<PAGE> PAGE 1
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<PAGE> PAGE 2
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022 A000002 J.P. MORGAN SECURITIES INC.
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022 A000004 MERRILL LYNCH PIERCE FENNER
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<PAGE> PAGE 3
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<PAGE> PAGE 4
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<PAGE> PAGE 5
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SIGNATURE THOMAS F. MCDONOUGH
TITLE SECRETARY
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Scudder Tax Free Trust, and to the
Shareholders of Scudder Medium Term Tax Free Fund:
In planning and performing our audit of the financial statements and
financial highlights of Scudder Medium Term Tax Free Fund (the Fund) for
the year ended December 31, 1994, we considered its internal control
structure, including procedures for safeguarding securities, in order to
determine our auditing procedures for the purpose of expressing our opinion
on the financial statements and financial highlights and to comply with the
requirements of Form N-SAR, not to provide assurance on the internal
control structure.
The management of Scudder Medium Term Tax Free Fund is responsible
for establishing and maintaining an internal control structure. In
fulfilling this responsibility, estimates and judgments by management are
required to assess the expected benefits and related costs of internal
control structure policies and procedures. Two of the objectives of an
internal control structure are to provide management with reasonable, but
not absolute, assurance that assets are safeguarded against loss from
unauthorized use or disposition and that transactions are executed in
accordance with management's authorization and recorded properly to permit
preparation of financial statements in conformity with generally accepted
accounting principles.
Because of inherent limitations in any internal control structure,
errors or irregularities may occur and not be detected. Also, projection of
any evaluation of the structure to future periods is subject to the risk
that it may become inadequate because of changes in conditions or that the
effectiveness of the design and operations may deteriorate.
Our consideration of the Fund's internal control structure would not
necessarily disclose all matters in the internal control structure that
might be material weaknesses under standards established by the American
Institute of Certified Public Accountants. A material weakness is a
condition in which the design or operation of the specific internal control
structure elements does not reduce to a relatively low level the risk that
errors or irregularities in amounts that would be material in relation to
the financial statements and financial highlights being audited may occur
and not be detected within a timely period by employees in the normal
course of performing their assigned functions. However, we noted no matters
involving the internal control structure, including procedures for
safeguarding securities, that we consider to be material weaknesses, as
defined above, as of December 31, 1994.
This report is intended solely for the information and use of
management of Scudder Medium Term Tax Free Fund and the Securities and
Exchange Commission.
/s/Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
February 10, 1995
Scudder Tax Free Trust
Two International Place
Boston, Massachusetts 02110
1-800-225-5163
November 4, 1994
To the Shareholders:
A Special Meeting of Shareholders of Scudder Tax Free Trust (the
"Trust"), consisting of Scudder Limited Term Tax Free Fund and Scudder
Medium Term Tax Free Fund (the "Funds") is to be held at 11:00 a.m.,
eastern time, on Tuesday, December 13, 1994, at the offices of Scudder,
Stevens & Clark, Inc., 13th Floor, Two International Place, Boston, MA
02110. Shareholders who are unable to attend this meeting are strongly
encouraged to vote by proxy, which is customary in corporate meetings of
this kind. A Proxy Statement regarding the meeting, proxy card(s) for your
vote at the meeting and an envelope--postage prepaid--in which to return your
proxy are enclosed.
At the Special Meeting the shareholders of each Fund will elect
Trustees of the Trust, consider the ratification of the selection of
Coopers & Lybrand L.L.P. as the Funds' independent accountants and consider
the approval of amendments to the Trust's Amended and Restated Declaration
of Trust. The shareholders of Scudder Limited Term Tax Free Fund will
consider approving the continuance of the Investment Management Agreement
between Scudder Limited Term Tax Free Fund and Scudder, Stevens & Clark,
Inc., and the shareholders of Scudder Medium Term Tax Free Fund will
consider approving a new Investment Management Agreement between Scudder
Medium Term Tax Free Fund and Scudder, Stevens & Clark, Inc., as well as
considering the approval of the amendment and/or reclassification of
certain fundamental investment policies. In addition, the shareholders
present will hear a report on the Funds. There will be an opportunity to
discuss matters of interest to you as a shareholder.
Your Fund's Trustees recommend that the shareholders vote in favor of
the foregoing matters.
Respectfully,
/s/David S. Lee
David S. Lee
President
SHAREHOLDERS ARE URGED TO SIGN THE PROXY CARD(S) AND MAIL IT IN THE
ENCLOSED POSTAGE-PREPAID ENVELOPE SO AS TO ENSURE A QUORUM AT THE MEETING.
THIS IS IMPORTANT WHETHER YOU OWN FEW OR MANY SHARES.
Scudder Tax Free Trust
Notice of Special Meeting of Shareholders
To the Shareholders of
Scudder Limited Term Tax Free Fund and
Scudder Medium Term Tax Free Fund:
Please take notice that a Special Meeting of Shareholders of Scudder Tax
Free Trust, consisting of Scudder Limited Term Tax Free Fund and Scudder
Medium Term Tax Free Fund (the "Funds") has been called to be held at the
offices of Scudder, Stevens & Clark, Inc., 13th Floor, Two International
Place, Boston, MA 02110 on Tuesday, December 13, 1994, at 11:00 a.m.,
eastern time, for the following purposes:
(1) To elect six Trustees to hold office until their respective
successors shall have been duly elected and qualified;
(2) To ratify or reject the action taken by the Trustees in selecting
Coopers & Lybrand L.L.P. as independent accountants for the Funds;
(3) To approve or disapprove the amendment of the Trust's Amended and
Restated Declaration of Trust to provide for the establishment of separate
classes of shares and to allow the Trustees to fix the minimum account
size;
(4) For Scudder Limited Term Tax Free Fund shareholders only: To
approve or disapprove the continuance of the Investment Management
Agreement between Scudder Limited Term Tax Free Fund and Scudder, Stevens &
Clark, Inc.;
(5) For Scudder Medium Term Tax Free Fund shareholders only: To
approve or disapprove a new Investment Management Agreement between Scudder
Medium Term Tax Free Fund and Scudder, Stevens & Clark, Inc.;
(6) For Scudder Medium Term Tax Free Fund shareholders only: To
approve or disapprove the amendment and/or reclassification of certain
fundamental investment policies;
And for shareholders of both Funds, to transact such other business as may
properly come before the meeting or any adjournments thereof.
Holders of record of shares of beneficial interest of the Funds at the
close of business on October 21, 1994 are entitled to vote at the meeting
and at any adjournments thereof.
By Order of the Trustees,
November 4, 1994 Thomas F. McDonough, Secretary
IMPORTANT--We urge you to sign and date the enclosed proxy card(s) and
return it in the enclosed addressed envelope which requires no postage and
is intended for your convenience. Your prompt return of the enclosed proxy
card(s) may save the Trust the necessity and expense of further
solicitations to ensure a quorum at the Special Meeting. If you can attend
the meeting and wish to vote your shares in person at that time, you will
be able to do so.
Scudder Tax Free Trust
Two International Place
Boston, Massachusetts 02110
PROXY STATEMENT
General
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Trustees of Scudder Tax Free Trust (the "Trust")
for use at the Special Meeting of Shareholders of Scudder Limited Term Tax
Free Fund and Scudder Medium Term Tax Free Fund (the "Funds") to be held at
the offices of Scudder, Stevens & Clark, Inc., 13th Floor, Two
International Place, Boston, MA 02110, on Tuesday, December 13, 1994 at
11:00 a.m., eastern time, (the "Meeting") and at any adjournments thereof.
This Proxy Statement, the Notice of Special Meeting of Shareholders
and the proxy card(s) are first being mailed to shareholders on or about
November 4, 1994. 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 referred to in the Proxy Statement. Any
shareholder giving a proxy has the power to revoke it by mail (addressed to
the Secretary of the Funds at the principal executive office of the Funds,
Two International Place, Boston, Massachusetts 02110) or in person at the
Meeting, by executing a superseding proxy or by submitting a notice of
revocation to the Funds.
The presence at any shareholders' meeting, in person or by proxy, of
shareholders entitled to cast a majority of the votes entitled to be cast
shall be necessary and sufficient to constitute a quorum for the
transaction of business. 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 Funds 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.
Abstentions and broker non-votes will not be counted in favor of, but
will have no other effect on, the vote for proposals (1) and (2) that
require the approval of a plurality and majority, respectively, of shares
voting at the Meeting. Abstentions and broker non-votes will have the
effect of a "no" vote for proposals (3), (4), (5) and (6) that require the
approval of a specified percentage of the outstanding shares of Scudder
Limited Term Tax Free Fund and/or Scudder Medium Term Tax Free Fund or of
such shares present at the Meeting.
Shareholders may only vote on matters which concern the Fund or Funds
in which they hold shares. Some of the proposals relate to the Trust of
which the Funds are a part. In the case of proposals on behalf of the
Trust, shares of all funds in the Trust will vote together. Holders of
record of shares of beneficial interest of the Funds at the close of
business on October 21, 1994 (the "Record Date"), will be entitled to one
vote per share on all business of the Meeting and any adjournments thereof.
There were 5,457,292 shares and 76,602,150 shares of beneficial interest
outstanding on the Record Date for Scudder Limited Term Tax Free Fund and
Scudder Medium Term Tax Free Fund, respectively.
(1) ELECTION OF TRUSTEES
Persons named in the accompanying proxy card(s) intend, in the absence of
contrary instructions, to vote all proxies in favor of the election of the
nominees listed below as Trustees of the Trust to serve until their
successors are duly elected and qualified. All nominees have consented to
stand for election and to serve if elected. If a nominee should be unable
to serve, an event not now anticipated, the proxies will be voted for such
person, if any, as shall be designated by the Board of Trustees to replace
such nominee. The Board of Trustees recommends that the shareholders vote
in favor of the election of the nominees listed below.
Information Concerning Nominees
The following table sets forth certain information concerning each of the
nominees as a Trustee of the Trust. With the exception of Ms. Tempel, each
of the nominees is now a Trustee of the Trust. Unless otherwise noted, each
of the nominees has engaged in the principal occupation or employment
listed in the following table for more than five years, but not necessarily
in the same capacity.
<TABLE>
<CAPTION>
Present Office with the
Trust, if any;
Principal Occupation or
Employment and Year First Shares Beneficially
Directorships in Elected to Owned on Percent
Name (Age) Publicly Held Companies the Board August 31, 1994(1) of Class
- ---------- ----------------------- --------- ------------------ --------
Fund Shares
------ ------
<C> <C> <C> <C> <C> <C>
David S. President of the Funds; 1982 Medium 35,022 (2) less than
Lee (60)*# Trustee; Managing Term 1/4 of 1%
Director of Scudder,
Stevens & Clark, Inc.;
Executive Committee &
Board of Governors,
Investment Company
Institute; Trustee
Emeritus, New England
Medical Center.
Dawn-Marie Trustee; Attorney and 1993 Medium 1,648 less than
Driscoll Corporate Director; Term 1/4 of 1%
(47) President, Driscoll
Associates; Former
Partner, Palmer & Dodge
(until 1990); Overseer,
WGBH.
Peter B. Trustee; Trustee, 1983 Medium 133 less than
Freeman Eastern Utilities Term 1/4 of 1%
(62)# Associates; Director,
Providence Journal
Company; Director,
AMICA Life Insurance
Co.; Director, AMICA
Mutual Insurance Co.
Wesley W. Trustee; Professor of 1983 Medium 2,028 less than
Marple, Jr. Business Term 1/4 of 1%
(62) Administration,
Northeastern
University, College of
Business
Administration;
Trustee, Eastern
Utilities Associates;
Director, UA Cogenex
Corporation.
Juris Trustee; Managing 1989 Medium 9,467 (2) less than
Padegs Director of Scudder, Term 1/4 of 1%
(62)*# Stevens & Clark, Inc.
Jean C. Managing Director, -- -- -- --
Tempel (51) Technology Leaders L.P.
and Executive Vice
President, Safeguard
Scientifics, Inc. 1994;
President and COO,
Safeguard 1992-1993;
Executive Vice
President and COO, The
Boston Company,
1985-1990; Director:
Safeguard Scientifics,
Inc.; Cambridge
Technology Partners
Inc.; CompuCom Systems
and Centocor Inc.
All Trustees and officers as a group Medium 48,298 (3) less than
Term 1/4 of 1%
Limited 0 -- Term <FN> ------------------ * Trustees considered by the Trust and
its counsel to be persons who are "interested persons" (which as used in
this proxy statement is as defined in the Investment Company Act of 1940,
as amended (the "1940 Act")) of the Trust or of the Funds' investment
adviser, Scudder, Stevens & Clark, Inc. ("Scudder"). Messrs. Padegs and Lee
are deemed to be "interested persons" because of their affiliation with the
Funds' investment adviser, or because they are officers of the Funds or
both.
# Messrs. Freeman, Lee and Padegs are members of the Executive Committee of
the Trust.
(1) The information as to beneficial ownership is based on statements furnished
to the Funds by the nominees and Trustees. Unless otherwise noted,
beneficial ownership is based on sole voting and investment power.
(2) Mr. Lee and Mr. Padegs' shares are held in a fiduciary capacity as to which
each shares investment and voting power.
(3) Of which 3,809 shares are held with sole investment and voting power and
44,489 shares are held with shared investment and voting power.
</FN>
</TABLE>
The Trustees and Officers of the Trust may also serve in similar capacities
for other Funds managed by Scudder.
In addition, 1,339,900 shares in the aggregate, or 30.74% of the
outstanding shares of Scudder Limited Term Tax Free Fund and 16,023,614
shares in the aggregate, or 20.28% of the outstanding shares of Scudder
Medium Term Tax Free Fund were owned by or on behalf of accounts for which
Scudder acts as investment adviser on August 31, 1994. Scudder may be
deemed to be the beneficial owner of such shares but disclaims any
beneficial ownership therein.
To the best of the Trust's knowledge, as of August 31, 1994, no person
owned beneficially more than 5% of either Fund's outstanding voting
securities.
Committees of the Board--Board Meetings
The Board of Trustees met four times during Scudder Medium Term Tax Free
Fund's fiscal year ended December 31, 1993. During such fiscal year, each
Trustee attended at least 75% of the total number of regular meetings of
the Trustees and of all Committees on which he or she served.
The Board of Trustees met three times during Scudder Limited Term Tax Free
Fund's fiscal period from February 15, 1994 (commencement of operations) to
October 31, 1994. During such fiscal period, each Trustee attended at least
75% of the total number of regular meetings of the Trustees and of all
Committees of the Board on which he or she served.
The Executive Committee did not meet during the fiscal year ended December
31, 1993 for Scudder Medium Term Tax Free Fund or during the fiscal period
from February 15, 1994 (commencement of operations) to October 31, 1994 for
Scudder Limited Term Tax Free Fund.
Audit Committee
The Trustees have an Audit Committee, consisting of the Trustees who are
not interested persons of the Funds or of Scudder (the "Non-Interested
Trustees"). The Audit Committee met twice during Scudder Medium Term Tax
Free Fund's fiscal year ended December 31, 1993 and twice during Scudder
Limited Term Tax Free Fund's fiscal period from February15, 1994
(commencement of operations) to October 31, 1994 to review with management
and the independent accountants, among other things, the scope of the audit
and the controls of the Funds and their agents, to review and approve in
advance the type of services to be rendered by independent accountants, to
recommend the selection of independent accountants for the Funds to the
Trustees for approval and in general to consider and report to the Trustees
on matters regarding the Funds' accounting and bookkeeping practices.
Nominating Committee
The Trustees have a Special Nominating Committee, consisting of the
Non-Interested Trustees. The Special Nominating Committee is charged with
the duty of making nominations of Non-Interested Trustees. Shareholders'
recommendations as to nominees received by management are referred to the
Special Nominating Committee for its consideration and action. The Special
Nominating Committee met twice during Scudder Medium Term Tax Free Fund's
fiscal year ended December 31, 1993 and once during Scudder Limited Term
Tax Free Fund's fiscal period from February 15, 1994 (commencement of
operations) to October 31, 1994.
Executive Officers
In addition to Mr. Lee, a Trustee who is also an Officer of the Trust, the
following persons are Executive Officers of the Trust:
<TABLE>
<CAPTION>
Present Office with the Trust; Year First Became
Name (Age) Principal Occupation or Employment an Officer*
----------- ---------------------------------- -----------
<C> <C> <C>
Jerard K. Hartman (61) Vice President of the Trust; 1986
Managing Director of Scudder,
Stevens & Clark, Inc.
Thomas W. Joseph (55) Vice President of the Trust; 1986
Principal of Scudder, Stevens &
Clark, Inc.
Thomas F. McDonough (47) Vice President and Secretary of 1984
the Trust; Principal of Scudder,
Stevens & Clark, Inc.
Pamela A. McGrath (40) Vice President and Treasurer of 1990
the Trust; Principal of Scudder,
Stevens & Clark, Inc.
Edward J. O'Connell (49) Vice President and Assistant 1987
Treasurer of the Trust; Principal
of Scudder, Stevens & Clark, Inc.
Coleen Downs Dinneen (33) Assistant Secretary of the Trust; 1992
Vice President of Scudder, Stevens
& Clark, Inc.
<FN>
* The President, Treasurer and Secretary each hold office until his or her
successor has been duly elected and qualified, and all other officers hold
office at the pleasure of the Trustees.
