into an administration agreement
with Scudder Kemper (the "Administration Agreement"), pursuant to which Scudder
Kemper provides or pays others to provide substantially all of the
administrative services required by the Class A, Class B and Class C shares of
Scudder Short Term Bond Fund (other than those provided by Scudder Kemper under
its investment management agreement with that Fund) in exchange for the payment
by Scudder Short Term Bond Fund of an annual administrative services fee (the
"Administrative Fee") equal to .325%, .375% and .35% of average daily net assets
attributable to the Class A, Class B and Class C shares, respectively. The fees
for the services provided by Kemper
-14-
<PAGE>
Distributors, Inc. ("KDI") under its current services agreement and underwriting
and distribution agreement with Scudder Short Term Bond Fund are not covered by,
and are in addition to, the Administrative Fee. One effect of this arrangement
is to make Scudder Short Term Bond Fund's future expense ratio more predictable.
On the other hand, the administrative fee rate does not decrease with economies
of scale from increases in asset size or decreased operating expenses. The
details of this arrangement (including expenses that are not covered) are set
out below.
Various service providers (the "Service Providers"), some of which are
affiliated with Scudder Kemper, provide certain services to Scudder Short Term
Bond Fund pursuant to separate agreements. These Service Providers may differ
from current Service Providers of the Fund. Scudder Fund Accounting Corporation,
a subsidiary of Scudder Kemper, computes net asset value for Scudder Short Term
Bond Fund and maintains its accounting records. Kemper Service Company ("KSvC"),
also a subsidiary of Scudder Kemper, is the transfer, shareholder servicing and
dividend-paying agent for the Class A, Class B and Class C shares of Scudder
Short Term Bond Fund. Scudder Trust Company, an affiliate of Scudder Kemper,
provides subaccounting and recordkeeping services for shareholder accounts in
certain retirement and employee benefit plans. As custodian, State Street Bank
and Trust Company ("State Street") holds the portfolio securities of Scudder
Short Term Bond Fund, pursuant to a custodian agreement. Other Service Providers
include the independent public accountants and legal counsel for Scudder Short
Term Bond Fund.
Under the Administration Agreement, each Service Provider provides the
services to Scudder Short Term Bond Fund described above, except that Scudder
Kemper pays these entities for the provision of their services to Scudder Short
Term Bond Fund and pays most other fund expenses, including insurance,
registration, printing and postage fees. In return, Scudder Short Term Bond Fund
pays Scudder Kemper the Administrative Fee.
The Administration Agreement will remain in effect with respect to the
Class A, Class B and Class C shares for an initial term ending September 30,
2003, subject to earlier termination by the trustees that oversee Scudder Short
Term Bond Fund. The fee payable by Scudder Short Term Bond Fund to Scudder
Kemper pursuant to the Administration Agreement is reduced by the amount of any
credit received from Scudder Short Term Bond Fund's custodian for cash balances.
Certain expenses of Scudder Short Term Bond Fund are not borne by Scudder
Kemper under the Administration Agreement, such as taxes, brokerage, interest
and extraordinary expenses, and the fees and expenses of the Independent
Trustees (including the fees and expenses of their independent counsel). Scudder
Short Term Bond Fund continues to pay the fees required by its investment
management agreement with Scudder Kemper. In addition, it pays the fees under
its services agreement and underwriting and distribution services agreement with
KDI, as described in "Distribution and Service Fees" below.
Comparison of Expenses
The tables and examples below are designed to assist you in understanding
the various costs and expenses that you will bear directly or indirectly as an
investor in the Class A, Class B and Class C shares of Scudder Short Term Bond
Fund, and compares these with the expenses of the Fund. [Comparative statement
regarding expenses to be inserted.] Unless otherwise noted, the information is
based on each Fund's expenses and average daily net assets during the twelve
months
-15-
<PAGE>
ended September 30, 2000 (prior to the creation of Class A, Class B and Class C
shares) and on a pro forma basis as of that date and for the twelve month period
then ended, assuming the Reorganization had been in effect for the period.
Expense Comparison Table
Class A Shares
<TABLE>
<CAPTION>
Scudder
Short Term Pro Forma
Fund Bond Fund (Combined)(1)
---- --------- ---------
<S> <C> <C> <C>
Shareholder Fees
----------------
Maximum Sales Charge (Load) Imposed on 2.75% 2.75% 2.75%
Purchases (as % of offering price)
Maximum Contingent Deferred Sales Charge None None None
(Load) (as % of redemption proceeds)(2)
Annual Fund Operating Expenses (unaudited)
------------------------------
(as a % of average net assets)
------------------------------
Management Fees .55% .45% .45%
Rule 12b-1/ASF Fees .22% .25% .22%
Other Expenses .35% .33%(3) .33%
---- ---- ----
Total Annual Fund Operating Expenses 1.12% 1.03% 1.00%
Expense Example of Total Operating
----------------------------------
Expenses at the End of the Period(4)
---------------------------------
One Year $ 386 $ 377 $ 374
Three Years $ 621 $ 594 $ 585
Five Years $ 875 $ 828 $ 812
Ten Years $1,601 $1,500 $1,466
</TABLE>
----------------
-16-
<PAGE>
Notes to Expense Comparison Table:
---------------------------------
(1) The Pro Forma column reflects expenses estimated for the Reorganized Fund
subsequent to the Reorganization and reflects the effect of the
Reorganization, including the implementation of Scudder Short Term Bond
Fund's Administration Agreement and adoption of a distribution plan.
(2) Class A shares purchased under the Large Order NAV Purchase Privilege have
a 1% contingent deferred sales charge if sold during the first year after
purchase and .50% if sold during the second year after purchase.
(3) Restated to reflect the implementation of Scudder Short Term Bond Fund's
Administration Agreement.
(4) Expense examples reflect what an investor would pay on a $10,000
investment, assuming a 5% annual return, the reinvestment of all dividends
and total operating expenses remain the same.
Expense Comparison Table
Class B Shares
<TABLE>
<CAPTION>
Scudder
Short Term Pro Forma
Fund Bond Fund (Combined)(1)
---- --------- ---------
<S> <C> <C> <C>
Shareholder Fees
----------------
Maximum Sales Charge (Load) Imposed on None None None
Purchases (as % of offering price)
Maximum Contingent Deferred Sales Charge 4.00% 4.00% 4.00%
(Load) (as % of redemption proceeds)(2)
Annual Fund Operating Expenses (unaudited)
------------------------------
(as a % of average net assets)
------------------------------
Management Fees .55% .45% .45%
Rule 12b-1/ASF Fees 1.00% 1.00% 1.00%
Other Expenses .35% .38%(3) .38%
---- ---- ----
Total Annual Fund Operating Expenses 1.90% 1.83% 1.83%
Expense Example of Total Operating
----------------------------------
Expenses Assuming Redemption at the
-----------------------------------
End of the Period(4)
-----------------
One Year $ 593 $ 586 $ 586
Three Years $ 897 $ 876 $ 876
Five Years $1,227 $1,190 $1,190
Ten Years $1,832 $1,745 $1,745
</TABLE>
-17-
<PAGE>
<TABLE>
<CAPTION>
Expense Example of Total Operating
----------------------------------
Expenses Assuming No Redemption at the
--------------------------------------
End of the Period(4)
------------------
<S> <C> <C> <C>
One Year $ 193 $ 186 $ 186
Three Years $ 597 $ 576 $ 576
Five Years $1,027 $ 990 $ 990
Ten Years $1,832 $1,745 $1,745
</TABLE>
____________
Notes to Expense Comparison Table:
---------------------------------
(1) The Pro Forma column reflects expenses estimated for the Reorganized Fund
subsequent to the Reorganization and reflects the effect of the
Reorganization, including the implementation of Scudder Short Term Bond
Fund's Administration Agreement and adoption of a distribution plan.
(2) Contingent deferred sales charges on Class B shares sold within the first
six years of ownership are 4% in the first year, 3% in the second and third
year, 2% in the fourth and fifth year, and 1% in the sixth year.
(3) Restated to reflect the implementation of Scudder Short Term Bond Fund's
Administration Agreement.
(4) Expense examples reflect what an investor would pay on a $10,000
investment, assuming a 5% annual return, the reinvestment of all dividends
and total operating expenses remain the same. Assumes conversion to Class A
shares six years after purchase.
Expense Comparison Table
Class C Shares
<TABLE>
<CAPTION>
Scudder Reorganized
Short Term Fund
Fund Bond Fund Pro Forma(1)
---- --------- ---------
<S> <C> <C> <C>
Shareholder Fees
----------------
Maximum Sales Charge (Load) Imposed on None None None
Purchases (as % of offering price)
Maximum Contingent Deferred Sales Charge 1.00% 1.00% 1.00%
(Load) (as % of redemption proceeds)(2)
Annual Fund Operating Expenses (unaudited)
------------------------------
(as a % of average net assets)
------------------------------
Management Fees .55% .45% .45%
Rule 12b-1/ASF Fees 1.00% 1.00% 1.00%
Other Expenses .30% .35% .35%
---- ---- ----
Total Annual Fund Operating Expenses 1.85% 1.80% 1.80%
</TABLE>
-18-
<PAGE>
<TABLE>
<CAPTION>
Expense Example of Total Operating
----------------------------------
Expenses Assuming Redemption at the
-----------------------------------
End of the Period(4)
-----------------
<S> <C> <C> <C>
One Year $ 288 $ 283 $ 283
Three Years $ 582 $ 566 $ 566
Five Years $1,001 $ 975 $ 975
Ten Years $2,169 $2,116 $2,116
Expense Example of Total Operating
----------------------------------
Expenses Assuming No Redemption at the
--------------------------------------
End of the Period(4)
-----------------
One Year $ 188 $ 183 $ 183
Three Years $ 582 $ 566 $ 566
Five Years $1,001 $ 975 $ 975
Ten Years $2,169 $2,116 $2,116
</TABLE>
_____________
Notes to Expense Comparison Table:
---------------------------------
(1) The Pro Forma column reflects expenses estimated for the Reorganized Fund
subsequent to the Reorganization and reflects the effect of the
Reorganization, including the implementation of Scudder Short Term Bond
Fund's Administration Agreement and adoption of a distribution plan.
(2) Contingent deferred sales charge on Class C shares is 1% for shares sold
during the first year after purchase.
(3) Restated to reflect the implementation of Scudder Short Term Bond Fund's
Administration Agreement.
(4) Expense examples reflect what an investor would pay on a $10,000
investment, assuming a 5% annual return, the reinvestment of all dividends
and total operating expenses remain the same.
Financial Highlights
The financial highlights table for Scudder Short Term Bond Fund prior to
the creation of Class A, Class B and Class C shares, which is intended to help
you understand Scudder Short Term Bond Fund's financial performance for the past
five years, is included in Scudder Short Term Bond Fund's prospectus dated March
1, 2000, which is included in the materials that have been provided to you with
this document.
Distribution and Services Fees
Pursuant to an underwriting and distribution services agreement with
Scudder Short Term Bond Fund, KDI, 222 South Riverside Plaza, Chicago, Illinois
60606, an affiliate of the Investment Manager, acts as the principal underwriter
and distributor of the Class A, Class B and Class C shares of that Fund and acts
as agent of the Fund in the continuing offer of such shares. Scudder Short Term
Bond Fund has adopted distribution plans on behalf of the Class A, Class B and
Class C shares in accordance with Rule 12b-1 under the 1940 Act that are
substantially identical to the existing distribution plans adopted by the Fund,
with one exception. As under the current distribution plans for the Fund,
Scudder Short Term Bond Fund pays KDI an asset-based fee at an annual rate of
0.75% of Class B and Class C shares. The distribution plans for Scudder Short
Term Bond Fund, however, unlike the distribution plans for the Fund, also
-19-
<PAGE>
authorize the payment to KDI of the 0.25% services fee with respect to the Class
A, Class B and Class C shares pursuant to the services agreement described
below. Neither KDI nor the Trustees of the Fund believe that the services
performed by KDI under the services agreement have been primarily intended to
result in sales of fund shares (i.e., "distribution" services) as defined in
Rule 12b-1, but rather are post-sale administrative and other services provided
to existing shareholders. Nonetheless, to avoid legal uncertainties due to the
ambiguity of the language contained in Rule 12b-1 and eliminate any doubt that
may arise in the future regarding whether the services performed by KDI under
the services agreement are "distribution" services, the distribution plans for
Scudder Short Term Bond Fund authorize the payment of the services fee. The
fact that the services fee is authorized by Scudder Short Term Bond Fund's
distribution plans does not change the fee rate or affect the nature or
quality of the services provided by KDI.
Pursuant to the services agreement with Scudder Short Term Bond Fund, which
is substantially identical to the current services agreement with the Fund, KDI
receives a services fee of up to 0.25% per year with respect to the Class A,
Class B and Class C shares. KDI uses the services fee to compensate financial
services firms ("firms") for providing personal services and maintenance of
accounts for their customers that hold those classes of shares of Scudder Short
Term Bond Fund, and may retain any portion of the fee not paid to firms to
compensate itself for administrative functions performed for the Fund. All fee
amounts are payable monthly and are based on the average daily net assets of
each Fund attributable to the relevant class of shares.
Purchases, Exchanges, and Redemptions
Both Funds are part of the Scudder Kemper complex of mutual funds. The
procedures for purchases, exchanges, and redemptions of Class A, Class B and
Class C shares of Scudder Short Term Bond Fund are identical to those of the
Fund. Shares of Scudder Short Term Bond Fund are exchangeable for shares of the
same class of most other open-end funds advised by Scudder Kemper offering such
shares.
Corresponding classes of shares of Scudder Short Term Bond Fund have
identical sales charges to those of the Fund. Scudder Short Term Bond Fund has a
maximum initial sales charge of 2.75% on Class A shares. Shareholders who
purchase $1 million or more of Class A shares pay no initial sales charge but
may have to pay a contingent deferred sales charge (a "CDSC") of up to 1% if the
shares are sold within 2 years of the date on which they were purchased. Class B
shares are sold without a front-end sales charge, but may be subject to a CDSC
upon redemption, depending on the length of time the shares are held. The CDSC
begins at 4% for shares sold in the first year, declines to 1% in the sixth year
and is eliminated after the sixth year. After six years, Class B shares
automatically convert to Class A shares. Class C shares are sold without a
front-end sales charge, but may be subject to a CDSC of up to 1% if the shares
are sold within one year of purchase.
Class A, Class B and Class C shares of Scudder Short Term Bond Fund
received in the Reorganization will be issued at net asset value, without a
sales charge, and no CDSC will be imposed on any shares of the Fund exchanged
for shares of Scudder Short Term Bond Fund as a result of the Reorganization.
However, following the Reorganization, any CDSC that applies to shares of the
Fund will continue to apply to shares of Scudder Short Term Bond Fund received
in the Reorganization, using the original purchase date for such shares to
calculate the holding period, rather than the date such shares are received in
the Reorganization.
Services available to shareholders of Scudder Short Term Bond Fund will be
identical to those available to shareholders of the Fund and include the
purchase and redemption of shares through an
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<PAGE>
automated telephone system and over the Internet, telephone redemptions, and
exchanges by telephone to most other Scudder Kemper funds that offer Class A,
Class B and Class C shares, and reinvestment privileges. Please see the Fund's
prospectus for additional information.
Dividends and Other Distributions
Each Fund intends to declare dividends from its net investment income daily
and distribute them monthly. Each Fund intends to distribute net realized
capital gains after utilization of capital loss carryforwards, if any, in
November or December of each year. An additional distribution may be made if
necessary. Shareholders of each Fund can have their dividends and distributions
automatically invested in additional shares of the same class of that Fund, or a
different fund in the same family of funds, at net asset value and credited to
the shareholder's account on the payment date or, at the shareholder's election,
paid in cash. For retirement plans, reinvestment is the only option.
If the Plan is approved by the Fund's shareholders, the Fund will pay its
shareholders a distribution of all undistributed net investment income and
undistributed realized net capital gains immediately prior to the Closing.
Other Differences Between the Funds.
Charter Documents.
The Fund is organized as a Massachusetts business trust and is governed by
an Agreement and Declaration of Trust, dated May 28, 1997, as amended. Scudder
Short Term Bond Fund is a series of Scudder Funds Trust, which is also a
Massachusetts business trust and is governed a Declaration of Trust dated July
24, 1981. Although the organizational documents of the Fund and of Scudder Short
Term Bond Fund are substantially similar, some differences do exist. The more
significant differences are listed below.
. Fund shareholders may remove a Trustee of the Fund by a vote of
50% of the outstanding shares of the Fund; a vote of two-thirds of the
outstanding shares of Scudder Short Term Bond Fund is required to
remove a Trustee of Scudder Short Term Bond Fund.
. A special meeting of the Fund may be called by shareholders of
the Fund holding 25% of the outstanding shares of the Fund (10% if the
purpose of the meeting is to consider the removal of a Trustee); a
special meeting for all purposes may be called by shareholders holding
10% of the outstanding shares of Scudder Short Term Bond Fund.
Trustees and Officers.
The Trustees of the Fund, currently and as proposed under Proposal 1,
are different from those of Scudder Short Term Bond Fund. As described in
Scudder Short Term Bond Fund's prospectus that has been included in the
materials that you received with this document, the following individuals
comprise the Board of Trustees of Scudder Short Term Bond Fund: Linda C.
Coughlin, Henry P. Becton, Jr., Dawn-Marie Driscoll, Edgar R. Fiedler,
Keith R. Fox, Joan E. Spero, Jean Gleason Stromberg, Jean C. Tempel, and
Steven Zaleznick. In addition, the officers of the Fund and Scudder Short
Term Bond Fund are different. (See Proposal 1 and the Statement of
Additional Information for further information.)
Fiscal Year.
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<PAGE>
The Fund's fiscal year-end is August 31. Scudder Short Term Bond Fund's
fiscal year-end is December 31.
Auditors.
The Fund's auditors are Ernst & Young LLP. Scudder Short Term Bond Fund's
auditors are PricewaterhouseCoopers LLP.
Tax Consequences
As a condition to the Reorganization, each Fund will have received an
opinion of Willkie Farr & Gallagher in connection with the Reorganization, to
the effect that, based upon certain facts, assumptions and representations, the
Reorganization will constitute a tax-free reorganization within the meaning of
section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code").
