Scudder State Tax Free Trust
Two International Place
Boston, Massachusetts 02110
1-800-225-5163
October 28, 1996
To the Shareholders:
A Special Meeting of Shareholders of Scudder State Tax Free Trust (the
"Trust"), consisting of Scudder New York Tax Free Money Fund, Scudder New York
Tax Free Fund, Scudder Massachusetts Tax Free Fund, Scudder Massachusetts
Limited Term Tax Free Fund, Scudder Ohio Tax Free Fund and Scudder Pennsylvania
Tax Free Fund (each a "Fund," collectively the "Funds"), is to be held at 11:45
a.m., eastern time, on Tuesday, December 10, 1996, 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, consider the approval of
amendments to the Trust's Amended and Restated Declaration of Trust and consider
the approval of the amendment and/or addition of certain fundamental investment
policies. The shareholders of Scudder New York Tax Free Money Fund, Scudder
Massachusetts Tax Free Fund, Scudder Ohio Tax Free Fund and Scudder Pennsylvania
Tax Free Fund will consider approving new Investment Management Agreements
between each Fund and Scudder, Stevens & Clark, Inc. 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.
- --------------------------------------------------------------------------------
<PAGE>
SCUDDER STATE TAX FREE TRUST
Notice of Special Meeting of Shareholders
To the Shareholders of
Scudder State Tax Free Trust:
Please take notice that a Special Meeting of Shareholders of Scudder State Tax
Free Trust, consisting of Scudder New York Tax Free Money Fund, Scudder New York
Tax Free Fund, Scudder Massachusetts Tax Free Fund, Scudder Massachusetts
Limited Term Tax Free Fund, Scudder Ohio Tax Free Fund and Scudder Pennsylvania
Tax Free Fund (each a "Fund," collectively 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 10, 1996, at 11:45
a.m., eastern time, for the following purposes:
(1) To elect nine 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) To approve or disapprove the amendment and/or addition of certain
fundamental policies;
(5) For Scudder New York Tax Free Money Fund, Scudder Massachusetts Tax Free
Fund, Scudder Ohio Tax Free Fund and Scudder Pennsylvania Tax Free Fund only: To
approve or disapprove new Investment Management Agreements between each Fund and
Scudder, Stevens & Clark, Inc.
And for shareholders of all 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 14, 1996 are entitled to vote at the meeting and at any
adjournments thereof.
By Order of the Trustees,
THOMAS F. MCDONOUGH, Secretary
October 28, 1996
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
<PAGE>
SCUDDER STATE TAX FREE TRUST
TWO INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110
PROXY STATEMENT
- --------------------------------------------------------------------------------
Proposals
For Shareholders of all Funds:
(1)Election of Trustees page 2
(2)Ratification or rejection of independent accountants page 9
(3)Approval or disapproval of the amendment of the Trust's Amended and
Restated Declaration of Trust page 10
(4)Approval or disapproval of certain amendments and/or additions
to certain investment restrictions page 12
For Shareholders of Scudder New York Tax Free Money Fund,
Scudder Massachusetts Tax Free Fund, Scudder Ohio Tax Free Fund
and Scudder Pennsylvania Tax Free Fund:
(5)Approval or disapproval of new Investment Management
Agreements page 21
- --------------------------------------------------------------------------------
General
This Proxy Statement is furnished in connection with the solicitation of proxies
by the Board of Trustees of Scudder State Tax Free Trust (the "Trust") for use
at the Special Meeting of Shareholders (the "Meeting") of Scudder New York Tax
Free Money Fund, Scudder New York Tax Free Fund, Scudder Massachusetts Tax Free
Fund, Scudder Massachusetts Limited Term Tax Free Fund, Scudder Ohio Tax Free
Fund and Scudder Pennsylvania Tax Free Fund (each a "Fund," collectively the
"Funds") to be held at the offices of Scudder, Stevens & Clark, Inc., 13th
Floor, Two International Place, Boston, MA 02110, on Tuesday, December 10, 1996
at 11:45 a.m., eastern time, 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 October 28,
1996. 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
1
<PAGE>
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) and (5) that require the approval of a specified percentage
of the outstanding shares of each or all of the Funds 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 14, 1996 (the "Record
Date"), will be entitled to one vote per share on all business of the Meeting
and any adjournments thereof.
Shares of the Funds outstanding on the Record Date were as follows:
Fund Shares
- ---- ------
Scudder New York Tax Free Money Fund 55,919,177
Scudder New York Tax Free Fund 17,528,296
Scudder Massachusetts Tax Free Fund 23,442,163
Scudder Massachusetts Limited Term Tax Free Fund 5,442,340
Scudder Ohio Tax Free Fund 6,563,562
Scudder Pennsylvania Tax Free Fund 5,676,172
Each Fund provides periodic reports to all shareholders which highlight relevant
information, including investment results and a review of portfolio changes. You
may receive an additional copy of the most recent annual report for each Fund,
without charge, by calling (800) 225-2470 or writing each Fund at P.O. Box 2291,
Boston, Massachusetts 02107-2291.
(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 E. Michael Brown, each
of the nominees is now a Trustee of the Trust. Unless otherwise noted, each of
2
<PAGE>
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. For the purposes of this table the following abbreviations will apply:
Scudder New York Tax Free Money Fund ("NYTFM"), Scudder New York Tax Free Fund
("NYTF"), Scudder Massachusetts Tax Free Fund ("MTF"), Scudder Massachusetts
Limited Term Tax Free Fund ("MLTTF"), Scudder Ohio Tax Free Fund ("OTF") and
Scudder Pennsylvania Tax Free Fund ("PTF").
<TABLE>
<CAPTION>
Present Office with the Trust, if
any; Principal Occupation or Shares
Employment and Directorships in Year First Beneficially
Publicly Held Became Owned on Percent of
Name (Age) Companies a Trustee August 31, 1996(1) Class
---------- --------- --------- ------------------ -----
Fund Shares
---- ------
<S> <C> <C> <C> <C> <C>
David S. Lee (62)*# President; Managing Director of 1983 NYTFM 10(2) less than 1/4 of 1%
Scudder, Stevens & Clark, Inc.; NYTF 14,619(3) less than 1/4 of 1%
Trustee Emeritus, New England MTF 8,776(4) less than 1/4 of 1%
Medical Center. Mr. Lee serves on MLTTF 0 less than 1/4 of 1%
the boards of an additional 25 OTF 0 less than 1/4 of 1%
funds managed by Scudder. PTF 0 less than 1/4 of 1%
Henry P. Becton, Jr. President and General Manager, 1990 NYTFM 1,001 less than 1/4 of 1%
(52) WGBH Educational Foundation NYTF 93 less than 1/4 of 1%
(public television and radio); MTF 119 less than 1/4 of 1%
Director, Becton Dickinson and MLTTF 117 less than 1/4 of 1%
Company; The Providence Journal OTF 76 less than 1/4 of 1%
Company; The Public Broadcasting PTF 74 less than 1/4 of 1%
Service and several private
companies. Mr. Becton serves on
the boards of an additional ten
funds managed by Scudder.
E. Michael Brown (56)* Managing Director of Scudder, -- NYTFM 0 less than 1/4 of 1%
Stevens & Clark, Inc. Mr. Brown NYTF 0 less than 1/4 of 1%
serves on the boards of an MTF 0 less than 1/4 of 1%
additional three funds managed by MLTTF 0 less than 1/4 of 1%
Scudder. OTF 0 less than 1/4 of 1%
PTF 0 less than 1/4 of 1%
3
<PAGE>
Present Office with the Trust, if
any; Principal Occupation or Shares
Employment and Directorships in Year First Beneficially
Publicly Held Became Owned on Percent of
Name (Age) Companies a Trustee August 31, 1996(1) Class
---------- --------- --------- ------------------ -----
Fund Shares
---- ------
Dawn-Marie Driscoll Executive Fellow, Center for 1987 NYTFM 525 less than 1/4 of 1%
(49) Business Ethics, Bentley College; NYTF 49 less than 1/4 of 1%
President, Driscoll Associates; MTF 111 less than 1/4 of 1%
Director of several private MLTTF 44 less than 1/4 of 1%
companies. Prior to 1990, law OTF 40 less than 1/4 of 1%
partner (Palmer & Dodge) and Vice PTF 39 less than 1/4 of 1%
President of Corporate Affairs
and General Counsel, Filene's.