</FN>
</TABLE>
Mr. David S. Lee, who is President and a Trustee of the Trust, and Messrs.
Jerard K. Hartman, Thomas W. Joseph, Thomas F. McDonough, Edward J.
O'Connell, Juris Padegs and Mses. Pamela A. McGrath and Coleen Downs
Dinneen, who are officers and/or Trustees of the Trust, are considered by
the Trust and their counsel to be persons who are "interested persons" of
the Trust or of Scudder because of their affiliation with Scudder, or
because of their affiliation with companies that are broker/dealers or
parent companies thereof. Messrs. Peter B. Freeman, Wesley W. Marple and
Ms. Dawn-Marie Driscoll are, and, if elected, Ms. Jean C. Tempel will be,
Non-Interested Trustees.
Transactions with and Remuneration of Officers and Trustees
The aggregate direct remuneration of the Non-Interested Trustees of Scudder
Medium Term Tax Free Fund was $26,993 during its fiscal year ended December
31, 1993. The aggregate direct remuneration of the Non-Interested Trustees
of Scudder Limited Term Tax Free Fund was $3,289 for the period February
15, 1994 (commencement of operations) to April 30, 1994. Each such
Non-Interested Trustee currently receives an annual Trustee's fee of $4,000
and a fee of $300 for each Trustees' meeting, Audit Committee meeting or
meeting held for the purpose of considering contractual arrangements
between the Trust and Scudder and $100 for each other committee meeting
attended. Scudder supervises the Funds' investments and pays the
compensation and expenses of the personnel of Scudder who serve as Trustees
and officers of the Trust, and receives an investment advisory fee. Several
of the Trust's officers and Trustees are also officers or employees of
Scudder, Scudder Fund Accounting Corporation, Scudder Service Corporation
or Scudder Trust Company and they may therefore be deemed to participate in
the fees paid to those firms, although the Trust makes no direct payments
to them.
Required Vote
Election of each of the listed nominees for Trustee requires the
affirmative vote of a plurality of the votes cast at the Meeting in person
or by proxy. The Board or Trustees recommends that shareholders vote in
favor of each of the nominees.
(2) RATIFICATION OR REJECTION OF THE SELECTION OF
COOPERS & LYBRAND L.L.P. AS INDEPENDENT ACCOUNTANTS
At a meeting held on August 9, 1994, all members of the Board of Trustees,
including a majority of the Non-Interested Trustees, selected Coopers &
Lybrand L.L.P. as Scudder Medium Term Tax Free Fund's independent
accountants for the fiscal year ending December 31, 1995, and Scudder
Limited Term Tax Free Fund's independent accountants for the fiscal year
ending October 31, 1995, to examine the Funds' books and accounts and to
certify the Funds' financial statements. Coopers & Lybrand L.L.P. are
independent accountants and have advised the Trust that they have no direct
financial interest or material indirect financial interest in the Trust.
One or more representatives of Coopers & Lybrand L.L.P. are expected to be
present at the meeting, will have an opportunity to make a statement if
they desire to do so and are expected to be available to respond to
appropriate questions.
Scudder Medium Term Tax Free Fund's financial statements for the fiscal
year ended December 31, 1993 were audited by Coopers & Lybrand L.L.P., who
will also audit Scudder Limited Term Tax Free Fund's financial statements
for the fiscal period ending October 31, 1994. In connection with its audit
services, Coopers & Lybrand L.L.P. reviews the financial statements
included in the Funds' annual reports to shareholders and their filings
with the Securities and Exchange Commission (the "SEC").
Required Vote
Ratification of the selection of independent accountants requires the
affirmative vote of a majority of the votes cast at the Meeting in person
or by proxy. The Board of Trustees recommends that shareholders ratify the
selection of Coopers & Lybrand L.L.P. as independent accountants.
(3) APPROVAL OR DISAPPROVAL OF AMENDMENTS TO THE TRUST'S AMENDED
AND RESTATED DECLARATION OF TRUST TO PROVIDE FOR THE
ESTABLISHMENT OF SEPARATE CLASSES OF SHARES AND TO
ALLOW THE TRUSTEES TO FIX THE MINIMUM ACCOUNT SIZE
The Trustees propose that the Trust's Amended and Restated Declaration of
Trust be amended to permit the division of shares of beneficial interest of
each Fund into separate classes, and to allow the Trustees to fix the
minimum account size. The principal purpose of the proposed amendments is
to give the Trustees additional flexibility to adapt to changing market
conditions. If this proposal is approved, the Amended and Restated
Declaration of Trust will be amended as shown in Exhibit A to this Proxy
Statement.
Different Classes of Shares
The Trust, a Massachusetts business trust, has an authorized capital
consisting of an unlimited number of shares of beneficial interest of $.01
par value per share (the "Shares"), all of which are of one class and have
equal rights as to voting, dividends and liquidation. Under the Amended and
Restated Declaration of Trust, as currently in effect, the Trustees have
the authority to issue two or more series of Shares (each a "Series") and
to designate the relative rights and preferences as between the different
Series. Under the Amended and Restated Declaration of Trust, shareholders
of each Series have an interest in a separate portfolio of assets.
Division of the Shares into different classes (each a "Class") would permit
Shares of different Classes to be distributed by different methods, and
shareholders of different Classes might bear different expenses in
connection with such methods of distribution. Shareholders of different
Classes of a particular Series would continue to have an interest in the
same portfolio of assets. For example, the Shares of one Class might be
made available through an administrative agreement with a bank, while the
Shares of another Class might continue to be available through Scudder
Investor Services, Inc. (the "Distributor"). In such an instance, the bank
might be compensated for its services through payment by the Fund of an
administrative fee, which would be allocated only to the Shares of the
Class available through the bank. Thus, shareholders who purchased their
shares through the Distributor would not bear the expense of making Shares
available through the bank. In the future, there may be other
considerations which would make it advisable to divide shares into
different Classes.
The Trustees have no present intention of taking the action necessary to
effect the division of Shares into separate Classes (which under present
regulations would require the Funds first to obtain an exemptive order of
the SEC), nor of changing the method of distribution of Shares of the
Funds, although the Funds may seek an exemptive order to permit the Funds
to take such action in the future without further shareholder approval. If
the Shares were divided into Classes and it was proposed that one or more
Classes bear expenses of an activity primarily intended to result in the
sale of Shares, the vote of a majority of the outstanding voting securities
of the affected Class or Classes would be required to approve a "Rule 12b-1
plan" to permit the bearing of such expenses.
Because allocation of expenses among different Classes could affect the
calculation of net asset value per Share, the proposed amendment would also
revise provisions of the Amended and Restated Declaration of Trust relating
to such calculations. The proposed amendment would also state explicitly
that a shareholder of a particular Series or Class thereof is not entitled
to bring a derivative or class action on behalf of any other Series or
Class (or shareholders of any other Series or Class) of the Trust.
No sales commission or load is charged to the investor on Shares sold
through the Distributor. No 12b-1 plan is currently in effect and,
accordingly, the Funds do not bear any of the expenses of distribution.
Minimum Account Size
If the value of a shareholder's account falls below the minimum size of
$1,000 currently set forth in the Amended and Restated Declaration of
Trust, the Trustees have the authority to cause that account to be redeemed
and the proceeds sent to the shareholder. The proposed amendment to the
Amended and Restated Declaration of Trust would permit the Trustees to fix
the minimum account size without seeking shareholder approval of an
amendment to the Amended and Restated Declaration of Trust.
The Trustees currently have no immediate intention of changing the minimum
account size of $1,000, but under the proposal it would become subject to
review from time to time. If the Trustees determine that the cost to the
Funds of servicing accounts above the current minimum account size
outweighs the benefits to the Funds of such accounts, they may determine
that it is in the Funds' best interest to increase the minimum account
size. Such a change may decrease the amount of the Funds' assets. Thus, if
inflation or other changes in economic conditions were to make a higher
minimum account size appropriate, the Trustees would be able to increase
the minimum account size without calling a shareholder meeting to amend the
Amended and Restated Declaration of Trust.
Required Vote
Approval of the amendments to the Trust's Amended and Restated Declaration
of Trust requires the affirmative vote of a majority of the outstanding
voting securities of each Fund, which as used in this Proposal means, for
each Fund (1) the holders of more than 50% of the outstanding shares of the
Fund or (2) the holders of 67% or more of the shares present if more than
50% of the shares are present at a meeting in person or by proxy, whichever
is less. If Proposal 3 is not approved by the shareholders of one or both
Funds, the current Amended and Restated Declaration of Trust will continue
in full force and effect for the time being pending consideration by the
Trustees of such further action as they may deem to be in the best interest
of the shareholders. The Board of Trustees recommends approval of the
amendments to the Trust's Amended and Restated Declaration of Trust.
(4) FOR SCUDDER LIMITED TERM TAX FREE FUND SHAREHOLDERS ONLY:
APPROVAL OR DISAPPROVAL OF THE CONTINUANCE OF THE INVESTMENT MANAGEMENT
AGREEMENT BETWEEN SCUDDER LIMITED TERM TAX FREE FUND AND
SCUDDER, STEVENS & CLARK, INC.
Scudder acts as investment manager to Scudder Limited Term Tax Free Fund
pursuant to an Investment Management Agreement dated February 15, 1994 (the
"Agreement") between the Trust on behalf of the Fund, and Scudder. The
Agreement was approved by the Trustees, including the Non-Interested
Trustees, on December 14, 1993 and by a vote of the sole shareholder on
February 10, 1994. Scudder Medium Term Tax Free Fund shareholders are being
asked to approve a similar agreement.
At a meeting held on August 9, 1994 the Trustees, including the
Non-Interested Trustees, recommended that shareholders approve the
continuance of the Agreement. Set forth below is a description of the
principal provisions of the Agreement. The Agreement is attached hereto as
Exhibit B. Additional information about Scudder is set forth on page 15.
Description of the Agreement
The Agreement continues in effect by its terms until September 30, 1995 and
from year to year thereafter only so long as its continuance is
specifically approved at least annually by the vote of a majority of the
Non-Interested Trustees, cast in person at a meeting called for the purpose
of voting on such approval, and either by a vote of the Trustees or a
majority of the Fund's outstanding voting securities (which is used in this
Proposal as defined in the 1940 Act and as set forth on page 12). The
Agreement may be terminated on 60 days' written notice, without penalty, by
the Trustees, the vote of a majority of the Fund's outstanding voting
securities, or Scudder, and automatically terminates in the event of its
assignment.
In approving the Agreement and recommending its approval by shareholders,
the Non-Interested Trustees, considering the best interests of the
shareholders of the Fund, took into account all such factors as they deemed
relevant. Among such factors were the nature, quality and extent of the
services furnished by Scudder to the Fund; the advantages and possible
disadvantages to the Fund of having a manager which also serves other
investment companies and private accounts; the investment record of
Scudder; possible economies of scale; comparative data as to advisory fees;
the risks assumed by Scudder; possible benefits to Scudder from serving as
manager to, and of an affiliate of Scudder serving as principal underwriter
of the Fund; current and developing conditions in the financial services
industry, including the entry into the industry of large and highly
capitalized companies which spend, and appear to be prepared to continue to
spend, substantial sums to engage personnel and to provide services to
competing investment companies; the financial resources of Scudder; the
continuance of appropriate incentives to assure that Scudder will continue
to furnish high quality services to the Fund; and various other factors.
In reviewing the terms of the Agreement and in discussions with Scudder
concerning such Agreement, the Non-Interested Trustees have been
represented, at the Fund's expense, by independent counsel, Ropes & Gray.
Counsel for the Fund is Willkie Farr & Gallagher.
Under the Agreement, Scudder regularly provides the Fund with investment
research, advice and supervision, furnishes an investment program, and
determines what securities shall be purchased, held, or sold, and what
portion of the Fund's assets shall be held uninvested, subject always to
the Trust's Amended and Restated Declaration of Trust, By-Laws, investment
policies and restrictions, the 1940 Act, and such policies and instructions
as the Trustees of the Trust may determine.
In addition to the provision of portfolio management services and the
payment of the Fund's office rent, under the Agreement Scudder renders
significant administrative services (not otherwise provided by third
parties) necessary for the Fund's operations as an open-end investment
company including, but not limited to, preparing reports to and meeting
materials for the Trust's Board of Trustees and reports and notices to Fund
shareholders; supervising, negotiating contractual arrangements with, and
monitoring the performance of various third-party service providers to the
Fund (such as the Fund's transfer and pricing agents, custodian,
accountants and others); preparing and making filings with the SEC and
other regulatory agencies; assisting in the preparation and filing of the
Fund's federal, state and local tax returns; preparing and filing the
Fund's federal excise tax returns; assisting with investor and public
relations matters; monitoring the valuation of portfolio securities and the
calculation of net asset value; monitoring the registration of shares of
the Fund under applicable federal and state securities laws; maintaining
the Fund's books and records to the extent not otherwise maintained by a
third party; assisting in establishing accounting policies of the Fund;
assisting in the resolution of accounting and legal issues; establishing
and monitoring the Fund's operating budgets; processing the payment of the
Fund's bills; assisting the Fund in, and otherwise arranging for the
payment of dividends and distributions and otherwise assisting the Fund in
the conduct of its business, subject to the direction and control of the
Trust's Board of Trustees.
Under the Agreement, the Fund is responsible for other expenses, including
organization expenses; clerical salaries; fees and expenses incurred in
connection with membership in investment company organizations; brokers'
commissions; payment for portfolio pricing services to a pricing agent, if
any; legal, auditing or accounting expenses; taxes or governmental fees;
the fees and expenses of the transfer agent; the cost of preparing share
certificates, and any other expenses, including clerical expenses, of
issuance, redemption or repurchase of shares of beneficial interest; the
expenses of and fees for registering or qualifying securities for sale; the
fees and expenses of Non-Interested Trustees; the cost of printing and
distributing reports and notices to shareholders; and the fees and expenses
of the Fund's custodians. The Fund may arrange to have third parties assume
all or part of the expenses of sale, underwriting and distribution of
shares of the Fund. The Fund is also responsible for expenses of
shareholders' meetings, the cost of responding to shareholders' inquiries,
and its expenses incurred in connection with litigation, proceedings and
claims and the legal obligation it may have to indemnify officers and
Trustees of the Trust with respect thereto.
Under the Agreement, Scudder pays the compensation and expenses of officers
and executive employees of the Fund affiliated with Scudder and makes
available, without expense to the Fund, the services of such trustees,
officers and employees as may be duly elected officers or Trustees of the
Trust, subject to their individual consent to serve and to any limitations
imposed by law. The Fund is responsible for the fees and expenses of
Trustees not affiliated with Scudder. The Agreement also specifically
provides that the Fund will pay the expenses, such as travel expenses, of
Trustees and officers of the Trust who are directors, officers or employees
of Scudder, to the extent that such expenses relate to attendance at
meetings of the Board of Trustees of the Trust or any committees thereof
held outside Boston, Massachusetts or New York, New York. During the period
February 15, 1994 (commencement of operations) to April 30, 1994, no
compensation, direct or otherwise (other than through fees paid to Scudder)
was paid or became payable by the Fund to any of its officers or Trustees
who were affiliated with Scudder.
The Agreement also provides that the Trust and the Fund may use a name
derived from the name "Scudder, Stevens & Clark" only so long as the
Agreement or any extension, renewal or amendment thereof remains in effect.
The Agreement further provides that Scudder shall not be liable for any act
or omission, error of judgment or mistake of law or for any loss suffered
by the Fund in connection with matters to which such Agreement relates,
except a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of Scudder in the performance of its duties or from
reckless disregard by Scudder of its obligations and duties under such
Agreement.
The Agreement provides that Scudder be paid a monthly fee, payable in
dollars, at an annual rate of 0.60 of 1% of the Fund's average daily net
assets. Scudder has agreed not to impose all of its management fee and to
maintain the annualized expenses of the Fund at not more than 0% of average
daily net assets of the Fund until February 28, 1995. For the period
February 15, 1994 (commencement of operations) to April 30, 1994, Scudder
did not impose its fee amounting to $18,208. Further, due to the expense
maintenance limitations of such Agreement, Scudder's reimbursement payable
for the period February 15, 1994 (commencement of operations) to April 30,
1994 amounted to $41,914.
Scudder Fund Accounting Corporation ("Fund Accounting"), a wholly-owned
subsidiary of Scudder, acts as the Fund's accounting agent and provides
certain accounting and record keeping services for the Fund including
computing the Fund's net asset value per share. Fund Accounting is paid as
compensation for its services a fee equal to 0.024% of the first $150
million of average daily net assets, 0.007% of such assets in excess of
$150 million, 0.004% of such assets in excess of $1 billion, plus holding
and transaction charges.
For the period February 15, 1994 (commencement of operations) to April 30,
1994, Fund Accounting, due to expense maintenance limitations, did not
impose any of its fee amounting to $7,393 in the aggregate.
Required Vote
Approval of the continuance of the Investment Management Agreement requires
the affirmative vote of a majority of the Fund's outstanding voting
securities, which as used in this Proposal means (1) the holders of more
than 50% of the outstanding shares of the Fund or (2) the holders of 67% or
more of the shares present if more than 50% of the shares are present at a
meeting in person or by proxy, whichever is less. If Proposal 4 is not
approved by shareholders, the current Agreement will continue in full force
and effect for the time being pending consideration by the Trustees of such
further action as they may deem to be in the best interest of the
shareholders. The Board of Trustees recommends approval of the continuance
of the Agreement.