If the Reorganization constitutes a tax-free reorganization, no gain or loss
will be recognized by the Fund or its shareholders as a direct result of the
Reorganization. See "The Proposed Transaction -- Federal Income Tax
Consequences."
* * *
The preceding is only a summary of certain information contained in this
Proxy Statement/Prospectus relating to the Reorganization. This summary is
qualified by reference to the more complete information contained elsewhere in
this Proxy Statement/Prospectus, the prospectuses and statements of additional
information of the Funds, and the Plan. Shareholders should read this entire
Proxy Statement/Prospectus carefully.
II. PRINCIPAL RISK FACTORS
The principal risks presented by Scudder Short Term Bond Fund are similar
to those presented by the Fund to the extent they may invest in similar
securities. The main risks applicable to each Fund include, among others, risks
of investing in government securities, management risk (i.e., securities
selection by the Investment Manager), interest rate risk, and risk associated
with credit quality. There is no guarantee that the U.S. government will provide
support to agencies or instrumentalities issuing the securities and such
securities may include risk of loss of principal and interest. In addition, each
Fund is subject to the risk that if interest rates drop significantly, holders
of the mortgages represented by mortgage-backed securities are more likely to
refinance, thus prepaying their obligations and potentially forcing the Funds to
reinvest in securities that pay lower interest rates. To the extent that Scudder
Short Term Bond Fund invests in foreign securities, it may be exposed to
additional risks associated with such investments and foreign currency risk.
Foreign investments tend to be more volatile than their U.S. counterparts, for
various reasons including political and economic uncertainties and difficulty in
obtaining accurate information. In addition, investments in lower rated
securities entail relatively greater risk of loss of income and principal than
investments in higher rated securities, and may fluctuate more in value. This
risk could affect each Fund, but may be more pronounced for the Fund to the
extent that it invests a portion of its assets in junk bonds. The Funds are not
insured or guaranteed by the FDIC or any other government agency. Share prices
will go up and down, so be aware that you could lose money.
-22-
<PAGE>
For a further discussion of the investment techniques and risk factors
applicable to the Funds, see the "Investment Objectives, Policies and
Restrictions of the Funds" above, and each Fund's prospectus and statement of
additional information.
III. THE PROPOSED TRANSACTION
Description of the Plan
As stated above, the Plan provides for the transfer of all or substantially
all of the assets of the Fund to Scudder Short Term Bond Fund in exchange for
that number of full and fractional Class A, Class B and Class C shares having an
aggregate net asset value equal to the aggregate net asset value of the shares
of the corresponding classes of the Fund as of the close of business on the
Valuation Date. Scudder Short Term Bond Fund will assume all of the liabilities
of the Fund. The Fund will distribute the Class A, Class B and Class C shares
received in the exchange to the shareholders of the Fund in complete liquidation
of the Fund. The Fund will then be terminated.
Upon completion of the Reorganization, each shareholder of the Fund will
own that number of full and fractional Class A, Class B and Class C Shares
having an aggregate net asset value equal to the aggregate net asset value of
such shareholder's shares of the corresponding class held in the Fund as of the
close of business on the Valuation Date. Such shares will be held in an account
with Scudder Short Term Bond Fund identical in all material respects to the
account currently maintained by the Fund for such shareholder. In the interest
of economy and convenience, Class A, Class B and Class C shares issued to the
Fund's shareholders in the Reorganization will be in uncertificated form. If
Class A, Class B or Class C shares of the Fund are represented by certificates
prior to the Closing, such certificates should be returned to the Fund's
shareholder servicing agent. Any Class A, Class B or Class C shares of Scudder
Short Term Bond Fund distributed in the Reorganization to shareholders in
exchange for certificated shares of the Fund may not be transferred, exchanged
or redeemed without delivery of such certificates.
Until the Closing, shareholders of the Fund will continue to be able to
redeem their shares at the net asset value next determined after receipt by the
Fund's transfer agent of a redemption request in proper form. Redemption and
purchase requests received on or after the Valuation Date by the transfer agent
will be treated as requests received for the redemption or purchase of Class A,
Class B or Class C shares of Scudder Short Term Bond Fund received by the
shareholder in connection with the Reorganization.
The obligations of each of the Fund and Scudder Funds Trust on behalf of
Scudder Short Term Bond Fund under the Plan are subject to various conditions,
as stated therein. The Plan also requires that all filings be made with, and all
authority be received from, the SEC and state securities commissions as may be
necessary in the opinion of counsel to permit the parties to carry out the
transactions contemplated by the Plan. Each Fund is in the process of making the
necessary filings. To provide for unforseen events, the Plan may be terminated:
(i) by the mutual agreement of the parties; (ii) by either party if the Closing
has not occurred by _____ __, 2001, unless such date is extended by mutual
agreement of the parties; or (iii) by either party if the other party has
materially breached its obligations under the Plan or made a material
misrepresentation in the Plan or in connection with the Reorganization. The Plan
may also be amended by mutual agreement in writing. However, no amendment may be
made following the shareholder meeting if such amendment would have the effect
of changing the provisions for determining the number of shares of Scudder Short
Term Bond Fund to be issued to the Fund in the Plan to the detriment of the
Fund's shareholders without their approval. For a complete description of the
terms and conditions of the Reorganization, please refer to the Plan at Exhibit
A.
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<PAGE>
Board Approval of the Proposed Transaction
As discussed above, the Reorganization is part of a Scudder Kemper
initiative that is intended to restructure and streamline the management and
operations of the funds Scudder Kemper advises. Scudder Kemper first proposed
the Reorganization to the Trustees of the Fund at a meeting held on May 24,
2000, see "Synopsis--Background of the Reorganization" above. This initiative
includes five major components:
(i) A change in branding to offer virtually all funds advised by Scudder
Kemper under the Scudder Investments name, with a concentration on
intermediary distribution;
(ii) The combination of funds with similar investment objectives and
policies, including in particular the combination of the Kemper Funds
with similar Scudder Funds currently offered to the general public;
(iii) The liquidation of certain small funds which have not achieved market
acceptance and which are unlikely to reach an efficient operating
size;
(iv) The implementation of an administration agreement for the Kemper
Funds similar to that recently adopted by the Scudder Funds covering,
for a single fee rate, substantially all services required for the
operation of the fund (other than those provided under the fund's
investment management agreement) and most expenses; and
(v) The consolidation of certain boards overseeing funds advised by
Scudder Kemper.
The Independent Trustees of the Fund reviewed the potential implications of
these proposals for the Fund as well as the various other funds for which they
serve as board members. They were assisted in this review by their independent
legal counsel and by independent consultants with special expertise in financial
and mutual fund industry matters. Following the May 24 meeting, the Independent
Trustees met in person or by telephone on numerous occasions (including
committee meetings) to review and discuss these proposals, both among themselves
and with representatives of Scudder Kemper, including the "interested" Trustees.
In the course of their review, the Independent Trustees requested and received
substantial additional information and suggested numerous changes to Scudder
Kemper's proposals.
Following the conclusion of this process, the Trustees of the Fund, the
board members of other funds involved and Scudder Kemper reached general
agreement on the elements of a restructuring plan that they believed were in the
best interests of shareholders and, where required, agreed to submit elements of
the plan for approval to shareholders of those funds.
On November 29, 2000, the Board of Trustees, including the Independent
Trustees, unanimously approved the terms of the Reorganization and certain
related proposals. The Trustees have also unanimously agreed to recommend that
the Reorganization be approved by the Fund's shareholders.
In determining whether to recommend that the shareholders of the Fund
approve the Reorganization, the Board of Trustees considered that:
. Given the Fund's relative small size and Scudder Kemper's commitment
to a streamlined family of funds, the Reorganization would allow
shareholders to continue their investment in a comparable fund and
will be effected on a tax-free basis, as opposed to liquidation,
which would be a taxable transaction.
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<PAGE>
. The combined fund would adopt the lower fee schedule of the two Funds'
investment advisory agreements.
. The fixed fee rate under the Administration Agreement is expected to
be, in the case of Class A shares, less than the estimated applicable
operating expenses such class would otherwise pay. In the case of
Class B shares and Class C shares, the fixed fee rate under the
Administration Agreement is expected to be higher than the estimated
current operating expenses such classes would otherwise pay; however,
due to the combined fund's lower investment advisory fee, the overall
expense ratio for Class B and Class C shares is expected to be lower
than the overall expense ratio that would otherwise apply to such
classes.
. It is a condition of the Reorganization that each Fund receive an
opinion of tax counsel that the transaction would be a tax-free
transaction.
. Although the Fund agreed to pay the estimated costs of the
Reorganization allocated to Class A shares and a portion of the
estimated costs of the Reorganization allocated to Class B shares,
management has estimated that such allocated costs will be recoverable
from lower overall expense rates within six months of completion of
the Reorganization. Scudder Kemper agreed to pay all of the estimated
costs of the Reorganization allocated to Class C shares, a portion of
the estimated costs of the Reorganization allocated to Class B shares
and all of the costs of the Reorganization that exceed estimated
costs.
As part of their deliberations, the Trustees considered, among other
things: (a) the fees and expense ratios of the Funds, including comparisons
between the expenses of the Fund and the estimated operating expenses of Scudder
Short Term Bond Fund after the Reorganization, and between the estimated
operating expenses of Scudder Short Term Bond Fund and other mutual funds with
similar investment objectives; (b) the terms and conditions of the
Reorganization and whether the Reorganization would result in the dilution of
shareholder interests; (c) the compatibility of the Funds' investment
objectives, policies, restrictions and portfolios; (d) the service features
available to shareholders of each Fund; (e) prospects for Scudder Short Term
Bond Fund to attract additional assets; and (f) the investment performance of
each Fund.
As part of their analysis, the Trustees considered direct and indirect
costs to shareholders including: (a) the direct costs of the Reorganization to
be borne by existing shareholders; (b) the potential costs of any necessary
rebalancing of the Fund's portfolio; and (c) the potential tax consequences to
shareholders as a result of differences in the Funds' realized or unrealized
capital gains or losses and capital loss carry forwards.
Costs. The anticipated costs of the Reorganization allocable to the
Fund are $55,842, which includes board meeting fees, legal, accounting
and other consultant fees, and proxy solicitation costs. Class A
shares will pay $32,665, which is 100% of the estimated costs
allocable to such class. Class B shares will pay a portion of their
estimated allocable costs of the Reorganization ($12,260
out of $20,571 (59.6%)). Scudder Kemper is bearing the remaining costs
for Class B shares and all costs for Class C shares, including any
cost overruns (except that Scudder Short Term Bond Fund is bearing the
SEC and state registration and notice fees which are estimated to be
$_________).
The costs of the Reorganization borne by the Fund have been expensed,
resulting in a reduction of the Class A and Class B shares' net asset
value per share of $0.0021 and $0.0026, respectively. Management of
the Fund expects that reduced operating expenses
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<PAGE>
resulting from the Reorganization should allow for recovery
of the costs of the Reorganization within 6 months after the
Closing.
Portfolio Transaction Costs. To consider the potential costs
of any necessary rebalancing of the Fund's portfolio as a
result of the Reorganization, the Independent Trustees asked
for, and Scudder Kemper provided, an estimate of the
expected turnover of the securities of the Fund, as a
percentage of the assets of the combined Fund, as a result
of the Reorganization. Scudder Kemper estimated such
turnover to be 5% to 10%, [which would result in estimated
brokerage expenses and/or transaction costs of $________
(less than $0.01 per share of the Fund), which the Trustees
considered were immaterial]. These estimates were based upon
current market conditions at the time and any actual costs
will be dependent upon liquidity and market conditions at
the Closing. In a "bear" market, for example, such costs
could be substantially higher and could result in capital
losses.
Potential Tax Consequences. Although the Reorganizations
will be achieved on a Federally tax-free basis (see "Federal
Income Tax Consequences" below, there are differences in the
Funds' realized or unrealized capital gains or losses and
capital loss carry forwards, which at [ ], 2000 were as
follows (although they may differ at the time of the
Closing):
[Charts to be inserted]
As noted above, under the terms of the Plan, shareholders of
the Fund will receive shares of Scudder Short Term Bond Fund
in an amount equal to the relative net asset value of their
Fund shares. The Trustees considered whether an adjustment
in this formula should be made for the above tax
differentials. The Trustees determined that no adjustment
should be made because the potential tax consequences were
not material, quantifiable or predictable because of (1)
uncertainties as to the amounts of any actual future
realization of capital gains or losses in view of future
changes in portfolio values, (2) the exemption of some
shareholders from Federal income taxation, and (3) the
differing consequences of Federal and various other income
taxation upon a distribution received by each shareholder
whose tax liability (if any) is determined by the net effect
of a multitude of considerations that are individual to the
shareholder. Shareholders should, however, review their own
tax situation to determine what effect, if any, these
potential tax differences may have on them.
The Trustees also gave extensive consideration to possible economies of
scale that might be realized by Scudder Kemper in connection with the
Reorganization, as well as the other fund combinations included in Scudder
Kemper's restructuring proposal.
Based on all the foregoing, the Board concluded that the Fund's
participation in the Reorganization would be in the best interests of the Fund
and would not dilute the interests of the Fund's shareholders. The Board of
Trustees, including the Independent Trustees, unanimously recommends that
shareholders of the Fund approve the Reorganization.
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<PAGE>
Description of the Securities to Be Issued
Scudder Short Term Bond Fund is a series of Scudder Funds Trust (the
"Acquiring Trust"), a Massachusetts business trust established under a
Declaration of Trust dated June 24, 1981, as amended. The Acquiring Trust's
authorized capital consists of an unlimited number of shares of beneficial
interest, par value $0.01 per share. The Trustees of the Acquiring Trust are
authorized to divide the shares of the Acquiring Trust into separate series.
Scudder Short Term Bond Fund is the only active series of the Acquiring Trust
that the board has created to date. The Trustees of the Acquiring Trust are also
authorized to further divide the shares of the series of the Acquiring Trust
into classes. The shares of Scudder Short Term Bond Fund are currently divided
into five classes, Class S, Class AARP, Class A, Class B and Class C. Although
shareholders of different classes of a series have an interest in the same
portfolio of assets, shareholders of different classes bear different expense
levels because distribution costs and certain other expenses approved by the
Trustees of the Acquiring Trust are borne directly by the class incurring such
expenses.
Each share of each class of Scudder Short Term Bond Fund represents an
interest in Scudder Short Term Bond Fund that is equal to and proportionate with
each other share of that class of Scudder Short Term Bond Fund. Scudder Short
Term Bond Fund shareholders are entitled to one vote per share held on matters
on which they are entitled to vote. In the areas of shareholder voting and the
powers and conduct of the Trustees, there are no material differences between
the rights of shareholders of the Fund and the rights of shareholders of Scudder
Short Term Bond Fund.
Federal Income Tax Consequences
The Reorganization is conditioned upon the receipt by each Fund of an
opinion from Willkie Farr & Gallagher substantially to the effect that, based
upon certain facts, assumptions and representations of the parties, for federal
income tax purposes: (i) the transfer to Scudder Short Term Bond Fund of all or
substantially all of the assets of the Fund in exchange solely for Class A,
Class B and Class C shares and the assumption by Scudder Short Term Bond Fund of
all of the liabilities of the Fund, followed by the distribution of such shares
to the Fund's shareholders in exchange for their shares of the Fund in complete
liquidation of the Fund, will constitute a "reorganization" within the meaning
of Section 368(a)(1) of the Code, and Scudder Short Term Bond Fund and the Fund
will each be "a party to a reorganization" within the meaning of Section 368(b)
of the Code; (ii) no gain or loss will be recognized by the Fund upon the
transfer of all or substantially all of its assets to Scudder Short Term Bond
Fund in exchange solely for Class A, Class B and Class C shares and the
assumption by Scudder Short Term Bond Fund of all of the liabilities of the Fund
or upon the distribution of the Class A, Class B and Class C shares to
shareholders of the Fund in exchange for their shares of the Fund; (iii) the
basis of the assets of the Fund in the hands of Scudder Short Term Bond Fund
will be the same as the basis of such assets of the Fund immediately prior to
the transfer; (iv) the holding period of the assets of the Fund in the hands of
Scudder Short Term Bond Fund will include the period during which such assets
were held by the Fund; (v) no gain or loss will be recognized by Scudder Short
Term Bond Fund upon the receipt of the assets of the Fund in exchange for Class
A, Class B and Class C shares and the assumption by Scudder Short Term Bond Fund
of all of the liabilities of the Fund; (vi) no gain or loss will be recognized
by the shareholders of the Fund upon the receipt of the Class A, Class B and
Class C shares solely in exchange for their shares of the Fund as part of the
transaction; (vii) the basis of the Class A, Class B and Class C shares received
by each shareholder of the Fund will be the same as the basis of the shares of
the Fund exchanged therefor; and (viii) the holding period of Class A, Class B
and Class C shares received by each shareholder of the Fund will include the
holding period during which the shares of the Fund exchanged therefor were held,
provided that at the time of the exchange the shares of the Fund were held as
capital assets in the hands of such shareholder of the Fund.
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<PAGE>
After the Closing, Scudder Short Term Bond Fund may dispose of certain
securities received by it from the Fund in connection with the Reorganization,
which may result in transaction costs and capital gains.
While the Fund is not aware of any adverse state or local tax consequences
of the proposed Reorganization, it has not requested any ruling or opinion with
respect to such consequences and shareholders may wish to consult their own tax
adviser with respect to such matters.
Legal Matters
Certain legal matters concerning the federal income tax consequences of the
Reorganization will be passed on by Willkie Farr & Gallagher, 787 Seventh
Avenue, New York, New York 10019. Certain legal matters concerning the issuance
of shares of Scudder Short Term Bond Fund will be passed on by Dechert, Ten Post
Office Square, South, Boston, Massachusetts 02109.