Ms. Driscoll serves on the boards
of an additional ten funds
managed by Scudder.
Peter B. Freeman (64)# Corporate Director and Trustee; 1986 NYTFM 1,000 less than 1/4 of 1%
Trustee, Eastern Utilities NYTF 168 less than 1/4 of 1%
Associates (electric utility MTF 72 less than 1/4 of 1%
holding company); Director, MLTFF 83 less than 1/4 of 1%
Providence Journal Company OTF 0 less than 1/4 of 1%
(multi-media company); Director, PTF 0 less than 1/4 of 1%
AMICA Life Insurance Co.;
Director, AMICA Insurance Co.
Formerly President of Fields
Point Management Co. and Goelet
Estate Co. (private investment
management companies); and
Chairman, Rhode Island School of
Design. Mr. Freeman serves on the
boards of an additional 21 funds
managed by Scudder.
Dudley H. Ladd (52)* Managing Director of Scudder 1987 NYTFM 0 less than 1/4 of 1%
Stevens & Clark, Inc. Mr. Ladd NYTF 0 less than 1/4 of 1%
serves on the boards of an MTF 0 less than 1/4 of 1%
additional nine funds managed by MLTTF 0 less than 1/4 of 1%
Scudder. OTF 0 less than 1/4 of 1%
PTF 0 less than 1/4 of 1%
4
<PAGE>
Present Office with the Trust, if
any; Principal Occupation or Shares
Employment and Directorships in Year First Beneficially
Publicly Held Became Owned on Percent of
Name (Age) Companies a Trustee August 31, 1996(1) Class
---------- --------- --------- ------------------ -----
Fund Shares
---- ------
Dr. Wesley W. Marple, Professor of Business Education, 1983 NYTFM 0 less than 1/4 of 1%
Jr. (64)# Northeastern University, teaching NYTF 98 less than 1/4 of 1%
financial management and MTF 20,117 less than 1/4 of 1%
investment banking; Trustee, MLTTF 100 less than 1/4 of 1%
Eastern Utilities Associates OTF 76 less than 1/4 of 1%
(electric utility holding PTF 82 less than 1/4 of 1%
company). Dr. Marple serves on
the boards of an additional ten
funds managed by Scudder.
Daniel Pierce (62)*# Chairman of the Board and 1991 NYTFM 0 less than 1/4 of 1%
Managing Director of Scudder, NYTF 0 less than 1/4 of 1%
Stevens & Clark, Inc.; Director, MTF 16,887(5) less than 1/4 of 1%
Fiduciary Trust Company (bank and MLTTF 28,008 less than 1/4 of 1%
trust company) and Fiduciary OTF 4,368(6) less than 1/4 of 1%
Company incorporated (bank and PTF 0 less than 1/4 of 1%
trust company). Mr. Pierce serves
on the boards of an additional 47
funds managed by Scudder.
Jean C. Tempel (53) General Partner, TL Ventures (a 1994 NYTFM 5,007 less than 1/4 of 1%
venture capital fund); Director, NYTF 465 less than 1/4 of 1%
Cambridge Technology Partners, MTF 810 less than 1/4 of 1%
Inc. (a systems integration on MLTTF 927 less than 1/4 of 1%
client/server platform co.); OTF 381 less than 1/4 of 1%
Director, Sonesta International PTF 373 less than 1/4 of 1%
Hotels, Inc.; Director, Centocor,
Inc. (diagnostic and
pharmaceutical biotechnology
co.); Director of several private
companies. Prior to 1993,
President of Safeguard
Scientifics, Inc. and Executive
Vice President and Chief
Operating Officer of The Boston
Company. Ms. Tempel serves on the
boards of an additional 11 funds
managed by Scudder.
</TABLE>
5
<PAGE>
All Trustees and Officers as a group Percent of Class
------------------------------------ ----------------
NYTFM 173,385 Less than 1%
NYTF 15,492 Less than 1%
MTF 48,557 Less than 1%
MLTTF 29,279 Less than 1%
OTF 4,941 Less than 1%
PTF 568 Less than 1%
- ---------------------------
* Persons 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.
(the "Adviser" or "Scudder"). Messrs. Lee, Brown, Ladd and Pierce 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. Lee, Freeman, Marple and Pierce 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's total shares in Scudder New York Tax Free Money Fund are held in
fiduciary capacity as to which he shares investment and voting power.
(3)Mr. Lee's total shares in Scudder New York Tax Free Fund are held in
fiduciary capacity as to which he shares investment and voting power.
(4)Mr. Lee's total shares in Scudder Massachusetts Tax Free Fund are held in
fiduciary capacity as to which he shares investment and voting power.
(5)Mr. Pierce's total in Scudder Massachusetts Tax Free Fund includes 6,749
shares owned by members of his family and 8,603 shares held in a fiduciary
capacity as to which he shares investment and voting power.
(6)Mr. Pierce's total shares in Scudder Ohio Tax Free Fund are held in a
fiduciary capacity as to which he shares investment and voting power.
The Trustees and Officers of the Trust may also serve in similar capacities for
other Funds managed by Scudder.
Scudder may be deemed to be the beneficial owner of shares in certain accounts
for which Scudder acts as investment adviser, but Scudder disclaims any
beneficial ownership in such shares as listed below:
<TABLE>
<CAPTION>
Percentage of the
Shares in the outstanding
Fund aggregate shares
- ---- --------- ------
<S> <C> <C>
Scudder New York Tax Free Money Fund 2,040,150 3.58%
Scudder New York Tax Free Fund 1,011,103 5.80%
Scudder Massachusetts Tax Free Fund 2,209,345 9.52%
Scudder Massachusetts Limited Term Tax Free Fund 440,595 8.09%
Scudder Ohio Tax Free Fund 281,661 4.32%
Scudder Pennsylvania Tax Free Fund 678,590 11.98%
</TABLE>
6
<PAGE>
As of August 31, 1996, 2,251,898 shares in the aggregate. 9.71% of the
outstanding shares of the Scudder Massachusetts Tax Free Fund, were held in the
nominees of Fiduciary Trust Company. Fiduciary Trust Company may be deemed to be
the beneficial owner of certain of these shares, but disclaims any beneficial
ownership therein.
As of August 31, 1996, 276,008 shares in the aggregate. 5.07% of the outstanding
shares of the Scudder Massachusetts Limited Term Tax Free Fund, were held in the
nominees of Fiduciary Trust Company. Fiduciary Trust Company may be deemed to be
the beneficial owner of certain of these shares, but disclaims any beneficial
ownership therein.
To the best of the Trust's knowledge, as of August 31, 1996, no person owned
beneficially more than 5% of any of the Fund's outstanding voting securities,
except as stated above.
Responsibilities of the Board -- Board and Committee Meetings
The Board of Trustees is responsible for the general oversight of each Fund's
business. A majority of the Board's members are not affiliated with the Adviser.
These "Independent Trustees" have primary responsibility for assuring that each
Fund is managed in the best interests of its shareholders.
The Board of Trustees meets at least quarterly to review the investment
performance of each Fund and other operational matters, including policies and
procedures designated to assure compliance with various regulatory requirements.
At least annually, the Independent Trustees review the fees paid to the Adviser
and its affiliates for investment advisory services and other administrative and
shareholder services. In this regard, they evaluate, among other things, each
Fund's investment performance, the quality and efficiency of the various other
services provided, costs incurred by the Adviser and its affiliates, and
comparative information regarding fees and expenses of competitive funds. They
are assisted in this process by the Funds' independent public accountants and by
independent legal counsel selected by the Independent Trustees.
All of the Independent Trustees serve on the Committee of Independent Trustees,
which nominates Independent Trustees and considers other related matters, and
the Audit Committee, which selects the Funds' independent public accountants and
reviews accounting policies and controls. In addition, Independent Trustees from
time to time have established and served on task forces and subcommittees
focusing on particular matters such as investment, accounting and shareholder
service issues.
The Independent Trustees met 16 times during 1995, including Board and Committee
meetings and meetings to review the Fund's contractual arrangements as described
above. As a group, the Independent Trustees had a 98.75% attendance record for
all such meetings.
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:
7
<PAGE>
<TABLE>
<CAPTION>
Present Office with the Trust; Year First Became
Name (Age) Principal Occupation or Employment (1) an Officer (2)
---------- ---------------------------------- ----------
<S> <C> <C>
Donald C. Carleton (62) Vice President; Managing Director of 1987
Scudder, Stevens & Clark, Inc.