(5) FOR SCUDDER MEDIUM TERM TAX FREE FUND SHAREHOLDERS ONLY: APPROVAL OR
DISAPPROVAL OF A NEW INVESTMENT MANAGEMENT AGREEMENT BETWEEN SCUDDER MEDIUM
TERM TAX FREE FUND AND SCUDDER, STEVENS & CLARK, INC.
Scudder acts as investment manager to Scudder Medium Term Tax Free Fund
pursuant to an Investment Advisory Agreement dated August 10, 1993 (the
"present Agreement") between the Trust on behalf of the Fund, and Scudder.
The Trustees recommend that shareholders approve the proposed Investment
Management Agreement (the "proposed Agreement") in place of the present
Agreement. At a meeting held on August 9, 1994 the Trustees, including the
Non-Interested Trustees, approved the terms of the proposed Agreement and
its adoption subject to approval by shareholders. The Agreements are
substantially the same, including the same fee schedule. Set forth below is
a description of certain differences between the present Agreement and the
proposed Agreement, as well as a description of those provisions which are
the same under both Agreements. The proposed Agreement is attached hereto
as Exhibit C. Scudder Limited Term Tax Free Fund shareholders are being
asked to approve the continuance of a similar agreement.
Description of the Agreements
Under both Agreements, Scudder regularly provides the Fund with investment
research, advice and supervision, furnishes an investment program, and
determines what securities shall be purchased, held, or sold, and what
portion of the Fund's assets shall be held uninvested, subject to the
Trust's Amended and Restated Declaration of Trust, By-Laws, investment
policies and restrictions, the 1940 Act, and such policies and instructions
as the Trustees of the Trust may determine.
In addition to the provision of portfolio management services and the
payment of the Fund's office rent, under the proposed Agreement Scudder
will render significant administrative services (not otherwise provided by
third parties) necessary for the Fund's operations as an open-end
investment company including, but not limited to, preparing reports to and
meeting materials for the Trust's Board of Trustees and reports and notices
to Fund shareholders; supervising, negotiating contractual arrangements
with, and monitoring the performance of various third-party service
providers to the Fund (such as the Fund's transfer and pricing agents,
custodian, accountants and others); preparing and making filings with the
SEC and other regulatory agencies; assisting in the preparation and filing
of the Fund's federal, state and local tax returns; preparing and filing
the Fund's federal excise tax returns; assisting with investor and public
relations matters; monitoring the valuation of portfolio securities and the
calculation of net asset value; monitoring the registration of shares of
the Fund under applicable federal and state securities laws; maintaining
the Fund's books and records to the extent not otherwise maintained by a
third party; assisting in establishing accounting policies of the Fund;
assisting in the resolution of accounting and legal issues; establishing
and monitoring the Fund's operating budgets; processing the payment of the
Fund's bills; assisting the Fund in, and otherwise arranging for the
payment of dividends and distributions and otherwise assisting the Fund in
the conduct of its business, subject to the direction and control of the
Trust's Board of Trustees. The Trustees believe it is desirable to include
the responsibility for providing these services in the proposed Agreement.
Under both the proposed and the present Agreements, the Fund is responsible
for other expenses, including organization expenses; clerical salaries;
fees and expenses incurred in connection with membership in investment
company organizations; brokers' commissions; legal, auditing and accounting
expenses; payment for portfolio pricing services to a pricing agent, if
any; taxes and governmental fees; the fees and expenses of the transfer
agent; and any other expenses, including clerical expenses, of issuance,
redemption or repurchase of shares; the expenses of and fees for
registering or qualifying securities for sale; the fees and expenses of
Non-Interested Trustees; the cost of printing and distributing reports and
notices to shareholders; and the fees and expenses of the Fund's
custodians. The Fund may arrange to have third parties assume all or part
of the expenses of sale, underwriting and distribution of shares of the
Fund. The Fund is also responsible for expenses of shareholders' meetings,
the cost of responding to shareholders' inquiries, and its expenses
incurred in connection with litigation, proceedings and claims and the
legal obligation it may have to indemnify officers and Trustees of the
Trust with respect thereto.
Under both Agreements, Scudder pays the compensation and expenses of
officers and executive employees of the Fund affiliated with Scudder and
makes available, without expense to the Fund, the services of such
trustees, officers and employees as may be duly elected officers or
Trustees of the Trust, subject to their individual consent to serve and to
any limitations imposed by law. The Fund is responsible for the fees and
expenses of Trustees not affiliated with Scudder. The proposed Agreement
also specifically provides that the Fund will pay the expenses, such as
travel expenses, of Trustees and officers of the Trust who are directors,
officers or employees of Scudder, to the extent that such expenses relate
to attendance at meetings of the Board of Trustees of the Trust or any
committees thereof held outside Boston, Massachusetts or New York, New
York. During the fiscal year ended December 31, 1993, no compensation,
direct or otherwise (other than through fees paid to Scudder) was paid or
became payable by the Fund to any of its officers or Trustees who were
affiliated with Scudder.
The Agreements provide that the Trust and the Fund may use a name derived
from the name "Scudder, Stevens & Clark" only so long as the Agreements or
any extension, renewal or amendment thereof remain in effect.
The Agreements further provide that Scudder shall not be liable for any act
or omission, error of judgment or mistake of law or for any loss suffered
by the Fund in connection with matters to which such Agreements relate,
except a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of Scudder in the performance of its duties or from
reckless disregard by Scudder of its obligations and duties under such
Agreements.
If approved, the proposed Agreement would continue in effect by its terms
until September 30, 1996 and from year to year thereafter only so long as
its continuance is specifically approved at least annually by the vote of a
majority of the Non-Interested Trustees, cast in person at a meeting called
for the purpose of voting on such approval, and either by a vote of the
Trustees or a majority of the Fund's outstanding voting securities (which
is used in this Proposal as defined in the 1940 Act). Both Agreements may
be terminated on 60 days' written notice, without penalty, by the Trustees,
the vote of a majority of the Fund's outstanding voting securities, or
Scudder, and automatically terminates in the event of its assignment.
In approving the proposed Agreement and recommending its approval by
shareholders, the Non-Interested Trustees, considering the best interests
of the shareholders of the Fund, took into account all such factors as they
deemed relevant. Among such factors were the nature, quality and extent of
the services furnished by Scudder to the Fund; the advantages and possible
disadvantages to the Fund of having a manager which also serves other
investment companies and private accounts; the investment record of
Scudder; possible economies of scale; comparative data as to advisory fees;
the risks assumed by Scudder; possible benefits to Scudder from serving as
Manager to, and of an affiliate of Scudder serving as principal underwriter
of the Fund; current and developing conditions in the financial services
industry, including the entry into the industry of large and highly
capitalized companies which spend, and appear to be prepared to continue to
spend, substantial sums to engage personnel and to provide services to
competing investment companies; the financial resources of Scudder; the
continuance of appropriate incentives to assure that Scudder will continue
to furnish high quality services to the Fund; and various other factors.
In reviewing the terms of the Agreements and in discussions with Scudder
concerning such Agreements, the Non-Interested Trustees have been
represented, at the Fund's expense, by independent counsel, Ropes & Gray.
Counsel for the Fund is Willkie Farr & Gallagher.
The Agreements provide that Scudder be paid a monthly fee, payable in
dollars, at an annual rate of 0.60 of 1% of the Fund's average daily net
assets; and 0.50 of 1% on net assets in excess of $500 million. Scudder has
agreed not to impose all or a portion of its management fee and to take
other action, to the extent necessary to maintain the annualized expenses
of the fund at not more than 0.70 of 1% of average daily net assets of the
Fund until April 30, 1995. For the year ended December 31, 1993, Scudder
did not impose its management fee amounting to $4,718,484 and the fee
imposed aggregated $484,365. Further, due to the expense maintenance
limitations of such Agreement, Scudder's reimbursement payable for the
period January 1, 1993 to June 30, 1993 amounted to $434,038.
As of October 1, 1994, Scudder Fund Accounting Corporation ("Fund
Accounting"), a wholly-owned subsidiary of Scudder, acts as accounting
agent and provides certain accounting and record keeping services for the
Fund including computing the Fund's net asset value per share. Fund
Accounting is paid as compensation for its services a fee equal to 0.024%
of the first $150 million of average daily net assets, 0.007% of such
assets in excess of $150 million, 0.004% of such assets in excess of $1
billion, plus holding and transaction charges.
Required Vote
Approval of this Proposal on behalf of Scudder Medium Term Tax Free Fund
requires the affirmative vote of a majority of the Fund's outstanding
securities (as defined in the discussion of Proposal 4 on page 12). The
Trustees have considered various factors and believe that this Proposal is
in the best interest of the Fund's shareholders. If the proposal is not
approved, the Fund's present Agreement will remain in effect and unchanged.
The Board of Trustees recommends that the shareholders vote in favor of the
approval of the proposed Agreement.
Investment Manager
Scudder is a Delaware corporation. Daniel Pierce* is the Chairman of the
Board of Scudder. Edmond D. Villani# is the President of Scudder. Stephen
R. Beckwith#, Lynn S. Birdsong#, Nicholas Bratt#, Linda C. Coughlin#,
Margaret D. Hadzima*, Jerard K. Hartman#, Richard A. Holt@, Dudley H.
Ladd*, Douglas M. Loudon#, John T. Packard+, Juris Padegs# and Cornelia M.
Small# are the other members of the Board of Directors of Scudder. The
principal occupation of each of the above named individuals is serving as a
Managing Director of Scudder.
- ------------------
*Two International Place, Boston, Massachusetts
#345 Park Avenue, New York, New York
+101 California Street, San Francisco, California
@Two Prudential Plaza, 180 West Stetson, Suite 5400, Chicago, Illinois
All of the outstanding voting and nonvoting securities of Scudder are held
of record by Stephen R. Beckwith, Juris Padegs, Daniel Pierce and Edmond D.
Villani in their capacity as the representatives (the "Representatives") of
the beneficial owners of such securities, pursuant to a Security Holders'
Agreement among Scudder, the beneficial owners of securities of Scudder and
the Representatives. Pursuant to the Security Holders' Agreement, the
Representatives have the right to reallocate shares among the beneficial
owners from time to time. Such reallocation will be at net book value in
cash transactions. All Managing Directors of Scudder own voting and
nonvoting stock; all Principals own nonvoting stock.
Messrs. Lee and Padegs, who are Officers and/or Trustees of the Funds, are
Managing Directors of Scudder. In addition, the following directors or
officers of Scudder or its affiliates are Officers of the Funds in the
following capacities: Jerard K. Hartman, Vice President; Pamela A. McGrath,
Vice President and Treasurer; Edward J. O'Connell, Vice President and
Assistant Treasurer; Thomas F. McDonough, Vice President and Secretary, and
Coleen Downs Dinneen, Assistant Secretary. Mr. Hartman is a Managing
Director; Messrs. O'Connell and McDonough and Ms. McGrath are Principals
and Ms. Dinneen is a Vice President of Scudder.
In addition to acting as investment manager to individuals and other
organizations, Scudder, or an affiliate, acts as investment adviser to all
of the investment companies, including the Funds, listed below, and the
separate series thereof. All of the investment companies listed below,
except for The Argentina Fund, Inc., The Brazil Fund, Inc., The First
Iberian Fund, Inc., The Korea Fund, Inc., The Latin America Dollar Income
Fund, Inc., Montgomery Street Income Securities, Inc., Scudder New Asia
Fund, Inc., Scudder New Europe Fund, Inc. and Scudder World Income
Opportunities Fund, Inc., are open-end investment companies or mutual
funds.
<TABLE>
<CAPTION>
Total Net Assets
as of Management Compensation
September 30, 1994 on an Annual Basis Based on the
Name (000 omitted) Value of Average Daily Net Assets
------ ------------- -----------------------------------
<S> <C> <C>
Scudder California $373,300 Scudder California Tax Free Fund:
Tax Free Trust 0.625 of 1%; 0.60 of 1% on net assets
in excess of $200 million. Scudder
California Tax Free Money Fund: 0.50
of 1%.
Scudder Cash $1,541,600 0.50 of 1%; 0.45 of 1% on net assets
Investment Trust in excess of $250 million; 0.40 of 1%
on net assets in excess of $500
million; 0.35 of 1% on net assets in
excess of $1 billion.
Scudder $604,800 1%; 0.95 of 1% on net assets in excess
Development Fund of $500 million; 0.90 of 1% on net
assets in excess of $1 billion.
Scudder Equity $1,374,100 Scudder Capital Growth Fund: 0.75 of
Trust 1%; 0.65 of 1% on net assets in excess
of $500 million; 0.60 of 1% on net
assets in excess of $1 billion.
Scudder Value Fund: 0.70 of 1%.
Scudder Fund, Inc. $614,300 Managed Government Securities Fund:
0.40 of 1%; 0.35 of 1% on net assets
in excess of $1.5 billion. Managed
Cash Fund: 0.40 of 1%; 0.35 of 1% on
net assets in excess of $1.5 billion.
Managed Federal Securities Fund: 0.40
of 1%; 0.35 of 1% on net assets in
excess of $1.5 billion. Managed Tax
Free Fund: 0.40 of 1%; 0.35 of 1% on
net assets in excess of $1.5 billion.
Managed Intermediate Government Fund:
0.65 of 1%.
Scudder Funds $2,517,000 Scudder Short Term Bond Fund: 0.60 of
Trust 1%; 0.50 of 1% on net assets in excess
of $500 million; 0.45 of 1% on net
assets in excess of $1 billion; 0.40
of 1% on net assets in excess of $1.5
billion; 0.375 of 1% on net assets in
excess of $2 billion and 0.35 of 1% on
net assets in excess of $3 billion.
Scudder Zero Coupon 2000 Fund: 0.60 of
1%.
Scudder Global $3,309,700 Scudder Global Fund: 1%; 0.95 of 1% on
Fund, Inc. net assets in excess of $500 million.
Scudder International Bond Fund: 0.85
of 1%; 0.80 of 1% on net assets in
excess of $1 billion. Scudder Short
Term Global Income Fund: 0.75 of 1%;
0.70 of 1% on net assets in excess of
$1 billion. Scudder Global Small
Company Fund: 1.10%. Scudder Emerging
Markets Income Fund: 1%.
Scudder GNMA Fund $449,900 0.65 of 1%; 0.60 of 1% on net assets
in excess of $200 million; 0.55 of 1%
on net assets in excess of $500
million.
Scudder $606,800 Federal Portfolio: 0.15 of 1%.
Institutional Government Portfolio: 0.15 of 1%. Cash
Fund, Inc. Portfolio: 0.15 of 1%. Tax-Free
Portfolio: 0.15 of 1%.
Scudder $3,697,600 Scudder International Fund: 0.90 of
International 1%; 0.85 of 1% on net assets in excess
Fund, Inc. of $500 million; 0.80 of 1% on net
assets in excess of $1 billion; 0.75
of 1% on net assets in excess of $2
billion. Scudder Latin America Fund:
1.25%. Scudder Pacific Opportunities
Fund: 1.10%.
Scudder Investment $2,109,000 Scudder Growth and Income Fund: 0.60
Trust of 1%; 0.55 of 1% on net assets in
excess of $500 million; 0.50 of 1% on
net assets in excess of $1 billion;
0.475 of 1% on net assets in excess of
$1.5 billion. Scudder Quality Growth
Fund: 0.70 of 1%.
Scudder Municipal $1,070,000 Scudder High Yield Tax Free Fund: 0.70
Trust of 1%; 0.65 of 1% on net assets in
excess of $200 million. Scudder
Managed Municipal Bonds: 0.55 of 1%;
0.50 of 1% on net assets in excess of
$200 million; 0.475 of 1% on net
assets in excess of $700 million.
Scudder Mutual $162,400 Scudder Gold Fund: 1%.
Funds, Inc.
Scudder Portfolio $534,600 Scudder Income Fund: 0.65 of 1%; 0.60
Trust of 1% on net assets in excess of $200
million; 0.55 of 1% on net assets in
excess of $500 million. Scudder
Balanced Fund: 0.70 of 1%.
Scudder State Tax $763,100 Scudder Massachusetts Limited Term Tax
Free Trust Free Fund: 0.60 of 1%. Scudder
Massachusetts Tax Free Fund: 0.60 of
1%. Scudder New York Tax Free Fund:
0.625 of 1%; 0.60 of 1% on net assets
in excess of $200 million. Scudder New
York Tax Free Money Fund: 0.50 of 1%.
Scudder Ohio Tax Free Fund: 0.60 of
1%. Scudder Pennsylvania Tax Free
Fund: 0.60 of 1%.
Scudder Tax Free $232,400 0.50 of 1%; 0.48 of 1% on net assets
Money Fund in excess of $500 million.
Scudder Tax Free $880,500 Scudder Limited Term Tax Free Fund:
Trust 0.60 of 1%. Scudder Medium Term Tax
Free Fund: 0.60 of 1%; 0.50 of 1% on
net assets in excess of $500 million.
Scudder U.S. $368,800 0.50 of 1%.
Treasury Money
Fund
Scudder Variable $986,600 Money Market Portfolio: 0.37 of 1%.
