Filed electronically with the Securities and Exchange
Commission on December 31, 1996
File No. 2-36238
File No. 811-2021
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
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Post-Effective Amendment No. 43
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and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 27
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Scudder Securities Trust
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(Exact Name of Registrant as Specified in Charter)
Two International Place, Boston, MA 02110-4103
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (617) 295-2567
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Thomas F. McDonough
Scudder, Stevens & Clark, Inc.
Two International Place, Boston MA 02110
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective
immediately upon filing pursuant to paragraph (b)
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X on January 1, 1997 pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a)(i)
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on _______________ pursuant to paragraph (a)(i)
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75 days after filing pursuant to paragraph (a)(ii)
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on _______________ pursuant to paragraph (a)(ii) of Rule 485.
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The Registrant has filed a declaration registering an indefinite amount of
securities pursuant to Rule 24f-2 under the Investment Company Act of 1940, as
amended. The Registrant filed the notice required by Rule 24f-2 for its most
recent fiscal year on August 28, 1996.
<PAGE>
SCUDDER DEVELOPMENT FUND
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
Items Required By Form N-1A
---------------------------
PART A
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Item No. Item Caption Prospectus Caption
- -------- ------------ ------------------
<S> <C> <C>
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial FINANCIAL HIGHLIGHTS
Information
4. General Description of INVESTMENT OBJECTIVES AND POLICIES
Registrant WHY INVEST IN THE FUND?
ADDITIONAL INFORMATION ABOUT POLICIES AND
INVESTMENTS
FUND ORGANIZATION
5. Management of the Fund FINANCIAL HIGHLIGHTS
A MESSAGE FROM SCUDDER'S CHAIRMAN FUND
ORGANIZATION--Investment adviser, Transfer agent
SHAREHOLDER BENEFITS--A team approach to investing
TRUSTEES AND OFFICERS
5A. Management's Discussion of NOT APPLICABLE
Fund Performance
6. Capital Stock and Other DISTRIBUTION AND PERFORMANCE INFORMATION--Dividends
Securities and capital gains distributions
FUND ORGANIZATION
TRANSACTION INFORMATION--Tax information
SHAREHOLDER BENEFITS--SAIL(TM)--Scudder Automated
Information Line, Dividend reinvestment plan, T.D.D. service for the
hearing impaired
HOW TO CONTACT SCUDDER
7. Purchase of Securities FUND ORGANIZATION--Underwriter
Being Offered PURCHASES
TRANSACTION INFORMATION--Purchasing shares, Share price, Processing time,
Minimum balances, Third party transactions
SHAREHOLDER BENEFITS--Dividend reinvestment plan
SCUDDER TAX-ADVANTAGED RETIREMENT PLANS
INVESTMENT PRODUCTS AND SERVICES
8. Redemption or Repurchase EXCHANGES AND REDEMPTIONS
TRANSACTION INFORMATION--Redeeming shares, Tax
identification number, Minimum balances
9. Pending Legal Proceedings NOT APPLICABLE
Cross Reference - Page 1
<PAGE>
PART B
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Caption in Statement of
Item No. Item Caption Additional Information
- -------- ------------ ----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and FUND ORGANIZATION
History
13. Investment Objectives and THE FUND'S INVESTMENT OBJECTIVE AND POLICIES PORTFOLIO
Policies TRANSACTIONS--Brokerage Commissions,
Portfolio turnover
14. Management of the Fund INVESTMENT ADVISER
TRUSTEES AND OFFICERS
REMUNERATION
15. Control Persons and TRUSTEES AND OFFICERS
Principal Holders of
Securities
16. Investment Advisory and INVESTMENT ADVISER
Other Services DISTRIBUTOR
ADDITIONAL INFORMATION--Experts, Other Information
17. Brokerage Allocation PORTFOLIO TRANSACTIONS--Brokerage Commissions,
and Other Practices Portfolio Turnover
18. Capital Stock and FUND ORGANIZATION
Other Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
19. Purchase, Redemption and PURCHASES
Pricing of Securities EXCHANGES AND REDEMPTIONS
Being Offered FEATURES AND SERVICES OFFERED BY THE FUND--Dividend
and Capital Gain Distribution Options
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of Performance PERFORMANCE INFORMATION
Data
23. Financial Statements FINANCIAL STATEMENTS
Cross Reference - Page 2
<PAGE>
SCUDDER SMALL COMPANY VALUE FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
---------------------------
PART A
- ------
Item No. Item Caption Prospectus Caption
- -------- ------------ ------------------
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial FINANCIAL HIGHLIGHTS
Information
4. General Description of INVESTMENT OBJECTIVES AND POLICIES
Registrant WHY INVEST IN THE FUND?
ADDITIONAL INFORMATION ABOUT POLICIES AND INVESTMENTS
FUND ORGANIZATION
5. Management of the Fund FINANCIAL HIGHLIGHTS
A MESSAGE FROM SCUDDER'S CHAIRMAN FUND
ORGANIZATION--Investment adviser, Transfer agent
SHAREHOLDER BENEFITS--A team approach to investing
TRUSTEES AND OFFICERS
5A. Management's Discussion NOT APPLICABLE
of Fund Performance
6. Capital Stock and Other DISTRIBUTION AND PERFORMANCE INFORMATION--Dividends
Securities and capital gains distributions
FUND ORGANIZATION
TRANSACTION INFORMATION--Tax information
SHAREHOLDER BENEFITS--SAIL(TM)--Scudder Automated
Information Line, Dividend reinvestment plan, T.D.D. service for the
hearing impaired
HOW TO CONTACT SCUDDER
7. Purchase of Securities FUND ORGANIZATION--Underwriter
Being Offered PURCHASES
TRANSACTION INFORMATION--Purchasing shares, Share price,
Processing time, Minimum balances, Third party transactions
SHAREHOLDER BENEFITS--Dividend reinvestment plan
SCUDDER TAX-ADVANTAGED RETIREMENT PLANS
INVESTMENT PRODUCTS AND SERVICES
8. Redemption or EXCHANGES AND REDEMPTIONS
Repurchase TRANSACTION INFORMATION--Redeeming shares, Tax
identification number, Minimum balances
9. Pending Legal NOT APPLICABLE
Proceedings
Cross Reference - Page 3
<PAGE>
PART B
- ------
Caption in Statement of
Item No. Item Caption Additional Information
- -------- ------------ ----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and FUND ORGANIZATION
History
13. Investment Objectives and THE FUND'S INVESTMENT OBJECTIVE AND POLICIES PORTFOLIO
Policies TRANSACTIONS--Brokerage Commissions,
Portfolio turnover
14. Management of the Fund INVESTMENT ADVISER
TRUSTEES AND OFFICERS
REMUNERATION
15. Control Persons and TRUSTEES AND OFFICERS
Principal Holders of
Securities
16. Investment Advisory and INVESTMENT ADVISER
Other Services DISTRIBUTOR
ADDITIONAL INFORMATION--Experts, Other Information
17. Brokerage Allocation PORTFOLIO TRANSACTIONS--Brokerage Commissions, Portfolio
and Other Practices Turnover
18. Capital Stock and FUND ORGANIZATION
Other Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
19. Purchase, Redemption and PURCHASES
Pricing of Securities EXCHANGES AND REDEMPTIONS
Being Offered FEATURES AND SERVICES OFFERED BY THE FUND--Dividend
and Capital Gain Distribution Options
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of Performance PERFORMANCE INFORMATION
Data
23. Financial Statements FINANCIAL STATEMENTS
Cross Reference - Page 4
<PAGE>
SCUDDER MICRO CAP FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
---------------------------
PART A
- ------
Item No. Item Caption Prospectus Caption
- -------- ------------ ------------------
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial NOT APPLICABLE
Information
4. General Description of INVESTMENT OBJECTIVE AND POLICIES
Registrant WHY INVEST IN THE FUND?
ADDITIONAL INFORMATION ABOUT POLICIES AND INVESTMENTS
FUND ORGANIZATION
5. Management of the Fund A MESSAGE FROM SCUDDER'S CHAIRMAN
FUND ORGANIZATION--Investment adviser, Transfer agent
SHAREHOLDER BENEFITS--A team approach to investing
TRUSTEES AND OFFICERS
5A. Management's Discussion of NOT APPLICABLE
Fund Performance
6. Capital Stock and Other DISTRIBUTION AND PERFORMANCE INFORMATION--Dividends
Securities and capital gains distributions
FUND ORGANIZATION
TRANSACTION INFORMATION--Tax information
SHAREHOLDER BENEFITS--SAIL(TM)--Scudder Automated
Information Line, Dividend reinvestment plan, T.D.D. service for the
hearing impaired
HOW TO CONTACT SCUDDER
7. Purchase of Securities FUND ORGANIZATION--Underwriter
Being Offered PURCHASES
TRANSACTION INFORMATION--Purchasing shares, Share price,
Processing time, Minimum balances, Third party transactions
SHAREHOLDER BENEFITS--Dividend reinvestment plan
SCUDDER TAX-ADVANTAGED RETIREMENT PLANS
INVESTMENT PRODUCTS AND SERVICES
8. Redemption or EXCHANGES AND REDEMPTIONS
Repurchase TRANSACTION INFORMATION--Redeeming shares, Tax
identification number, Minimum balances
9. Pending Legal NOT APPLICABLE
Proceedings
Cross Reference - Page 5
<PAGE>
PART B
- ------
Caption in Statement of
Item No. Item Caption Additional Information
- -------- ------------ ----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and FUND ORGANIZATION
History
13. Investment Objectives and THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
Policies PORTFOLIO TRANSACTIONS--Brokerage Commissions,
Portfolio turnover
14. Management of the Fund INVESTMENT ADVISER
TRUSTEES AND OFFICERS
REMUNERATION
15. Control Persons and TRUSTEES AND OFFICERS
Principal Holders of
Securities
16. Investment Advisory and INVESTMENT ADVISER
Other Services DISTRIBUTOR
ADDITIONAL INFORMATION--Experts, Other Information
17. Brokerage Allocation PORTFOLIO TRANSACTIONS--Brokerage Commissions, Portfolio
and Other Practices
18. Capital Stock and FUND ORGANIZATION
Other Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
19. Purchase, Redemption and PURCHASES
Pricing of Securities EXCHANGES AND REDEMPTIONS
Being Offered FEATURES AND SERVICES OFFERED BY THE FUND--Dividend
and Capital Gain Distribution Options
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of PERFORMANCE INFORMATION
Performance Data
23. Financial Statements FINANCIAL STATEMENTS
Cross Reference - Page 6
<PAGE>
SCUDDER 21ST CENTURY GROWTH FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
---------------------------
PART A
- ------
Item No. Item Caption Prospectus Caption
- -------- ------------ ------------------
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial NOT APPLICABLE
Information
4. General Description of INVESTMENT OBJECTIVE AND POLICIES
Registrant WHY INVEST IN THE FUND?
ADDITIONAL INFORMATION ABOUT POLICIES AND INVESTMENTS
FUND ORGANIZATION
5. Management of the Fund A MESSAGE FROM SCUDDER'S CHAIRMAN
FUND ORGANIZATION--Investment adviser,
Transfer agent SHAREHOLDER BENEFITS--A
team approach to investing TRUSTEES
AND OFFICERS
5A. Management's Discussion of NOT APPLICABLE
Fund Performance
6. Capital Stock and Other DISTRIBUTION AND PERFORMANCE INFORMATION--Dividends
Securities and capital gains distributions
FUND ORGANIZATION
TRANSACTION INFORMATION--Tax information
SHAREHOLDER BENEFITS--SAIL(TM)--Scudder Automated
Information Line, Dividend reinvestment plan, T.D.D. service for the
hearing impaired
HOW TO CONTACT SCUDDER
7. Purchase of Securities FUND ORGANIZATION--Underwriter
Being Offered PURCHASES
TRANSACTION INFORMATION--Purchasing shares, Share price,
Processing time, Minimum balances, Third party transactions
SHAREHOLDER BENEFITS--Dividend reinvestment plan
SCUDDER TAX-ADVANTAGED RETIREMENT PLANS
INVESTMENT PRODUCTS AND SERVICES
8. Redemption or EXCHANGES AND REDEMPTIONS
Repurchase TRANSACTION INFORMATION--Redeeming shares, Tax
identification number, Minimum balances
9. Pending Legal NOT APPLICABLE
Proceedings
Cross Reference - Page 7
<PAGE>
PART B
- ------
Caption in Statement of
Item No. Item Caption Additional Information
- -------- ------------ ----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and FUND ORGANIZATION
History
13. Investment Objectives and THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
Policies PORTFOLIO TRANSACTIONS--Brokerage Commissions,
Portfolio turnover
14. Management of the Fund INVESTMENT ADVISER
TRUSTEES AND OFFICERS
REMUNERATION
15. Control Persons and TRUSTEES AND OFFICERS
Principal Holders of
Securities
16. Investment Advisory and INVESTMENT ADVISER
Other Services DISTRIBUTOR
ADDITIONAL INFORMATION--Experts, Other Information
17. Brokerage Allocation PORTFOLIO TRANSACTIONS--Brokerage Commissions, Portfolio
and Other Practices Turnover
18. Capital Stock and FUND ORGANIZATION
Other Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
19. Purchase, Redemption and PURCHASES
Pricing of Securities EXCHANGES AND REDEMPTIONS
Being Offered FEATURES AND SERVICES OFFERED BY THE FUND--Dividend
and Capital Gain Distribution Options
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of PERFORMANCE INFORMATION
Performance Data
23. Financial Statements FINANCIAL STATEMENTS
</TABLE>
Cross Reference - Page 8
<PAGE>
This prospectus sets forth concisely the information about Scudder Small Company
Value Fund, a series of Scudder Securities Trust, an open-end management
investment company, that a prospective investor should know before investing.
Please retain it for future reference. If you require more detailed information,
a Statement of Additional Information dated January 1, 1997, as amended from
time to time, may be obtained without charge by writing Scudder Investor
Services, Inc., Two International Place, Boston, MA 02110-4103 or calling
1-800-225-2470. The Statement, which is incorporated by reference into this
prospectus, has been filed with the Securities and Exchange Commission.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Contents--see page 4.
Scudder Small Company Value Fund
Prospectus
January 1, 1997
A pure no-load(TM) (no sales charges) mutual fund which invests for long-term
growth of capital by seeking out undervalued stocks of small U.S. companies.
<PAGE>
Expense information
How to compare a Scudder pure no-load(TM) fund
This information is designed to help you understand the various costs and
expenses of investing in Scudder Small Company Value Fund (the "Fund"). By
reviewing this table and those in other mutual funds' prospectuses, you can
compare the Fund's fees and expenses with those of other funds. With Scudder's
pure no-load(TM) funds, you pay no commissions to purchase or redeem shares, or
to exchange from one fund to another. As a result, all of your investment goes
to work for you.
1) Shareholder transaction expenses: Expenses charged directly to your
individual account in the Fund for various transactions.
Sales commissions to purchase shares (sales load) NONE
Commissions to reinvest dividends NONE
Deferred sales charge NONE
Redemption fees payable to the Fund 1.00%*
Exchange fees payable to the Fund 1.00%*
2) Annual Fund operating expenses: Expenses paid by the Fund before it
distributes its net investment income, expressed as a percentage of the
Fund's average daily net assets for the fiscal year ended August 31, 1996.
Investment management fee (after waiver) 0%**
12b-1 fees NONE
Other expenses 1.50%
Total Fund operating expenses 1.50%**
Example
Based on the level of total Fund operating expenses listed above, the total
expenses relating to a $1,000 investment, assuming a 5% annual return and
redemption at the end of each period, are listed below. Investors do not pay
these expenses directly; they are paid by the Fund before it distributes its
net investment income to shareholders.
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$15 $47 $82 $179
See "Fund organization--Investment adviser" for further information about the
investment management fee. This example assumes reinvestment of all dividends
and distributions and that the percentage amounts listed under "Annual Fund
operating expenses" remain the same each year. This example should not be
considered a representation of past or future expenses or return. Actual Fund
expenses and return vary from year to year and may be higher or lower than
those shown.
* There is a 1% fee retained by the Fund which is imposed only on redemptions
or exchanges of shares held less than one year. You may redeem by writing
or calling the Fund. If you wish to receive your redemption proceeds via
wire, there is a $5 wire service fee. For additional information, please
refer to "Transaction information--Exchanging and redeeming shares."
** Until December 31, 1997, the Adviser has agreed to waive a portion of its
investment management fee to the extent necessary so that the total
annualized expenses of the Fund do not exceed 1.50% of average daily net
assets. If the Adviser had not agreed to waive a portion of its fee,
annualized Fund expenses would have been: investment management fee .75%,
other expenses 1.86% and total operating expenses 2.61% for the fiscal
period ended August 31, 1996. To the extent that expenses fall below the
current expense limitation, the Adviser reserves the right to recoup,
during the fiscal year incurred, amounts waived during the period, but only
to the extent that the Fund's expenses do not exceed 1.50%.
2
<PAGE>
Financial highlights
The following table includes selected data for a share outstanding throughout
the period (a) and other performance information derived from the audited
financial statements.
If you would like more detailed information concerning the Fund's performance, a
complete portfolio listing and audited financial statements are available in the
Fund's Annual Report dated August 31, 1996 and may be obtained without charge by
writing or calling Scudder Investor Services, Inc.
For the Period
October 6, 1995
(commencement
of operations) to
August 31,
1996
- --------------------------------------------------------------------------------
Net asset value, beginning of period $12.00
Income from investment operations:
Net investment income .07
Net realized and unrealized gain on investment transactions 1.53
Total from investment operations 1.60
Less distributions from net investment income (.05)
Redemption fees .02
Net asset value, end of period $13.57
Total Return (%) (b) 13.54(c)**
Ratios and Supplemental Data
Net assets, end of period ($ millions) 41
Ratio of operating expenses, net to average daily net assets (%) 1.50*
Ratio of operating expenses before expense reductions, to
average daily net assets (%) 2.61*
Ratio of net investment income to average daily net assets (%) .67*
Portfolio turnover rate (%) 33.97*
Average commission rate paid $.0364
(a) Per share amounts have been calculated using the weighted average shares
outstanding during the period.
(b) Total return is higher due to maintenance of the Fund's expenses.
(c) Total return does not reflect the effect of the 1% redemption fee on shares
held less than one year.
* Annualized
** Not annualized
3
<PAGE>
A message from Scudder's chairman
Scudder, Stevens & Clark, Inc., investment adviser to the Scudder Family of
Funds, was founded in 1919. We offered America's first no-load mutual fund in
1928. Today, we manage in excess of $100 billion for many private accounts and
over 50 mutual fund portfolios. We manage the mutual funds in a special program
for the American Association of Retired Persons, as well as the fund options
available through Scudder Horizon Plan, a tax-advantaged variable annuity. We
also advise The Japan Fund and nine closed-end funds that invest in countries
around the world.
The Scudder Family of Funds is designed to make investing easy and less costly.
It includes money market, tax free, income and growth funds as well as IRAs,
401(k)s, Keoghs and other retirement plans.
Services available to all shareholders include toll-free access to the
professional service representatives of Scudder Investor Relations, easy
exchange among funds, shareholder reports, informative newsletters and the
walk-in convenience of Scudder Funds Centers.
All Scudder mutual funds are pure no-load(TM). This means you pay no commissions
to purchase or redeem your shares or to exchange from one fund to another. There
are no "12b-1" fees either, which many other funds now charge to support their
marketing efforts. All of your investment goes to work for you. We look forward
to welcoming you as a shareholder.
/s/Daniel Pierce
Scudder Small Company Value Fund
Investment objective
o long-term growth of capital
Investment characteristics
o a diversified, actively managed portfolio of domestic small capitalization
stocks
o a systematic, proprietary investment approach to uncovering potentially
undervalued small U.S. companies
o potential for above-average long-term growth with above-average stock market
risk
Contents
Investment objective and policies 5
Why invest in the Fund? 6
U.S. investment experience 7
What are the Fund's special risks? 7
Additional information about policies
and investments 7
Distribution and performance information 10
Fund organization 11
Transaction information 11
Purchases 14
Exchanges and redemptions 15
Shareholder benefits 18
Trustees and Officers 21
Investment products and services 22
How to contact Scudder 23
4
<PAGE>
Investment objective and policies
Scudder Small Company Value Fund (the "Fund"), a diversified series of Scudder
Securities Trust, invests for long-term growth of capital by seeking out
undervalued stocks of small U.S. companies. The Fund's investment adviser,
Scudder, Stevens & Clark, Inc. (the "Adviser"), uses a systematic, proprietary
investment approach to identify small, domestic companies that, in the opinion
of the Adviser, are selling at prices that do not reflect adequately their
long-term business potential. These companies are often out of favor or not
closely followed by investors and, as a result, may offer substantial
appreciation potential over time.
The Fund is expected to provide little, if any, current income and is designed
for the aggressive portion of an investor's portfolio. Although the Fund
typically holds a large number of securities identified through a quantitative,
value-driven investment strategy, it does entail above-average investment risk
in comparison to larger stocks. Shares of the Fund should be purchased with a
long-term horizon in mind. To encourage long-term investment, a 1% redemption
and exchange fee, described more fully below, is payable to the Fund for the
benefit of remaining shareholders on shares held less than one year.
Except as otherwise indicated, the Fund's investment objective and policies are
not fundamental and may be changed without a vote of shareholders. If there is a
change in investment objective, shareholders should consider whether the Fund
remains an appropriate investment in light of their then current financial
position and needs. There can be no assurance that the Fund's objective will be
met.
Investments
In pursuit of long-term growth of capital, the Fund invests, under normal
circumstances, at least 90% of its assets in the common stock of small U.S.
companies. The Fund will invest in securities of companies that are similar in
size to those in the Russell 2000(R) Index of small stocks and maintain a median
market capitalization (i.e., current stock price times shares outstanding) below
$500 million. On a temporary basis, the Fund may continue to hold securities of
companies that have grown in market capitalization above the maximum of the
Russell 2000 Index, but will not add to these holdings.
The Fund takes a diversified approach to investing in small capitalization
issues. It will not be unusual for the Fund to participate in more than one
hundred small companies, representing a variety of U.S. industries.
While the Fund invests predominantly in common stocks, it can purchase other
types of equity securities including preferred stocks (either convertible or
nonconvertible), rights, warrants and restricted securities. Securities may be
listed on national exchanges or, more commonly, traded over-the-counter. The
Fund also may invest up to 20% of its assets in U.S. Treasury, agency and
instrumentality obligations on a temporary basis, may enter into repurchase
agreements and may engage in strategic transactions, using such derivatives
contracts as index options and futures, to increase stock market participation,
enhance liquidity and manage transaction costs. In addition, for temporary or
emergency purposes, such as providing for redemptions or distributions, the Fund
may borrow from banks and other financial institutions in an amount not
exceeding the value of one-third of the Fund's total assets. The Fund will not
borrow for investment purposes.
For temporary defensive purposes, the Fund may invest without limit in cash and
cash equivalents when the Adviser deems such a position advisable in light of
economic or market conditions. More information about these investment
techniques is provided under "Additional information about policies and
investments."
5
<PAGE>
Investment objective and policies (cont'd)
Value investment approach
The Fund is actively managed using a disciplined, value-oriented investment
management approach. The Adviser uses a proprietary, computerized model to
identify for investment small public U.S. companies selling at prices that, in
the opinion of the Adviser, do not reflect adequately their long-term business
potential. Companies purchased for the Fund typically have the following
characteristics:
o Attractive valuations relative to the Russell 2000 Index--a widely used
benchmark of small stock performance--based on measures such as price to
earnings, price to book value and price to cash flow ratios.
o Favorable trends in earnings growth rates and stock price momentum.
The Fund's holdings are often out of favor or simply overlooked by investors.
Accordingly, their prices can rise either as a result of improved business
fundamentals, particularly when earnings grow faster than general expectations,
or as more investors come to recognize the full extent of a company's underlying
potential.
While the Fund involves above-average equity risk, the Fund's value-oriented,
systematic approach to investing is designed to mitigate volatility of the
Fund's share price relative to the small capitalization sector of the U.S. stock
market. This risk is further managed by purchasing a large number of stocks, and
employing specialized portfolio management techniques, such as portfolio
optimization.
Why invest in the Fund?
Scudder Small Company Value Fund combines the long-term growth potential of
small company stocks with the defensive nature of value investing. The Fund
focuses on U.S. small capitalization issues that may be out of favor or not
closely followed by investors, yet which, in the opinion of the Adviser, will
reward investors with substantial returns over time. U.S. small capitalization
stocks have outperformed large capitalization stocks over time, albeit with
greater volatility in returns. Since the Fund involves both above-average
performance opportunity and risk, it may be suitable for those individuals who
are investing for a long-term goal, such as accumulating assets for retirement,
funding a child's college education or building wealth for future generations.
While the Fund may invest in a broad range of industries, it is not, by itself,
a complete investment program. Nonetheless, it can help improve the
diversification of an investment portfolio already holding other types of stock
and fixed-income securities. Historically, the prices of value stocks, and in
particular small company value stocks, have not always moved in tandem with the
prices of either large company stocks or higher-risk small company "growth"
issues. Thus, Fund shares can add balance to a personal investment portfolio.
The Fund offers low-cost, convenient access to a sector of the U.S. stock market
in which investors might otherwise find it difficult to participate. On their
own, individual investors might find it a challenge to analyze data on hundreds
of small companies, receive complete, up-to-date financial information, and buy
and sell securities at favorable prices. The Fund's portfolio management team
assumes the burden of these varied responsibilities for investors.
In addition, the Fund offers all the benefits of the Scudder Family of Funds.
Scudder, Stevens & Clark, Inc. manages a diverse family of pure no-load(TM)
funds and provides a wide range of services to help investors meet their
investment needs. Please refer to "Investment products and services" for
additional information.
6
<PAGE>
U.S. investment experience
The Adviser is one of America's largest independent investment managers and has
been involved in U.S. stock investing since its founding over 75 years ago. As
of June 30, 1996, Scudder managed in excess of $23 billion in U.S. equity
securities, including over $6 billion in domestically-oriented growth mutual
funds. The Adviser manages Scudder Development Fund, one of America's first
small company mutual funds, Scudder Micro Cap Fund and Scudder 21st Century
Growth Fund.
What are the Fund's special risks?
While historically small company stocks have outperformed the stocks of large
companies, the former have customarily involved more risk as well. Small
companies may have limited product lines, markets or financial resources; may
lack management depth or experience; and may be more vulnerable to adverse
general market or economic developments than large companies. The prices of
small company securities are often more volatile than prices associated with
large company issues, and can display abrupt or erratic movements at times, due
to limited trading volumes and less publicly available information.
Also, because small companies normally have fewer shares outstanding and these
shares trade less frequently than large companies, it may be more difficult for
the Fund to buy and sell significant amounts of such shares without an
unfavorable impact on prevailing market prices.
Some of the companies in which the Fund may invest may distribute, sell or
produce products which have recently been brought to market and may be dependent
on key personnel.
The securities of small companies are often traded over-the-counter and may not
be traded in the volumes typical on a national securities exchange.
Consequently, in order to sell this type of holding, the Fund may need to
discount the securities from recent prices or dispose of the securities over a
long period of time.
Additional information about policies and investments
Investment restrictions
The Fund has adopted certain fundamental policies which may not be changed
without a vote of shareholders and which are designed to reduce the Fund's
investment risk.
The Fund may not borrow money except as a temporary measure for extraordinary or
emergency purposes and may not make loans except through the lending of
portfolio securities, the purchase of debt securities or through repurchase
agreements.
The Fund may not invest more than 25% of its total assets in securities of
companies in the same industry.
A complete description of these and other policies and restrictions is contained
under "Investment Restrictions" in the Fund's Statement of Additional
Information.
Common stocks
Under normal circumstances, the Fund invests primarily in common stocks. Common
stock is issued by companies to raise cash for business purposes and represents
a proportionate interest in the issuing companies. Therefore, the Fund
participates in the success or failure of any company in which it holds stock.
The market values of equity securities can fluctuate
7
<PAGE>
Additional information about policies and investments (cont'd)
significantly, reflecting the business performance of the issuing company,
investor perception and general economic or financial market movements. Smaller
companies are especially sensitive to these factors and may even become
valueless. Despite the risk of price volatility, however, common stocks also
offer the greatest potential for gain on investment, compared to other classes
of financial assets such as bonds or cash equivalents.
Convertible securities
The convertible securities in which the Fund may invest consist of bonds, notes,
debentures and preferred stocks which may be converted or exchanged at a stated
or determinable exchange ratio into underlying shares of common stock. Prior to
their conversion, convertible securities may have characteristics similar to
nonconvertible securities of the same type.
Repurchase agreements
As a means of earning income for periods as short as overnight, the Fund may
enter into repurchase agreements with selected banks and broker/dealers. Under a
repurchase agreement, the Fund acquires securities, subject to the seller's
agreement to repurchase at a specified time and price.
The Fund may enter into repurchase commitments with any party deemed
creditworthy by the Adviser if the transaction is entered into for investment
purposes and the counterparty's creditworthiness is at least equal to that of
issuers of securities which the Fund may purchase.
Strategic Transactions and derivatives
The Fund may, but is not required to, utilize various other investment
strategies as described below to hedge various market risks or to seek gain.
These strategies may be executed through the use of derivative contracts. Such
strategies are generally accepted as a part of modern portfolio management and
are regularly utilized by many mutual funds and other institutional investors.
Techniques and instruments may change over time as new instruments and
strategies are developed or regulatory changes occur.
In the course of pursuing these investment strategies, the Fund may purchase and
sell exchange-listed and over-the-counter put and call options on securities,
equity and other financial instruments, and purchase and sell financial futures
contracts and options thereon (collectively, all the above are called "Strategic
Transactions").
Strategic Transactions may be used without limit to attempt to protect against
possible changes in the market value of securities held in or to be purchased
for the Fund's portfolio resulting from securities market fluctuations, to
protect the Fund's unrealized gains in the value of its portfolio securities, to
facilitate the sale of such securities for investment purposes, or to establish
a position in the derivatives markets as a temporary substitute for purchasing
or selling particular securities. Some Strategic Transactions may also be used
to enhance potential gain although no more than 5% of the Fund's assets will be
committed to Strategic Transactions entered into for non-hedging purposes. Any
or all of these investment techniques may be used at any time and in any
combination, and there is no particular strategy that dictates the use of one
technique rather than another, as use of any Strategic Transaction is a function
of numerous variables including market conditions. The ability of the Fund to
utilize these Strategic Transactions successfully will depend on the Adviser's
ability to predict pertinent market movements, which cannot be assured. The Fund
will comply with applicable regulatory requirements when implementing these
strategies, techniques and instruments. Strategic Transactions involving
financial futures and options thereon will be purchased, sold or entered
8
<PAGE>
into only for bona fide hedging, risk management or portfolio management
purposes and not for speculative purposes. Please refer to "Risk
factors--Strategic Transactions and derivatives" for more information.
Risk factors
The Fund's risks are determined by the nature of the securities held and the
portfolio management strategies used by the Adviser. The following are
descriptions of certain risks related to the investments and techniques that the
Fund may use from time to time.
Repurchase agreements. If the seller under a repurchase agreement becomes
insolvent, the Fund's right to dispose of the securities may be restricted, or
the value of the securities may decline before the Fund is able to dispose of
them. In the event of the commencement of bankruptcy or insolvency proceedings
with respect to the seller of the securities before repurchase of the securities
under a repurchase agreement, the Fund may encounter delay and incur costs,
including a decline in the value of the securities, before being able to sell
the securities. Some repurchase commitment transactions may not provide the Fund
with collateral marked-to-market during the term of the commitment.
Convertible securities. While convertible securities generally offer lower
yields than nonconvertible debt securities of similar quality, their prices may
reflect changes in the value of the underlying common stock. Convertible
securities entail less credit risk than the issuer's common stock.
Illiquid or restricted investments. The absence of a trading market can make it
difficult to ascertain a market value for illiquid or restricted investments.
Disposing of illiquid or restricted investments may involve time-consuming
negotiation and legal expenses, and it may be difficult or impossible for the
Fund to sell them promptly at an acceptable price.
Borrowing. Although the principal of the Fund's borrowing will be fixed, the
Fund's assets may change in value during the time a borrowing is outstanding,
increasing exposure to capital risk.
Strategic Transactions and derivatives. Strategic Transactions, including
derivative contracts, have risks associated with them including possible default
by the other party to the transaction, illiquidity and, to the extent the
Adviser's view as to certain market movements is incorrect, the risk that the
use of such Strategic Transactions could result in losses greater than if they
had not been used. Use of put and call options may result in losses to the Fund,
force the sale or purchase of portfolio securities at inopportune times or for
prices higher than (in the case of put options) or lower than (in the case of
call options) current market values, limit the amount of appreciation the Fund
can realize on its investments or cause the Fund to hold a security it might
otherwise sell. The use of options and futures transactions entails certain
other risks. In particular, the variable degree of correlation between price
movements of futures contracts and price movements in the related portfolio
position of the Fund creates the possibility that losses on the hedging
instrument may be greater than gains in the value of the Fund's position. In
addition, futures and options markets may not be liquid in all circumstances and
certain over-the-counter options may have no markets. As a result, in certain
markets, the Fund might not be able to close out a transaction without incurring
substantial losses, if at all. Although the use of futures contracts and options
transactions for hedging should tend to minimize the risk of loss due to a
decline in the value of the hedged position, at the same time they tend to limit
any potential gain which might result from an increase in value of such
position. Finally, the daily variation margin requirements for futures contracts
would create a greater ongoing potential financial risk than would purchases of
options, where the exposure is limited to the cost
9
<PAGE>
Additional information about policies and investments (cont'd)
of the initial premium. Losses resulting from the use of Strategic Transactions
would reduce net asset value, and possibly income, and such losses can be
greater than if the Strategic Transactions had not been utilized. The Strategic
Transactions that the Fund may use and some of their risks are described more
fully in the Fund's Statement of Additional Information.
Distribution and performance information
Dividends and capital gains distributions
The Fund intends to distribute any dividends from net investment income and any
net realized capital gains after utilization of capital loss carryforwards, if
any, in November or December, although an additional distribution may be made if
necessary. Any dividends or capital gains distributions declared in October,
November or December with a record date in such a month and paid the following
January will be treated by shareholders for federal income tax purposes as if
received on December 31 of the calendar year declared. According to preference,
shareholders may receive distributions in cash or have them reinvested in
additional shares of the Fund. If an investment is in the form of a retirement
plan, all dividends and capital gains distributions must be reinvested into the
shareholder's account.
Generally, dividends from net investment income are taxable to shareholders as
ordinary income. Long-term capital gains distributions, if any, are taxable as
long-term capital gains regardless of the length of time shareholders have owned
their shares. Short-term capital gains and any other taxable income
distributions are taxable as ordinary income. A portion of such dividends from
net investment income may qualify for the dividends-received deduction for
corporations.
The Fund sends detailed tax information to shareholders about the amount and
type of its distributions by January 31 of the following year.
Under normal investment conditions, it is anticipated that the Fund's portfolio
turnover rate will not exceed 75% per year. However, economic and market
conditions may necessitate more active trading, resulting in a higher portfolio
turnover rate. A higher rate involves greater brokerage expenses to the Fund and
may result in the realization of net capital gains, which would be taxable to
shareholders when distributed.
Performance information
From time to time, quotations of the Fund's performance may be included in
advertisements, sales literature or shareholder reports. All performance figures
are historical, show the performance of a hypothetical investment and are not
intended to indicate future performance. "Total return" is the change in value
of an investment in the Fund for a specified period. The "average annual total
return" of the Fund is the average annual compound rate of return of an
investment in the Fund assuming the investment has been held for one year and
the life of the Fund as of a stated ending date. "Cumulative total return"
represents the cumulative change in value of an investment in the Fund for
various periods. All types of total return calculations assume that all
dividends and capital gains distributions during the period were reinvested in
shares of the Fund. "Capital change" measures return from capital, including
reinvestment of any capital gains distributions but does not include the
reinvestment of dividends. Performance will vary based upon, among other things,
changes in market conditions and the level of the Fund's expenses.
10
<PAGE>
Fund organization
Scudder Small Company Value Fund is a diversified series of Scudder Securities
Trust (the "Trust"), formerly Scudder Development Fund, an open-end, management
investment company registered under the Investment Company Act of 1940 (the
"1940 Act"). The Trust was organized as a Massachusetts business trust in
October 1985 and on December 31, 1985 assumed the business of its predecessor.
Its predecessor was organized as a Delaware corporation in February 1970.
The Fund's activities are supervised by the Trust's Board of Trustees.
Shareholders have one vote for each share held on matters on which they are
entitled to vote. The Trust is not required to and has no current intention of
holding annual shareholder meetings, although special meetings may be called for
purposes such as electing or removing Trustees, changing fundamental investment
policies or approving an investment management agreement. Shareholders will be
assisted in communicating with other shareholders in connection with removing a
Trustee as if Section 16(c) of the 1940 Act were applicable.
Investment adviser
The Fund retains the investment management firm of Scudder, Stevens & Clark,
Inc., a Delaware corporation, to manage its daily investment and business
affairs subject to the policies established by the Board of Trustees. The
Trustees have overall responsibility for the management of the Fund under
Massachusetts law.
The Fund pays the Adviser an annual fee of 0.75% of the Fund's average daily net
assets. The fee is payable monthly, provided that the Fund will make such
interim payments as may be requested by the Adviser not to exceed 75% of the
amount of the fee then accrued on the books of the Fund and unpaid. The fee is
higher than the average management fee, but not necessarily higher than that
charged by funds with a similar investment objective.
The Adviser has agreed to maintain the annualized expenses of the Fund at no
more than 1.50% of the average daily net assets of the Fund until December 31,
1997.
All of the Fund's expenses are paid out of gross investment income. Shareholders
pay no direct charges or fees for investment or administrative services.
Scudder, Stevens & Clark, Inc. is located at 345 Park Avenue, New York, New
York.
Transfer agent
Scudder Service Corporation, P.O. Box 2291, Boston, Massachusetts 02107-2291, a
subsidiary of the Adviser, is the transfer, shareholder servicing and
dividend-paying agent for the Fund.
Underwriter
Scudder Investor Services, Inc., a subsidiary of the Adviser, is the Fund's
principal underwriter. Scudder Investor Services, Inc. confirms, as agent, all
purchases of shares of the Fund. Scudder Investor Relations is a telephone
information service provided by Scudder Investor Services, Inc.
Fund accounting agent
Scudder Fund Accounting Corporation, a subsidiary of the Adviser, is responsible
for determining the daily net asset value per share and maintaining the general
accounting records of the Fund.
Custodian
State Street Bank and Trust Company is
the Fund's custodian.
Transaction information
Purchasing shares
Purchases are executed at the next calculated net asset value per share after
the Fund's transfer agent receives the purchase request in good order.
11
<PAGE>
Transaction information (cont'd)
Purchases are made in full and fractional shares. (See "Share price.")
By check. If you purchase shares with a check that does not clear, your purchase
will be canceled and you will be subject to any losses or fees incurred in the
transaction. Checks must be drawn on or payable through a U.S. bank. If you
purchase shares by check and redeem them within seven business days of purchase,
the Fund may hold redemption proceeds until the purchase check has cleared. If
you purchase shares by federal funds wire, you may avoid this delay. Redemption
requests by telephone prior to the expiration of the seven-day period will not
be accepted.
By wire. To open a new account by wire, first call Scudder at
1-800-225-5163 to obtain an account number. A representative will instruct you
to send a completed, signed application to the transfer agent. Accounts cannot
be opened without a completed, signed application and a Scudder fund account
number. Contact your bank to arrange a wire transfer to:
The Scudder Funds
State Street Bank and Trust Company
Boston, MA 02101
ABA Number 011000028
DDA Account 9903-5552
Your wire instructions must also include:
- -- the name of the fund in which the money is to be invested,
- -- the account number of the fund, and
- -- the name(s) of the account holder(s).
The account will be established once the application and money order are
received in good order.
You may also make additional investments of $100 or more to your existing
account by wire.
By telephone order. Existing shareholders may purchase shares at a certain day's
price by calling 1-800-225-5163 before the close of regular trading on the New
York Stock Exchange (the "Exchange"), normally 4 p.m. eastern time, on that day.
Orders must be for $10,000 or more and cannot be for an amount greater than four
times the value of your account at the time the order is placed. A confirmation
with complete purchase information is sent shortly after your order is received.
You must include with your payment the order number given at the time the order
is placed. If payment by check or wire is not received within three business
days, the order is subject to cancellation and the shareholder will be
responsible for any loss to the Fund resulting from this cancellation. Telephone
orders are not available for shares held in Scudder IRA accounts and most other
Scudder retirement plan accounts.
By "AutoBuy." If you elected "AutoBuy" for your account, you can call toll-free
to purchase shares. The money will be automatically transferred from your
predesignated bank checking account. Your bank must be a member of the Automated
Clearing House for you to use this service. If you did not elect "AutoBuy," call
1-800-225-5163 for more information.
To purchase additional shares, call 1-800-225-5163. Purchases must be for at
least $250 but not more than $250,000. Proceeds in the amount of your purchase
will be transferred from your bank checking account in two or three business
days following your call. For requests received by the close of regular trading
on the Exchange, shares will be purchased at the net asset value per share
calculated at the close of trading on the day of your call. "AutoBuy" requests
received after the close of regular trading on the Exchange will begin their
processing and be purchased at the net asset value calculated the following
business day.
If you purchase shares by "AutoBuy" and redeem them within seven days of the
purchase, the Fund may hold the redemption proceeds for a period of up to seven
business days. If you
12
<PAGE>
purchase shares and there are insufficient funds in your bank account, the
purchase will be canceled and you will be subject to any losses or fees incurred
in the transaction. "AutoBuy" transactions are not available for Scudder IRA
accounts and most other retirement plan accounts.
Exchanging and redeeming shares
Upon the redemption or exchange of shares held less than one year, a fee of 1%
of the current net asset value of the shares will be assessed and retained by
the Fund for the benefit of the remaining shareholders. The fee is waived for
all shares purchased through certain Scudder retirement plans, including 401(k)
plans, 403(b) plans, 457 plans, Keogh accounts, and Profit Sharing and Money
Purchase Pension Plans. However, if such shares are purchased through a broker,
financial institution or recordkeeper maintaining an omnibus account for the
shares, such waiver may not apply. (Before purchasing shares, please check with
your account representative concerning the availability of the fee waiver.) In
addition, this waiver does not apply to IRA and SEP-IRA accounts. This fee is
intended to encourage long-term investment in the Fund, to avoid transaction and
other expenses caused by early redemptions, and to facilitate portfolio
management. The fee is not a deferred sales charge, is not a commission paid to
the Adviser or its subsidiaries, and does not benefit the Adviser in any way.
The Fund reserves the right to modify the terms of or terminate this fee at any
time.
The fee applies to redemptions from the Fund and exchanges to other Scudder
funds, but not to dividend or capital gains distributions which have been
automatically reinvested in the Fund.
The fee is applied to the shares being redeemed or exchanged in the order in
which they were purchased. See "Exchanges and Redemptions" in the Fund's
Statement of Additional Information for a more detailed description of the
redemption fee.