Philip G. Condon (46) Vice President; Managing Director of 1995
Scudder, Stevens & Clark, Inc.
Jerard K. Hartman (63) Vice President; Managing Director of 1986
Scudder, Stevens & Clark, Inc.
Thomas W. Joseph (57) Vice President; Principal of Scudder, 1986
Stevens & Clark, Inc.
Thomas F. McDonough (49) Vice President and Secretary; Principal of 1984
Scudder, Stevens & Clark, Inc.
Pamela A. McGrath (42) Vice President and Treasurer; Managing 1990
Director of Scudder, Stevens & Clark, Inc.
Edward J. O'Connell (51) Vice President and Assistant Treasurer; 1990
Principal of Scudder, Stevens & Clark, Inc.
Jeremy L. Ragus (44) Vice President; Principal of Scudder, 1995
Stevens & Clark, Inc.
Rebecca Wilson (34) Vice President; Assistant Vice President of 1995
Scudder, Stevens & Clark, Inc.
Coleen Downs Dinneen (35) Assistant Secretary; Vice President of 1992
Scudder, Stevens & Clark, Inc.
</TABLE>
(1)Unless otherwise stated, all Executive Officers have been associated with
Scudder for more than five years, although not necessarily in the same
capacity.
(2)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.
Compensation of Trustees
The Independent Trustees receive the following compensation from the Trust: an
annual trustee's fee of $12,000; a fee of $300 for attendance at each Board
meeting, audit committee meeting, or other meeting held for the purposes of
considering arrangements between the Funds and the Adviser or any Affiliate of
the Adviser; $100 for any other committee meeting (although in some cases the
Independent Trustees have waived committee meeting fees); and reimbursement of
expenses incurred for travel to and from Board Meetings. No additional
compensation is paid to any Independent Trustees for travel time to meetings,
attendance at directors' educational seminars or conferences, service on
industry or association committees, participation as speakers at directors'
conferences, service on special trustee task forces or subcommittees or service
as lead or liaison trustee. Independent Trustees do not receive any employee
benefits such as pension, retirement, or health insurance.
The Independent Trustees also serve in the same capacity for other funds managed
by the Adviser. These funds differ broadly in type and complexity and in some
8
<PAGE>
cases have substantially different Trustee fee schedules. The following table
shows the aggregate compensation received by each Independent Trustee during
1995 from the Trust and from all Scudder Funds as a group.
<TABLE>
<CAPTION>
Scudder State Tax Free Trust* All Scudder Funds
----------------------------- -----------------
<S> <C> <C>
Henry P. Becton, Jr. $ 15,800 $ 82,800 (15 funds**)
Dawn-Marie Driscoll $ 16,100 $ 92,800 (16 funds)
Peter B. Freeman $ 16,100 $ 126,750 (26 funds***)
Wesley W. Marple, Jr. $ 16,100 $ 93,100 (15 funds**)
Jean C. Tempel $ 16,100 $ 92,200 (15 funds**)
</TABLE>
* Scudder State Tax Free Fund consists of six mutual funds: Scudder New York
Tax Free Money Fund, Scudder New York Tax Free Fund, Scudder Massachusetts
Tax Free Fund, Scudder Massachusetts Limited Term Tax Free Fund, Scudder Ohio
Tax Free Fund and Scudder Pennsylvania Tax Free Fund.
** This amount does not include membership on the Board of Scudder High Yield
Bond Fund, which commenced operations on June 28, 1996.
***This amount does not include membership on the Board of Institutional
International Equity Portfolio, which commenced operations on April 3, 1996.
Members of the Board of Trustees who are employees of Scudder or its affiliates
receive no direct compensation from the Trust, although they are compensated as
employees of Scudder, which in turn receives an investment advisory fee from
each Fund.
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 of 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 13, 1996, all members of the Board of Trustees,
including a majority of the Independent Trustees, selected Coopers & Lybrand
L.L.P. as independent accountants for Scudder New York Tax Free Money Fund,
Scudder New York Tax Free Fund, Scudder Massachusetts Tax Free Fund, Scudder
Ohio Tax Free Fund and Scudder Pennsylvania Tax Free Fund for the fiscal year
ending March 31, 1997, and Scudder Massachusetts Limited Term Tax Free Fund's
independent accountants for the fiscal year ending October 31, 1997, 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.
The financial statements for the fiscal year ended March 31, 1996 for Scudder
New York Tax Free Money Fund, Scudder New York Tax Free Fund, Scudder
Massachusetts Tax Free Fund, Scudder Ohio Tax Free Fund and Scudder Pennsylvania
Tax Free Fund were audited by Coopers & Lybrand L.L.P. Scudder Massachusetts
Limited Term Tax Free Fund's financial statements for the fiscal period ending
9
<PAGE>
October 31, 1995 were also audited by Coopers & Lybrand L.L.P. In connection
with its audit services, Coopers & Lybrand L.L.P. reviews the financial
statements included in the Funds' annual and semiannual reports.
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 authorized capital consisting of
an unlimited number of shares of beneficial interest of $.01 par value per share
(the "Shares"). 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
between the different Series. Thus under the current Amended and Restated
Declaration of Trust, shareholders of each Series have an interest in a separate
portfolio of assets, but all the shares are of one class and have equal rights
as to voting, dividends and liquidations.
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 directly 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, nor of changing the method of
distribution of Shares of the Funds, although the Funds may take such action in
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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 have determined that the cost to the Funds of servicing accounts
above the current minimum account size outweighs the benefits to the Funds of
such accounts, and they have determined that it is in the Funds' best interest
to increase the minimum account size. Therefore, effective January 1, 1997, the
initial investment and the minimum account balance will increase to $2,500 for
regular accounts and $1,000 for fiduciary accounts such as IRAs. Such a change
may decrease the amount of a Fund's assets.
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. If Proposal 3 is not approved by the shareholders with
respect to the shares entitled to vote, 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.
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(4) APPROVAL OR DISAPPROVAL OF THE AMENDMENT AND/OR ADDITION OF CERTAIN
FUNDAMENTAL INVESTMENT RESTRICTIONS
As described in the following proposals, the Trustees are recommending that
shareholders approve a number of changes to each applicable Fund's fundamental
investment restrictions. Generally, the purpose of these proposed changes is to
increase each Fund's investment flexibility and to bring each Fund's policies
more in line with those of many other Scudder funds.
The adoption of any of these proposals is not contingent on the adoption of any
other proposal.
Shareholders may only vote on matters which concern the Fund or Funds in which
they hold shares.
Required Vote
Approval of each of these proposals requires the affirmative vote of a majority
of the outstanding voting securities of each applicable 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. The Trustees have considered various factors and
believe that these proposals are in the best interests of each Fund's
shareholders. If a proposal is not approved, that Fund's present fundamental
investment restriction will remain in effect and a shareholder vote would be
required before a Fund could engage in activities prohibited by a fundamental
restriction.
The Trustees recommend that shareholders vote in favor of the amendment of each
Fund's investment restrictions as described in Proposals 4A-4I below.
4A.Approval Or Disapproval Of Amendments To Each Of The Following Fund's
Investment Restriction With Respect To Borrowing:
Scudder New York Tax Free Money Fund
Scudder Massachusetts Tax Free Fund
Scudder Massachusetts Limited Term Tax Free Fund
Scudder Ohio Tax Free Fund
Scudder Pennsylvania Tax Free Fund
The Trustees are recommending that each preceding Fund's fundamental investment
restriction relating to borrowing be clarified and rephrased consistent with the
equivalent policies of other funds managed by Scudder. Upon approval of this
proposal, to conform to applicable state requirements, the Trustees will adopt a
non-fundamental restriction which would permit a Fund to borrow only from banks
and would limit borrowings to 5% of total assets taken at market value. Should
state restrictions change, the Trustees would be able to change this
non-fundamental policy without shareholder approval.
The current restriction states as follows for each Fund listed below:
Scudder Massachusetts Tax Free Fund
Scudder Massachusetts Limited Term Tax Free Fund
Scudder New York Tax Free Money Fund
Scudder Ohio Tax Free Fund
Scudder Pennsylvania Tax Free Fund
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"The Fund may not. . .
borrow money except from banks or pursuant to reverse repurchase agreements
as a temporary measure for extraordinary or emergency purposes (the Fund is
required to maintain asset coverage (including borrowings) of 300% for all
borrowings) and no purchases of securities will be made while such
borrowings exceed 5% of the Fund's assets (with regard to Scudder New York
Tax Free Money Fund, the payment of interest on borrowing by the Fund will
reduce income).