Life Investment Capital Growth Portfolio: 0.475 of 1%.
Fund Growth and Income Portfolio: 0.475 of
1%. Bond Portfolio: 0.475 of 1%.
Balanced Portfolio: 0.475 of 1%.
International Portfolio: 0.875 of 1%.
The Japan Fund, $684,000 0.85 of 1% of the first $100 million
Inc. of average daily net assets; 0.75 of
1% on assets in excess of $100 million
up to and including $300 million; 0.70
of 1% on assets in excess of $300
million up to and including $600
million; 0.65 of 1% on assets in
excess of $600 million. The Manager
pays The Nikko International Capital
Management Co., Ltd. for investment
and research services: 0.15 of 1% up
to $700 million of average daily net
assets; 0.14 of 1% on assets in excess
of $700 million, payable monthly
during fiscal year 1994; 0.10 of 1% on
average daily net assets, payable
during fiscal year 1995.
Total Net Assets
as of Management Compensation
September 30, 1994 on an Annual Basis Based on the
Name (000 omitted) Value of Average Weekly Net Assets
------ ------------- -----------------------------------
The Argentina $137,200 1.30%; the Investment Manager pays
Fund, Inc.* Sociedad General de Negocios y Valores
S.A. for investment and research
services 0.36 of 1%.
The Brazil Fund, $446,600 1.30%; 1.25% on net assets in excess
Inc.* of $150 million; and 1.20% on net
assets in excess of $300 million. The
Manager pays Banco Icatu S.A. for
investment and research services 0.25
of 1%; 0.15 of 1% on net assets in
excess of $150 million; and 0.05 of 1%
on net assets in excess of $300
million.
The First Iberian $58,700 1.00%.
Fund, Inc.*
The Latin America $83,200 1.20%.
Dollar Income
Fund, Inc.*
Scudder New Asia $202,900 1.25%; 1.15% on net assets in excess
Fund, Inc.* of $75 million; 1.10% on net assets in
excess of $200 million.
Scudder New Europe $183,900 1.25%; 1.15% on net assets in excess
Fund, Inc.* of $75 million; 1.10% on net assets in
excess of $200 million.
Scudder World $51,400 1.20%.
Income
Opportunities
Fund, Inc.*
Total Net Assets
as of Management Compensation
September 30, 1994 on an Annual Basis Based on the
Name (000 omitted) Value of Average Monthly Net Assets
------ ------------- -----------------------------------
The Korea Fund, $632,100 1.15%; 1.10% on net assets in excess
Inc.* of $50 million; 1% on net assets in
excess of $100 million; 0.95 of 1% on
net assets in excess of $350 million;
0.90 of 1% on net assets in excess of
$750 million. The Investment Manager
pays Daewoo Capital Management Co.,
Ltd. for investment and research
services 0.2875 of 1%; 0.275 of 1% on
net assets in excess of $50 million;
0.25 of 1% on net assets in excess of
$100 million; 0.2375 of 1% on net
assets in excess of $350 million;
0.2250 of 1% on net assets in excess
of $750 million.
Montgomery Street $184,700 0.50 of 1%; 0.45 of 1% on net assets
Income Securities, in excess of $150 million; 0.40 of 1%
Inc. * on net assets in excess of $200
million.
<FN>
* These funds are not subject to state imposed expense limitations.
</FN>
</TABLE>
Scudder also provides investment advisory services to the mutual funds
which compose the AARP Investment Program from Scudder (the "Program") with
assets of approximately $12 billion. The eight funds which are series of
the four AARP trusts and their assets and compensation rates are as
follows:
<TABLE>
<CAPTION>
Total Net Assets
as of
September 30, 1994
Name (000 omitted) Individual Fund Fee Rate+++
------ ------------- ---------------------------
<S> <C> <C>
AARP Cash $331,900 AARP High Quality Money Fund: 0.10 of
Investment Funds 1%.
AARP Income Trust $6,134,200 AARP GNMA and U.S. Treasury Fund: 0.12
of 1%. AARP High Quality Bond Fund:
0.19 of 1%.
AARP Tax Free $2,038,900 AARP High Quality Tax Free Money Fund:
Income Trust 0.10 of 1%. AARP Insured Tax Free
General Bond Fund: 0.19 of 1%.
AARP Growth Trust $3,170,400 AARP Growth and Income Fund: 0.19 of
1%. AARP Capital Growth Fund: 0.32 of
1%. AARP Balanced Stock and Bond Fund:
0.19 of 1%.
<FN>
- ---------
+++In addition to the Individual Fund Fee listed above, each of the eight
AARP Funds pays Scudder an Annual Base Fee in proportion to the ratio
of its daily net assets to the daily net assets of all of the AARP
Funds. The Annual Base Fee Rate is: 0.35 of 1% on net assets of the
Program up to and including $2 billion; 0.33 of 1% on net assets of
the Program in excess of $2 billion up to and including $4 billion;
0.30 of 1% on net assets of the Program in excess of $4 billion up to
and including $6 billion; 0.28 of 1% on net assets of the Program in
excess of $6 billion up to and including $8 billion; 0.26 of 1% on net
assets of the Program in excess of $8 billion up to and including $11
billion; 0.25 of 1% on net assets of the Program in excess of $11
billion up to and including $14 billion; and 0.24 of 1% on net assets
of the Program in excess of $14 billion.
</FN>
</TABLE>
Scudder (or an affiliate) also acts as investment adviser to the following
foreign investment funds: Canadian High Income Fund, Scudder Floating Rate
Fund for Fannie Mae Mortgage Securities, Global Balanced Fund, Hot Growth
Companies Fund, Indosuez High Yield Bond Fund, InverLatin Dollar Income
Fund, Inc., Scudder Latin America Investment Trust PLC, ProMexico Fixed
Income Dollar Fund, Scudder Global Opportunities Funds, Scudder Mortgage
Fund, Sovereign High Yield Investment Company N.V. (A), Sovereign High
Yield Investment Company N.V. (B), The Venezuela High Income Fund N.V.,
Latin America Income and Appreciation Fund N.V. and The World Capital Fund.
Scudder has agreed to maintain the expenses of certain of the above
investment companies (or series thereof) at or below a specified percentage
of net assets.
Directors, officers and employees of Scudder from time to time may have
transactions with various banks, including the Funds' custodian bank. It is
Scudder's opinion that the terms and conditions of those transactions as
have occurred were not influenced by existing or potential custodial or
other Fund relationships.
The Consolidated Statement of Condition as of December 31, 1993 and related
Independent Auditors' Report dated February 11, 1994 for Scudder is
attached hereto as Exhibit D.
Brokerage Commissions on Portfolio Transactions
To the maximum extent feasible, Scudder places orders for portfolio
transactions through the Distributor, which in turn places orders on behalf
of the Fund involved with issuers, underwriters or other brokers and
dealers. The Distributor receives no commissions, fees or other
remuneration from the Funds for this service. Allocation of brokerage is
supervised by Scudder.
A Fund's purchases and sales of portfolio securities are generally placed
by Scudder with the issuer or a primary market maker for these securities
on a net basis, without any brokerage commission being paid by a Fund.
Trading does, however, involve transaction costs. Transactions with dealers
serving as primary market makers reflect the spread between the bid and
asked prices. Purchases of underwritten issues may be made which will
involve an underwriting fee paid to the underwriter.
The primary objective of Scudder in placing orders for the purchase and
sale of securities for the Funds is to obtain the most favorable net
results taking into account such factors as price, commission where
applicable (negotiable in the case of U.S. national securities exchange
transactions), size of order, difficulty of execution and skill required of
the executing broker/dealer. Scudder seeks to evaluate the overall
reasonableness of brokerage commissions paid (to the extent applicable)
through the familiarity of the Distributor with commissions charged on
comparable transactions, as well as by comparing commissions paid by a Fund
to reported commissions paid by others. Scudder reviews on a routine basis
commission rates, execution and settlement services performed, making
internal and external comparisons.
When it can be done consistently with the policy of obtaining the most
favorable net results, it is Scudder's practice to place such orders with
brokers and dealers who supply market quotations to the custodian of the
Funds for appraisal purposes, or who supply research, market and
statistical information to the Funds. The term "research, market and
statistical information" includes advice as to the value of securities; the
advisability of investing in, purchasing or selling securities; the
availability of securities or purchasers or sellers of securities; and
analyses and reports concerning issuers, industries, securities, economic
factors and trends, portfolio strategy and the performance of accounts.
Scudder is not authorized when placing portfolio transactions for a Fund to
pay a brokerage commission in excess of that which another broker might
have charged for effecting the same transaction solely on account of the
receipt of research, market or statistical information. Scudder will not
place orders with brokers or dealers on the basis that a broker or dealer
has or has not sold shares of a Fund. In effecting transactions in
over-the-counter securities, orders are placed with the principal
market-makers for the security being traded unless, after exercising care,
it appears that more favorable results are available otherwise.
Scudder may place brokerage transactions through the custodian and a credit
against the custodian fee due to State Street Bank and Trust Company equal
to one-half of the commission on any such transaction will be given. Except
for implementing the policy stated above, there is no intention to place
portfolio transactions with particular brokers or dealers or groups
thereof.
Although certain research, market and statistical information from brokers
and dealers can be useful to the Funds and to Scudder, it is the opinion of
Scudder that such information will only supplement Scudder's own research
effort, since the information must still be analyzed, weighed, and reviewed
by Scudder's staff. Such information may be useful to Scudder in providing
services to clients other than the Funds and not all such information is
used by Scudder in connection with the Funds. Conversely, such information
provided to Scudder by brokers and dealers through whom other clients of
Scudder effect securities transactions may be useful to Scudder in
providing services to the Funds.
During Scudder Limited Term Tax Free Fund's fiscal period from February 15,
1994 (commencement of operations) to April 30, 1994, the Fund paid no
brokerage commissions on purchases or sales of portfolio securities. During
Scudder Medium Term Tax Free Fund's fiscal year ended December 31, 1993,
the Fund paid no brokerage commissions on purchases or sales of portfolio
securities.
Certain investments may be appropriate for a Fund and also for other
clients advised by Scudder. Investment decisions for a Fund and other
clients will be made with a view to achieving their respective investment
objectives and after consideration of such factors as their current
holdings, availability of cash for investment and the size of their
investments generally. Frequently, a particular security may be bought or
sold for only one client or in different amounts and at different times for
more than one but less than all clients. Likewise, a particular security
may be bought for one or more clients when one or more clients are selling
the security. In addition, purchases or sales of the same security may be
made for two or more clients on the same day. In such event, such
transactions will be allocated among the clients in a manner believed by
Scudder to be equitable to each. In some cases, this procedure could have
an adverse effect on the price or amount of the securities purchased or
sold by a Fund. Purchase and sale orders for a Fund may be combined with
those of other clients of Scudder in the interest of achieving the most
favorable net results to the Funds.
Principal Underwriter
The shares of the Funds are distributed by the Distributor. No sales
commission or load is charged to the investor on shares of the Funds sold
through the Distributor.
Under the underwriting agreements, the Funds are responsible for: the
payment of all fees and expenses in connection with the preparation and
filing with the SEC of the registration statement and prospectus and any
amendments and supplements thereto; the registration and qualification of
shares for sale in the various states, including registering the Funds as
brokers or dealers in various states, as required; the fees and expenses of
preparing, printing and mailing prospectuses annually to existing
shareholders, and notices, proxy statements, reports or other
communications to shareholders of the Funds; the cost of printing and
mailing confirmations of purchases of shares and any prospectuses
accompanying such confirmations; any issuance taxes and/or any initial
transfer taxes; a portion of shareholder toll-free telephone charges and
expenses of shareholder service representatives; the cost of wiring funds
for share purchases and redemptions (unless paid by the shareholder who
initiates the transaction); the cost of printing and postage of business
reply envelopes; and a portion of the cost of the computer terminals used
by both the Funds and the Distributor.
The Distributor pays for printing and distributing prospectuses or reports
prepared for its use in connection with the offering of the Funds' shares
to the public and preparing, printing and mailing any other literature or
advertising in connection with the offering of the shares of the Funds to
the public. The Distributor pays all fees and expenses in connection with
its qualification and registration as a broker or dealer under federal and
state laws, a portion of the cost of toll-free telephone service and
expenses of shareholder service representatives, a portion of the cost of
computer terminals, and expenses of any activity which is primarily
intended to result in the sale of shares issued by the Funds, unless a Rule
12b-1 Plan is in effect which provides that the Funds shall bear some or
all of such expenses.
Although the Funds do not currently have a 12b-1 Plan, and the Trustees
have no current intention of adopting one, the Funds would also pay those
fees and expenses permitted to be paid or assumed by the Funds pursuant to
a 12b-1 Plan, if any, were such a plan adopted by the Funds,
notwithstanding any other provision to the contrary in the underwriting
agreement.
The officers and directors of the Distributor include Thomas W. Joseph,
David S. Lee, Thomas F. McDonough, Edward J. O'Connell, Juris Padegs, and
Coleen Downs Dinneen, each of whom is an interested person of the Trust.
(6) FOR SCUDDER MEDIUM TERM TAX FREE FUND SHAREHOLDERS ONLY: TO APPROVE OR
DISAPPROVE THE AMENDMENT AND/OR RECLASSIFICATION OF CERTAIN FUNDAMENTAL
INVESTMENT POLICIES
The 1940 Act requires investment companies like the Fund to have certain
specific investment policies which can be changed only by a shareholder
vote. Investment companies may also elect to designate other policies which
may be changed only by a shareholder vote. Both types of policies are often
referred to as "fundamental" policies. (In this Proxy Statement, the word
"restriction" is sometimes used to describe a policy.)
Some fundamental policies have been adopted in the past by the Fund to
reflect certain regulatory, business or industry conditions which are no
longer in effect. Accordingly, the Trustees authorized a review of the
Fund's fundamental policies with the following goals: (i) to simplify,
modernize and make consistent with those of other investment companies
managed by Scudder, a Fund policy which is required to be fundamental; and
(ii) to eliminate as fundamental any policies which are not required to be
fundamental under state securities laws or the positions of the staff of
the SEC in interpreting the 1940 Act, in which case, depending on the
circumstances, the policy would be adopted by the Trustees as a
nonfundamental policy in the same or a modified form. Nonfundamental
policies can be changed by the Trustees without shareholder approval.
This Proposal seeks shareholder approval of changes which are intended to
accomplish the foregoing goals. The proposed changes to the fundamental
policies are discussed in detail below. Please refer to the changes to the
policies as set forth in Exhibit E. By reducing to a minimum those policies
which can be changed only by shareholder vote, the Fund would be able to
avoid the costs and delay associated with a shareholder meeting and the
Trustees believe that Scudder's ability to manage the Fund's portfolio in a
changing regulatory or investment environment will be enhanced.
Accordingly, investment management opportunities will be increased. The
numerical references below to the Fund's investment restrictions correspond
to the numbered paragraphs in Exhibit E.
Reclassification of Certain Restrictions
The Trustees propose that Restrictions (1), (2), (3), and (4) be
reclassified as nonfundamental policies of the Fund (which could be
thereafter changed or eliminated by Trustee action) as these policies are
not required by the 1940 Act or other law or regulation to be fundamental.
As a result of this proposed reclassification of certain investment
restrictions as nonfundamental, a future change in any of these
restrictions could be effected by the Trustees without shareholder approval
if the Trustees determined that such change was appropriate and desirable.
Except as described below, the Trustees have no present intention of
amending or eliminating the investment restrictions. The Trustees believe,
however, that this reclassification of restrictions will permit the Fund to
respond more rapidly to future changes in the Fund's competitive and
regulatory environment.
Amendment and Reclassification of Restriction (5)
In addition to proposing that Restriction (5) be reclassified as
nonfundamental, the Trustees propose that the restriction be modified to
clarify that the Fund's engaging in options and futures transactions are
not prohibited by the restriction.
Amendment of Restriction (6)
Although expected to comprise only an incidental portion of the Fund's
portfolio at any time, the Fund may, but is not required to, utilize
certain investment strategies to hedge various market risks (such as
interest rates and broad or specific market movements), to manage the
effective maturity or duration of the Fund's portfolio, or to enhance
potential gain (although engaging in such strategies to enhance gain is
restricted to no more than 5% of the Fund's net assets). These types of
"strategic transactions" may include derivative contracts, and may involve
substantial risk. Currently, the Fund has a fundamental investment policy
relating to commodities, as required by Section 8(b)(1)(F) of the 1940 Act.
This investment policy specifically enumerates a range of the types of
strategic transactions in which the Fund may invest as exceptions to the
policy, since such transactions could be deemed commodities as that term is
defined in the Commodity Exchange Act, by the appropriate regulatory
authority. The proposed change to the fundamental investment policy would
specify physical commodities, so that strategic transactions which may be
deemed to be "commodities", but which are not related to physical
commodities, would no longer need to be specifically and individually
excluded from the policy. Should shareholders approve this proposal, the
Fund could change the list of those strategic transactions which could be
deemed to be "commodities" without seeking shareholder approval.