Exchanges. Your new account will have the same registration and address as your
existing account. The exchange requirements for corporations, other
organizations, trusts, fiduciaries, agents, institutional investors and
retirement plans may be different from those for regular accounts.
Please call 1-800-225-5163 for more information, including information about the
transfer of special account features.
You can also make exchanges among your Scudder fund accounts on SAIL, the
Scudder Automated Information Line, by calling 1-800-343-2890.
Redemptions by telephone. This is the quickest and easiest way to sell Fund
shares. If you elected telephone redemption to your bank on your application,
you can call to request that federal funds be sent to your authorized bank
account. If you did not elect telephone redemption to your bank on your
application, call 1-800-225-5163 for more information.
Redemption proceeds will be wired to your bank unless otherwise requested. If
your bank cannot receive federal reserve wires, redemption proceeds will be
mailed to your bank. There will be a $5 charge for all wire redemptions.
You can also make redemptions from your Scudder fund account on SAIL by calling
1-800-343-2890.
If you open an account by wire, you cannot redeem shares by telephone until the
Fund's transfer agent has received your completed and signed application.
Telephone redemption is not available for shares held in Scudder IRA accounts
and most other Scudder retirement plan accounts.
In the event that you are unable to reach the Fund by telephone, you should
write to the Fund; see "How to contact Scudder" for the address.
(Continued on page 16)
13
<PAGE>
Purchases
<TABLE>
<S> <C> <C>
Opening Minimum initial investment: $2,500; IRAs $1,000
an account Group retirement plans (401(k), 403(b), etc.) have similar
or lower minimums. See appropriate plan literature.
Make checks o By Mail Send your completed and signed application and check
payable to "The by regular mail to: or by express, registered,
or certified mail to:
The Scudder Funds Scudder Shareholder
P.O. Box 2291 Service Center
Boston, MA 42 Longwater Drive
02107-2291 Norwell, MA
02061-1612
o By Wire Please see Transaction information--Purchasing shares--
By wire for details, including the ABA wire transfer number.
Then call 1-800-225-5163 for instructions.
o In Person Visit one of our Funds Centers to complete your application
with the help of a Scudder representative. Funds Center
locations are listed under Shareholder benefits.
- -----------------------------------------------------------------------------------------------------------------------
Purchasing Minimum additional investment: $100; IRAs $50
additional Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums.
shares See appropriate plan literature.
Make checks o By Mail Send a check with a Scudder investment slip, or with a letter of
payable to "The instruction including your account number and the complete
Scudder Funds." Fund name, to the appropriate address listed above.
o By Wire Please see Transaction information--Purchasing shares--
By wire for details, including the ABA wire transfer number.
o In Person Visit one of our Funds Centers to make an additional
investment in your Scudder fund account. Funds Center
locations are listed under Shareholder benefits.
o By Telephone Please see Transaction information--Purchasing shares--
By AutoBuy or By telephone order for more details.
o By Automatic You may arrange to make investments on a regular
Investment Plan basis through automatic deductions from your bank checking
($50 minimum) account. Please call 1-800-225-5163 for more information and an
enrollment form.
</TABLE>
14
<PAGE>
Exchanges and redemptions
<TABLE>
<S> <C>
Exchanging Minimum investments: $2,500 to establish a new account;
shares $100 to exchange among existing accounts
o By Telephone To speak with a service representative, call 1-800-225-5163 from
8 a.m. to 8 p.m. eastern time or to access SAIL(TM), Scudder's Automated
Information Line, call 1-800-343-2890 (24 hours a day).
There may be a o By Mail Print or type your instructions and include:
1% fee payable or Fax - the name of the Fund and the account number you are exchanging from;
to the Fund for - your name(s) and address as they appear on your account;
exchanges of - the dollar amount or number of shares you wish to exchange;
shares held less - the name of the Fund you are exchanging into;
than one year - your signature(s) as it appears on your account; and
- a daytime telephone number.
Send your instructions
by regular mail to: or by express, registered, or by fax to:
or certified mail to:
The Scudder Funds Scudder Shareholder 1-800-821-6234
P.O. Box 2291 Service Center
Boston, MA 02107-2291 42 Longwater Drive
Norwell, MA
02061-1612
- -----------------------------------------------------------------------------------------------------------------------
Redeeming o By Telephone To speak with a service representative, call 1-800-225-5163 from
shares 8 a.m. to 8 p.m. eastern time or to access SAIL(TM), Scudder's Automated
Information Line, call 1-800-343-2890 (24 hours a day). You may have
redemption proceeds sent to your predesignated bank account, or
redemption proceeds of up to $100,000 sent to your address of record.
There may be a o By Mail Send your instructions for redemption to the appropriate address or fax number
1% fee payable or Fax above and include:
to the Fund for - the name of the Fund and account number you are redeeming from;
redemption of - your name(s) and address as they appear on your account;
shares held less - the dollar amount or number of shares you wish to redeem;
than one year - your signature(s) as it appears on your account; and
- a daytime telephone number.
A signature guarantee is required for redemptions over $50,000.
See Transaction information--Redeeming shares.
o By Automatic You may arrange to receive automatic cash payments periodically.
Withdrawal Call 1-800-225-5163 for more information and an enrollment form.
Plan
</TABLE>
15
<PAGE>
Transaction information (cont'd)
(Continued from page 13)
By "AutoSell." If you elected "AutoSell" for your account, you can call
toll-free to redeem shares. The money will be automatically transferred to your
predesignated bank checking account. Your bank must be a member of the Automated
Clearing House for you to use this service. If you did not elect "AutoSell,"
call 1-800-225-5163 for more information.
To redeem shares, call 1-800-225-5163. Redemptions must be for at least $250.
Proceeds in the amount of your redemption will be transferred to your bank
checking account in two or three business days following your call. For requests
received by the close of regular trading on the Exchange, shares will be
redeemed at the net asset value per share calculated at the close of trading on
the day of your call. "AutoSell" requests received after the close of regular
trading on the Exchange will begin their processing and be redeemed at the net
asset value calculated the following business day.
"AutoSell" transactions are not available for Scudder IRA accounts and most
other retirement plan accounts.
Signature guarantees. For your protection and to prevent fraudulent redemptions,
on written redemption requests in excess of $50,000 we require an original
signature and an original signature guarantee for each person in whose name the
account is registered. (The Fund reserves the right, however, to require a
signature guarantee for all redemptions.) You can obtain a signature guarantee
from most banks, credit unions or savings associations, or from broker/dealers,
municipal securities broker/dealers, government securities broker/dealers,
national securities exchanges, registered securities associations or clearing
agencies deemed eligible by the Securities and Exchange Commission. Signature
guarantees by notaries public are not acceptable. Redemption requirements for
corporations, other organizations, trusts, fiduciaries, agents, institutional
investors and retirement plans may be different from those for regular accounts.
For more information, please call 1-800-225-5163.
Telephone transactions
Shareholders automatically receive the ability to exchange by telephone and the
right to redeem by telephone up to $100,000 to their address of record.
Shareholders also may, by telephone, request that redemption proceeds be sent to
a predesignated bank account. The Fund uses procedures designed to give
reasonable assurance that telephone instructions are genuine, including
recording telephone calls, testing a caller's identity and sending written
confirmation of telephone transactions. If the Fund does not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Fund will not be liable for acting upon instructions
communicated by telephone that it reasonably believes to be genuine.
Share price
Purchases and redemptions, including exchanges, are made at net asset value.
There is a 1% fee payable to the Fund for exchanges or redemptions of shares
held less than one year. Scudder Fund Accounting Corporation determines net
asset value per share as of the close of regular trading on the Exchange,
normally 4 p.m. eastern time, on each day the Exchange is open for trading. Net
asset value per share is calculated by dividing the value of total Fund assets,
less all liabilities, by the total number of shares outstanding.
Processing time
All purchase and redemption requests must be received in good order by the
Fund's transfer agent. Those requests received by the close of regular trading
on the Exchange are executed at the net asset value per share calculated at the
close of regular trading that day.
16
<PAGE>
Purchase and redemption requests received after the close of regular trading on
the Exchange will be executed the following business day. If you wish to make a
purchase of $500,000 or more, you should notify Scudder Investor Relations by
calling 1-800-225-5163. The Fund will normally send your redemption proceeds
within one business day following the redemption request, but may take up to
seven business days (or longer in the case of shares recently purchased by
check).
Purchase restrictions
Purchases and sales should be made for long-term investment purposes only. The
Fund and Scudder Investor Services, Inc. each reserves the right to reject
purchases of Fund shares (including exchanges) for any reason including when a
pattern of frequent purchases and sales made in response to short-term
fluctuations in the Fund's share price appears evident.
Tax information
A redemption of shares, including an exchange into another Scudder fund, is a
sale of shares and may result in a gain or loss for income tax purposes.
Tax identification number
Be sure to complete the Tax Identification Number section of the Fund's
application when you open an account. Federal tax law requires the Fund to
withhold 31% of taxable dividends, capital gains distributions and redemption
and exchange proceeds from accounts (other than those of certain exempt payees)
without a certified Social Security or tax identification number and certain
other certified information or upon notification from the IRS or a broker that
withholding is required. The Fund reserves the right to reject new account
applications without a certified Social Security or tax identification number.
The Fund also reserves the right, following 30 days' notice, to redeem all
shares in accounts without a certified Social Security or tax identification
number. A shareholder may avoid involuntary redemption by providing the Fund
with a tax identification number during the 30-day notice period. Redemptions
for failure to provide a tax identification number are not subject to the 1%
redemption fee.
Minimum balances
Shareholders should maintain a share balance worth at least $2,500, which amount
may be changed by the Board of Trustees. Scudder retirement plans have similar
or lower minimum share balance requirements. A shareholder may open an account
with at least $1,000, if an automatic investment plan of $100/month is
established.
Shareholders who maintain a non-fiduciary account balance of less than $2,500 in
the Fund, without establishing an automatic investment plan, will be assessed an
annual $10.00 per fund charge with the fee to be paid to the Fund. The $10.00
charge will not apply to shareholders with a combined household account balance
in any of the Scudder Funds of $25,000 or more. The Fund reserves the right,
following 60 days' written notice to shareholders, to redeem all shares in
accounts below $250, including accounts of new investors, where a reduction in
value has occurred due to a redemption or exchange out of the account. The Fund
will mail the proceeds of the redeemed account to the shareholder. Reductions in
value that result solely from market activity will not trigger an involuntary
redemption. Retirement accounts and certain other accounts will not be assessed
the $10.00 charge or be subject to automatic liquidation. Please refer to
"Exchanges and Redemptions--Other information" in the Fund's Statement of
Additional Information for more information.
Third party transactions
If purchases and redemptions of Fund shares are arranged and settlement is made
at an investor's election through a member of the National Association of
Securities Dealers, Inc., other than Scudder Investor Services, Inc., that
member may, at its discretion, charge a fee for that service.
17
<PAGE>
Transaction information (cont'd)
Redemption-in-kind
The Fund reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption or repurchase order by making
payment in whole or in part in readily marketable securities chosen by the Fund
and valued as they are for purposes of computing the Fund's net asset value (a
redemption-in-kind). If payment is made in securities, a shareholder may incur
transaction expenses in converting these securities to cash. The Trust has
elected, however, to be governed by Rule 18f-1 under the 1940 Act, as a result
of which the Fund is obligated to redeem shares, with respect to any one
shareholder during any 90-day period, solely in cash up to the lesser of
$250,000 or 1% of the net asset value of the Fund at the beginning of the
period.
Shareholder benefits
Experienced professional management
Scudder, Stevens & Clark, Inc., one of the nation's most experienced investment
management firms, actively manages your Scudder fund investment. Professional
management is an important advantage for investors who do not have the time or
expertise to invest directly in individual securities.
A team approach to investing
Scudder Small Company Value Fund is managed by a team of Scudder investment
professionals, who each play an important role in the Fund's management process.
Team members work together to develop investment strategies and select
securities for the Fund's portfolio. Scudder believes its team approach benefits
Fund investors by bringing together many disciplines and leveraging Scudder's
extensive resources.
Philip S. Fortuna, Lead Portfolio Manager, joined Scudder in 1986 as manager of
institutional equity accounts. He became director of quantitative research in
1987 and served as director of investment operations from 1993 to 1994. James M.
Eysenbach, Portfolio Manager, joined Scudder in 1991 as a senior quantitative
analyst and is currently director of quantitative research for Scudder. Mr.
Eysenbach has more than ten years investment research and management experience.
SAIL(TM)--Scudder Automated Information Line
For personalized account information including fund prices, yields and account
balances, to perform transactions in existing Scudder fund accounts, or to
obtain information on any Scudder fund, shareholders can call Scudder's
Automated Information Line (SAIL) at 1-800-343-2890, 24 hours a day. During
periods of extreme economic or market changes, or other conditions, it may be
difficult for you to effect telephone transactions in your account. In such an
event you should write to the Fund; please see "How to contact Scudder" for the
address.
Investment flexibility
Scudder offers toll-free telephone exchange between funds at current net asset
value. You can move your investments among money market, income, growth,
tax-free and growth and income funds with a simple toll-free call or, if you
prefer, by sending your instructions through the mail or by fax. Telephone and
fax redemptions and exchanges are subject to termination and their terms are
subject to change at any time by the Fund or the transfer agent. In some cases,
the transfer agent or Scudder Investor Services, Inc. may impose additional
conditions on telephone transactions.
Dividend reinvestment plan
You may have dividends and distributions automatically reinvested in additional
Fund shares. Please call 1-800-225-5163 to request this feature.
18
<PAGE>
Shareholder statements
You receive a detailed account statement every time you purchase or redeem
shares. All of your statements should be retained to help you keep track of
account activity and the cost of shares for tax purposes.
Shareholder reports
In addition to account statements, you receive periodic shareholder reports
highlighting relevant information, including investment results and a review of
portfolio changes.
To reduce the volume of mail you receive, only one copy of most Fund reports,
such as the Fund's Annual Report, may be mailed to your household (same surname,
same address). Please call 1-800-225-5163 if you wish to receive additional
shareholder reports.
Newsletters
Four times a year, Scudder sends you Perspectives, an informative newsletter
covering economic and investment developments, service enhancements and other
topics of interest to Scudder fund investors.
Scudder Funds Centers
As a convenience to shareholders who like to conduct business in person, Scudder
Investor Services, Inc. maintains Funds Centers in Boca Raton, Boston, Chicago,
New York and San Francisco.
T.D.D. service for the hearing impaired
Scudder's full range of investor information and shareholder services is
available to hearing impaired investors through a toll-free T.D.D. (Telephone
Device for the Deaf) service. If you have access to a T.D.D., call
1-800-543-7916 for investment information or specific account questions and
transactions.
19
<PAGE>
Scudder tax-advantaged retirement plans
Scudder offers a variety of tax-advantaged retirement plans for individuals,
businesses and non-profit organizations. These flexible plans are designed for
use with the Scudder Family of Funds (except Scudder tax-free funds, which are
inappropriate for such plans). Scudder Funds offer a broad range of investment
objectives and can be used to seek almost any investment goal. Using Scudder's
retirement plans can help shareholders save on current taxes while building
their retirement savings.
o Scudder No-Fee IRAs. These retirement plans allow a maximum annual
contribution of $2,000 per person for anyone with earned income. Many
people can deduct all or part of their contributions from their
taxable income, and all investment earnings accrue on a tax deferred
basis. The Scudder No-Fee IRA charges no annual custodial fee.
o 401(k) Plans. 401(k) plans allow employers and employees to make
tax-deductible retirement contributions. Scudder offers a full service
program that includes recordkeeping, prototype plan, employee
communications and trustee services, as well as investment options.
o Profit Sharing and Money Purchase Pension Plans. These plans allow
corporations, partnerships and people who are self-employed to make
annual, tax-deductible contributions of up to $30,000 for each person
covered by the plans. Plans may be adopted individually or paired to
maximize contributions. These are sometimes known as Keogh plans.
o 403(b) Plans. Retirement plans for tax-exempt organizations and school
systems to which employers and employees may both contribute.
o SEP-IRAs. Easily administered retirement plans for small businesses
and self-employed individuals. The maximum annual contribution to
SEP-IRA accounts is adjusted each year for inflation.
o Scudder Horizon Plan. A no-load variable annuity that lets you build
assets by deferring taxes on your investment earnings. You can start
with $2,500 or more.
Scudder Trust Company (an affiliate of the Adviser) is Trustee or Custodian for
some of these plans and is paid an annual fee for some of the above retirement
plans. For information about establishing a Scudder No-Fee IRA, SEP-IRA, Profit
Sharing Plan, Money Purchase Pension Plan or a Scudder Horizon Plan, please call
1-800-225-2470. For information about 401(k)s or 403(b)s please call
1-800-323-6105. To effect transactions in existing IRA, SEP-IRA, Profit Sharing
or Pension Plan accounts, call 1-800-225-5163.
The variable annuity contract is provided by Charter National Life Insurance
Company (in New York State, Intramerica Life Insurance Company [S 1802]). The
contract is offered by Scudder Insurance Agency, Inc. (in New York State, Nevada
and Montana, Scudder Insurance Agency of New York, Inc.). CNL, Inc. is the
Principal Underwriter. Scudder Horizon Plan is not available in all states.
20
<PAGE>
Trustees and Officers
Daniel Pierce*
President and Trustee
Paul Bancroft III
Trustee; Venture Capitalist and Consultant
Thomas J. Devine
Trustee; Consultant
Keith R. Fox
Trustee; President, Exeter Capital
Management Corporation
Dudley H. Ladd*
Trustee
Wilson Nolen
Trustee; Consultant
Kathryn L. Quirk*
Trustee
Gordon Shillinglaw
Trustee; Professor Emeritus of Accounting,
Columbia University
Graduate School of Business
Robert W. Lear
Honorary Trustee; Executive-in-Residence,
Visiting Professor, Columbia University
Graduate School of Business
Robert G. Stone, Jr.
Honorary Trustee; Chairman of the Board
and Director, Kirby Corporation
Edmund R. Swanberg*
Honorary Trustee
Peter Chin*
Vice President
James M. Eysenbach*
Vice President
Philip S. Fortuna*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
David S. Lee*
Vice President
Roy C. McKay*
Vice President
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
Edward J. O'Connell*
Vice President and Assistant Treasurer
Richard W. Desmond*
Assistant Secretary
*Scudder, Stevens & Clark, Inc.
21
<PAGE>
Investment products and services
The Scudder Family of Funds++
Money Market
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Tax Free Money Market+
Scudder Tax Free Money Fund
Scudder California Tax Free Money Fund*
Scudder New York Tax Free Money Fund*
Tax Free+
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund*
Scudder Massachusetts Limited Term
Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
U. S. Income
Scudder Short Term Bond Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder Zero Coupon 2000 Fund
Scudder High Yield Bond Fund
Global Income
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
Scudder Balanced Fund
Scudder Growth and Income Fund
U.S. Growth
Value
Scudder Capital Growth Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Quality Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
Worldwide
Scudder Global Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Emerging Markets Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund
Retirement Programs
IRA
SEP IRA
SIMPLE IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan *+++
(a variable annuity)
Closed-End Funds#
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder World Income Opportunities
Fund, Inc.
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. ++Funds within categories are listed from expected
least to most risk. +A portion of the income from the tax-free funds may be
subject to federal, state, and local taxes. *Not available in all states. +++A
no-load variable annuity contract provided by Charter National Life Insurance
Company and its affiliate, offered by Scudder's insurance agencies,
1-800-225-2470. #These funds, advised by Scudder, Stevens & Clark, Inc., are
traded on various stock exchanges.
22
<PAGE>
How to contact Scudder
Account Service and Information:
For existing account service and transactions
Scudder Investor Relations -- 1-800-225-5163
For 24 hour account information, fund information, exchanges, and an
overview of all the services available to you
Scudder Electronic Account Services -- http://funds.scudder.com
For personalized information about your Scudder accounts, exchanges and
redemptions
Scudder Automated Information Line (SAIL) -- 1-800-343-2890
Investment Information:
For information about the Scudder funds, including additional
applications and prospectuses, or for answers to investment questions
Scudder Investor Relations -- 1-800-225-2470
[email protected]
Scudder's World Wide Web Site -- http://funds.scudder.com
For establishing 401(k) and 403(b) plans
Scudder Defined Contribution Services -- 1-800-323-6105
Scudder Brokerage Services:
To receive information about this discount brokerage service and to
obtain an application Scudder Brokerage Services** --
1-800-700-0820
Please address all correspondence to:
The Scudder Funds
P.O. Box 2291
Boston, Massachusetts
02107-2291
Or Stop by a Scudder Funds Center:
Many shareholders enjoy the personal, one-on-one service of the Scudder
Funds Centers. Check for a Funds Center near you--they can be found in
the following cities:
Boca Raton Chicago San Francisco
Boston New York
Scudder Investor Relations and Scudder Funds Centers are services provided
through Scudder Investor Services, Inc., Distributor.
* Contact Scudder Investor Services, Inc., Distributor, to receive a
prospectus with more complete information, including management fees and
expenses. Please read it carefully before you invest or send money.
** Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA
02061--Member NASD/SIPC.
23
<PAGE>
SCUDDER SMALL COMPANY VALUE FUND
A Pure No-Load (TM) (No Sales Charges) Mutual Fund
Which Invests for Long-Term Growth
of Capital by Seeking out Undervalued
Stocks of Small U.S. Companies
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
January 1, 1997
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus and should
be read in conjunction with the Prospectus of Scudder Small Company Value Fund
dated January 1, 1997, as amended from time to time, a copy of which may be
obtained without charge by writing to Scudder Investor Services, Inc., Two
International Place, Boston, Massachusetts 02110-4103.
<PAGE>
TABLE OF CONTENTS Page
THE FUND'S INVESTMENT OBJECTIVE AND POLICIES..................................1
General Investment Objective and Policies...................................1
Investments and Investment Techniques.......................................2
Investment Restrictions....................................................11
PURCHASES....................................................................14
Additional Information About Opening An Account............................14
Additional Information About Making Subsequent Investments.................14
Additional Information About Making Subsequent Investments by AutoBuy......14
Checks.....................................................................15
Wire Transfer of Federal Funds.............................................15
Share Price................................................................15
Share Certificates.........................................................15
Other Information..........................................................16
EXCHANGES AND REDEMPTIONS....................................................16
Exchanges..................................................................16
Special Redemption and Exchange Information................................17
Redemption by Telephone....................................................17
Redemption by AutoSell.....................................................18
Redemption by Mail or Fax..................................................18
Redemption-In-Kind.........................................................19
Other Information..........................................................19
FEATURES AND SERVICES OFFERED BY THE FUND....................................20
The Pure No-Load(TM) Concept...............................................20
Dividends and Capital Gain Distribution Options............................21
Diversification............................................................21
Scudder Funds Centers......................................................21
Reports to Shareholders....................................................21
Transaction Summaries......................................................21
THE SCUDDER FAMILY OF FUNDS..................................................21
SPECIAL PLAN ACCOUNTS........................................................25
Scudder Retirement Plans: Profit-Sharing and Money Purchase
Pension Plans for Corporations and Self-Employed Individuals..........26
Scudder 401(k): Cash or Deferred Profit-Sharing Plan for
Corporations and Self-Employed Individuals............................26
Scudder IRA: Individual Retirement Account................................26
Scudder 403(b) Plan........................................................27
Automatic Withdrawal Plan..................................................27
Group or Salary Deduction Plan.............................................27
Automatic Investment Plan..................................................28
Uniform Transfers/Gifts to Minors Act......................................28
Scudder Savings Incentive Match Plans for Employees: SIMPLE IRA'S..........28
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS....................................28
PERFORMANCE INFORMATION......................................................29
Average Annual Total Return................................................29
Cumulative Total Return....................................................29
Total Return...............................................................29
Capital Change.............................................................30
Comparison of Fund Performance.............................................30
Internet access............................................................31
i
<PAGE>
TABLE OF CONTENTS (continued)
FUND ORGANIZATION............................................................34
INVESTMENT ADVISER...........................................................35
Personal Investments by Employees of the Adviser...........................37
TRUSTEES AND OFFICERS........................................................37
REMUNERATION.................................................................39
DISTRIBUTOR..................................................................40
TAXES........................................................................41
PORTFOLIO TRANSACTIONS.......................................................44
Brokerage Commissions......................................................44
Portfolio Turnover.........................................................45
NET ASSET VALUE..............................................................45
ADDITIONAL INFORMATION.......................................................46
Experts....................................................................46
Shareholder Indemnification................................................46
Other Information..........................................................46
FINANCIAL STATEMENTS.........................................................47
ii
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
(See "Investment objective and policies" and "Additional information
about policies and investments" in the Fund's prospectus.)
Scudder Small Company Value Fund (the "Fund") is a pure no-load(TM),
diversified series of Scudder Securities Trust (the "Trust"), an open-end
management investment company which continuously offers and redeems its shares
at net asset value. It is a company of the type commonly known as a mutual fund.
General Investment Objective and Policies
Scudder Small Company Value Fund invests for long-term growth of
capital by seeking out undervalued stocks of small U.S. companies. The Fund's
investment adviser, Scudder, Stevens & Clark, Inc. (the "Adviser"), uses a
systematic, proprietary investment approach to identify small, U.S. companies
that, in the opinion of the Adviser, are selling at prices that do not reflect
adequately their long-term business potential. The Fund evaluates over 1000
companies similar in size to those comprising the Russell 2000(R) Index (created
by Frank Russell Company ("Russell"), a leading asset strategy and investment
management consultant, which provides independent evaluation of investment
managers. These companies are often out of favor or not closely followed by
investors and, as a result, can offer substantial appreciation potential over
time.
The Fund is expected to provide little, if any, current income and is
designed for the aggressive portion of an investor's portfolio. Although the
Fund typically holds a large number of securities identified through a
quantitative, value-driven investment strategy, it does entail above average
investment risk in comparison to larger U.S. stocks. Shares of the Fund should
be purchased with a long-term horizon in mind (five years or more).
In pursuit of long-term growth of capital, the Fund invests, under
normal circumstances, at least 90% of its assets in the common stock of small
U.S. companies. The Fund will invest in securities of companies that are similar
in size to those in the Russell 2000 Index of small stocks and maintain a median
market capitalization (i.e., current stock price times shares outstanding) below
$500 million. On a temporary basis, the Fund may continue to hold securities of
companies that have grown in market capitalization above the maximum of the
Russell 2000 Index, but will not add to these holdings.
The Fund takes a diversified approach to investing in small
capitalization issues. It will not be unusual for the Fund to participate in
more than one hundred small companies, representing a variety of U.S.
industries.
While the Fund invests primarily in common stocks, it can purchase
other types of equity securities including preferred stocks (either convertible
or nonconvertible), rights, warrants and restricted securities. Securities may
be listed on national exchanges or, more commonly, traded over-the-counter. The
Fund may also invest up to 20% of its assets in U.S. Treasury, agency and
instrumentality obligations on a temporary basis, may enter into repurchase
agreements and may engage in strategic transactions, using such derivatives
contracts as index options and futures, to increase stock market participation,
enhance liquidity and manage transaction costs. In addition, for temporary or
emergency purposes, such as providing for redemptions or distributions, the Fund
may borrow from banks and other financial institutions in an amount not
exceeding the value of one-third of the Fund's total assets. The Fund will not
borrow for investment purposes.
For temporary defensive purposes, the Fund may invest without limit in
cash and cash equivalents when the Adviser deems such a position advisable in
light of economic or market conditions.
Except as otherwise indicated, the Fund's investment objective and
policies are not fundamental and may be changed without a vote of shareholders.
If there is a change in investment objective, shareholders should consider
whether the Fund remains an appropriate investment in light of their then
current financial position and needs. The Fund is intended to be an investment
vehicle for that portion of an investor's assets which can appropriately accept
above-average risk and is not intended to provide a balanced investment program
to meet all requirements of every investor. There is no assurance that the
Fund's objective will be met.
<PAGE>
Investments and Investment Techniques
Value Investment Approach. The Fund is actively managed using a disciplined,
value-oriented investment management approach. The Adviser uses a proprietary,
computerized model to identify for investment small public U.S. companies
selling at prices that, in the opinion of the Adviser, do not reflect adequately
their long-term business potential. Companies purchased for the Fund typically
have the following characteristics:
o attractive valuations relative to the Russell 2000 Index--a widely
used benchmark of small stock performance--based on measures such as
price to earnings, price to book value and price to cash flow ratios.
o favorable trends in earnings growth rates and stock price momentum.
The Fund's holdings are often out of favor or simply overlooked by
investors. Accordingly, their prices can rise either as a result of improved
business fundamentals, particularly when earnings grow faster than general
expectations, or as more investors come to recognize the full extent of a
company's underlying potential.
While the Fund involves above-average equity risk, the Fund's
value-oriented, systematic approach to investing is designed to mitigate
volatility of the Fund's share price relative to the small capitalization sector
of the U.S. stock market. This risk is further managed by purchasing a large
number of stocks, and employing specialized portfolio management techniques,
such as portfolio optimization.
The Fund focuses specifically on finding undervalued stocks of small
U.S. companies. Historically, small companies have been attractive because they
have been sources of new technologies and services, have competed with large
companies on the basis of lower labor costs and have grown faster than larger
firms. Their small size has also allowed them to respond rapidly to changing
business conditions. In addition, small companies have not been closely followed
by as many securities analysts as larger companies, so they have rewarded
investors with the patience and knowledge to have sought them out.
According to Ibbotson Associates, which has compiled market data back
to 1926, the growth of $1 invested in small company stocks over that 70 year
period would have grown to $2,454.63, compared to $1,113.92 if invested in large
company stocks. Over this period, the compound annual growth rate of that $1
investment would have been 11.8% for the small company investment versus 10.5%
for the large company investment. With the better performance, however, comes
greater volatility in returns -- from a one-year high of 123.27% to a one-year
low of -49.68% during the period for small stocks, vs. 54.0% and -43.3% for
large stocks.
2
<PAGE>
LINE CHART TITLE -- Cumulative Value of $1 Invested in 1926
(Periods ended December 31)
CHART DATA:
U.S. Small S&P500
Stock Index Index
1925 $1 $1
1926 $1 $1
1927 $1 $2
1928 $2 $2
1929 $1 $2
1930 $1 $2
1931 $0 $1
1932 $0 $1
1933 $1 $1
1934 $1 $1
1935 $1 $2
1936 $2 $2
1937 $1 $2
1938 $1 $2
1939 $1 $2
1940 $1 $2
1941 $1 $2
1942 $1 $2
1943 $2 $2
1944 $3 $3
1945 $6 $4
1946 $5 $4
1947 $5 $4
1948 $5 $4
1949 $6 $5
1950 $9 $6
1951 $9 $8
1952 $10 $9
1953 $9 $9
1954 $14 $14
1955 $17 $19
1956 $18 $20
1957 $16 $18
1958 $26 $25
1959 $30 $28
1960 $29 $28
1961 $38 $36
1962 $34 $33
1963 $41 $40
1964 $51 $47
1965 $73 $53
1966 $67 $48
1967 $124 $59
1968 $168 $66
1969 $126 $60
1970 $104 $62
1971 $121 $71
1972 $127 $85
1973 $88 $73
1974 $70 $53
1975 $107 $73
1976 $169 $91
1977 $211 $84
1978 $261 $90
1979 $375 $106
1980 $524 $141
1981 $597 $134
1982 $764 $162
1983 $1,067 $199
1984 $996 $211
1985 $1,241 $279
1986 $1,326 $331
1987 $1,203 $348
1988 $1,478 $406
1989 $1,629 $534
1990 $1,277 $517
1991 $1,848 $676
1992 $2,279 $727
1993 $2,757 $800
1994 $2,843 $811
- ----------Small Co. Stocks - - - - - Large Co. Stocks
Source: Ibbotson Associates^1
The value approach entails searching for "bargains" in the market.
These are often companies that are selling at prices below their estimated
long-term business potential, and not followed or not purchased due to recent
company downturns. Historically, these stocks, as measured by the Russell 2000
Value Index, typically have been less volatile than small growth stocks which
generally have higher price/earnings ratios. As one would expect, value stocks
have tended to rise as business fundamentals improved or as investors began to
recognize their potential. "Growth" stocks have provided even more substantial
increases in up markets, but they are also subject to substantial decreases in
down markets, especially relative to value stocks. These greater ups and downs
for growth stocks have meant greater overall volatility or risk. However,
according to data compiled by Russell, historical performance indicates that the
value orientation tends to produce less extreme swings, and manages to provide
superior overall returns due to the limited downside risk inherent in the
discipline.
The Russell 2000 Index is a dynamic index comprised of 2000 small U.S.
company stocks. (Scudder Small Company Value Fund invests in stocks of similar
size -- see General Investment Objective and Policies.) For measurement and
analysis, Russell has split the Index into growth and value subsets.
Russell 2000 Index of Small Stocks Performance in Up and Down Markets
---------------------------------------------------------------------
Compound Average Monthly Total Return: 1979* to September 1996
<TABLE>
<CAPTION>
# Months Russell 2000(R) Growth Russell 2000(R) Value Russell 2000(R)
<S> <C> <C> <C> <C>
Down Months 80 -5.1% -3.1% -4.1%
Up Months 133 5.0% 4.1% 4.5%
All Months 213 1.1% 1.3% 1.2%
(annualized) -- 13.7% 17.1% 15.5%
</TABLE>
* Earliest performance for the Russell Indices.
- -----------------------------------
1 Small stocks from 1926-1995 are described by the NYSE 5th - 9th decile
returns. Large stocks are described by the Standard & Poor's Composite Index,
currently comprised of 500 generally large stocks in the U.S. Prior to 1957, the
Index was comprised of 90 of the largest stocks. Source: Stocks, Bonds Bills and
Inflation 1995 Yearbook, Ibbotson Associates.
3
<PAGE>
From 1979 to September 1996, a period that includes one of the most
significant "up market" periods in history, the Russell 2000 Value Index has
outperformed the overall Russell 2000 index by 1.6 percentage points on an
annualized basis. Furthermore, small company value stocks tend to outperform
small company stocks over various rolling periods.^2
o Value has outperformed Russell 2000 in 59% of rolling 12
month periods.
o Value has outperformed Russell 2000 in 97% of rolling 60
month periods.
Small Cap Value Outperforms Growth
o By 1.6% Points Annualized (1979-9/1996)
o In 120 of 202 (59%) Rolling 12 Month Periods
o In 149 of 154 (97%) Rolling 60 Month Periods
- --------------------------------------------------------------------------------
BAR CHART DATA:
Annualized
Return
60 Months Difference: Annualized
Ending Value Spread
12/83 0.0346087 0.038
1/84 0.0438278 0.038
2/84 0.0472239 0.038
3/84 0.0577473 0.038
4/84 0.0565478 0.038
5/84 0.0567705 0.038
6/84 0.0545425 0.038
7/84 0.0557066 0.038
8/84 0.052983 0.038
9/84 0.0664292 0.038
10/84 0.0755604 0.038
11/84 0.0920687 0.038
12/84 0.1020845 0.038
1/85 0.1038914 0.038
2/85 0.1100621 0.038
3/85 0.1016473 0.038
4/85 0.1039443 0.038
5/85 0.1002155 0.038
6/85 0.1039151 0.038
7/85 0.1091658 0.038
8/85 0.1166986 0.038
9/85 0.1282937 0.038
10/85 0.1356246 0.038
11/85 0.1530403 0.038
12/85 0.1457428 0.038
1/86 0.1305166 0.038
2/86 0.1246366 0.038
3/86 0.1251109 0.038
4/86 0.1161768 0.038
5/86 0.1220581 0.038
6/86 0.1036195 0.038
7/86 0.107317 0.038
8/86 0.1035346 0.038
9/86 0.1041231 0.038
10/86 0.1064023 0.038
11/86 0.1000979 0.038
12/86 0.1006096 0.038
1/87 0.0913806 0.038
2/87 0.0772037 0.038
3/87 0.069843 0.038
4/87 0.0738568 0.038
5/87 0.072885 0.038
6/87 0.071527 0.038
7/87 0.0729313 0.038
8/87 0.0697387 0.038
9/87 0.0701602 0.038
10/87 0.0866742 0.038
11/87 0.0964989 0.038
12/87 0.0893898 0.038
1/88 0.103369 0.038
2/88 0.1071233 0.038
3/88 0.0958217 0.038
4/88 0.0945512 0.038
5/88 0.0987943 0.038
6/88 0.1032942 0.038
7/88 0.0957559 0.038
8/88 0.0944309 0.038
9/88 0.0890342 0.038
10/88 0.0808101 0.038
11/88 0.0824382 0.038
12/88 0.0736043 0.038
1/89 0.062771 0.038
2/89 0.0609783 0.038
3/89 0.0546294 0.038
4/89 0.0521274 0.038
5/89 0.0477441 0.038
6/89 0.0548926 0.038
7/89 0.0461915 0.038
8/89 0.0498976 0.038
9/89 0.0370838 0.038
10/89 0.0300199 0.038
11/89 0.0211541 0.038
12/89 0.0180115 0.038
1/90 0.0293186 0.038
2/90 0.0290076 0.038
3/90 0.024351 0.038
4/90 0.019701 0.038
5/90 0.0142428 0.038
6/90 0.0121097 0.038
7/90 0.0135762 0.038
8/90 0.0163397 0.038
9/90 0.0137056 0.038
10/90 0.0128216 0.038
11/90 0.0071697 0.038
12/90 0.0051593 0.038
1/91 0.0066234 0.038
2/91 0.0063261 0.038
3/91 0.0049931 0.038
4/91 0.0130887 0.038
5/91 0.013701 0.038
6/91 0.0201859 0.038
7/91 0.0102779 0.038
8/91 0.0033432 0.038
9/91 -0.0083258 0.038
10/91 -0.0102789 0.038
11/91 -0.0080352 0.038
12/91 -0.0165802 0.038
1/92 -0.0106831 0.038
2/92 0.0021855 0.038
3/92 0.0125911 0.038
4/92 0.0212696 0.038
5/92 0.0258835 0.038
6/92 0.0320814 0.038
7/92 0.0304257 0.038
8/92 0.0339362 0.038
9/92 0.0317203 0.038
10/92 0.0152406 0.038
11/92 0.0029502 0.038
12/92 0.0156615 0.038
1/93 0.0141114 0.038
2/93 0.0284998 0.038
3/93 0.0338493 0.038
4/93 0.0359001 0.038
5/93 0.0276343 0.038
6/93 0.02983 0.038
7/93 0.027488 0.038
8/93 0.0210342 0.038
9/93 0.0198674 0.038
10/93 0.0161792 0.038
11/93 0.0171174 0.038
12/93 0.0190467 0.038
1/94 0.0201445 0.038
2/94 0.018219 0.038
3/94 0.0237025 0.038
4/94 0.0280144 0.038
5/94 0.0344442 0.038
6/94 0.0338768 0.038
7/94 0.0379387 0.038
8/94 0.0329909 0.038
9/94 0.0333337 0.038
10/94 0.0294388 0.038
11/94 0.0302732 0.038
12/94 0.0350409 0.038
1/95 0.031192 0.038
2/95 0.0322933 0.038
3/95 0.0297015 0.038
4/95 0.0347185 0.038
5/95 0.0441071 0.038
6/95 0.0386426 0.038
Note: Small Cap Style Indices, currently defined by Frank Russell using
price-to-book ratios and the IBES Long Term Growth Forecast, are subsets of the
Russell 2000 Small Stock Index. Returns through 9/96. Source: Frank Russell Co.,
Scudder, Stevens & Clark.
The performance advantage of value stocks has been fairly consistent
over rolling five year periods and has not been caused by exceptional
performance in any one year. Instead, this phenomenon appears to be driven by
the fact that the downside volatility of small cap value stocks is limited
relative to that of growth stocks, as indicated in the previous table. Upside
performance also tends to be limited, but is sufficiently high that, over time,
small cap value stocks have outperformed small cap growth stocks.
Investments Involving Above-Average Risk. As opportunities for greater gain
frequently involve a correspondingly larger risk of loss, the Fund may purchase
securities carrying above-average risk. The Fund's shares are suitable only for
those investors who can make such investments without concern for current income
and who are in a financial position to assume above-average stock market risks
in search of long-term rewards.
As stated above, the Fund may purchase securities involving
above-average risk. Small companies may have limited product lines, markets or
financial resources; may lack management depth or experience; and may be more
____________________________________
2 Rolling periods capture returns over overlapping uniform holding periods. In
examining 60-month rolling periods, the first rolling period would be
1/79-12/83, the second rolling period would be 2/79-1/84, the third rolling
period would be 3/79-2/84, etc.
4
<PAGE>
vulnerable to adverse general market or economic developments than large
companies. The prices of small company securities are often more volatile than
prices associated with large company issues, and can display abrupt or erratic
movements at times, due to limited trading volumes and less publicly available
information. To help reduce risk, the Fund allocates its investments among many
companies and different industries.
The securities of small companies are often traded only
over-the-counter and may not be traded in the volume typical of trading on a
national securities exchange. As a result, the disposition by the Fund of
holdings of such securities may require the Fund to offer a discount from recent
prices or dispose of the securities over a lengthy period of time. The prices of
this type of security may be more volatile than those of larger companies which
are often traded on a national securities exchange.
Convertible Securities. The Fund may invest in convertible securities; that is,
bonds, notes, debentures, preferred stocks, and other securities which are
convertible into common stocks.
The convertible securities in which the Fund may invest may be
converted or exchanged at a stated or determinable exchange ratio into
underlying shares of common stock. The exchange ratio for any particular
convertible security may be adjusted from time to time due to stock splits,
dividends, spin-offs, other corporate distributions, or scheduled changes in the
exchange ratio. Convertible debt securities and convertible preferred stocks,
until converted, have general characteristics similar to both debt and equity
securities. Although to a lesser extent than with debt securities generally, the
market value of convertible securities tends to decline as interest rates
increase and, conversely, tends to increase as interest rates decline. In
addition, because of the conversion or exchange feature, the market value of
convertible securities typically changes as the market value of the underlying
common stocks changes, and, therefore, also tends to follow movements in the
general market for equity securities. A unique feature of convertible securities
is that as the market price of the underlying common stock declines, convertible
securities tend to trade increasingly on a yield basis and so may not experience
market value declines to the same extent as the underlying common stock. When
the market price of the underlying common stock increases, the prices of the
convertible securities tend to rise as a reflection of the value of the
underlying common stock, although typically not as much as the underlying common
stock. While no securities investments are without risk, investments in
convertible securities generally entail less risk than investments in common
stock of the same issuer.
As debt securities, convertible securities are investments which
provide for a stream of income (or in the case of zero coupon securities,
accretion of income) with generally higher yields than common stocks. Of course,
like all debt securities, there can be no assurance of income or principal
payments because the issuers of the convertible securities may default on their
obligations. Convertible securities generally offer lower yields than
nonconvertible securities of similar quality because of their conversion or
exchange features.
Convertible securities generally are subordinated to other similar but
non-convertible securities of the same issuer, although convertible bonds, as
corporate debt obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common stock, of the
same issuer. However, because of the subordination feature, convertible bonds
and convertible preferred stock typically have lower ratings than similar
non-convertible securities.