If this proposal is approved, the Trustees intend to replace this restriction
for each of the Funds with the following fundamental investment restriction:
"The Fund may not. . .
borrow money, except as a temporary measure for extraordinary or emergency
purposes or except in connection with reverse repurchase agreements;
provided that the Fund maintains asset coverage of 300% for all borrowings;
And each Fund would also adopt the following non-fundamental policy:
"The Fund may not. . .
borrow money in excess of 5% of its total assets (taken at market value)
except for temporary or emergency purposes, borrow other than from banks or
in connection with reverse repurchase agreements."
4B.Approval Or Disapproval Of Amendments To Each Of The Following Fund's
Investment Restriction With Respect To Investments In Real Estate:
Scudder New York Tax Free Money Fund
Scudder Massachusetts Tax Free Fund
Scudder Massachusetts Limited Term Tax Free Fund
Scudder Ohio Tax Free Fund
Scudder Pennsylvania Tax Free Fund
The Trustees are recommending that each preceding Fund's fundamental investment
restriction relating to investments in real estate be revised to grant a Fund
the maximum flexibility in light of current regulatory requirements. The
proposed policies are consistent with the equivalent policies of other funds
managed by Scudder.
The current restriction states as follows for each Fund listed below:
Scudder New York Tax Free Money Fund
Scudder Massachusetts Tax Free Fund
Scudder Massachusetts Limited Term Tax Free Fund
Scudder Ohio Tax Free Fund
"The Fund will not. . .
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 commodities or commodities contracts, except
futures contracts, including but not limited to contracts for the future
delivery of securities and contracts based on securities indices."
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The current restriction states as follows for the Fund listed below:
Scudder Pennsylvania Tax Free Fund
"The Fund will not. . .
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 commodities or commodities contracts."
The proposed amendments would provide maximum flexibility to invest in real
estate related securities, as well as reserve for each Fund the freedom of
action to hold and sell real estate acquired as a result of each Fund's
ownership of securities.
The proposed amended fundamental investment restriction regarding real estate
would read as follows for each of the Funds:
"The Fund may not. . .
purchase or sell real estate (except that the Fund may invest in (i)
securities of companies which deal in real estate or mortgages, and (ii)
securities secured by real estate or interests therein, and that the Fund
(except for Scudder New York Tax Free Money Fund) reserves freedom of
action to hold and to sell real estate acquired as a result of the Fund's
ownership of securities)."
To the extent each Fund invests in real estate-related securities, it will be
subject to the risks associated with the real estate market. These risks may
include declines in the value of real estate, changes in general or local
economic conditions, overbuilding, difficulty in completing construction,
increased competition, changes in zoning laws, increases in property taxes and
operating expenses, and variations in rental income. Generally, increases in
interest rates will increase the costs of obtaining financing, which may result
in a decrease in the value of such investments. Finally, management of real
estate, even on a temporary or emergency basis, requires different skills and
experience than managing a pool of securities.
4C.Approval Or Disapproval Of an Addition To Each Of The Following Fund's
Investment Restriction With Respect To Investments In Commodities:
Scudder New York Tax Free Money Fund
Scudder Massachusetts Tax Free Fund
Scudder Massachusetts Limited Term Tax Free Fund
Scudder Ohio Tax Free Fund
Scudder Pennsylvania Tax Free Fund
In addition, each Fund will adopt a new fundamental policy to separately address
the purchase of commodities. The new fundamental policy regarding commodities
would read as follows for each of the Funds:
"The Fund may not. . .
purchase or sell physical commodities or contracts relating to physical
commodities."
The proposed new fundamental policy regarding commodities amends the restriction
to refer exclusively to physical commodities, as distinguished, for example,
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from financial futures, so that transactions in what may technically be deemed
to be commodities (such as certain financial futures contracts including
interest rate futures and municipal bond interest rate futures contracts,
derivatives contracts, and other similar instruments which may be developed in
the future) would not be subject to the restriction. Each state specific fund,
other than the Scudder Pennsylvania Tax Free Fund, currently has the authority
to invest in futures contracts, including financial futures. The proposed new
restriction would expand investment authority only for the Scudder Pennsylvania
Tax Free Fund. It would also make each Fund's restrictions more precise and
explicit. Each Fund has no current intention to invest in any new types of
derivatives, although the amended restriction will provide greater flexibility
to do so in the future as new types of derivatives are developed.
4D.Approval Or Disapproval Of An Amendment To Each Of The Following Fund's
Investment Restriction Relating To Underwriting Securities:
Scudder New York Tax Free Money Fund
Scudder Massachusetts Tax Free Fund
Scudder Massachusetts Limited Term Tax Free Fund
Scudder Ohio Tax Free Fund
Scudder Pennsylvania Tax Free Fund
The Trustees are recommending that each preceding Fund's fundamental investment
restriction relating to underwriting securities be clarified and rephrased
consistent with the equivalent policies of other funds managed by Scudder. The
proposed amendment would replace the current restriction, which states for each
Fund listed below that:
Scudder Massachusetts Tax Free Fund
Scudder Massachusetts Limited Term Tax Free Fund
Scudder Ohio Tax Free Fund
Scudder Pennsylvania Tax Free Fund
"The Fund may not. . .
act as underwriter of the securities issued by others, except to the extent
that the purchase of securities in accordance with its investment objective
and policies directly from the issuer thereof and the later disposition
thereof may be deemed to be underwriting."
The current restriction states as follows for the Fund listed below:
Scudder New York Tax Free Money Fund
"The Fund may not. . .
act as underwriter of the securities issued by others, except to the extent
that it may be deemed to be an underwriter in connection with the purchase
of securities in accordance with its investment objective and policies
directly from the issuer thereof and the later disposition thereof may be
deemed to be underwriting."
The proposed amended fundamental investment restriction would read as follows
for each of the Funds:
"The Fund may not. . .
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act as an underwriter of securities issued by others, except to the extent
that it may be deemed an underwriter in connection with the disposition of
portfolio securities of the Fund."
4E.Approval Or Disapproval Of An Amendment To Each Of The Following Fund's
Investment Restriction With Respect To Making Loans By Purchasing Securities
Scudder New York Tax Free Money Fund
Scudder Massachusetts Tax Free Fund
Scudder Ohio Tax Free Fund
Scudder Pennsylvania Tax Free Fund
The Trustees are recommending that each preceding Fund's fundamental investment
restriction relating to making loans be clarified and rephrased consistent with
the equivalent policies of other funds managed by Scudder. The proposed
amendment would replace the current restriction, which states for each Fund
listed below that:
Scudder Massachusetts Tax Free Fund
Scudder Ohio Tax Free Fund
Scudder Pennsylvania Tax Free Fund
"The Fund may not. . .
make loans to other persons, except to the extent that the purchase of debt
obligations in accordance with its investment objective and policies and
the entry into repurchase agreements may be deemed to be loans. The
purchase of all of a publicly offered issue of debt obligations or all or a
portion of non-publicly offered debt obligations may be deemed the making
of a loan for this purpose, but, although not a policy which may be changed
only by a vote of the shareholders, management expects that such securities
would seldom exceed 25% of the net assets of the Fund."
The current restriction states as follows for the Fund listed below:
Scudder New York Tax Free Money Fund
"The Fund may not. . .
make loans to other persons, except to the extent that the purchase of debt
obligations in accordance with its investment objective and policies and
the entry into repurchase agreements may be deemed to be loans. The
purchase of all of a publicly offered issue of debt obligations or all or a
portion of non-publicly offered debt obligations may be deemed the making
of a loan for this purpose, but, although not a policy which may be changed
only by a vote of the shareholders, management expects that such securities
would seldom exceed 25% of the net assets of the Fund. These securities are
not expected to comprise a major portion of the Fund's investments."
The proposed amended fundamental investment restriction would read as follows
for each of the Funds:
"The Fund may not. . .
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make loans to other persons, except (a) loans of portfolio securities, and
(b) to the extent the entry into repurchase agreements and the purchase of
debt securities in accordance with its investment objectives and investment
policies may be deemed to be loans."