Capitalization
The following table shows on an unaudited basis the capitalization of
Scudder Short Term Bond Fund and the Fund as of September 30, 2000 and on a pro
forma basis as of that date, giving effect to the Reorganization(1):
<TABLE>
<CAPTION>
Scudder Short Pro Forma Pro Forma
Fund Term Bond Fund Adjustments Combined
---- -------------- ----------- --------
<S> <C> <C> <C> <C>
Net Assets
Class S shares $647,224,465 --(3) $ 647,224,465
Class AARP shares $353,046,917 --(3) $ 353,046,917
Class A shares $120,898,863 --(2) $ 120,898,863
Class B shares $ 34,587,522 --(2) $ 34,587,522
Class C shares $ 6,708,001 $ 6,708,001
Total Net Assets $1,162,465,768
Shares Outstanding
Class S shares 62,098,331 62,098,331
Class AARP shares 33,869,218 33,869,218
Class A shares 15,160,444 (3,557,866) 11,602,578
Class B shares 4,316,319 (996,979) 3,319,340
Class C shares 837,622 (193,860) 643,762
Net Asset Value
per Share
Class S shares $ 10.42 $ 10.42
Class AARP shares $ 10.42 $ 10.42
Class A shares $ 7.97 $ 10.42
Class B shares $ 8.01 $ 10.42
Class C shares $ 8.01 $ 10.42
</TABLE>
___________________
(1) Assumes the Reorganization had been consummated on September 30, 2000, and
is for informational purposes only. No assurance can be given as to how many
shares of Scudder Short Term Bond Fund will be received by the shareholders of
the Fund on the date the Reorganization takes place, and the foregoing should
not be relied upon to reflect the number of shares of Scudder Short Term Bond
Fund that actually will be received on or after such date.
(2) Represents one-time proxy, legal, accounting and other costs of the
Reorganization to be borne by the Fund.
(3) Represents one-time proxy, legal, accounting and other costs of the
Reorganization to be borne by Scudder Short Term Bond Fund.
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The Board of Trustees unanimously recommends that the shareholders of the
Fund vote in favor of this Proposal 2.
PROPOSAL 3: RATIFICATION OR REJECTION OF THE SELECTION OF INDEPENDENT
AUDITORS
The Board of Trustees, including all of the Independent Trustees, has
selected Ernst & Young LLP to act as independent auditors of the Fund for the
Fund's current fiscal year and recommends that shareholders ratify such
selection. However, if the Plan is approved, as described under Proposal 2,
PricewaterhouseCoopers LLP will serve as the independent auditors for the
combined fund. One or more representatives of Ernst & Young LLP are expected to
be present at the 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.
The Board of Trustees unanimously recommends that shareholders of the
Fund vote in favor of this Proposal 3.
ADDITIONAL INFORMATION
Information about the Funds
Additional information about the Funds and the Reorganization has been
filed with the SEC and may be obtained without charge by writing to Scudder
Investor Services, Inc., Two International Place, Boston, MA 02110-4103, or by
calling 1-800-[ ].
The Funds are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and the 1940 Act, and in accordance therewith,
file reports, proxy material and other information about each of the Funds with
the SEC. Such reports, proxy material and other information filed by each Fund
can be inspected and copied at the Public Reference Room maintained by the SEC
at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the following SEC
Regional Offices: Northeast Regional Office, 7 World Trade Center, Suite 1300,
New York, NY 10048; Southeast Regional Office, 1401 Brickell Avenue, Suite 200,
Miami, FL 33131; Midwest Regional Office, Citicorp Center, 500 W. Madison
Street, Chicago, IL 60661-2511; Central Regional Office, 1801 California Street,
Suite 4800, Denver, CO 80202-2648; and Pacific Regional Office, 5670 Wilshire
Boulevard, 11th Floor, Los Angeles, CA 90036-3648. Copies of such material can
also be obtained from the Public Reference Branch, Office of Consumer Affairs
and Information Services, Securities and Exchange Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates. The SEC maintains an Internet
World Wide Web site (at http://www.sec.gov) which contains the prospectuses and
statements of additional information for the Funds, materials that are
incorporated by reference into the prospectuses and statements of additional
information, and other information about the Funds.
General
Proxy Solicitation. Proxy solicitation costs will be considered
Reorganization expenses and will be allocated accordingly. See "The Proposed
Transaction - Board Approval of the Proposed Transaction." In addition to
solicitation by mail, certain officers and representatives of the Fund, officers
and employees of Scudder Kemper 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.
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<PAGE>
Any shareholder of the Fund giving a proxy has the power to revoke it by
mail (addressed to the Secretary at the principal executive office of the Fund,
c/o Scudder Kemper Investments, Inc., at the address for the Fund shown at the
beginning of this Proxy Statement/Prospectus) or in person at the 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 Meeting will be
voted as specified in the proxy or, if no specification is made, in favor of
each Proposal.
The presence at any shareholders' meeting, in person or by proxy, of the
holders of at least 30% of the shares of the Fund entitled to be cast shall be
necessary and sufficient to constitute a quorum for the transaction of business.
In the event that the necessary quorum to transact business or the vote required
to approve any Proposal is not obtained at the Meeting, the persons named as
proxies may propose one or more adjournments of the Meeting in accordance with
applicable law to permit further solicitation of proxies with respect to that
Proposal. Any such adjournment as to a matter will require the affirmative vote
of the holders of a majority of the Fund's shares present in person or by proxy
at the Meeting. The persons named as proxies will vote in favor of any such
adjournment those proxies which they are entitled to vote in favor of that
Proposal 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 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.
The election of the Trustees under Proposal 1 requires the affirmative vote
of a plurality of the shares of the Fund voting on such election. Approval of
Proposal 2 requires the affirmative vote of the holders of a majority of the
Fund's shares outstanding and entitled to vote thereon. Approval of Proposal 3
requires the affirmative vote of a majority of the shares of the Fund voting at
the Meeting. Abstentions and broker non-votes will not be counted in favor of,
but will have no other effect on, Proposals 1 and 3, and will have the effect of
a "no" vote on Proposal 2.
Holders of record of the shares of the Fund at the close of business on
March 5, 2001 will be entitled to one vote per share on all business of the
Meeting. As of February 5, 2001, there were [ ] Class A shares, [ ] Class B
shares and [ ] Class C shares of the Fund outstanding.
[As of December 31, 2000, the officers and Trustees of Scudder Short Term
Bond Fund as a group owned beneficially less than 1% of the outstanding shares
of each class of Scudder Short Term Bond Fund.] Appendix 2 hereto sets forth the
beneficial owners of more than 5% of each Fund's shares. To the best of each
Fund's knowledge, as of December 31, 2000, no person owned beneficially more
than 5% of either Fund's outstanding shares, except as stated on Appendix 2.
Shareholder Communications Corporation ("SCC") has been engaged to assist
in the solicitation of proxies, at an estimated cost of $[ ]. As the Meeting
date approaches, certain shareholders of the Fund may receive a telephone call
from a representative of SCC if their votes have not yet been received.
Authorization to permit SCC to execute proxies may be obtained by telephonic or
electronically transmitted instructions from shareholders of the Fund. Proxies
that are obtained telephonically will be recorded in accordance with the
procedures described below. The Trustees believe that these procedures are
reasonably designed to ensure that both the identity of the shareholder casting
the vote and 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 and address, or the last
four digits of the shareholder's social security or
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<PAGE>
employer identification number, or both, and to confirm that the shareholder has
received the proxy materials in the mail. If the shareholder is a corporation or
other entity, the SCC representative is required to ask for the person's title
and confirmation that the person is authorized to direct the voting of the
shares. 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 on the proxy card(s), and ask for the shareholder's
instructions on the Proposals. Although the SCC representative is permitted to
answer questions about the process, he or she is not permitted to recommend to
the shareholder how to vote, other than to read any recommendation set forth in
the Proxy Statement/Prospectus. SCC will record the shareholder's instructions
on the card. Within 72 hours, the shareholder will be sent a letter or 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.
Shareholders may also provide their voting instructions through telephone
touch-tone voting or Internet voting. These options require shareholders to
input a control number which is located on each voting instruction card. After
inputting this number, shareholders will be prompted to provide their voting
instructions on the Proposals. Shareholders will have an opportunity to review
their voting instructions and make any necessary changes before submitting their
voting instructions and terminating their telephone call or Internet link.
Shareholders who vote on the Internet, in addition to confirming their voting
instructions prior to submission, will also receive an e-mail confirming their
instructions.
If a shareholder wishes to participate in the Meeting, but does not wish to
give a proxy by telephone or electronically, the shareholder may still submit
the proxy card(s) originally sent with the Proxy Statement/Prospectus or attend
in person. Should shareholders require additional information regarding the
proxy or replacement proxy card(s), they may contact SCC toll-free at
1-800-[ ]. Any proxy given by a shareholder is revocable until voted at
the Meeting.
Shareholder Proposals for Subsequent Meetings. Shareholders wishing to
submit proposals for inclusion in a proxy statement for a shareholder meeting
subsequent to the Meeting, if any, should send their written proposals to the
Secretary of the Fund, c/o Scudder Kemper Investments, Inc., 222 South Riverside
Plaza, Chicago, Illinois 60606, 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 Meeting. The Board is not aware of any
matters that will be presented for action at the Meeting other than the matters
described in this material. 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 Fund.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD(S) (OR TAKE ADVANTAGE
OF AVAILABLE ELECTRONIC OR TELEPHONIC VOTING PROCEDURES) PROMPTLY. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES.
By Order of the Board,
/s/ Philip J. Collora
Philip J. Collora
Secretary
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<PAGE>
INDEX OF EXHIBITS AND APPENDICES
<TABLE>
<S> <C>
EXHIBIT A: FORM OF AGREEMENT AND PLAN OF REORGANIZATION..................
EXHIBIT B: MANAGEMENT'S DISCUSSION OF SCUDDER SHORT TERM BOND
FUND'S PERFORMANCE............................................
APPENDIX 1: TRUSTEE AND NOMINEE SHAREHOLDINGS.............................
APPENDIX 2: BENEFICIAL OWNERS OF FUND SHARES..............................
</TABLE>
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<PAGE>
EXHIBIT A
<PAGE>
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this [ ] day of [ ], 2001, by and among Scudder Funds Trust (the "Acquiring
Trust"), a Massachusetts business trust, on behalf of Scudder Short
Term Bond Fund (the "Acquiring Fund"), a separate series of the Acquiring Trust,
Kemper Short-Term U.S. Government Fund (the "Acquired Trust" and, together with
the Acquiring Trust, each a "Trust" and collectively the "Trusts"), a
Massachusetts business trust, on behalf of Kemper Short-Term U.S. Government
Fund (the "Acquired Fund" and, together with the Acquiring Fund, each a "Fund"
and collectively the "Funds"), a separate series of the Acquired Trust, and
Scudder Kemper Investments, Inc. ("Scudder Kemper"), investment adviser to the
Funds (for purposes of Paragraph 10.2 of the Agreement only). The principal
place of business of the Acquiring Trust is Two International Place, Boston,
Massachusetts 02110-4103 and the principal place of business of the Acquired
Trust is 222 South Riverside Plaza, Chicago, Illinois 60606.
This Agreement is intended to be and is adopted as a plan of reorganization
and liquidation within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"). The reorganization (the "Reorganization")
will consist of the transfer of all or substantially all of the assets of the
Acquired Fund to the Acquiring Fund in exchange solely for Class A, Class B and
Class C voting shares of beneficial interest of ($.01 par value per share) of
the Acquiring Fund (the "Acquiring Fund Shares"), the assumption by the
Acquiring Fund of all of the liabilities of the Acquired Fund and the
distribution of the Acquiring Fund Shares to the Class A, Class B and Class C
shareholders of the Acquired Fund in complete liquidation of the Acquired Fund
as provided herein, all upon the terms and conditions hereinafter set forth in
this Agreement.
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND TO THE ACQUIRING FUND IN EXCHANGE
FOR ACQUIRING FUND SHARES, THE ASSUMPTION OF ALL ACQUIRED FUND LIABILITIES
AND THE LIQUIDATION OF THE ACQUIRED FUND
1.1. Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein, the Acquired Fund agrees
to transfer to the Acquiring Fund all or substantially all of the Acquired
Fund's assets as set forth in section 1.2, and the Acquiring Fund agrees in
exchange therefor (i) to deliver to the Acquired Fund that number of full and
fractional Class A, Class B and Class C Acquiring Fund Shares determined by
dividing the value of the Acquired Fund's assets net of any liabilities of the
Acquired Fund with respect to the Class A, Class B and Class C shares of the
Acquired Fund, computed in the manner and as of the time and date set forth in
section 2.1, by the net asset value of one Acquiring Fund Share of the
corresponding class, computed in the manner and as of the time and date set
forth in section 2.2; and (ii) to assume all of the liabilities of the Acquired
Fund, including, but not limited to, any deferred compensation to Acquired Fund
board members. All Acquiring Fund Shares delivered to the Acquired Fund shall be
delivered at net asset value without sales load, commission or other similar fee
being imposed. Such transactions shall take place at the closing provided for in
section 3.1 (the "Closing").
1.2. The assets of the Acquired Fund to be acquired by the Acquiring Fund
(the "Assets") shall consist of all assets, including, without limitation, all
cash, cash equivalents, securities, commodities and futures interests and
dividends or interest or other receivables that are owned by the Acquired Fund
and any deferred or prepaid expenses shown on the unaudited statement of assets
and liabilities of the
<PAGE>
Acquired Fund prepared as of the effective time of the Closing in accordance
with generally accepted accounting principles ("GAAP") applied consistently with
those of the Acquired Fund's most recent audited balance sheet. The Assets shall
constitute at least 90% of the fair market value of the net assets, and at least
70% of the fair market value of the gross assets, held by the Acquired Fund
immediately before the Closing (excluding for these purposes assets used to pay
the dividends and other distributions paid pursuant to section 1.4).
1.3. The Acquired Fund will endeavor to discharge all of its known
liabilities and obligations prior to the Closing Date as defined in section 3.6.
1.4. On or as soon as practicable prior to the Closing Date as defined in
section 3.1, the Acquired Fund will declare and pay to its shareholders of
record one or more dividends and/or other distributions so that it will have
distributed substantially all of its investment company taxable income (computed
without regard to any deduction for dividends paid) and realized net capital
gain, if any, for the current taxable year through the Closing Date.
1.5. Immediately after the transfer of Assets provided for in section 1.1,
the Acquired Fund will distribute to the Acquired Fund's shareholders of record
with respect to each class of its shares (the "Acquired Fund Shareholders"),
determined as of the Valuation Time (as defined in section 2.1), on a pro rata
basis within that class, the Acquiring Fund Shares of the same class received by
the Acquired Fund pursuant to section 1.1 and will completely liquidate. Such
distribution and liquidation will be accomplished with respect to each class of
the Acquired Fund by the transfer of the Acquiring Fund Shares then credited to
the account of the Acquired Fund on the books of the Acquiring Fund to open
accounts on the share records of the Acquiring Fund in the names of the Acquired
Fund Shareholders. The Acquiring Fund shall have no obligation to inquire as to
the validity, propriety or correctness of such records, but shall assume that
such transaction is valid, proper and correct. The aggregate net asset value of
Class A, Class B and Class C Acquiring Fund Shares to be so credited to the
Class A, Class B and Class C Acquired Fund Shareholders shall, with respect to
each class, be equal to the aggregate net asset value of the Acquired Fund
shares of the same class owned by such shareholders as of the Valuation Time.
All issued and outstanding shares of the Acquired Fund will simultaneously be
cancelled on the books of the Acquired Fund, although share certificates
representing interests in Class A, Class B and Class C shares of the Acquired
Fund will represent a number of Acquiring Fund Shares after the Closing Date as
determined in accordance with section 2.3. The Acquiring Fund will not issue
certificates representing Acquiring Fund Shares in connection with such
exchange.
1.6. Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund. Shares of the Acquiring Fund will be issued in the manner
described in the Acquiring Fund's then-current prospectus and statement of
additional information.
1.7. Any reporting responsibility of the Acquired Fund including, without
limitation, the responsibility for filing of regulatory reports, tax returns, or
other documents with the Securities and Exchange Commission (the "Commission"),
any state securities commission, and any federal, state or local tax authorities
or any other relevant regulatory authority, is and shall remain the
responsibility of the Acquired Fund.
1.8. All books and records of the Acquired Fund, including all books and
records required to be maintained under the Investment Company Act of 1940, as
amended (the "1940 Act"), and the rules and regulations thereunder, shall be
available to the Acquiring Fund from and after the Closing Date and shall be
turned over to the Acquiring Fund as soon as practicable following the Closing
Date.
2
<PAGE>
2. VALUATION
2.1. The value of the Assets shall be computed as of the close of regular
trading on The New York Stock Exchange, Inc. (the "NYSE") on the business day
immediately preceding the Closing Date, as defined in Section 3.1 (the
"Valuation Time") after the declaration and payment of any dividends and/or
other distributions on that date, using the valuation procedures set forth in
the Acquiring Fund's Declaration of Trust, as amended, and then-current
prospectus or statement of additional information, copies of which have been
delivered to the Acquired Fund.
2.2. The net asset value of a Class A, Class B or Class C Acquiring Fund
Share shall be the net asset value per share computed with respect to that class
as of the Valuation Time using the valuation procedures referred to in section
2.1. [Notwithstanding anything to the contrary contained in this Agreement, in
the event that, as of the Valuation Time, there are no Class A, Class B and/or
Class C Acquiring Fund Shares issued and outstanding, then, for purposes of this
Agreement, the per share net asset value of a Class A, Class B and/or Class C
shares, as applicable, shall be equal to the net asset value of one Class S
Acquiring Fund Share.]
2.3. The number of the Class A, Class B and Class C Acquiring Fund Shares
to be issued (including fractional shares, if any) in exchange for the Assets
shall be determined with respect to each such class by dividing the value of the
Assets with respect to Class A, Class B and Class C shares of the Acquired Fund,
as the case may be, determined in accordance with section 2.1 by the net asset
value of an Acquiring Fund Share of the same class determined in accordance with
section 2.2.
2.4. All computations of value hereunder shall be made by or under the
direction of each Fund's respective accounting agent, if applicable, in
accordance with its regular practice and the requirements of the 1940 Act and
shall be subject to confirmation by each Fund's respective independent
accountants upon the reasonable request of the other Fund.