Convertible securities may be issued as fixed income obligations that
pay current income or as zero coupon notes and bonds, including Liquid Yield
Option Notes (LYONS). Zero coupon securities pay no cash income and are sold at
substantial discounts from their value at maturity. When held to maturity, their
entire income, which consists of accretion of discount, comes from the
difference between the issue price and their value at maturity. Zero coupon
convertible securities offer the opportunity for capital appreciation as
increases (or decreases) in market value of such securities closely follow the
movements in the market value of the underlying common stock. Zero coupon
convertible securities generally are expected to be less volatile than the
underlying common stocks as they usually are issued with shorter maturities (15
years or less) and are issued with options and/or redemption features
exercisable by the holder of the obligation entitling the holder to redeem the
obligation and receive a defined cash payment.
Repurchase Agreements. The Fund may enter into repurchase agreements with any
member bank of the Federal Reserve System and any broker/dealer which is
recognized as a reporting government securities dealer if the creditworthiness
of the bank or broker/dealer has been determined by the Adviser to be at least
as high as that of other obligations the Fund may purchase or to be at least
5
<PAGE>
equal to that of issuers of commercial paper rated within the two highest grades
assigned by Moody's Investors Service ("Moody's") or Standard & Poor's ("S&P").
A repurchase agreement provides a means for the Fund to earn income on
funds for periods as short as overnight. It is an arrangement under which the
purchaser (i.e., the Fund) acquires a security ("Obligation") and the seller
agrees, at the time of sale, to repurchase the Obligation at a specified time
and price. Securities subject to a repurchase agreement are held in a segregated
account and the value of such securities kept at least equal to the repurchase
price on a daily basis. The repurchase price may be higher than the purchase
price, the difference being income to the Fund, or the purchase and repurchase
prices may be the same, with interest at a stated rate due to the Fund together
with the repurchase price upon repurchase. In either case, the income to the
Fund is unrelated to the interest rate on the Obligation itself. Obligations
will be physically held by the Custodian or in the Federal Reserve Book Entry
System.
For purposes of the Investment Company Act of 1940, as amended, ("1940
Act"), a repurchase agreement is deemed to be a loan from the Fund to the seller
of the Obligation subject to the repurchase agreement and is therefore subject
to the Fund's investment restriction applicable to loans. It is not clear
whether a court would consider the Obligation purchased by the Fund subject to a
repurchase agreement as being owned by the Fund or as being collateral for a
loan by the Fund to the seller. In the event of the commencement of bankruptcy
or insolvency proceedings with respect to the seller of the Obligation before
repurchase of the Obligation under a repurchase agreement, the Fund may
encounter delay and incur costs before being able to sell the security. Delays
may involve loss of interest or decline in price of the Obligation. If the court
characterizes the transaction as a loan and the Fund has not perfected a
security interest in the Obligation, the Fund may be required to return the
Obligation to the seller's estate and be treated as an unsecured creditor of the
seller. As an unsecured creditor, the Fund would be at risk of losing some or
all of the principal and income involved in the transaction. As with any
unsecured debt obligation purchased for the Fund, the Adviser seeks to minimize
the risk of loss through repurchase agreements by analyzing the creditworthiness
of the obligor, in this case the seller of the Obligation. Apart from the risk
of bankruptcy or insolvency proceedings, there is also the risk that the seller
may fail to repurchase the security. However, if the market value of the
Obligation subject to the repurchase agreement becomes less than the repurchase
price (including interest), the Fund will direct the seller of the Obligation to
deliver additional securities so that the market value of all securities subject
to the repurchase agreement will equal or exceed the repurchase price.
Borrowing. As a matter of fundamental policy, the Fund is authorized to borrow
money from banks and other entities in an amount equal to up to 33 1/3% of the
Fund's net assets for purposes of liquidity and to provide for redemptions and
distributions. No purchase of securities will be made while such borrowings
exceed 5% of the Fund's net assets. The Fund will borrow only when the Adviser
believes that borrowing will benefit the Fund after taking into account
considerations such as the costs of the borrowing. The Fund does not expect to
borrow for investment purposes, to increase return or leverage the portfolio.
Borrowing by the Fund will involve special risk considerations. Although the
principal of the Fund's borrowings will be fixed, the Fund's assets may change
in value during the time a borrowing is outstanding, thus increasing exposure to
capital risk.
Strategic Transactions and Derivatives. The Fund may, but is not required to,
utilize various other investment strategies as described below to hedge various
market risks or to seek gain. These strategies may be executed through the use
of derivative contracts. Such strategies are generally accepted as a part of
modern portfolio management and are regularly utilized by many mutual funds and
other institutional investors. Techniques and instruments may change over time
as new instruments and strategies are developed or regulatory changes occur.
In the course of pursuing these investment strategies, the Fund may
purchase and sell exchange-listed and over-the-counter put and call options on
securities, equity and other financial instruments, purchase and sell financial
futures contracts and options thereon, and enter into various interest rate
transactions such as swaps, caps, floors or collars (collectively, all the above
are called "Strategic Transactions"). Strategic Transactions may be used without
limit to attempt to protect against possible changes in the market value of
securities held in or to be purchased for the Fund's portfolio resulting from
securities market fluctuations, to protect the Fund's unrealized gains in the
value of its portfolio securities, to facilitate the sale of such securities for
investment purposes, to manage the effective maturity or duration of
fixed-income securities in the Fund's portfolio, or to establish a position in
the derivatives markets as a temporary substitute for purchasing or selling
particular securities. Some Strategic Transactions may also be used to enhance
6
<PAGE>
potential gain although no more than 5% of the Fund's assets will be committed
to Strategic Transactions entered into for non-hedging purposes. Any or all of
these investment techniques may be used at any time and in any combination, and
there is no particular strategy that dictates the use of one technique rather
than another, as use of any Strategic Transaction is a function of numerous
variables including market conditions. The ability of the Fund to utilize these
Strategic Transactions successfully will depend on the Adviser's ability to
predict pertinent market movements, which cannot be assured. The Fund will
comply with applicable regulatory requirements when implementing these
strategies, techniques and instruments. Strategic Transactions involving
financial futures and options thereon will be purchased, sold or entered into
only for bona fide hedging, risk management or portfolio management purposes and
not for speculative purposes.
Strategic Transactions, including derivative contracts, have risks
associated with them including possible default by the other party to the
transaction, illiquidity and, to the extent the Adviser's view as to certain
market movements is incorrect, the risk that the use of such Strategic
Transactions could result in losses greater than if they had not been used. Use
of put and call options may result in losses to the Fund, force the sale or
purchase of portfolio securities at inopportune times or for prices higher than
(in the case of put options) or lower than (in the case of call options) current
market values, limit the amount of appreciation the Fund can realize on its
investments or cause the Fund to hold a security it might otherwise sell. The
use of options and futures transactions entails certain other risks. In
particular, the variable degree of correlation between price movements of
futures contracts and price movements in the related portfolio position of the
Fund creates the possibility that losses on the hedging instrument may be
greater than gains in the value of the Fund's position. In addition, futures and
options markets may not be liquid in all circumstances and certain
over-the-counter options may have no markets. As a result, in certain markets,
the Fund might not be able to close out a transaction without incurring
substantial losses, if at all. Although the use of futures and options
transactions for hedging should tend to minimize the risk of loss due to a
decline in the value of the hedged position, at the same time they tend to limit
any potential gain which might result from an increase in value of such
position. Finally, the daily variation margin requirements for futures contracts
would create a greater ongoing potential financial risk than would purchases of
options, where the exposure is limited to the cost of the initial premium.
Losses resulting from the use of Strategic Transactions would reduce net asset
value, and possibly income, and such losses can be greater than if the Strategic
Transactions had not been utilized.
General Characteristics of Options. Put options and call options typically have
similar structural characteristics and operational mechanics regardless of the
underlying instrument on which they are purchased or sold. Thus, the following
general discussion relates to each of the particular types of options discussed
in greater detail below. In addition, many Strategic Transactions involving
options require segregation of Fund assets in special accounts, as described
below under "Use of Segregated and Other Special Accounts."
A put option gives the purchaser of the option, upon payment of a
premium, the right to sell, and the writer the obligation to buy, the underlying
security, commodity, index, currency or other instrument at the exercise price.
For instance, the Fund's purchase of a put option on a security might be
designed to protect its holdings in the underlying instrument (or, in some
cases, a similar instrument) against a substantial decline in the market value
by giving the Fund the right to sell such instrument at the option exercise
price. A call option, upon payment of a premium, gives the purchaser of the
option the right to buy, and the seller the obligation to sell, the underlying
instrument at the exercise price. The Fund's purchase of a call option on a
security, financial future, index, currency or other instrument might be
intended to protect the Fund against an increase in the price of the underlying
instrument that it intends to purchase in the future by fixing the price at
which it may purchase such instrument. An American style put or call option may
be exercised at any time during the option period while a European style put or
call option may be exercised only upon expiration or during a fixed period prior
thereto. The Fund is authorized to purchase and sell exchange listed options and
over-the-counter options ("OTC options"). Exchange listed options are issued by
a regulated intermediary such as the Options Clearing Corporation ("OCC"), which
guarantees the performance of the obligations of the parties to such options.
The discussion below uses the OCC as an example, but is also applicable to other
financial intermediaries.
With certain exceptions, OCC issued and exchange listed options
generally settle by physical delivery of the underlying security or currency,
although in the future cash settlement may become available. Index options and
Eurodollar instruments are cash settled for the net amount, if any, by which the
option is "in-the-money" (i.e., where the value of the underlying instrument
exceeds, in the case of a call option, or is less than, in the case of a put
option, the exercise price of the option) at the time the option is exercised.
Frequently, rather than taking or making delivery of the underlying instrument
7
<PAGE>
through the process of exercising the option, listed options are closed by
entering into offsetting purchase or sale transactions that do not result in
ownership of the new option.
The Fund's ability to close out its position as a purchaser or seller
of an OCC or exchange listed put or call option is dependent, in part, upon the
liquidity of the option market. Among the possible reasons for the absence of a
liquid option market on an exchange are: (i) insufficient trading interest in
certain options; (ii) restrictions on transactions imposed by an exchange; (iii)
trading halts, suspensions or other restrictions imposed with respect to
particular classes or series of options or underlying securities including
reaching daily price limits; (iv) interruption of the normal operations of the
OCC or an exchange; (v) inadequacy of the facilities of an exchange or OCC to
handle current trading volume; or (vi) a decision by one or more exchanges to
discontinue the trading of options (or a particular class or series of options),
in which event the relevant market for that option on that exchange would cease
to exist, although outstanding options on that exchange would generally continue
to be exercisable in accordance with their terms.
The hours of trading for listed options may not coincide with the hours
during which the underlying financial instruments are traded. To the extent that
the option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.
OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct bilateral
agreement with the Counterparty. In contrast to exchange listed options, which
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term, exercise price,
premium, guarantees and security, are set by negotiation of the parties. The
Fund will only sell OTC options (other than OTC currency options) that are
subject to a buy-back provision permitting the Fund to require the Counterparty
to sell the option back to the Fund at a formula price within seven days. The
Fund expects generally to enter into OTC options that have cash settlement
provisions, although it is not required to do so.
Unless the parties provide for it, there is no central clearing or
guaranty function in an OTC option. As a result, if the Counterparty fails to
make or take delivery of the security, currency or other instrument underlying
an OTC option it has entered into with the Fund or fails to make a cash
settlement payment due in accordance with the terms of that option, the Fund
will lose any premium it paid for the option as well as any anticipated benefit
of the transaction. Accordingly, the Adviser must assess the creditworthiness of
each such Counterparty or any guarantor or credit enhancement of the
Counterparty's credit to determine the likelihood that the terms of the OTC
option will be satisfied. The Fund will engage in OTC option transactions only
with U.S. government securities dealers recognized by the Federal Reserve Bank
of New York as "primary dealers" or broker/dealers, domestic or foreign banks or
other financial institutions which have received (or the guarantors of the
obligation of which have received) a short-term credit rating of A-1 from S&P or
P-1 from Moody's or an equivalent rating from any nationally recognized
statistical rating organization ("NRSRO") or, in the case of OTC currency
transactions, are determined to be of equivalent credit quality by the Adviser.
The staff of the SEC currently takes the position that OTC options purchased by
the Fund, and portfolio securities "covering" the amount of the Fund's
obligation pursuant to an OTC option sold by it (the cost of the sell-back plus
the in-the-money amount, if any) are illiquid, and are subject to the Fund's
limitation on investing no more than 15% of its assets in illiquid securities.
If the Fund sells a call option, the premium that it receives may serve
as a partial hedge, to the extent of the option premium, against a decrease in
the value of the underlying securities or instruments in its portfolio or will
increase the Fund's income. The sale of put options can also provide income.
The Fund may purchase and sell call options on securities including
U.S. Treasury and agency securities, mortgage-backed securities, equity
securities (including convertible securities) and Eurodollar instruments that
are traded on U.S. and foreign securities exchanges and in the over-the-counter
markets, and on securities indices, and futures contracts. All calls sold by the
Fund must be "covered" (i.e., the Fund must own the securities or futures
contract subject to the call) or must meet the asset segregation requirements
described below as long as the call is outstanding. Even though the Fund will
receive the option premium to help protect it against loss, a call sold by the
Fund exposes the Fund during the term of the option to possible loss of
opportunity to realize appreciation in the market price of the underlying
8
<PAGE>
security or instrument and may require the Fund to hold a security or instrument
which it might otherwise have sold.
The Fund may purchase and sell put options on securities including U.S.
Treasury and agency securities, mortgage-backed securities, equity securities
(including convertible securities) and Eurodollar instruments (whether or not it
holds the above securities in its portfolio), and on securities indices, and
futures contracts other than futures on individual corporate debt and individual
equity securities. The Fund will not sell put options if, as a result, more than
50% of the Fund's assets would be required to be segregated to cover its
potential obligations under such put options other than those with respect to
futures and options thereon. In selling put options, there is a risk that the
Fund may be required to buy the underlying security at a disadvantageous price
above the market price.
General Characteristics of Futures. The Fund may enter into financial futures
contracts or purchase or sell put and call options on such futures as a hedge
against anticipated interest rate, or equity market changes, for duration
management and for risk management purposes. Futures are generally bought and
sold on the commodities exchanges where they are listed with payment of initial
and variation margin as described below. The sale of a futures contract creates
a firm obligation by the Fund, as seller, to deliver to the buyer the specific
type of financial instrument called for in the contract at a specific future
time for a specified price (or, with respect to index futures and Eurodollar
instruments, the net cash amount). Options on futures contracts are similar to
options on securities except that an option on a futures contract gives the
purchaser the right in return for the premium paid to assume a position in a
futures contract and obligates the seller to deliver such position.
The Fund's use of financial futures and options thereon will in all
cases be consistent with applicable regulatory requirements and in particular
the rules and regulations of the Commodity Futures Trading Commission and will
be entered into only for bona fide hedging, risk management (including duration
management) or other portfolio management purposes. Typically, maintaining a
futures contract or selling an option thereon requires the Fund to deposit with
a financial intermediary as security for its obligations an amount of cash or
other specified assets (initial margin) which initially is typically 1% to 10%
of the face amount of the contract (but may be higher in some circumstances).
Additional cash or assets (variation margin) may be required to be deposited
thereafter on a daily basis as the mark to market value of the contract
fluctuates. The purchase of an option on financial futures involves payment of a
premium for the option without any further obligation on the part of the Fund.
If the Fund exercises an option on a futures contract it will be obligated to
post initial margin (and potential subsequent variation margin) for the
resulting futures position just as it would for any position. Futures contracts
and options thereon are generally settled by entering into an offsetting
transaction but there can be no assurance that the position can be offset prior
to settlement at an advantageous price, nor that delivery will occur.
The Fund will not enter into a futures contract or related option
(except for closing transactions) if, immediately thereafter, the sum of the
amount of its initial margin and premiums on open futures contracts and options
thereon would exceed 5% of the Fund's total assets (taken at current value);
however, in the case of an option that is in-the-money at the time of the
purchase, the in-the-money amount may be excluded in calculating the 5%
limitation. The segregation requirements with respect to futures contracts and
options thereon are described below.
Options on Securities Indices and Other Financial Indices. The Fund also may
purchase and sell call and put options on securities indices and other financial
indices and in so doing can achieve many of the same objectives it would achieve
through the sale or purchase of options on individual securities or other
instruments. Options on securities indices and other financial indices are
similar to options on a security or other instrument except that, rather than
settling by physical delivery of the underlying instrument, they settle by cash
settlement, i.e., an option on an index gives the holder the right to receive,
upon exercise of the option, an amount of cash if the closing level of the index
upon which the option is based exceeds, in the case of a call, or is less than,
in the case of a put, the exercise price of the option (except if, in the case
of an OTC option, physical delivery is specified). This amount of cash is equal
to the excess of the closing price of the index over the exercise price of the
option, which also may be multiplied by a formula value. The seller of the
option is obligated, in return for the premium received, to make delivery of
this amount. The gain or loss on an option on an index depends on price
movements in the instruments making up the market, market segment, industry or
other composite on which the underlying index is based, rather than price
movements in individual securities, as is the case with respect to options on
securities.
9
<PAGE>
Combined Transactions. The Fund may enter into multiple transactions, including
multiple options transactions, multiple futures transactions, and multiple
interest rate transactions and any combination of futures, options, currency and
interest rate transactions ("component" transactions), instead of a single
Strategic Transaction, as part of a single or combined strategy when, in the
opinion of the Adviser, it is in the best interests of the Fund to do so. A
combined transaction will usually contain elements of risk that are present in
each of its component transactions. Although combined transactions are normally
entered into based on the Adviser's judgment that the combined strategies will
reduce risk or otherwise more effectively achieve the desired portfolio
management goal, it is possible that the combination will instead increase such
risks or hinder achievement of the portfolio management objective.
Swaps, Caps, Floors and Collars. Among the Strategic Transactions into which the
Fund may enter are interest rate, currency and index swaps and the purchase or
sale of related caps, floors and collars. The Fund expects to enter into these
transactions primarily to preserve a return or spread on a particular investment
or portion of its portfolio as a duration management technique or to protect
against any increase in the price of securities the Fund anticipates purchasing
at a later date. The Fund intends to use these transactions as hedges and not as
speculative investments and will not sell interest rate caps or floors where it
does not own securities or other instruments providing the income stream the
Fund may be obligated to pay. Interest rate swaps involve the exchange by the
Fund with another party of their respective commitments to pay or receive
interest, e.g., an exchange of floating rate payments for fixed rate payments
with respect to a notional amount of principal. An index swap is an agreement to
swap cash flows on a notional amount based on changes in the values of the
reference indices. The purchase of a cap entitles the purchaser to receive
payments on a notional principal amount from the party selling such cap to the
extent that a specified index exceeds a predetermined interest rate or amount.
The purchase of a floor entitles the purchaser to receive payments on a notional
principal amount from the party selling such floor to the extent that a
specified index falls below a predetermined interest rate or amount. A collar is
a combination of a cap and a floor that preserves a certain return within a
predetermined range of interest rates or values.
The Fund will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. Inasmuch as these swaps, caps,
floors and collars are entered into for good faith hedging purposes, the Adviser
and the Fund believe such obligations do not constitute senior securities under
the 1940 Act and, accordingly, will not treat them as being subject to its
borrowing restrictions. The Fund will not enter into any swap, cap, floor or
collar transaction unless, at the time of entering into such transaction, the
unsecured long-term debt of the Counterparty, combined with any credit
enhancements, is rated at least A by S&P or Moody's or has an equivalent rating
from a NRSRO or is determined to be of equivalent credit quality by the Adviser.
If there is a default by the Counterparty, the Fund may have contractual
remedies pursuant to the agreements related to the transaction. The swap market
has grown substantially in recent years with a large number of banks and
investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid. Caps, floors and collars are more recent innovations for
which standardized documentation has not yet been fully developed and,
accordingly, they are less liquid than swaps.
Eurodollar Instruments. The Fund may make investments in Eurodollar instruments.
Eurodollar instruments are U.S. dollar-denominated futures contracts or options
thereon which are linked to the London Interbank Offered Rate ("LIBOR"),
although foreign currency-denominated instruments are available from time to
time. Eurodollar futures contracts enable purchasers to obtain a fixed rate for
the lending of funds and sellers to obtain a fixed rate for borrowings. The Fund
might use Eurodollar futures contracts and options thereon to hedge against
changes in LIBOR, to which many interest rate swaps and fixed income instruments
are linked.
Risks of Strategic Transactions Outside the U.S. When conducted outside the
U.S., Strategic Transactions may not be regulated as rigorously as in the U.S.,
may not involve a clearing mechanism and related guarantees, and are subject to
the risk of governmental actions affecting trading in, or the prices of, foreign
securities, currencies and other instruments. The value of such positions also
could be adversely affected by: (i) other complex foreign political, legal and
economic factors, (ii) lesser availability than in the U.S. of data on which to
make trading decisions, (iii) delays in the Fund's ability to act upon economic
events occurring in foreign markets during non-business hours in the U.S., (iv)
the imposition of different exercise and settlement terms and procedures and
margin requirements than in the U.S., and (v) lower trading volume and
liquidity.
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Use of Segregated and Other Special Accounts. Many Strategic Transactions, in
addition to other requirements, require that the Fund segregate liquid high
grade assets with its custodian to the extent Fund obligations are not otherwise
"covered" through ownership of the underlying security, financial instrument or
currency. In general, either the full amount of any obligation by the Fund to
pay or deliver securities or assets must be covered at all times by the
securities, instruments or currency required to be delivered, or, subject to any
regulatory restrictions, an amount of cash or liquid high grade securities at
least equal to the current amount of the obligation must be segregated with the
custodian. The segregated assets cannot be sold or transferred unless equivalent
assets are substituted in their place or it is no longer necessary to segregate
them. For example, a call option written by the Fund will require the Fund to
hold the securities subject to the call (or securities convertible into the
needed securities without additional consideration) or to segregate liquid
high-grade securities sufficient to purchase and deliver the securities if the
call is exercised. A call option sold by the Fund on an index will require the
Fund to own portfolio securities which correlate with the index or to segregate
liquid high grade assets equal to the excess of the index value over the
exercise price on a current basis. A put option written by the Fund requires the
Fund to segregate liquid, high grade assets equal to the exercise price.
OTC options entered into by the Fund, including those on securities,
financial instruments or indices and OCC issued and exchange listed index
options, will generally provide for cash settlement. As a result, when the Fund
sells these instruments it will only segregate an amount of assets equal to its
accrued net obligations, as there is no requirement for payment or delivery of
amounts in excess of the net amount. These amounts will equal 100% of the
exercise price in the case of a non cash-settled put, the same as an OCC
guaranteed listed option sold by the Fund, or the in-the-money amount plus any
sell-back formula amount in the case of a cash-settled put or call. In addition,
when the Fund sells a call option on an index at a time when the in-the-money
amount exceeds the exercise price, the Fund will segregate, until the option
expires or is closed out, cash or cash equivalents equal in value to such
excess. OCC issued and exchange listed options sold by the Fund other than those
above generally settle with physical delivery, or with an election of either
physical delivery or cash settlement and the Fund will segregate an amount of
assets equal to the full value of the option. OTC options settling with physical
delivery, or with an election of either physical delivery or cash settlement
will be treated the same as other options settling with physical delivery.
In the case of a futures contract or an option thereon, the Fund must
deposit initial margin and possible daily variation margin in addition to
segregating assets sufficient to meet its obligation to purchase or provide
securities or currencies, or to pay the amount owed at the expiration of an
index-based futures contract. Such assets may consist of cash, cash equivalents,
liquid debt or equity securities or other acceptable assets.
With respect to swaps, the Fund will accrue the net amount of the
excess, if any, of its obligations over its entitlements with respect to each
swap on a daily basis and will segregate an amount of cash or liquid high grade
securities having a value equal to the accrued excess. Caps, floors and collars
require segregation of assets with a value equal to the Fund's net obligation,
if any.
Strategic Transactions may be covered by other means when consistent
with applicable regulatory policies. The Fund may also enter into offsetting
transactions so that its combined position, coupled with any segregated assets,
equals its net outstanding obligation in related options and Strategic
Transactions. For example, the Fund could purchase a put option if the strike
price of that option is the same or higher than the strike price of a put option
sold by the Fund. Moreover, instead of segregating assets if the Fund held a
futures or forward contract, it could purchase a put option on the same futures
or forward contract with a strike price as high or higher than the price of the
contract held. Other Strategic Transactions may also be offset in combinations.
If the offsetting transaction terminates at the time of or after the primary
transaction no segregation is required, but if it terminates prior to such time,
assets equal to any remaining obligation would need to be segregated.
The Fund's activities involving Strategic Transactions may be limited
by the requirements of Subchapter M of the Internal Revenue Code for
qualification as a regulated investment company. (See "TAXES.")
Investment Restrictions
Unless specified to the contrary, the following restrictions may not be
changed without the approval of a majority of the outstanding voting securities
of the Fund involved which, under the 1940 Act and the rules thereunder and as
used in this Statement of Additional Information, means the lesser of (1) 67% or
more of the voting securities present at such meeting, if the holders of more
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than 50% of the outstanding voting securities of the Fund are present or
represented by proxy, or (2) more than 50% of the outstanding voting securities
of the Fund.
Any investment restrictions herein which involve a maximum percentage
of securities or assets shall not be considered to be violated unless an excess
over the percentage occurs immediately after and is caused by an acquisition or
encumbrance of securities or assets of, or borrowings by, the Fund.
As a matter of fundamental policy, the Fund may not:
(1) with respect to 75% of its total assets, taken at market
value, purchase more than 10% of the outstanding voting
securities of any one issuer or invest more than 5% of the
value of its total assets in the securities of any one issuer,
except obligations issued or guaranteed by the U.S.
Government, its agencies, or instrumentalities and except
securities of other investment companies;
(2) 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;
(3) 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 reserves freedom of
action to hold and to sell real estate acquired as a result of
the Fund's ownership of securities); or purchase or sell
physical commodities or contracts relating to physical
commodities;
(4) 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;
(5) 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 objective and investment policies may be
deemed to be loans;
(6) 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; and
(7) purchase any securities which 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,
provided that there is no limitation with respect to
investments in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities (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 primarily related to financing the activities
of their parents).
As a matter of nonfundamental policy, the Fund will not:
(a) purchase or retain securities of any open-end investment
company, or securities of closed-end investment companies
except by purchase in the open market where no commission or
profit to a sponsor or dealer results from such purchases, or
except when such purchase, though not made in the open market,
is part of a plan of merger, consolidation, reorganization or
acquisition of assets; in any event the Fund may not purchase
more than 3% of the outstanding voting securities of another
investment company, may not invest more than 5% of its total
assets in another investment company, and may not invest more
than 10% of its total assets in other investment companies;
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(b) pledge, mortgage or hypothecate its assets in excess, together
with permitted borrowings, of 1/3 of its total assets;
(c) purchase or retain securities of an issuer any of whose
officers, directors, trustees or security holders is an
officer, director or trustee of the Fund or a member, officer,
director or trustee of the investment adviser of the Fund if
one or more of such individuals owns beneficially more than
one-half of one percent (1/2%) of the outstanding shares or
securities or both (taken at market value) of such issuer and
such individuals owning more than one-half of one percent
(1/2%) of such shares or securities together own beneficially
more than 5% of such shares or securities or both;
(d) purchase securities on margin or make short sales unless, by
virtue of its ownership of other securities, it has the right
to obtain securities equivalent in kind and amount to the
securities sold at no added cost and, if the right is
conditional, the sale is made upon the same conditions, except
in connection with arbitrage transactions, and except that the
Fund may obtain such short-term credits as may be necessary
for the clearance of purchases and sales of securities;
(e) invest more than 15% of its net assets in securities which are
not readily marketable, the disposition of which is restricted
under Federal securities laws, or in repurchase agreements not
terminable within 7 days, and the Fund will not invest more
than 10% of its total assets in restricted securities;
(f) purchase securities of any issuer with a record of less than
three years continuous operations, including predecessors and
equity securities which are not readily marketable if such
purchase would cause the investments of the Fund in all such
issuers to exceed 5% of the total assets of the Fund taken at
market value, except U.S. Government securities or securities
of such issuers which are rated by at least one nationally
recognized statistical rating organization;
(g) buy options on securities or financial instruments unless the
aggregate premiums paid on all such options held by the Fund
at any time do not exceed 20% of the Fund's net assets; or
sell put options on securities if, as a result, the aggregate
value of the obligations underlying such put options would
exceed 50% of the Fund's net assets;
(h) enter into futures contracts or purchase options thereon
unless immediately after the purchase, the value of the
aggregate initial margin with respect to all futures contracts
entered into on behalf of the Fund and the premiums paid for
options on futures contracts does not exceed 5% of the fair
market value of the Fund's total assets; provided, that in the
case of an option that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in computing
the 5% limit;
(i) invest in oil, gas or other mineral leases, or exploration or
development programs (although it may invest in issuers which
own or invest in such interests);
(j) purchase warrants if as a result warrants taken at the lower
of cost or market value would represent more than 5% of the
value of the Fund's total net assets or more than 2% of its
net assets in warrants that are not listed on the New York or
American Stock Exchanges or on an exchange with comparable
listing requirements (for this purpose, warrants attached to
securities will be deemed to have no value);
(k) purchase or sell real estate limited partnership interests; or
(l) make securities loans if the value of such securities loaned
exceeds 30% of the value of the Fund's total assets at the
time any loan is made; all loans of portfolio securities will
be fully collateralized and marked to market daily. The Fund
has no current intention of making loans of portfolio
securities that would amount to greater than 5% of the Fund's
total assets.
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PURCHASES
(See "Purchases" and "Transaction information" in the Fund's prospectus.)
Additional Information About Opening An Account
Clients having a regular investment counsel account with the Adviser or
its affiliates and members of their immediate families, officers and employees
of the Adviser or of any affiliated organization and their immediate families,
members of the National Association of Securities Dealers, Inc. ("NASD") and
banks may, if they prefer, subscribe initially for at least $2,500 of Fund
shares through Scudder Investor Services, Inc. (the "Distributor") by letter,
fax, TWX, or telephone.
Shareholders of other Scudder funds who have submitted an account
application and have a certified Taxpayer Identification Number, clients having
a regular investment counsel account with the Adviser or its affiliates and
members of their immediate families, officers and employees of the Adviser or of
any affiliated organization and their immediate families, members of the NASD,
and banks may open an account by wire. These investors must call 1-800-225-5163
to get an account number. During the call, the investor will be asked to
indicate the Fund name, amount to be wired ($2,500 minimum), name of bank or
trust company from which the wire will be sent, the exact registration of the
new account, the taxpayer identification or Social Security number, address and
telephone number. The investor must then call the bank to arrange a wire
transfer to The Scudder Funds, State Street Bank and Trust Company, Boston, MA
02110, ABA Number 011000028, DDA Account Number: 9903-5552. The investor must
give the Scudder fund name, account name and the new account number. Finally,
the investor must send the completed and signed application to the Fund
promptly.
The minimum initial purchase amount is less than $2,500 under certain
special plan accounts.
Additional Information About Making Subsequent Investments
Subsequent purchase orders for $10,000 or more and for an amount not
greater than four times the value of the shareholder's account may be placed by
telephone, fax, etc. by members of the NASD, by banks, and by established
shareholders (except by Scudder Individual Retirement Account (IRA), Scudder
Horizon Plan, Scudder Profit Sharing and Money Purchase Pension Plans, and
Scudder 401(k) and Scudder 403(b) Plan holders). Orders placed in this manner
may be directed to any office of the Distributor listed in the Fund's
prospectus. A confirmation of the purchase will be mailed out promptly following
receipt of a request to buy. Federal regulations require that payment be
received within three business days. If payment is not received within that
time, the order is subject to cancellation. In the event of such cancellation or
cancellation at the purchaser's request, the purchaser will be responsible for
any loss incurred by a Fund or the principal underwriter by reason of such
cancellation. If the purchaser is a shareholder, the Trust shall have the
authority, as agent of the shareholder, to redeem shares in the account in order
to reimburse the Fund or the principal underwriter for the loss incurred. Net
losses on such transactions which are not recovered from the purchaser will be
absorbed by the principal underwriter. Any net profit on the liquidation of
unpaid shares will accrue to the Fund.
Additional Information About Making Subsequent Investments by AutoBuy
Shareholders, whose predesignated bank account of record is a member of
the Automated Clearing House Network (ACH) and who have elected to participate
in the AutoBuy program, may purchase shares of the Fund by telephone. Through
this service shareholders may purchase up to $250,000 but not less than $250. To
purchase shares by AutoBuy, shareholders should call before 4 p.m. eastern time.
Proceeds in the amount of your purchase will be transferred from your bank
checking account two or three business days following your call. For requests
received by the close of regular trading on the Exchange, shares will be
purchased at the net asset value per share calculated at the close of trading on
the day of your call. AutoBuy requests received after the close of regular
trading on the Exchange will begin their processing and be purchased at the net
asset value calculated the following business day. If you purchase shares by
AutoBuy and redeem them within seven days of the purchase, the Fund may hold the
redemption proceeds for a period of up to seven business days. If you purchase
shares and there are insufficient funds in your bank account the purchase will
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be canceled and you will be subject to any losses or fees incurred in the
transaction. AutoBuy transactions are not available for Scudder IRA accounts and
most other retirement plan accounts.
In order to request purchases by AutoBuy, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account from which the purchase payment will be debited.
New investors wishing to establish AutoBuy may so indicate on the application.
Existing shareholders who wish to add AutoBuy to their account may do so by
completing an AutoBuy Enrollment Form. After sending in an enrollment form
shareholders should allow for 15 days for this service to be available.
The Fund employs procedures, including recording telephone calls,
testing a caller's identity, and sending written confirmation of telephone
transactions, designed to give reasonable assurance that instructions
communicated by telephone are genuine and to discourage fraud. To the extent
that the Fund does not follow such procedures, it may be liable for losses due
to unauthorized or fraudulent telephone instructions. The Fund will not be
liable for acting upon instructions communicated by telephone that it reasonably
believes to be genuine.
Checks
A certified check is not necessary, but checks are only accepted
subject to collection at full face value U.S. funds and must be drawn on, or
payable through, a U.S. bank.
If shares of the Fund are purchased by a check which proves to be
uncollectible, the Trust reserves the right to cancel the purchase immediately
and the purchaser will be responsible for any loss incurred by the Trust or the
principal underwriter by reason of such cancellation. If the purchaser is a
shareholder, the Trust will have the authority, as agent of the shareholder, to
redeem shares in the account in order to reimburse the Fund or the principal
underwriter for the loss incurred. Investors whose orders have been canceled may
be prohibited from, or restricted in, placing future orders in any of the
Scudder funds.
Wire Transfer of Federal Funds
To obtain the net asset value determined as of the close of regular
trading on the Exchange on a selected day, your bank must forward federal funds
by wire transfer and provide the required account information so as to be
available to the Fund prior to the close of regular trading on the Exchange
(normally 4 p.m. eastern time).
The bank sending an investor's federal funds by bank wire may charge
for the service. Presently, the Distributor pays a fee for receipt by State
Street Bank and Trust Company (the "Custodian") of "wired funds," but the right
to charge investors for this service is reserved.
Boston banks are closed on certain holidays although the Exchange may
be open. These holidays include Martin Luther King, Jr. Day (the 3rd Monday in
January), Columbus Day (the 2nd Monday in October) and Veterans Day (November
11). Investors are not able to purchase shares by wiring federal funds on such
holidays because the Custodian is not open to receive such federal funds on
behalf of the Fund.
Share Price
Purchases will be filled without sales charge at the net asset value
next computed after receipt of the application in good order. Net asset value
normally will be computed as of the close of regular trading on each day during
which the Exchange is open for trading. Orders received after the close of
regular trading on the Exchange will receive the next business day's net asset
value. If the order has been placed by a member of the NASD, other than the
Distributor, it is the responsibility of that member broker, rather than the
Fund, to forward the purchase order to Scudder Service Corporation (the
"Transfer Agent") by the close of regular trading on the Exchange.
Share Certificates
Due to the desire of the Trust's management to afford ease of
redemption, certificates will not be issued to indicate ownership in the Fund.
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Other Information
If purchases or redemptions of Fund shares are arranged and settlement
is made at the investor's election through a member of the NASD other than the
Distributor, that member may, at its discretion, charge a fee for that service.
The Board of Trustees and the Distributor, each has the right to limit
the amount of purchases by and to refuse to sell to any person, and each may
suspend or terminate the offering of shares of the Fund at any time.
The Tax Identification Number section of the application must be
completed when opening an account. Applications and purchase orders without a
certified tax identification number and certain other certified information
(e.g. from exempt organizations, certification of exempt status) will be
returned to the investor.
The Trust may issue shares at net asset value in connection with any
merger or consolidation with, or acquisition of the assets of, any investment
company or personal holding company, subject to the requirements of the 1940
Act.
EXCHANGES AND REDEMPTIONS
(See "Exchanges and redemptions" and "Transaction information" in the
Fund's prospectus.)
Exchanges
Exchanges are comprised of a redemption from one Scudder fund and a
purchase into another Scudder fund. The purchase side of the exchange may be
either an additional investment into an existing account or may involve opening
a new account in the other fund. When an exchange involves a new account, the
new account will be established with the same registration, tax identification
number, address, telephone redemption option, "Scudder Automated Information
Line" (SAIL) transaction authorization and dividend option as the existing
account. Other features will not carry over automatically to the new account.
Exchanges to a new fund account must be for a minimum of $2,500. When an
exchange represents an additional investment into an existing account, the
account receiving the exchange proceeds must have identical registration, tax
identification number, address, and account options/features as the account of
origin. Exchanges into an existing account must be for $100 or more. If the
account receiving the exchange proceeds is to be different in any respect, the
exchange request must be in writing and must contain an original signature
guarantee as described under "Transaction information--Exchanging and redeeming
shares--Signature guarantees" in the Fund's prospectus.
Exchange orders received before the close of regular trading on the
Exchange on any business day ordinarily will be executed at the respective net
asset values determined on that day. Exchange orders received after the close of
regular trading on the Exchange will be executed on the following business day.
Investors may also request, at no extra charge, to have exchanges
automatically executed on a predetermined schedule from one Scudder Fund to an
existing account in another Scudder Fund, at current net asset value, through
Scudder's Automatic Exchange Program. Exchanges must be for a minimum of $50.
Shareholders may add this free feature over the telephone or in writing.
Automatic Exchanges will continue until the shareholder requests by telephone or
in writing to have the feature removed, or until the originating account is
depleted. The Trust and the Transfer Agent each reserves the right to suspend or
terminate the privilege of the Automatic Exchange Program at any time.
There is no charge to the shareholder for any exchange described above.
However, shares that are exchanged may be subject to the Fund's 1% redemption
fee. (See "Special Redemption and Exchange Information." An exchange into
another Scudder fund is a redemption of shares, and therefore may result in tax
consequences (gain or loss) to the shareholder, and the proceeds of such an
exchange may be subject to backup withholding. (See "TAXES.")
Investors currently receive the exchange privilege, including exchange
by telephone, automatically without having to elect it. The Trust employs
procedures, including recording telephone calls, testing a caller's identity,
and sending written confirmation of telephone transactions, designed to give
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reasonable assurance that instructions communicated by telephone are genuine,
and to discourage fraud. To the extent that the Trust does not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Trust will not be liable for acting upon
instructions communicated by telephone that it reasonably believes to be
genuine. The Trust, the Fund and the Transfer Agent each reserves the right to
suspend or terminate the privilege of exchanging by telephone or fax at any
time.
The Scudder funds into which investors may make an exchange are listed
under "THE SCUDDER FAMILY OF FUNDS" herein. Before making an exchange,
shareholders should obtain from the Distributor a prospectus of the Scudder fund
into which the exchange is being contemplated.
Scudder retirement plans may have different exchange requirements.
Please refer to appropriate plan literature.
Special Redemption and Exchange Information
In general, shares of the Fund may be exchanged or redeemed at net
asset value. However, shares of the Fund held for less than one year are
redeemable at a price equal to 99% of the then current net asset value per
share. This 1% discount, referred to in the prospectus and this statement of
additional information as a redemption fee, directly affects the amount a
shareholder who is subject to the discount receives upon exchange or redemption.
It is intended to encourage long-term investment in the Fund, to avoid
transaction and other expenses caused by early redemptions and to facilitate
portfolio management. The fee is not a deferred sales charge, is not a
commission paid to the Adviser or its subsidiaries, and does not benefit the
Adviser in any way. The Fund reserves the right to modify the terms of or
terminate this fee at any time.
The redemption discount will not be applied to (a) a redemption of
shares of the Fund outstanding for one year or more, (b) shares purchased
through certain Scudder retirement plans, including 401(k) plans, 403(b) plans,
457 plans, Keogh accounts, and Profit Sharing and Money Purchase Pension Plans
provided, however, if such shares are purchased through a broker, financial
institution or recordkeeper maintaining an omnibus account for the shares, such
waiver may not apply. (Before purchasing shares, please check with your account
representative concerning the availability of the fee waiver.) In addition, this
waiver does not apply to IRA and SEP-IRA accounts. (c) a redemption of
reinvestment shares (i.e., shares purchased through the reinvestment of
dividends or capital gains distributions paid by the Fund), or (d) a redemption
of shares by the Fund upon exercise of its right to liquidate accounts (i)
falling below the minimum account size by reason of shareholder redemptions or
(ii) when the shareholder has failed to provide tax identification information.
For this purpose and without regard to the shares actually redeemed, shares will
be treated as redeemed as follows: first, reinvestment shares; second, purchased
shares held one year or more; and third, purchased shares held for less than one
year. Finally, if a redeeming shareholder acquires Fund shares through a
transfer from another shareholder, applicability of the discount, if any, will
be determined by reference to the date the shares were originally purchased, and
not from the date of transfer between shareholders.
Redemption by Telephone
Shareholders currently receive the right, automatically without having
to elect it, to redeem by telephone up to $50,000 and have the proceeds mailed
to their address of record. Shareholders may also request to have the proceeds
mailed or wired to their predesignated bank account. In order to request wire
redemptions by telephone, shareholders must have completed and returned to the
Transfer Agent the application, including the designation of a bank account to
which the redemption proceeds are to be sent.
(a) NEW INVESTORS wishing to establish telephone redemption to a
predesignated bank account must complete the appropriate
section on the application.
(b) EXISTING SHAREHOLDERS (except those who are Scudder IRA,
Scudder Pension and Profit-Sharing, Scudder 401(k) and Scudder
403(b) Planholders) who wish to establish telephone redemption
to a predesignated bank account or who want to change the bank
account previously designated to receive redemption payments
should either return a Telephone Redemption Option Form
17
<PAGE>
(available upon request) or send a letter identifying the
account and specifying the exact information to be changed.
The letter must be signed exactly as the shareholder's name(s)
appears on the account. An original signature and an original
signature guarantee are required for each person in whose name
the account is registered.
If a request for redemption to a shareholder's bank account is made by
telephone or fax, payment will be by Federal Reserve bank wire to the bank
account designated on the application, unless a request is made that the
redemption check be mailed to the designated bank account. There will be a $5
charge for all wire redemptions.