4F.Approval Or Disapproval Of An Amendment To Each Of The Following Fund's
Investment Restriction Regarding The Issuance Of Senior Securities:
Scudder New York Tax Free Money Fund
Scudder Massachusetts Tax Free Fund
Scudder Massachusetts Limited Term Tax Free Fund
Scudder Ohio Tax Free Fund
Scudder Pennsylvania Tax Free Fund
The Trustees are recommending that the fundamental investment restriction
relating to the issuance of senior securities be clarified and rephrased
consistent with the equivalent policies of other funds managed by Scudder. The
proposed amendment would replace the current restriction, which states for each
Fund listed below that:
Scudder Massachusetts Tax Free Fund
Scudder Ohio Tax Free Fund
Scudder Pennsylvania Tax Free Fund
"The Fund may not. . .
issue senior securities, except as appropriate to evidence indebtedness
which the Fund is permitted to incur pursuant to investment restriction (2)
and except for shares of any additional series which may be established by
the Trustees."
The current restriction states as follows for the Fund listed below:
Scudder New York Tax Free Money Fund
"The Fund may not. . .
issue senior securities, except as appropriate to evidence indebtedness
which the Fund is permitted to incur pursuant to investment restriction (1)
and except for shares of any additional series which may be established by
the Trustees."
The current restriction states as follows for the Fund listed below:
Scudder Massachusetts Limited Term Tax Free Fund
"The Fund may not. . .
issue senior securities, except as appropriate to evidence indebtedness
which the Fund is permitted to incur pursuant to investment restriction (2)
and except for shares of any other series which may have been or may be
hereafter established by the Trustees."
The Trustees propose that this policy be amended to read as follows for each of
the Funds:
"The Fund may not. . .
Issue senior securities, except as appropriate to evidence indebtedness
which it is permitted to incur, and except for shares of the separate
classes or series of the Trust, provided that collateral arrangements with
respect to currency-related contracts, futures contracts, options or other
permitted investments, including deposits of initial and variation margin,
are not considered to be the issuance of senior securities for purposes of
this restriction."
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4G.Approval Or Disapproval Of Amendments To Each Of The Following Fund's
Investment Restriction With Respect To Concentration Of Its Assets:
Scudder New York Tax Free Money Fund
Scudder New York Tax Free Fund
Scudder Massachusetts Tax Free Fund
Scudder Massachusetts Limited Term Tax Free Fund
Scudder Ohio Tax Free Fund
Scudder Pennsylvania Tax Free Fund
The Trustees are recommending that each of the preceding Fund's fundamental
investment restriction with respect to concentration of its assets be revised to
make it clear that a Fund may invest more than 25% of its total assets in the
securities of agencies or instrumentalities of the U.S. government. The current
restriction states as follows for each Fund listed below:
Scudder New York Tax Free Money Fund
Scudder Massachusetts Tax Free Fund
Scudder Massachusetts Limited Term Tax Free Fund
Scudder Ohio Tax Free Fund
Scudder Pennsylvania Tax Free Fund
"The Fund may not. . .
purchase (i) pollution control and industrial development bonds or (ii)
securities which are not municipal obligations if the purchase would cause
more than 25% in the aggregate of the market value of the total assets of
the Fund at the time of such purchase to be invested in the securities of
one or more issuers having their principal business activities in the same
industry."
The current restriction states as follows for the Fund listed below:
Scudder New York Tax Free Fund
"The Fund may not. . .
purchase (a) private activity bonds, or (b) securities which are neither
municipal obligations nor securities of the U.S. Government, its agencies
or instrumentalities, if in either case the purchase would cause more than
25% of the market value of its total assets at the time of such purchase to
be invested in the securities of one or more issuers having their principal
business activities in the same industry (for the purposes of this
restriction, telephone companies are considered to be in a separate
industry from gas and electric public utilities, and wholly-owned finance
companies are considered to be in the industry of their parents if their
activities are related primarily to financing the activities of their
parents)."
The proposed amended fundamental restriction, which makes certain other
clarifying changes, would read as follows for each of the Funds:
"The Fund may not. . .
purchase securities if such purchase would cause more than 25% in the
aggregate of the market value of the total assets of the Fund at the time
of such purchase to be invested in the securities of one or more issuers
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having their principal business activities in the same industry, provided
that there is no limitation in respect to investments in obligations issued
or guaranteed by the U.S. Government or its agencies or instrumentalities,
(and in the case of Scudder New York Tax Free Money Fund, in municipal
obligations issued by governments or political subdivisions of governments,
or in certificates of deposit or bankers' acceptances issued by domestic
banks)."
Scudder recommended this amendment to the Trustees to make it clear that each
Fund may invest in the securities of the agencies or instrumentalities of the
U.S. government without regard to the 25% limit. Scudder believes that the
current restriction does not prevent a Fund from investing in such securities
without limit, because the government issuers, including agencies and
instrumentalities of a governmental issuer, are not members of any industry.
However, the proposed amendment is being made to avoid any ambiguity in the
future, as well as to make that provision of the restriction consistent with the
equivalent policies of other funds managed by Scudder. Because private activity
bonds are considered representative of the industry in which the obligor is
engaged, no explicit reference to private activity bonds is necessary. The
omission in the amended policy of any reference to private activity bonds does
not imply a change to the Fund's fundamental policy limiting to 25% its
investments in issuers engaged in the same industry.
4H.Approval Or Disapproval Of Amendments To The Following Fund's Investment
Restriction With Respect To Diversification:
Scudder New York Tax Free Money Fund
The Trustees are recommending that the preceding Fund's fundamental investment
restriction with respect to diversification be modified to give the Fund greater
flexibility to obtain commitments from third parties to assure that particular
portfolio securities satisfy the Fund's credit, maturity and liquidity
standards.
The SEC has proposed extensive changes to the principal rule governing the
operations of money market funds--Rule 2a-7 ("Rule") under the 1940 Act. The
Rule is intended to help assure that money market funds can maintain a stable
net asset value. It contains extensive restrictions in addition to those
concerning diversification, including quality and maturity standards.
The two current restrictions state as follows:
"The Fund may not...
with respect to 50% of the total assets of the Fund, invest more than 5% of
its total assets in the securities of any one issuer, except U.S.
Government securities, and with respect to 100% of the value of the total
assets of the Fund, the Fund may not invest more than 25% of the value of
its total assets in the securities of any one issuer;
and
with respect to 50% of the total assets of the Fund purchase the securities
of any issuer if such purchase would cause more than 10% of the voting
securities of such issuer to be held by the Fund."
The proposed amended fundamental restriction, would read as follows for the
Fund:
"The Fund may not...
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with respect to 50% of the total assets of the Fund, invest more than 5% of
its total assets in the securities of any one issuer, except U.S.
Government securities, and with respect to 100% of the value of the total
assets of the Fund, the Fund may not invest more than 25% of the value of
its total assets in the securities of any one issuer;
and
with respect to 50% of the total assets of the Fund purchase the securities
of any issuer if such purchase would cause more than 10% of the voting
securities of such issuer to be held by the Fund, provided that the amount
of the total assets of the Fund that may be invested in the securities of
any one issuer will, instead, be limited in accordance with federal law,
regulation and regulatory interpretation applicable to money market funds,
as amended from time to time."
The Trustees have determined that it would be in the best interest of the Fund
to operate in accordance with the Rule, as amended. The Trustees have also
determined that the diversification standards of the Rule, rather than those
stated above, should govern the activities of the Fund. The modification to the
diversification policy will give the Fund greater flexibility to obtain
commitments from third parties to assure that particular portfolio securities
satisfy the Fund's credit, maturity and liquidity standards.
Scudder believes that the protections of the Rule, including its diversification
and other requirements can fairly be characterized as stricter overall than what
is otherwise required by the 1940 Act. The Rule is designed specifically for
money market funds and imposes what is considered to be strict but appropriate
regulation of those funds. The Rule should govern the operation of such funds to
the extent that the specific Rule might conflict with the general
diversification requirements applicable to all mutual funds regardless of
investment objectives and policies. Therefore, a change in the Fund's
diversification policy to be consistent with the Rule will provide the Fund with
desirable flexibility (within the parameters of a very restrictive Rule), will
permit the Fund to operate more effectively, and will be consistent with the
investment objectives of the Fund and with the best interests of the Fund and
its shareholders.