3. CLOSING AND CLOSING DATE
3.1. The Closing of the transactions contemplated by this Agreement shall
be [ ], 2001, or such later date as the parties may agree in writing (the
"Closing Date"). All acts taking place at the Closing shall be deemed to take
place simultaneously as of 9:00 a.m., Eastern time, on the Closing Date, unless
otherwise agreed to by the parties. The Closing shall be held at the offices of
Dechert, Ten Post Office Square - South, Boston, MA 02109, or at such other
place and time as the parties may agree.
3.2. The Acquired Fund shall deliver to Acquiring Fund on the Closing Date
a schedule of Assets.
3.3. State Street Bank and Trust Company ("State Street"), custodian for
the Acquired Fund, shall deliver at the Closing a certificate of an authorized
officer stating that (a) the Assets shall have been delivered in proper form to
State Street, custodian for the Acquiring Fund, prior to or on the Closing Date
and (b) all necessary taxes in connection with the delivery of the Assets,
including all applicable federal and state stock transfer stamps, if any, have
been paid or provision for payment has been made. The Acquired Fund's portfolio
securities represented by a certificate or other written instrument shall be
presented by the custodian for the Acquired Fund to the custodian for the
Acquiring Fund for examination no later than five business days preceding the
Closing Date and transferred and delivered by the Acquired Fund as of the
Closing Date by the Acquired Fund for the account of Acquiring Fund duly
endorsed in proper form for transfer in such condition as to constitute good
delivery thereof. The Acquired Fund's portfolio securities and instruments
deposited with a securities depository, as defined in Rule 17f-4 under
3
<PAGE>
the 1940 Act, shall be delivered as of the Closing Date by book entry in
accordance with the customary practices of such depositories and the custodian
for the Acquiring Fund. The cash to be transferred by the Acquired Fund shall be
delivered by wire transfer of federal funds on the Closing Date.
3.4. Kemper Service Company, as transfer agent for the Acquired Fund, on
behalf of the Acquired Fund, shall deliver at the Closing a certificate of an
authorized officer stating that its records contain the names and addresses of
the Acquired Fund Shareholders and the number and percentage ownership (to three
decimal places) of outstanding Class A, Class B and Class C Acquired Fund shares
owned by each such shareholder immediately prior to the Closing. The Acquiring
Fund shall issue and deliver a confirmation evidencing the Acquiring Fund Shares
to be credited on the Closing Date to the Acquired Fund or provide evidence
satisfactory to the Acquired Fund that such Acquiring Fund Shares have been
credited to the Acquired Fund's account on the books of the Acquiring Fund. At
the Closing, each party shall deliver to the other such bills of sale, checks,
assignments, share certificates, if any, receipts or other documents as such
other party or its counsel may reasonably request to effect the transactions
contemplated by this Agreement.
3.5. In the event that immediately prior to the Valuation Time (a) the
NYSE or another primary trading market for portfolio securities of the Acquiring
Fund or the Acquired Fund shall be closed to trading or trading thereupon shall
be restricted, or (b) trading or the reporting of trading on such Exchange or
elsewhere shall be disrupted so that, in the judgment of the Board members of
either party to this Agreement, accurate appraisal of the value of the net
assets with respect to the Class A, Class B and Class C shares of the Acquiring
Fund or the Acquired Fund is impracticable, the Closing Date shall be postponed
until the first business day after the day when trading shall have been fully
resumed and reporting shall have been restored.
3.6. The liabilities of the Acquired Fund shall include all of the
Acquired Fund's liabilities, debts, obligations, and duties of whatever kind or
nature, whether absolute, accrued, contingent, or otherwise, whether or not
arising in the ordinary course of business, whether or not determinable at the
Closing Date, and whether or not specifically referred to in this Agreement
including but not limited to any deferred compensation to the Acquired Fund's
board members.
4. REPRESENTATIONS AND WARRANTIES
4.1. The Acquired Trust, on behalf of the Acquired Fund, represents and
warrants to the Acquiring Fund as follows:
(a) The Acquired Trust is a voluntary association with transferable
shares commonly referred to as a Massachusetts business trust duly organized and
validly existing under the laws of The Commonwealth of Massachusetts with power
under the Acquired Trust's Declaration of Trust, as amended, to own all of its
properties and assets and to carry on its business as it is now being conducted
and, subject to approval of shareholders of the Acquired Fund, to carry out the
Agreement. The Acquired Fund is a separate series of the Acquired Trust duly
designated in accordance with the applicable provisions of the Acquired Trust's
Declaration of Trust. The Acquired Fund is a separate series of the Acquired
Trust duly designated in accordance with the applicable provisions of the
Acquired Trust's Declaration of Trust. The Acquired Trust and Acquired Fund are
qualified to do business in all jurisdictions in which they are required to be
so qualified, except jurisdictions in which the failure to so qualify would not
have material adverse effect on the Acquired Trust or Acquired Fund. The
Acquired Fund has all material federal, state and local authorizations necessary
to own all of the properties and assets and to carry on its business as now
being conducted, except authorizations which the failure to so obtain would not
have a material adverse effect on the Acquired Fund;
4
<PAGE>
(b) The Acquired Trust is registered with the Commission as an
open-end management investment company under the 1940 Act, and such registration
is in full force and effect and the Acquired Fund is in compliance in all
material respects with the 1940 Act and the rules and regulations thereunder;
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquired Fund of
the transactions contemplated herein, except such as have been obtained under
the Securities Act of 1933, as amended (the "1933 Act"), the Securities Exchange
Act of 1934, as amended (the "1934 Act"), and the 1940 Act and such as may be
required by state securities laws;
(d) Other than with respect to contracts entered into in connection
with the portfolio management of the Acquired Fund which shall terminate on or
prior to the Closing Date, the Acquired Trust is not, and the execution,
delivery and performance of this Agreement by the Acquired Trust will not result
(i) in violation of Massachusetts law or of the Acquired Trust's Declaration of
Trust, as amended, or By-Laws, (ii) in a violation or breach of, or constitute a
default under, any material agreement, indenture, instrument, contract, lease or
other undertaking to which the Acquired Fund is a party or by which it is bound,
and the execution, delivery and performance of this Agreement by the Acquired
Fund will not result in the acceleration of any obligation, or the imposition of
any penalty, under any agreement, indenture, instrument, contract, lease,
judgment or decree to which the Acquired Fund is a party or by which it is
bound, or (iii) in the creation or imposition of any lien, charge or encumbrance
on any property or assets of the Acquired Fund.
(e) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or to its knowledge threatened against the Acquired Fund or any properties or
assets held by it. The Acquired Fund knows of no facts which might form the
basis for the institution of such proceedings which would materially and
adversely affect its business and is not a party to or subject to the provisions
of any order, decree or judgment of any court or governmental body which
materially and adversely affects its business or its ability to consummate the
transactions herein contemplated;
(f) The Statements of Assets and Liabilities, Operations, and Changes
in Net Assets, the Financial Highlights, and the Investment Portfolio of the
Acquired Fund at and for the fiscal year ended [ ], 200[ ], have been audited
by Ernst & Young LLP, independent auditors, and are in accordance with GAAP
consistently applied, and such statements (a copy of each of which has been
furnished to the Acquiring Fund) present fairly, in all material respects, the
financial position of the Acquired Fund as of such date in accordance with GAAP,
and there are no known contingent liabilities of the Acquired Fund required to
be reflected on a balance sheet (including the notes thereto) in accordance with
GAAP as of such date not disclosed therein;
(g) Since [ ], 200[ ], there has not been any material adverse
change in the Acquired Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business, or any
incurrence by the Acquired Fund of indebtedness maturing more than one year from
the date such indebtedness was incurred except as otherwise disclosed to and
accepted in writing by the Acquiring Fund. For purposes of this subsection (g),
a decline in net asset value per share of the Acquired Fund due to declines in
market values of securities in the Acquired Fund's portfolio, the discharge of
Acquired Fund liabilities, or the redemption of Acquired Fund shares by Acquired
Fund Shareholders shall not constitute a material adverse change;
(h) At the date hereof and at the Closing Date, all federal and other
tax returns and reports of the Acquired Fund required by law to have been filed
by such dates (including any extensions)
5
<PAGE>
shall have been filed and are or will be correct in all material respects, and
all federal and other taxes shown as due or required to be shown as due on said
returns and reports shall have been paid or provision shall have been made for
the payment thereof, and, to the best of the Acquired Fund's knowledge, no such
return is currently under audit and no assessment has been asserted with respect
to such returns;
(i) For each taxable year of its operation (including the taxable year
ending on the Closing Date), the Acquired Fund has met the requirements of
Subchapter M of the Code for qualification as a regulated investment company and
has elected to be treated as such, has been eligible to and has computed its
federal income tax under Section 852 of the Code, and will have distributed all
of its investment company taxable income and net capital gain (as defined in the
Code) that has accrued through the Closing Date;
(j) All issued and outstanding shares of the Acquired Fund (i) have
been offered and sold in every state and the District of Columbia in compliance
in all material respects with applicable registration requirements of the 1933
Act and state securities laws, (ii) are, and on the Closing Date will be, duly
and validly issued and outstanding, fully paid and non-assessable and not
subject to preemptive or dissenter's rights (recognizing that, under
Massachusetts law, Acquired Fund Shareholders, under certain circumstances,
could be held personally liable for obligations of the Acquired Fund), and (iii)
will be held at the time of the Closing by the persons and in the amounts set
forth in the records of Kemper Service Company, as provided in section 3.4. The
Acquired Fund does not have outstanding any options, warrants or other rights to
subscribe for or purchase any of the Acquired Fund shares, nor is there
outstanding any security convertible into any of the Acquired Fund shares;
(k) At the Closing Date, the Acquired Fund will have good and
marketable title to the Acquired Fund's assets to be transferred to the
Acquiring Fund pursuant to section 1.2 and full right, power, and authority to
sell, assign, transfer and deliver such assets hereunder free of any liens or
other encumbrances, except those liens or encumbrances as to which the Acquiring
Fund has received notice at or prior to the Closing, and upon delivery and
payment for such assets, the Acquiring Fund will acquire good and marketable
title thereto, subject to no restrictions on the full transfer thereof,
including such restrictions as might arise under the 1933 Act and the 1940 Act,
except those restrictions as to which the Acquiring Fund has received notice and
necessary documentation at or prior to the Closing;
(l) The execution, delivery and performance of this Agreement will
have been duly authorized prior to the Closing Date by all necessary action on
the part of the Board members of the Acquired Trust (including the
determinations required by Rule 17a-8(a) under the 1940 Act), and, subject to
the approval of the Acquired Fund Shareholders, this Agreement constitutes a
valid and binding obligation of the Acquired Trust, on behalf of the Acquired
Fund, enforceable in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
other laws relating to or affecting creditors' rights and to general equity
principles;
(m) The information to be furnished by the Acquired Fund for use in
applications for orders, registration statements or proxy materials or for use
in any other document filed or to be filed with any federal, state or local
regulatory authority (including the National Association of Securities Dealers,
Inc. (the "NASD")), which may be necessary in connection with the transactions
contemplated hereby, shall be accurate and complete in all material respects and
shall comply in all material respects with federal securities and other laws and
regulations applicable thereto;
(n) The current prospectus and statement of additional information of
the Acquired Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and regulations of
the Commission thereunder and do not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the
6
<PAGE>
statements therein, in light of the circumstances under which they were made,
not materially misleading; and
(o) The proxy statement of the Acquired Fund to be included in the
Registration Statement referred to in section 5.7 (the "Proxy Statement"),
insofar as it relates to the Acquired Fund, will, on the effective date of the
Registration Statement and on the Closing Date, (i) comply in all material
respects with the provisions and Regulations of the 1933 Act, 1934 Act and 1940
Act, as applicable, and (ii) not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which such
statements are made, not materially misleading; provided, however, that the
representations and warranties in this section shall not apply to statements in
or omissions from the Proxy Statement and the Registration Statement made in
reliance upon and in conformity with information that was furnished or should
have been furnished by the Acquiring Fund for use therein.
4.2. The Acquiring Trust, on behalf of the Acquiring Fund, represents and
warrants to the Acquired Fund as follows:
(a) The Acquiring Trust is a voluntary association with transferable
shares commonly referred to as a Massachusetts business trust duly organized and
validly existing under the laws of The Commonwealth of Massachusetts with power
under the Acquiring Trust's Declaration of Trust, as amended, to own all of its
properties and assets and to carry on its business as it is now being conducted
and, subject to the approval of shareholders of the Acquired Fund, to carry out
the Agreement. The Acquiring Fund is a separate series of the Acquiring Trust
duly designated in accordance with the applicable provisions of the Acquiring
Trust's Declaration of Trust. The Acquiring Trust and Acquiring Fund are
qualified to do business in all jurisdictions in which they are required to be
so qualified, except jurisdictions in which the failure to so qualify would not
have material adverse effect on the Acquiring Trust or Acquiring Fund. The
Acquiring Fund has all material federal, state and local authorizations
necessary to own all of the properties and assets and to carry on its business
as now being conducted, except authorizations which the failure to so obtain
would not have a material adverse effect on the Acquiring Fund;
(b) The Acquiring Trust is registered with the Commission as an
open-end management investment company under the 1940 Act, and such registration
is in full force and effect and the Acquiring Fund is in compliance in all
material respects with the 1940 Act and the rules and regulations thereunder;
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquiring Fund of
the transactions contemplated herein, except such as have been obtained under
the 1933 Act, the 1934 Act and the 1940 Act and such as may be required by state
securities laws;
(d) The Acquiring Trust is not, and the execution, delivery and
performance of this Agreement by the Acquiring Trust will not result (i) in
violation of Massachusetts law or of the Acquiring Trust's Declaration of Trust,
as amended, or By-Laws, or (ii) in a violation or breach of, or constitute a
default under, any material agreement, indenture, instrument, contract, lease or
other undertaking known to counsel to which the Acquiring Fund is a party or by
which it is bound, and the execution, delivery and performance of this Agreement
by the Acquiring Fund will not result in the acceleration of any obligation, or
the imposition of any penalty, under any agreement, indenture, instrument,
contract, lease, judgment or decree to which the Acquiring Fund is a party or by
which it is bound, or (iii) in the creation or imposition of any lien, charge or
encumbrance on any property or assets of the Acquiring Fund;
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(e) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or to its knowledge threatened against the Acquiring Fund or any properties or
assets held by it. The Acquiring Fund knows of no facts which might form the
basis for the institution of such proceedings which would materially and
adversely affect its business and is not a party to or subject to the provisions
of any order, decree or judgment of any court or governmental body which
materially and adversely affects its business or its ability to consummate the
transactions herein contemplated;
(f) The Statements of Assets and Liabilities, Operations, and Changes
in Net Assets, the Financial Highlights, and the Investment Portfolio of the
Acquiring Fund at and for the fiscal year ended [ ], 200[ ], have been
audited by Ernst & Young LLP, independent accountants, and are in accordance
with GAAP consistently applied, and such statements (a copy of each of which has
been furnished to the Acquired Fund) present fairly, in all material respects,
the financial position of the Acquiring Fund as of such date in accordance with
GAAP, and there are no known contingent liabilities of the Acquiring Fund
required to be reflected on a balance sheet (including the notes thereto) in
accordance with GAAP as of such date not disclosed therein;
(g) Since [ ], 200[ ], there has not been any material adverse
change in the Acquiring Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business, or any
incurrence by the Acquiring Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred except as otherwise disclosed to
and accepted in writing by the Acquired Fund. For purposes of this subsection
(g), a decline in net asset value per share of the Acquiring Fund due to
declines in market values of securities in the Acquiring Fund's portfolio, the
discharge of Acquiring Fund liabilities, or the redemption of Acquiring Fund
shares by Acquiring Fund shareholders shall not constitute a material adverse
change;
(h) At the date hereof and at the Closing Date, all federal and other
tax returns and reports of the Acquiring Fund required by law to have been filed
by such dates (including any extensions) shall have been filed and are or will
be correct in all material respects, and all federal and other taxes shown as
due or required to be shown as due on said returns and reports shall have been
paid or provision shall have been made for the payment thereof, and, to the best
of the Acquiring Fund's knowledge, no such return is currently under audit and
no assessment has been asserted with respect to such returns;
(i) For each taxable year of its operation, the Acquiring Fund has met
the requirements of Subchapter M of the Code for qualification as a regulated
investment company and has elected to be treated as such, has been eligible to
and has computed its federal income tax under Section 852 of the Code, and will
do so for the taxable year including the Closing Date;
(j) All issued and outstanding shares of the Acquiring Fund (i) have
been offered and sold in every state and the District of Columbia in compliance
in all material respects with applicable registration requirements of the 1933
Act and state securities laws and (ii) are, and on the Closing Date will be,
duly and validly issued and outstanding, fully paid and non-assessable, and not
subject to preemptive or dissenter's rights (recognizing that, under
Massachusetts law, Acquiring Fund Shareholders, under certain circumstances,
could be held personally liable for the obligations of the Acquiring Fund). The
Acquiring Fund does not have outstanding any options, warrants or other rights
to subscribe for or purchase any of the Acquiring Fund shares, nor is there
outstanding any security convertible into any of the Acquiring Fund shares;
(k) The Acquiring Fund Shares to be issued and delivered to the
Acquired Fund, for the account of the Acquired Fund Shareholders, pursuant to
the terms of this Agreement, will at the Closing Date have been duly authorized
and, when so issued and delivered, will be duly and validly
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issued and outstanding Acquiring Fund Shares, and will be fully paid and
non-assessable (recognizing that, under Massachusetts law, Acquiring Fund
Shareholders, under certain circumstances, could be held personally liable for
the obligations of the Acquiring Fund);
(l) At the Closing Date, the Acquiring Fund will have good and
marketable title to the Acquiring Fund's assets, free of any liens or other
encumbrances, except those liens or encumbrances as to which the Acquired Fund
has received notice at or prior to the Closing;
(m) The execution, delivery and performance of this Agreement will
have been duly authorized prior to the Closing Date by all necessary action on
the part of the Board members of the Acquiring Trust (including the
determinations required by Rule 17a-8(a) under the 1940 Act) and this Agreement
will constitute a valid and binding obligation of the Acquiring Trust, on behalf
of the Acquiring Fund, enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other laws relating to or affecting creditors' rights and to
general equity principles;
(n) The information to be furnished by the Acquiring Fund for use in
applications for orders, registration statements or proxy materials or for use
in any other document filed or to be filed with any federal, state or local
regulatory authority (including the NASD), which may be necessary in connection
with the transactions contemplated hereby, shall be accurate and complete in all
material respects and shall comply in all material respects with federal
securities and other laws and regulations applicable thereto;
(o) The current prospectus and statement of additional information of
the Acquiring Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and regulations of
the Commission thereunder and do not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not materially misleading;
(p) The Proxy Statement to be included in the Registration Statement,
only insofar as it relates to the Acquiring Fund, will, on the effective date of
the Registration Statement and on the Closing Date, (i) comply in all material
respects with the provisions and Regulations of the 1933 Act, 1934 Act, and 1940
Act and (ii) not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not materially misleading; provided, however, that the
representations and warranties in this section shall not apply to statements in
or omissions from the Proxy Statement and the Registration Statement made in
reliance upon and in conformity with information that was furnished or should
have been furnished by the Acquired Fund for use therein; and
(q) The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act and such
of the state securities laws as may be necessary in order to continue its
operations after the Closing Date.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1. The Acquiring Fund and the Acquired Fund each covenants to operate
its business in the ordinary course between the date hereof and the Closing
Date, it being understood that (a) such ordinary course of business will include
(i) the declaration and payment of customary dividends and other distributions
and (ii) such changes as are contemplated by the Funds' normal operations; and
(b) each Fund shall retain exclusive control of the composition of its portfolio
until the Closing Date. No party shall take any action that would, or reasonably
would be expected to, result in any of its representations
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<PAGE>
and warranties set forth in this Agreement being or becoming untrue in any
material respect. The Acquired Fund and Acquiring Fund covenant and agree to
coordinate the respective portfolios of the Acquired Fund and Acquiring Fund
from the date of the Agreement up to and including the Closing Date in order
that at Closing, when the Assets are added to the Acquiring Fund's portfolio,
the resulting portfolio will meet the Acquiring Fund's investment objective,
policies and restrictions, as set forth in the Acquiring Fund's Prospectus, a
copy of which has been delivered to the Acquired Fund.