In the course of pursuing these investment strategies, the Fund may enter
into certain strategic transactions including the purchase and sale of
exchange-listed and over-the-counter put and call options on securities,
fixed-income indices and other financial instruments, and the purchase and
sale of futures contracts and options thereon. Strategic transactions may
be used to attempt to protect against possible changes in the market value
of securities held in or to be purchased for the Fund's portfolio resulting
from securities markets fluctuations, to protect the Fund's unrealized
gains in the value of its portfolio securities, to facilitate the sale of
such securities for investment purposes, to manage the effective maturity
or duration of the Fund's portfolio, or to establish a position in the
derivatives markets as a temporary substitute for purchasing or selling
particular securities. Strategic transactions may have risks associated
with them including possible default by the other party to the transaction,
illiquidity and, to the extent Scudder's view as to certain market
movements is incorrect, the risk that the use of such strategic
transactions could result in losses greater than if they had not been used.
The Fund's Board of Trustees believe that it would be in the best interest
of the Fund and its shareholders to amend this restriction to refer to
physical commodities. The Fund does not intend to invest in any strategic
transactions other than those described in its prospectus dated May 1,
1994.
If this Proposal is approved by shareholders at the Meeting, the Fund's
Prospectus and Statement of Additional Information will be amended or
supplemented in due course in order to reflect the reclassification and/or
amendment of the investment policies. Shareholders will be notified by the
Fund of any future investment policy changes, either in the Fund's
Prospectus and Statement of Additional Information, which is updated at
least annually, or in other Fund correspondence.
Required Vote
Approval of this Proposal on behalf of Scudder Medium Term Tax Free Fund
with respect to any restriction requires the vote of a majority of the
outstanding securities of the Fund (as defined in the discussion of
Proposal 4 on page 12). The Trustees have considered various factors and
believe that this Proposal is in the best interest of the Fund's
shareholders. If the Proposal is not approved with respect to any one or
more restrictions, the Fund's present fundamental investment restrictions
that are not approved will remain in effect and unchanged. The Board of
Trustees recommends that the shareholders vote in favor of the amendment
and/or reclassification of each of the Fund's investment restrictions as
described above.
Other Matters
The Board of Trustees knows of no business to be brought before the Meeting
other than as set forth above. The appointed proxies will vote on any other
business that comes before the Meeting or any adjournments thereof in
accordance with their best judgment.
Please complete and sign the enclosed proxy and return it in the envelope
provided so that the Meeting may be held and action may be taken, with the
greatest possible number of shares participating, on the matters described
in this Proxy Statement. This will not preclude your voting in person if
you attend the Meeting.
Miscellaneous
Proxies will be solicited by mail and may be solicited in person or by
telephone or telegraph by officers of the Funds, personnel of Scudder or an
agent of the Funds for compensation. The expenses connected with the
solicitation of proxies and with any further proxies which may be solicited
will be borne by the Funds. The Funds will reimburse banks, brokers and
other persons holding the Funds' shares registered in their names, or in
the names of their nominees, for their expenses incurred in sending proxy
material to and obtaining proxies from the beneficial owners of such
shares.
The Scudder Medium Term Tax Free Fund Annual Report and Scudder Limited
Term Tax Free Fund Semiannual Report (the initial and current fiscal period
having ended on October 31, 1994) have been mailed to all shareholders who
were shareholders of record on October 21, 1994, the Record Date for the
Meeting.
To the knowledge of the Trustees there has been no material adverse change
in the financial operations of Scudder Limited Term Tax Free Fund
(exclusive of changes attributable to general market or economic
conditions) since the date of the financial statements contained in the
unaudited Scudder Limited Term Tax Free Fund Semiannual Report.
Proxies solicited by the Board for the Meeting will not be voted for the
election of Trustees unless (a) the Trust shall have received a certificate
from the President (or highest executive officer) of the Trust dated the
date on which such vote is to be taken that, to the knowledge of that
officer, there has been no material adverse change in the financial
operations of Scudder Limited Term Tax Free Fund (exclusive of changes
attributable to general market or economic conditions) since the date of
the unaudited financial statements included in the Scudder Limited Term Tax
Free Fund Semiannual Report, unless such material adverse change has been
disclosed to shareholders in additional proxy solicitation material or (b)
the Trust shall have mailed to all shareholders of record audited financial
statements of the Trust in an annual report (in accordance with Section 30
of the 1940 Act) and given the shareholders an opportunity to revoke any
proxies previously furnished. Notwithstanding the exclusions contained in
this and the previous paragraph, any changes attributable to improper
performance of responsibilities are not excluded from the determination as
to whether there has been a material change.
In the event that sufficient votes in favor of the proposals set forth in
the Notice of Special Meeting are not received by December 13, 1994, the
persons named in the enclosed proxy card(s) may propose one or more
adjournments of the Meeting to permit further solicitation of proxies. Any
such adjournment will require the affirmative vote of the holders of a
majority of the shares present in person or by proxy at the session of the
meeting to be adjourned. The persons named in the enclosed proxy card(s)
will vote in favor of such adjournment those proxies which they are
entitled to vote in favor of the proposal for which further solicitation of
proxies is to be made. They will vote against any such adjournment those
proxies required to be voted against such proposal. The costs of any such
additional solicitation and of any adjourned session will be borne by the
Funds.
Shareholder Proposals
Shareholders wishing to submit proposals for inclusion in a proxy statement
for any subsequent shareholders' meeting should send their written
proposals to Thomas F. McDonough, Secretary of the Trust, c/o Scudder,
Stevens & Clark, Inc., Two International Place, Boston, Massachusetts
02110, within a reasonable time before the solicitation of proxies for such
shareholders' meeting. The timely submission of a proposal does not
guarantee its inclusion.
Two International Place By Order of the Trustees
Boston, Massachusetts 02110 Thomas F. McDonough
November 4, 1994 Secretary
<PAGE>
EXHIBIT A
PROPOSED AMENDMENTS TO AMENDED AND RESTATED
DECLARATION OF TRUST
(ADDITIONS ARE SHOWN IN ITALICS; DELETIONS ARE CROSSED OUT)
Article I, Section 1.2, subsections (k), (m) and (r):
(k) "Series" individually or collectively means the two or more Series as
may be established and designated from time to time by the Trustees
pursuant to Section 5.11 hereof. Unless the context otherwise requires, the
term "Series" shall include Classes into which shares of the Trust, or of a
Series, may be divided from time to time.
(m) "Shares" means the equal proportionate units of interest into which
the beneficial interest in the Trust shall be divided from time to time,
including the Shares of any and all Series and Classes which may be
established by the Trustees and includes fractions of Shares as well as
whole Shares. "Outstanding Shares" means those shares shown from time to
time on the books of the Trust or its Transfer Agent as then issued and
outstanding, but shall not include Shares which have been redeemed or
repurchased by the Trust and which are at the time held in the Treasury of
the Trust.
(r) "Class" means the two or more Classes as may be established and
designated from time to time by the Trustees pursuant to Section 5.13
hereof.
Article V, Sections 5.1, 5.9 and 5.13:
Section 5.1. Beneficial Interest. The interest of the beneficiaries
hereunder shall be divided into transferable Shares of beneficial interest,
all of one class, except as provided in Section 5.11 and Section 5.13
hereof, par value $.01 per share. The number of Shares of beneficial
interest authorized hereunder is unlimited. All Shares issued hereunder
including, without limitation, Shares issued in connection with a dividend
in Shares or a split of Shares, shall be fully paid and non-assessable.
Section 5.9. Voting Powers. The Shareholders shall have power to vote only
(i) for the election of Trustees as provided in Section 2.12; (ii) for the
removal of Trustees as provided in Section 2.13; (iii) with respect to any
investment advisory or management contract entered into pursuant to Section
3.2; (iv) with respect to termination of the Trust as provided in Section
8.2; (v) with respect to any amendment of this Declaration to the extent
and as provided in Section 8.3; (vi) with respect to any merger,
consolidation or sale of assets as provided in Section 8.4; (vii) with
respect to incorporation of the Trust, or any Series to the extent and as
provided in Section 8.5; (viii) to the same extent as the stockholders of
Massachusetts business corporation as to whether or not a court action,
proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or any Series or
Class thereof or the Shareholders (provided, however, that a Shareholder of
a particular Series or Class shall not be entitled to a derivative or class
action on behalf of any other Series or Class (or Shareholder of any other
Series or Class) of the Trust); (ix) with respect to any plan adopted
pursuant to Rule 12b-1 (or any successor rule) under the 1940 Act; and (x)
with respect to such additional matters relating to the Trust as may be
required by this Declaration, the By-laws or any registration of the Trust
as an investment company under the 1940 Act with the Commission (or any
successor agency) or as the Trustees may consider necessary or desirable.
Each whole Share shall be entitled to one vote as to any matter on which it
is entitled to vote and each fractional Share shall be entitled to a
proportionate fractional vote, except that the Trustees may, in conjunction
with the establishment of any Series or Class of Shares, establish or
reserve the right to establish conditions under which the several Series or
Classes shall have separate voting rights or, if a Series or Class would
not, in the sole judgment of the Trustees, be materially affected by a
proposal, no voting rights. There shall be no cumulative voting in the
election of Trustees. Until Shares are issued, the Trustees may exercise
all rights of Shareholders and may take any action required by law, this
Declaration or the By-laws to be taken by Shareholders. The By-laws may
include further provisions for Shareholders' votes and meetings and related
matters.
Section 5.13. Class Designation. The Trustees, in their discretion, may
authorize the division of the Shares of the Trust, or, if any Series be
established, the Shares of any Series, into two or more Classes, and the
different Classes shall be established and designated, and the variations
in the relative rights and preferences as between the different Classes
shall be fixed and determined, by the Trustees; provided, that all Shares
of the Trust or of any Series shall be identical to all other Shares of the
Trust or the same Series, as the case may be, except that there may be
variations between different classes as to allocation of expenses, right of
redemption, special and relative rights as to dividends and on liquidation,
conversion rights, and conditions under which the several Classes shall
have separate voting rights. All references to Shares in this Declaration
shall be deemed to be Shares of any or all Classes as the context may
require.
If the Trustees shall divide the Shares of the Trust or any Series into two
or more Classes, the following provisions shall be applicable:
(a) All provisions herein relating to the Trust, or any Series of the
Trust, shall apply equally to each Class of Shares of the Trust or of any
Series of the Trust, except as the context requires otherwise.
(b) The number of Shares of each Class that may be issued shall be
unlimited. The Trustees may classify or reclassify any unissued Shares of
the Trust or any Series or any Shares previously issued and reacquired of
any Class of the Trust or of any Series into one or more Classes that may
be established and designated from time to time. The Trustees may hold as
treasury Shares (of the same or some other Class), reissue for such
consideration and on such terms as they may determine, or cancel any Shares
of any Class reacquired by the Trust at their discretion from time to time.
(c) Liabilities, expenses, costs, charges and reserves related to the
distribution of, and other identified expenses that should properly be
allocated to, the Shares of a particular Class may be charged to and borne
solely by such Class and the bearing of expenses solely by a Class of
Shares may be appropriately reflected (in a manner determined by the
Trustees) and cause differences in the net asset value attributable to, and
the dividend, redemption and liquidation rights of, the Shares of different
Classes. Each allocation of liabilities, expenses, costs, charges and
reserves by the Trustees shall be conclusive and binding upon the
Shareholders of all Classes for all purposes.
(d) The establishment and designation of any Class of Shares shall be
effective upon the execution of a majority of the then Trustees of an
instrument setting forth such establishment and designation and the
relative rights and preferences of such Class, or as otherwise provided in
such instrument. The Trustees may, by an instrument executed by a majority
of their number, abolish any Class and the establishment and designation
thereof. Each instrument referred to in this paragraph shall have the
status of an amendment to this Declaration.
Article VI, Section 6.6:
Section 6.6. Redemption of Shareholder's Interest. The Trust shall have the
right at any time without prior notice to the shareholder to redeem Shares
of any shareholder for their then current net asset value per Share if at
such time the shareholder owns Shares having an aggregate net asset value
of less than $1,000 an amount set from time to time by the Trustees subject
to such terms and conditions as the Trustees may approve, and subject to
the Trust's giving general notice to all shareholders of its intention to
avail itself of such right, either by publication in the Trust's
registration statement, if any, or by such other means as the Trustees may
determine.
Article VII, Section 7.1:
Section 7.1. Net Asset Value. The value of the assets of the Trust or any
Series of the Trust shall be determined by appraisal of the securities of
the Trust or allocated to such Series, such appraisal to be on the basis of
the amortized cost of such securities in the case of money market
securities, market value in the case of other securities, or by such other
method as shall be deemed to reflect the fair value thereof, determined in
good faith by or under the direction of the Trustees. From the total value
of said assets, there shall be deducted all indebtedness, interest, taxes,
payable or accrued, including estimated taxes on unrealized book profits,
expenses and management charges accrued to the appraisal date, net income
determined and declared as a distribution and all other items in the nature
of liabilities attributable to the Trust or such Series or Class thereof
which shall be deemed appropriate. The resulting amount which shall
represent the total net assets of the Trust or the Series shall be divided
by the number of Shares of the Trust or such Series outstanding at the time
and the quotient so obtained shall be deemed to be the net asset value of
the Shares. The net asset value of a Share shall be determined by dividing
the net asset value of the Class, or, if no Class has been established, of
the Series, or, if no Series has been established, of the Trust, by the
number of Shares of that Class, or Series, or of the Trust, as applicable,
outstanding. The net asset value of Shares of the Trust or any Class or
Series of the Trust shall be determined pursuant to the procedure and
methods prescribed or approved by the Trustees in their discretion and as
set forth in the most recent Registration Statement of the Trust as filed
with the Securities and Exchange Commission pursuant to the requirements of
the Securities Act of 1933, as amended, the Investment Company Act of 1940,
as amended, and the Rules thereunder. The net asset value of the Shares
shall be determined at least once on each business day, as of the close of
trading on the New York Stock Exchange or as of such other time or times as
the Trustees shall determine. The power and duty to make the daily
calculations may be delegated by the Trustees to the Investment Adviser,
the Custodian, the Transfer Agent or such other Person as the Trustees may
determine by resolution or by approving a contract which delegates such
duty to another Person. The Trustees may suspend the daily determination of
net asset value to the extent permitted by the 1940 Act.
<PAGE>
EXHIBIT B
Scudder Tax Free Trust
175 Federal Street
Boston, Massachusetts 02110
February 15, 1994
Scudder, Stevens & Clark, Inc.
345 Park Avenue
New York, NY 10154
Investment Management Agreement
Scudder Limited Term Tax Free Fund
Ladies and Gentlemen:
Scudder Tax Free Trust (the "Trust") has been established as a
Massachusetts business trust to engage in the business of an investment
company. Pursuant to the Trust's Declaration of Trust, the Board of
Trustees has divided the Trust's shares of beneficial interest, par value
$.01 per share, (the "Shares") into separate series, or funds, including
Scudder Short Term Tax Free Fund (the "Fund"). Series may be abolished and
dissolved, and additional series established, from time to time by action
of the Trustees.
That Trust, on behalf of the Fund, has selected you to act as the sole
investment manager of the Fund and to provide certain other services, as
more fully set forth below, and you have indicated that you are willing to
act as such investment manager and to perform such services under the terms
and conditions hereinafter set forth. Accordingly, the Trust, on behalf of
the Fund, agrees with you as follows:
1. Delivery of Documents. The Trust engages in the business of
investing and reinvesting the assets of the Fund in the manner and in
accordance with the investment objectives, policies and restrictions
specified in the currently effective Prospectus (the "Prospectus") and
Statement of Additional Information (the "SAI") relating to the Fund
included in the Trust's Registration Statement on Form N-1A, as amended
from time to time, (the "Registration Statement") filed by the Trust under
the Investment Company Act of 1940, as amended, (the "1940 Act") and the
Securities Act of 1933, as amended. Copies of the documents referred to in
the preceding sentence have been furnished to you by the Trust. The Trust
has also furnished you with copies properly certified or authenticated of
each of the following additional documents related to the Trust and the
Fund:
(a) Amended and Restated Declaration of Trust of the Trust dated
December 8, 1987, as amended to date (the "Declaration").
(b) By-Laws of the Trust as in effect on the date hereof (the
"By-Laws").
(c) Resolutions of the Trustees of the Fund and the shareholders of
the Fund selecting you as investment manager and approving the
form of this Agreement.
(d) Establishment and Designation of Additional Shares of Beneficial
Interest dated December 14, 1993.
The Trust will furnish you from time to time with copies, properly
certified or authenticated, of all amendments of or supplements, if any, to
the foregoing, including the Prospectus, the SAI and the Registration
Statement.
2. Name of Trust and Fund. The Trust and the Fund may use any name
derived from the name "Scudder, Stevens & Clark", if the Trust elects to do
so, only for so long as this Agreement, any other investment management
agreement between you and the Trust with respect to the Fund or any
extension, renewal or amendment hereof or thereof remains in effect,
including any similar agreement with any organization which shall have
succeeded to your business as investment manager. At such time as such an
agreement shall no longer be in effect, the Trust and the Fund shall each
(to the extent the Trust has the legal power to cause it to be done) cease
to use such a name or any other name indicating that it is managed by or
otherwise connected with you or any organization which shall have so
succeeded to your business.