4I. Approval Or Disapproval Of A Change To The Following Fund's
Subclassification From A Diversified To A Non-Diversified Investment
Company Under The 1940 Act.
Scudder New York Tax Free Fund
The Trustees are recommending that the preceding Fund's fundamental investment
restriction regarding diversification be changed so that the Fund would be
classified as a non-diversified investment company under the 1940 Act in order
to provide greater flexibility in managing the Fund's portfolio.
The Fund is currently classified as a diversified investment company under the
1940 Act. As such, the Fund is subject to more restrictive limitations on the
percentage of its assets that it may invest in the securities of individual
issuers than is a non-diversified investment company. Because of its focus on
New York tax-exempt investments, the Fund has a more limited number of
investment options available to it than a fund that does not focus on
investments from a single state. Consequently, the Fund may have substantially
greater difficulty in adhering to 1940 Act diversification requirements than
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would a fund that does not focus on investments from a single state. The
Trustees believe that the Fund's investment flexibility will increase, and
performance could benefit, by changing the Fund's classification under the 1940
Act to non-diversified. Scudder currently anticipates any restructuring of the
Fund's portfolio will occur gradually. Each of the other state specific funds,
is already classified as "non-diversified."
Under the 1940 Act, a diversified investment company must have at least 75% of
the value of its total assets represented by cash and cash items (including
receivables), U.S. Government securities, securities of other investment
companies, and other securities limited in respect of any one issuer to an
amount not greater in value than 5% of the value of the total assets of the
investment company, and to not more than 10% of the outstanding voting
securities of the issuer. A non-diversified investment company is not required
to meet these restrictions.
The Fund would continue, however, to be subject to other, less restrictive
diversification requirements in order to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986 as amended (the
"Code"). Under the Code, to qualify as a regulated investment company, the Fund
generally must, among other things, diversify its holdings so that, at the end
of each quarter of its taxable year, (i) at least 50% of the market value of the
Fund's assets is represented by cash (including cash items and receivables),
U.S. Government securities, and other securities, with such other securities
limited, in respect of any one issuer, for purposes of this calculation to an
amount not greater and (ii) not more than 25% of the value of its total assets
is invested in the securities of any one issuer (other than U.S. Government
securities).
If the Fund becomes a non-diversified investment company under the 1940 Act,
investment in the Fund may present greater risks to investors than an investment
in a diversified investment company. The investment return on a non-diversified
investment company typically is dependent upon the performance of a smaller
number of securities, and the Fund's assumption of larger positions in the
securities of a smaller number of issuers will affect the net asset value of the
Fund's shares to a greater extent than that of a diversified investment company
in the event of changes in the financial condition, or in the market's
assessment, of the issuers.
If the shareholders of the Fund approve this proposal, the Fund's fundamental
investment diversification policy would be amended to eliminate the 1940 Act
diversification requirements, and would read as follows:
"The Registrant may not...
Purchase any security (other than obligations of the U.S. Government, its
agencies or instrumentalities) if as a result (a) more than 25% of the
Registrant's total assets would then be invested in securities of any single
issuer, or (b) 25% or more of the Registrant's total assets would then be
invested in securities of issuers in any one industry or group of similar or
related industries, provided, however, that the foregoing restriction shall not
be deemed to prohibit the Fund from purchasing the securities of any issuer
pursuant to the exercise of rights distributed to the Fund by the issuer, except
that no such purchase may be made if as a result the Fund will fail to meet the
diversification requirements of the Code.
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(5) APPROVAL OR DISAPPROVAL OF NEW INVESTMENT MANAGEMENT AGREEMENTS FOR
SCUDDER NEW YORK TAX FREE MONEY FUND,
SCUDDER MASSACHUSETTS TAX FREE FUND, SCUDDER OHIO TAX FREE FUND AND
SCUDDER PENNSYLVANIA TAX FREE FUND
Scudder acts as investment manager to Scudder New York Tax Free Money Fund,
Scudder Massachusetts Tax Free Fund, Scudder Ohio Tax Free Fund and Scudder
Pennsylvania Tax Free Fund pursuant to Investment Advisory Agreements dated June
1, 1987 for each of the Funds (the "present Agreements") between the Trust on
behalf of each Fund, and Scudder.
The Trustees recommend that shareholders approve the proposed Investment
Management Agreements (the "proposed Agreements") in place of the present
Agreements. At a meeting held on August 13, 1996 the Trustees, including the
Independent Trustees, approved the terms of the proposed Agreements and their
adoptions subject to approval by shareholders of the relevant Funds. The
proposed and present Agreements are substantially the same, including the same
fee schedule. Set forth below is a description of certain differences between
the present Agreements and the proposed Agreements, as well as a description of
those provisions which are the same under both the proposed and present
Agreements. A form of a proposed Agreement is attached hereto as Exhibit B.
In approving the proposed Agreements and recommending their approval by
shareholders, the Independent Trustees, considering the best interests of the
shareholders of each 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 each Fund; the necessity of Scudder maintaining and
enhancing its ability to retain and attract capable personnel to serve each
Fund; the increased complexity of the securities market; the investment record
of Scudder in managing each Fund; Scudder's profitability with respect to each
Fund and the other investment companies managed by Scudder before marketing
expenses paid by Scudder; possible economies of scale; comparative data as to
investment performance, advisory fees and expense ratios; Scudder's expenditures
in developing worthwhile and innovative shareholder services for each of the
Funds; improvements in the quality and scope of the shareholder services
provided to each Fund's shareholders; the risks assumed by Scudder; the
advantages and possible disadvantages to each Fund of having an adviser which
also serves other investment companies as well as other accounts; possible
benefits to Scudder from serving as adviser and from affiliates of Scudder
serving as principal underwriter, transfer agent and fund accounting agent of
each Fund; current and developing conditions in the financial services industry,
including the entry into the industry of large and well capitalized companies
which are spending, and appear to be prepared to continue to spend, substantial
sums to engage personnel and to provide services to competing investment
companies; the financial resources of Scudder and the continuance of appropriate
incentives to assure that Scudder will continue to furnish high quality services
to each Fund; and various other factors.
Description of the Agreements
Under the present Agreements, Scudder regularly provides each Fund with
investment research, advice and supervision and furnishes an investment program.
Under the proposed Agreements, Scudder will provide each Fund with continuing
investment management. Under both agreements, Scudder determines what securities
shall be purchased, held, or sold, and what portion of each Fund's assets shall
be held uninvested, subject to the Trust's Amended and Restated Declaration of
22
<PAGE>
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
each Fund's office rent, under the proposed Agreements Scudder will render
significant administrative services (not otherwise provided by third parties)
necessary for each 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 each Fund (such as the
Funds' transfer and pricing agents, fund accounting agent, 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 each 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 each registration of shares of each Fund under
applicable federal and state securities laws; maintaining each Fund's books and
records to the extent not otherwise maintained by a third party; assisting in
establishing accounting policies of each Fund; assisting in the resolution of
accounting and legal issues; establishing and monitoring the Fund's operating
budgets; processing the payment of each Fund's bills; assisting each Fund in,
and otherwise arranging for the payment of dividends and distributions and
otherwise assisting each Fund in the conduct of its business, subject to the
direction and control of the Trust's Board of Trustees. The 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, each 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 Independent Trustees; the cost of printing and
distributing reports and notices to shareholders; and the fees and expenses of
each Fund's custodians. Each Fund may arrange to have third parties assume all
or part of the expenses of sale, underwriting and distribution of shares of each
Fund. Each Fund is also responsible for expenses of shareholders' 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 each Trust with respect thereto.
Under the proposed Agreements, details of Fund expenses have been included. Each
Fund is responsible for maintenance of books and records which are not otherwise
required to be maintained by the Funds' custodian or other agents of the Trust;
telephone, facsimile, postage and other communications expenses; any dues
incurred by a Fund in connection with membership in investment company trade
organizations; payment for valuation services to pricing agents; costs of
acquiring or disposing of any portfolio securities of a Fund; printing and
distributing reports, notices and dividends to shareholders; expenses of
printing and mailing Prospectuses and Statements of Additional Information of
23
<PAGE>
each Fund and supplements thereto; costs of stationery; any litigation expenses;
indemnification of Trustees and officers of the Trust and costs of shareholders'
meetings and other expenses.