5.2. Upon reasonable notice, the Acquiring Fund's officers and agents
shall have reasonable access to the Acquired Fund's books and records necessary
to maintain current knowledge of the Acquired Fund and to ensure that the
representations and warranties made by the Acquired Fund are accurate.
5.3. The Acquired Fund covenants to call a meeting of the Acquired Fund
Shareholders entitled to vote thereon to consider and act upon this Agreement
and to take all other reasonable action necessary to obtain approval of the
transactions contemplated herein. Such meeting shall be scheduled for no later
than [ ], 2001.
5.4. The Acquired Fund covenants that the Acquiring Fund Shares to be
issued hereunder are not being acquired for the purpose of making any
distribution thereof other than in accordance with the terms of this Agreement.
5.5. The Acquired Fund covenants that it will assist the Acquiring Fund in
obtaining such information as the Acquiring Fund reasonably requests concerning
the beneficial ownership of the Acquired Fund shares.
5.6. Subject to the provisions of this Agreement, the Acquiring Fund and
the Acquired Fund will each take, or cause to be taken, all actions, and do or
cause to be done, all things reasonably necessary, proper, and/or advisable to
consummate and make effective the transactions contemplated by this Agreement.
5.7. Each Fund covenants to prepare in compliance with the 1933 Act, the
1934 Act and the 1940 Act the Registration Statement on Form N-14 (the
"Registration Statement") in connection with the meeting of the Acquired Fund
Shareholders to consider approval of this Agreement and the transactions
contemplated herein. The Acquiring Fund will file the Registration Statement,
including the Proxy Statement, with the Commission. The Acquired Fund will
provide the Acquiring Fund with information reasonably necessary for the
preparation of a prospectus, which will include the Proxy Statement referred to
in section 4.1(o), all to be included in the Registration Statement, in
compliance in all material respects with the 1933 Act, the 1934 Act and the 1940
Act.
5.8. The Acquired Fund covenants that it will, from time to time, as and
when reasonably requested by the Acquiring Fund, execute and deliver or cause to
be executed and delivered all such assignments and other instruments, and will
take or cause to be taken such further action as the Acquiring Fund may
reasonably deem necessary or desirable in order to vest in and confirm the
Acquiring Fund's title to and possession of all the assets and otherwise to
carry out the intent and purpose of this Agreement.
5.9. The Acquiring Fund covenants to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act and 1940 Act, and such
of the state securities laws as it deems appropriate in order to continue its
operations after the Closing Date and to consummate the transactions
contemplated herein; provided, however, that the Acquiring Fund may take such
actions it reasonably deems advisable after the Closing Date as circumstances
change.
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<PAGE>
5.10. The Acquiring Fund covenants that it will, from time to time, as and
when reasonably requested by the Acquired Fund, execute and deliver or cause to
be executed and delivered all such assignments, assumption agreements, releases,
and other instruments, and will take or cause to be taken such further action,
as the Acquired Fund may reasonably deem necessary or desirable in order to (i)
vest and confirm to the Acquired Fund title to and possession of all Acquiring
Fund shares to be transferred to the Acquired Fund pursuant to this Agreement
and (ii) assume the liabilities from the Acquired Fund.
5.11. As soon as reasonably practicable after the Closing, the Acquired
Fund shall make a liquidating distribution to its shareholders consisting of the
Acquiring Fund Shares received at the Closing.
5.12. The Acquiring Fund and the Acquired Fund shall each use its
reasonable best efforts to fulfill or obtain the fulfillment of the conditions
precedent to effect the transactions contemplated by this Agreement as promptly
as practicable.
5.13. The intention of the parties is that the transaction will qualify as
a reorganization within the meaning of Section 368(a) of the Code. Neither the
Trust, the Acquiring Fund nor the Acquired Fund shall take any action, or cause
any action to be taken (including, without limitation, the filing of any tax
return) that is inconsistent with such treatment or results in the failure of
the transaction to qualify as a reorganization within the meaning of Section
368(a) of the Code. At or prior to the Closing Date, the Trust, the Acquiring
Fund and the Acquired Fund will take such action, or cause such action to be
taken, as is reasonably necessary to enable Wilkie Farr & Gallagher to render
the tax opinion contemplated herein in Section 8.5.
5.14. At or immediately prior to the Closing, the Acquired Fund may declare
and pay to its stockholders a dividend or other distribution in an amount large
enough so that it will have distributed substantially all (and in any event not
less than 98%) of its investment company taxable income (computed without regard
to any deduction for dividends paid) and realized net capital gain, if any, for
the current taxable year through the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date, and, in addition thereto, the following further
conditions:
6.1. All representations and warranties of the Acquiring Trust, on behalf
of the Acquiring Fund, contained in this Agreement shall be true and correct in
all material respects as of the date hereof and, except as they may be affected
by the transactions contemplated by this Agreement, as of the Closing Date, with
the same force and effect as if made on and as of the Closing Date; and there
shall be (i) no pending or threatened litigation brought by any person (other
than the Acquired Fund, its adviser or any of their affiliates) against the
Acquiring Fund or its investment adviser(s), Board members or officers arising
out of this Agreement and (ii) no facts known to the Acquiring Fund which the
Acquiring Fund reasonably believes might result in such litigation.
6.2. The Acquiring Fund shall have delivered to the Acquired Fund on the
Closing Date a certificate executed in its name by its President or a Vice
President, in a form reasonably satisfactory to the Acquired Trust, on behalf of
the Acquiring Fund, and dated as of the Closing Date, to the effect that the
representations and warranties of the Acquiring Fund made in this Agreement are
true and correct on and as of the Closing Date, except as they may be affected
by the transactions contemplated by this Agreement, and as to such other matters
as the Acquired Fund shall reasonably request.
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6.3. The Acquired Fund shall have received on the Closing Date an opinion
of Dechert, in a form reasonably satisfactory to the Acquired Fund, and dated as
of the Closing Date, to the effect that:
(a) The Acquiring Trust has been duly formed and is an existing
business trust; (b) the Acquiring Fund has the power to carry on its business as
presently conducted in accordance with the description thereof in the Acquiring
Fund's registration statement under the 1940 Act; (c) the Agreement has been
duly authorized, executed and delivered by the Acquiring Trust, on behalf of the
Acquiring Fund, and constitutes a valid and legally binding obligation of the
Acquiring Trust, on behalf of the Acquiring Fund, enforceable in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and laws of general applicability relating to or
affecting creditors' rights and to general equity principles; (d) the execution
and delivery of the Agreement did not, and the exchange of the Acquired Fund's
assets for Acquiring Fund Shares pursuant to the Agreement will not, violate the
Acquiring Trust's Declaration of Trust, as amended, or By-laws; and (e) to the
knowledge of such counsel, and without any independent investigation, (i) the
Acquiring Trust is not subject to any litigation or other proceedings that might
have a materially adverse effect on the operations of the Acquiring Trust, (ii)
the Acquiring Trust is duly registered as an investment company with the
Commission and is not subject to any stop order; and (iii) all regulatory
consents, authorizations, approvals or filings required to be obtained or made
by the Acquiring Fund under the Federal laws of the United States or the laws of
The Commonwealth of Massachusetts for the exchange of the Acquired Fund's assets
for Acquiring Fund Shares, pursuant to the Agreement have been obtained or made.
The delivery of such opinion is conditioned upon receipt by Dechert of
customary representations it shall reasonably request of each of the Acquiring
Trust and the Acquired Trust.
6.4. The Acquiring Fund shall have performed all of the covenants and
complied with all of the provisions required by this Agreement to be performed
or complied with by the Acquiring Fund on or before the Closing Date.
6.5. The Acquiring Fund shall have (i) adopted a new investment management
agreement, (ii) entered into an administrative services agreement with Scudder
Kemper Investments, Inc. ("Scudder Kemper") and (iii) adopted security valuation
procedures identical to the Acquired Fund's, each in a form reasonably
satisfactory to the Acquired Fund.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by the
Acquired Fund of all of the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following further
conditions:
7.1. All representations and warranties of the Acquired Trust, on behalf
of the Acquired Fund, contained in this Agreement shall be true and correct in
all material respects as of the date hereof and, except as they may be affected
by the transactions contemplated by this Agreement, as of the Closing Date, with
the same force and effect as if made on and as of the Closing Date; and there
shall be (i) no pending or threatened litigation brought by any person (other
than the Acquiring Fund, its adviser or any of their affiliates) against the
Acquired Fund or its investment adviser(s), Board members or officers arising
out of this Agreement and (ii) no facts known to the Acquired Fund which the
Acquired Fund reasonably believes might result in such litigation.
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7.2. The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets and liabilities as of the Closing Date,
certified by the Treasurer of the Acquired Fund.
7.3. The Acquired Fund shall have delivered to the Acquiring Fund on the
Closing Date a certificate executed in its name by its President or a Vice
President, in a form reasonably satisfactory to the Acquiring Fund and dated as
of the Closing Date, to the effect that the representations and warranties of
the Acquired Trust with respect to the Acquired Fund made in this Agreement are
true and correct on and as of the Closing Date, except as they may be affected
by the transactions contemplated by this Agreement, and as to such other matters
as the Acquiring Fund shall reasonably request.
7.4. The Acquiring Fund shall have received on the Closing Date an opinion
of Dechert, in a form reasonably satisfactory to the Acquiring Fund, and dated
as of the Closing Date, to the effect that:
(a) The Acquired Trust has been duly formed and is an existing
business trust; (b) the Acquired Fund has the power to carry on its business as
presently conducted in accordance with the description thereof in the Acquired
Trust's registration statement under the 1940 Act; (c) the Agreement has been
duly authorized, executed and delivered by the Acquired Trust, on behalf of the
Acquired Fund, and constitutes a valid and legally binding obligation of the
Acquired Trust, on behalf of the Acquired Fund, enforceable in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and laws of general applicability relating to or
affecting creditors' rights and to general equity principles; (d) the execution
and delivery of the Agreement did not, and the exchange of the Acquired Fund's
assets for Acquiring Fund Shares pursuant to the Agreement will not, violate the
Acquired Trust's Declaration of Trust, as amended, or By-laws; and (e) to the
knowledge of such counsel, and without any independent investigation, (i) the
Acquired Trust is not subject to any litigation or other proceedings that might
have a materially adverse effect on the operations of the Acquired Trust, (ii)
the Acquired Trust is duly registered as an investment company with the
Commission and is not subject to any stop order, and (iii) all regulatory
consents, authorizations, approvals or filings required to be obtained or made
by the Acquired Fund under the Federal laws of the United States or the laws of
The Commonwealth of Massachusetts for the exchange of the Acquired Fund's assets
for Acquiring Fund Shares, pursuant to the Agreement have been obtained or made.
The delivery of such opinion is conditioned upon receipt by Dechert
of customary representations it shall reasonably request of each of the
Acquiring Trust and the Acquired Trust.
7.5. The Acquired Fund shall have performed all of the covenants and
complied with all of the provisions required by this Agreement to be performed
or complied with by the Acquired Fund on or before the Closing Date.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND THE
ACQUIRED FUND
If any of the conditions set forth below have not been met on or before the
Closing Date with respect to the Acquired Fund or the Acquiring Fund, the other
party to this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement:
8.1. This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
the Acquired Fund in accordance with the provisions of the Acquired Trust's
Declaration of Trust, as amended, and By-Laws, applicable Massachusetts law and
the 1940 Act, and certified copies of the resolutions evidencing such approval
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shall have been delivered to the Acquiring Fund. Notwithstanding anything herein
to the contrary, neither the Acquiring Fund nor the Acquired Fund may waive the
conditions set forth in this section 8.1.
8.2. On the Closing Date, no action, suit or other proceeding shall be
pending or to its knowledge threatened before any court or governmental agency
in which it is sought to restrain or prohibit, or obtain material damages or
other relief in connection with, this Agreement or the transactions contemplated
herein.
8.3. All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities deemed necessary by
the Acquiring Fund or the Acquired Fund to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties of the
Acquiring Fund or the Acquired Fund, provided that either party hereto may for
itself waive any of such conditions.
8.4. The Registration Statement shall have become effective under the 1933
Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending, threatened
or contemplated under the 1933 Act.
8.5. The parties shall have received an opinion of Willkie Farr &
Gallagher addressed to each of the Acquiring Fund and the Acquired Fund, in a
form reasonably satisfactory to each such party to this Agreement, substantially
to the effect that, based upon certain facts, assumptions and representations of
the parties, for federal income tax purposes: (i) the transfer to the Acquiring
Fund of all or substantially all of the assets of the Acquired Fund in exchange
solely for Acquiring Fund Shares and the assumption by the Acquiring Fund of all
of the liabilities of the Acquired Fund, followed by the distribution of such
shares to the Acquired Fund Shareholders in exchange for their shares of the
Acquired Fund in complete liquidation of the Acquired Fund, will constitute a
"reorganization" within the meaning of Section 368(a)(1) of the Code, and the
Acquiring Fund and the Acquired Fund will each be "a party to a reorganization"
within the meaning of Section 368(b) of the Code; (ii) no gain or loss will be
recognized by the Acquired Fund upon the transfer of all or substantially all of
its assets to the Acquiring Fund in exchange solely for Acquiring Fund Shares
and the assumption by the Acquiring Fund of all of the liabilities of the
Acquired Fund; (iii) the basis of the assets of the Acquired Fund in the hands
of the Acquiring Fund will be the same as the basis of such assets of the
Acquired Fund immediately prior to the transfer; (iv) the holding period of the
assets of the Acquired Fund in the hands of the Acquiring Fund will include the
period during which such assets were held by the Acquired Fund; (v) no gain or
loss will be recognized by the Acquiring Fund upon the receipt of the assets of
the Acquired Fund in exchange for Acquiring Fund Shares and the assumption by
the Acquiring Fund of all of the liabilities of the Acquired Fund; (vi) no gain
or loss will be recognized by Acquired Fund Shareholders upon the receipt of the
Acquiring Fund Shares solely in exchange for their shares of the Acquired Fund
as part of the transaction; (vii) the basis of the Acquiring Fund Shares
received by Acquired Fund Shareholders will be the same as the basis of the
shares of the Acquired Fund exchanged therefor; and (viii) the holding period of
Acquiring Fund Shares received by Acquired Fund Shareholders will include the
holding period during which the shares of the Acquired Fund exchanged therefor
were held, provided that at the time of the exchange the shares of the Acquired
Fund were held as capital assets in the hands of Acquired Fund Shareholders. The
delivery of such opinion is conditioned upon receipt by Willkie Farr & Gallagher
of representations it shall request of each of the Acquiring Fund and Acquired
Trust. Notwithstanding anything herein to the contrary, neither the Acquiring
Fund nor the Acquired Fund may waive the condition set forth in this section
8.5.
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9. INDEMNIFICATION
9.1. The Acquiring Fund agrees to indemnify and hold harmless the Acquired
Fund and each of the Acquired Fund's Board members and officers from and against
any and all losses, claims, damages, liabilities or expenses (including, without
limitation, the payment of reasonable legal fees and reasonable costs of
investigation) to which jointly and severally, the Acquired Fund or any of its
Board members or officers may become subject, insofar as any such loss, claim,
damage, liability or expense (or actions with respect thereto) arises out of or
is based on any breach by the Acquiring Fund of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
9.2. The Acquired Fund agrees to indemnify and hold harmless the Acquiring
Fund and each of the Acquiring Fund's Board members and officers from and
against any and all losses, claims, damages, liabilities or expenses (including,
without limitation, the payment of reasonable legal fees and reasonable costs of
investigation) to which jointly and severally, the Acquiring Fund or any of its
Board members or officers may become subject, insofar as any such loss, claim,
damage, liability or expense (or actions with respect thereto) arises out of or
is based on any breach by the Acquired Fund of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
10. FEES AND EXPENSES
10.1. Each of the Acquiring Fund on behalf of the Acquiring Fund, and the
Acquired Trust, on behalf of the Acquired Fund, represents and warrants to the
other that it has no obligations to pay any brokers or finders fees in
connection with the transactions provided for herein.