3. Portfolio Management Services. As manager of the assets of the
Fund, you shall provide continuing investment management of the assets of
the Fund in accordance with the investment objectives, policies and
restrictions set forth in the Prospectus and SAI; the applicable provisions
of the 1940 Act and the Internal Revenue Code of 1986, as amended, (the
"Code") relating to regulated investment companies and all rules and
regulations thereunder; and all other applicable federal and state laws and
regulations of which you have knowledge; subject always to policies and
instructions adopted by the Trust's Board of Trustees. In connection
therewith, you shall use reasonable efforts to manage the Fund so that it
will qualify as a regulated investment company under Subchapter M of the
Code and regulations issued thereunder. The Fund shall have the benefit of
the investment analysis and research, the review of current economic
conditions and trends and the consideration of long-range investment policy
generally available to your investment advisory clients. In managing the
Fund in accordance with the requirements set forth in this section 3, you
shall be entitled to receive and act upon advice of counsel to the Trust or
counsel to you. You shall also make available to the Trust promptly upon
request all the Fund's investment records and ledgers as are necessary to
assist the Trust to comply with the requirements of the 1940 Act and other
applicable laws. To the extent required by law, you shall furnish to
regulatory authorities having the requisite authority any information or
reports in connection with the services provided pursuant to this Agreement
which may be requested in order to ascertain whether the operations of the
Trust are being conducted in a manner consistent with applicable laws and
regulations.
You shall determine the securities, instruments, investments,
currencies, repurchase agreements, futures, options and other contracts
relating to investments to be purchased, sold or entered into by the Fund
and place orders with broker-dealers, foreign currency dealers, futures
commission merchants or others pursuant to your determinations and all in
accordance with Fund policies as expressed in the Registration Statement.
You shall determine what portion of the Fund's portfolio shall be invested
in securities and other assets and what portion, if any, should be held
uninvested.
You shall furnish to the Trust's Board of Trustees periodic reports on
the investment performance of the Fund and on the performance of your
obligations pursuant to this Agreement, and you shall supply such
additional reports and information as the Trust's officers or Board of
Trustees shall reasonably request.
4. Administrative Services. In addition to the portfolio management
services specified above in section 3, you shall furnish at your expense
for the use of the Fund such office space and facilities in the United
States as the Fund may require for its reasonable needs, and you (or one or
more of your affiliates designated by you) shall render to the Trust
administrative services on behalf of the Fund necessary for operating as an
open-end investment company and not provided by persons not parties to this
Agreement including, but not limited to, preparing reports to and meeting
materials for the Trust's Board of Trustees and reports and notices to Fund
shareholders; supervising, negotiating contractual arrangements with, to
the extent appropriate, and monitoring the performance of, custodians,
depositories, transfer and pricing agents, accountants, attorneys,
printers, underwriters, brokers and dealers, insurers and other persons in
any capacity deemed to be necessary or desirable to Fund operations;
preparing and making filings with the Securities and Exchange Commission
(the "SEC") and other regulatory and self-regulatory organizations,
including, but not limited to, preliminary and definitive proxy materials,
post-effective amendments to the Registration Statement, semi-annual
reports on Form N-SAR and notices pursuant to Rule 24f-2 under the 1940
Act; overseeing the tabulation of proxies by the Fund's transfer agent;
assisting in the preparation and filing of the Fund's federal, state and
local tax returns; preparing and filing the Fund's federal excise tax
return pursuant to Section 4982 of the Code; providing assistance with
investor and public relations matters; monitoring the valuation of
portfolio securities, the calculation of net asset value and the
calculation and payment of distributions to Fund shareholders; monitoring
the registration of shares of the Fund under applicable federal and state
securities laws; maintaining or causing to be maintained for the Fund all
books, records and reports and any other information required under the
1940 Act, to the extent that such books, records and reports and other
information are not maintained by the Fund's custodian or other agents of
the Trust; assisting in establishing the accounting policies of the Fund;
assisting in the resolution of accounting issues that may arise with
respect to the Fund's operations and consulting with the Trust's
independent accountants, legal counsel and the Fund's other agents as
necessary in connection therewith; establishing and monitoring the Fund's
operating expense budgets; reviewing the Fund's bills; processing the
payment of bills that have been approved by an authorized person; assisting
the Fund in determining the amount of dividends and distributions available
to be paid by the Fund to its shareholders, preparing and arranging for the
printing of dividend notices to shareholders, and providing the transfer
and dividend paying agent and the custodian with such information as is
required for such parties to effect the payment of dividends and
distributions; and otherwise assisting the Trust and the Fund as it may
reasonably request in the conduct of the Fund's business, subject to the
direction and control of the Trust's Board of Trustees. Nothing in this
Agreement shall be deemed to shift to you or to diminish the obligations of
any agent of the Fund or any other person not a party to this Agreement
which is obligated to provide services to the Fund.
5. Allocation of Charges and Expenses. Except as otherwise
specifically provided in this section 5, you shall pay the compensation and
expenses of all Trustees, officers and executive employees of the Trust
(including the Fund's share of payroll taxes) who are affiliated persons of
you, and you shall make available, without expense to the Fund, the
services of such of your directors, officers and employees as may duly be
elected officers of the Trust, subject to their individual consent to serve
and to any limitations imposed by law. You shall provide at your expense
the portfolio management services described in section 3 hereof and the
administrative services described in section 4 hereof.
You shall not be required to pay any expenses of the Fund other than
those specifically allocated to you in this section 5. In particular, but
without limiting the generality of the foregoing, you shall not be
responsible, except to the extent of the reasonable compensation of such of
the Fund's Trustees and officers as are directors, officers or employees of
you whose services may be involved, for the following expenses of the Fund:
organization expenses of the Fund (including out-of-pocket expenses, but
not including your overhead or employee costs); fees payable to you and to
any other Fund advisors or consultants; legal expenses; auditing and
accounting expenses; maintenance of books and records which are required to
be maintained by the Fund's custodian or other agents of the Trust;
telephone, telex, facsimile, postage and other communications expenses;
taxes and governmental fees; fees, dues and expenses incurred by the Trust
in connection with membership in investment company trade organizations;
fees and expenses of the Fund's custodians, subcustodians, transfer agents,
dividend disbursing agents and registrars; payment for portfolio pricing or
valuation services to pricing agents, accountants, bankers and other
specialists, if any; expenses of preparing share certificates and, except
as provided below in this section 5, other expenses in connection with the
issuance, offering, distribution, sale, redemption or repurchase of
securities issued by the Fund; expenses relating to investor and public
relations; expenses and fees of registering or qualifying Shares of the
Fund for sale; interest charges, bond premiums and other insurance expense;
freight, insurance and other charges in connection with the shipment of the
Fund's portfolio securities; the compensation and all expenses
(specifically including travel expenses relating to Trust business) of
Trustees, officers and employees of the Trust who are not affiliated
persons of you; brokerage commissions or other costs of acquiring or
disposing of any portfolio securities of the Fund; expenses of printing and
distributing reports, notices and dividends to shareholders; expenses of
printing and mailing Prospectuses and SAIs of the Fund and supplements
thereto; costs of stationery; any litigation expenses; indemnification of
Trustees and officers of the Trust; costs of shareholders' and other
meetings; and travel expenses (or an appropriate portion thereof) of
Trustees and officers of the Trust who are directors, officers or employees
of you to the extent that such expenses relate to attendance at meetings of
the Board of Trustees of the Trust or any committees thereof or advisors
thereto held outside of Boston, Massachusetts or New York, New York.
You shall not be required to pay expenses of any activity which is
primarily intended to result in sales of Shares of the Fund if and to the
extent that (i) such expenses are required to be borne by a principal
underwriter which acts as the distributor of the Fund's Shares pursuant to
an underwriting agreement which provides that the underwriter shall assume
some or all of such expenses, or (ii) the Trust on behalf of the Fund shall
have adopted a plan in conformity with Rule 12b-1 under the 1940 Act
providing that the Fund (or some other party) shall assume some or all of
such expenses. You shall be required to pay such of the foregoing sales
expenses as are not required to be paid by the principal underwriter
pursuant to the underwriting agreement or are not permitted to be paid by
the Fund (or some other party) pursuant to such a plan.
6. Management Fee. For all services to be rendered, payments to be
made and costs to be assumed by you as provided in sections 3, 4 and 5
hereof, the Trust on behalf of the Fund shall pay you on the last day of
each month the unpaid balance of a fee equal to the excess of (a) 1/12 of
0.60 of 1% of the average daily net assets as defined below of the Fund for
such month over (b) the greater of (i) the amount by which the Fund's
expenses exceed the lowest applicable expense limitation (as more fully
described below) or (ii) any compensation waived by you from time to time
(as more fully described below). You shall be entitled to receive during
any month such interim payments of your fee hereunder as you shall request,
provided that no such payment shall exceed 75% of the amount of your fee
then accrued on the books of the Fund and unpaid.
The "average daily net assets" of the Fund shall mean the average of
the values placed on the Fund's net assets as of 4:00 p.m. (New York time)
on each day on which the net asset value of the Fund is determined
consistent with the provisions of Rule 22c-1 under the 1940 Act or, if the
Fund lawfully determines the value of its net assets as of some other time
on each business day, as of such time. The value of the net assets of the
Fund shall always be determined pursuant to the applicable provisions of
the Declaration and the Registration Statement. If the determination of net
asset value does not take place for any particular day, then for the
purposes of this section 6, the value of the net assets of the Fund as last
determined shall be deemed to be the value of its net assets as of 4:00
p.m. (New York time), or as of such other time as the value of the net
assets of the Fund's portfolio may be lawfully determined on that day. If
the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall
be deemed to be the sole determination thereof on that day for the purposes
of this section 6.
You agree that your gross compensation for any fiscal year shall not
be greater than an amount which, when added to the other expenses of the
Fund, shall cause the aggregate expenses of the Fund to equal the maximum
expenses under the lowest applicable expense limitation established
pursuant to the statutes or regulations of any jurisdiction in which the
Shares of the Fund may be qualified for offer and sale. Except to the
extent that such amount has been reflected in reduced payments to you, you
shall refund to the Fund the amount of any payment received in excess of
the limitation pursuant to this section 6 as promptly as practicable after
the end of such fiscal year, provided that you shall not be required to pay
the Fund an amount greater than the fee paid to you in respect of such year
pursuant to this Agreement. As used in this section 6, "expenses" shall
mean those expenses included in the applicable expense limitation having
the broadest specifications thereof, and "expense limitation" means a limit
on the maximum annual expenses which may be incurred by an investment
company determined (i) by multiplying a fixed percentage by the average, or
by multiplying more than one such percentage by different specified amounts
of the average, of the values of an investment company's net assets for a
fiscal year or (ii) by multiplying a fixed percentage by an investment
company's net investment income for a fiscal year. The words "lowest
applicable expense limitation" shall be construed to result in the largest
reduction of your compensation for any fiscal year of the Fund; provided,
however, that nothing in this Agreement shall limit your fees if not
required by an applicable statute or regulation referred to above in this
section 6.
You may waive all or a portion of your fees provided for hereunder and
such waiver shall be treated as a reduction in purchase price of your
services. You shall be contractually bound hereunder by the terms of any
publicly announced waiver of your fee, or any limitation of the Fund's
expenses, as if such waiver or limitation were fully set forth herein.
7. Avoidance of Inconsistent Position; Services Not Exclusive. In
connection with purchases or sales of portfolio securities and other
investments for the account of the Fund, neither you nor any of your
directors, officers or employees shall act as a principal or agent or
receive any commission. You or your agent shall arrange for the placing of
all orders for the purchase and sale of portfolio securities and other
investments for the Fund's account with brokers or dealers selected by you
in accordance with Fund policies as expressed in the Registration
Statement. If any occasion should arise in which you give any advice to
clients of yours concerning the Shares of the Fund, you shall act solely as
investment counsel for such clients and not in any way on behalf of the
Fund.
Your services to the Fund pursuant to this Agreement are not to be
deemed to be exclusive and it is understood that you may render investment
advice, management and services to others. In acting under this Agreement,
you shall be an independent contractor and not an agent of the Trust.
8. Limitation of Liability of Manager. As an inducement to your
undertaking to render services pursuant to this Agreement, the Trust agrees
that you shall not be liable under this Agreement for any error of judgment
or mistake of law or for any loss suffered by the Fund in connection with
the matters to which this Agreement relates, provided that nothing in this
Agreement shall be deemed to protect or purport to protect you against any
liability to the Trust, the Fund or its shareholders to which you would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of your duties, or by reason of your reckless
disregard of your obligations and duties hereunder. Any person, even though
also employed by you, who may be or become an employee of and paid by the
Fund shall be deemed, when acting within the scope of his or her employment
by the Fund, to be acting in such employment solely for the Trust and not
as your employee or agent.
9. Duration and Termination of This Agreement. This Agreement shall
remain in force until September 30, 1995, and continue in force from year
to year thereafter, but only so long as such continuance is specifically
approved at least annually (a) by the vote of a majority of the Trustees
who are not parties to this Agreement or interested persons of any party to
this Agreement, cast in person at a meeting called for the purpose of
voting on such approval, and (b) by the Trustees of the Trust, or by the
vote of a majority of the outstanding voting securities of the Fund. The
aforesaid requirement that continuance of this Agreement be "specifically
approved at least annually" shall be construed in a manner consistent with
the 1940 Act and the rules and regulations thereunder.
This Agreement may be terminated with respect to the Fund at any time,
without the payment of any penalty, by the vote of a majority of the
outstanding voting securities of the Fund or by the Trust's Board of
Trustees on 60 days' written notice to you, or by you on 60 days' written
notice to the Trust. This Agreement shall terminate automatically in the
event of its assignment.
10. Amendment of this Agreement. No provision of this Agreement may
be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought, and no amendment of
this Agreement shall be effective until approved by the vote of a majority
of the outstanding voting securities of the Fund and by the Trust's Board
of Trustees, including a majority of the Trustees who are not parties to
this Agreement or interested persons of any party to this Agreement, cast
in person at a meeting called for the purpose of voting on such approval.
11. Limitation of Liability for Claims. The Declaration, a copy of
which, together with all amendments thereto, is on file in the Office of
the Secretary of the Commonwealth of Massachusetts, provides that the name
"Scudder Tax Free Trust" refers to the Trustees under the Declaration
collectively as trustees and not as individuals or personally, and that no
shareholder of the Fund, or Trustee, officer, employee or agent of the
Trust, shall be subject to claims against or obligations of the Trust or of
the Fund to any extent whatsoever, but that the Trust estate only shall be
liable.
You are hereby expressly put on notice of the limitation of liability
as set forth in the Declaration and you agree that the obligations assumed
by the Trust on behalf of the Fund pursuant to this Agreement shall be
limited in all cases to the Fund and its assets, and you shall not seek
satisfaction of any such obligation from the shareholders or any
shareholder of the Fund or any other series of the Trust, or from any
Trustee, officer, employee or agent of the Trust. You understand that the
rights and obligations of the Fund, or series, under the Declaration are
separate and distinct from those of any and all other series.
12. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
In interpreting the provisions of this Agreement, the definitions
contained in Section 2(a) of the 1940 Act (particularly the definitions of
"affiliated person," "assignment" and "majority of the outstanding voting
securities"), as from time to time amended, shall be applied, subject,
however, to such exemptions as may be granted by the SEC by any rule,
regulation or order.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be
construed in a manner inconsistent with the 1940 Act, or in a manner which
would cause the Fund to fail to comply with the requirements of Subchapter
M of the Code.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding
contract effective as of the date of this Agreement.
Yours very truly,
SCUDDER TAX FREE Trust,
on behalf of Scudder Limited
Term Tax Free Fund
By /s/David S. Lee
President
The foregoing Agreement is hereby accepted as of the date thereof.
SCUDDER, STEVENS & CLARK, INC.
By /s/Daniel Pierce
Managing Director
<PAGE>
EXHIBIT C
Scudder Tax Free Trust
Two International Place
Boston, Massachusetts 02110
- ------------------------, 1994
Scudder, Stevens & Clark, Inc.
345 Park Avenue
New York, NY 10154
Investment Management Agreement
Scudder Medium Term Tax Free Fund
Ladies and Gentlemen:
Scudder Tax Free Trust (the "Trust") has been established as a
Massachusetts business trust to engage in the business of an investment
company. Pursuant to the Trust's Declaration of Trust, the Board of
Trustees has divided the Trust's shares of beneficial interest, par value
$.01 per share, (the "Shares") into separate series, or funds, including
Scudder Medium Term Tax Free Fund (the "Fund"). Series may be abolished and
dissolved, and additional series established, from time to time by action
of the Trustees.
That Trust, on behalf of the Fund, has selected you to act as the sole
investment manager of the Fund and to provide certain other services, as
more fully set forth below, and you have indicated that you are willing to
act as such investment manager and to perform such services under the terms
and conditions hereinafter set forth. Accordingly, the Trust on behalf of
the Fund agrees with you as follows:
1. Delivery of Documents. The Trust engages in the business of
investing and reinvesting the assets of the Fund in the manner and in
accordance with the investment objectives, policies and restrictions
specified in the currently effective Prospectus (the "Prospectus") and
Statement of Additional Information (the "SAI") relating to the Fund
included in the Trust's Registration Statement on Form N-1A, as amended
from time to time, (the "Registration Statement") filed by the Trust under
the Investment Company Act of 1940, as amended, (the "1940 Act") and the
Securities Act of 1933, as amended. Copies of the documents referred to in
the preceding sentence have been furnished to you by the Trust. The Trust
has also furnished you with copies properly certified or authenticated of
each of the following additional documents related to the Trust and the
Fund:
(a) Amended and Restated Declaration of Trust of the Trust dated
December 8, 1987, as amended to date (the "Declaration").