Under both Agreements, Scudder pays the compensation and expenses of officers
and executive employees of each Fund affiliated with Scudder and makes
available, without expense to each 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. Each
Fund is responsible for the fees and expenses of Trustees not affiliated with
Scudder. The proposed Agreement also states that Scudder will pay each Fund's
share of payroll taxes. The proposed Agreement also specifically provides that
each 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 March 31, 1996
for Scudder New York Tax Free Money Fund, Scudder Massachusetts Tax Free Fund,
Scudder Ohio Tax Free Fund and Scudder Pennsylvania Tax Free Fund, no
compensation, direct or otherwise (other than through fees paid to Scudder) was
paid or became payable by any Fund to any of its officers or Trustees who were
affiliated with Scudder.
The present Agreement provides that each Fund may use a name derived from the
name "Scudder, Stevens & Clark, Inc.," only so long as such Agreement, or any
extension, renewal or amendment thereof, remains in effect. The proposed
Agreement provides that each Fund is granted a nonexclusive right and sublicense
to use the "Scudder" name and mark as part of the Trust's name, and the Scudder
Marks in connection with the Trust's investment products and services.
The proposed and present 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 each 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.
In reviewing the terms of the proposed and present Agreements and in discussions
with Scudder concerning such Agreements, the Independent Trustees have been
represented, at each Fund's expense, by independent counsel, Ropes & Gray.
Counsel for the Funds is Willkie Farr & Gallagher.
Both Agreements provide that Scudder be paid a monthly fee, payable in dollars,
at an annual rate of 0.50 of 1% of Scudder New York Tax Free Money Fund's
average daily net assets and 0.60% of 1% for each of Scudder Massachusetts Tax
Free Fund, Scudder Ohio Tax Free Fund and Scudder Pennsylvania Tax Free Fund's
average daily net assets. 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 Scudder New York Tax Free Money Fund, Scudder Ohio
Tax Free Fund and Scudder Pennsylvania Tax Free Fund at not more than 0.60 of
1%, 0.50 of 1% and 0.50 of 1% of average daily net assets, respectively, until
July 31, 1997. Under the proposed Agreements the Adviser shall be entitled to
receive during any month such interim payments of the fee, not to exceed 75% of
the amount of the fee then accrued on the books of the Fund and unpaid. For the
fiscal year ended March 31, 1996 for Scudder New York Tax Free Money Fund,
24
<PAGE>
Scudder Ohio Tax Free Fund and Scudder Pennsylvania Tax Free Fund, Scudder did
not impose its management fees amounting to $142,485, $314,079 and $308,030,
respectively, and the fee imposed aggregated $134,788, $172,284 and $145,682,
respectively.
If approved by the shareholders of each Fund, the proposed Agreements will
become effective on the day following such approval and will remain in force
until September 30, 1998, and the present Agreements will terminate. The
proposed Agreements would continue in effect thereafter by its terms from year
to year only so long as its continuance is specifically approved at least
annually by the vote of a majority of the Independent Trustees cast in person at
a meeting called for the purpose of voting on such approval, and either by vote
of the Trustees, or a majority of each Fund's outstanding voting securities, as
defined below. The proposed Agreements may be terminated on 60 days' written
notice, without penalty, by the Trustees, by the vote of the shareholders of a
majority of each Fund's outstanding voting securities, or by Scudder, and
automatically terminates in the event of its assignment. The current Agreements
require annual approval of its continuance and contains the same termination
provisions as the proposed Agreements.
Any or all of the present Agreements will continue in effect if this Proposal is
not approved by the shareholders of a Fund. The present Agreements were last
approved by the Trustees on August 13, 1996.
Required Vote
Approval of the proposed Agreements on behalf of Scudder New York Tax Free Money
Fund, Scudder Massachusetts Tax Free Fund, Scudder Ohio Tax Free Fund and
Scudder Pennsylvania Tax Free Fund requires the affirmative vote of a majority
of shareholders of each of the Fund's outstanding voting securities, which as
used in this Proposal means (1) holders of more than 50% of the outstanding
shares of each 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. The Board of Trustees recommends that the shareholders of
each Fund vote in favor of the approval of the proposed Agreements.
Investment Adviser
Scudder is one of the most experienced investment counsel firms in the United
States. It was established in 1919 as a partnership and was restructured as a
Delaware corporation in 1985. The principal source of Scudder's income is
professional fees received from providing continuing investment advice.
Scudder's subsidiary, Scudder Investor Services, Inc. (the "Distributor"), Two
International Place, Boston, MA 02110, acts as the principal underwriter for
shares of registered open-end investment companies. Scudder provides investment
counsel for many individuals and institutions, including insurance companies,
endowments, industrial corporations and financial and banking organizations.
Scudder is a Delaware corporation. Daniel Pierce* is the Chairman of the Board
of Scudder. Edmond D. Villani# is the President and Chief Executive Officer of
Scudder. Stephen R. Beckwith#, Lynn S. Birdsong#, E. Michael Brown*, Nicholas
Bratt#, Mark S. Casady*, Linda C. Coughlin*, Margaret D. Hadzima*, Jerard K.
Hartman#, Richard A. Holt@, Dudley H. Ladd*, John T. Packard+++, Kathryn L.
Quirk#, Cornelia M. Small# and Stephen A. Wohler* are the other members of the
25
<PAGE>
Board of Directors of Scudder. The principal occupation of each of the above
named individuals is serving as a Managing Director of Scudder.
All of the outstanding voting and nonvoting securities of Scudder are held of
record by Stephen R. Beckwith, Juris Padegs, Daniel Pierce and Edmond D. Villani
in their capacity as the representatives (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.
In addition to acting as investment manager to individuals and other
organizations, Scudder, or an affiliate, acts as investment adviser to numerous
investment companies including the investment company listed below which is also
an open-end investment company or mutual fund.
<TABLE>
<CAPTION>
Total Net Assets
as of Management Compensation
September 30, 1996 on an Annual Basis Based on the
Name (000 omitted) Value of Average Daily Net Assets
---- ------------- ---------------------------------
<S> <C> <C>
Scudder California Tax Free Trust $359,500 Scudder California Tax Free Fund: 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%.
</TABLE>
Trustees, 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 will not
be influenced by existing or potential custodial or other Fund relationships.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of Scudder, computes
net asset value for each of the Funds. Scudder Massachusetts Tax Free Fund,
Scudder Ohio Tax Free Fund and Scudder Pennsylvania Tax Free Fund each pay SFAC
an annual fee equal to 0.024% of the first $150 million of average daily net
assets, 0.0070% of such assets in excess of $150 million, 0.004% of such assets
in excess of $1 billion, plus holding and transaction charges for this service.
Scudder New York Tax Free Money Fund pays SFAC an annual fee equal to 0.020% of
the first $150 million of average daily net assets, 0.0060% of such assets in
excess of $150 million, 0.0035% of such assets in excess of $1 billion, plus
holding and transaction charges for this service. For the period ended March 31,
1996, the amount charged to Scudder New York Tax Free Money Fund, Scudder
Massachusetts Tax Free Fund, Scudder Ohio Tax Free Fund and Scudder Pennsylvania
Tax Free Fund by SFAC aggregated $30,000, $58,015, $36,000, and $36,000,
respectively.
- ---------------------------
* Two International Place, Boston, Massachusetts
# 345 Park Avenue, New York, New York
0 101 California Street, San Francisco, California
@ Two Prudential Plaza, 180 West Stetson, Suite 5400, Chicago, Illinois
Brokerage Commissions on Portfolio Transactions
To the maximum extent feasible Scudder places orders for portfolio transactions
through the Distributor (a corporation registered as a broker/dealer and a
26
<PAGE>
subsidiary of Scudder), which in turn places orders on behalf of each of the
Funds with issuers, underwriters or other brokers and dealers. The Distributor
receives no commissions, fees or other remuneration from any Fund for this
service. Allocation of portfolio transactions is supervised by Scudder. During
the fiscal years ended October 31, 1995 and March 31, 1996, respectively, no
brokerage commissions were paid by any of the Funds.
ADDITIONAL INFORMATION
Other Matters
The Board of Trustees does not know of any matters to be brought before the
Meeting other than those mentioned in this Proxy Statement. 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 card 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 facsimile by Officers of the Trust, 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.
In the event that sufficient votes in favor of the proposals set forth in the
Notice of Special Meeting are not received by December 10, 1996, the persons
named as appointed proxies on 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 as appointed proxies on 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.