Note: Investors designating a savings bank to receive their telephone
redemption proceeds are advised that if the savings bank is not a participant in
the Federal Reserve System, redemption proceeds must be wired through a
commercial bank which is a correspondent of the savings bank. As this may delay
receipt by the shareholder's account, it is suggested that investors wishing to
use a savings bank discuss wire procedures with their bank and submit any
special wire transfer information with the telephone redemption authorization.
If appropriate wire information is not supplied, redemption proceeds will be
mailed to the designated bank.
The Fund employs procedures, including recording telephone calls,
testing a caller's identity, and sending written confirmation of telephone
transactions, designed to give reasonable assurance that instructions
communicated by telephone are genuine, and to discourage fraud. To the extent
that the Fund does not follow such procedures, it may be liable for losses due
to unauthorized or fraudulent telephone instructions. The Fund will not be
liable for acting upon instructions communicated by telephone that it reasonably
believes to be genuine.
Redemption by AutoSell
Shareholders, whose predesignated bank account of record is a member of
the Automated Clearing House Network (ACH) and who have elected to participate
in the AutoSell program may sell shares of the Fund by telephone. To sell shares
by AutoSell, shareholders should call before 4 p.m. eastern time. Redemptions
must be for at least $250. Proceeds in the amount of your redemption will be
transferred to your bank checking account two or three business days following
your call. For requests received by the close of regular trading on the
Exchange, shares will be redeemed at the net asset value per share calculated at
the close of trading on the day of your call. AutoSell requests received after
the close of regular trading on the Exchange will begin their processing and be
redeemed at the net asset value calculated the following business day. AutoSell
transactions are not available for Scudder IRA accounts and most other
retirement plan accounts.
In order to request redemptions by AutoSell, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account from which the purchase payment will be debited.
New investors wishing to establish AutoSell may so indicate on the application.
Existing shareholders who wish to add AutoSell to their account may do so by
completing an AutoSell Enrollment Form. After sending in an enrollment form,
shareholders should allow for 15 days for this service to be available.
The Fund employs procedures, including recording telephone calls,
testing a caller's identity, and sending written confirmation of telephone
transactions, designed to give reasonable assurance that instructions
communicated by telephone are genuine, and to discourage fraud. To the extent
that the Fund does not follow such procedures, it may be liable for losses due
to unauthorized or fraudulent telephone instructions. The Fund will not be
liable for acting upon instructions communicated by telephone that it reasonably
believes to be genuine.
Redemption by Mail or Fax
In order to ensure proper authorization before redeeming shares, the
Transfer Agent may request additional documents such as, but not restricted to,
stock powers, trust instruments, certificates of death, appointments as
executor, certificates of corporate authority and waivers of tax (required in
some states when settling estates).
It is suggested that shareholders holding shares registered in other
than individual names contact the Transfer Agent prior to any redemptions to
ensure that all necessary documents accompany the request. When shares are held
in the name of a corporation, trust, fiduciary, agent, attorney or partnership,
the Transfer Agent requires, in addition to the stock power, certified evidence
18
<PAGE>
of authority to sign. These procedures are for the protection of shareholders
and should be followed to ensure prompt payment. Redemption requests must not be
conditional as to date or price of the redemption. Proceeds of a redemption will
be sent within five business days after receipt by the Transfer Agent of a
request for redemption that complies with the above requirements. Delays in
payment of more than seven days for shares tendered for repurchase or redemption
may result, but only until the purchase check has cleared.
The requirements for IRA redemptions are different from those for
regular accounts. For more information please call 1-800-225-5163.
Redemption-In-Kind
The Trust reserves the right, if conditions exist which make cash
payments undesirable, to honor any request for redemption or repurchase order by
making payment in whole or in part in readily marketable securities chosen by
the Trust and valued as they are for purposes of computing the Fund's net asset
value (a redemption-in-kind). If payment is made in securities, a shareholder
may incur transaction expenses in converting these securities into cash. The
Fund has elected, however, to be governed by Rule 18f-1 under the 1940 Act as a
result of which the Trust is obligated to redeem shares, with respect to any one
shareholder during any 90 day period, solely in cash up to the lesser of
$250,000 or 1% of the net asset value of the Fund at the beginning of the
period.
Other Information
If a shareholder redeems all shares in the account after the record
date of a dividend, the shareholder will receive, in addition to the net asset
value thereof, all declared but unpaid dividends thereon. The value of shares
redeemed or repurchased may be more or less than the shareholder's cost
depending on the net asset value at the time of redemption or repurchase. A wire
charge may be applicable for redemption proceeds wired to an investor's bank
account. Redemptions of shares, including an exchange into another Scudder fund,
may result in tax consequences (gain or loss) to the shareholder and the
proceeds of such redemptions may be subject to backup withholding. (see
"TAXES.")
Shareholders who wish to redeem shares from Special Plan Accounts
should contact the employer, trustee or custodian of the Plan for the
requirements.
The determination of net asset value and a shareholder's right to
redeem shares and to receive payment may be suspended at times and a
shareholder's right to redeem shares and to receive payment may be suspended at
times during which (a) the Exchange is closed, other than customary weekend and
holiday closings, (b) trading on the Exchange is restricted for any reason, (c)
an emergency exists as a result of which disposal by the Fund of securities
owned by it is not reasonably practicable or it is not reasonably practicable
for the Fund fairly to determine the value of its net assets, or (d) a
governmental body having jurisdiction over the Fund may by order permit such a
suspension for the protection of the Trust's shareholders; provided that
applicable rules and regulations of the SEC (or any succeeding governmental
authority) shall govern as to whether the conditions prescribed in (b), (c) or
(d) exist.
Shareholders should maintain a share balance worth at least $2,500,
which amount may be changed by the Board of Trustees. Scudder retirement plans
have similar or lower minimum share balance requirements. A shareholder may open
an account with at least $1,000, if an automatic investment plan of $100/month
is established. Shareholders who maintain a non-fiduciary account balance of
less than $2,500 in the Fund, without establishing an automatic investment plan,
will be assessed an annual $10.00 per fund charge with the fee to be paid to the
Fund. The $10.00 charge will not apply to shareholders with a combined household
account balance in any of the Scudder Funds of $25,000 or more. The Fund
reserves the right, following 60 days' written notice to shareholders, to redeem
all shares in accounts below $250, including accounts of new investors, where a
reduction in value has occurred due to a redemption or exchange out of the
account. The Fund will mail the proceeds of the redeemed account to the
shareholder. Reductions in value that result solely from market activity will
not trigger an involuntary redemption. Retirement accounts and certain other
accounts will not be assessed the $10.00 charge or be subject to automatic
liquidation.
19
<PAGE>
FEATURES AND SERVICES OFFERED BY THE FUND
(See "Shareholder benefits" in the Fund's prospectus.)
The Pure No-Load(TM) Concept
Investors are encouraged to be aware of the full ramifications of
mutual fund fee structures, and of how Scudder distinguishes its funds from the
vast majority of mutual funds available today. The primary distinction is
between load and no-load funds.
Load funds generally are defined as mutual funds that charge a fee for
the sale and distribution of fund shares. There are three types of loads:
front-end loads, back-end loads, and asset-based 12b-1 fees. 12b-1 fees are
distribution-related fees charged against fund assets and are distinct from
service fees, which are charged for personal services and/or maintenance of
shareholder accounts. Asset-based sales charges and service fees are typically
paid pursuant to distribution plans adopted under 12b-1 under the 1940 Act.
A front-end load is a sales charge, which can be as high as 8.50% of
the amount invested. A back-end load is a contingent deferred sales charge,
which can be as high as 8.50% of either the amount invested or redeemed. The
maximum front-end or back-end load varies, and depends upon whether or not a
fund also charges a 12b-1 fee and/or a service fee or offers investors various
sales-related services such as dividend reinvestment. The maximum charge for a
12b-1 fee is 0.75% of a fund's average annual net assets, and the maximum charge
for a service fee is 0.25% of a fund's average annual net assets.
A no-load fund does not charge a front-end or back-end load, but can
charge a small 12b-1 fee and/or service fee against fund assets. Under the
National Association of Securities Dealers Rules of Fair Practice, a mutual fund
can call itself a "no-load" fund only if the 12b-1 fee and/or service fee does
not exceed 0.25% of a fund's average annual net assets.
Because Scudder funds do not pay any asset-based sales charges or
service fees, Scudder developed and trademarked the phrase pure no-load(TM) to
distinguish Scudder funds from other no-load mutual funds. Scudder pioneered the
no-load concept when it created the nation's first no-load fund in 1928, and
later developed the nation's first family of no-load mutual funds.
The following chart shows the potential long-term advantage of
investing $10,000 in a Scudder pure no-load fund over investing the same amount
in a load fund that collects an 8.50% front-end load, a load fund that collects
only a 0.75% 12b-1 and/or service fee, and a no-load fund charging only a 0.25%
12b-1 and/or service fee. The hypothetical figures in the chart show the value
of an account assuming a constant 10% rate of return over the time periods
indicated and reinvestment of dividends and distributions.
<TABLE>
====================================================================================================================
Scudder No-Load Fund with
YEARS Pure No-Load(TM)Fund 8.50% Load Fund Load Fund with 0.75% 0.25% 12b-1 Fee
12b-1 Fee
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10 $ 25,937 $ 23,733 $ 24,222 $ 25,354
- --------------------------------------------------------------------------------------------------------------------
15 41,772 38,222 37,698 40,371
- --------------------------------------------------------------------------------------------------------------------
20 67,275 61,557 58,672 64,282
====================================================================================================================
</TABLE>
Investors are encouraged to review the fee tables on page 2 of the
Fund's prospectus for more specific information about the rates at which
management fees and other expenses are assessed.
20
<PAGE>
Dividends and Capital Gain Distribution Options
Investors have freedom to choose whether to receive cash or to reinvest
any dividends from net investment income or distributions from realized capital
gains in additional shares of the Fund. A change of instructions for the method
of payment must be received by the Transfer Agent at least five days prior to a
dividend record date. Shareholders may change their dividend option either by
calling 1-800-225-5163 or by sending written instructions to the Transfer Agent.
Please include your account number with your written request. See "How to
contact Scudder" in the Prospectus for the address.
Reinvestment is usually made at the closing net asset value determined
on the business day following the record date. Investors may leave standing
instructions with the Transfer Agent designating their option for either
reinvestment or cash distribution of any income dividends or capital gains
distributions. If no election is made, dividends and distributions will be
invested in additional shares of the Fund.
Investors may also have dividends and distributions automatically
deposited in their predesignated bank account through Scudder's
DistributionsDirect Program. Shareholders who elect to participate in the
DistributionsDirect Program, and whose predesignated checking account of record
is with a member bank of the Automated Clearing House Network (ACH) can have
income and capital gain distributions automatically deposited to their personal
bank account usually within three business days after the Fund pays its
distribution. A DistributionsDirect request form can be obtained by calling
1-800-225-5163. Confirmation statements will be mailed to shareholders as
notification that distributions have been deposited.
Investors choosing to participate in Scudder's Automatic Withdrawal
Plan must reinvest any dividends or capital gains. For most retirement plan
accounts, the reinvestment of dividends and capital gains is also required.
Diversification
Your investment represents an interest in a large, diversified
portfolio of securities. Diversification may protect you against the possible
risks of concentrating in fewer securities or in a specific market sector.
Scudder Funds Centers
Investors may visit any of the Funds Centers maintained by the
Distributor. The Centers are designed to provide individuals with services
during any business day. Investors may pick up literature or obtain assistance
with opening an account, adding monies or special options to existing accounts,
making exchanges within the Scudder Family of Funds, redeeming shares or opening
retirement plans. Checks should not be mailed to the Centers but to "The Scudder
Funds" at the address listed under "How to contact Scudder" in the Prospectus.
Reports to Shareholders
The Fund issues shareholders unaudited semiannual financial statements
and annual financial statements audited by independent accountants, including a
list of investments held and statements of assets and liabilities, operations,
changes in net assets and financial highlights.
Transaction Summaries
Annual summaries of all transactions in each Fund account are available
to shareholders. The summaries may be obtained by calling 1-800-225-5163.
THE SCUDDER FAMILY OF FUNDS
(See "Investment products and services" in the Fund's prospectus.)
The Scudder Family of Funds is America's first family of mutual funds
and the nation's oldest family of no-load mutual funds. To assist investors in
choosing a Scudder fund, descriptions of the Scudder funds' objectives follow.
21
<PAGE>
Initial purchases in each Scudder fund must be at least $2,500 or $1,000 in the
case of IRAs. Subsequent purchases must be for $100 or more. Minimum investments
for special plan accounts may be lower.
MONEY MARKET
Scudder Cash Investment Trust ("SCIT") seeks to maintain the stability
of capital, and consistent therewith, to maintain the liquidity of
capital and to provide current income through investment in a
supervised portfolio of short-term debt securities. SCIT intends to
seek to maintain a constant net asset value of $1.00 per share,
although in certain circumstances this may not be possible.
Scudder U.S. Treasury Money Fund seeks to provide safety, liquidity and
stability of capital and consistent therewith to provide current income
through investment in a supervised portfolio of U.S. Government and
U.S. Government guaranteed obligations with maturities of not more than
762 calendar days. The Fund intends to seek to maintain a constant net
asset value of $1.00 per share, although in certain circumstances this
may not be possible.
INCOME
Scudder Emerging Markets Income Fund seeks to provide high current
income and, secondarily, long-term capital appreciation through
investments primarily in high-yielding debt securities issued in
emerging markets.
Scudder Global Bond Fund seeks to provide total return with an emphasis
on current income by investing primarily in high-grade bonds
denominated in foreign currencies and the U.S. dollar. As a secondary
objective, the Fund will seek capital appreciation.
Scudder GNMA Fund seeks to provide investors with high current income
from a portfolio of high-quality GNMA securities.
Scudder High Yield Bond Fund seeks to provide a high level of current
income and, secondarily, capital appreciation through investment
primarily in below investment grade domestic debt securities.
Scudder Income Fund seeks to earn a high level of income consistent
with the prudent investment of capital through a flexible investment
program emphasizing high-grade bonds.
Scudder International Bond Fund seeks to provide income from a
portfolio of high-grade bonds denominated in foreign currencies. As a
secondary objective, the Fund seeks protection and possible enhancement
of principal value by actively managing currency, bond market and
maturity exposure and by security selection.
Scudder Short Term Bond Fund seeks to provide a higher and more stable
level of income than is normally provided by money market investments,
and more price stability than investments in intermediate- and
long-term bonds.
Scudder Zero Coupon 2000 Fund seeks to provide as high an investment
return over a selected period as is consistent with the minimization of
reinvestment risks through investments primarily in zero coupon
securities.
TAX FREE MONEY MARKET
Scudder Tax Free Money Fund ("STFMF") is designed to provide investors
with income exempt from regular federal income tax while seeking
stability of principal. STFMF seeks to maintain a constant net asset
value of $1.00 per share, although in certain circumstances this may
not be possible.
22
<PAGE>
Scudder California Tax Free Money Fund* is designed to provide
California taxpayers income exempt from California state and regular
federal income taxes, and seeks stability of capital and the
maintenance of a constant net asset value of $1.00 per share, although
in certain circumstances this may not be possible.
Scudder New York Tax Free Money Fund* is designed to provide New York
taxpayers income exempt from New York state, New York City and regular
federal income taxes, and seeks stability of capital and the
maintenance of a constant net asset value of $1.00 per share, although
in certain circumstances this may not be possible.
TAX FREE
Scudder High Yield Tax Free Fund seeks to provide high income which is
exempt from regular federal income tax by investing in municipal
securities.
Scudder Limited Term Tax Free Fund seeks to provide as high a level of
income exempt from regular federal income tax as is consistent with a
high degree of principal stability.
Scudder Managed Municipal Bonds seeks to provide income which is exempt
from regular federal income tax primarily through investments in
long-term municipal securities with an emphasis on high grade.
Scudder Medium Term Tax Free Fund seeks to provide a high level of
income free from regular federal income taxes and to limit principal
fluctuation by investing in high-grade municipal securities of
intermediate maturities.
Scudder California Tax Free Fund* seeks to provide income exempt from
both California and regular federal income taxes through the
professional and efficient management of a portfolio consisting of
California state, municipal and local government obligations.
Scudder Massachusetts Limited Term Tax Free Fund* seeks to provide as
high a level of income exempt from Massachusetts personal and regular
federal income tax as is consistent with a high degree of principal
stability.
Scudder Massachusetts Tax Free Fund* seeks to provide income exempt
from both Massachusetts and regular federal income taxes through the
professional and efficient management of a portfolio consisting of
Massachusetts state, municipal and local government obligations.
Scudder New York Tax Free Fund* seeks to provide income exempt from New
York state, New York City and regular federal income taxes through the
professional and efficient management of a portfolio consisting of
investments in New York state, municipal and local government
obligations.
Scudder Ohio Tax Free Fund* seeks to provide income exempt from both
Ohio and regular federal income taxes through the professional and
efficient management of a portfolio consisting of Ohio state, municipal
and local government obligations.
Scudder Pennsylvania Tax Free Fund* seeks to provide income exempt from
both Pennsylvania and regular federal income taxes through a portfolio
consisting of Pennsylvania state, municipal and local government
obligations.
GROWTH AND INCOME
Scudder Balanced Fund seeks to provide a balance of growth and income,
as well as long-term preservation of capital, from a diversified
portfolio of equity and fixed income securities.
_____________________________________
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.
23
<PAGE>
Scudder Growth and Income Fund seeks to provide long-term growth of
capital, current income, and growth of income through a portfolio
invested primarily in common stocks and convertible securities by
companies which offer the prospect of growth of earnings while paying
current dividends.
GROWTH
Scudder Classic Growth Fund seeks long-term growth of capital with
reduced share price volatility compared to other growth mutual funds.
Scudder Development Fund seeks to achieve long-term growth of capital
primarily through investments in marketable securities, principally
common stocks, of relatively small or little-known companies which in
the opinion of management have promise of expanding their size and
profitability or of gaining increased market recognition for their
securities, or both.
Scudder Emerging Markets Growth Fund seeks long-term growth of capital
primarily through equity investment in emerging markets around the
globe.
Scudder Global Discovery Fund seeks above-average capital appreciation
over the long term by investing primarily in the equity securities of
small companies located throughout the world.
Scudder Global Fund seeks long-term growth of capital primarily through
a diversified portfolio of marketable equity securities selected on a
worldwide basis. It may also invest in debt securities of U.S.
and foreign issuers. Income is an incidental consideration.
Scudder Gold Fund seeks maximum return (principal change and income)
consistent with investing in a portfolio of gold-related equity
securities and gold.
Scudder Greater Europe Growth Fund seeks long-term growth of capital
through investments primarily in the equity securities of European
companies.
Scudder International Fund seeks long-term growth of capital through
investment principally in a diversified portfolio of marketable equity
securities selected primarily to permit participation in non-U.S.
companies and economies with prospects for growth. It also invests in
fixed-income securities of foreign governments and companies, with a
view toward total investment return.
Scudder Large Company Value Fund seeks to maximize long-term capital
appreciation through a broad and flexible investment program
emphasizing common stocks.
Scudder Latin America Fund seeks to provide long-term capital
appreciation through investment primarily in the securities of Latin
American issuers.
Scudder Micro Cap Fund seeks long-term growth of capital by investing
primarily in a diversified portfolio of U.S. micro-cap stocks.
Scudder Pacific Opportunities Fund seeks long-term growth of capital
through investment primarily in the equity securities of Pacific Basin
companies, excluding Japan.
Scudder Quality Growth Fund seeks to provide long-term growth of
capital through investment primarily in the equity securities of
seasoned, financially strong U.S. growth companies.
Scudder Small Company Value Fund invests for long-term growth of
capital by seeking out undervalued stocks of small U.S. companies.
Scudder 21st Century Growth Fund seeks long-term growth of capital by
investing primarily in securities of emerging growth companies poised
to be leaders in the 21st century.
24
<PAGE>
Scudder Value Fund seeks long-term growth of capital through investment
in undervalued equity securities.
The Japan Fund, Inc. seeks capital appreciation through investment in
Japanese securities, primarily in common stocks of Japanese companies.
ASSET ALLOCATION
Scudder Pathway Series: Conservative Portfolio seeks primarily current
income and secondarily long-term growth of capital. In pursuing these
objectives, the Portfolio will, under normal market conditions, invest
substantially in a select mix of Scudder bond mutual funds, but will
have some exposure to Scudder equity mutual funds.
Scudder Pathway Series: Balanced Portfolio seeks a balance of growth
and income by investing in a select mix of Scudder money market, bond
and equity mutual funds.
Scudder Pathway Series: Growth Portfolio seeks to provide investors
with long-term growth of capital. In pursuing this objective, the
Portfolio will, under normal market conditions, invest predominantly in
a select mix of Scudder equity mutual funds designed to provide
long-term growth.
Scudder Pathway Series: International Portfolio seeks maximum total
return. Total return consists of any capital appreciation plus dividend
income and interest. To achieve this objective, the Portfolio invests
in a select mix of international and global Scudder Funds.
The net asset values of most Scudder Funds can be found daily in the
"Mutual Funds" section of The Wall Street Journal under "Scudder Funds," and in
other leading newspapers throughout the country. Investors will notice the net
asset value and offering price are the same, reflecting the fact that no sales
commission or "load" is charged on the sale of shares of the Scudder Funds. The
latest seven-day yields for the money-market funds can be found every Monday and
Thursday in the "Money-Market Funds" section of The Wall Street Journal. This
information also may be obtained by calling the Scudder Automated Information
Line (SAIL) at 1-800-343-2890.
The Scudder Family of Funds offers many conveniences and services,
including: active professional investment management; broad and diversified
investment portfolios; pure no-load funds with no commissions to purchase or
redeem shares or Rule 12b-1 distribution fees; individual attention from a
service representative of Scudder Investor Relations; easy telephone exchanges
into other Scudder funds; shares redeemable at net asset value at any time.
SPECIAL PLAN ACCOUNTS
(See "Scudder tax-advantaged retirement plans," "Purchases--By
Automatic Investment Plan" and "Exchanges and redemptions--By
Automatic Withdrawal Plan" in the Fund's prospectus.)
Detailed information on any Scudder investment plan, including the
applicable charges, minimum investment requirements and disclosures made
pursuant to Internal Revenue Service (the "IRS") requirements, may be obtained
by contacting Scudder Investor Services, Inc., Two International Place, Boston,
Massachusetts 02110-4103 or by calling toll free, 1-800-225-2470. It is
advisable for an investor considering the funding of the investment plans
described below to consult with an attorney or other investment or tax adviser
with respect to the suitability requirements and tax aspects thereof.
Shares of the Fund may also be a permitted investment under profit
sharing and pension plans and IRA's other than those offered by the Fund's
distributor depending on the provisions of the relevant plan or IRA.
None of the plans assures a profit or guarantees protection against
depreciation, especially in declining markets.
25
<PAGE>
Scudder Retirement Plans: Profit-Sharing and Money Purchase
Pension Plans for Corporations and Self-Employed Individuals
Shares of the Fund may be purchased as the investment medium under a
plan in the form of a Scudder Profit-Sharing Plan (including a version of the
Plan which includes a cash-or-deferred feature) or a Scudder Money Purchase
Pension Plan (jointly referred to as the Scudder Retirement Plans) adopted by a
corporation, a self-employed individual or a group of self-employed individuals
(including sole proprietorships and partnerships), or other qualifying
organization. Each of these forms was approved by the IRS as a prototype. The
IRS's approval of an employer's plan under Section 401(a) of the Internal
Revenue Code will be greatly facilitated if it is in such approved form. Under
certain circumstances, the IRS will assume that a plan, adopted in this form,
after special notice to any employees, meets the requirements of Section 401(a)
of the Internal Revenue Code.
Scudder 401(k): Cash or Deferred Profit-Sharing Plan
for Corporations and Self-Employed Individuals
Shares of the Fund may be purchased as the investment medium under a
plan in the form of a Scudder 401(k) Plan adopted by a corporation, a
self-employed individual or a group of self-employed individuals (including sole
proprietors and partnerships), or other qualifying organization. This plan has
been approved as a prototype by the IRS.
Scudder IRA: Individual Retirement Account
Shares of the Fund may be purchased as the underlying investment for an
Individual Retirement Account which meets the requirements of Section 408(a) of
the Internal Revenue Code.
A single individual who is not an active participant in an
employer-maintained retirement plan, a simplified employee pension plan, or a
tax-deferred annuity program (a "qualified plan"), and a married individual who
is not an active participant in a qualified plan and whose spouse is also not an
active participant in a qualified plan, are eligible to make tax deductible
contributions of up to $2,000 to an IRA prior to the year such individual
attains age 70 1/2. In addition, certain individuals who are active participants
in qualified plans (or who have spouses who are active participants) are also
eligible to make tax-deductible contributions to an IRA; the annual amount, if
any, of the contribution which such an individual will be eligible to deduct
will be determined by the amount of his, her, or their adjusted gross income for
the year. Whenever the adjusted gross income limitation prohibits an individual
from contributing what would otherwise be the maximum tax-deductible
contribution he or she could make, the individual will be eligible to contribute
the difference to an IRA in the form of nondeductible contributions.
An eligible individual may contribute as much as $2,000 of qualified
income (earned income or, under certain circumstances, alimony) to an IRA each
year (beginning in 1997, up to $2,000 per individual for married couples if only
one spouse has earned income). All income and capital gains derived from IRA
investments are reinvested and compound tax-deferred until distributed. Such
tax-deferred compounding can lead to substantial retirement savings.
The table below shows how much individuals would accumulate in a fully
tax-deductible IRA by age 65 (before any distributions) if they contribute
$2,000 at the beginning of each year, assuming average annual returns of 5, 10,
and 15%. (At withdrawal, accumulations in this table will be taxable.)
Value of IRA at Age 65
Assuming $2,000 Deductible Annual Contribution
- --------------------------------------------------------------------------------
Starting Annual Rate of Return
Age of -----------------------------------------------------------------
Contributions 5% 10% 15%
- --------------------------------------------------------------------------------
25 $253,680 $973,704 $4,091,908
35 139,522 361,887 999,914
45 69,439 126,005 235,620
55 26,414 35,062 46,699
26
<PAGE>
This next table shows how much individuals would accumulate in non-IRA
accounts by age 65 if they start with $2,000 in pretax earned income at the
beginning of each year (which is $1,380 after taxes are paid), assuming average
annual returns of 5, 10 and 15%. (At withdrawal, a portion of the accumulation
in this table will be taxable.)
Value of a Non-IRA Account at
Age 65 Assuming $1,380 Annual Contributions
(post tax, $2,000 pretax) and a 31% Tax Bracket
- --------------------------------------------------------------------------------
Starting Annual Rate of Return
Age of ----------------------------------------------------------------
Contributions 5% 10% 15%
- --------------------------------------------------------------------------------
25 $119,318 $287,021 $741,431
35 73,094 136,868 267,697
45 40,166 59,821 90,764
55 16,709 20,286 24,681
Scudder 403(b) Plan
Shares of the Fund may also be purchased as the underlying investment
for tax sheltered annuity plans under the provisions of Section 403(b)(7) of the
Internal Revenue Code. In general, employees of tax-exempt organizations
described in Section 501(c)(3) of the Internal Revenue Code (such as hospitals,
churches, religious, scientific, or literary organizations and educational
institutions) or a public school system are eligible to participate in a 403(b)
plan.
Automatic Withdrawal Plan
Non-retirement plan shareholders may establish an Automatic Withdrawal
Plan to receive monthly, quarterly or periodic redemptions from his or her
account for any designated amount of $50 or more. Payments are mailed at the end
of each month. The check amounts may be based on the redemption of a fixed
dollar amount, fixed share amount, percent of account value or declining
balance. The Plan provides for income dividends and capital gains distributions,
if any, to be reinvested in additional shares. Shares are then liquidated as
necessary to provide for withdrawal payments. Since the withdrawals are in
amounts selected by the investor and have no relationship to yield or income,
payments received cannot be considered as yield or income on the investment and
the resulting liquidations may deplete or possibly extinguish the initial
investment. Requests for increases in withdrawal amounts or to change payee must
be submitted in writing, signed exactly as the account is registered and contain
signature guarantee(s) as described under "Transaction information--Redeeming
shares--Signature guarantees" in the Fund's prospectus. Any such requests must
be received by the Fund's transfer agent by the 15th of the month in which such
change is to take effect. An Automatic Withdrawal Plan may be terminated at any
time by the shareholder, the Trust or its agent on written notice, and will be
terminated when all shares of the Fund under the Plan have been liquidated or
upon receipt by the Trust of notice of death of the shareholder.
An Automatic Withdrawal Plan request form can be obtained by calling
1-800-225-5163.
Group or Salary Deduction Plan
An investor may join a Group or Salary Deduction Plan where
satisfactory arrangements have been made with Scudder Investor Services, Inc.
for forwarding regular investments through a single source. The minimum annual
investment is $240 per investor which may be made in monthly, quarterly,
semiannual or annual payments. The minimum monthly deposit per investor is $20.
Except for trustees or custodian fees for certain retirement plans, at present
there is no separate charge for maintaining group or salary deduction plans;
however, the Trust and its agents reserve the right to establish a maintenance
charge in the future depending on the services required by the investor.
The Trust reserves the right, after notice has been given to the
shareholder, to redeem and close a shareholder's account in the event that the
shareholder ceases participating in the group plan prior to investment of $1,000
per individual or in the event of a redemption which occurs prior to the
accumulation of that amount or which reduces the account value to less than
$1,000 and the account value is not increased to $1,000 within a reasonable time
after notification. An investor in a plan who has not purchased shares for six
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months shall be presumed to have stopped making payments under the plan.
Automatic Investment Plan
Shareholders may arrange to make periodic investments through automatic
deductions from checking accounts by completing the appropriate form and
providing the necessary documentation to establish this service. The minimum
investment is $50.
The Automatic Investment Plan involves an investment strategy called
dollar cost averaging. Dollar cost averaging is a method of investing whereby a
specific dollar amount is invested at regular intervals. By investing the same
dollar amount each period, when shares are priced low the investor will purchase
more shares than when the share price is higher. Over a period of time this
investment approach may allow the investor to reduce the average price of the
shares purchased. However, this investment approach does not assure a profit or
protect against loss. This type of regular investment program may be suitable
for various investment goals such as, but not limited to, college planning or
saving for a home.
Uniform Transfers/Gifts to Minors Act
Grandparents, parents or other donors may set up custodian accounts for
minors. The minimum initial investment is $1,000 unless the donor agrees to
continue to make regular share purchases for the account through Scudder's
Automatic Investment Plan (AIP). In this case, the minimum initial investment is
$500.
The Trust reserves the right, after notice has been given to the
shareholder and custodian, to redeem and close a shareholder's account in the
event that regular investments to the account cease before the $1,000 minimum is
reached.
Scudder Savings Incentive Match Plans for Employees: SIMPLE IRA'S
Shares of the Fund may be purchased as the underlying investment for a
"SIMPLE IRA". A SIMPLE IRA is an IRA into which both an individual and the
individual's employer may make contributions. The individual may elect to make
pre-tax contributions, calculated as a percentage of compensation, to a SIMPLE
IRA, up to $6,000 a year. Subject to certain limits, the employer may either
match a portion of your contributions, or may make a contribution equal to 2% of
the employee's compensation without regard to the amount the employee
contributes under the SIMPLE IRA. Individuals will be immediately 100% vested in
all contributions made to a SIMPLE IRA.
If amounts are distributed from a SIMPLE IRA account during the two year
period beginning on the date the employee first participates in the SIMPLE
salary reduction arrangement, a 25% penalty tax will be imposed on such
distribution. Also during that two year period, the SIMPLE IRA account can be
rolled over tax-free only to another SIMPLE IRA account. After that two year
period has passed, distributions from a SIMPLE IRA instead will be subject
generally to the rules applicable to other IRAs; for example, they may be rolled
over tax-free into any individual retirement plan, they will be subject to the
10% penalty tax on early distributions that are made before the individual
reaches age 59-1/2, and they will be fully taxed when withdrawn.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
(See "Distribution and performance information--Dividends and capital
gains distributions" in the Fund's prospectus.)
The Fund intends to follow the practice of distributing substantially
all of its investment company taxable income, which includes any excess of net
realized short-term capital gains over net realized long-term capital losses.
The Fund may follow the practice of distributing the entire excess of net
realized long-term capital gains over net realized short-term capital losses.
However, the Fund may retain all or part of such gain for reinvestment, after
paying the related federal income taxes for which the shareholders may claim a
credit against their federal income tax liability. If the Fund does not
distribute the amount of capital gains and/or ordinary income required to be
distributed by an excise tax provision of the Code, the Fund may be subject to
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that excise tax. In certain circumstances, the Fund may determine that it is in
the interest of shareholders to distribute less than the required amount. (See
"TAXES.")
The Fund intends to distribute investment company taxable income and
any net realized capital gains resulting from Fund investment activity in
November or December each year. Both types of distributions will be made in
shares of the Fund and confirmations will be mailed to each shareholder unless a
shareholder has elected to receive cash, in which case a check will be sent.
Distributions of investment company taxable income and net realized capital
gains are taxable (see "TAXES"), whether made in shares or cash.
PERFORMANCE INFORMATION
(See "Distribution and performance information--Performance
information" in the Fund's prospectus.)
From time to time, quotations of the Fund's performance may be included
in advertisements, sales literature or reports to shareholders or prospective
investors. These performance figures will be calculated in the following manner:
Average Annual Total Return
Average Annual Total Return is the average annual compound rate of
return for the periods of one year and the life of the Fund, all ended on the
last day of a recent calendar quarter. Average annual total return quotations
reflect changes in the price of the Fund's shares and assume that all dividends
and capital gains distributions during the respective periods were reinvested in
Fund shares. Average annual total return is calculated by finding the average
annual compound rates of return of a hypothetical investment over such periods,
according to the following formula (average annual total return is then
expressed as a percentage):
T = (ERV/P)^1/n - 1
Where:
P = a hypothetical initial investment of $1,000
T = Average Annual Total Return
n = number of years
ERV = ending redeemable value: ERV is the value,
at the end of the applicable period, of a
hypothetical $1,000 investment made at the
beginning of the applicable period.
Cumulative Total Return
Cumulative Total Return is the cumulative rate of return on a
hypothetical initial investment of $1,000 for a specified period. Cumulative
Total Return quotations reflect changes in the price of the Fund's shares and
assume that all dividends and capital gains distributions during the period were
reinvested in Fund shares. Cumulative Total Return is calculated by finding the
cumulative rates of return of a hypothetical investment over such periods,
according to the following formula (Cumulative Total Return is then expressed as
a percentage):
C = (ERV/P) -1
Where:
C = Cumulative Total Return
P = a hypothetical initial investment of $1,000
ERV = ending redeemable value: ERV is the value,
at the end of the applicable period, of a
hypothetical $1,000 investment made at the
beginning of the applicable period.
Total Return
Total Return is the rate of return on an investment for a specified
period of time calculated in the same manner as Cumulative Total Return.
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Capital Change
Capital Change measures the return from invested capital including
reinvested capital gains distributions. Capital change does not include the
reinvestment of income dividends.
Quotations of the Fund's performance are historical and are not
intended to indicate future performance. An investor's shares when redeemed may
be worth more or less than their original cost. Performance of the Fund will
vary based on changes in market conditions and the level of the Fund's expenses.
Comparison of Fund Performance
A comparison of the quoted non-standard performance offered for various
investments is valid only if performance is calculated in the same manner. Since
there are different methods of calculating performance, investors should
consider the effects of the methods used to calculate performance when comparing
performance of the Fund with performance quoted with respect to other investment
companies or types of investments.
In connection with communicating its performance to current or
prospective shareholders, the Fund also may compare these figures to the
performance of unmanaged indices which may assume reinvestment of dividends or
interest but generally do not reflect deductions for administrative and
management costs. Examples include, but are not limited to the Dow Jones
Industrial Average, the Consumer Price Index, Standard & Poor's 500 Composite
Stock Price Index (S&P 500), the NASDAQ OTC Composite Index, the NASDAQ
Industrials Index, the Russell 2000 Index, and statistics published by the Small
Business Administration.
From time to time, in advertising and marketing literature, this Fund's
performance may be compared to the performance of broad groups of mutual funds
with similar investment goals, as tracked by independent organizations such as,
Investment Company Data, Inc. ("ICD"), Lipper Analytical Services, Inc.
("Lipper"), CDA Investment Technologies, Inc. ("CDA"), Morningstar, Inc., Value
Line Mutual Fund Survey and other independent organizations. When these
organizations' tracking results are used, the Fund will be compared to the
appropriate fund category, that is, by fund objective and portfolio holdings, or
to the appropriate volatility grouping, where volatility is a measure of a
fund's risk. For instance, a Scudder growth fund will be compared to funds in
the growth fund category; a Scudder income fund will be compared to funds in the
income fund category; and so on. Scudder funds (except for money market funds)
may also be compared to funds with similar volatility, as measured statistically
by independent organizations.
From time to time, in marketing and other Fund literature, Trustees and
officers of the Fund, the Fund's portfolio manager, or members of the portfolio
management team may be depicted and quoted to give prospective and current
shareholders a better sense of the outlook and approach of those who manage the
Fund. In addition, the amount of assets that the Adviser has under management in
various geographical areas may be quoted in advertising and marketing materials.
The Fund may be advertised as an investment choice in Scudder's college
planning program. The description may contain illustrations of projected future
college costs based on assumed rates of inflation and examples of hypothetical
fund performance, calculated as described above.
Statistical and other information, as provided by the Social Security
Administration, may be used in marketing materials pertaining to retirement
planning in order to estimate future payouts of social security benefits.
Estimates may be used on demographic and economic data.
Marketing and other Fund literature may include a description of the
potential risks and rewards associated with an investment in the Fund. The
description may include a "risk/return spectrum" which compares the Fund to
other Scudder funds or broad categories of funds, such as money market, bond or
equity funds, in terms of potential risks and returns. Money market funds are
designed to maintain a constant $1.00 share price and have a fluctuating yield.
Share price, yield and total return of a bond fund will fluctuate. The share
price and return of an equity fund also will fluctuate. The description may also
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compare the Fund to bank products, such as certificates of deposit. Unlike
mutual funds, certificates of deposit are insured up to $100,000 by the U.S.
government and offer a fixed rate of return.
Because bank products guarantee the principal value of an investment
and money market funds seek stability of principal, these investments are
considered to be less risky than investments in either bond or equity funds,
which may involve the loss of principal. However, all long-term investments,
including investments in bank products, may be subject to inflation risk, which
is the risk of erosion of the value of an investment as prices increase over a
long time period. The risks/returns associated with an investment in bond or
equity funds depend upon many factors. For bond funds these factors include, but
are not limited to, a fund's overall investment objective, the average portfolio
maturity, credit quality of the securities held, and interest rate movements.
For equity funds, factors include a fund's overall investment objective, the
types of equity securities held and the financial position of the issuers of the
securities. The risks/returns associated with an investment in international
bond or equity funds also will depend upon currency exchange rate fluctuation.
A risk/return spectrum generally will position the various investment
categories in the following order: bank products, money market funds, bond funds
and equity funds. Shorter-term bond funds generally are considered less risky
and offer the potential for less return than longer-term bond funds. The same is
true of domestic bond funds relative to international bond funds, and bond funds
that purchase higher quality securities relative to bond funds that purchase
lower quality securities. Growth and income equity funds are generally
considered to be less risky and offer the potential for less return than growth
funds. In addition, international equity funds usually are considered more risky
than domestic equity funds but generally offer the potential for greater return.
Risk/return spectrums also may depict funds that invest in both
domestic and foreign securities or a combination of bond and equity securities.
Internet access
World Wide Web Site -- The address of the Scudder Funds site is
http://funds.scudder.com. The site offers guidance on global investing and
developing strategies to help meet financial goals and provides access to the
Scudder investor relations department via e-mail. The site also enables users to
access or view fund prospectuses and profiles with links between summary
information in Profiles and details in the Prospectus. Users can fill out new
account forms on-line, order free software, and request literature on funds.
The site is designed for interactivity, simplicity and maneuverability.
A section entitled "Planning Resources" provides information on asset
allocation, tuition, and retirement planning to users who fill out interactive
"worksheets." Investors can easily establish a "Personal Page," that presents
price information, updated daily, on funds they're interested in following. The
"Personal Page" also offers easy navigation to other parts of the site. Fund
performance data from both Scudder and Lipper Analytical Services, Inc. are
available on the site. Also offered on the site is a news feature, which
provides timely and topical material on the Scudder Funds.
Scudder has communicated with shareholders and other interested parties
on Prodigy since 1988 and has participated since 1994 in GALT's Networth
"financial marketplace" site on the Internet. The firm made Scudder Funds
information available on America Online in early 1996.
Account Access -- Scudder is among the first mutual fund families to allow
shareholders to manage their fund accounts through the World Wide Web. Scudder
Fund shareholders can view a snapshot of current holdings, review account
activity and move assets between Scudder Fund accounts.
Scudder's personal portfolio capabilities -- known as SEAS (Scudder
Electronic Account Services) -- are accessible only by current Scudder Fund
shareholders who have set up a Personal Page on Scudder's Web site. Using a
secure Web browser, shareholders sign on to their account with their Social
Security number and their SAIL password. As an additional security measure,
users can change their current password or disable access to their portfolio
through the World Wide Web.
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An Account Activity option reveals a financial history of transactions
for an account, with trade dates, type and amount of transaction, share price
and number of shares traded. For users who wish to trade shares between Scudder
Funds, the Fund Exchange option provides a step-by-step procedure to exchange
shares among existing fund accounts or to new Scudder Fund accounts.
A Call Me(TM) feature enables users to speak with a Scudder Investor
Relations telephone representative while viewing their account on the Web site.
In order to use the Call MeTM feature, an individual must have two phone lines
and enter on the screen the phone number that is not being used to connect to
the Internet. They are connected to the next available Scudder Investor
Relations representative from 8 a.m. to 8 p.m. eastern time.
Evaluation of Fund performance or other relevant statistical
information made by independent sources may also be used in advertisements
concerning the Fund, including reprints of, or selections from, editorials or
articles about this Fund. Sources for Fund performance information and articles
about the Fund include the following:
American Association of Individual Investors' Journal, a monthly publication of
the AAII that includes articles on investment analysis techniques.
Asian Wall Street Journal, a weekly Asian newspaper that often reviews U.S.
mutual funds investing internationally.
Banxquote, an on-line source of national averages for leading money market and
bank CD interest rates, published on a weekly basis by Masterfund, Inc. of
Wilmington, Delaware.
Barron's, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance data.
Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds investing abroad.
CDA Investment Technologies, Inc., an organization which provides performance
and ranking information through examining the dollar results of hypothetical
mutual fund investments and comparing these results against appropriate market
indices.
Consumer Digest, a monthly business/financial magazine that includes a "Money
Watch" section featuring financial news.
Financial Times, Europe's business newspaper, which features from time to time
articles on international or country-specific funds.