10.2. Each Fund will pay its own allocable share of expenses associated
with the Reorganization, except that Scudder Kemper will bear any such expenses
in excess of $[ ] for the Acquiring Fund and $[ ] for the Acquired Fund
(approximately $[ ] and $[ ] per share, respectively, based on [ ],
200[ ] net assets for each Fund). Any such expenses which are so borne by
Scudder Kemper will be solely and directly related to the Reorganization within
the meaning of Revenue Ruling 73-54, 1973-1 C.B. 187. Acquired Fund Shareholders
will pay their own expenses, if any, incurred in connection with the
Reorganization.
11. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
11.1. The Acquiring Fund and the Acquired Fund agree that neither party has
made any representation, warranty or covenant not set forth herein and that this
Agreement constitutes the entire agreement between the parties.
11.2. Except as specified in the next sentence set forth in this section
11.2, the representations, warranties and covenants contained in this Agreement
or in any document delivered pursuant hereto or in connection herewith shall not
survive the consummation of the transactions contemplated hereunder. The
covenants to be performed after the Closing and the obligations of each of the
Acquiring Fund and Acquired Fund in Sections 9.1 and 9.2 shall survive the
Closing.
12. TERMINATION
12.1. This Agreement may be terminated and the transactions contemplated
hereby may be abandoned by either party by (i) mutual agreement of the parties,
or (ii) by either party if the Closing shall not have occurred on or before
[ ], 2001, unless such date is extended by mutual agreement of the parties, or
(iii) by either party if the other party shall have materially breached its
obligations under this
15
<PAGE>
Agreement or made a material and intentional misrepresentation herein or in
connection herewith. In the event of any such termination, this Agreement shall
become void and there shall be no liability hereunder on the part of any party
or their respective Board members or officers, except for any such material
breach or intentional misrepresentation, as to each of which all remedies at law
or in equity of the party adversely affected shall survive.
13. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by any authorized officer of the Acquired
Fund and any authorized officer of the Acquiring Fund; provided, however, that
following the meeting of the Acquired Fund Shareholders called by the Acquired
Fund pursuant to section 5.3 of this Agreement, no such amendment may have the
effect of changing the provisions for determining the number of the Acquiring
Fund Shares to be issued to the Acquired Fund Shareholders under this Agreement
to the detriment of such shareholders without their further approval.
14. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be deemed duly given
if delivered by hand (including by Federal Express or similar express courier)
or transmitted by facsimile or three days after being mailed by prepaid
registered or certified mail, return receipt requested, addressed to the
Acquired Fund, 222 South Riverside Plaza, Chicago, Illinois 60606, with a copy
to Dechert, Ten Post Office Square South, Boston, MA 02109-4603, Attention:
Joseph R. Fleming, Esq., or to the Acquiring Fund, Two International Place,
Boston, MA 02110-4103, with a copy to Dechert, Ten Post Office Square South,
Boston, MA 02109-4603, Attention: Joseph R. Fleming, Esq., or to any other
address that the Acquired Fund or the Acquiring Fund shall have last designated
by notice to the other party.
15. HEADINGS; COUNTERPARTS; ASSIGNMENT; LIMITATION OF LIABILITY
15.1. The Article and section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
15.2. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
15.3. This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and the shareholders of the
Acquiring Fund and the Acquired Fund and their respective successors and
assigns, any rights or remedies under or by reason of this Agreement.
15.4. References in this Agreement to the Trust mean and refer to the Board
members of the Trust from time to time serving under its Declaration of Trust on
file with the Secretary of State of The Commonwealth of Massachusetts, as the
same may be amended from time to time, pursuant to which the Trust conducts its
business. It is expressly agreed that the obligations of each Trust hereunder
shall not be binding upon any of the Board members, shareholders, nominees,
officers, agents, or employees of the Trusts or the Funds personally, but bind
only the respective property of the Funds, as provided in each Trust's
Declaration of Trust. Moreover, no series of either Trust other than the Funds
shall be responsible
16
<PAGE>
for the obligations of the Trusts hereunder, and all persons shall look only to
the assets of the Funds to satisfy the obligations of the Trusts hereunder. The
execution and the delivery of this Agreement have been authorized by each
Trust's Board members, on behalf of the applicable Fund, and this Agreement has
been signed by authorized officers of each Fund acting as such, and neither such
authorization by such Board members, nor such execution and delivery by such
officers, shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the
respective property of the Funds, as provided in each Trust's Declaration of
Trust.
Notwithstanding anything to the contrary contained in this Agreement, the
obligations, agreements, representations and warranties with respect to each
Fund shall constitute the obligations, agreements, representations and
warranties of that Fund only (the "Obligated Fund"), and in no event shall any
other series of the Trusts or the assets of any such series be held liable with
respect to the breach or other default by the Obligated Fund of its obligations,
agreements, representations and warranties as set forth herein.
15.5. This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Massachusetts, without regard to its
principles of conflicts of laws.
17
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by an authorized officer and its seal to be affixed thereto and
attested by its Secretary or Assistant Secretary.
Attest: KEMPER SHORT-TERM U.S. GOVERNMENT
FUND
______________________________
Secretary
________________________________
By:_____________________________
Its:____________________________
Attest: SCUDDER FUNDS TRUST
on behalf of Scudder Short Term Bond Fund
______________________________
Secretary
________________________________
By:_____________________________
Its:____________________________
AGREED TO AND ACKNOWLEDGED
ONLY WITH RESPECT TO
PARAGRAPH 10.2 HERETO
SCUDDER KEMPER INVESTMENTS, INC.
______________________________
By:___________________________
Its:__________________________
18
<PAGE>
EXHIBIT B
MANAGEMENT'S DISCUSSION OF SCUDDER SHORT TERM BOND FUND'S
PERFORMANCE
[To be provided]
<PAGE>
Performance Update
--------------------------------------------------------------------------------
December 31, 1999
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
Salomon Brothers Inc.
Treasury/Government
Scudder Short Sponsored Corporate
Term Bond Fund Index (1-3 years)*
'89 10000 10000
'90 10988 10972
'91 12568 12271
'92 13251 13062
'93 14335 13796
'94 13924 13880
'95 15420 15392
'96 16014 16187
'97 17002 17266
'98 17739 18467
'99 18017 18977
Yearly periods ended December 31
--------------------------------------------------------------------------------
Fund Index Comparison
--------------------------------------------------------------------------------
Total Return
Growth of Average
Period ended 12/31/1999 $10,000 Cumulative Annual
--------------------------------------------------------------------------------
Scudder Short Term Bond Fund
--------------------------------------------------------------------------------
1 year $ 10,157 1.57% 1.57%
--------------------------------------------------------------------------------
5 year $ 12,940 29.40% 5.29%
--------------------------------------------------------------------------------
10 year** $ 18,017 80.17% 6.06%
--------------------------------------------------------------------------------
Salomon Brothers Inc. Treasury/Government Sponsored Corporate Index (1-3 years)*
--------------------------------------------------------------------------------
1 year $ 10,276 2.76% 2.76%
--------------------------------------------------------------------------------
5 year $ 13,672 36.72% 6.45%
--------------------------------------------------------------------------------
10 year** $ 18,977 89.77% 6.61%
--------------------------------------------------------------------------------
* Salomon Brothers Inc. Treasury/Government Sponsored Corporate Index (1-3
years) is composed of Treasury, Government Sponsored Agency, and Corporate
securities with maturities of one to three years. Index returns assume
reinvestment of dividends and, unlike Fund returns, do not reflect any fees
or expenses.
** The Fund, with its current name and objective, commenced operations on July
3, 1989. Performance figures include the performance of its predecessor, the
General 1994 Portfolio of Scudder Target Fund. Since adopting its current
objective, the cumulative and average annual returns are 89.31% and 6.27%,
respectively.
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results. Investment return
and principal value will fluctuate, so an investor's shares, when redeemed,
may be worth more or less than when purchased. If the Adviser had not
maintained the Fund's expenses, the one year total return for the Fund
would have been lower.
<PAGE>
Portfolio Management Discussion
--------------------------------------------------------------------------------
December 31, 1999
In the following interview, portfolio managers Robert S. Cessine and John E.
Dugenske discuss Scudder Short Term Bond Fund's strategy and the market
environment in the twelve-month period ended December 31, 1999.
Q: The bond market experienced one of the worst years of the twentieth century
in 1999. How did this play out in the various subsectors you follow, and what
were some of the causes?
A: The environment for government bonds has steadily deteriorated over the past
year, but certain sectors of the market have held up relatively well. The
greatest amount of attention has been given to the performance of the benchmark
30-year Treasury bond, whose yield rose from 5.10% to 6.48% (as its price fell)
over the course of the year. Of greater concern to us was the fact that the two-
and three-year notes, which are particularly sensitive to Federal Reserve
policy, were also under pressure, particularly in the fourth quarter. The reason
for the downdraft was the market's growing concern over inflation pressures in
the U.S. economy. Even though broad measures such as the Consumer Price Index
have shown that inflation is still relatively tame, investors are concerned that
the combination of tight labor markets, improved growth overseas, and soaring
stock prices have made an acceleration of inflation inevitable. The Fed sought
to preempt inflation by raising interest rates three times in 1999, and the
consensus expectation is that more rate hikes will be necessary in 2000. With
the economy still barreling along, the bond market has been unnerved by the fact
that there is no discernable point at which the Fed will stop raising rates.
Until investors gain a sense that the Fed has completed its current tightening
cycle, we believe it is likely that volatility will continue.
Outside of Treasuries, certain sectors of the bond market fared well. According
to the Merrill Lynch fixed income indices, mortgage- and asset-backed securities
both provided positive performance over the full year, while government agency
notes were down less than 1%.
2
<PAGE>
Corporate issues performed poorly over the full year, but outperformed
Treasuries in the fourth quarter as fears of a supply-demand imbalance ahead of
Y2K dissipated. The stronger performance of these sectors proved beneficial to
fund performance. Our diversified approach among a variety of corporates,
asset-backeds, agency notes, and mortgages helped to mitigate the effects of the
difficult interest rate environment.
Q: How did the fund perform in this environment?
A: For the twelve-month period ended December 31, 1999, the fund posted a total
return of 1.57%, compared to the 2.76% for its unmanaged benchmark, the Solomon
Brothers Treasury/Government Sponsored Corporate Index. Relative performance was
slightly better during the fourth quarter, the fund returned 0.81%, versus 0.68%
for the index.
Q: How did you position the portfolio among the various subsectors of the bond
market?
A: We increased the fund's holdings in asset-backed securities, which we view as
one of the most attractive areas among short-term issues. The sector offers
attractive yield spreads over Treasuries at what we believe to be a low level of
risk. As of December 31, asset-backeds made up 23.1% of net assets, versus 19.1%
on June 30. We have also found spreads to be attractive in AAA-rated corporates,
a group that was trading at roughly 80 basis points (or eight-tenths of a
percentage point) over comparable Treasuries at year end. Given the low risk
inherent in this sector, we have been taking advantage of the attractive yields.
We believe that this strategy has enabled the fund to withstand the downdraft in
bond prices by positioning it to benefit from the recent outperformance of
asset-backeds and high-grade corporates.
Our corporate position is well diversified among bonds issued by steady,
noncyclical companies with stable cash flows and strong balance sheets. We have
repositioned the
3
<PAGE>
portfolio so that the majority of our positions in individual corporate bonds
(26 overall) are each 1-1.5% of total assets. In the process, we have raised the
overall quality of our corporate position, increased diversification, and, in
our view, lowered overall portfolio risk.
Q: What was your strategy with respect to duration and credit quality?
A: We have trimmed duration to 1.85 years from a high of 2.30 in the third
quarter. As a result, portfolio duration is now neutral with respect to both the
two-year Treasury and the universe of short-term bond funds. Our decision to
reduce duration proved beneficial to performance in a period when
longer-duration assets generally underperformed. Looking ahead, we intend to
maintain a neutral stance until such time as it becomes evident to us that the
Fed is approaching the end of its tightening cycle. The fund's average credit
quality stands at A, which reflects a conservative approach that has also held
the fund in good stead in an unfavorable environment.
Q: What is your outlook for the year ahead?
A: We believe that the bond market will remain unsettled in the early part of
2000. Economic reports should continue to have a significant impact on
short-term market movements as investors search for signs of incipient
inflation. Until there is a clearer indication that the Fed will be able to move
away from its current tightening mode, we expect bond market performance to be
choppy and volatile. As a result, we intend to maintain a neutral duration
strategy and a focus on quality until the interest rate outlook stabilizes.
Given the poor performance of the bond market in '99, it's likely that our next
move will be to increase, rather than decrease, duration. In addition, we will
continue to use volatility as an opportunity to take advantage of value in the
corporate and asset-backed sectors. Overall, we are confident that the fund is
well positioned for the environment we see unfolding over the next 3-6 months.
4
<PAGE>
APPENDIX 1
Trustee and Nominee Shareholdings
The following table sets forth, for each Nominee and Trustee, the number of
shares owned in Kemper Short-Term U.S. Government Fund as of December 31, 2000.
[Each nominee's and Trustee's individual shareholdings of Kemper Short-Term U.S.
Government Fund constitute less than 1% of the outstanding shares of such fund.]
[As a group, the Trustees and officers own less than 1% of the shares of Kemper
Short-Term U.S. Government Fund.]
<PAGE>
APPENDIX 2
Beneficial Owners of Fund Shares
<PAGE>
This proxy statement/prospectus is accompanied by Scudder Short Term Bond
Fund's prospectus that offers Class A, Class B and Class C Shares dated March 1,
2001, which was previously filed with the Securities and Exchange Commission
(the "Commission") via EDGAR on December 26, 2000 (File No. 33-18477) and is
incorporated by reference herein.
Scudder Short Term Bond Fund's statement of additional information that
offers Class A, Class B and Class C Shares dated March 1, 2001, which was
previously filed with the Commission via EDGAR on December 26, 2000 (File No.
33-18477), is incorporated by reference herein.
Kemper Short-Term U.S. Government Fund's prospectus dated January 1, 2001,
which was previously filed with the Commission via EDGAR on October 13, 2000
(File No. 811-05195), is incorporated by reference herein.
<PAGE>
PART B
SCUDDER FUNDS TRUST
----------------------------------------------------------
Statement of Additional Information
March [ ], 2001
----------------------------------------------------------
Acquisition of the Assets of By and in Exchange for Shares of
Kemper Short-Term U.S. Government Fund Scudder Short Term Bond Fund, a
222 South Riverside Plaza series of Scudder Funds Trust (the
Chicago, IL 60606. "Acquiring Trust") Two International
Place Boston, MA 02110-4103
This Statement of Additional Information is available to the shareholders
of Kemper Short-Term U.S. Government Fund in connection with a proposed
transaction whereby Scudder Short Term Bond Fund will acquire all or
substantially all of the assets and all of the liabilities of Kemper Short-Term
U.S. Government Fund in exchange for shares of Scudder Short Term Bond Fund
(the "Reorganization").
This Statement of Additional Information of the Acquiring Trust contains
material which may be of interest to investors but which is not included in the
Proxy Statement/Prospectus of the Acquiring Trust relating to the
Reorganization. This Statement of Additional Information consists of this cover
page and the following documents:
1. Scudder Short Term Bond Fund's statement of additional information dated
March 1, 2001 which was previously filed with the Securities and Exchange
Commission (the "Commission") via EDGAR on December 26, 2000 (File No. 811-
03229) and is incorporated by reference herein.
2. Scudder Short Term Bond Fund's annual report to shareholders for the fiscal
year ended December 31, 1999, which was previously filed with the Commission via
EDGAR on February 24, 2000 (File No. 811-03229) and is incorporated by reference
herein.
3. Scudder Short Term Bond Fund's semiannual report to shareholders for the
period ended June 30, 2000, which was previously filed with the Commission via
EDGAR on August 30, 2000 (File No. 811-03229) and is incorporated by reference
herein.
4. Kemper Short-Term U.S. Government Fund's prospectus dated January 1, 2001,
which was previously filed with the Commission via EDGAR on October 13, 2000
(File No. 811-05195) and is incorporated by reference herein.
5. Kemper Short-Term U.S. Government Fund's statement of additional
information dated January 1, 2001, which was previously filed with the
Commission via EDGAR on October 13, 2000 (File No. 811-05195) and is
incorporated by reference herein.
6. Kemper Short-Term U.S. Government Fund's annual report to shareholders for
the fiscal year ended August 31, 2000, which was previously filed with the
Commission via EDGAR on October 26, 2000 (File No. 811-05195) and is
incorporated by reference herein.
7. The financial statements and schedules of Scudder Short Term Bond Fund and
Kemper Short-Term U.S. Government Fund required by Regulation S-X for the
periods specified in Article 3 thereof, which are filed herein.
This Statement of Additional Information is not a prospectus. A Proxy
Statement/Prospectus dated March [ ], 2001 relating to the Reorganization may be
obtained by writing Kemper Short-Term U.S. Government Fund at 222 South
Riverside Drive, Chicago, IL 60606 or by calling [ ] at 1-800-[ ]. This
Statement of Additional Information should be read in conjunction with the Proxy
Statement/Prospectus.