(b) By-Laws of the Trust as in effect on the date hereof (the
"By-Laws").
(c) Resolutions of the Trustees of the Trust and the shareholders of
the Fund selecting you as investment manager and approving the
form of this Agreement.
(d) Establishment and Designation of Series of Shares of Beneficial
Interest dated December 14, 1993 relating to the Fund.
The Trust will furnish you from time to time with copies, properly
certified or authenticated, of all amendments of or supplements, if any, to
the foregoing, including the Prospectus, the SAI and the Registration
Statement.
2. Name of Trust and Fund. The Trust and the Fund may use any name
derived from the name "Scudder, Stevens & Clark," if the Trust elects to do
so, only for so long as this Agreement, any other investment management
agreement between you and the Trust with respect to the Fund or any
extension, renewal or amendment hereof or thereof remains in effect,
including any similar agreement with any organization which shall have
succeeded to your business as investment manager. At such time as such an
agreement shall no longer be in effect, the Trust and the Fund shall each
(to the extent the Trust has the legal power to cause it to be done) cease
to use such a name or any other name indicating that it is managed by or
otherwise connected with you or any organization which shall have so
succeeded to your business.
3. Portfolio Management Services. As manager of the assets of the
Fund, you shall provide continuing investment management of the assets of
the Fund in accordance with the investment objectives, policies and
restrictions set forth in the Prospectus and SAI; the applicable provisions
of the 1940 Act and the Internal Revenue Code of 1986, as amended, (the
"Code") relating to regulated investment companies and all rules and
regulations thereunder; and all other applicable federal and state laws and
regulations of which you have knowledge; subject always to policies and
instructions adopted by the Trust's Board of Trustees. In connection
therewith, you shall use reasonable efforts to manage the Fund so that it
will qualify as a regulated investment company under Subchapter M of the
Code and regulations issued thereunder. The Fund shall have the benefit of
the investment analysis and research, the review of current economic
conditions and trends and the consideration of long-range investment policy
generally available to your investment advisory clients. In managing the
Fund in accordance with the requirements set forth in this section 3, you
shall be entitled to receive and act upon advice of counsel to the Trust or
counsel to you. You shall also make available to the Trust promptly upon
request all of the Fund's investment records and ledgers as are necessary
to assist the Trust to comply with the requirements of the 1940 Act and
other applicable laws. To the extent required by law, you shall furnish to
regulatory authorities having the requisite authority any information or
reports in connection with the services provided pursuant to this Agreement
which may be requested in order to ascertain whether the operations of the
Trust are being conducted in a manner consistent with applicable laws and
regulations.
You shall determine the securities, instruments, investments,
currencies, repurchase agreements, futures, options and other contracts
relating to investments to be purchased, sold or entered into by the Fund
and place orders with broker-dealers, foreign currency dealers, futures
commission merchants or others pursuant to your determinations and all in
accordance with Fund policies as expressed in the Registration Statement.
You shall determine what portion of the Fund's portfolio shall be invested
in securities and other assets and what portion, if any, should be held
uninvested.
You shall furnish to the Trust's Board of Trustees periodic reports on
the investment performance of the Fund and on the performance of your
obligations pursuant to this Agreement, and you shall supply such
additional reports and information as the Trust's officers or Board of
Trustees shall reasonably request.
4. Administrative Services. In addition to the portfolio management
services specified above in section 3, you shall furnish at your expense
for the use of the Fund such office space and facilities in the United
States as the Fund may require for its reasonable needs, and you (or one or
more of your affiliates designated by you) shall render to the Trust
administrative services on behalf of the Fund necessary for operating as an
open-end investment company and not provided by persons not parties to this
Agreement including, but not limited to, preparing reports to and meeting
materials for the Trust's Board of Trustees and reports and notices to Fund
shareholders; supervising, negotiating contractual arrangements with, to
the extent appropriate, and monitoring the performance of, custodians,
depositories, transfer and pricing agents, accountants, attorneys,
printers, underwriters, brokers and dealers, insurers and other persons in
any capacity deemed to be necessary or desirable to Fund operations;
preparing and making filings with the Securities and Exchange Commission
(the "SEC") and other regulatory and self-regulatory organizations,
including, but not limited to, preliminary and definitive proxy materials,
post-effective amendments to the Registration Statement, semi-annual
reports on Form N-SAR and notices pursuant to Rule 24f-2 under the 1940
Act; overseeing the tabulation of proxies by the Fund's transfer agent;
assisting in the preparation and filing of the Fund's federal, state and
local tax returns; preparing and filing the Fund's federal excise tax
return pursuant to Section 4982 of the Code; providing assistance with
investor and public relations matters; monitoring the valuation of
portfolio securities, the calculation of net asset value and the
calculation and payment of distributions to Fund shareholders; monitoring
the registration of Shares of the Fund under applicable federal and state
securities laws; maintaining or causing to be maintained for the Fund all
books, records and reports and any other information required under the
1940 Act, to the extent that such books, records and reports and other
information are not maintained by the Fund's custodian or other agents of
the Fund; assisting in establishing the accounting policies of the Fund;
assisting in the resolution of accounting issues that may arise with
respect to the Fund's operations and consulting with the Fund's independent
accountants, legal counsel and the Fund's other agents as necessary in
connection therewith; establishing and monitoring the Fund's operating
expense budgets; reviewing the Fund's bills; processing the payment of
bills that have been approved by an authorized person; assisting the Fund
in determining the amount of dividends and distributions available to be
paid by the Fund to its shareholders, preparing and arranging for the
printing of dividend notices to shareholders, and providing the transfer
and dividend paying agent and the custodian with such information as is
required for such parties to effect the payment of dividends and
distributions; and otherwise assisting the Trust as it may reasonably
request in the conduct of the Fund's business, subject to the direction and
control of the Trust's Board of Trustees. Nothing in this Agreement shall
be deemed to shift to you or to diminish the obligations of any agent of
the Fund or any other person not a party to this Agreement which is
obligated to provide services to the Fund.
5. Allocation of Charges and Expenses. Except as otherwise
specifically provided in this section 5, you shall pay the compensation and
expenses of all Trustees, officers and executive employees of the Trust
(including the Fund's share of payroll taxes) who are affiliated persons of
you, and you shall make available, without expense to the Fund, the
services of such of your directors, officers and employees as may duly be
elected officers of the Trust, subject to their individual consent to serve
and to any limitations imposed by law. You shall provide at your expense
the portfolio management services described in section 3 hereof and the
administrative services described in section 4 hereof.
You shall not be required to pay any expenses of the Fund other than
those specifically allocated to you in this section 5. In particular, but
without limiting the generality of the foregoing, you shall not be
responsible, except to the extent of the reasonable compensation of such of
the Fund's Trustees and officers as are directors, officers or employees of
you whose services may be involved, for the following expenses of the Fund:
organization expenses of the Fund (including out-of-pocket expenses, but
not including your overhead or employee costs); fees payable to you and to
any other Fund advisors or consultants; legal expenses; auditing and
accounting expenses; maintenance of books and records which are required to
be maintained by the Fund's custodian or other agents of the Trust;
telephone, telex, facsimile, postage and other communications expenses;
taxes and governmental fees; fees, dues and expenses incurred by the Fund
in connection with membership in investment company trade organizations;
fees and expenses of the Fund's custodians, subcustodians, transfer agents,
dividend disbursing agents and registrars; payment for portfolio pricing or
valuation services to pricing agents, accountants, bankers and other
specialists, if any; expenses of preparing share certificates and, except
as provided below in this section 5, other expenses in connection with the
issuance, offering, distribution, sale, redemption or repurchase of
securities issued by the Fund; expenses relating to investor and public
relations; expenses and fees of registering or qualifying Shares of the
Fund for sale; interest charges, bond premiums and other insurance expense;
freight, insurance and other charges in connection with the shipment of the
Fund's portfolio securities; the compensation and all expenses
(specifically including travel expenses relating to Trust business) of
Trustees, officers and employees of the Trust who are not affiliated
persons of you; brokerage commissions or other costs of acquiring or
disposing of any portfolio securities of the Fund; expenses of printing and
distributing reports, notices and dividends to shareholders; expenses of
printing and mailing Prospectuses and SAIs of the Fund and supplements
thereto; costs of stationery; any litigation expenses; indemnification of
Trustees and officers of the Trust; costs of shareholders' and other
meetings; and travel expenses (or an appropriate portion thereof) of
Trustees and officers of the Trust who are directors, officers or employees
of you to the extent that such expenses relate to attendance at meetings of
the Board of Trustees of the Trust or any committees thereof or advisors
thereto held outside of Boston, Massachusetts or New York, New York.
You shall not be required to pay expenses of any activity which is
primarily intended to result in sales of Shares of the Fund if and to the
extent that (i) such expenses are required to be borne by a principal
underwriter which acts as the distributor of the Fund's Shares pursuant to
an underwriting agreement which provides that the underwriter shall assume
some or all of such expenses, or (ii) the Trust on behalf of the Fund shall
have adopted a plan in conformity with Rule 12b-1 under the 1940 Act
providing that the Fund (or some other party) shall assume some or all of
such expenses. You shall be required to pay such of the foregoing sales
expenses as are not required to be paid by the principal underwriter
pursuant to the underwriting agreement or are not permitted to be paid by
the Fund (or some other party) pursuant to such a plan.
6. Management Fee. For all services to be rendered, payments to be
made and costs to be assumed by you as provided in sections 3, 4 and 5
hereof, the Trust on behalf of the Fund shall pay you on the last day of
each month the unpaid balance of a fee equal to the excess of (a) 1/12 of
.60 of 1% of the average daily net assets as defined below of the Fund for
such month; provided that, for any calendar month during which the average
of such values exceeds $500,000,000, the fee payable for that month based
on the portion of the average of such values in excess of $500,000,000
shall be 1/12 of .50 of 1% of such portion; over (b) the greater of (i) the
amount by which the Fund's expenses exceed the lowest applicable expense
limitation (as more fully described below) or (ii) any compensation waived
by you from time to time (as more fully described below). You shall be
entitled to receive during any month such interim payments of your fee
hereunder as you shall request, provided that no such payment shall exceed
75% of the amount of your fee then accrued on the books of the Fund and
unpaid.
The "average daily net assets" of the Fund shall mean the average of
the values placed on the Fund's net assets as of 4:00 p.m. (New York time)
on each day on which the net asset value of the Fund is determined
consistent with the provisions of Rule 22c-1 under the 1940 Act or, if the
Fund lawfully determines the value of its net assets as of some other time
on each business day, as of such time. The value of the net assets of the
Fund shall always be determined pursuant to the applicable provisions of
the Declaration and the Registration Statement. If the determination of net
asset value does not take place for any particular day, then for the
purposes of this section 6, the value of the net assets of the Fund as last
determined shall be deemed to be the value of its net assets as of 4:00
p.m. (New York time), or as of such other time as the value of the net
assets of the Fund's portfolio may be lawfully determined on that day. If
the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall
be deemed to be the sole determination thereof on that day for the purposes
of this section 6.
You agree that your gross compensation for any fiscal year shall not
be greater than an amount which, when added to the other expenses of the
Fund, shall cause the aggregate expenses of the Fund to equal the maximum
expenses under the lowest applicable expense limitation established
pursuant to the statutes or regulations of any jurisdiction in which the
Shares of the Fund may be qualified for offer and sale. Except to the
extent that such amount has been reflected in reduced payments to you, you
shall refund to the Fund the amount of any payment received in excess of
the limitation pursuant to this section 6 as promptly as practicable after
the end of such fiscal year, provided that you shall not be required to pay
the Fund an amount greater than the fee paid to you in respect of such year
pursuant to this Agreement. As used in this section 6, "expenses" shall
mean those expenses included in the applicable expense limitation having
the broadest specifications thereof, and "expense limitation" means a limit
on the maximum annual expenses which may be incurred by an investment
company determined (i) by multiplying a fixed percentage by the average, or
by multiplying more than one such percentage by different specified amounts
of the average, of the values of an investment company's net assets for a
fiscal year or (ii) by multiplying a fixed percentage by an investment
company's net investment income for a fiscal year. The words "lowest
applicable expense limitation" shall be construed to result in the largest
reduction of your compensation for any fiscal year of the Fund; provided,
however, that nothing in this Agreement shall limit your fees if not
required by an applicable statute or regulation referred to above in this
section 6.
You may waive all or a portion of your fees provided for hereunder and
such waiver shall be treated as a reduction in purchase price of your
services. You shall be contractually bound hereunder by the terms of any
publicly announced waiver of your fee, or any limitation of the Fund's
expenses, as if such waiver or limitation were fully set forth herein.
7. Avoidance of Inconsistent Position; Services Not Exclusive. In
connection with purchases or sales of portfolio securities and other
investments for the account of the Fund, neither you nor any of your
directors, officers or employees shall act as a principal or agent or
receive any commission. You or your agent shall arrange for the placing of
all orders for the purchase and sale of portfolio securities and other
investments for the Fund's account with brokers or dealers selected by you
in accordance with Fund policies as expressed in the Registration
Statement. If any occasion should arise in which you give any advice to
clients of yours concerning the Shares of the Fund, you shall act solely as
investment counsel for such clients and not in any way on behalf of the
Fund.
Your services to the Fund pursuant to this Agreement are not to be
deemed to be exclusive and it is understood that you may render investment
advice, management and services to others. In acting under this Agreement,
you shall be an independent contractor and not an agent of the Trust.
8. Limitation of Liability of Manager. As an inducement to your
undertaking to render services pursuant to this Agreement, the Trust agrees
that you shall not be liable under this Agreement for any error of judgment
or mistake of law or for any loss suffered by the Fund in connection with
the matters to which this Agreement relates, provided that nothing in this
Agreement shall be deemed to protect or purport to protect you against any
liability to the Trust, the Fund or its shareholders to which you would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of your duties, or by reason of your reckless
disregard of your obligations and duties hereunder. Any person, even though
also employed by you, who may be or become an employee of and paid by the
Fund shall be deemed, when acting within the scope of his or her employment
by the Fund, to be acting in such employment solely for the Fund and not as
your employee or agent.
9. Duration and Termination of This Agreement. This Agreement shall
remain in force until September 30, 1996, and continue in force from year
to year thereafter, but only so long as such continuance is specifically
approved at least annually (a) by the vote of a majority of the Trustees
who are not parties to this Agreement or interested persons of any party to
this Agreement, cast in person at a meeting called for the purpose of
voting on such approval, and (b) by the Trustees of the Trust, or by the
vote of a majority of the outstanding voting securities of the Fund. The
aforesaid requirement that continuance of this Agreement be "specifically
approved at least annually" shall be construed in a manner consistent with
the 1940 Act and the rules and regulations thereunder.
This Agreement may be terminated with respect to the Fund at any time,
without the payment of any penalty, by the vote of a majority of the
outstanding voting securities of the Fund or by the Trust's Board of
Trustees on 60 days' written notice to you, or by you on 60 days' written
notice to the Trust. This Agreement shall terminate automatically in the
event of its assignment.
10. Amendment of this Agreement. No provision of this Agreement may
be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought, and no amendment of
this Agreement shall be effective until approved by the vote of a majority
of the outstanding voting securities of the Fund and by the Trust's Board
of Trustees, including a majority of the Trustees who are not parties to
this Agreement or interested persons of any party to this Agreement, cast
in person at a meeting called for the purpose of voting on such approval.
11. Limitation of Liability for Claims. The Declaration, a copy of
which, together with all amendments thereto, is on file in the Office of
the Secretary of the Commonwealth of Massachusetts, provides that the name
"Scudder Tax Free Trust" refers to the Trustees under the Declaration
collectively as trustees and not as individuals or personally, and that no
shareholder of the Fund, or Trustee, officer, employee or agent of the
Trust, shall be subject to claims against or obligations of the Trust or of
the Fund to any extent whatsoever, but that the Trust estate only shall be
liable.
You are hereby expressly put on notice of the limitation of liability
as set forth in the Declaration and you agree that the obligations assumed
by the Trust on behalf of the Fund pursuant to this Agreement shall be
limited in all cases to the Fund and its assets, and you shall not seek
satisfaction of any such obligation from the shareholders or any
shareholder of the Fund or any other series of the Trust, or from any
Trustee, officer, employee or agent of the Trust. You understand that the
rights and obligations of each Fund, or series, under the Declaration are
separate and distinct from those of any and all other series.
12. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
In interpreting the provisions of this Agreement, the definitions
contained in Section 2(a) of the 1940 Act (particularly the definitions of
"affiliated person," "assignment" and "majority of the outstanding voting
securities"), as from time to time amended, shall be applied, subject,
however, to such exemptions as may be granted by the SEC by any rule,
regulation or order.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be
construed in a manner inconsistent with the 1940 Act, or in a manner which
would cause the Fund to fail to comply with the requirements of Subchapter
M of the Code.
This Agreement shall supersede all prior investment advisory or
management agreements entered into between you and the Trust on behalf of
the Fund.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding
contract effective as of the date of this Agreement.