Financial World, a general business/financial magazine that includes a "Market
Watch" department reporting on activities in the mutual fund industry.
Forbes, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.
Fortune, a national business publication that periodically rates the performance
of a variety of mutual funds.
The Frank Russell Company, a West-Coast investment management firm that
periodically evaluates international stock markets and compares foreign equity
market performance to U.S. stock market performance.
Global Investor, a European publication that periodically reviews the
performance of U.S. mutual funds investing internationally.
IBC Money Fund Report, a weekly publication of IBC Financial Data, Inc.,
reporting on the performance of the nation's money market funds, summarizing
money market fund activity and including certain averages as performance
benchmarks, specifically "IBC's Money Fund Average," and "IBC's Government Money
Fund Average."
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Ibbotson Associates, Inc., a company specializing in investment research and
data.
Investment Company Data, Inc., an independent organization which provides
performance ranking information for broad classes of mutual funds.
Investor's Business Daily, a daily newspaper that features financial, economic,
and business news.
Kiplinger's Personal Finance Magazine, a monthly investment advisory publication
that periodically features the performance of a variety of securities.
Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis, a weekly
publication of industry-wide mutual fund averages by type of fund.
Money, a monthly magazine that from time to time features both specific funds
and the mutual fund industry as a whole.
Morgan Stanley International, an integrated investment banking firm that
compiles statistical information.
Mutual Fund Values, a biweekly Morningstar, Inc. publication that provides
ratings of mutual funds based on fund performance, risk and portfolio
characteristics.
The New York Times, a nationally distributed newspaper which regularly covers
financial news.
The No-Load Fund Investor, a monthly newsletter, published by Sheldon Jacobs,
that includes mutual fund performance data and recommendations for the mutual
fund investor.
No-Load Fund*X, a monthly newsletter, published by DAL Investment Company, Inc.,
that reports on mutual fund performance, rates funds and discusses investment
strategies for the mutual fund investor.
Personal Investing News, a monthly news publication that often reports on
investment opportunities and market conditions.
Personal Investor, a monthly investment advisory publication that includes a
"Mutual Funds Outlook" section reporting on mutual fund performance measures,
yields, indices and portfolio holdings.
Smart Money, a national personal finance magazine published monthly by Dow Jones
and Company, Inc. and The Hearst Corporation. Focus is placed on ideas for
investing, spending and saving.
Success, a monthly magazine targeted to the world of entrepreneurs and growing
business, often featuring mutual fund performance data.
United Mutual Fund Selector, a semi-monthly investment newsletter, published by
Babson United Investment Advisors, that includes mutual fund performance data
and reviews of mutual fund portfolios and investment strategies.
USA Today, a leading national daily newspaper.
U.S. News and World Report, a national news weekly that periodically reports
mutual fund performance data.
Value Line Mutual Fund Survey, an independent organization that provides
biweekly performance and other information on mutual funds.
The Wall Street Journal, a Dow Jones and Company, Inc. newspaper which regularly
covers financial news.
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Wiesenberger Investment Companies Services, an annual compendium of information
about mutual funds and other investment companies, including comparative data on
funds' backgrounds, management policies, salient features, management results,
income and dividend records and price ranges.
Working Woman, a monthly publication that features a "Financial Workshop"
section reporting on the mutual fund/financial industry.
Worth, a national publication put out 10 times per year by Capital Publishing
Company, a subsidiary of Fidelity Investments. Focus is placed on personal
financial journalism.
FUND ORGANIZATION
(See "Fund organization" in the Fund's prospectus.)
The Fund is a series of Scudder Securities Trust, formerly Scudder
Development Fund, a Massachusetts business trust established under a Declaration
of Trust dated October 16, 1985, as amended. The Trust's predecessor was
organized as a Delaware corporation in 1970. The Trust's authorized capital
consists of an unlimited number of shares of beneficial interest of $0.01 par
value, all of which are of one class and have equal rights as to voting,
dividends and liquidation. The Trust's shares are currently divided into four
series, Scudder Development Fund, Scudder Micro Cap Fund, Scudder 21st Century
Growth Fund and Scudder Small Company Value Fund. The Trustees have the
authority to issue additional series of shares and to designate the relative
rights and preferences as between the different series. Each share of each Fund
has equal rights with each other share of that Fund as to voting, dividends and
liquidation. All shares issued and outstanding will be fully paid and
nonassessable by the Trust, and redeemable as described in this Statement of
Additional Information and in each Fund's prospectus.
The assets of the Trust received for the issue or sale of the shares of
each series and all income, earnings, profits and proceeds thereof, subject only
to the rights of creditors, are specifically allocated to such series and
constitute the underlying assets of such series. The underlying assets of each
series are segregated on the books of account, and are to be charged with the
liabilities in respect to such series and with a proportionate share of the
general liabilities of the Trust. If a series were unable to meet its
obligations, the assets of all other series may in some circumstances be
available to creditors for that purpose, in which case the assets of such other
series could be used to meet liabilities which are not otherwise properly
chargeable to them. Expenses with respect to any two or more series are to be
allocated in proportion to the asset value of the respective series except where
allocations of direct expenses can otherwise be fairly made. The officers of the
Trust, subject to the general supervision of the Trustees, have the power to
determine which liabilities are allocable to a given series, or which are
general or allocable to two or more series. In the event of the dissolution or
liquidation of the Trust or any series, the holders of the shares of any series
are entitled to receive as a class the underlying assets of such shares
available for distribution to shareholders.
Shares of the Trust entitle their holders to one vote per share;
however, separate votes are taken by each series on matters affecting that
individual series. For example, a change in investment policy for a series would
be voted upon only by shareholders of the series involved. Additionally,
approval of the investment advisory agreement is a matter to be determined
separately by each series.
The Trustees, in their discretion, may authorize the division of shares
of the Fund (or shares of a series) into different classes, permitting shares of
different classes to be distributed by different methods. Although shareholders
of different classes of a series would have an interest in the same portfolio of
assets, shareholders of different classes may bear different expenses in
connection with different methods of distribution. 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
Fund.
The Declaration of Trust provides that obligations of the Fund are not
binding upon the Trustees individually but only upon the property of the Fund,
that the Trustees and officers will not be liable for errors of judgment or
mistakes of fact or law, and that the Fund will indemnify its Trustees and
officers against liabilities and expenses incurred in connection with litigation
in which they may be involved because of their offices with the Fund, except if
it is determined in the manner provided in the Declaration of Trust that they
have not acted in good faith in the reasonable belief that their actions were in
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the best interests of the Fund. However, nothing in the Declaration of Trust
protects or indemnifies a Trustee or officer against any liability to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
INVESTMENT ADVISER
(See "Fund organization--Investment adviser" in the
Fund's prospectus.)
Scudder, Stevens & Clark, Inc. (the "Adviser"), an investment counsel
firm, acts as investment adviser to the Fund. This organization is one of the
most experienced investment counsel firms in the U.S. It was established as a
partnership in 1919 and pioneered the practice of providing investment counsel
to individual clients on a fee basis. In 1928 it introduced the first no-load
mutual fund to the public. In 1953 the Adviser introduced Scudder International
Fund, Inc., the first mutual fund available in the U.S. investing
internationally in securities of issuers in several foreign countries. The firm
reorganized from a partnership to a corporation on June 28, 1985.
The principal source of the Adviser's income is professional fees
received from providing continuous investment advice, and the firm derives no
income from brokerage or underwriting of securities. Today, it provides
investment counsel for many individuals and institutions, including insurance
companies, colleges, industrial corporations, and financial and banking
organizations. In addition, it manages Montgomery Street Income Securities,
Inc., Scudder California Tax Free Trust, Scudder Cash Investment Trust, Scudder
Equity Trust, Scudder Fund, Inc., Scudder Funds Trust, Scudder Global Fund,
Inc., Scudder GNMA Fund, Scudder Portfolio Trust, Scudder Institutional Fund,
Inc., Scudder International Fund, Inc., Scudder Investment Trust, Scudder
Municipal Trust, Scudder Mutual Funds, Inc., Scudder New Asia Fund, Inc.,
Scudder New Europe Fund, Inc., Scudder Pathway Series, Scudder Securities Trust,
Scudder State Tax Free Trust, Scudder Tax Free Money Fund, Scudder Tax Free
Trust, Scudder U.S. Treasury Money Fund, Scudder Variable Life Investment Fund,
Scudder World Income Opportunities Fund, Inc., The Argentina Fund, Inc., The
Brazil Fund, Inc., The First Iberian Fund, Inc., The Korea Fund, Inc., The Japan
Fund, Inc. and The Latin America Dollar Income Fund, Inc. Some of the foregoing
companies or trusts have two or more series.
The Adviser also provides investment advisory services to the mutual
funds which comprise the AARP Investment Program from Scudder. The AARP
Investment Program from Scudder has assets over $12 billion and includes the
AARP Growth Trust, AARP Income Trust, AARP Tax Free Income Trust, AARP Managed
Investment Portfolios Trust and AARP Cash Investment Funds.
The Adviser maintains a large research department, which conducts
continuous studies of the factors that affect the position of various
industries, companies and individual securities. In this work, the Adviser
utilizes certain reports and statistics from a wide variety of sources,
including brokers and dealers who may execute portfolio transactions for the
Fund and other clients of the Adviser, but conclusions are based primarily on
investigations and critical analyses by the Adviser's own research specialists.
Certain investments may be appropriate for the Fund and also for other
clients advised by the Adviser. Investment decisions for the Fund and other
clients are made with a view toward achieving their respective investment
objectives and after consideration of such factors as their current holdings,
availability of cash for investment and the size of their investments generally.
Frequently, a particular security may be bought or sold for only one client or
in different amounts and at different times for more than one but less than all
clients. Likewise, a particular security may be bought for one or more clients
when one or more other clients are selling the security. In addition, purchases
or sales of the same security may be made for two or more clients on the same
day. In such event, such transactions will be allocated among the clients in a
manner believed by the Adviser to be equitable to each. In some cases, this
procedure could have an adverse effect on the price or amount of the securities
purchased or sold by the Fund. Purchase and sale orders for the Fund may be
combined with those of other clients of the Adviser in the interest of achieving
the most favorable net results to the Fund.
The Investment Management Agreement (the "Agreement") dated October 6,
1995 was approved by the Trustees of the Fund on September 6, 1995 and by the
initial shareholder of the Fund on October 4, 1995. The Agreement will continue
in effect until September 30, 1997 and from year to year thereafter only if its
continuance is approved annually by the vote of a majority of those Trustees who
are not parties to such Agreement or interested persons of the Adviser or the
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Fund, cast in person at a meeting called for the purpose of voting on such
approval, and either by a vote of the Fund's Trustees or of a majority of the
outstanding voting securities of the Fund. The Agreement may be terminated at
any time without payment of penalty by either party on sixty days' written
notice, and automatically terminates in the event of its assignment.
Under the Agreement, the Adviser provides the Fund with continuing
investment management for the Fund's portfolio consistent with the Fund's
investment objective, policies and restrictions and determines what securities
shall be purchased, held or sold and what portion of the Fund's assets shall be
held uninvested, subject always to the provisions of the Fund's Declaration of
Trust and By-Laws, the 1940 Act, the Code and to the Fund's investment
objective, policies and restrictions, and subject, further, to such policies and
instructions as the Board of Trustees of the Fund may from time to time
establish. The Adviser also advises and assists the officers of the Fund in
taking such steps as are necessary or appropriate to carry out the decisions of
its Trustees and the appropriate committees of the Trustees regarding the
conduct of the business of the Fund.
Under the Agreement, the Adviser renders significant administrative
services (not otherwise provided by third parties) necessary for the Fund's
operations as an open-end investment company including, but not limited to,
preparing reports and notices to the Trustees and shareholders; supervising,
negotiating contractual arrangements with, and monitoring various third-party
service providers to the Fund (such as the Fund's transfer agent, pricing
agents, custodian, accountants and others); preparing and making filings with
the SEC and other regulatory agencies; assisting in the preparation and filing
of the Fund's federal, state and local tax returns; preparing and filing the
Fund's federal excise tax returns; assisting with investor and public relations
matters; monitoring the valuation of securities and the calculation of net asset
value; monitoring the registration of shares of the Fund under applicable
federal and state securities laws; maintaining the Fund's books and records to
the extent not otherwise maintained by a third party; assisting in establishing
accounting policies of the Fund; assisting in the resolution of accounting and
legal issues; establishing and monitoring the Fund's operating budget;
processing the payment of the Fund's bills; assisting the Fund in, and otherwise
arranging for, the payment of distributions and dividends and otherwise
assisting the Fund in the conduct of its business, subject to the direction and
control of the Trustees.
The Adviser pays the compensation and expenses (except those for
attending Board and committee meetings outside New York, New York and Boston,
Massachusetts) of all Trustees, officers and executive employees of the Fund
affiliated with the Adviser, and makes available, without expense to the Fund,
the services of such directors, officers and employees of the Adviser as may
duly be elected officers of the Fund, subject to their individual consent to
serve and to any limitations imposed by law, and provides the Fund's office
space and facilities.
For these services the Fund pays the Adviser a fee equal to an annual
rate of 0.75% of the Fund's average daily net assets payable monthly, provided
the Fund will make such interim payments as may be requested by the Adviser not
to exceed 75% of the amount of the fee then accrued on the books of the Fund and
unpaid. The Adviser has agreed until December 31, 1997 to maintain the total
annualized expenses of the Fund at no more than 1.50% of the average daily net
assets of the Fund. For the fiscal period October 6, 1995 (commencement of
operations) to August 31, 1996, the Adviser did not impose any portion of its
management fee amounting to $171,544.
Under the Agreement, the Fund is responsible for all of its other
expenses including: fees and expenses incurred in connection with membership in
investment company organizations; broker's commissions, legal, auditing and
accounting expenses; the calculation of net asset value; taxes and governmental
fees; the fees and expenses of the Transfer Agent; the cost of preparing share
certificates or any other expenses including expenses of issuance, redemption or
repurchase of shares; the expenses of and the fees for registering or qualifying
securities for sale; the fees and expenses of Trustees, officers and employees
of the Fund who are not affiliated with the Adviser; the cost of printing and
distributing reports and notices to shareholders; and the fees and disbursements
of custodians. The Fund may arrange to have third parties assume all or part of
the expenses of sale, underwriting and distribution of shares of the Fund. The
Fund is also responsible for expenses of shareholders' meetings, the cost of
responding to shareholders' inquiries and expenses incurred in connection with
litigation, proceedings and claims and the legal obligation it may have to
indemnify its officers and Trustees with respect thereto.
The Agreement requires the Adviser to reimburse the Fund for all or a
portion of advances of its management fee to the extent annual expenses of the
Fund (including the management fee stated above) exceed the limitations
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<PAGE>
prescribed by any state in which the Fund's shares are offered for sale.
Management has been advised that, while most states have eliminated expense
limitations, the lowest such limitation is presently 2 1/2% of average daily net
assets up to $30 million, 2% of the next $70 million of average daily net assets
and 1 1/2% of average daily net assets in excess of that amount. Certain
expenses such as brokerage commissions, taxes, extraordinary expenses and
interest are excluded from such limitation. For the fiscal period ended August
31, 1996 expenses of the Fund equaled 1.50% of the average net assets of the
Fund. Any such fee advance required to be returned to the Fund will be returned
as promptly as practicable after the end of the Fund's fiscal year. However, no
fee payment will be made to the Adviser during any fiscal year which will cause
year to date expenses to exceed the cumulative pro rata expense limitation at
the time of such payment.
The Agreement also provides that the Fund may use any name derived from
the name "Scudder, Stevens & Clark" only as long as the Agreement or any
extension, renewal or amendment thereof remains in effect.
In reviewing the terms of the Agreement and in discussions with the
Adviser concerning such Agreement, the Trustees of the Fund who are not
"interested persons" of the Adviser are represented by independent counsel at
the Fund's expense.
The Agreement provides that the Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund in
connection with matters to which the Agreement relates, except a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of the
Adviser in the performance of its duties or from reckless disregard by the
Adviser of its obligations and duties under the Agreement.
Officers and employees of the Adviser from time to time may have
transactions with various banks, including the Fund's custodian bank. It is the
Adviser's opinion that the terms and conditions of those transactions which have
occurred were not influenced by existing or potential custodial or other Fund
relationships.
None of the Trustees or officers of the Fund may have dealings with the
Fund as principals in the purchase or sale of securities, except as individual
subscribers or holders of shares of the Fund.
Personal Investments by Employees of the Adviser
Employees of the Adviser are permitted to make personal securities
transactions, subject to requirements and restrictions set forth in the
Adviser's Code of Ethics. The Code of Ethics contains provisions and
requirements designed to identify and address certain conflicts of interest
between personal investment activities and the interests of investment advisory
clients such as the Funds. Among other things, the Code of Ethics, which
generally complies with standards recommended by the Investment Company
Institute's Advisory Group on Personal Investing, prohibits certain types of
transactions absent prior approval, imposes time periods during which personal
transactions may not be made in certain securities, and requires the submission
of duplicate broker confirmations and monthly reporting of securities
transactions. Additional restrictions apply to portfolio managers, traders,
research analysts and others involved in the investment advisory process.
Exceptions to these and other provisions of the Code of Ethics may be granted in
particular circumstances after review by appropriate personnel.
TRUSTEES AND OFFICERS
<TABLE>
<S> <C> <C> <C>
Name Position Position with Underwriter,
and Address with Fund Principal Occupation** Scudder Investor Services, Inc.
- ----------- --------- ---------------------- -------------------------------
Daniel Pierce+* (62) President and Chairman of the Board and Vice President, Director and
Trustee Managing Director of Scudder, Assistant Treasurer
Stevens & Clark, Inc.
Paul Bancroft III (66) Trustee Venture Capitalist and --
1120 Cheston Lane Consultant; Retired, President
Queenstown, MD 21658 Chief Executive Officer and
Director of Bessemer Securities
Corporation
37
<PAGE>
Name Position Position with Underwriter,
and Address with Fund Principal Occupation** Scudder Investor Services, Inc.
- ----------- --------- ---------------------- -------------------------------
Thomas J. Devine (70) Trustee Consultant --
641 Lexington Avenue,
28th Floor
New York, NY 10022
Keith R. Fox (42) Trustee President, Exeter Capital --
10 East 53rd Street Management Corporation
New York, NY 10022
Dudley H. Ladd+#* (52) Trustee Managing Director of Scudder, Director and Senior Vice
Stevens & Clark, Inc. President
Dr. Wilson Nolen (70) Trustee Consultant (1989 until --
1120 Fifth Avenue present); Corporate Vice
New York, NY 10128 President of Becton, Dickinson
& Company, manufacturer of
medical and scientific products
(until June 1989)
Kathryn L. Quirk++#* (44) Trustee Managing Director of Scudder, Vice President
Stevens & Clark, Inc.
Dr. Gordon Shillinglaw (71) Trustee Professor Emeritus of --
Columbia University Accounting, Columbia University
196 Villard Avenue Graduate School of Business
Hastings-on-Hudson
New York, NY 10706
Robert W. Lear (79) Honorary Trustee Executive-in-Residence, --
429 Silvermine Road Visiting Professor, Columbia
New Canaan, CT 06840 University Graduate School of
Business
Robert G. Stone, Jr. (73) Honorary Trustee Chairman of the Board and --
405 Lexington Avenue, Director, Kirby Corporation
39th Floor (inland and offshore marine
New York, NY 10174 transportation and diesel
repairs)
Edmund R. Swanberg++ (75) Honorary Trustee Advisory Managing Director of --
Scudder, Stevens & Clark, Inc.
Peter Chin++ (54) Vice President Principal of Scudder, Stevens & --
Clark, Inc.
James M. Eysenbach@ (34) Vice President Vice President of Scudder, --
Stevens & Clark, Inc.
Philip S. Fortuna++ (39) Vice President Managing Director of Scudder, --
Stevens & Clark, Inc.
38
<PAGE>
Jerard K. Hartman++ (63) Vice President Managing Director of Scudder, --
Stevens & Clark, Inc.
Thomas W. Joseph+ (57) Vice President Principal of Scudder, Stevens & Vice President, Director,
Clark, Inc. Treasurer and Assistant Clerk
David S. Lee+ (62) Vice President Managing Director of Scudder, President, Director and
Stevens & Clark, Inc. Assistant Treasurer
Thomas F. McDonough+ (49) Vice President Principal of Scudder, Stevens & Clerk
and Secretary Clark, Inc.
Pamela A. McGrath+ (43) Vice President Managing Director of Scudder, --
and Treasurer Stevens & Clark, Inc.
Roy C. McKay++ (53) Vice President Managing Director of Scudder, --
Stevens & Clark, Inc.
Edward J. O'Connell++ (51) Vice President Principal of Scudder, Stevens & Assistant Treasurer
and Assistant Clark, Inc.
Treasurer
Richard W. Desmond++ (60) Assistant Vice President of Scudder, Vice President
Secretary Stevens & Clark, Inc.
* Messrs. Ladd, Pierce and Ms. Quirk are considered by the Fund and counsel to be persons who are "interested
persons" of the Adviser or of the Fund, within the meaning of the Investment Company Act of 1940, as
amended.
** Unless otherwise stated, all the Trustees and officers have been
associated with their respective companies for more than five years,
but not necessarily in the same capacity.
# Mr. Ladd and Ms. Quirk are members of the Executive Committee, which may exercise all of the powers of the
Trustees when they are not in session.
+ Address: Two International Place, Boston, Massachusetts
++ Address: 345 Park Avenue, New York, New York
@ Address: 101 California Street, Suite 4100, San Francisco, CA 94111-5886
</TABLE>
The Trustees and Officers of the Fund also serve in similar capacities
with other Scudder Funds.
As of November 30, 1996, all Directors and officers as a group owned
beneficially (as that term is defined in Section 13(d) of the Securities
Exchange Act of 1934) 135,084 shares, or 4.04% of the shares of the Fund.
Certain accounts for which the Adviser acts as investment adviser owned
319,545 shares in the aggregate, or 9.55% of the outstanding shares on November
30, 1996. The Adviser may be deemed to be the beneficial owner of such shares
but disclaims any beneficial ownership in such shares.
To the best of the Fund's knowledge, as of November 30, 1996, no person
owned beneficially more than 5% of the Fund's outstanding shares except as
stated above.
REMUNERATION
Several of the officers and Trustees of the Trust may be officers or
employees of the Adviser, or of the Distributor, the Transfer Agent, Scudder
Trust Company, or Scudder Fund Accounting Corporation, from whom they receive
39
<PAGE>
compensation, as a result of which they may be deemed to participate in the fees
paid by the Trust. The Trust pays no direct remuneration to any officer of the
Trust. However, each of the Trust's Trustees who is not affiliated with the
Adviser will be compensated for all expenses relating to Trust business
(specifically including travel expenses relating to Trust business). Each of
these unaffiliated Trustees receives an annual Trustee's fee of $4,000 plus $400
for each attended each Trustees' meeting, audit committee meeting or meeting
held for the purpose of considering arrangements between the Fund and the
Adviser or any of its affiliates. Each unaffiliated Trustee also receives $150
per committee meeting attended other than those set forth above. For the fiscal
period ended August 31, 1996, the Fund paid such Trustees $45,631.
The following table shows the aggregate compensation received by each
unaffiliated Trustee during 1995 from Scudder Small Company Value Fund and from
all Scudder Funds as a group.
Scudder
Name Securities Trust* All Scudder Funds
---- ----------------- -----------------
Paul Bancroft III, $1,350 $140,717 (15 funds)
Trustee
Thomas J. Devine, $1,350 $144,917 (17 funds)
Trustee
Dr. Wilson Nolen, $1,350 $146,992 (16 funds)
Trustee
Dr. Gordon Shillinglaw, $1,350 $100,747 (15 funds)
Trustee
Robert G. Stone, Jr.+ **, $1,350 $142,952 (16 funds)
Trustee
* Scudder Securities Trust consists of four Funds: Scudder Development Fund,
Scudder Small Company Value Fund, Scudder Micro Cap Fund and Scudder 21st
Century Growth Fund. Scudder Small Company Value Fund commenced operations
on October 6, 1995, Scudder Micro Cap Fund commenced operations on August
12, 1996 and Scudder 21st Century Growth Fund commenced operations on
September 9, 1996.
** This amount does not reflect $6,788 in pension or retirement benefits
accrued as part of Fund Complex expenses, and $6,000 in estimated annual
benefits payable upon retirement. Retirement benefits accrued and proposed
are to be paid to Mr. Stone as additional compensation for serving on the
Board of The Japan Fund, Inc.
+ Honorary Trustee of Scudder Securities Trust as of January 1, 1996.
DISTRIBUTOR
The Trust has an underwriting agreement with Scudder Investor Services,
Inc. (the "Distributor"), a Massachusetts corporation, which is a subsidiary of
the Adviser, a Delaware corporation. The Trust's underwriting agreement dated
September 30, 1995 will remain in effect until September 30, 1997 and from year
to year thereafter only if its continuance is approved annually by a majority of
the Trustees who are not parties to such agreement or interested persons of any
such party and either by a vote of a majority of the Trustees or a majority of
the outstanding voting securities of the Fund. The underwriting agreement was
last approved by the Trustees on September 6, 1995.
Under the underwriting agreement, the Fund is responsible for: the
payment of all fees and expenses in connection with the preparation and filing
with the SEC of its registration statement and prospectus and any amendments and
supplements thereto; the registration and qualification of shares for sale in
the various states, including registering the Fund as a broker or dealer in the
various states as required; the fees and expenses of preparing, printing and
mailing prospectuses annually to existing shareholders (see below for expenses
relating to prospectuses paid by the Distributor), notices, proxy statements,
reports or other communications to shareholders of the Fund; the cost of
printing and mailing confirmations of purchases of shares and any prospectuses
accompanying such confirmations; any issuance taxes and/or any initial transfer
40
<PAGE>
taxes; a portion of shareholder toll-free telephone charges and expenses of
shareholder service representatives; the cost of wiring funds for share
purchases and redemptions (unless paid by the shareholder who initiates the
transaction); the cost of printing and postage of business reply envelopes; and
a portion of the cost of computer terminals used by both the Fund and the
Distributor.
The Distributor will pay for printing and distributing prospectuses or
reports prepared for its use in connection with the offering of the Fund's
shares to the public and preparing, printing and mailing any other literature or
advertising in connection with the offering of the shares of the Fund to the
public. The Distributor will pay all fees and expenses in connection with its
qualification and registration as a broker or dealer under federal and state
laws, a portion of the cost of toll-free telephone service and expenses of
shareholder service representatives, a portion of the cost of computer
terminals, and expenses of any activity which is primarily intended to result in
the sale of shares issued by the Fund, unless a 12b-1 Plan is in effect which
provides that the Fund shall bear some or all of such expenses.
NOTE: Although the Fund does not currently have a 12b-1 Plan, and the
Trustees have no current intention of adopting one, the Fund would also
pay those fees and expenses permitted to be paid or assumed by the Fund
pursuant to a 12b-1 Plan, if any, were adopted by the Fund,
notwithstanding any other provision to the contrary in the underwriting
agreement.
As agent, the Distributor currently offers the Fund's shares on a
continuous basis to investors in all states in which shares of the Fund may from
time to time be registered or where permitted by applicable law. The
underwriting agreement provides that the Distributor accepts orders for shares
at net asset value as no sales commission or load is charged to the investor.
The Distributor has made no firm commitment to acquire shares of the Fund.
TAXES
(See "Distribution and performance information--Dividends and
capital gain distributions" and "Transaction information--
Tax information, Tax identification number" in the Fund's prospectus.)
The Fund has elected to be treated as a regulated investment company
under Subchapter M of the Code or a predecessor statute, and has qualified as
such since its inception. It intends to continue to qualify for such treatment.
Such qualification does not involve governmental supervision or management of
investment practices or policy.
A regulated investment company qualifying under Subchapter M of the
Code is required to distribute to its shareholders at least 90 percent of its
investment company taxable income (including net short-term capital gain) and
generally is not subject to federal income tax to the extent that it distributes
annually its investment company taxable income and net realized capital gains in
the manner required under the Code.
The Fund is subject to a 4% nondeductible excise tax on amounts
required to be but not distributed under a prescribed formula. The formula
requires payment to shareholders during a calendar year of distributions
representing at least 98% of the Fund's ordinary income for the calendar year,
at least 98% of the excess of its capital gains over capital losses (adjusted
for certain ordinary losses) realized during the one-year period ending October
31 during such year, and all ordinary income and capital gains for prior years
that were not previously distributed.
Investment company taxable income includes dividends, interest and net
short-term capital gains in excess of net long-term capital losses, less
expenses. Net realized capital gains for a fiscal year are computed by taking
into account any capital loss carryforward of the Fund. Presently, the Fund has
no capital loss carryforwards. From November 1, 1995 through August 31, 1996 the
Fund incurred $6,985 of net realized capital losses which the Fund intends to
elect to defer and treat as arising in the fiscal year ending August 31, 1997.
If any net realized long-term capital gains in excess of net realized
short-term capital losses are retained by the Fund for reinvestment, requiring
federal income taxes to be paid thereon by the Fund, the Fund intends to elect
to treat such capital gains as having been distributed to shareholders. As a
result, each shareholder will report such capital gains as long-term capital
gains, will be able to claim a relative share of federal income taxes paid by
the Fund on such gains as a credit against personal federal income tax
41
<PAGE>
liability, and will be entitled to increase the adjusted tax basis on Fund
shares by the difference between a pro rata share of such gains owned and the
individual tax credit.
Distributions of investment company taxable income are taxable to
shareholders as ordinary income.
To the extent that dividends from domestic corporations constitute a
portion of the Fund's gross income, a portion of the income distributions of the
Fund may be eligible for the deduction for dividends received by corporations.
Shareholders will be informed of the portion of dividends which so qualify. The
dividends-received deduction is reduced to the extent the shares of the Fund
with respect to which the dividends are received are treated as debt-financed
under federal income tax law, and is eliminated if either those shares or the
shares of the Fund are deemed to have been held by the Fund or the shareholder,
as the case may be, for less than 46 days.
Properly designated distributions of the excess of net long-term
capital gain over net short-term capital loss are taxable to shareholders as
long-term capital gain, regardless of the length of time the shares of the Fund
have been held by such shareholders. Such distributions are not eligible for the
dividends-received deduction. Any loss realized upon the redemption of shares
held at the time of redemption for six months or less will be treated as a
long-term capital loss to the extent of any amounts treated as distributions of
long-term capital gain during such six-month period.
Distributions of investment company taxable income and net realized
capital gains will be taxable as described above, whether received in shares or
in cash. Shareholders electing to receive distributions in the form of
additional shares will have a cost basis for federal income tax purposes in each
share so received equal to the net asset value of a share on the reinvestment
date.
All distributions of investment company taxable income and net realized
capital gain, whether received in shares or in cash, must be reported by each
shareholder on his or her federal income tax return. Dividends and capital gains
distributions declared in October, November or December and payable to
shareholders of record in such a month will be deemed to have been received by
shareholders on December 31 if paid during January of the following year.
Redemptions of shares, including exchanges for shares of another Scudder fund,
may result in tax consequences (gain or loss) to the shareholder and are also
subject to these reporting requirements.
A qualifying individual may make a deductible IRA contribution for any
taxable year only if (i) neither the individual nor his or her spouse (unless
filing separate returns) is an active participant in an employer's retirement
plan, or (ii) the individual (and his or her spouse, if applicable) has an
adjusted gross income below a certain level ($40,050 for married individuals
filing a joint return, with a phase-out of the deduction for adjusted gross
income between $40,050 and $50,000; $25,050 for a single individual, with a
phase-out for adjusted gross income between $25,050 and $35,000). However, an
individual not permitted to make a deductible contribution to an IRA for any
such taxable year may nonetheless make nondeductible contributions up to $2,000
to an IRA (beginning in 1997, up to $2,000 per individual for married couples if
only one spouse has earned income) for that year. There are special rules for
determining how withdrawals are to be taxed if an IRA contains both deductible
and nondeductible amounts. In general, a proportionate amount of each withdrawal
will be deemed to be made from nondeductible contributions; amounts treated as a
return of nondeductible contributions will not be taxable. Also, annual
contributions may be made to a spousal IRA even if the spouse has earnings in a
given year if the spouse elects to be treated as having no earnings (for IRA
contribution purposes) for the year.
Distributions by the Fund result in a reduction in the net asset value
of the Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above, even though,
from an investment standpoint, it may constitute a partial return of capital. In
particular, investors should consider the tax implications of buying shares just
prior to a distribution. The price of shares purchased at that time includes the
amount of the forthcoming distribution. Those purchasing just prior to a
distribution will then receive a partial return of capital upon the
distribution, which will nevertheless be taxable to them.
Equity options (including covered call options on portfolio stock) and
over-the-counter options on debt securities written or purchased by the Fund
will be subject to tax under Section 1234 of the Code. In general, no loss is
recognized by a Fund upon payment of a premium in connection with the purchase
of a put or call option. The character of any gain or loss recognized (i.e.,
42
<PAGE>
long-term or short-term) will generally depend, in the case of a lapse or sale
of the option, on the Fund's holding period for the option, and in the case of
an exercise of a put option, on the Fund's holding period for the underlying
stock. The purchase of a put option may constitute a short sale for federal
income tax purposes, causing an adjustment in the holding period of the
underlying stock or substantially identical stock in the Fund's portfolio. If
the Fund writes a put or call option, no gain is recognized upon its receipt of
a premium. If the option lapses or is closed out, any gain or loss is treated as
a short-term capital gain or loss. If a call option is exercised, any resulting
gain or loss is a short-term or long-term capital gain or loss depending on the
holding period of the underlying stock. The exercise of a put option written by
the Fund is not a taxable transaction for the Fund.
Many futures and forward contracts entered into by the Fund and all
listed non-equity options written or purchased by the Fund (including options on
futures contracts and options on broad-based stock indices) will be governed by
Section 1256 of the Code. Absent a tax election to the contrary, gain or loss
attributable to the lapse, exercise or closing out of any such position
generally will be treated as 60% long-term and 40% short-term capital gain or
loss, and on the last trading day of the Fund's fiscal year, all outstanding
Section 1256 positions will be marked to market (i.e. treated as if such
positions were closed out at their closing price on such day), with any
resulting gain or loss recognized as 60% long-term and 40% short-term capital
gain or loss. Under certain circumstances, entry into a futures contract to sell
a security may constitute a short sale for federal income tax purposes, causing
an adjustment in the holding period of the underlying security or a
substantially identical security in the Fund's portfolio.
Positions of the Fund which consist of at least one stock and at least
one other position with respect to a related security which substantially
diminishes the Fund's risk of loss with respect to such stock could be treated
as a "straddle" which is governed by Section 1092 of the Code, the operation of
which may cause deferral of losses, adjustments in the holding periods of stock
or securities and conversion of short-term capital losses into long-term capital
losses. An exception to these straddle rules exists for certain "qualified
covered call options" on stock written by the Fund.
Positions of the Fund which consist of at least one position not
governed by Section 1256 and at least one futures or forward contract or
nonequity option governed by Section 1256 which substantially diminishes the
Fund's risk of loss with respect to such other position will be treated as a
"mixed straddle." Although mixed straddles are subject to the straddle rules of
Section 1092 of the Code, certain tax elections exist for them which reduce or
eliminate the operation of these rules. The Fund intends to monitor its
transactions in options and futures and may make certain tax elections in
connection with these investments.
The Fund will be required to report to the Internal Revenue Service all
distributions of taxable income and capital gains as well as gross proceeds from
the redemption or exchange of Fund shares, except in the case of certain exempt
shareholders. Under the backup withholding provisions of Section 3406 of the
Code, distributions of taxable income and capital gains and proceeds from the
redemption or exchange of the shares of a regulated investment company may be
subject to withholding of federal income tax at the rate of 31% in the case of
non-exempt shareholders who fail to furnish the investment company with their
taxpayer identification numbers and with required certifications regarding their
status under the federal income tax law. Withholding may also be required if the
Fund is notified by the IRS or a broker that the taxpayer identification number
furnished by the shareholder is incorrect or that the shareholder has previously
failed to report interest or dividend income. If the withholding provisions are
applicable, any such distributions and proceeds, whether taken in cash or
reinvested in additional shares, will be reduced by the amounts required to be
withheld.
Shareholders of the Fund may be subject to state and local taxes on
distributions received from the Fund and on redemptions of the Fund's shares.
Each distribution is accompanied by a brief explanation of the form and
character of the distribution. In January of each year the Fund issues to each
shareholder a statement of the federal income tax status of all distributions.
The Fund is organized as a series of a Massachusetts business trust and
is not liable for any income or franchise tax in the Commonwealth of
Massachusetts, provided that it qualifies as a regulated investment company for
federal income tax purposes.
43
<PAGE>
The foregoing discussion of U.S. federal income tax law relates solely
to the application of that law to U.S. persons, i.e., U.S. citizens and
residents and U.S. corporations, partnerships, trusts and estates. Each
shareholder who is not a U.S. person should consider the U.S. and foreign tax
consequences of ownership of shares of the Fund, including the possibility that
such a shareholder may be subject to a U.S. withholding tax at a rate of 30% (or
at a lower rate under an applicable income tax treaty) on amounts constituting
ordinary income received by him or her, where such amounts are treated as income
from U.S. sources under the Code.
Shareholders should consult their tax advisers about the application of
the provisions of tax law described in this Statement of Additional Information
in light of their particular tax situations.
PORTFOLIO TRANSACTIONS
Brokerage Commissions
To the maximum extent feasible the Adviser places orders for portfolio
transactions for the Fund through the Distributor, which in turn places orders
on behalf of the Fund with issuers, underwriters or other brokers and dealers.
The Distributor receives no commissions, fees or other remuneration from the
Fund for this service.
Allocation of brokerage is supervised by the Adviser.
The primary objective of the Adviser in placing orders for the purchase
and sale of securities for the Fund's portfolio is to obtain the most favorable
net results, taking into account such factors as price, commission where
applicable (negotiable in the case of U.S. national securities exchange
transactions), size of order, difficulty of execution and skill required of the
executing broker/dealer. The Adviser seeks to evaluate the overall
reasonableness of brokerage commissions paid (to the extent applicable) through
the familiarity of the Distributor with commissions charged on comparable
transactions, as well as by comparing commissions paid by the Fund to reported
commissions paid by others. The Adviser reviews on a routine basis commission
rates, execution and settlement services performed, making internal and external
comparisons.
When it can be done consistently with the policy of obtaining the most
favorable net results, it is the Adviser's practice to place such orders with
brokers and dealers who supply market quotations to the custodian of the Fund
for appraisal purposes; or who supply research, market and statistical
information to the Fund or the Adviser. The term "research, market and
statistical information" includes advice as to the value of securities, the
advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities, and analyses
and reports concerning issuers, industries, securities, economic factors and
trends, portfolio strategy and the performance of accounts. The Adviser is not
authorized when placing portfolio transactions for the Fund to pay a brokerage
commission (to the extent applicable) in excess of that which another broker
might have charged for executing the same transaction solely on account of the
receipt of research, market or statistical information. The Adviser does not
place orders with brokers or dealers on the basis that the broker or dealer has
or has not sold shares of the Fund. In effecting transactions in
over-the-counter securities, orders are placed with the principal market makers
for the security being traded unless, after exercising care, it appears that
more favorable results are available otherwise.
Although certain research, market and statistical information from
brokers and dealers can be useful to the Fund and to the Adviser, it is the
opinion of the Adviser that such information will only supplement the Adviser's
own research effort since the information must still be analyzed, weighed, and
reviewed by the Adviser's staff. Such information may be useful to the Adviser
in providing services to clients other than the Fund, and not all such
information is used by the Adviser in connection with the Fund. Conversely, such
information provided to the Adviser by brokers and dealers through whom other
clients of the Adviser effect securities transactions may be useful to the
Adviser in providing services to the Fund.
Subject also to obtaining the most favorable net results, the Adviser
may place brokerage transactions through the Fund's custodian and a credit
against the custodian fee due to the custodian equal to one-half of the
commission on any such transaction will be given. Except for implementing the
policy stated above, there is no intention to place portfolio transactions with
particular brokers or dealers or groups thereof.
44
<PAGE>
In the fiscal period ended August 31, 1996, the Fund paid brokerage
commissions of $_______. For the fiscal period ended August 31, 1996, $_______
(__% of the total brokerage commissions paid) resulted from orders placed,
consistent with the policy of obtaining the most favorable net results, with
brokers and dealers who provided supplementary research information to the Fund
or the Adviser. The amount of such transactions aggregated $________ (__% of all
transactions).
The Trustees intend to review from time to time whether the recapture
for the benefit of the Fund of some portion of the brokerage commissions or
similar fees paid by the Fund on portfolio transactions is legally permissible
and advisable.
Portfolio Turnover
The Fund's average annual portfolio turnover rate is the ratio of the
lesser of sales or purchases to the monthly average value of the portfolio
securities owned during the year, excluding all securities with maturities or
expiration dates at the time of acquisition of one year or less. A higher rate
involves greater brokerage transaction expenses to the Fund and may result in
the realization of net capital gains, which would be taxable to shareholders
when distributed. Purchases and sales are made for the Fund's portfolio whenever
necessary, in management's opinion, to meet the Fund's objective. For the fiscal
period ended August 31, 1996 the portfolio turnover rate was 33.97%.
NET ASSET VALUE
The net asset value of shares of the Fund is computed as of the close
of regular trading on the New York Stock Exchange (the "Exchange") on each day
the Exchange is open for trading. The Exchange is scheduled to be closed on the
following holidays: New Year's Day, Presidents Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas. Net asset value per
share is determined by dividing the value of the total assets of the Fund, less
all liabilities, by the total number of shares outstanding.
An exchange-traded equity security is valued at its most recent sale
price. Lacking any sales, the security is valued at the calculated mean between
the most recent bid quotation and the most recent asked quotation (the
"Calculated Mean"). Lacking a Calculated Mean, the security is valued at the
most recent bid quotation. An equity security which is traded on the National
Association of Securities Dealers Automated Quotation ("NASDAQ") system is
valued at its most recent sale price. Lacking any sales, the security is valued
at the high or "inside" bid quotation. The value of an equity security not
quoted on the NASDAQ System, but traded in another over-the-counter market, is
its most recent sale price. Lacking any sales, the security is valued at the
Calculated Mean. Lacking a Calculated Mean, the security is valued at the most
recent bid quotation.
Debt securities, other than short-term securities, are valued at prices
supplied by the Fund's pricing agent(s) which reflect broker/dealer supplied
valuations and electronic data processing techniques. Short-term securities with
remaining maturities of sixty days or less are valued by the amortized cost
method, which the Board believes approximates market value. If it is not
possible to value a particular debt security pursuant to these valuation
methods, the value of such security is the most recent bid quotation supplied by
a bona fide marketmaker. If it is not possible to value a particular debt
security pursuant to the above methods, the Adviser may calculate the price of
that debt security, subject to limitations established by the Board.