SAI-1
<PAGE>
Pro Forma
Portfolio of Investments
As of September 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Scudder Kemper Short Pro Forma Scudder Kemper Short Pro Forma
Short-Term Term U.S. Combined Short-Term Term U.S. Combined
Bond Par/ Government Par/Share Bond Market Government Market
Repurchase Agreements 5.5% Share Amount Par/Share Amount Amount Value ($) Market Value ($) Value ($)
-------------------------- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Repurchase Agreement with State
Street Bank, 6.48%, 10/02/2000 49,015,000 620,000 49,635,000 49,015,000 620,000 49,635,000
Repurchase Agreement with Chase
Securities Government 6.65%,
10/02/2000 9,000,000 9,000,000 9,000,000 9,000,000
Repurchase Agreement with Chase
Securities Government 6.6%,
10/05/2000 4,000,000 4,000,000 4,000,000 4,000,000
--------------------------------------------
Total Repurchase Agreements (Cost of
$49,015,000, $13,620,000, and
$62,635,000 respectively) 49,015,000 13,620,000 62,635,000
============================================
U.S. Treasury Obligations 6.4%
------------------------------
U.S. Treasury Note, 5.5%, 01/31/2003 4,300,000 4,300,000 4,254,979 4,254,979
U.S. Treasury Note, 6.125%, 08/15/2007 3,600,000 3,600,000 3,635,424 3,635,424
U.S. Treasury Note, 6.125%, 08/31/2002 10,600,000 17,100,000 27,700,000 10,614,946 17,124,111 27,739,057
U.S. Treasury Note, 6.75%, 05/15/2005 24,600,000 24,600,000 25,484,124 25,484,124
U.S. Treasury Bond, 10.375%, 11/15/2012 3,100,000 3,100,000 3,849,332 3,849,332
U.S. Treasury Bond, 6.5%, 02/15/2010 2,800,000 5,300,000 8,100,000 2,917,684 5,522,759 8,440,443
--------------------------------------------
Total U.S. Treasury Obligations (Cost of
$38,746,766, $34,178,267, and
$72,925,033 respectively) 39,016,754 34,386,605 73,403,359
============================================
Government National Mortgage
----------------------------
Association 9.9%
----------------
Government National Mortgage
Association Pass-thru, 6.9237504%,
09/20/2024 12,630,647 2,114,727 14,745,374 12,646,435 2,117,370 14,763,805
Government National Mortgage
Association Pass-thru, 6.5%,
12/01/2028 209,082 209,082 201,372 201,372
Government National Mortgage
Association Pass-thru 7% with
various maturities thru 04/15/2029 1,201,463 1,201,463 1,183,665 1,183,665
Government National Mortgage
Association Pass-thru 8% with
various maturities thru 06/01/2015 11,747,746 1,993,083 13,740,829 12,041,237 2,039,796 14,081,033
Government National Mortgage
Association Pass-thru 8.5% with
various maturities thru 12/15/2029 39,002,686 448,932 39,451,619 39,998,659 461,418 40,460,077
Government National Mortgage
Association Pass-thru 9% with
various maturities thru 02/01/2030 33,263,019 33,263,019 34,474,082 34,474,082
Government National Mortgage
Association Pass-thru 9.5% with
various maturities thru 06/15/2018 21,784 21,784 22,729 22,729
Government National Mortgage
Association Pass-thru, 11.5%,
01/01/2029 6,869,729 6,869,729 7,565,083 7,565,083
--------------------------------------------
Total Government National Mortgage
Association (Cost of $82,636,726,
$40,428,793, and $123,065,519
respectively) 72,251,414 40,500,432 112,751,846
============================================
U.S. Government & Agencies 9.5%
-------------------------------
Federal Home Loan Bank, Zero Coupon,
10/02/2000 31,363,000 31,363,000 31,357,598 31,357,598
Federal National Mortgage Association,
6.75%, 08/15/2002 3,000,000 3,000,000 3,013,110 3,013,110
Federal National Mortgage Association,
7%, 07/15/2005 10,175,000 1,900,000 12,075,000 10,346,652 1,932,053 12,278,705
Federal National Mortgage Association,
6%, 01/18/2014 9,700,000 9,700,000 9,560,514 9,560,514
Federal National Mortgage Association,
8%, 07/01/2015 9,917,783 9,917,783 10,150,232 10,150,232
Federal Home Loan Mortgage Corp.,
11%, 12/01/2014 1,136 1,136 1,141 1,141
Federal Home Loan Mortgage Corp.,
7.375%, 05/15/2003 20,000,000 20,000,000 20,396,800 20,396,800
Student Loan Marketing Association,
6.43%, 01/25/2013 22,800,000 22,800,000 22,764,375 22,764,375
--------------------------------------------
Total U.S. Government & Agencies (Cost
of $93,912,510, $4,904,539, and
$98,817,049 respectively) 104,576,171 4,946,304 109,522,475
============================================
Collateralized Mortgage Obligations 19.3%
-----------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Federal National Mortgage Association,
Series G94-10 PD, 6.5%, 09/17/2009 5,000,000 5,000,000 4,829,650 4,829,650
Federal National Mortgage Association,
Series 1998-49 PE, 6%, 01/20/2019 3,200,000 3,200,000 3,130,976 3,130,976
Federal National Mortgage Association,
Series 1999-51, 6%, 07/25/2017 23,910,700 23,910,700 23,566,864 23,566,864
Federal National Mortgage Association,
Series 1998-S8 PW, 5.5%, 02/25/2021 10,934,925 10,934,925 10,623,935 10,623,935
Federal National Mortgage Association,
Class 1999-51 LB, 6.5%, 03/25/2014 16,524,000 16,524,000 16,394,782 16,394,782
Federal National Mortgage Association,
Class 1999-54, LB, 6.5%, 04/25/2014 18,556,000 18,556,000 18,405,139 18,405,139
Federal Home Loan Mortgage Corp.,
Series 2066 PQ, 6.15%, 03/15/2021 9,600,000 9,600,000 9,482,976 9,482,976
Federal Home Loan Mortgage Corp.,
Series 2093 VA, 6%, 07/15/2004 4,274,508 4,274,508 4,211,715 4,211,715
Federal Home Loan Mortgage Corp.,
Series 2131 BA, 6%, 11/15/2017 22,631,012 22,631,012 22,333,866 22,333,866
Federal Home Loan Mortgage Corp,,
Series 2175 TC, 6%, 02/15/2017 9,000,000 9,000,000 8,842,500 8,842,500
Federal Home Loan Mortgage Corp.,
Series T-20, 7.06%, 06/25/2016 12,500,000 2,000,000 14,500,000 12,472,656 1,995,625 14,468,281
Federal Home Loan Mortgage Corp.,
Series T-22, 6,77%, 11/25/2029 33,163,315 33,163,315 33,194,405 33,194,405
Federal Home Loan Mortgage Corp.,
Series 2198 PA, 6.75%, 08/15/2016 14,500,000 3,000,000 17,500,000 14,450,120 2,989,680 17,439,800
Federal Home Loan Mortgage Corp.,
Series T-23, 6.7619%, 05/25/2030 21,804,110 8,506,524 30,310,634 21,821,144 8,513,169 30,334,313
Residential Funding Mortgage Security,
7.724%, 04/28/2022 4,631,667 4,631,667 4,607,061 4,607,061
------------------------------------------
Total Collateralized Mortgage Obligations
(Cost of $185,995,563, $36,575,596,
$222,571,159 respectively) ) 185,571,513 36,294,750 221,866,263
==========================================
Asset Backed 16.8%
------------------
Capital Automobile Receivable Asset Trust,
Series 1999-1 A2, 5.58%, 06/15/2002 12,094,376 3,278,053 15,372,428 12,026,284 3,259,597 15,285,881
Coast-Plymouth Tax Lien Capital, LLC,
6.76%, 11/15/2004 7,243,037 1,810,759 9,053,797 7,218,121 1,804,530 9,022,651
Contimortgage Net Interest Margin Notes,
Series 1997-3, 7.23%, 07/16/2028 4,929,746 4,929,746 985,949 985,949
Daimler Chrysler Auto Trustseries 2000-C,
6.82%, 09/06/2004 6,100,000 6,100,000 6,107,399 6,107,399
Discover Card Master Trust I,
Series 1996-4 A, 6.156%, 10/16/2013 8,000,000 1,600,000 9,600,000 8,050,000 1,610,000 9,660,000
Discover Card Master Trust I ,
Series 2000-2 A, 6.8%, 09/18/2007 20,000,000 20,000,000 20,015,625 20,015,625
EQCC Home Equity Loan Trust, 6.88%,
07/15/2004 6,867,887 5,023,369 11,891,255 6,861,431 5,018,646 11,880,077
First Security Auto Owner Trust,
Series 2000-1, A4, 7.4%, 10/15/2005 12,500,000 12,500,000 12,677,734 12,677,734
Ford Credit Auto Owner Trust,
5.86%, 10/15/2002 15,415,000 15,415,000 15,292,161 15,292,161
Ford Credit Auto Owner Trust,
Series 2000-c, A4, 7.24%, 02/15/2004 8,300,000 1,400,000 9,700,000 8,388,146 1,414,868 9,803,014
GE Capital Mortgage Services, Inc.,
7%, 08/25/2013 14,500,000 14,500,000 14,416,171 14,416,171
Green Tree Financial Corp.,
Series 1995-8 B1, 7.3%, 12/15/2026 8,833,947 8,833,947 6,501,232 6,501,232
Green Tree Financial Corp.
Series 1996-5 B2, 8.45%, 07/15/2027 9,832,276 9,832,276 4,753,290 4,753,290
Green Tree Financial Corp.
Series 1997-1 B1, 7.23%, 03/15/2028 4,000,000 4,000,000 2,870,000 2,870,000
Green Tree Financial Corp.
Series 1997-2 B2, 8.05%, 06/15/2028 1,450,347 1,450,347 670,332 670,332
MBNA Master Credit Card Trust,
6.9%, 08/15/2003 15,000,000 2,500,000 17,500,000 15,013,950 2,502,325 17,516,275
Merrill Lynch Mortgage Investors Inc.,
B, Series 1991-D, 9.85%,
07/15/2011, 144A 2,912,394 2,912,394 2,929,664 2,929,664
Residential Funding Mortgage Securities,
Inc., Series 2000-HI1 AI2, 7.58%,
09/25/2010 14,500,000 14,500,000 13,901,875 13,901,875
Residential Asset Securities Corp.,
7.18%, 01/25/2025 15,500,000 2,000,000 17,500,000 15,478,203 1,997,187 17,475,390
Toyota Auto Receivables Owner Trust,
Series 2000-C, A4, 7.21%, 04/15/2007 1,800,000 1,800,000 1,825,875 1,825,875
------------------------------------------
Total Asset Backed (Cost of $188,511,851,
$19,448,965, and $207,960,816 respectively) 174,157,567 19,433,028 193,590,595
==========================================
Corporate Obligations 28.9%
---------------------------
Associates Corp. of North America,
6.96%, 05/08/2003 10,500,000 10,500,000 10,569,195 10,569,195
Atlantic Richfield Co.,
5.55%, 04/15/2003 10,600,000 10,600,000 10,326,944 10,326,944
Bank One Corp., 6.4%, 08/01/2002 10,000,000 10,000,000 9,932,900 9,932,900
BankAmerica Corp., 5.75%, 03/01/2004 13,100,000 13,100,000 12,612,287 12,612,287
Chase Manhattan Corp., 5.75%,
04/15/2004 10,000,000 10,000,000 9,609,500 9,609,500
Conoco Inc., 5.9%, 04/15/2004 11,000,000 11,000,000 10,668,790 10,668,790
Cox Communications, Inc.,
7.5%, 08/15/2004 10,600,000 10,600,000 10,667,416 10,667,416
DaimlerChrysler NA Holdings,
7.125%, 04/10/2003 11,500,000 11,500,000 11,524,840 11,524,840
Detroit Edison Co.,
5.93%, 02/01/2001 9,000,000 9,000,000 8,951,400 8,951,400
Deutsch Telekom Int Fin,
7.75%, 06/15/2005 10,600,000 10,600,000 10,784,122 10,784,122
FleetBoston Financial Group,
6.87%, 03/27/2003 10,600,000 10,600,000 10,587,280 10,587,280
Ford Motor Credit Corp.,
7.25%, 01/15/2003 10,600,000 10,600,000 10,640,598 10,640,598
General Electric Capital Corp.,
6.02%, 05/04/2001 10,600,000 10,600,000 10,546,364 10,546,364
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
General Motors Acceptance Corp.,
6.75%, 12/10/2002 10,600,000 10,600,000 10,549,438 10,549,438
Hewlett-Packard Co., 7.15%, 06/15/2005 10,600,000 10,600,000 10,743,736 10,743,736
International Business Machines Corp.,
7.25%, 11/01/2002 11,500,000 11,500,000 11,653,755 11,653,755
International Paper Co., 8%, 07/08/2003 10,600,000 10,600,000 10,772,356 10,772,356
MCI Communications Corp., 6.125%, 04/15/2002 10,000,000 10,000,000 9,873,700 9,873,700
NBD Bank NA Michigan, 6.25%, 08/15/2003 9,500,000 9,500,000 9,302,590 9,302,590
National Westminster Bank, 9.375%, 11/15/2003 9,600,000 9,600,000 10,226,784 10,226,784
Prudential Funding Corp, 6.785%, 02/15/2002, 144A 10,600,000 10,600,000 10,587,280 10,587,280
Public Service Electric Gas and Co.,
7.19%, 09/06/2002 10,100,000 10,100,000 10,148,480 10,148,480
Raytheon Co.144A, 7.9%, 03/01/2003 10,600,000 10,600,000 10,685,330 10,685,330
Safeway Inc., 6.05%, 11/15/2003 11,100,000 11,100,000 10,760,451 10,760,451
Sprint Capital Corp., 5.875%, 05/01/2004 10,600,000 10,600,000 10,133,388 10,133,388
Toyota Auto Receivables Owner Trust,
7.21%, 04/15/2007 11,550,000 11,550,000 11,716,031 11,716,031
Transamerica Finance Corp., 7.25%, 08/15/2002 15,000,000 15,000,000 15,065,250 15,065,250
United States West Communications, Inc.,
7.625%, 06/09/2003 9,500,000 9,500,000 9,617,610 9,617,610
Verizon Communications, 9.1%, 06/01/2003 10,600,000 10,600,000 11,114,100 11,114,100
Wal-Mart Stores, Inc., 6.875%, 08/01/2002 10,600,000 10,600,000 10,635,404 10,635,404
Wells Fargo & Co., 6.8137%, 04/26/2002 11,000,000 11,000,000 11,001,650 11,001,650
----------------------------------------
Total Corporate Obligations (Cost of $330,654,610,
$0, and $330,654,610 respectively) 332,008,969 332,008,969
========================================
Foreign Bonds - Non U.S.$ Denominated 2.7%
------------------------------------------
Province of Ontario, 7.375%, 01/27/2003 10,000,000 10,000,000 10,132,400 10,132,400
Quebec Province, 7.5%, 07/15/2002 10,600,000 10,600,000 10,725,398 10,725,398
Repsol International Finance, 7.45%, 07/15/2005 10,600,000 10,600,000 10,715,022 10,715,022
----------------------------------------
Total Foreign Bonds - Non U.S.$ Denominated
(Cost of $31,403,948, $0, and $31,403,948
respectively) 31,572,820 31,572,820
========================================
Foreign Government Obligations 1.1%
-----------------------------------
Government Trust Certificates, 9.25%, 11/15/2001 8,917,940 8,917,940 9,063,391 9,063,391
Government Trust Certificates, 9.4%, 05/15/2002 3,115,374 3,115,374 3,145,819 3,145,819
----------------------------------------
Total Foreign Government Obligations (Cost of
$0, $12,597,341, $12,597,341 respectively) 12,209,210 12,209,210
========================================
----------------------------------------
Total Investment Portfolio (Cost of $1,000,876,974,
$161,753,501 and $1,162,630,475 respectively) 988,170,208 161,390,329 1,149,560,537
========================================
</TABLE>
<PAGE>
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
PRO FORMA COMBINING CONDENSED STATEMENT OF ASSETS AND LIABILITIES
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
Scudder Short Kemper Short Term Pro Forma Pro Forma
Term Bond US Government Adjustments Combined
----------------- ----------------- ----------- ----------------
<S> <C> <C> <C> <C>
Investments, at value $ 988,170,208 $ 161,390,329 $ 1,149,560,537
Cash 19,297 627 $ 19,924
Other assets less liabilities 12,081,877 803,430 $ - (2) $ 12,885,307
----------------- ----------------- ----------- ----------------
Total Net assets $ 1,000,271,382 $ 162,194,386 $ - $ 1,162,465,768
================= ================= =========== ================
Net Assets
Class S Shares $ 647,224,465 $ 647,224,465
Class AARP Shares $ 353,046,917 $ 353,046,917
Class A Shares $ 120,898,863 $ 120,898,863
Class B Shares $ 34,587,522 $ 34,587,522
Class C Shares $ 6,708,001 $ 6,708,001
Shares Outstanding
Class S Shares 62,098,331 62,098,331
Class AARP Shares 33,869,218 33,869,218
Class A Shares 15,160,444 (3,557,866) 11,602,578
Class B Shares 4,316,319 (996,979) 3,319,340
Class C Shares 837,622 (193,860) 643,762
Net Asset Value per Share
Class S Shares $ 10.42 $ 10.42
Class AARP Shares $ 10.42 $ 10.42
Class A Shares $ 7.97 $ 10.42
Class B Shares $ 8.01 $ 10.42
Class C Shares $ 8.01 $ 10.42
</TABLE>
<PAGE>
PRO FORMA COMBINING CONDENSED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTH PERIOD ENDED SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
Scudder Short Kemper Short Term Pro Forma Pro Forma
Term Bond US Government Adjustments Combined
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income:
Interest and dividend income $ 52,305,077 12,147,436 $ - $ 64,452,513
---------------------------------------------------------------------------
Total Investment Income 52,305,077 12,147,436 64,452,513
Expenses
Management fees 4,230,747 1,006,638 (929,141) (3) 4,308,244
12B-1 - 788,939 788,939
Trustees Fees 63,918 12,558 - (4) 76,476
All other expenses 2,187,548 623,254 129,977 (5) 2,940,779
---------------------------------------------------------------------------
Total expenses before reductions 6,482,213 2,431,389 (799,164) 8,114,438
Expense reductions (283,552) - 283,552 -
---------------------------------------------------------------------------
Expenses, net 6,198,661 2,431,389 (515,612) 8,114,438
---------------------------------------------------------------------------
Net investment income (loss) 46,106,416 9,716,047 515,612 56,338,075
---------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss)
on Investments:
Net realized gain (loss) from investments (16,987,603) (2,241,492) - (19,229,095)
Net unrealized appreciation (depreciation)
of investments 9,356,952 1,070,607 - 10,427,559
---------------------------------------------------------------------------
Net increase in net assets from operations $ 38,475,765 $ 8,545,162 $ 515,612 $ 47,536,539
===========================================================================
</TABLE>
Notes to Pro Forma Combining Financial Statements
(Unaudited)
September 30, 2000
1. These financial statements set forth the unaudited pro forma condensed
Statement of Assets and Liabilities as of September 30, 2000, and the
unaudited pro forma condensed Statement of Operations for the twelve month
period ended September 30, 2000 for the Scudder Short Term Bond Fund and
Kemper Short Term US Government Fund as adjusted giving effect to the
Reorganization as if it had occurred as of the beginning of the period. These
statements have been derived from the books and records utilized in
calculating daily net asset value for each fund.