Yours very truly,
Scudder Tax Free Trust
on behalf of Scudder Medium Term Tax
Free Fund
By --------------------
President
The foregoing Agreement is hereby accepted as of the date thereof.
SCUDDER, STEVENS & CLARK, INC.
By --------------------
Managing Director
<PAGE>
EXHIBIT D
SCUDDER, STEVENS & CLARK, INC.
Consolidated Statement of Condition
December 31, 1993
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current assets
Cash and cash equivalents $11,689,984
Short term investments 50,196,591
Investment advisory fees receivable 36,806,144
Service fees receivable 5,005,051
Expense reimbursement from funds 1,399,751
Income taxes receivable 4,502,214
Receivables for fund shares 5,466,585
Other current assets 4,840,317
------------
Total current assets 119,906,637
Investments available for sale 9,095,068
Other investments 2,222,345
Fixed assets, net of accumulated depreciation and 33,756,800
amortization
Other assets 5,554,131
------------
Total assets $170,534,981
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $19,572,911
Short term borrowing 13,000,000
Payables for fund shares 5,466,585
Deferred lease obligations 1,566,163
Total current liabilities 39,605,659
Deferred lease obligations 6,844,331
------------
Deferred income taxes 8,675,236
------------
Total liabilities 55,125,226
------------
Stockholders' equity
Common stock, par value $.01 per share:
Class A:
Authorized 9,250 shares, issued and outstanding 8,712 87
shares
Class B:
Authorized 8,000,000 shares, issued and outstanding 60,505
6,050,546 shares
Capital in excess of par value 58,784,982
Unrealized securities gains on investments available 1,343,658
for sale, net
Cumulative translation adjustment 264,316
Retained earnings 54,956,207
------------
Total stockholders' equity 115,409,755
------------
Total liabilities and stockholders' equity $170,534,981
============
</TABLE>
See accompanying notes to consolidated statement of condition.
SCUDDER, STEVENS & CLARK, INC.
Notes to Consolidated Statement of Condition
December 31, 1993
(1) Summary of Significant Accounting Policies
Organization, Principles of Consolidation
Scudder, Stevens & Clark, Inc. (the "Parent") serves as a registered
investment adviser to individuals, institutions and investment companies.
Its principal subsidiaries include Scudder Investor Services, Inc., a
registered broker/dealer which acts as principal underwriter and
administrator for a group of investment companies managed by the Parent;
Scudder Service Corporation which acts as transfer agent for these
investment companies; and Scudder Trust Company which acts as the
trustee/custodian of IRA, Keogh and other retirement plans primarily
invested in mutual funds managed or administered by the Parent and also
sponsors collective investment trusts and New Hampshire investment trusts.
The consolidated statement of condition includes the accounts of Scudder,
Stevens & Clark, Inc. and its subsidiaries (the "Company"). All significant
intercompany transactions have been eliminated in consolidation.
Cash Equivalents
Cash equivalents represent primarily investments in affiliated Scudder
money market mutual funds amounting to $6,712,700 at December 31, 1993. The
Company is the investment manager for these funds.
Investment Securities
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
115, "Accounting for Certain Investments in Debt and Equity Securities," as
of December 31, 1993. The adoption of this standard did not have a material
impact on the Company's financial position. The following summarizes the
Company's accounting for its investments:
a. Short Term Investments
Short term investments consist of shares of short and medium term bond
funds advised by the Company. The Company does not intend to hold these
investments over the long term and carries them for liquidity purposes and
investment income and to realize gains from market fluctuations. The
investments are carried at market value. Gains and losses on redemptions
are calculated on the first in, first out cost method.
b. Investments Available for Sale
Investments available for sale consist of various equity and bond funds
advised by the Company and U.S. Treasury obligations. The Company intends
to hold these securities for the foreseeable future unless liquidity needs
demand or market conditions make it advantageous to liquidate them. The
investments are carried at market value, with unrealized gains and losses
net of deferred income taxes recognized as an adjustment to stockholders'
equity. Gains and losses on redemptions and sales are calculated on the
first in, first out cost method. In determining cost basis, premiums and
discounts are amortized on a level yield basis.
c. Other Investments
Other investments consist of seed money required for various mutual funds
advised by the Company which will be held until permitted to be liquidated,
normally 5 years, and equity interests in joint ventures and other
miscellaneous equity investments which will be held indefinitely. These
investments are carried at cost unless their value is permanently impaired.
Financial Instruments
In the course of its activities, the Company deals in financial instruments
such as cash, various receivables, investment securities, and expenses
payable. Due to the short term nature of all financial instruments except
for investment securities, the market value of such instruments
approximates the carrying value of the instruments. Market values of
investment securities have been disclosed in the financial statements and
footnotes.
Fund Share Transactions
Sales of fund shares are recorded on a trade date basis.
Fixed Assets
Fixed assets are carried at cost less accumulated depreciation and
amortization.
Deferred Lease Obligations
The Company recognizes lease obligations in connection with landlord
incentive rental terms or payments and premature lease terminations.
Income Taxes
The Company files a consolidated federal income tax return. The Parent and
its subsidiaries file separate state and local income tax returns.
Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting
for Income Taxes," which requires a change from the deferred method of
accounting for timing differences in the recognition of revenues and
expenses for tax and financial reporting purposes to the "asset and
liability method." Under the asset and liability method, deferred income
taxes are recognized for the tax consequences of temporary differences
between the financial statements and the tax bases of assets and
liabilities. The adoption of this standard did not have a material impact
on the Company's financial position.
(2) Related Party Transactions
The Company serves as an investment manager to various related investment
companies. Certain stockholders of the Company are members of the Boards of
Directors of these investment companies. At December 31, 1993, investment
advisory fees receivable and service fees receivable from affiliated mutual
funds were $22,470,588.
The Company pays certain expenses on behalf of affiliated mutual funds for
which it is reimbursed. At December 31, 1993, the amounts due to the
Company relating to these expenses were $1,399,751. In addition, the
Company absorbs expenses of mutual funds whose expenses exceed statutory or
Company imposed limitations. At December 31, 1993, the Company owed
$1,195,345 to these funds related to these expense limitations.
(3) Investments Available for Sale
<TABLE>
<CAPTION>
The following table presents information relating to the Company's
investments available for sale at December 31, 1993.
Gross Unrealized
Cost Market Value Gains (Losses)
<S> <C> <C> <C> <C>
Shares of mutual $4,738,294 $7,126,039 $2,453,988 $(66,243)
funds
U.S. Treasury 1,939,156 1,937,354 -- (1,802)
obligations
Other 20,529 31,675 11,146 --
------ ------ ------ ------
$6,697,979 $9,095,068 $2,465,134 $(68,045)
========== ========== ========== =========
</TABLE>
U.S. Treasury obligations mature in two years or less in 1993.
(4) Other Investments
<TABLE>
<CAPTION>
The following table presents information relating to the Company's other
investments at December 31, 1993.
Gross Unrealized
Cost Market Value Gains (Losses)
<S> <C> <C> <C> <C>
Other securities $1,849,060 $3,114,960 $1,265,900 $--
Shares of mutual 373,285 418,809 50,215 (4,691)
funds (restricted) ------- ------- ------ ------
$2,222,345 $3,533,769 $1,316,115 $(4,691)
========== ========== ========== ========
</TABLE>
(5) Fixed Assets
<TABLE>
<CAPTION>
Fixed assets at December 31, 1993 consisted of the following:
<S> <C>
Furniture and fixtures $15,340,356
Office equipment 33,904,357
Leasehold improvements 18,220,875
----------
67,465,588
Less accumulated depreciation and amortization 33,708,788
----------
Fixed assets, net $33,756,800
===========
</TABLE>
(6) Short Term Borrowing
The Company borrowed $13,000,000 under an unsecured $20,000,000 line of
credit from a commercial bank at an average rate of 4.85% to mature
February 8, 1994.
(7) Employee Benefit Plans
The Company sponsors the Scudder, Stevens & Clark Profit Sharing and 401(k)
Plan Trust and Scudder Defined Benefit Plan and Trust.
Scudder, Stevens & Clark Profit Sharing and 401(k) Plan Trust ("PSk")
The profit sharing part of PSk covers all employees of the Parent and
participating affiliates (the "Employer") who have worked 1,000 hours
during each year after the first year of employment. Employer contributions
made to the profit sharing part of PSk are completely discretionary and
dependent upon profits. The final determination as to the amount of
contribution for any year is made by the Board of Directors of the Parent.
Employer contributions are allocated to the profit sharing accounts of
eligible participants based on a percentage of such participants'
compensation exclusive of commissions. Combined contributions to PSk for
any calendar year are limited by statute to $30,000 per participant.
Employees are eligible to participate in the 401(k) part of PSk after three
months of service. The Employer makes no contributions to the 401(k) part
of PSk, employee participation in which is voluntary. Eligible participants
may contribute to either or both the profit sharing or 401(k) parts of PSk
to a combined maximum of 7% of defined compensation.
Scudder Defined Benefit Plan and Trust ("DBP")
Effective February 1, 1986, the Employer adopted a noncontributory defined
benefit plan covering employees who have worked 1,000 hours during each
year after the first year of employment. In general, benefits under DBP are
based on a participant's years of service with the Employer after January
31, 1986 and such participant's compensation exclusive of commissions.
The funding policy is to contribute annually to DBP the maximum amount that
can be deducted for federal income tax purposes. The Parent and its
participating affiliates contribute the amount necessary to fund DBP with
regard to each entity's employees.
The following table sets forth the plan's funded status and the basis for
the amounts recognized in the Company's consolidated financial statements
at December 31, 1993.
<TABLE>
<CAPTION>
Defined Benefit Plan:
<S> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation including vested benefits of $(8,721,044)
$7,274,399 ============
Projected benefit obligation for service rendered to date $(11,241,787)
Plan assets at fair value 10,897,542
------------
Plan assets less than projected benefit obligations (344,245)
Unrecognized net loss from past experience different from 1,671,673
that assumed and effects of changes in assumptions
Prior service cost not yet recognized in net periodic 160,508
pension cost
Unrecognized net assets at February 1, 1987 amortized over 34,964
15 years ------------
Prepaid pension cost $1,522,900
============
</TABLE>
At December 31, 1993, essentially all plan assets were invested in related
Scudder mutual funds primarily through the Scudder Balanced Fund.
The straight line amortization method is used in calculating prior service
cost. Gains and losses are amortized only if they are outside of the 10%
corridor of the larger of projected benefit obligation or fair value of
plan assets.
The weighted average discount rate and rate of increase in future
compensation levels used in determining the projected benefit obligation
were 7.5% and 6%, respectively. The expected long term rate of return on
plan assets, net of expenses, was 8.5%.
In addition, the Company established a defined contribution plan in London
to cover local employees.
The Company does not provide any other postretirement benefits to its
employees.
(8) Stockholders' Equity
The Company has two classes of common stock, Class A voting shares and
Class B nonvoting shares. The Company has the option to convert any (but
not all) shares of Class A common stock into an equal number of shares of
Class B common stock, and to convert any or all Class B common stock into
Class A common stock.
(9) Income Taxes
<TABLE>
<CAPTION>
The components of income taxes receivable and deferred income taxes at
December 31, 1993 are as follows:
<S> <C>
Income taxes receivable:
Federal $2,639,473
State and local 1,862,741
------------
$4,502,214
============
Deferred income taxes:
Federal $(6,109,967)
State and local (2,565,269)
------------
$(8,675,236)
============
</TABLE>
<TABLE>
<CAPTION>
The components of the net deferred tax liability at December 31, 1993 are
as follows:
<S> <C>
Deferred tax liabilities relating to:
Accrual to cash adjustment (Parent only) $7,325,143
Unrealized gain on investments available for sale 1,053,430
Pension contribution 700,418
Foreign exchange 151,929
----------
Total deferred liabilities 9,230,920
----------
Deferred tax assets relating to:
Depreciation 274,345
Unrealized loss on short term investments 169,243
Compensation expense 112,096
----------
Total deferred tax assets 555,684
----------
Net deferred tax liability $8,675,236
==========
</TABLE>
(10) Commitments
<TABLE>
<CAPTION>
Minimum rentals under noncancelable operating leases for office space and
equipment at December 31, 1993 are as follows:
<S> <C>
Year ending December 31
1994 $24,300,055
1995 22,220,816
1996 21,419,054
1997 16,219,558
1998 15,463,942
Later years 143,521,297
------------
243,144,722
Less minimum future rentals under noncancelable operating 1,191,207
subleases ------------
Total net minimum payment required $241,953,515
============
Such rentals are subject to escalation clauses.
</TABLE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Scudder, Stevens & Clark, Inc.
We have audited the accompanying consolidated statement of condition of
Scudder, Stevens & Clark, Inc. and subsidiaries as of December 31, 1993.
This financial statement is the responsibility of the Company's management.
Our responsibility is to express an opinion on this financial statement
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of condition is
free of material misstatement. An audit of a statement of condition
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the statement of condition. An audit of a statement of
condition also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
statement of condition presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated statement of condition referred to above
presents fairly, in all material respects, the consolidated financial
position of Scudder, Stevens & Clark, Inc. and subsidiaries as of December
31, 1993 in conformity with generally accepted accounting principles.
KPMG Peat Marwick
New York, New York
February 11, 1994
<PAGE>
EXHIBIT E
INVESTMENT RESTRICTIONS (ADDITIONS ARE SHOWN IN ITALICS,
DELETIONS ARE CROSSED OUT)
If the Proposal is approved, the following policies will be reclassified as
nonfundamental:
As a matter of nonfundamental policy, the Fund may not:
(1) enter into repurchase agreements or purchase any securities if, as a
result thereof, more than 10% of the total assets of the Fund (taken at
market value) would be, in the aggregate, subject to repurchase agreements
maturing in more than seven days and invested in restricted securities or
securities which are not readily marketable;
(2) participate on a joint or a joint and several basis in any trading
account in securities, but may for the purpose of possibly achieving better
net results on portfolio transactions or lower brokerage commission rates
join with other investment company and client accounts managed by Scudder,
Stevens & Clark in the purchase or sale of debt obligations;
(3) purchase or retain securities of an issuer any of whose officers,
directors, trustees or security holders is an officer or Trustee of the
Fund or a member, officer, director or trustee of the investment adviser of
the Fund if one or more of such individuals owns beneficially more than
one-half of one percent (1/2 of 1%) of the shares or securities or both
(taken at market value) of such issuer and such individuals owning more
than one-half of one percent (1/2 or 1%) of such shares or securities
together own beneficially more than 5% of such shares or securities or
both;
(4) purchase securities of any issuer with a record of less than three
years' continuous operation, including predecessors, except (i) obligations
issued or guaranteed by the U.S. Government or its agencies or (ii)
municipal obligations which are rated by at least one nationally recognized
municipal bond rating service, if such purchase would cause the Fund's
investments in all such issuers to exceed 5% of the Fund's total assets
taken at market value;
If the Proposal is approved, the following policy will be reclassified as
nonfundamental and amended:
(5) purchase securities on margin or make short sales unless, by virtue of
its ownership of other securities, it has the right to obtain securities
equivalent in kind and amount to the same securities in the same amount as
the securities sold and, if the right is conditional, the sale is made upon
the same conditions, except that the Fund may maintain short positions in
forward currency contracts, options and futures contracts, subject to any
legal requirements concerning segregation;
If the Proposal is approved, the following policy will be amended:
As a matter of fundamental policy, the Fund may not:
(6) purchase and sell real estate (though it may invest in securities of
companies which deal in real estate and in other permitted investments
secured by real estate) or physical commodities or physical commodities
contracts, except futures contracts, including but not limited to contracts
for the future delivery of securities and contracts based on securities
indices;
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Scudder Medium Term Tax Free Fund ended December 31, 1994 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> Scudder Medium Term Tax Free Fund
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-1-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 723,481,012
<INVESTMENTS-AT-VALUE> 699,647,413
<RECEIVABLES> 18,531,249
<ASSETS-OTHER> 3,287,219
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 721,465,881
<PAYABLE-FOR-SECURITIES> 13,785,084
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,243,784
<TOTAL-LIABILITIES> 20,028,868
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 725,355,643
<SHARES-COMMON-STOCK> 67,486,134
<SHARES-COMMON-PRIOR> 89,545,863
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (85,031)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (23,833,599)
<NET-ASSETS> 701,437,013
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 49,170,281
<OTHER-INCOME> 0
<EXPENSES-NET> 5,526,307
<NET-INVESTMENT-INCOME> 43,643,974
<REALIZED-GAINS-CURRENT> 1,334,624
<APPREC-INCREASE-CURRENT> (81,623,664)
<NET-CHANGE-FROM-OPS> (36,645,066)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 43,643,974
<DISTRIBUTIONS-OF-GAINS> 3,856,845
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 22,098,846
<NUMBER-OF-SHARES-REDEEMED> 47,017,553
<SHARES-REINVESTED> 2,858,978
<NET-CHANGE-IN-ASSETS> (315,987,478)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,896,593
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,920,420
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,296,481
<AVERAGE-NET-ASSETS> 883,743,267
<PER-SHARE-NAV-BEGIN> 11.36
<PER-SHARE-NII> .53
<PER-SHARE-GAIN-APPREC> (.92)
<PER-SHARE-DIVIDEND> .53
<PER-SHARE-DISTRIBUTIONS> .05
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.39
<EXPENSE-RATIO> .63
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