An exchange traded options contract on securities, currencies, futures
and other financial instruments is valued at its most recent sale price on such
exchange. Lacking any sales, the options contract is valued at the Calculated
Mean. Lacking any Calculated Mean, the options contract is valued at the most
recent bid quotation in the case of a purchased options contract, or the most
recent asked quotation in the case of a written options contract. An options
contract on securities, currencies and other financial instruments traded
over-the-counter is valued at the most recent bid quotation in the case of a
purchased options contract and at the most recent asked quotation in the case of
a written options contract. Futures contracts are valued at the most recent
settlement price. Foreign currency exchange forward contracts are valued at the
value of the underlying currency at the prevailing exchange rate.
If a security is traded on more than one exchange, or upon one or more
exchanges and in the over-the-counter market, quotations are taken from the
market in which the security is traded most extensively.
45
<PAGE>
If, in the opinion of the Fund's Valuation Committee, the value of a
portfolio asset as determined in accordance with these procedures does not
represent the fair market value of the portfolio asset, the value of the
portfolio asset is taken to be an amount which, in the opinion of the Valuation
Committee, represents fair market value on the basis of all available
information. The value of other portfolio holdings owned by the Fund is
determined in a manner which, in the discretion of the Valuation Committee most
fairly reflects fair market value of the property on the valuation date.
Following the valuations of securities or other portfolio assets in
terms of the currency in which the market quotation used is expressed ("Local
Currency"), the value of these portfolio assets in terms of U.S. dollars is
calculated by converting the Local Currency into U.S. dollars at the prevailing
currency exchange rate on the valuation date.
ADDITIONAL INFORMATION
Experts
The Financial Highlights of the Fund included in the prospectus and the
Financial Statements incorporated by reference in this Statement of Additional
Information have been so included or incorporated by reference in reliance on
the report of Coopers & Lybrand L.L.P., One Post Office Square, Boston,
Massachusetts 02109, independent accountants, and given on the authority of that
firm as experts in accounting and auditing.
Shareholder Indemnification
The Trust is an organization of the type commonly known as a
Massachusetts business trust. Under Massachusetts law, shareholders of such a
trust may, under certain circumstances, be held personally liable as partners
for the obligations of the Trust. The Declaration of Trust contains an express
disclaimer of shareholder liability in connection with the Fund's property or
the acts, obligations or affairs of the Trust. The Declaration of Trust also
provides for indemnification out of the Fund's property of any shareholder held
personally liable for the claims and liabilities which a shareholder may become
subject by reason of being or having been a shareholder. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations.
Other Information
Many of the investment changes in the Fund will be made at prices
different from those prevailing at the time they may be reflected in a regular
report to shareholders of the Fund. These transactions will reflect investment
decisions made by the Adviser in light of the objective and policies of the
Fund, and other factors such as its other portfolio holdings and tax
considerations, and should not be construed as recommendations for similar
action by other investors.
The name "Scudder Securities Trust" is a designation of the Trustees
for the time being under a Declaration of Trust dated October 16, 1985, as
amended from time to time, and all persons dealing with the Fund must look
solely to the property of the Fund for the enforcement of any claims against the
Fund as neither the Trustees, officers, agents or shareholders assume any
personal liability for obligations entered into on behalf of the Fund. No series
of the Trust shall be liable for the obligations of any other series. Upon the
initial purchase of shares of the Fund, the shareholder agrees to be bound by
the Trust's Declaration of Trust, as amended from time to time. The Declaration
of Trust is on file at the Massachusetts Secretary of State's Office in Boston,
Massachusetts.
The Fund has a fiscal year end of August 31.
The CUSIP number of the Fund is 811196-20-3.
The Fund employs State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02110 as custodian.
The firm of Dechert Price & Rhoads is counsel to the Fund.
46
<PAGE>
Costs of $49,658 incurred by the Fund in conjunction with its
organization are amortized over the five year period beginning October 6, 1995.
Scudder Fund Accounting Corporation ("SFAC"), Two International Place,
Boston, Massachusetts, 02110-4103, a subsidiary of the Adviser, computes net
asset value for the Fund. The Fund pays SFAC an annual fee equal to 0.025% of
the first $150 million of average daily net assets, 0.0075% of such assets in
excess of $150 million, 0.0045% of such assets in excess of $1 billion, plus
holding and transaction charges for this service. For the period October 6, 1995
(commencement of operations) to August 31, 1996, SFAC did not impose a portion
of their fee amounting to $31,965 and the fee imposed amounted to $36,531.
Scudder Service Corporation ("SSC"), P.O. Box 2291, Boston,
Massachusetts 02107-2291, a subsidiary of the Adviser, is the transfer and
dividend paying agent for the Fund. The Fund pays SSC an annual fee for each
account maintained for a participant. For the period October 6, 1995
(commencement of operations) to August 31, 1996, SSC did not impose a portion of
their fee amounting to $50,693, and the fee imposed amounted to $57,935.
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the period October 6, 1995
(commencement of operations) to August 31,1996, STC did not impose a portion of
their fee amounting to $1,082, and the fee imposed amounted to $1,236.
The Fund's prospectus and this Statement of Additional Information omit
certain information contained in the Registration Statement which the Fund has
filed with the SEC under the Securities Act of 1933 and reference is hereby made
to the Registration Statement for further information with respect to the Fund
and the securities offered hereby. This Registration Statement and its
amendments are available for inspection by the public at the SEC in Washington,
D.C.
FINANCIAL STATEMENTS
The financial statements, including the investment portfolio, of
Scudder Small Company Value Fund, which are included on pages 17-23, inclusive,
in the Annual Report to the Shareholders of the Fund dated August 31, 1996,
together with the Report of the Independent Accountants, and Financial
Highlights, are incorporated by reference and attached hereto, and are deemed to
be a part of this Statement of Additional Information.
47
<PAGE>
Scudder Small Company Value Fund
Annual Report
August 31, 1996
Pure No-Load(TM) Funds
A pure no-load(TM) (no sales charges) mutual fund which offers opportunities for
long-term growth of capital by seeking undervalued stocks of small U.S.
companies.
<PAGE>
Table of Contents
2 In Brief
3 Letter from the Fund's President
4 Portfolio Summary
5 Portfolio Management Discussion
8 Investment Portfolio
17 Financial Statements
20 Financial Highlights
21 Notes to Financial Statements
24 Report of Independent Accountants
25 Officers and Trustees
26 Investment Products and Services
27 How to Contact Scudder
In Brief
o Scudder Small Company Value Fund provided a strong total return of 13.54%
from its commencement of operations on October 6, 1995, through the end of
its abbreviated fiscal year on August 31, 1996.
o At the end of August, the average price-earnings ratio for portfolio
holdings was 11.6 based on trailing 12-month earnings, or well below half
of the 27.2 ratio for the broad universe of small stocks.
o One of the key benefits of the Fund's value-oriented approach to small
stock investing -- reduced volatility -- was clearly displayed over the
period versus broad small- and large-capitalization stock indices.
2 - Scudder Small Company Value Fund
<PAGE>
Letter From the Fund's President
Dear Shareholders,
We welcome you as an investor in Scudder Small Company Value Fund and are
pleased to present the first annual report of the Fund, covering the abbreviated
fiscal year beginning with the commencement of operations on October 6, 1995 and
ended August 31, 1996. For this period, the Fund's total return was a strong
13.54%.
After an extended period of relatively unbroken market strength, U.S.
equities provided a bumpy ride for most of the interval from March through
August of 1996, as a lack of clarity with respect to the direction of the
economy caused investor sentiment to gyrate. Small stocks in particular
experienced a high level of volatility and in many cases significant declines.
Scudder Small Company Value Fund shareholders were well served by the Fund's
systematic, value-oriented approach, which is designed to outperform other more
aggressive small stock strategies in such periods.
For those of you who like to stay informed about new funds offered by
Scudder, we recently introduced three new equity funds. Scudder Classic Growth
Fund seeks long-term capital appreciation with a higher degree of principal
stability than the average growth fund. Scudder 21st Century Growth Fund takes a
more aggressive approach, focusing primarily on emerging growth companies with
the potential to benefit from the rapidly changing industrial and economic
landscape that we foresee. Scudder Micro Cap Fund invests in the dynamic
universe of America's smallest publicly traded companies. For more information
on these and other Scudder Fund products and services, please turn to page 26.
Thank you for your interest and continued investment in Scudder Small
Company Value Fund. Please do not hesitate to contact Investor Relations at
1-800-225-2470 with any questions regarding your account.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Small Company Value Fund
3 - Scudder Small Company Value Fund
<PAGE>
PORTFOLIO SUMMARY as of August 31, 1996
- -----------------------------
ASSET ALLOCATION
- -----------------------------
Equity Securities 99%
Cash & Equivalents, Net 1%
- -----------------------------
100%
- -----------------------------
Total Net Assets (millions): $41.2
Net Asset Value per Share: $13.57
Fund assets are invested
in stocks of small U.S.
companies.
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- -----------------------------
SECTORS/LARGEST HOLDINGS
(Excludes 1% Cash Eqv., Net)
- -----------------------------
1. FINANCIAL (26%)
Washington National Corp.
Financial services holding company
providing various types of life, health
disability insurance
2. MANUFACTURING (18%)
DT Industries, Inc.
Manufacturer of automated production
equipment and precision metal
components
3. CONSUMER DISCRETIONARY (10%)
Ross Stores, Inc.
Chain of off-price retail apparel stores
4. CONSTRUCTION (9%)
Southdown, Inc.
Cement and concrete producer
5. DURABLES (7%)
SPX Corp.
Manufacturer of automotive and
heavy-duty engine and chassis parts,
repair and maintenance equipment
6. UTILITIES (6%)
North Carolina Natural Gas Corp.
Natural gas distributor
7. TECHNOLOGY (5%)
CTS Corp.
Manufacturer of electronic and
electromechanical components
8. SERVICE INDUSTRIES (4%)
Kinder Care Learning Centers
Operator of day-care centers
9. METALS & MINERALS (4%)
Commercial Metals Co.
Producer and marketer of steel and
copper tubes, and recycling of
abandoned railroad materials
10. OTHER (11%)
RPC, Inc.
Service provider to oil and gas
companies, drilling contractors and steel
companies
- -------------------------------------------------------------------
STOCK CHARACTERISTICS
- -------------------------------------------------------------------
Fund as
% of
Russell S&P Russell
Fund 2000* 500** 2000
- ------------------------------------------------------------------
SMALL COMPANIES ($ MILLIONS)
Market Capitalization: Median 268 325 4,976 82%
Market Capitalization: Wgt. Avg. 304 532 35,989 57%
Revenues 586 549 23,557 107%
VALUE ORIENTATION
P/E: Trailing Twelve Months 11.6 27.2 18.7 43%
Price/Sales 0.5 1.0 1.2 52%
Price/Book Value 1.4 2.3 3.0 63%
Yield (Avg. Stock) 1.6% 1.4% 2.3% 110%
* The Russell 2000 Index is an unmanaged capitalization-weighted
measure of small U.S. companies whose common stocks trade on the
New York Stock Exchange, American Stock Exchange, and
NASDAQ market.
** The Standard & Poor's (S&P) 500 Index is an unmanaged
capitalization-weighted measure of 500 widely held common stocks
listed on the New York Stock Exchange, American Stock Exchange, and
NASDAQ market.
The average price-earnings ratio for stocks in the
Fund of 11.6 is less than half of that for the overall
small stock market.
For more complete details about the Fund's Investment Portfolio, see page 8.
A monthly Investment Portfolio Summary and quarterly Portfolio Holdings are
available upon request.
- -------------------------------------------------------------------------------
4 - Scudder Small Company Value Fund
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
Scudder Small Company Value Fund provided a total return of 13.54% from its
commencement of operations on October 6, 1995, through its initial fiscal
year-end on August 31, 1996. This performance exceeded that of small company
value stocks in the aggregate as measured by the unmanaged Russell 2000 Value
Index, and the broad small cap market as gauged by the unmanaged Russell 2000
Index (see accompanying table).
The Russell 2000 Value Index consists of securities from the Russell 2000 Index
that display value characteristics, and is the Fund's benchmark for purposes of
performance. While comparative results for shorter periods have varied,
historically, the Russell 2000 Value Index has outperformed the Russell 2000
Index over most five-year periods.
Total Returns Since Inception of
Scudder Small Company Value Fund
10/6/95 - 8/31/96
=======================================================
Scudder Small Company Value Fund 13.54%
Russell 2000 Value Index 12.38
(small company value stocks)
Russell 2000 Index 12.19
(small company stocks)
S&P 500 Index 14.21
(large company stocks)
=======================================================
For the first several months of the Fund's fiscal period, the U.S. stock market
was buoyed by slow growth, a low rate of inflation, and the prospect of further
interest rate declines. In March, stocks began to display increased volatility
as investors reacted to conflicting signals concerning the direction of economic
growth, inflation and interest rates. While small stock returns in the aggregate
were solidly in the positive column for the period, as shown in the accompanying
table, they slightly lagged behind those of their larger-capitalization
counterparts.
A Disciplined, Value-Oriented
Approach to Small Stock Investing
Scudder Small Company Value Fund takes a distinctive approach to seeking
long-term growth of capital from investing in U.S. stocks. The Fund is designed
to provide investors with a vehicle for accessing the benefits of two techniques
that have historically provided superior long-term returns -- investing in small
stocks, and employing a value-oriented selection criteria.
The Fund's selection process begins with the narrowing of the prospective
investment universe to small U.S. companies -- those with market capitalizations
less than $1 billion. These issues are then assessed using a proprietary set of
quantitative measurements that relate to a stock's intrinsic value. In addition,
indicators of company growth and stock price momentum are evaluated. The small
stocks that are identified by our method as displaying the strongest combination
of these investment characteristics with overall acceptable risk become part of
the portfolio. The goal is to produce a portfolio of stocks of small companies
with reasonable growth prospects, purchased at discounted prices.
5 - Scudder Small Company Value Fund
<PAGE>
At the end of August, the Fund's $41.2 million in net assets was invested in 211
stocks. Consistent with the approach outlined above, the median market
capitalization of these holdings was $268 million -- similar in size to those in
the Russell 2000 Index and less than 10% of the market capitalization of the
typical S&P 500 company. With respect to the value orientation of the Fund, the
average price-earnings (p/e) ratio -- a widely used measure of stock value --
for portfolio holdings was 11.6 based on trailing 12-month earnings, or well
below half of the 27.2 ratio for the broad universe of small stocks, as
represented by the Russell 2000 Index. That a number of portfolio holdings
benefited from takeover activity over the period illustrates the potential for
stocks that display good relative value to benefit as the market comes to
appreciate their desirable investment characteristics.
At the end of August, the Fund's largest concentration was in the finance
sector, which accounted for approximately 26% of the portfolio's stock holdings.
This position is actually underweight relative to the 35% weighting of finance
stocks in the Russell 2000 Value Index. Other groups where the Fund's
value-driven process resulted in significant representation include
manufacturing and consumer discretionary stocks.
Reduced Volatility
One of the key benefits of the Fund's value-oriented approach to small stock
investing -- reduced volatility -- was clearly displayed over the period. For
example, over the first eight months of 1996, the day-to-day volatility of the
Fund's net asset value was significantly lower than the price volatility of both
the large-capitalization S&P 500 and small-cap Russell 2000 stocks, based on
standard deviation, a common measure of investment volatility. In addition, on
those days when small stocks declined (as reflected by the Russell 2000), the
Fund outperformed the overall small stock market 79% of the time. These results
are in keeping with our expectation that the Fund should, in general, outperform
the broader market during periods of equity weakness. This in turn can
contribute to the Fund's goal of providing growth of capital and competitive
returns over the long run.
Finally, we were successful in minimizing the required fiscal year-end
distribution of taxable capital gains to shareholders, selectively taking losses
on securities which had declined since being purchased by the Fund to offset
realized gains in other securities.
Looking Ahead
As the Fund's fiscal period drew to a close, there were signs that the U.S.
stock market had resumed its upward march, following a period of some months
where wild vacillations were the norm. It may be too much to expect this strong
performance to continue indefinitely; short-term volatility and periodic
corrections are part of equity investing. However, the long-term prospects for
the U.S. economy and stock market are positive, based on a number of structural
trends including moderate growth and benign inflation.
6 - Scudder Small Company Value Fund
<PAGE>
Scudder Small Company Value Fund: A Team Approach to Investing
Scudder Small Company Value Fund is managed by a team of Scudder investment
professionals who each play an important role in the Fund's management
process. Team members work together to develop investment strategies and
select securities for the Fund's portfolio. They are supported by Scudder's
large staff of quantitative analysts, traders and other investment specialists
who work in Scudder's offices across the United States and abroad. Scudder
believes its team approach benefits Fund investors by bringing together many
disciplines and leveraging Scudder's extensive resources.
Philip S. Fortuna, Lead Portfolio Manager, joined Scudder in 1986 as manager
of institutional equity accounts. He became director of quantitative research
in 1987 and served as director of investment operations from 1993 to 1994.
James M. Eysenbach, Portfolio Manager, joined Scudder in 1991 as a senior
quantitative analyst and is currently director of quantitative research for
Scudder. Mr. Eysenbach has more than nine years investment research and
management experience.
Your Portfolio Management Team: Philip S. Fortuna and James M. Eysenbach
Going forward, the Fund will continue to be essentially fully invested in small
U.S. stocks pursuant to its objective and our policy of not trying to "time" the
market. We will continue to apply our disciplined, value-oriented approach to
selecting a portfolio of small stocks that we believe will position the Fund to
benefit shareholders seeking long-term capital appreciation.
Sincerely,
Your Portfolio Management Team
/s/Philip S. Fortuna /s/James M. Eysenbach
Philip S. Fortuna James M. Eysenbach
7 - Scudder Small Company Value Fund
<PAGE>
INVESTMENT PORTFOLIO as of August 31, 1996
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- --------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS 3.3%
- --------------------------------------------------------------------------------
Repurchase Agreement with State Street Bank and
Trust Company dated 8/30/96 at 5.23%, to be
repurchased at $1,388,807 on 9/3/96,
collateralized by a $1,395,000 U.S. Treasury
Note, 6.125%, 5/15/98 (Cost $1,388,000) ....... 1,388,000 1,388,000
<CAPTION>
Shares
- --------------------------------------------------------------------------------
COMMON STOCKS 96.7%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY 10.1%
DEPARTMENT & CHAIN STORES 2.7%
AnnTaylor Stores Corp.* ....................... 5,900 85,550
Carson Pirie Scott & Co.* ..................... 9,900 249,975
Genovese Drug Stores, Inc. "A" ................ 18,500 228,938
Ross Stores, Inc. ............................. 9,400 361,900
Shopko Stores, Inc. ........................... 13,700 208,925
---------
1,135,288
---------
HOME FURNISHINGS 4.5%
Chromcraft Revington, Inc.* ................... 4,200 106,313
Furniture Brands International, Inc.* ......... 22,700 272,400
Haverty Furniture Co., Inc. ................... 16,200 176,175
Interface, Inc. ............................... 15,200 233,700
Oneida Ltd. ................................... 14,400 210,600
Prime Hospitality Corp.* ...................... 17,500 332,500
Thomas Industries, Inc. ....................... 11,500 209,875
Toro Co. ...................................... 11,100 346,875
---------
1,888,438
---------
RECREATIONAL PRODUCTS 0.9%
Carmike Cinemas, Inc.* ........................ 6,400 154,400
Outboard Marine Corp. ......................... 12,800 214,400
---------
368,800
---------
RESTAURANTS 0.6%
Ryan's Family Steak Houses, Inc.* ............. 29,100 243,713
---------
SPECIALTY RETAIL 1.4%
Fabri-Centers of America "A"* ................. 9,600 129,600
Inacom Corp.* ................................. 12,000 324,000
Trak Auto Corp.* .............................. 9,000 148,500
---------
602,100
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load
- --------------------------------------------------------------------------------
8 -- SCUDDER SMALL COMPANY VALUE FUND
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE($)
- --------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER STAPLES 3.O%
FOOD & BEVERAGE 2.6%
Golden Poultry Co., Inc. ....................... 24,000 252,000
Hudson Foods, Inc. "A" ......................... 8,200 111,725
Morningstar Group, Inc.* ....................... 22,100 245,863
Nash-Finch Co. ................................. 9,000 146,250
Super Food Services, Inc. ...................... 18,800 223,250
WLR Foods, Inc. ................................ 9,400 109,863
---------
1,088,951
---------
TEXTILES 0.4%
Guilford Mills, Inc. ........................... 7,600 171,950
---------
HEALTH 1.6%
BIOTECHNOLOGY 0.5%
Bio-Rad Laboratories, Inc. "A" ................. 6,900 193,200
---------
HOSPITAL MANAGEMENT 0.3%
GranCare, Inc.* ................................ 5,700 111,863
---------
MEDICAL SUPPLY & SPECIALTY 0.8%
Bindley Western Industries, Inc. ............... 12,200 216,550
West Co., Inc. ................................. 5,700 142,500
---------
359,050
---------
COMMUNINCATIONS 0.1%
TELEPHONE/COMMUNICATIONS
Atlantic Tele-Network, Inc.* ................... 1,600 36,200
---------
FINANCIAL 25.4%
BANKS 15.4%
ALBANK Financial Corp. ......................... 7,200 209,700
Astoria Financial Corp. ........................ 6,400 171,600
Banknorth Group, Inc. .......................... 6,400 225,600
Center Financial Corp. ......................... 10,800 268,650
Chittenden Corp. ............................... 5,250 123,375
Colonial BancGroup, Inc. ....................... 7,700 262,763
Commerce Bancorp, Inc. ......................... 9,275 227,238
Community First Bankshares, Inc. ............... 12,900 304,763
Corns Bankshares, Inc. ......................... 9,500 289,750
First Citizens BancShares, Inc. "A" ............ 1,200 76,800
First Commonwealth Financial Corp. ............. 7,500 139,688
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load
- --------------------------------------------------------------------------------
9 -- SCUDDER SMALL COMPANY VALUE FUND
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE($)
- --------------------------------------------------------------------------------
<S> <C> <C>
First Indiana Corp. ............................ 8,340 192,863
FirstBank Puerto Rico .......................... 9,500 213,750
Greater New York Savings Bank* ................. 15,100 171,763
HUBCO, Inc. .................................... 13,100 271,825
Hancock Holding Co. ............................ 6,700 242,875
InterWest Bancorp, Inc. ........................ 3,600 99,900
Irwin Financial Corp. .......................... 2,900 118,175
New York Bancorp, Inc. ......................... 4,500 137,250
North Side Savings Bank ........................ 5,800 269,700
People's Heritage Financial Group, Inc. ........ 9,400 206,800
RCSB Financial, Inc. ........................... 7,900 212,313
Reliance Bancorp, Inc. ......................... 9,200 157,550
Riggs National Corp. ........................... 16,900 270,400
Sovereign Bancorp, Inc. ........................ 19,320 206,483
Susquehanna Bancshares, Inc. ................... 11,500 342,125
TR Financial Corp. ............................. 7,600 215,650
USBANCORP, Inc. ................................ 9,400 343,100
Westamerica Bancorp. ........................... 4,900 238,875
Whitney Holding Corp. .......................... 9,400 289,050
---------
6,500,374
---------
INSURANCE 9.1%
Acceptance Insurance Cos., Inc.* ............... 9,500 163,875
Allied Group, Inc. ............................. 7,700 296,450
American Annuity Group, Inc. ................... 14,000 185,500
American Heritage Life Investment Corp. ........ 6,600 127,875
American Travellers Corp. ...................... 6,900 214,763
Capitol Transamerica Corp. ..................... 2,900 61,625
Delphi Financial Group, Inc. "A" ............... 2,900 87,000
First American Financial Co. ................... 4,800 153,000
Integon Corp. .................................. 12,700 258,763
Lawyers Title Corp. ............................ 12,200 254,675
Life USA Holdings, Inc.* ....................... 14,300 126,913
MAIC Holdings, Inc.* ........................... 4,580 148,850
MMI Companies, Inc. ............................ 7,800 249,600
Nymagic, Inc. .................................. 1,700 31,875
Presidential Life Corp. ........................ 22,200 216,450
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load
- --------------------------------------------------------------------------------
10 -- SCUDDER SMALL COMPANY VALUE FUND
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE($)
- --------------------------------------------------------------------------------
<S> <C> <C>
Reliable Life Insurance Co. ........................ 1,800 118,800
Security-Connecticut Corp. ......................... 6,600 199,650
Stewart Information Services Corp. ................. 4,500 93,375
Trenwick Group, Inc. ............................... 6,000 319,500
United Fire & Casualty Co. ......................... 6,100 183,000
Washington National Corp. .......................... 12,200 353,800
---------
3,845,339
---------
CONSUMER FINANCE 0.4%
Webster Financial Corp. ............................ 5,100 164,475
---------
OTHER FINANCIAL COMPANIES 0.5%
Bay View Capital Corp. ............................. 5,200 192,400
---------
MEDIA 0.6%
BROADCASTING & ENTERTAINMENT
AMC Entertainment, Inc.* ........................... 8,100 148,838
Value Vision International, Inc. "A"* .............. 20,900 120,175
---------
269,013
---------
SERVICE INDUSTRIES 4.2%
ENVIRONMENTAL SERVICES 0.5%
Sevenson Environmental Services, Inc. .............. 11,800 215,350
---------
INVESTMENT 1.3%
BHC Financial, Inc. ................................ 8,000 114,000
Jefferies Group, Inc. .............................. 8,400 254,100
McDonald & Co. Investments ......................... 9,800 194,775
---------
562,875
---------
MISCELLANEOUS COMMERCIAL SERVICES O.7%
Berlitz International, Inc.* ....................... 500 11,250
Volt Information Sciences, Inc. .................... 6,000 234,000
Winthrop Resources Corp. ........................... 1,600 39,600
---------
284,850
---------
MISCELLANEOUS CONSUMER SERVICES 0.7%
Kinder Care Learning Centers* ...................... 18,800 274,950
---------
PRINTING/PUBLISHING 1.0%
Bowne & Co., Inc. .................................. 11,300 224,588
Graphic Industries, Inc. ........................... 23,600 215,350
---------
439,938
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load
- --------------------------------------------------------------------------------
11 -- SCUDDER SMALL COMPANY VALUE FUND
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE($)
- --------------------------------------------------------------------------------
<S> <C> <C>
DURABLES 6.9%
AEROSPACE 0.7%
Curtiss-Wright Corp. ............................. 2,200 116,738
Tracor, Inc.* .................................... 8,500 164,688
---------
281,426
---------
AUTOMOBILES 5.0%
A.O. Smith Corp. ................................. 5,400 130,950
Coachmen Industries, Inc. ........................ 3,100 57,738
Durakon Industries, Inc.* ........................ 7,100 95,850
Myers Industries, Inc. ........................... 15,400 238,700
Oshkosh Truck Corp. "B" .......................... 13,900 168,538
SPX Corp. ........................................ 14,300 398,613
Standard Products Co. ............................ 3,600 82,800
Stant Corp. ...................................... 17,600 187,000
Titan, Wheel International, Inc. ................. 12,000 183,O00
Walbro, Inc. ..................................... 13,000 255,125
Wynn's International, Inc. ....................... 12,400 330,150
---------
2,128,464
---------
CONSTRUCTION/AGRICULTURAL EQUIPMENT 1.2%
Global Industrial Technologies, Inc.* ............ 16,300 313,775
NACCO Industries, Inc. "A" ....................... 1,000 48,500
Raymond Corp. .................................... 7,350 141,488
---------
503,763
---------
MANUFACTURING 16.9%
CHEMICALS 0.6%
Cambrex Corp. .................................... 7,950 261,356
---------
CONTAINERS & PAPER 1.1%
Mosinee Paper Corp. .............................. 9,066 256,115
Park Ohio Industries, Inc.* ...................... 15,000 217,500
---------
473,615
---------
DIVERSIFIED MANUFACTURING 3.9%
ACX Technologies, Inc. ........................... 8,100 135,675
Bearings, Inc. ................................... 9,850 284,419
International Aluminum Co. ....................... 10,900 275,225
Robbins & Myers, Inc. ............................ 6,800 149,600
Scotsman Industries, Inc. ........................ 14,800 316,350
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load
- --------------------------------------------------------------------------------
12 -- SCUDDER SMALL COMPANY VALUE FUND
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE($)
- --------------------------------------------------------------------------------
<S> <C> <C>
Tredegar Industries, Inc. ........................ 6,900 217,350
Valmont Industries ............................... 8,100 251,100
---------
1,629,719
---------
ELECTRICAL PRODUCTS 0.2%
DII Group, Inc.* ................................. 2,300 67,275
---------
HAND TOOLS 0.6%
L.S. Starrett Corp. .............................. 10,700 254,125
---------
INDUSTRIAL SPECIALTY 3.5%
American Filtrona Corp. .......................... 8,300 259,375
Barnes Group, Inc. ............................... 4,000 198,000
Central Sprinkler Corp.* ......................... 5,900 100,300
Commercial Intertech Corp. ....................... 6,000 150,000
FSI International, Inc. .......................... 8,000 86,000
Greenbrier Companies, Inc. ....................... 15,400 177,100
Kulicke & Soffa Industries, Inc. ................. 6,600 65,175
O'Sullivan Corp. ................................. 7,800 89,700
Spartech Corp. ................................... 16,400 161,950
Wyman-Gordon Co.* ................................ 8,300 173,263
---------
1,460,863
---------
MACHINERY/COMPONENTS/CONTROLS 5.0%
Amcast Industrial Corp. .......................... 13,800 244,950
DT Industries, Inc. .............................. 12,900 338,625
Gleason Corp. .................................... 1,500 59,813
Kysor Industrial Corp. ........................... 11,000 281,875
Mueller Industries, lnc .......................... 5,500 194,563
Penn Engineering & Manufacturing Corp. ........... 8,400 134,400
Penn Engineering & Manufacturing Corp."A" ........ 2,800 52,150
Reliance Steel & Aluminum Co. .................... 6,400 214,400
Sequa Corp."A"* .................................. 2,000 87,500
Varlen Corp. ..................................... 11,880 255,420
Zero Corporation ................................. 11,800 238,950
---------
2,102,646
---------
WHOLESALE DISTRIBUTORS 2.0%
A.M. Castle & Co. ................................ 10,875 241,969
Fisher Scientific International .................. 1,600 63,600
Hughes Supply, Inc. .............................. 6,900 267,375
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds
- --------------------------------------------------------------------------------
13 -- SCUDDER SMALL COMPANY VALUE FUND
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE($)
- --------------------------------------------------------------------------------
<S> <C> <C>
Rexel, Inc.* ....................................... 19,500 270,563
-------
843,507
-------
TECHNOLOGY 4.3%
COMPUTER SOFTWARE 0.2%
MTS Systems Corp. .................................. 4,600 85,100
-------
DIVERSE ELECTRONIC PRODUCTS 0.7%
Esterline Technologies Corp.* ...................... 5,500 113,438
HADCO Corp.* ....................................... 6,300 163,013
-------
276,451
-------
EDP PERIPHERALS 0.2%
DH Technology, Inc. ................................ 2,900 71,050
-------
ELECTRONIC COMPONENTS/DISTRIBUTORS 2.1%
Augat, Inc. ........................................ 11,300 216,113
Bell Industries, Inc. .............................. 15,790 264,483
CTS Corp. .......................................... 6,9O0 281,175
Furon Corp. ........................................ 5,500 121,000
-------
882,771
-------
MILITARY ELECTRONICS 0.4%
Watkins-Johnson Co. ................................ 9,200 184,000
-------
PRECISION INSTRUMENTS 0.2%
Silicon Valley Group, Inc.* ........................ 5,600 101,500
-------
SEMICONDUCTORS 0.5%
Siliconix, Inc.* ................................... 4,300 79,550
VLSI Technology, Inc.* ............................. 8,700 121,800
-------
201,350
-------
ENERGY 3.6%
OIL & GAS PRODUCTION 0.9%
Belden & Blake Corp.* .............................. 8,800 180,400
KCS Energy, Inc. ................................... 1,700 53,550
Plains Resources, Inc.* ............................ 4,400 59,950
Tesoro Petroleum Corp. ............................. 7,400 94,350
-------
388,250
-------
OILFIELD SERVICES/EQUIPMENT 2.7%
Cliffs Drilling Co.* ............................... 5,200 148,200
Getty Petroleum Corp. .............................. 18,800 274,950
Pride Petroleum Services, Inc.* .................... 23,500 337,813
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load
- --------------------------------------------------------------------------------
14 -- SCUDDER SMALL COMPANY VALUE FUND
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE($)
- --------------------------------------------------------------------------------
<S> <C> <C>
RPC, Inc.* ................................... 31,200 347,100
---------
1,108,063
---------
METALS & MINERALS 3.6%
STEEL & METALS
Acme Metals, Inc.* ........................... 14,400 210,600
Brush Wellman, Inc. .......................... 8,800 167,200
Chaparral Steel Co. .......................... 18,300 240,188
Commercial Metals Co. ........................ 11,800 355,475
National Steel Corp."B"* ..................... 9,900 101,475
Rouge Steel Co."A" ........................... 7,100 158,863
Shiloh Industries, Inc.* ..................... 14,500 221,125
WHX Corporation* ............................. 6,700 68,675
---------
1,523,601
---------
CONSTRUCTION 9.1%
BUILDING MATERIALS 4.4%
Butler Manufacturing Co. ..................... 4,200 126,000
Fibreboard Corp. ............................. 6,600 197,175
Florida Rock Industries, Inc. ................ 11,600 307,400
Lone Star Industries, Inc. ................... 3,200 104,000
Medusa Corp. ................................. 7,600 226,100
Puerto Rican Cement Co., Inc. ................ 8,000 241,000
Southdown, Inc. .............................. 14,000 325,500
Triangle Pacific Corp.* ...................... 5,800 126,150
Universal Forest Products, Inc. .............. 16,100 211,313
---------
1,864,638
---------
BUILDING PRODUCTS 0.5%
Nortek, Inc.* ................................ 13,500 185,625
---------
HOMEBUILDING 3.7%
Beazer Homes USA, Inc.* ...................... 12,900 187,050
Champion Enterprises, Inc. ................... 9,200 174,800
Continental Homes Holding Corp. .............. 10,300 198,275
Hovnanian Enterprises, Inc."A"* .............. 30,600 193,163
MDC Holdings, Inc. ........................... 25,500 175,313
NVR, Inc.* ................................... 20,100 188,438
Skyline Corp. ................................ 10,200 258,825
U.S. Home Corp.* ............................. 8,500 190,188
---------
1,566,052
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load
- --------------------------------------------------------------------------------
15 -- SCUDDER SMALL COMPANY VALUE FUND
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE($)
- --------------------------------------------------------------------------------
<S> <C> <C>
MISCELLANEOUS 0.5%
Granite Construction, Inc. ..................... 11,400 216,600
----------
TRANSPORTATION 1.9%
AIRLINES 1.0%
Alaska Air Group, Inc.* ........................ 15,200 321,100
Skywest, Inc. .................................. 5,700 97,613
----------
418,713
----------
MARINE TRANSPORTATION 0.5%
Avondale Industries, Inc.* ..................... 13,500 212,625
----------
TRUCKING 0.4%
Landstar System, Inc.* ......................... 6,200 162,750
----------
UTILITIES 5.4%
ELECTRIC UTILITIES 1.7%
Commonwealth Energy System Companies ........... 11,700 273,488
Northwestern Public Service Co. ................ 10,400 299,000
St. Joseph Light & Power Co. ................... 8,400 136,500
----------
708,988
----------
NATURAL GAS DISTRIBUTION 2.6%
Bay State Gas Co. .............................. 5,600 152,600
Energen Corp. .................................. 10,100 237,350
New Jersey Resources Corp. ..................... 5,600 160,300
North Carolina Natural Gas Corp. ............... 10,600 308,725
Northwest Natural Gas Co. ...................... 7,200 255,600
----------
1,114,575
----------
WATER SUPPLY 1.1%
Aquarion Co. ................................... 10,900 282,038
SJW Corp. ...................................... 600 22,575
Southern California Water Co. .................. 6,300 138,577
----------
443,190
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $37,868,706) 40,671,768
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0% (Cost $39,256,706)(a) 42,059,768
- --------------------------------------------------------------------------------
<FN>
(a) The cost for federal income tax purposes was $39,256,706. At August 31,
1996, net unrealized appreciation for all securities based on tax cost was
$2,803,062. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $4,032,736 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$1,229,674.
* Non-income producing security.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load
- --------------------------------------------------------------------------------
16 -- SCUDDER SMALL COMPANY VALUE FUND
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
AS OF AUGUST 31, 1996
<CAPTION>
<S> <C> <C>
ASSETS
- -----------------------------------------------------------------------------------------------------
Investments, at market (identified cost $39,256,706) (Note A) ............ $42,059,768
Cash ..................................................................... 793
Receivable on investments sold ........................................... 445,094
Receivable on Fund shares sold ........................................... 45,202
Dividends and interest receivable ........................................ 45,704
Deferred organization expense (Note A) ................................... 19,446
-----------
Total assets ............................................................. 42,616,007
LIABILITIES
- -----------------------------------------------------------------------------------------------------
Payable for investments purchased ........................................ $ 1,239,769
Payable for Fund shares redeemed ......................................... 36,687
Accrued expenses (Note C) ................................................ 152,365
-----------
Total liabilities ........................................................ 1,428,821
-------------------------------------------------------------------------------------------
NET ASSETS, AT MARKET VALUE .............................................. $41,187,186
-------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ...................................... $ 93,313
Net unrealized appreciation on investments ............................... 2,803,062
Accumulated net realized loss ............................................ (6,985)
Shares of beneficial interest ............................................ 30,342
Additional paid-in capital ............................................... 38,267,454
-------------------------------------------------------------------------------------------
NET ASSETS, AT MARKET VALUE .............................................. $41,187,186
-------------------------------------------------------------------------------------------
NET ASSET VALUE
- -----------------------------------------------------------------------------------------------------
NET ASSET VALUE, offering and redemption price (Note A) per share
($41,187,186/3,034,156 outstanding shares of beneficial interest, -----------
$.01 par value, unlimited number of shares authorized) ................. $13.57
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load
- --------------------------------------------------------------------------------
17 -- SCUDDER SMALL COMPANY VALUE FUND
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
FOR THE PERIOD OCTOBER 6, 1995
(COMMENCEMENT OF OPERATIONS) TO AUGUST 31, 1996
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME
- ----------------------------------------------------------------------------------------------------
Income:
Dividends ................................................................ $ 444,857
Interest ................................................................. 54,116
----------
498,973
Expenses:
Management fee (Note C) .................................................. 171,544
Services to shareholders (Note C) ........................................ 140,499
Custodian and accounting fees (Note C) ................................... 127,904
Trustees' fees and expenses (Note C) ..................................... 45,631
State registration ....................................................... 39,063
Reports to shareholders .................................................. 22,139
Auditing ................................................................. 20,200
Federal registration ..................................................... 13,302
Legal .................................................................... 11,380
Amortization of organization expense (Note A) ............................ 4,305
Other .................................................................... 4,987
----------
Total expenses before reductions ......................................... 600,954
Expense reductions (Note C) .............................................. (255,284)
----------
Expenses, net ............................................................ 345,670
------------------------------------------------------------------------------------------
NET INVESTMENT INCOME .................................................... 153,303
------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
- ----------------------------------------------------------------------------------------------------
Net realized loss from investments ....................................... (6,985)
Net unrealized appreciation during the period on investments ............. 2,803,062
Net gain on investment transactions ...................................... 2,796,077
------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ..................... $2,949,380
------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load
- --------------------------------------------------------------------------------
18 -- SCUDDER SMALL COMPANY VALUE FUND
<PAGE>
<TABLE>
Statement of Changes in Net Assets
<CAPTION>
FOR THE PERIOD
OCTOBER 6, 1995
(COMMENCEMENT
OF OPERATIONS) TO
INCREASE (DECREASE) IN NET ASSETS AUGUST 31, 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ..................................................... $ 153,303
Net realized loss from investment transactions (6,985)
Net unrealized appreciation on investment transactions during the period .. 2,803,062
-----------
Net increase in net assets resulting from operations ...................... 2,949,380
-----------
Distributions to shareholders from net investment income .................. (61,519)
-----------
Fund share transactions:
Proceeds from shares sold ................................................. 42,630,158
Net asset value of shares issued to shareholders in reinvestment of
distributions ........................................................... 59,327
Cost of shares redeemed ................................................... (4,422,357)
Redemption fees (Note A) .................................................. 30,997
-----------
Net increase in net assets from Fund share transactions ................... 38,298,125
-----------
INCREASE IN NET ASSETS .................................................... 41,185,986
Net assets at beginning of period ......................................... 1,200
NET ASSETS AT END OF PERIOD (including undistributed net investment -----------
income of $93,313) ...................................................... $41,187,186
-----------
OTHER INFORMATION
- --------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period ................................. 100
-----------
Shares sold ............................................................... 3,368,696
Shares issued to shareholders in reinvestment of distributions ............ 4,792
Shares redeemed ........................................................... (339,432)
-----------
Net increase in Fund shares ............................................... 3,034,056
-----------
Shares outstanding at end of period ....................................... 3,034,156
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load
- --------------------------------------------------------------------------------
19 -- SCUDDER SMALL COMPANY VALUE FUND
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
The following table includes selected data for a share outstanding throughout
the period (a) and other performance information derived from the financial
statements.
<CAPTION>
FOR THE PERIOD
OCTOBER 6, 1995
(COMMENCEMENT
OF OPERATIONS) TO
AUGUST 31,
1996
- ---------------------------------------------------------------------------------
<S> <C>
------
Net asset value, beginning of period .............................. $12.00
------
Income from investment operations:
Net investment income ............................................. .07
Net realized and unrealized gain on investment transactions ....... 1.53
------
Total from investment operations .................................. 1.60
------
Less distributions from net investment income ..................... (.05)
Redemption fees (Note A) .......................................... .02
------
Net asset value, end of period .................................... $13.57
------
- ---------------------------------------------------------------------------------
TOTAL RETURN (%)(b) ............................................... 13.54(c)**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) ............................ 41
Ratio of operating expenses, net to average daily net assets (%) .. 1.50*
Ratio of operating expenses before expense reductions, to
average daily net assets (%) .................................... 2.61*
Ratio of net investment income to average daily net assets (%) .... .67*
Portfolio turnover rate (%) ....................................... 33.97*
Average commission rate paid ...................................... $.0364
<FN>
(a) Per share amounts have been calculated using the weighted average shares
outstanding during the period.
(b) Total return is higher due to maintenance of the Fund's expenses.
(c) Total return does not reflect the effect of the 1% redemption fee on shares
held less than one year.
* Annualized
** Not annualized
</FN>
</TABLE>
- --------------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load
- --------------------------------------------------------------------------------
20 -- SCUDDER SMALL COMPANY VALUE FUND
<PAGE>
NOTES TO FINANCIAL STATEMENTS
A. SIGNIFICANT ACCOUNTING POLICIES
Scudder Small Company Value Fund (the "Fund") is a diversified series of Scudder
Securities Trust (the "Trust"). The Trust is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed by the Fund in the preparation of its
financial statements.