2. Represents one-time proxy, legal, accounting and other costs of the
Reorganization of $xxxxxx and $xxxxxx to be borne by Scudder Short Term Bond
Fund and Kemper Short Term U.S. Government Fund, respectively.
3. Represents reduction in management fees resulting from the use of Scudder
Short Term Bond Fund's lower management fee schedule.
4. Reduction in trustee fees resulting from the Reorganization.
5. Represents increase in other expenses resulting from the application of
Scudder Short Term Bond Fund's administrative fee contract for the full year.
<PAGE>
PART C. OTHER INFORMATION
Item 15. Indemnification.
------- ---------------
A policy of insurance covering Scudder Kemper Investments,
Inc., its subsidiaries including Scudder Investor Services, Inc., and
all of the registered investment companies advised by Scudder Kemper
Investments, Inc. insures the Registrant's trustees and officers and
others against liability arising by reason of an alleged breach of duty
caused by any negligent act, error or accidental omission in the scope
of their duties.
Article IV, Sections 4.1 - 4.3 of the Registrant's Declaration
of Trust provide as follows:
Section 4.1. No Personal Liability of Shareholders, Trustees,
------------------------------------------------
etc. No Shareholder shall be subject to any personal liability
---
whatsoever to any Person in connection with Trust Property or the acts,
obligations or affairs of the Trust. No Trustee, officer, employee or
agent of the Trust shall be subject to any personal liability
whatsoever to any Person, other than to the Trust or its Shareholders,
in connection with Trust Property or the affairs of the Trust, save
only that arising from bad faith, willful misfeasance, gross negligence
or reckless disregard of his duties with respect to such Person; and
all such Persons shall look solely to the Trust Property for
satisfaction of claims of any nature arising in connection with the
affairs of the Trust. If any Shareholder, Trustee, officer, employee,
or agent, as such, of the Trust, is made a party to any suit or
proceeding to enforce any such liability of the Trust, he shall not, on
account thereof, be held to any personal liability. The Trust shall
indemnify and hold each Shareholder harmless from and against all
claims and liabilities, to which such Shareholder may become subject by
reason of his being or having been a Shareholder, and shall reimburse
such Shareholder for all legal and other expenses reasonably incurred
by him in connection with any such claim or liability. The
indemnification and reimbursement required by the preceding sentence
shall be made only out of the asset of the one or more Series of which
the Shareholder who is entitled to indemnification or reimbursement was
a Shareholder at the time the act or event occurred, which gave rise to
the claim against or liability of said Shareholder. The rights accruing
to a Shareholder under this Section 4.1 shall not impair any other
right to which such Shareholder may be lawfully entitled, nor shall
anything herein contained restrict the right of the Trust to indemnify
or reimburse a Shareholder in any appropriate situation even though not
specifically provided herein.
Section 4.2. Non-Liability of Trustees, etc. No Trustee,
------------------------------
officer, employee or agent of the Trust shall be liable to the Trust,
its Shareholders, or to any Shareholder, Trustee, officer, employee, or
agent thereof for any action or failure to act (including without
limitation the failure to compel in any way any former or acting
Trustee to redress any breach of trust) except for his own bad faith,
willful misfeasance, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
Section 4.3. Mandatory Indemnification.
--------------------------
(a) Subject to the exceptions and limitations
contained in paragraph (b) below:
(i) every person who is, or has been, a Trustee or
officer of the Trust shall be indemnified by the Trust to the Fullest
extent permitted by law against all liability and against all expenses
reasonably incurred or paid by him in connection with any claim,
action, suit or proceeding in which he becomes involved as a party or
otherwise by virtue of his being or having been a Trustee or officer
and against amounts paid or incurred by him in the settlement thereof;
C-1
<PAGE>
(ii) the words "claim," "action," "suit," or
"proceeding" shall apply to all claims, actions, suits or proceedings
(civil, criminal, administrative or other, including appeals), actual
or threatened; and the words "liability" and "expenses" shall include,
without limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder
to a Trustee or officer:
(i) against any liability to the Trust, a Series
thereof, or the Shareholders by reason of a final adjudication by a
court or other body before which a proceeding was brought that he
engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office;
(ii) with respect to any matter as to which he shall
have been finally adjudicated not to have acted in good faith in the
reasonable belief that his action was in the best interest of the
Trust;
(iii) in the event of a settlement or other
disposition not involving a final adjudication as provided in paragraph
(b)(i) or (b)(ii) resulting in a payment by a Trustee or officer,
unless there has been a determination that such Trustee or officer did
not engage in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office:
(A) by the court or other body approving the
settlement or other disposition; or
(B) based upon a review of readily available
facts (as opposed to a full trial-type inquiry) by (x) vote of a
majority of the disinterested Trustees acting on the matter (provided
that a majority of the Disinterested Trustees then in office act on the
matter) or (y) written opinion of independent legal counsel.
(c) The rights of indemnification herein provided
may be insured against by policies maintained by the Trust, shall be
severable, shall not affect any other rights to which any Trustee or
officer may now or hereafter be entitled, shall continue as to a person
who has ceased to be such Trust or officer and shall inure to the
benefit of the heirs, executors, administrators and assigns of such a
person. Nothing contained herein shall affect any rights to
indemnification to which personnel of the Trust other than Trustees and
officers may be entitled by contract or otherwise under law.
(d) Expenses of preparation and presentation of a
defense to any claim, action, suit or proceeding of the character
described in paragraph (a) of this Section 4.3 may be advanced by the
Trust prior to final disposition thereof upon receipt of an undertaking
by or on behalf of the recipient to repay such amount if it is
ultimately determined that he is not entitled to indemnification under
this Section 4.3 provided that either:
(i) such undertaking is secured by a surety bond or
some other appropriate security provided by the recipient, or the Trust
shall be insured against losses arising out of any such advances; or
(ii) a majority of the Disinterested Trustees acting
on the matter (provided that a majority of the Disinterested Trustees
act on the matter) or an independent legal counsel in a written opinion
shall determine, based upon a review of readily available facts (as
opposed to a
C-2
<PAGE>
full trial-type inquiry), that there is reason to believe that the
recipient ultimately will be found entitled to indemnification.
As used in this Section 4.3, a "Disinterested Trustee" is one who is
not (i) an "Interested Person" of the Trust (including anyone who has
been exempted from being an "Interested Person" by any rule, regulation
or order of the Commission), or (ii) involved in the claim, action,
suit or proceeding.
Item 16. Exhibits.
------- --------
(1) (a)(1) Amended and Restated Declaration of Trust dated
December 21, 1987 is incorporated by reference
to Registrant's Registration Statement on Form
N-1A, as amended (the "Registration Statement").
(a)(2) Instrument dated September 17, 1982 Establishing
and Designating Series of Shares is incorporated
by reference to Post-Effective Amendment No. 24
to the Registration Statement.
(a)(3) Instrument dated September 17, 1982 Establishing
and Designating an Additional Series of Shares
is incorporated by reference to Post-Effective
Amendment No. 24 to the Registration Statement.
(a)(4) Instrument dated March 21, 1984 Establishing and
Designating an Additional Series of Shares is
incorporated by reference to Post-Effective
Amendment No. 24 to the Registration Statement.
(a)(5) Certificate of Amendment of Declaration of Trust
dated June 29, 1989 is incorporated by reference
to Post-Effective Amendment No. 24 to the
Registration Statement.
(a)(6) Amendment of Establishment and Designation of
Additional Series of Shares dated June 29, 1989
is incorporated by reference to Post-Effective
Amendment No. 24 to the Registration Statement.
(a)(7) Abolition of series by the Registrant dated June
29, 1989 on behalf of the U.S. Government 1990
Portfolio is incorporated by reference to Post-
Effective Amendment No. 24 to the Registration
Statement.
(a)(8) Abolition of series by the Registrant dated June
29, 1989 on behalf of the General 1990 Portfolio
is incorporated by reference to Post-Effective
Amendment No. 24 to the Registration Statement.
(a)(9) Abolition of series by the Registrant on behalf
of the Scudder Zero Coupon 1995 Fund, dated July
15, 1992 is incorporated by reference to Post-
Effective Amendment No. 24 to the Registration
Statement.
(a)(10) Redesignation of Series of Registrant dated
March 7, 1990 is incorporated by reference to
Post-Effective Amendment No. 24 to the
Registration Statement.
C-3
<PAGE>
(a)(11) Certificate of Amendment of Declaration of Trust
dated July 2, 1991 is incorporated by reference
to Post-Effective Amendment No. 24 to the
Registration Statement.
(a)(12) Establishment and Designation of Classes of
Shares of Beneficial Interest, $0.01 par value,
Class S and Class AARP, with respect to Scudder
Short Term Bond Fund is incorporated by
reference to Post-Effective Amendment No. 32 to
the Registration Statement.
(2) (b)(1) By-Laws of the Registrant dated as of September
17, 1982 is incorporated by reference to Post-
Effective Amendment No. 24 to the Registration
Statement.
(b)(2) Amendment to the By-Laws of Registrant as of
March 5, 1984 is incorporated by reference to
Post-Effective Amendment No. 24 to the
Registration Statement.
(b)(3) Amendment to the By-Laws of Registrant as of
October 1, 1984 is incorporated by reference to
Post-Effective Amendment No. 24 to the
Registration Statement.
(b)(4) Amendment to the By-Laws of Registrant as of
December 12, 1991 is incorporated by reference
to Post-Effective Amendment No. 24 to the
Registration Statement.
(b)(5) Amendment to the By-Laws of the Registrant dated
September 17, 1992 is incorporated by reference
to Post-Effective Amendment No. 24 to the
Registration Statement.
(3) Inapplicable.
(4) Form of Agreement and Plan of Reorganization is
filed herein as Exhibit A to Part A.
(5) Inapplicable.
(6) (d)(1) Investment Management Agreement between the
Registrant, on behalf of Scudder Short Term Bond
Fund, and Scudder Kemper Investments, Inc. dated
September 7, 1998 is incorporated by reference
to Post-Effective Amendment No. 28 to the
Registration Statement.
(d)(2) Investment Management Agreement between the
Registrant, on behalf of Scudder Zero Coupon
2000 Fund, and Scudder Kemper Investments, Inc.
dated September 7, 1998 is incorporated by
reference to Post-Effective Amendment No. 28 to
the Registration Statement.
(d)(3) Form of Investment Management Agreement between
the Registrant, on behalf of Scudder Short Term
Bond Fund, and Scudder Kemper Investments, Inc.
dated August 14, 2000 is incorporated by
reference to Post-Effective Amendment No. 33 to
the Registration Statement.
C-4
<PAGE>
(7) (e)(1) Underwriting Agreement between the Registrant
and Scudder Investor Services, Inc. dated
September 7, 1998 is incorporated by reference
to Post-Effective Amendment No. 28 to the
Registration Statement.
(e)(2) Underwriting Agreement between the Registrant
and Scudder Investor Services, Inc., dated May
8, 2000 is incorporated by reference to Post-
Effective Amendment No. 33 to the Registration
Statement.
(8) Inapplicable.
(9) (g)(1) Custodian Agreement between the Registrant and
State Street Bank and Trust Company ("State
Street Bank") dated December 17, 1982 is
incorporated by reference to Post-Effective
Amendment No. 24 to the Registration Statement.
(g)(2) Fee schedule for Custodian Agreement between the
Registrant and State Street Bank is incorporated
by reference to Post-Effective Amendment No. 24
to the Registration Statement.
(g)(3) Amendment to the Custodian Agreement between the
Registrant and State Street Bank dated September
14, 1987 is incorporated by reference to Post-
Effective Amendment No. 24 to the Registration
Statement.
(g)(4) Amendment to the Custodian Agreement between the
Registrant and State Street Bank dated September
16, 1988 is incorporated by reference to Post-
Effective Amendment No. 24 to the Registration
Statement.
(g)(5) Amendment to the Custodian Agreement between the
Registrant and State Street Bank dated December
13, 1990 is incorporated by reference to Post-
Effective Amendment No. 24 to the Registration
Statement.
(10) (n)(1) Scudder Funds Trust Plan with respect to Scudder
Short Term Bond Fund pursuant to Rule 18f-3
dated March 14, 2000 is incorporated by
reference to Post-Effective Amendment No. 33 to
the Registration Statement.
(n)(2) Amended and Restated Plan with respect to
Scudder Short Term Bond Fund pursuant to Rule
18f-3 is incorporated by reference to Post-
Effective Amendment No. 33 to the Registration
Statement.
(n)(3) Scudder Funds Amended and Restated Multi-
Distribution Plan is filed herewith.
(11) Opinion and Consent of Dechert filed herewith.
(12) Opinion and Consent of Willkie Farr & Gallagher
to be filed by post-effective amendment.
(13) (h)(1) Transfer Agency and Service Agreement with fee
schedule between the Registrant and Scudder
Service Corporation dated October 2, 1989 is
incorporated by reference to Post-Effective
Amendment No. 24 to the Registration Statement.
C-5
<PAGE>
(h)(2) Revised fee schedule dated October 1, 1995 for
Exhibit 9(a) is incorporated by reference to
Post-Effective Amendment No. 23 to the
Registration Statement.
(h)(3) Revised fee schedule dated October 1, 1996 for
Exhibit 9(a) is incorporated by reference to
Post-Effective Amendment No. 23 to the
Registration Statement.
(h)(4) COMPASS Service Agreement with Scudder Trust
Company dated October 1, 1995 is incorporated by
reference to Post-Effective Amendment No. 22 to
the Registration Statement.
(h)(5) Revised fee schedule dated October 1, 1996 for
Exhibit 9(h)(4) is incorporated by reference to
Post-Effective Amendment No. 23 to the
Registration Statement.
(h)(6) Shareholder Services Agreement between the
Registrant and Charles Schwab & Co., Inc. dated
June 1, 1990 is incorporated by reference to
Post-Effective Amendment No. 24 to the
Registration Statement.
(h)(7) Fund Accounting Services Agreement between the
Registrant, on behalf of Scudder Short Term Bond
Fund, and Scudder Fund Accounting Corporation
dated July 19, 1995 is incorporated by reference
to Post-Effective Amendment No. 22 to the
Registration Statement.
(h)(8) Agreement and Plan of Reorganization dated
November 9, 1998 by and between the Registrant
and Scudder Short Term Bond Fund and Scudder
Zero Coupon 2000 Fund is incorporated by
reference to Post-Effective Amendment No. 28 to
the Registration Statement.
(h)(9) Form of Administrative Agreement between the
Registrant on behalf of Scudder Short Term Bond
Fund and Scudder Kemper Investments, Inc. dated
August 14, 2000 is incorporated by reference to
Post-Effective Amendment No. 33 to the
Registration Statement.
(14) Consents of Independent Accountants are filed
herewith.
(15) Inapplicable.
(16) Powers of Attorney are filed herewith.
(17) Revised Form of Proxy is filed herewith.
C-6
<PAGE>
Item 17. Undertakings.
------- ------------
(1) The undersigned registrant agrees that prior to any public
reoffering of the securities registered through the use of a
prospectus which is a part of this registration statement by any
person or party who is deemed to be an underwriter within the
meaning of Rule 145(c) of the Securities Act [17 CFR 230.145c],
the reoffering prospectus will contain the information called for
by the applicable registration form for C-8 350 reofferings by
persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(2) The undersigned registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an
amendment to the registration statement and will not be used
until the amendment is effective, and that, in determining any
liability under the 1933 Act, each post-effective amendment shall
be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
(3) The undersigned Registrant undertakes to file, by post-effective
amendment, an opinion of counsel supporting the tax consequences
of the proposed reorganization within a reasonable time after
receipt of such opinion.
C-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Scudder Funds Trust has duly caused this
Registration Statement on Form N-14 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston and the
Commonwealth of Massachusetts on the 28/th/ day of December, 2000.
SCUDDER FUNDS TRUST
By: /s/ Linda C. Coughlin
------------------------------
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form N-14 has been signed below by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Linda C. Coughlin President & Trustee December 28, 2000
----------------------------------
Linda C. Coughlin
/s/ Henry P. Becton, Jr * Trustee December 28, 2000
----------------------------------
Henry P. Becton, Jr.
/s/ Dawn-Marie Driscoll * Trustee December 28, 2000
----------------------------------
Dawn-Marie Driscoll
/s/ Edgar R. Fiedler * Trustee December 28, 2000
----------------------------------
Edgar R. Fiedler
/s/ Keith R. Fox * Trustee December 28, 2000
----------------------------------
Keith R. Fox
Joan Edelman Spero * Trustee December 28, 2000
----------------------------------
Joan Edelman Spero
/s/ Jean Gleason Stromberg * Trustee December 28, 2000
----------------------------------
Jean Gleason Stromberg
/s/ Jean C. Tempel * Trustee December 28, 2000
----------------------------------
Jean C. Tempel
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Steven Zaleznick * Trustee December 28, 2000
-------------------------------
Steven Zaleznick
Treasurer (Principal Financial and December 28, 2000
/s/ John R. Hebble Accounting Officer)
-------------------------------
John R. Hebble
</TABLE>
*By: /s/ Joseph R. Fleming *
--------------------------- December 28, 2000
Joseph R. Fleming, Attorney-in-fact
*Executed pursuant to powers of attorney filed with the Registrant's
Registration Statement on Form N-14 as filed with the Commission electronically
herewith.
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
FORM N-14
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SCUDDER FUNDS TRUST
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SCUDDER FUNDS TRUST
EXHIBIT INDEX
Exhibit 10 Scudder Funds Amended and Restated Multi-Distribution System Plan
Exhibit 11 Opinion and Consent of Dechert
Exhibit 14 Consents of Independent Auditors
Exhibit 16 Powers of Attorney
Exhibit 17 Form of Proxy