By Order of the Board of Trustees
Two International Place THOMAS F. MCDONOUGH
Boston, Massachusetts 02110 Secretary
October 28, 1996
27
<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
A-1
<PAGE>
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
A-2
<PAGE>
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 or 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.
A-3
<PAGE>
EXHIBIT B
Scudder State Tax Free Trust
Two International Place
Boston, Massachusetts 02110
_______________ , 1996
Scudder, Stevens & Clark, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Scudder _____________ Fund
Ladies and Gentlemen:
Scudder State 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 Amended and Restated Declaration of Trust, as amended
from time-to-time (the "Declaration"), the Board of Trustees has divided the
Trust's shares of beneficial interest, par value $.01 per share, (the "Shares")
into separate series, or funds, including Scudder _____________ Fund (the
"Fund"). Series may be abolished and dissolved, and additional series
established, from time to time by action of the Trustees.
The Trust, on behalf of the 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) The Declaration dated December 8, 1987, as amended to date.
(b) By-Laws of the Trust as in effect on the date hereof (the "By-Laws").
(c) Resolutions of the Trustees of the Trust and the shareholders of the Fund
selecting you as investment manager and approving the form of this
Agreement.
B-1
<PAGE>
(d) Establishment and Designation of Series of Shares of Beneficial Interest
dated December 9, 1987 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. Sublicense to Use the Scudder Trademarks. As exclusive licensee of the
rights to use and sublicense the use of the "Scudder" and "Scudder, Stevens &
Clark," trademarks (together, the "Scudder Marks"), you hereby grant the Trust a
nonexclusive right and sublicense to use (i) the "Scudder" name and mark as part
of the Trust's name (the "Fund Name"), and (ii) the Scudder Marks in connection
with the Trust's investment products and services, in each case only for so long
as this Agreement, any other investment management agreement between you and the
Trust, or any extension, renewal or amendment hereof or thereof remains in
effect, and only for so long as you are a licensee of the Scudder Marks,
provided however, that you agree to use your best efforts to maintain your
license to use and sublicense the Scudder Marks. The Trust agrees that it shall
have no right to sublicense or assign rights to use the Scudder Marks, shall
acquire no interest in the Scudder Marks other than the rights granted herein,
that all of the Trust's uses of the Scudder Marks shall inure to the benefit of
Scudder Trust Company as owner and licensor of the Scudder Marks (the "Trademark
Owner"), and that the Trust shall not challenge the validity of the Scudder
Marks or the Trademark Owner's ownership thereof. The Trust further agrees that
all services and products it offers in connection with the Scudder Marks shall
meet commercially reasonable standards of quality, as may be determined by you
or the Trademark Owner from time to time, provided that you acknowledge that the
services and products the Trust rendered during the one-year period preceding
the date of this Agreement are acceptable. At your reasonable request, the Trust
shall cooperate with you and the Trademark Owner and shall execute and deliver
any and all documents necessary to maintain and protect (including but not
limited to in connection with any trademark infringement action) the Scudder
Marks and/or enter the Trust as a registered user thereof. At such time as this
Agreement or any other investment management agreement shall no longer be in
effect between you (or your successor) and the Trust, or you no longer are a
licensee of the Scudder Marks, the Trust shall (to the extent that, and as soon
as, it lawfully can) cease to use the Fund Name or any other name indicating
that it is advised by, managed by or otherwise connected with you (or any
organization which shall have succeeded to your business as investment manager)
or the Trademark Owner. In no event shall the Trust use the Scudder Marks or any
other name or mark confusingly similar thereto (including, but not limited to,
any name or mark that includes the name "Scudder") if this Agreement or any
other investment advisory agreement between you (or your successor) and the Fund
is terminated.
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
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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, accounting agents, custodians, depositories, transfer agents and
pricing agents, accountants, attorneys, printers, underwriters, brokers and
dealers, insurers and other persons in any capacity deemed to be necessary or
desirable to Fund operations; preparing and making filings with the Securities
and Exchange Commission (the "SEC") and other regulatory and self-regulatory
organizations, including, but not limited to, preliminary and definitive proxy
materials, post-effective amendments to the Registration Statement, semi-annual
reports on Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act;
overseeing the tabulation of proxies by the 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; monitoring the registration of Shares of the Fund under
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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, the custodian, and the
accounting agent with such information as is required for such parties to effect
the payment of dividends and distributions; and otherwise assisting the Trust as
it may reasonably request in the conduct of 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 accounting agent, custodians,
subcustodians, transfer agents, dividend disbursing agents and registrars;
payment for portfolio pricing or valuation services to pricing agents,
accountants, bankers and other specialists, if any; expenses of preparing share
certificates and, except as provided below in this section 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
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<PAGE>
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) for Scudder Massachusetts Tax Free
Fund, Scudder Ohio Tax Free Fund and Scudder Pennsylvania Tax Free Fund, 1/12 of
.60 of 1 percent of the average daily net assets as defined below of the Fund
for such month, or (a)(i) for Scudder New York Tax Free Money Fund, 1/12 of .50
of 1 percent 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 percent 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
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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
B-6
<PAGE>
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, 1998, and continue in force from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually (a) by the vote of a majority of the Trustees who are not parties
to this Agreement or interested persons of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
by the Trustees of the Trust, or 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 State 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.
B-7
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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 State Tax Free Trust
on behalf of Scudder _______________ Fund
By: ______________________________
President
The foregoing Agreement is hereby accepted as of the date thereof.
SCUDDER, STEVENS & CLARK, INC.
By: ______________________________
Managing Director
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<TABLE>
<CAPTION>
<S> <C> <C>
PROXY SCUDDER STATE TAX FREE TRUST PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE TRUSTEES
Special Meeting of Shareholders--December 10, 1996
The undersigned hereby appoints Peter B. Freeman, David S. Lee and Dudley H. Ladd and each of them, the proxies for
the undersigned, with the power of substitution to each of them, to vote all shares of Scudder State Tax Free Trust,
which the undersigned is entitled to vote at the Special Meeting of Shareholders, to be held at the offices of Scudder,
Stevens & Clark, Inc., 13th Floor, Two International Place, Boston, MA 02110, on December 10, 1996 at 11:45 a.m.,
eastern time, and at any adjournments thereof.
Unless otherwise specified in the squares provided, the undersigned's vote will be cast FOR each item listed below.
1. The election of Trustees; FOR all nominees listed below WITHHOLD
(except as marked to the contrary below) /__/ to vote for all nominees listed below /__/
Nominees: David S. Lee, Henry P. Becton, Jr., E. Michael Brown, Dawn-Marie Driscoll, Peter B. Freeman, Dudley H.
Ladd, Wesley W. Marple, Jr., Daniel Pierce and Jean C. Tempel
(INSTRUCTION: To withhold authority to vote for any individual nominee, please strike a line through that nominee's
name.)
2. Ratification of the selection of Coopers & Lybrand as independent FOR /__/ AGAINST /__/ ABSTAIN /__/
accountants;
3. To approve the amendment of the Trust's Amended and Restated Declaration of FOR /__/ AGAINST /__/ ABSTAIN /__/
Trust to provide for the establishment of separate classes of shares and to
allow the Trustees to fix the minimum account size.
Please continue voting and sign on reverse side
- ------------------------------------------------------------------------------------------------------------------------
<PAGE>
4. To approve the amendment of certain fundamental investment polices. FOR each policy FOR /__/ ABSTAIN /__/
listed below (except
as marked by crossing out)
Please cross out the number of any policy change(s) you do not wish to approve: (4A) (4B) (4C) (4D) (4E) (4F) (4G) (4H) (4I)
5. To approve a new Investment Management Agreement between each of Scudder FOR /__/ AGAINST /__/ ABSTAIN /__/
New York Tax Free Money Fund, Scudder Massachusetts Tax Free Fund, Scudder
Ohio Tax Free Fund and Scudder Pennsylvania Tax Free Fund and Scudder,
Stevens & Clark, Inc.
To transact such other business as may properly come before the meeting or any adjournments thereof.
----------------------------------------
(Signature of shareholder)
----------------------------------------
(Signature of joint owner, if any)
Date , 1996
----------------------------
PLEASE SIGN AND RETURN IN ENCLOSED POSTAGE-PREPAID ENVELOPE
</TABLE>