SECURITY VALUATION. Portfolio securities which are traded on U.S. stock
exchanges are valued at the most recent sale price reported on the exchange on
which the security is traded most extensively. If no sale occurred, the security
is then valued at the calculated mean between the most recent bid and asked
quotations. If there are no such bid and asked quotations, the most recent bid
quotation is used. Securities quoted on the National Association of Securities
Dealers Automatic Quotation ("NASDAQ") System, for which there have been sales,
are valued at the most recent sale price reported on such system. If there are
no such sales, the value is the high or "inside" bid quotation. Securities which
are not quoted on the NASDAQ System but are traded in another over-the-counter
market are valued at the most recent sale price on such market. If no sale
occurred, the security is then valued at the calculated mean between the most
recent bid and asked quotations. If there are no such bid and asked quotations,
the most recent bid quotation shall be used. Short-term investments having a
maturity of sixty days or less are valued at amortized cost.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Trustees.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value, depending on the maturity of the repurchase
agreement and the underlying collateral, is equal to at least 100.5% of the
resale price.
FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements of
the Internal Revenue Code which are applicable to regulated investment companies
and to distribute all of its taxable income to its shareholders. Accordingly,
the Fund paid no federal income taxes and no federal income tax provision was
required.
From November 1, 1995 through August 31, 1996 the Fund incurred $6,985 of net
realized capital losses which the Fund intends to elect to defer and treat as
arising in the fiscal year ending August 31, 1997.
REDEMPTION FEES. In general, shares of the Fund may be redeemed at net asset
value. However, upon the redemption or exchange of shares held by shareholders
for less than one year, a fee of 1% of the lower of cost or the current net
asset value of the shares will be assessed and retained by the Fund for the
benefit of the remaining shareholders. The redemption fee is accounted for as an
addition to paid-in capital.
DISTRIBUTION OF INCOME AND GAINS. Distributions of net investment income are
made annually. During any particular year net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed and, therefore, will be distributed to
shareholders annually. An additional distribution may be made to the extent
necessary to avoid the payment of a four percent federal excise tax.
- --------------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load
- --------------------------------------------------------------------------------
21 -- SCUDDER SMALL COMPANY VALUE FUND
<PAGE>
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. As a result, net
investment income (loss) and net realized gain (loss) on investment transactions
for a reporting period may differ significantly from distributions during such
period. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting the net asset value of the
Fund.
The Fund uses the identified cost method for determining realized gain or loss
on investments for both financial and federal income tax reporting purposes.
ORGANIZATION COSTS. Costs incurred by the Fund in connection with its
organization have been deferred and are being amortized on a straight-line basis
over a five-year period.
OTHER. Investment security transactions are accounted for on a trade-date basis.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on an accrual basis.
B. PURCHASES AND SALES OF SECURITIES
During the period October 6, 1995 (commencement of operations) to August 31,
1996, purchases and sales of investment securities (excluding short-term
investments) aggregated $46,153,298 and $8,277,607, respectively.
C. RELATED PARTIES
Under the Fund's Investment Management Agreement (the "Agreement") with Scudder,
Stevens & Clark, Inc. (the "Adviser"), the Fund pays the Adviser a fee equal to
an annual rate of 0.75% of the Fund's average daily net assets, computed and
accrued daily and payable monthly. As manager of the assets of the Fund, the
Adviser directs the investments of the Fund in accordance with its investment
objectives, policies, and restrictions. The Adviser determines the securities,
instruments, and other contracts relating to investments to be purchased, sold
or entered into by the Fund. In addition to portfolio management services, the
Adviser provides certain administrative services in accordance with the
Agreement. The Agreement also provides that if the Fund's expenses, exclusive of
taxes, interest, and extraordinary expenses, exceed specified limits, such
excess, up to the amount of the management fee, will be paid by the Adviser. In
addition, the Adviser has agreed not to impose all or a portion of its
management fee until December 31, 1996 in order to maintain the annualized
expenses of the Fund at not more than 1.50% of average daily net assets. For the
period October 6, 1995 (commencement of operations) to August 31, 1996, the
Adviser did not impose any of its management fee amounting to $171,544.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
period October 6, 1995 (commencement of operations) to August 31, 1996, SSC did
not impose a portion of their fee amounting to $50,693, and the fee imposed
amounted to $57,935.
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the period October 6, 1995
(commencement of operations) to August 31, 1996, STC did not impose a portion of
their fee amounting to $1,082, and the fee imposed amounted to $1,236.
- --------------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load
- --------------------------------------------------------------------------------
22 -- SCUDDER SMALL COMPANY VALUE FUND
<PAGE>
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the period October
6, 1995 (commencement of operations) to August 31, 1996, SFAC did not impose a
portion of their fee amounting to $31,965, and the fee imposed amounted to
$36,531.
The Fund pays each of its Trustees not affiliated with the Adviser $4,000
annually, plus specified amounts for attended board and committee meetings. For
the period October 6, 1995 (commencement of operations) to August 31, 1996,
Trustees' fees and expenses aggregated $45,631.
D. LINES OF CREDIT
The Fund and several affiliated Funds (the "Participants") share in a $500
million revolving credit facility for temporary or emergency purposes, including
the meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated among each of the Participants. Interest is calculated based
on the market rates at the time of the borrowing. The Fund may borrow up to a
maximum of 33.33% of its net assets under the agreement. In addition, the Fund
also maintains an uncommitted line of credit.
- --------------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load
- --------------------------------------------------------------------------------
23 -- SCUDDER SMALL COMPANY VALUE FUND
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES OF SCUDDER SECURITIES TRUST AND THE SHAREHOLDERS OF SCUDDER
SMALL COMPANY VALUE FUND:
We have audited the accompanying statement of assets and liabilities of Scudder
Small Company Value Fund, including the investment portfolio, as of August 31,
1996, and the related statement of operations, the statement of changes in net
assets, and the financial highlights for the period October 6, 1995
(commencement of operations) to August 31, 1996. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of August 31, 1996 by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder Small Company Value Fund as of August 31, 1996, the results of its
operations, the changes in its net assets, and the financial highlights for the
period October 6, 1995 (commencement of operations) to August 31, 1996, in
conformity with generally accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
October 7, 1996
- --------------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load
- --------------------------------------------------------------------------------
24 -- SCUDDER SMALL COMPANY VALUE FUND
<PAGE>
Officers and Trustees
Daniel Pierce*
President and Trustee
Paul Bancroft III
Trustee; Venture Capitalist and Consultant
Thomas J. Devine
Trustee; Consultant
Keith R. Fox
Trustee; President, Exeter Capital Management Corporation
Dudley H. Ladd*
Trustee
Dr. Wilson Nolen
Trustee; Consultant
Juris Padegs*
Trustee
Dr. Gordon Shillinglaw
Trustee; Professor Emeritus of Accounting, Columbia University Graduate School
of Business
Robert W. Lear
Honorary Trustee; Executive-in-Residence, Visiting Professor,
Columbia University Graduate School of Business
Robert G. Stone, Jr.
Honorary Trustee; Chairman of the Board and Director, Kirby Corporation
Edmund R. Swanberg*
Honorary Trustee
Peter Chin*
Vice President
James M. Eysenbach*
Vice President
Philip S. Fortuna*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
David S. Lee*
Vice President
Roy C. McKay*
Vice President
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
Edward J. O'Connell*
Vice President and Assistant Treasurer
Kathryn L. Quirk*
Vice President and Assistant Secretary
Richard W. Desmond*
Assistant Secretary
Coleen Downs Dinneen*
Assistant Secretary
*Scudder, Stevens & Clark, Inc.
25 - Scudder Small Company Value Fund
<PAGE>
Investment Products and Services
The Scudder Family of Funds
================================================================================
Money Market
Scudder Cash Investment Trust
Scudder U.S. Treasury Money Fund
Tax Free Money Market+
Scudder Tax Free Money Fund
Scudder California Tax Free Money Fund*
Scudder New York Tax Free Money Fund*
Tax Free+
Scudder California Tax Free Fund*
Scudder High Yield Tax Free Fund
Scudder Limited Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder Massachusetts Limited Term
Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder Medium Term Tax Free Fund
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
Growth and Income
Scudder Balanced Fund
Scudder Growth and Income Fund
Income
Scudder Emerging Markets Income Fund
Scudder Global Bond Fund
Scudder GNMA Fund
Scudder High Yield Bond Fund
Scudder Income Fund
Scudder International Bond Fund
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Growth
Scudder Capital Growth Fund
Scudder Classic Growth Fund
Scudder Development Fund
Scudder Emerging Markets Growth Fund
Scudder Global Discovery Fund
Scudder Global Fund
Scudder Gold Fund
Scudder Greater Europe Growth Fund
Scudder International Fund
Scudder Latin America Fund
Scudder Micro Cap Fund
Scudder Pacific Opportunities Fund
Scudder Quality Growth Fund
Scudder Small Company Value Fund
Scudder 21st Century Growth Fund
Scudder Value Fund
The Japan Fund
Retirement Plans and Tax-Advantaged Investments
================================================================================
IRAs
Keogh Plans
Scudder Horizon Plan*+++ (a variable annuity)
401(k) Plans
403(b) Plans
SEP-IRAs
Profit Sharing and Money Purchase
Pension Plans
Closed-End Funds#
================================================================================
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder World Income Opportunities
Fund, Inc.
Institutional Cash Management
================================================================================
Scudder Institutional Fund, Inc.
Scudder Fund, Inc.
Scudder Treasurers Trust(TM)++
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +A portion of the income from the tax-free funds may
be subject to federal, state, and local taxes. *Not available in all states.
+++A no-load variable annuity contract provided by Charter National Life
Insurance Company and its affiliate, offered by Scudder's insurance agencies,
1-800-225-2470. #These funds, advised by Scudder, Stevens & Clark, Inc., are
traded on various stock exchanges. ++For information on Scudder Treasurers
Trust,(TM) an institutional cash management service that utilizes certain
portfolios of Scudder Fund, Inc. ($100,000 minimum), call 1-800-541-7703.
26 - Scudder Small Company Value Fund
<PAGE>
How to Contact Scudder
Account Service and Information
For existing account service and transactions
Scudder Investor Relations
1-800-225-5163
For personalized information about your Scudder accounts;
exchanges and redemptions; or information on any Scudder fund
Scudder Automated Information Line (SAIL)
1-800-343-2890
Investment Information
To receive information about the Scudder funds, for additional
applications and prospectuses, or for investment questions
Scudder Investor Relations
1-800-225-2470
For establishing 401(k) and 403(b) plans
Scudder Defined Contribution Services
1-800-323-6105
Please address all correspondence to
The Scudder Funds
P.O. Box 2291
Boston, Massachusetts
02107-2291
Visit the Scudder World Wide Web Site at:
http://funds.scudder.com
Or Stop by a Scudder Funds Center
Many shareholders enjoy the personal, one-on-one service of the
Scudder Funds Centers. Check for a Funds Center near you--they
can be found in the following cities:
Boca Raton New York
Boston Portland, OR
Chicago San Diego
Cincinnati San Francisco
Los Angeles Scottsdale
For information on Scudder Treasurers Trust(TM), an
institutional cash management service for corporations,
non-profit organizations and trusts which utilizes certain
portfolios of Scudder Fund, Inc.* ($100,000 minimum), call:
1-800-541-7703.
For information on Scudder Institutional Funds*, funds designed
to meet the broad investment management and service needs of
banks and other institutions, call:
1-800-854-8525.
Scudder Investor Relations and Scudder Funds Centers are services provided
through Scudder Investor Services, Inc., Distributor.
* Contact Scudder Investor Services, Inc., Distributor, to receive a
prospectus with more complete information, including management fees and
expenses. Please read it carefully before you invest or send money.
27 - Scudder Small Company Value Fund
<PAGE>
Celebrating Over 75 Years of Serving Investors
Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven Clark,
Scudder, Stevens & Clark was the first independent investment counsel firm in
the United States. Since its birth, Scudder's pioneering spirit and commitment
to professional long-term investment management have helped shape the investment
industry. In 1928, we introduced the nation's first no-load mutual fund. Today
we offer over 40 pure no load(TM) funds, including the first international
mutual fund offered to U.S. investors.
Over the years, Scudder's global investment perspective and dedication to
research and fundamental investment disciplines have helped us become one of the
largest and most respected investment managers in the world. Though times have
changed since our beginnings, we remain committed to our long-standing
principles: managing money with integrity and distinction; keeping the interests
of our clients first; providing access to investments and markets that may not
be easily available to individuals; and making investing as simple and
convenient as possible through friendly, comprehensive service.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
<PAGE>
PART C. OTHER INFORMATION
<TABLE>
<CAPTION>
Item 24. Financial Statements and Exhibits
- -------- ---------------------------------
<S> <C> <C> <C>
NEW
Item 24. Financial Statements and Exhibits
a. Financial Statements
Included in Part A of this Registration Statement:
For Scudder Development Fund:
Financial highlights for the ten fiscal years ended June 30, 1996.
For Scudder Small Company Value Fund:
Financial highlights for the period October 6, 1995 (commencement of operations)
to August 31, 1996.
For Scudder Micro Cap Fund:
Financial highlights to be filed by amendment.
For Scudder 21st Century Growth Fund:
Financial highlights to be filed by amendment.
Included in Part B of this Registration Statement:
For Scudder Development Fund:
Investment Portfolio as of June 30, 1996
Statement of Assets and Liabilities as of June 30, 1996
Statement of Operations for the fiscal year ended June 30, 1996
Statements of Changes in Net Assets for the two fiscal years ended June 30, 1996
Financial Highlights for the ten fiscal years ended June 30, 1996
Notes to Financial Statements
Report of Independent Accountants
For Scudder Small Company Value Fund:
Investment Portfolio as of August 31, 1996
Statement of Assets and Liabilities as of August 31, 1996
Statement of Operations for the period October 6, 1995 (commencement of
operations) to August 31, 1996
Statement of Changes in Net Assets for the period October 6, 1995 (commencement of
operations) to August 31, 1996
Financial Highlights for the period October 6, 1995 (commencement of operations)
to August 31, 1996
Notes to Financial Statements
For Scudder Micro Cap Fund:
Statement of Assets and Liabilities as of August 1, 1996 and related notes.
(Incorporated by reference to Post-Effective Amendment No. 40 to the Registration
Statement.)
Part C - Page 1
<PAGE>
For Scudder 21st Century Growth Fund:
Statement of Assets and Liabilities as of September 5, 1996 and related notes.
(Incorporated by reference to Post-Effective Amendment No. 41 to the Registration
Statement.)
Statements, schedules and historical information other than those listed above have been
omitted since they are either not applicable or are not required.
b. Exhibits:
1. (a)(1) Amended and Restated Declaration of Trust dated December 21, 1987.
(Filed electronically herein.)
(a)(2) Amendment to Amended and Restated Declaration of Trust dated
December 13, 1990.
(Filed electronically herein.)
(a)(3) Amendment to Amended and Restated Declaration of Trust to change the
name of the Trust dated July 21, 1995 is filed herein.
(Incorporated by reference to Exhibit 1 (a)(3) to Post-Effective
Amendment No. 35 to the Registration Statement.)
(a)(4) Amendment to Amended and Restated Declaration of Trust to add new
series dated July 21, 1995.
(Incorporated by reference to Exhibit 1(a)(4) to Post-Effective
Amendment No. 35 to the Registration Statement.)
(a)(5) Establishment and Designation of Series dated June 6, 1996.
(Incorporated by reference to Exhibit 1(a)(5) to Post-Effective
Amendment No. 40 to the Registration Statement.)
2. (a) Amendment to the By-Laws Article IV: Notice of Meetings dated
December 12, 1991.
(Filed electronically herein.)
(b) By-Laws as of October 16, 1985.
(Filed electronically herein.)
(c) Amendment to the By-Laws of Registrant as amended through December
9, 1985.
(Filed electronically herein.)
3. Inapplicable.
4. Specimen certificate representing shares of beneficial interest
($.01 par value) for Scudder Development Fund.
(Incorporated by reference to Exhibit 4 to Post-Effective Amendment
No. 28 to the Registration Statement.)
5. (a) Investment Management Agreement between the Registrant, on behalf of
Scudder Development Fund, and Scudder, Stevens & Clark, Inc. dated
June 9, 1992.
(Filed electronically herein.)
Part C - Page 2
<PAGE>
(b) Investment Management Agreement between the Registrant, on behalf of
Scudder Development Fund, and Scudder, Stevens & Clark, Inc. dated
December 14, 1990.
(Filed electronically herein.)
(c) Investment Management Agreement between the Registrant, on behalf of
Scudder Small Company Value Fund, and Scudder, Stevens & Clark, Inc.
dated October 6, 1995.
(Incorporated by reference to Exhibit 5(c) to Post-Effective
Amendment No. 36 to the Registration Statement.)
(d) Investment Management Agreement between the Registrant, on behalf of
Scudder Micro Cap Fund, and Scudder, Stevens & Clark, Inc. dated
August 12, 1996.
(Incorporated by reference to Exhibit 5(d) to Post-Effective
Amendment No. 40 to the Registration Statement.)
(e) Investment Management Agreement between the Registrant, on behalf of
Scudder 21st Century Growth Fund, and Scudder, Stevens & Clark, Inc.
dated September 9, 1996.
(Incorporated by reference to Exhibit 5(e) to Post-Effective
Amendment No. 41 to the Registration Statement).
6. (a) Underwriting Agreement between the Registrant, on behalf of Scudder
Development Fund, and Scudder Investor Services, Inc., formerly
Scudder Fund Distributors, Inc., dated December 31, 1985.
(Incorporated by reference to Exhibit 6 to Post-Effective
Amendment No. 25 to the Registration Statement.)
(b) Underwriting Agreement between the Registrant and Scudder Investor
Services, Inc., dated September 30, 1995.
(Filed electronically herein.)
7. Inapplicable.
8. (a)(1) Custodian Contract between the Registrant, on behalf of Scudder
Development Fund, and Brown Brothers Harriman & Co. dated April 1,
1980.
(Filed electronically herein.)
(a)(2) Fee schedule for Exhibit 8(a)(1).
(Filed electronically herein.)
(a)(3) Custodian Contract between the Registrant and State Street Bank and
Trust Company dated September 6, 1995.
(Incorporated by reference to Exhibit 8(a)(3) to Post-Effective
Amendment No. 35 to the Registration Statement.)
(a)(4) Fee schedule for Exhibit 8(a)(3).
(Incorporated by reference to Exhibit 8(a)(4) to Post-Effective
Amendment No. 35 to the Registration Statement.)
(b)(1) Subcustodian Agreement between Brown Brothers Harriman & Co. and The
Bank of New York, London office, dated January 30, 1979.
(Filed electronically herein.)
Part C - Page 3
<PAGE>
(b)(2) Fee schedule for Exhibit 8(b)(1).
(Filed electronically herein.)
9. (a)(1) Transfer Agency and Service Agreement between the Registrant and
Scudder Service Corporation dated October 2, 1989.
(Filed electronically herein.)
(a)(2) Fee schedule for Exhibit 9(a)(1).
(Filed electronically herein.)
(a)(3) Service Agreement between Copeland Associates, Inc., on behalf of
Scudder Development Fund, and Scudder Service Corporation dated June
8, 1995.
(Incorporated by reference to Exhibit 9(a)(3) to Post-Effective
Amendment No. 35 to the Registration Statement.)
(a)(4) Revised fee schedule for Exhibit 9(a)(1).
(Incorporated by reference to Exhibit 9(a)(4) to Post-Effective
Amendment No. 37 to the Registration Statement.)
(b)(1) COMPASS Service Agreement between the Registrant and Scudder Trust
Company dated January 1, 1990.
(Filed electronically herein.)
(b)(2) Fee schedule for Exhibit 9(b)(1).
(Filed electronically herein.)
(b)(3) COMPASS Service Agreement between the Registrant and Scudder Trust
Company.
(Incorporated by reference to Exhibit 9(b)(3) to Post-Effective
Amendment No. 37 to the Registration Statement.)
(d) Shareholder Services Agreement between the Registrant and Charles
Schwab & Co., Inc. dated June 1, 1990.
(Filed electronically herein.)
(e) Fund Accounting Services Agreement between the Registrant, on behalf
of Scudder Development Fund, and Scudder Fund Accounting Corporation
dated March 21, 1995.
(Incorporated by reference to Exhibit 9(e) to Post-Effective
Amendment No. 35 to the Registration Statement.)
(f) Fund Accounting Services Agreement between the Registrant, on behalf
of Scudder Small Company Value Fund, and Scudder Fund Accounting
Corporation dated October 6, 1995.
(Incorporated by reference to Exhibit 9(f) to Post-Effective
Amendment No. 37 to the Registration Statement.)
(g) Fund Accounting Services Agreement between the Registrant, on behalf
of Scudder Micro Cap Fund, and Scudder Fund Accounting Corporation
dated August 12, 1996.
(Incorporated by reference to Exhibit 9(g) to Post-Effective
Amendment No. 41 to the Registration Statement.)
Part C - Page 4
<PAGE>
(h) Fund Accounting Services Agreement between the Registrant, on behalf
of Scudder 21st Century Growth Fund, and Scudder Fund Accounting
Corporation dated September 9, 1996.
(Incorporated by reference to Exhibit 9(h) to Post-Effective
Amendment No. 41 to the Registration Statement.)
10. Inapplicable.
11. Consent of Independent Accountants is filed herein.
12. Inapplicable.
13. Inapplicable.
14. (a) Scudder Flexi-Plan for Corporations and Self-Employed Individuals.
(Filed electronically herein.)
(b) Scudder Individual Retirement Plan.
(Filed electronically herein.)
(c) Scudder Funds 403(b) Plan.
(Filed electronically herein.)
(d) Scudder Employer-Select 403(b) Plan.
(Filed electronically herein.)
(e) Scudder Cash or Deferred Profit Sharing Plan under Section 401(k).
(Filed electronically herein.)
15. Inapplicable.
16. Schedule for Computation of Performance Data.
(Filed electronically herein.)
17. Financial Data Schedule is filed herein.
18. Inapplicable.
Power of Attorney is incorporated by reference to the Signature Page of Post-Effective Amendment No. 30,
Post-Effective Amendment No. 37 and Post-Effective Amendment No. 40.
Item 25. Persons Controlled by or under Common Control with Registrant
- -------- -------------------------------------------------------------
None
</TABLE>
Part C - Page 5
<PAGE>
Item 26. Number of Holders of Securities (as of November 29, 1996).
- -------- ----------------------------------------------------------
<TABLE>
<CAPTION>
(1) (2)
Title of Class Number of Record Shareholders
-------------- -----------------------------
<C> <C>
Shares of beneficial interest
($.01 par value)
Scudder Development Fund 53,810
Scudder Micro Cap Fund 4,869
Scudder Small Company Value Fund 6,970
Scudder 21st Century Growth Fund 1,152
</TABLE>
Item 27. Indemnification
- -------- ---------------
A policy of insurance covering Scudder, Stevens & Clark, Inc.,
its subsidiaries including Scudder Investor Services, Inc.,
and all of the registered investment companies advised by
Scudder, Stevens & Clark, Inc. insures the Registrant's
trustees and officers and others against liability arising by
reason of an alleged breach of duty caused by any negligent
act, error or accidental omission in the scope of their
duties.
Article IV, Sections 4.1 - 4.3 of the Registrant's Declaration
of Trust provide as follows:
Section 4.1. No Personal Liability of Shareholders, Trustees,
Etc. No Shareholder shall be subject to any personal liability
whatsoever to any Person in connection with Trust Property or
the acts, obligations or affairs of the Trust. No Trustee,
officer, employee or agent of the Trust shall be subject to
any personal liability whatsoever to any Person, other than to
the Trust or its Shareholders, in connection with Trust
Property or the affairs of the Trust, save only that arising
from bad faith, willful misfeasance, gross negligence or
reckless disregard of his duties with respect to such Person;
and all such Persons shall look solely to the Trust Property
for satisfaction of claims of any nature arising in connection
with the affairs of the Trust. If any Shareholder, Trustee,
officer, employee, or agent, as such, of the Trust, is made a
party to any suit or proceeding to enforce any such liability
of the Trust, he shall not, on account thereof, be held to any
personal liability. The Trust shall indemnify and hold each
Shareholder harmless from and against all claims and
liabilities, to which such Shareholder may become subject by
reason of his being or having been a Shareholder, and shall
reimburse such Shareholder for all legal and other expenses
reasonably incurred by him in connection with any such claim
or liability. The indemnification and reimbursement required
by the preceding sentence shall be made only out of the assets
of the one or more Series of which the Shareholder who is
entitled to indemnification or reimbursement was a Shareholder
at the time the act or event occurred which gave rise to the
claim against or liability of said Shareholder. The rights
accruing to a Shareholder under this Section 4.1 shall not
impair any other right to which such Shareholder may be
lawfully entitled, nor shall anything herein contained
restrict the right of the Trust to indemnify or reimburse a
Shareholder in any appropriate situation even though not
specifically provided herein.
Section 4.2. Non-Liability of Trustees, Etc. No Trustee,
officer, employee or agent of the Trust shall be liable to the
Trust, its Shareholders, or to any Shareholder, Trustee,
officer, employee, or agent thereof for any action or failure
to act (including without limitation the failure to compel in
any way any former or acting Trustee to redress any breach of
trust) except for his own bad faith, willful misfeasance,
gross negligence or reckless disregard of the duties involved
in the conduct of his office.
Section 4.3. Mandatory Indemnification. (a) Subject to the
exceptions and limitations contained in paragraph (b) below:
(i) every person who is, or has been, a Trustee or
officer of the Trust shall be indemnified by the Trust to the
fullest extent permitted by law against all liability and
against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which
Part C - Page 6
<PAGE>
he becomes involved as a party or otherwise by virtue of his
being or having been a Trustee or officer and against amounts
paid or incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or
"proceeding" shall apply to all claims, actions, suits or
proceedings (civil, criminal, administrative or other,
including appeals), actual or threatened; and the words
"liability" and "expenses" shall include, without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement,
fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to
a Trustee or officer:
(i) against any liability to the Trust, a Series
thereof, or the Shareholders by reason of a final adjudication
by a court or other body before which a proceeding was brought
that he engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his office;
(ii) with respect to any matter as to which he shall
have been finally adjudicated not to have acted in good faith
in the reasonable belief that his action was in the best
interest of the Trust;
(iii) in the event of a settlement or other
disposition not involving a final adjudication as provided in
paragraph (b)(i) or (b)(ii) resulting in a payment by a
Trustee or officer, unless there has been a determination that
such Trustee or officer did not engage in willful misfeasance,
bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office:
(A) by the court or other body approving the
settlement or other disposition; or
(B) based upon a review of readily available
facts (as opposed to a full trial-type inquiry) by
(x) vote of a majority of the Disinterested Trustees
acting on the matter (provided that a majority of the
Disinterested Trustees then in office act on the
matter) or (y) written opinion of independent legal
counsel.
(c) The rights of indemnification herein provided may
be insured against by policies maintained by the Trust, shall
be severable, shall not affect any other rights to which any
Trustee or officer may now or hereafter be entitled, shall
continue as to a person who has ceased to be such Trustee or
officer and shall insure to the benefit of the heirs,
executors, administrators and assigns of such a person.
Nothing contained herein shall affect any rights to
indemnification to which personnel of the Trust other than
Trustees and officers may be entitled by contract or otherwise
under law.
(d) Expenses of preparation and presentation of a
defense to any claim, action, suit or proceeding of the
character described in paragraph (a) of this Section 4.3 may
be advanced by the Trust prior to final disposition thereof
upon receipt of an undertaking by or on behalf of the
recipient to repay such amount if it is ultimately determined
that he is not entitled to indemnification under this Section
4.3, provided that either:
(i) such undertaking is secured by a surety bond or
some other appropriate security provided by the recipient, or
the Trust shall be insured against losses arising out of any
such advances; or
(ii) a majority of the Disinterested Trustees acting
on the matter (provided that a majority of the Disinterested
Trustees act on the matter) or an independent legal counsel in
a written opinion shall determine, based upon a review of
readily available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
As used in this Section 4.3, a "Disinterested
Trustee" is one who is not (i) an "Interested Person" of the
Trust (including anyone who has been exempted from being an
"Interested Person" by any rule, regulation or order of the
Commission), or (ii) involved in the claim, action, suit or
proceeding.
Part C - Page 7
<PAGE>
Item 28. Business or Other Connections of Investment Adviser
- -------- ---------------------------------------------------
The Adviser has stockholders and employees who are denominated
officers but do not as such have corporation-wide
responsibilities. Such persons are not considered officers for
the purpose of this Item 28.
<TABLE>
<CAPTION>
Business and Other Connections of Board
Name of Directors of Registrant's Adviser
---- ------------------------------------
<C> <C>
Stephen R. Beckwith Director, Vice President, Assistant Treasurer, Chief Operating Officer & Chief
Financial Officer, Scudder, Stevens & Clark, Inc. (investment adviser)**
Lynn S. Birdsong Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Supervisory Director, The Latin America Income and Appreciation Fund N.V.
(investment company) +
Supervisory Director, The Venezuela High Income Fund N.V. (investment company) xx
Supervisory Director, Scudder Mortgage Fund (investment company)+
Supervisory Director, Scudder Floating Rate Funds for Fannie Mae Mortgage Securities
I & II (investment company) +
Director, Scudder, Stevens & Clark (Luxembourg) S.A. (investment manager) #
Trustee, Scudder Funds Trust (investment company)*
President & Director, The Latin America Dollar Income Fund, Inc. (investment company)**
President & Director, Scudder World Income Opportunities Fund, Inc. (investment
company)**
Director, Canadian High Income Fund (investment company)#
Director, Hot Growth Companies Fund (investment company)#
President, The Japan Fund, Inc. (investment company)**
Director, Sovereign High Yield Investment Company (investment company)+
Nicholas Bratt Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
President & Director, Scudder New Europe Fund, Inc. (investment company)**
President & Director, The Brazil Fund, Inc. (investment company)**
President & Director, The First Iberian Fund, Inc. (investment company)**
President & Director, Scudder International Fund, Inc. (investment company)**
President & Director, Scudder Global Fund, Inc. (President on all series except Scudder
Global Fund) (investment company)**
President & Director, The Korea Fund, Inc. (investment company)**
President & Director, Scudder New Asia Fund, Inc. (investment company)**
President, The Argentina Fund, Inc. (investment company)**
Vice President, Scudder, Stevens & Clark Corporation (Delaware) (investment adviser)**
Vice President, Scudder, Stevens & Clark Japan, Inc. (investment adviser)###
Vice President, Scudder, Stevens & Clark of Canada Ltd. (Canadian investment adviser)
Toronto, Ontario, Canada
Vice President, Scudder, Stevens & Clark Overseas Corporation^oo
E. Michael Brown Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Trustee, Scudder GNMA Fund (investment company)*
Trustee, Scudder U.S. Treasury Fund (investment company)*
Trustee, Scudder Tax Free Money Fund (investment company)*
Assistant Treasurer, Scudder Investor Services, Inc. (broker/dealer)*
Director & President, Scudder Realty Holding Corporation (a real estate holding
company)*
Director & President, Scudder Trust Company (a trust company)+++
Director, Scudder Trust (Cayman) Ltd.
Part C - Page 8
<PAGE>
Mark S. Casady Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Director & Vice President, Scudder Investor Services, Inc. (broker/dealer)*
Vice President, Scudder Service Corporation (in-house transfer agent)*
Director, SFA, Inc. (advertising agency)*
Linda C. Coughlin Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Director & Senior Vice President, Scudder Investor Services, Inc. (broker/dealer)*
President & Trustee, AARP Cash Investment Funds (investment company)**
President & Trustee, AARP Growth Trust (investment company)**
President & Trustee, AARP Income Trust (investment company)**
President & Trustee, AARP Tax Free Income Trust (investment company)**
President & Trustee, AARP Managed Investment Portfolios Trust (investment company)**
Director, SFA, Inc. (advertising agency)*
Margaret D. Hadzima Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Assistant Treasurer, Scudder Investor Services, Inc. (broker/dealer)*
Jerard K. Hartman Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Vice President, Scudder California Tax Free Trust (investment company)*
Vice President, Scudder Equity Trust (investment company)**
Vice President, Scudder Cash Investment Trust (investment company)*
Vice President, Scudder Fund, Inc. (investment company)**
Vice President, Scudder Global Fund, Inc. (investment company)**
Vice President, Scudder GNMA Fund (investment company)*
Vice President, Scudder Portfolio Trust (investment company)*
Vice President, Scudder Institutional Fund, Inc. (investment company)**
Vice President, Scudder International Fund, Inc. (investment company)**
Vice President, Scudder Investment Trust (investment company)*
Vice President, Scudder Municipal Trust (investment company)*
Vice President, Scudder Mutual Funds, Inc. (investment company)**
Vice President, Scudder New Asia Fund, Inc. (investment company)**
Vice President, Scudder New Europe Fund, Inc. (investment company)**
Vice President, Scudder Securities Trust (investment company)*
Vice President, Scudder State Tax Free Trust (investment company)*
Vice President, Scudder Funds Trust (investment company)**
Vice President, Scudder Tax Free Money Fund (investment company)*
Vice President, Scudder Tax Free Trust (investment company)*
Vice President, Scudder U.S. Treasury Money Fund (investment company)*
Vice President, Scudder Pathway Series (investment company)*
Vice President, Scudder Variable Life Investment Fund (investment company)*
Vice President, The Brazil Fund, Inc. (investment company)**
Vice President, The Korea Fund, Inc. (investment company)**
Vice President, The Argentina Fund, Inc. (investment company)**
Vice President & Director, Scudder, Stevens & Clark of Canada, Ltd. (Canadian
investment adviser) Toronto, Ontario, Canada
Vice President, The First Iberian Fund, Inc. (investment company)**
Vice President, The Latin America Dollar Income Fund, Inc. (investment company)**
Vice President, Scudder World Income Opportunities Fund, Inc. (investment company)**
Richard A. Holt Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Vice President, Scudder Variable Life Investment Fund (investment company)*
Part C - Page 9
<PAGE>
Dudley H. Ladd Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Director, Scudder Global Fund, Inc. (investment company)**
Director, Scudder International Fund, Inc. (investment company)**
Director, Scudder Mutual Fund, Inc. (investment company)**
Senior Vice President & Director, Scudder Investor Services, Inc. (broker/dealer)*
President & Director, SFA, Inc. (advertising agency)*
Vice President & Trustee, Scudder Cash Investment Trust (investment company)*
Trustee, Scudder Investment Trust (investment company)*
Trustee, Scudder Portfolio Trust (investment company)*
Trustee, Scudder Municipal Trust (investment company)*
Trustee, Scudder Securities Trust (investment company)*
Trustee, Scudder State Tax Free Trust (investment company)*
Trustee, Scudder Equity Trust (investment company)**
Vice President, Scudder U.S. Treasury Money Fund (investment company)*
John T. Packard Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
President, Montgomery Street Income Securities, Inc. (investment company) o
Director, Scudder Realty Advisors, Inc. (realty investment adviser) x
Daniel Pierce Chairman & Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Chairman & Director, Scudder New Europe Fund, Inc. (investment company)**
Trustee, Scudder California Tax Free Trust (investment company)*
President & Trustee, Scudder Equity Trust (investment company)**
Director, The First Iberian Fund, Inc. (investment company)**
President & Trustee, Scudder GNMA Fund (investment company)*
President & Trustee, Scudder Portfolio Trust (investment company)*
President & Trustee, Scudder Funds Trust (investment company)**
President & Director, Scudder Institutional Fund, Inc. (investment company)**
President & Director, Scudder Fund, Inc. (investment company)**
Chairman & Director, Scudder International Fund, Inc. (investment company)**
President & Trustee, Scudder Investment Trust (investment company)*
Vice President & Trustee, Scudder Municipal Trust (investment company)*
Vice President & Trustee, Scudder Pathway Series (investment company)*
President & Director, Scudder Mutual Funds, Inc. (investment company)**
Director, Scudder New Asia Fund, Inc. (investment company)**
President & Trustee, Scudder Securities Trust (investment company)*
Trustee, Scudder State Tax Free Trust (investment company)*
Vice President & Trustee, Scudder Variable Life Investment Fund (investment company)*
Director, The Brazil Fund, Inc. (until 7/94) (investment company)**
Vice President & Assistant Treasurer, Montgomery Street Income Securities, Inc.
(investment company)o
Chairman, Vice President & Director, Scudder Global Fund, Inc. (investment company)**
Vice President, Director & Assistant Treasurer, Scudder Investor Services, Inc.
(broker/dealer)*
President & Director, Scudder Service Corporation (in-house transfer agent)*
Chairman & President, Scudder, Stevens & Clark of Canada, Ltd. (Canadian investment
adviser), Toronto, Ontario, Canada
President & Director, Scudder Precious Metals, Inc. xxx
Chairman & Director, Scudder Global Opportunities Funds (investment company)
Luxembourg
Chairman, Scudder, Stevens & Clark, Ltd. (investment adviser) London, England
Director, Scudder Fund Accounting Corporation (in-house fund accounting agent)*
Director, Vice President & Assistant Secretary, Scudder Realty Holdings Corporation (a
real estate holding company)*
Part C - Page 10
<PAGE>
Director, Scudder Latin America Investment Trust PLC (investment company)@
Incorporator, Scudder Trust Company (a trust company)+++
Director, Fiduciary Trust Company (banking & trust company) Boston, MA
Director, Fiduciary Company Incorporated (banking &
trust company) Boston, MA
Trustee, New England Aquarium, Boston, MA
Kathryn L. Quirk Director & Secretary, Scudder, Stevens & Clark, Inc. (investment adviser)**
Vice President, Scudder Fund, Inc. (investment company)**
Vice President, Scudder Institutional Fund, Inc. (investment company)**
Vice President & Assistant Secretary, Scudder World Income Opportunities Fund, Inc.
(investment company)**
Vice President & Assistant Secretary, The Korea Fund, Inc. (investment company)**
Vice President & Assistant Secretary, The Argentina Fund, Inc. (investment company)**
Vice President & Assistant Secretary, The Brazil Fund, Inc. (investment company)**
Vice President & Assistant Secretary, Scudder International Fund, Inc. (investment
company)**
Vice President & Assistant Secretary, Scudder Equity Trust (investment company)**
Vice President & Assistant Secretary, Scudder Securities Trust (investment company)*
Vice President & Assistant Secretary, Scudder Funds Trust (investment company)**
Vice President & Assistant Secretary, Scudder Global Fund, Inc. (investment
company)**
Vice President & Assistant Secretary, Montgomery Street Income Securities, Inc.
(investment company)o
Vice President & Assistant Secretary, Scudder Mutual Funds, Inc. (investment
company)**
Vice President & Assistant Secretary, Scudder Pathway Series (investment company)*
Vice President & Assistant Secretary, Scudder New Europe Fund, Inc. (investment
company)**
Vice President & Assistant Secretary, Scudder Variable Life Investment Fund
(investment company)*
Vice President & Assistant Secretary, The First Iberian Fund, Inc. (investment
company)**
Vice President & Assistant Secretary, The Latin America Dollar Income Fund, Inc.
(investment company)**
Vice President & Secretary, AARP Growth Trust (investment company)**
Vice President & Secretary, AARP Income Trust (investment company)**
Vice President & Secretary, AARP Tax Free Income Trust(investment company)**
Vice President & Secretary, AARP Cash Investment Funds (investment company)**
Vice President & Secretary, AARP Managed Investment Portfolios Trust (investment
company)**
Vice President, Scudder GNMA Fund (investment company)*
Vice President & Secretary, The Japan Fund, Inc. (investment company)**
Director, Vice President & Secretary, Scudder Fund Accounting Corporation (in-house
fund accounting agent)*
Senior Vice President, Scudder Investor Services, Inc. (broker/dealer)*
Director, Vice President & Secretary, Scudder Realty Holdings Corporation (a real
estate holding company)*
Vice President & Assistant Secretary, Scudder Precious Metals, Inc. xxx
Cornelia M. Small Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Vice President, Scudder Global Fund, Inc. (investment company)**
Vice President, AARP Cash Investment Funds (investment company)**
Vice President, AARP Growth Trust (investment company)**
Vice President, AARP Income Trust (investment company)**
Vice President, AARP Tax Free Income Trust (investment company)**
Part C - Page 11
<PAGE>
Edmond D. Villani Director, President & Chief Executive Officer, Scudder, Stevens & Clark, Inc.
(investment adviser)**
Chairman & Director, Scudder New Asia Fund, Inc. (investment company)**
Chairman & Director, The Argentina Fund, Inc. (investment company)**
Director, Scudder Realty Advisors, Inc. (realty investment adviser) x
Supervisory Director, Scudder Mortgage Fund (investment company) +
Chairman & Director, The Latin America Dollar Income Fund, Inc. (investment company)**
Director, Scudder, Stevens & Clark Japan, Inc. (investment adviser)###
Chairman & Director, Scudder World Income Opportunities Fund, Inc. (investment
company)**
Supervisory Director, Scudder Floating Rate Funds for Fannie Mae Mortgage Securities I
& II (investment company)+
Director, The Brazil Fund, Inc. (investment company)**
Director, Indosuez High Yield Bond Fund (investment company) Luxembourg
President & Director, Scudder, Stevens & Clark Overseas Corporation^oo
President & Director, Scudder, Stevens & Clark Corporation (Delaware) (investment
adviser)**
Director, IBJ Global Investment Management S.A., (Luxembourg investment management
company) Luxembourg, Grand-Duchy of Luxembourg
Stephen A. Wohler Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Vice President, Montgomery Street Income Securities, Inc. (investment company)o
* Two International Place, Boston, MA
x 333 South Hope Street, Los Angeles, CA
** 345 Park Avenue, New York, NY
++ Two Prudential Plaza, 180 N. Stetson Avenue, Chicago, IL
+++ 5 Industrial Way, Salem, NH
o 101 California Street, San Francisco, CA
# Societe Anonyme, 47, Boulevard Royal, L-2449 Luxembourg, R.C. Luxembourg B 34.564
+ John B. Gorsiraweg 6, Willemstad Curacao, Netherlands Antilles
xx De Ruyterkade 62, P.O. Box 812, Willemstad Curacao, Netherlands Antilles
## 2 Boulevard Royal, Luxembourg
*** B1 2F3F 248 Section 3, Nan King East Road, Taipei, Taiwan
xxx Grand Cayman, Cayman Islands, British West Indies
^oo 20-5, Ichibancho, Chiyoda-ku, Tokyo, Japan
### 1-7, Kojimachi, Chiyoda-ku, Tokyo, Japan
@ c/o Sinclair Hendersen Limited, 23 Cathedral Yard, Exeter, Devon
</TABLE>
Item 29. Principal Underwriters.
- -------- -----------------------
(a) Scudder California Tax Free Trust
Scudder Cash Investment Trust
Scudder Equity Trust
Scudder Fund, Inc.
Scudder Funds Trust
Scudder Global Fund, Inc.
Scudder GNMA Fund
Scudder Institutional Fund, Inc.
Scudder International Fund, Inc.
Scudder Investment Trust
Scudder Municipal Trust
Scudder Mutual Funds, Inc.
Scudder Pathway Series
Part C - Page 12
<PAGE>
Scudder Portfolio Trust
Scudder Securities Trust
Scudder State Tax Free Trust
Scudder Tax Free Money Fund
Scudder Tax Free Trust
Scudder U.S. Treasury Money Fund
Scudder Variable Life Investment Fund
AARP Cash Investment Funds
AARP Growth Trust
AARP Income Trust
AARP Tax Free Income Trust
AARP Managed Investment Portfolios Trust
The Japan Fund, Inc.
<TABLE>
<CAPTION>
(b)
(1) (2) (3)
Name and Principal Position and Offices with Positions and
Business Address Scudder Investor Services, Inc. Offices with Registrant
---------------- ------------------------------- -----------------------
<C> <C> <C>
E. Michael Brown Assistant Treasurer
Two International Place
Boston, MA 02110
Mark S. Casady Director and Vice President
Two International Place
Boston, MA 02110
Linda Coughlin Director and Senior Vice President
Two International Place
Boston, MA 02110
Richard W. Desmond Vice President
345 Park Avenue
New York, NY 10154
Coleen Downs Dinneen Assistant Clerk
Two International Place
Boston, MA 02110
Paul J. Elmlinger Senior Vice President
345 Park Avenue
New York, NY 10154
Margaret D. Hadzima Assistant Treasurer
Two International Place
Boston, MA 02110
Thomas W. Joseph Director, Vice President,
Two International Place Treasurer and Assistant Clerk
Boston, MA 02110
Dudley H. Ladd Director and Senior Vice President
Two International Place
Boston, MA 02110
Part C - Page 13
<PAGE>
Name and Principal Position and Offices with Positions and
Business Address Scudder Investor Services, Inc. Offices with Registrant
---------------- ------------------------------- -----------------------
David S. Lee Director, President and Assistant
Two International Place Treasurer
Boston, MA 02110
Thomas F. McDonough Clerk
Two International Place
Boston, MA 02110
Thomas H. O'Brien Assistant Treasurer
345 Park Avenue
New York, NY 10154
Edward J. O'Connell Assistant Treasurer
345 Park Avenue
New York, NY 10154
Daniel Pierce Director, Vice President
Two International Place and Assistant Treasurer
Boston, MA 02110
Kathryn L. Quirk Senior Vice President
345 Park Avenue
New York, NY 10154
Edmund J. Thimme Director and Vice President
345 Park Avenue
New York, NY 10154
Benjamin Thorndike Vice President
Two International Place
Boston, MA 02110
David B. Watts Assistant Treasurer
Two International Place
Boston, MA 02110
Linda J. Wondrack Vice President
Two International Place
Boston, MA 02110
The Underwriter has employees who are denominated officers of an
operational area. Such persons do not have corporation-wide
responsibilities and are not considered officers for the purpose of
this Item 29.
(c)
(1) (2) (3) (4) (5)
Net Underwriting Compensation on
Name of Principal Discounts and Redemptions Brokerage Other
Underwriter Commissions and Repurchases Commissions Compensation
----------- ----------- --------------- ----------- ------------
Scudder Investor None None None None
Services, Inc.
</TABLE>
Part C - Page 14
<PAGE>
Item 30. Location of Accounts and Records.
- -------- ---------------------------------
Certain accounts, books and other documents required to be
maintained by Section 31(a) of the 1940 Act and the Rules
promulgated thereunder are maintained by Scudder, Stevens &
Clark, Inc., Two International Place, Boston, MA 02110-4103.
Records relating to the duties of the Registrant's custodian
are maintained by State Street Bank and Trust Company,
Heritage Drive, North Quincy, Massachusetts. Records relating
to the duties of the Registrant's transfer agent are
maintained by Scudder Service Corporation, Two International
Place, Boston, Massachusetts.
Item 31. Management Services.
- -------- --------------------
Inapplicable.
Item 32. Undertakings.
- -------- -------------
The Registrant hereby undertakes to file post-effective
amendments, using reasonably current financial statements of
Scudder Micro Cap Fund and Scudder 21st Century Growth Fund,
within four to six months from the effectiveness date of each
Registrant's Registration Statement under the 1933 Act.
The Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of a Fund's latest
annual report to shareholders upon request and without change.
The Registrant hereby undertakes to call a meeting of
shareholders for the purpose of voting on the question of
removal of a Trustee or Trustees when requested to do so by
the holders of at least 10% of the Registrant's outstanding
shares and in connection with such meeting to comply with the
provisions of Section 16(c) of the Investment Company Act of
1940 relating to shareholder communications.
The Registrant hereby undertakes, insofar as indemnification
for liability arising under the Securities Act of 1933 may be
permitted to trustees, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a
trustee, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person in
connection with the securities being registered, the
registrant will submit unless in the opinion of its counsel
the matter has been settled by controlling precedent, to a
court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
Part C - Page 15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boston and the Commonwealth of
Massachusetts on the 31th day of December, 1996.
SCUDDER SECURITIES TRUST
By /s/Thomas F. McDonough
-----------------------------------
Thomas F. McDonough, Vice President
and Secretary
Pursuant to the requirements of the Securities Act of 1933, this amendment
to its Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/Daniel Pierce*
- -----------------------
Daniel Pierce* President (Principal Executive December 31, 1996
Officer) and Trustee
/s/Paul Bancroft III
- -----------------------
Paul Bancroft III* Trustee December 31, 1996
/s/Thomas J. Devine
- -----------------------
Thomas J. Devine* Trustee December 31, 1996
/s/Wilson Nolen
- -----------------------
Wilson Nolen* Trustee December 31, 1996
/s/Juris Padegs
- -----------------------
Juris Padegs* Trustee December 31, 1996
/s/Gordon Shillinglaw
- -----------------------
Gordon Shillinglaw* Trustee December 31, 1996
<PAGE>
SIGNATURE TITLE DATE
- --------- ----- ----
/s/Pamela A. McGrath
- -----------------------
Pamela A. McGrath Vice President and Treasurer December 31, 1996
(Principal Financial and Accounting
Officer)
*By: /s/Thomas F. McDonough
-----------------------
Thomas F. McDonough
Attorney-in-fact pursuant to a
power of attorney contained in
the signature page of Post-
Effective Amendment No. 30
filed August 26, 1991.
2
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Boston and Commonwealth of
Massachusetts on the 31st day of December, 1996.
SCUDDER SMALL COMPANY VALUE FUND
By /s/Thomas F. McDonough
-----------------------
Thomas F. McDonough,
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
amendment to its Registration Statement has been signed below by the following
persons in the capacities and on the date indicated. By so signing, the
undersigned in his capacity as a director or officer, or both, as the case may
be of the Registrant, does hereby appoint David S. Lee, Thomas F. McDonough and
Sheldon A. Jones and each of them severally, or if more than one acts, a
majority of them, his true and lawful attorney and agent to execute in his name,
place and stead (in such capacity) any and all amendments to the Registration
Statement and any post-effective amendments thereto and all instruments
necessary or desirable in connection therewith, to attest the seal of the
Registrant thereon and to file the same with the Securities and Exchange
Commission. Each of said attorneys and agents shall have power to act with or
without the other and have full power and authority to do and perform in the
name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary or advisable to be done in the premises as fully and to all
intents and purposes as the undersigned might or could do in person, hereby
ratifying and approving the act of said attorneys and agents and each of them.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/Keith R. Fox Trustee December 31, 1996
- --------------- -----------------
Keith R. Fox
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Boston and Commonwealth of
Massachusetts on the 31st day of December, 1996.
SCUDDER SMALL COMPANY VALUE FUND
By /s/Thomas F. McDonough
-----------------------
Thomas F. McDonough,
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
amendment to its Registration Statement has been signed below by the following
persons in the capacities and on the date indicated. By so signing, the
undersigned in his capacity as a director or officer, or both, as the case may
be of the Registrant, does hereby appoint David S. Lee, Thomas F. McDonough and
Sheldon A. Jones and each of them severally, or if more than one acts, a
majority of them, his true and lawful attorney and agent to execute in his name,
place and stead (in such capacity) any and all amendments to the Registration
Statement and any post-effective amendments thereto and all instruments
necessary or desirable in connection therewith, to attest the seal of the
Registrant thereon and to file the same with the Securities and Exchange
Commission. Each of said attorneys and agents shall have power to act with or
without the other and have full power and authority to do and perform in the
name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary or advisable to be done in the premises as fully and to all
intents and purposes as the undersigned might or could do in person, hereby
ratifying and approving the act of said attorneys and agents and each of them.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/Dudley H. Ladd Trustee 12/17/96
- ----------------- --------
Dudley H. Ladd
<PAGE>
File No. 2-36238
File No. 811-2021
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM N-1A
POST-EFFECTIVE AMENDMENT NO. 43
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 27
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
SCUDDER SECURITIES TRUST
<PAGE>
SCUDDER SECURITIES TRUST
EXHIBIT INDEX
Exhibit 1(a)(1)
Exhibit 1(a)(2)
Exhibit 2(a)
Exhibit 2(b)
Exhibit 2(c)
Exhibit 5(a)
Exhibit 5(b)
Exhibit 6(b)
Exhibit 8(a)(1)
Exhibit 8(a)(2)
Exhibit 8(b)(1)
Exhibit 8(b)(2)
Exhibit 9(a)(1)
Exhibit 9(a)(2)
Exhibit 9(b)(1)
Exhibit 9(b)(2)
Exhibit 9(d)
Exhibit 14(a)
Exhibit 14(b)
Exhibit 14(c)
Exhibit 14(d)
Exhibit 14(e)
Exhibit 16
Exhibit 17
Exhibit 1(a)(1)
FILED
[NAME ILLEGIBLE]
SECRETARY OF STATE
CORPORATION DIVISION
SCUDDER DEVELOPMENT FUND
AMENDED AND RESTATED
DECLARATION OF TRUST
DATED DECEMBER 21, 1987
CITY CLERK'S OFFICE
DEC 2 [?] 1987
CITY OF BOSTON
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I -- Name and Definitions
Section 1.1 Name 1
Section 1.2 Definitions 1
ARTICLE II -- Trustees 3
Section 2.1 General Powers 3
Section 2.2 Investments 4
Section 2.3 Legal Title 5
Section 2.4 Issuance and Repurchase of
Shares 6
Section 2.5 Delegation; Committees 6
Section 2.6 Collection and Payment 6
Section 2.7 Expenses 6
Section 2.8 Manner of Acting; By-laws 6
Section 2.9 Miscellaneous Powers 7
Section 2.10 Principal Transactions 7
Section 2.11 Number of Trustees 8
Section 2.12 Election and Term 8
Section 2.13 Resignation and Removal 8
Section 2.14 Vacancies 9
Section 2.15 Delegation of Power to Other Trustees 9
ARTICLE III -- Contracts 9
Section 3.1 Distribution Contract 9
Section 3.2 Advisory or Management Contract 10
Section 3.3 Affiliations of Trustees or
Officers, Etc. 10
Section 3.4 Compliance with 1940 Act 11
ARTICLE IV -- Limitations of Liability of Shareholders,
Trustees and Others 11
Section 4.1 No Personal Liability of Shareholders,
Trustees, Etc. 11
Section 4.2 Non-Liability of Trustees, Etc. 12
Section 4.3 Mandatory Indemnification 12
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Page
Section 4.4 No Bond Required of Trustees 14
Section 4.5 No Duty of Investigation; Notice in
Trust Instruments, Etc. 14
Section 4.6 Reliance on Experts, Etc. 14
ARTICLE V -- Shares of Beneficial Interest 15
Section 5.1 Beneficial Interest 15
Section 5.2 Rights of Shareholders 15
Section 5.3 Trust Only 15
Section 5.4 Issuance of Shares 15
Section 5.5 Register of Shares 16
Section 5.6 Transfer of Shares 16
Section 5.7 Notices, Reports 17
Section 5.8 Treasury Shares 17
Section 5.9 Voting Powers 17
Section 5.10 Meetings of Shareholders 18
Section 5.11 Series Designation 18
Section 5.12 Assent to Declaration of Trust 20
ARTICLE VI -- Redemption and Repurchase of Shares 20
Section 6.1 Redemption of Shares 20
Section 6.2 Price 21
Section 6.3 Payment 21
Section 6.4 Effect of Suspension of
Determination of Net
Asset Value 21
Section 6.5 Repurchase by Agreement 21
Section 6.6 Redemption of Shareholders
Interest 22
Section 6.7 Redemption of Shares in Order
to Qualify as Regulated
Investment Company
Disclosure of Holding 22
Section 6.8 Reductions in Number of Outstanding
Shares Pursuant to Net Asset
Value Formula 22
Section 6.9 Suspension of Right of Redemption 23
ARTICLE VII -- Determination of Net Asset Value, Net
Income and Distributions 23
Section 7.1 Net Asset Value 23
Section 7.2 Distributions to Shareholders 24
Section 7.3 Determination of Net Income: Constant
Net Asset Value; Reduction of
Outstanding Shares 25
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Page
Section 7.4 Allocation Between Principal and
Income 25
Section 7.5 Power to Modify Foregoing
Procedures 26
ARTICLE VIII -- Duration, Termination of Trust;
Amendment; Mergers, Etc. 26
Section 8.1 Duration 26
Section 8.2 Termination of Trust 26
Section 8.3 Amendment Procedure 27
Section 8.4 Merger, Consolidation and Sale
of Assets 28
Section 8.5 Incorporation 28
ARTICLE IX -- Reports to Shareholders 28
ARTICLE X -- Miscellaneous 29
Section 10.1 Filing 29
Section 10.2 Governing Law 29
Section 10.3 Counterparts 29
Section 10.4 Reliance by Third Parties 29
Section 10.5 Provisions in Conflict with Law
or Regulations 30
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<PAGE>
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
SCUDDER DEVELOPMENT FUND
DATED DECEMBER 21, 1987
AMENDED AND RESTATED DECLARATION OF TRUST made December 21, 1987, by the
undersigned Trustees;
WHEREAS, pursuant to a Declaration of Trust dated October 16, 1985, the
Trustees, established a Massachusetts business trust for the investment and
reinvestment of funds contributed thereto;
WHEREAS, said Declaration of Trust has been amended from time to time;
WHEREAS, the Trustees desire to amend and restate said Declaration of Trust
in its entirety;
NOW, THEREFORE, the Trustees amend and restate the Declaration of Trust as
follows:
ARTICLE I
NAME AND DEFINITIONS
Section 1.1. Name. The name of the Trust created hereby is the "Scudder
Development Fund".
Section 1.2. Definitions. Wherever they are used herein, the following
terms have the following respective meanings:
(a) "By-laws" means the By-laws referred to in Section 2.8 hereof, as from
time to time amended.
(b) The term "Commission" has the meaning given it in the 1940 Act. The
term "Interested Person" has the meaning given it in the 1940 Act, as modified
by any applicable order or orders of the Commission. Except as otherwise defined
by the Trustees in conjunction with the establishment of any series of Shares,
the term "vote of a majority of the Shares outstanding and entitled to vote"
shall have the same meaning as the term "vote of a majority of the outstanding
voting securities" given it in the 1940 Act.
(c) "Custodian" means any Person other than the Trust who has custody of
any Trust Property as required by Section 17(f)
<PAGE>
of the 1940 Act, but does not include a system for the central handling of
securities described in said Section 17(f).
(d) "Declaration" means this Declaration of Trust as further amended from
time-to-time. Reference in this Declaration of Trust to "Declaration," "hereof,"
"herein," and "hereunder" shall be deemed to refer to this Declaration rather
than exclusively to the article or section in which such words appear.
(e) "Distributor" means the party, other than the Trust, to the contract
described in Section 3.1 hereof.
(f) "His" shall include the feminine and neuter, as well as the masculine
genders.
(g) "Investment Adviser" means the party, other than the Trust, to the
contract described in Section 3.2 hereof.
(h) "Municipal Bonds" means obligations issued by or on behalf of states,
territories of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities, the interest from which
is exempt from regular Federal income tax.
(i) The "1940 Act" means the Investment Company Act of 1940, as amended
from time to time.
(j) "Person" means and includes individuals, corporations, partnerships,
trusts, associations, joint ventures and other entities, whether or not legal
entities, and governments and agencies and political subdivisions thereof.
(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.
(1) "Shareholder" means a record owner of Outstanding Shares.
(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 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.
(n) "Transfer Agent" means any one or more Persons other than the Trust who
maintains the Shareholder records of the
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Trust, such as the list of Shareholders, the number of Shares credited to each
account, and the like.
(o) The "Trust" means the Scudder Development Fund.
(p) The "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust or the Trustees.
(q) The "Trustees" means the person or persons who has or have signed this
Declaration, so long as he or they shall continue in office in accordance with
the terms hereof, and all other persons who may from time to time be duly
qualified and serving as Trustees in accordance with the provisions of Article
II hereof, and reference herein to a Trustee or the Trustees shall refer to such
person or persons in this capacity or their capacities as trustees hereunder.
ARTICLE II
TRUSTEES
Section 2.1. General Powers. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust to the same
extent as if the Trustees were the sole owners of the Trust Property and
business in their own right, but with such powers of delegation as may be
permitted by this Declaration. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without the Commonwealth of Massachusetts,
in any and all states of the United States of America, in the District of
Columbia, and in any and all commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities of the United States of America and
of foreign governments, and to do all such other things and execute all such
instruments as they deem necessary, proper or desirable in order to promote the
interests of the Trust although such things are not herein specifically
mentioned. Any determination as to what is in the interests of the Trust made by
the Trustees in good faith shall be conclusive. In construing the provisions of
this Declaration, the presumption shall be in favor of a grant of power to the
Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.
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<PAGE>
Section 2.2. Investments. The Trustees shall have the power:
(a) To operate as and carry on the business of an investment company, and
exercise all the powers necessary and appropriate to the conduct of such
operations.
(b) To invest in, hold for investment, or reinvest in, securities,
including common and preferred stocks; warrants; bonds, debentures, bills, time
notes and all other evidences of indebtedness; negotiable or non-negotiable
instruments; government securities, including securities of any state,
municipality or other political subdivision thereof, or any governmental or
quasi-governmental agency or instrumentality; and money market instruments
including bank certificates of deposit, finance paper, commercial paper, bankers
acceptances and all kinds of repurchase agreements, of any corporation, company,
trust, association, firm or other business organization however established, and
of any country, state, municipality or other political subdivision, or any
governmental or quasi-governmental agency or instrumentality.
(c) To acquire (by purchase, subscription or otherwise), to hold, to trade
in and deal in, to acquire any rights or options to purchase or sell, to sell or
otherwise dispose of, to lend, and to pledge any such securities and to enter
into repurchase agreements and forward foreign currency exchange contracts, to
purchase and sell futures contracts on securities, securities indices and
foreign currencies, to purchase or sell options on such contracts and foreign
currency contracts and to engage in all types of hedging and risk management
transactions.
(d) To exercise all rights, powers and privileges of ownership or interest
in all securities, repurchase agreements, futures contracts and options and
other assets included in the Trust Property, including the right to vote thereon
and otherwise act with respect thereto and to do all acts for the preservation,
protection, improvement and enhancement in value of all such assets.
(e) To acquire (by purchase, lease or otherwise) and to hold, use,
maintain, develop and dispose of (by sale or otherwise) any property, real or
personal, including cash, and any interest therein.
(f) To borrow money and in this connection issue notes or other evidence of
indebtedness; to secure borrowings by mortgaging, pledging or otherwise
subjecting as security the Trust Property; to endorse, guarantee, or undertake
the performance of any obligation or engagement of any other Person and to lend
Trust Property.
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<PAGE>
(g) To aid by further investment any corporation, company, trust,
association or firm, any obligation of or interest in which is included in the
Trust Property or in the affairs of which the Trustees have any direct or
indirect interest; to do all acts and things designed to protect, preserve,
improve or enhance the value of such obligation or interest, and to guarantee or
become surety on any or all of the contracts, stocks, bonds, notes, debentures
and other obligations of any such corporation, company, trust, association or
firm.
(h) To enter into a plan of distribution and any related agreements whereby
the Trust may finance directly or indirectly any activity which is primarily
intended to result in the sale of Shares.
(i) In general to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary, suitable
or proper for the accomplishment of any purpose or the attainment of any object
or the furtherance of any power hereinbefore set forth, either alone or in
association with others, and to do every other act or thing incidental or
appurtenant to or growing out of or connected with the aforesaid business or
purposes, objects or powers.
The foregoing clauses shall be construed both as objects and powers, and
the foregoing enumeration of specific powers shall not be held to limit or
restrict in any manner the general powers of the Trustees.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust, nor shall the Trustees be limited
by any law limiting the investments which may be made by fiduciaries.
Section 2.3. Legal Title. Legal title to all the Trust Property, including
the property of any Series of the Trust, shall be vested in the Trustees as
joint tenants except that the Trustees shall have power to cause legal title to
any Trust Property to be held by or in the name of one or more of the Trustees,
or in the name of the Trust, or in the name of any other Person as nominee, on
such terms as the Trustees may determine, provided that the interest of the
Trust therein is deemed appropriately protected. The right, title and interest
of the Trustees in the Trust Property and the property of each Series of the
Trust shall vest automatically in each Person who may hereafter become a
Trustee. Upon the termination of the term of office, resignation, removal or
death of a Trustee he shall automatically cease to have any right, title or
interest in any of the Trust Property or the property of any Series of the
Trust, and the right, title and interest of such Trustee in the Trust Property
shall vest automatically in the remaining Trustees. Such vesting and cessation
of title shall be
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<PAGE>
effective whether or not conveyancing documents have been executed and
delivered.
Section 2.4. Issuance and Repurchase of Shares. The Trustees shall have the
power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold, resell,
reissue, dispose of, transfer, and otherwise deal in Shares and, subject to the
provisions set forth in Articles VI and VII and Section 5.11 hereof, to apply to
any such repurchase, redemption, retirement, cancellation or acquisition of
Shares any funds or property of the particular series of the Trust with respect
to which such Shares are issued, whether capital or surplus or otherwise, to the
full extent now or hereafter permitted by the laws of the Commonwealth of
Massachusetts governing business corporations.
Section 2.5. Delegation; Committees. The Trustees shall have power to
delegate from time to time to such of their number or to officers, employees or
agents of the Trust the doing of such things and the execution of such
instruments either in the name of the Trust or the names of the Trustees or
otherwise as the Trustees may deem expedient, to the same extent as such
delegation is permitted by the 1940 Act.
Section 2.6. Collection and Payment. The Trustees shall have power to
collect all property due to the Trust; to pay all claims, including taxes,
against the Trust Property; to prosecute, defend, compromise or abandon any
claims relating to the Trust Property; to foreclose any security interest
securing any obligations, by virtue of which any property is owed to the Trust;
and to enter into releases, agreements and other instruments.
Section 2.7. Expenses. The Trustees shall have the power to incur and pay
any expenses which in the opinion of the Trustees are necessary or incidental to
carry out any of the purposes of this Declaration, and to pay reasonable
compensation from the funds of the Trust to themselves as Trustees. The Trustees
shall fix the compensation of all officers, employees and Trustees.
Section 2.8. Manner of Acting; By-laws. Except as otherwise provided herein
or in the By-laws, any action to be taken by the Trustees may be taken by a
majority of the Trustees present at a meeting of Trustees (a quorum being
present), including any meeting held by means of a conference telephone circuit
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, or by written consents of the entire number
of Trustees then in office. The Trustees may adopt By-laws not inconsistent with
this Declaration to provide for the conduct of the business of the Trust and may
amend or repeal such By-laws to the extent such power is not reserved to the
Shareholders.
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<PAGE>
Notwithstanding the foregoing provisions of this Section 2.8 and in
addition to such provisions or any other provision of this Declaration or of the
By-laws, the Trustees may by resolution appoint a committee consisting of less
than the whole number of Trustees then in office1 which committee may be
empowered to act for and bind the Trustees and the Trust, as if the acts of such
committee were the acts of all the Trustees then in office, with respect to the
institution, prosecution, dismissal, settlement, review or investigation of any
action, suit or proceeding which shall be pending or threatened to be brought
before any court, administrative agency or other adjudicatory body.
Section 2.9. Miscellaneous Powers. Subject to Section 5.11 hereof, the
Trustees shall have the power to: (a) employ or contract with such Persons as
the Trustees may deem desirable for the transaction of the business of the
Trust; (b) enter into joint ventures, partnerships and any other combinations or
associations; (c) remove Trustees or fill vacancies in or add to their number,
elect and remove such officers and appoint and terminate such agents or
employees as they consider appropriate, and appoint from their own number, and
terminate, any one or more committees which may exercise some or all of the
power and authority of the Trustees as the Trustees may determine; (d) purchase,
and pay for out of Trust Property, insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, investment advisers, distributors,
selected dealers or independent contractors of the Trust against all claims
arising by reason of holding any such position or by reason of any action taken
or omitted by any such Person in such capacity, whether or not constituting
negligence, or whether or not the Trust would have the power to indemnify such
Person against such liability; (e) establish pension, profit-sharing, share
purchase, and other retirement, incentive and benefit plans for any Trustees,
officers, employees and agents of the Trust; (f) to the extent permitted by law,
indemnify any person with whom the Trust has dealings, including the Investment
Adviser, Distributor, Transfer Agent and selected dealers, to such extent as the
Trustees shall determine; (g) guarantee indebtedness or contractual obligations
of others; (h) determine and change the fiscal year of the Trust and the method
by which its accounts shall be kept; and (i) adopt a seal for the Trust, but the
absence of such seal shall not impair the validity of any instrument executed on
behalf of the Trust.
Section 2.10. Principal Transactions. Except in transactions not permitted
by the 1940 Act or rules and regulations adopted by the Commission, the Trustees
may, on behalf of the Trust, buy any securities from or sell any securities to,
or lend any assets of the Trust to, any Trustee or officer of the Trust or any
firm of which any such Trustee or officer is a
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<PAGE>
member acting as principal, or have any such dealings with the Investment
Adviser, Distributor or transfer agent or with any Interested Person of such
Person; and the Trust may employ any such Person, or firm or company in which
such Person is an Interested Person, as broker, legal counsel, registrar,
transfer agent, dividend disbursing agent or Custodian upon customary terms.
Section 2.11. Number of Trustees. The number of Trustees shall initially be
one (1), and thereafter shall be such number as shall be fixed from time to time
by a written instrument signed by a majority of the Trustees, provided, however,
that the number of Trustees shall in no event be more than fifteen (15).
Section 2.12. Election and Term. Except for the Trustees named herein or
appointed to fill vacancies pursuant to Section 2.14 hereof, the Trustees shall
be elected by the Shareholders owning of record a plurality of the Shares voting
at a meeting of Shareholders. Such a meeting shall be held on a date fixed by
the Trustees. Except in the event of resignation or removals pursuant to Section
2.13 hereof, each Trustee shall hold office until such time as less than a
majority of the Trustees holding office have been elected by Shareholders. In
such event the Trustees then in office will call a Shareholders' meeting for the
election of Trustees. Except for the foregoing circumstances, the Trustees shall
continue to hold office and may appoint successor Trustees.
Section 2.13. Resignation and Removal. Any Trustee may resign his trust
(without the need for any prior or subsequent accounting) by an instrument in
writing signed by him and delivered to the other Trustees and such resignation
shall be effective upon such delivery, or at a later date according to the terms
of the instrument. Any of the Trustees may be removed (provided the aggregate
number of Trustees after such removal shall not be less than one) with cause, by
the action of two-thirds of the remaining Trustees. Any Trustee may be removed
at any meeting of Shareholders by vote of two-thirds of the Outstanding Shares.
The Trustees shall promptly call a meeting of the shareholders for the purpose
of voting upon the question of removal of any such Trustee or Trustees when
requested in writing so to do by the holders of not less than ten percent of the
Outstanding Shares and, in that connection, the Trustees will assist shareholder
communications to the extent provided for in Section 16(c) under the 1940 Act.
Upon the resignation or removal of a Trustee, or his otherwise ceasing to be a
Trustee, he shall execute and deliver such documents as the remaining Trustees
shall require for the purpose of conveying to the Trust or the remaining
Trustees any Trust Property or property of any series of the Trust held in the
name of the resigning or removed Trustee. Upon the incapacity
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<PAGE>
or death of any Trustee, his legal representative shall execute and deliver on
his behalf such documents as the remaining Trustees shall require as provided in
the preceding sentence.
Section 2.14. Vacancies. The term of office of a Trustee shall terminate
and a vacancy shall occur in the event of the death, resignation, removal,
bankruptcy, adjudicated incompetence or other incapacity to perform the duties
of the office of a Trustee. No such vacancy shall operate to annul the
Declaration or to revoke any existing agency created pursuant to the terms of
the Declaration. In the case of an existing vacancy, including a vacancy
existing by reason of an increase in the number of Trustees, subject to the
provisions of Section 16(a) of the 1940 Act, the remaining Trustees shall fill
such vacancy by the appointment of such other person as they in their discretion
shall see fit, made by a written instrument signed by a majority of the Trustees
then in office. Any such appointment shall not become effective, however, until
the person named in the written instrument of appointment shall have accepted in
writing such appointment and agreed in writing to be bound by the terms of the
Declaration. An appointment of a Trustee may be made in anticipation of a
vacancy to occur at a later date by reason of retirement, resignation or
increase in the number of Trustees, provided that such appointment shall not
become effective prior to such retirement, resignation or increase in the number
of Trustees. Whenever a vacancy in the number of Trustees shall occur, until
such vacancy is filled as provided in this Section 2.14, the Trustees in office,
regardless of their number, shall have all the powers granted to the Trustees
and shall discharge all the duties imposed upon the Trustees by the Declaration.
A written instrument certifying the existence of such vacancy signed by a
majority of the Trustees in office shall be conclusive evidence of the existence
of such vacancy.
Section 2.15. Delegation of Power to Other Trustees. Any Trustee may, by
power of attorney, delegate his power for a period not exceeding six (6) months
at any one time to any other Trustee or Trustees; provided that in no case shall
Less than two (2) Trustees personally exercise the powers granted to the
Trustees under this Declaration except as herein otherwise expressly provided.
ARTICLE III
CONTRACTS
Section 3.1. Distribution Contract. The Trustees may in their discretion
from time to time enter into an exclusive or non-exclusive underwriting contract
or contracts providing that the sale of the Shares at a price based on the net
asset value
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of a Share, whereby the Trustees may either agree to sell the Shares to the
other party to the contract or appoint such other party their sales agent for
the Shares, and in either case on such terms and conditions; if any, as may be
prescribed in the By-laws, and such further terms and conditions as the Trustees
may in their discretion determine not inconsistent with the provisions of this
Article III or of the By-laws; and such contract may also provide for the
repurchase of the Shares by such other party as agent of the Trustees.
Section 3.2. Advisory or Management Contract. The Trustees may in their
discretion from time to time enter into an investment advisory or management
contract or separate advisory contracts with respect to one or more Series
whereby the other party to such contract shall undertake to furnish to the Trust
such management, investment advisory, statistical and research facilities and
services and such other facilities and services, if any, and all upon such terms
and conditions as the Trustees may in their discretion determine, including the
grant of authority to such other party to determine what securities shall be
purchased or sold by the Trust and what portion of its assets shall be
uninvested, which authority shall include the power to make changes in the
investments of the Trust or any Series.
The Trustees may also employ, or authorize the Investment Adviser to
employ, one or more sub-advisers from time to time to perform such of the acts
and services of the Investment Adviser and upon such terms and conditions as may
be agreed upon between the Investment Adviser and such sub-advisers and approved
by the Trustees. Any reference in this Declaration to the investment Adviser
shall be deemed to include such sub-advisers unless the context otherwise
requires.
Section 3.3. Affiliations of Trustees or Officers, Etc. The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager,
adviser or distributor of or for any partnership, corporation, trust,
association or other organization or of or for any parent or affiliate of
any organization, with which a contract of the character described in
Sections 3.1 or 3.2 above or for services as Custodian, Transfer Agent or
disbursing agent or for related services may have been or may hereafter be
made, or that any such organization, or any parent or affiliate thereof, is
a Shareholder of or has an interest in the Trust, or that
(ii) any partnership, corporation, trust, association or other
organization with which a contract of the
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character described in Sections 3.1 or 3.2 above or for services as
Custodian, Transfer Agent or disbursing agent or for related services may
have been or may hereafter be made also has any one or more of such
contracts with one or more other partnerships, corporations, trusts,
associations or other organizations, or has other business or interests,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing
the same or create any liability or accountability to the Trust or its
Shareholders.
Section 3.4. Compliance with 1940 Act. Any contract entered into pursuant
to Sections 3.1 or 3.2 shall be consistent with and subject to the requirements
of Section 15 of the 1940 Act (including any amendment thereof or other
applicable act of Congress hereafter enacted), as modified by any applicable
order or orders of the Commission, with respect to its continuance in effect,
its termination and the method of authorization and approval of such contract or
renewal thereof.
ARTICLE IV
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
Section 4.1. No Personal Liability of Shareholders, Trustees, Etc. No
Shareholder shall be subject to any personal liability whatsoever to any Person
in connection with Trust Property or the acts, obligations or affairs of the
Trust. No Trustee, officer, employee or agent of the Trust shall be subject to
any personal liability whatsoever to any Person, other than to the Trust or its
Shareholders, in connection with Trust Property or the affairs of the Trust,
save only that arising from bad faith, willful misfeasance, gross negligence or
reckless disregard of his duties with respect to such Person; and all such
Persons shall look solely to the Trust Property for satisfaction of claims of
any nature arising in connection with the affairs of the Trust. If any
Shareholder, Trustee, officer, employee, or agent, as such, of the Trust, is
made a party to any suit or proceeding to enforce any such liability of the
Trust, he shall not, on account thereof, be held to any personal liability. The
Trust shall indemnify and hold each Shareholder harmless from and against all
claims and liabilities, to which such Shareholder may become subject by reason
of his being or having been a Shareholder, and shall reimburse such Shareholder
for all legal and other expenses reasonably incurred by him in connection with
any such claim or liability. The indemnification and reimbursement required by
the preceding sentence shall be made only out of the assets of
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the one or more Series of which the Shareholder who is entitled to
indemnification or reimbursement was a Shareholder at the time the act or event
occurred which gave rise to the claim against or liability of said Shareholder.
The rights accruing to a Shareholder under this Section 4.1 shall not impair any
other right to which such Shareholder may be lawfully entitled, nor shall
anything herein contained restrict the right of the Trust to indemnify or
reimburse a Shareholder in any appropriate situation even though not
specifically provided herein.
Section 4.2. Non-Liability of Trustees, Etc No Trustee, officer, employee
or agent of the Trust shall be liable to the Trust, its Shareholders, or to any
Shareholder, Trustee, officer, employee, or agent thereof for any action or
failure to act (including without limitation the failure to compel in any way
any former or acting Trustee to redress any breach of trust) except for his own
bad faith, willful misfeasance, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
Section 4.3. Mandatory Indemnification. (a) Subject to the exceptions and
limitations contained in paragraph (b) below:
(i) every person who is, or has been, a Trustee or officer of the Trust
shall be indemnified by the Trust to the fullest extent permitted by law against
all liability and against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been a Trustee
or officer and against amounts paid or incurred by him in the settlement
thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall apply to
all claims, actions, suits or proceedings (civil, criminal, administrative or
other, including appeals), actual or threatened; and the words "liability" and
"expenses" shall include, without limitation, attorneys' fees, costs, judgments,
amounts paid in settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Trustee or officer:
(i) against any liability to the Trust, a Series thereof, or the
Shareholders by reason of a final adjudication by a court or other body
before which a proceeding was brought that he engaged in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office;
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(ii) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief that
his action was in the best. interest of the Trust;
(iii) in the event of a settlement or other disposition not involving
a final adjudication as provided in paragraph (b)(i) or (b)(ii) resulting
in a payment by a Trustee or officer, unless there has been a determination
that such Trustee or officer did not engage in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office:
(A) by the court or other body approving the settlement or other
disposition; or
(B) based upon a review of readily available facts (as opposed to
a full trial-type inquiry) by (x) vote of a majority of the
Disinterested Trustees acting on the matter (provided that a majority
of the Disinterested Trustees then in office act on the matter) or (y)
written opinion of independent legal counsel.
(c) The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any other
rights to which any Trustee or officer may now or hereafter be entitled, shall
continue as to a person who has ceased to be such Trustee or officer and shall
inure to the benefit of the heirs, executors, administrators and assigns of such
a person. Nothing contained herein shall affect any rights to indemnification to
which personnel of the Trust other than Trustees and officers may be entitled by
contract or otherwise under law.
(d) Expenses of preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described in paragraph (a) of this
Section 4.3 may be advanced by the Trust prior to final disposition thereof upon
receipt of an undertaking by or on behalf of the recipient to repay such amount
if it is ultimately determined that he is not entitled to indemnification under
this Section 4.3, provided that either:
(i) such undertaking is secured by a surety bond or some other
appropriate security provided by the recipient, or the Trust shall be
insured against losses arising out of any such advances; or
(ii) a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees act on the matter)
or an independent legal counsel
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in a written opinion shall determine, based upon a review of readily
available facts (as opposed to a full trial-type inquiry), that there is
reason to believe that the recipient ultimately will be found entitled to
indemnification.
As used in this Section 4.3, a "Disinterested Trustee" is one who is
not (i) an Interested Person of the Trust (including anyone who has been
exempted from being an Interested Person by any rule, regulation or order
of the Commission), or (ii) involved in the claim, action, suit or
proceeding.
Section 4.4. No Bond Required of Trustees. No Trustee shall be obligated to
give any bond or other security for the performance of any of his duties
hereunder.
Section 4.5. No Duty of Investigation; Notice in Trust Instruments. Etc No
purchaser, lender, transfer agent or other Person dealing with the Trustees or
any officer, employee or agent of the Trust shall be bound to make any inquiry
concerning the validity of any transaction purporting to be made by the Trustees
or by said officer, employee or agent or be liable for the application of money
or property paid, loaned, or delivered to or on the order of the Trustees or of
said officer, employee or agent. Every obligation, contract, instrument,
certificate, Share, other security of the Trust or undertaking, and every other
act or thing whatsoever executed in connection with the Trust shall be
conclusively presumed to have been executed or done by the executors thereof
only in their capacity as Trustees under this Declaration or in their capacity
as officers, employees or agents of the Trust. Every written obligation,
contract, instrument, certificate, Share, other security of the Trust or
undertaking made or issued by the Trustees may recite that the same is executed
or made by them not individually, but as Trustees under the Declaration, and
that the obligations of the Trust under any such instrument are not binding upon
any of the Trustees or Shareholders individually, but bind only the trust
estate, and may contain any further recital which they or he may deem
appropriate, but the omission of such recital shall not operate to bind the
Trustees individually. The Trustees shall at all times maintain insurance for
the protection of the Trust Property, its Shareholders, Trustees, officers,
employees and agents in such amount as the Trustees shall deem adequate to cover
possible tort liability, and such other insurance as the Trustees in their sole
judgment shall deem advisable.
Section 4.6. Reliance on Experts, Etc. Each Trustee and officer or employee
of the Trust shall, in the performance of his duties, be fully and completely
justified and protected with regard to any act or any failure to act resulting
from reliance in good faith upon the books of account or other
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records of the Trust, upon an opinion of counsel, or upon reports made to the
Trust by any of its officers or employees or by the Investment Adviser; the
Distributor, Transfer Agent, selected dealers, accountants, appraisers or other
experts or consultants selected with reasonable care by the Trustees, officers
or employees of the Trust, regardless of whether such counsel or expert may also
be a Trustee.
ARTICLE V
SHARES OF BENEFICIAL INTEREST
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 hereof, par value $.0l 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 5.2. Rights of Shareholders. The ownership of the Trust Property
and the property of each Series of the Trust of every description and the right
to conduct any business hereinbefore described are vested exclusively in the
Trustees, and the Shareholders shall have no interest therein other than the
beneficial interest conferred by their Shares, and they shall have no right to
call for any partition or division of any property, profits, rights or interests
of the Trust nor can they be called upon to share or assume any losses of the
Trust or suffer an assessment of any kind by virtue of their ownership of
Shares. The Shares shall be personal property giving only the rights
specifically set forth in this Declaration. The Shares shall not entitle the
holder to preference, preemptive, appraisal, conversion or exchange rights,
except as the Trustees may determine with respect to any Series of Shares.
Section 5.3. Trust Only. It is the intention of the Trustees to create only
the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in this Declaration of Trust shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners or members of
a joint stock association.
Section 5.4. Issuance of Shares. The Trustees in their discretion may, from
time to time without vote of the Shareholders, issue Shares, in addition to the
then issued and outstanding Shares and Shares held in the treasury, to such
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party or parties and for such amount and type of consideration, I including cash
or property, at such time or times and on such terms as the Trustees may deem
best, and may in such manner acquire other assets (including the acquisition of
assets subject to, and in connection with the assumption of liabilities) and
businesses. In connection with any issuance of Shares, the Trustees may issue
fractional Shares and Shares held in the treasury. The Trustees may from time to
time divide or combine the Shares into a greater or lesser number without
thereby changing the proportionate beneficial interests and Shares shall be
redeemed as, whole Shares and/or l/l,000ths of a Share or integral multiples
thereof.
Section 5.5. Register of Shares. A register shall be kept at the principal
office of the Trust or an office of the Transfer Agent which shall contain the
names and addresses of the Shareholders and the number of Shares held by them
respectively and a record of all transfers thereof. Such register shall be
conclusive as to who are the holders of the Shares and who shall be entitled to
receive dividends or distributions or otherwise to exercise or enjoy the rights
of Shareholders. No Shareholder shall be entitled to receive payment of any
dividend or distribution, nor to have notice given to him as herein or in the
By-laws provided, until he has given his address to the Transfer Agent or such
other officer or agent of the Trustees as shall keep the said register for entry
thereon. It is not contemplated that certificates will be issued for the Shares;
however, the Trustees, in their discretion, may authorize the issuance of share
certificates and promulgate appropriate rules and regulations as to their use.
Section 5.6. Transfer of Shares. Except as otherwise provided for by the
Trustees, shares shall be transferable on the records of the Trust only by the
record holder thereof or by his agent thereunto duly authorized in writing, upon
delivery to the Trustees or the Transfer Agent of a duly executed instrument of
transfer, together with such evidence of the genuineness of each such execution
and authorization and of other matters as may reasonably be required. Upon such
delivery the transfer shall be recorded on the register of the Trust. Until such
record is made, the Shareholder of record shall be deemed to be the holder of
such Shares for all purposes hereunder and neither the Trustees nor any transfer
agent or registrar nor any officer, employee or agent of the Trust shall be
affected by any notice of the proposed transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or the Transfer
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Agent, but until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder and neither the
Trustees nor any Transfer Agent or registrar nor any officer or agent of the
Trust shall be affected by any notice of such death, bankruptcy or incompetence,
or other operation of law.
Section 5.7. Notices, Reports. Any and all notices to which any Shareholder
may be entitled and any and all communications shall be deemed duly served or
given if mailed, postage prepaid, addressed to any Shareholder of record at his
last known address as recorded on the register of the Trust. A notice of a
meeting, an annual report and any other communication to Shareholders need not
be sent to a Shareholder (i) if an annual report and a proxy statement for two
consecutive shareholder meetings have been mailed to such Shareholder's address
and have been returned as undeliverable, (ii) if all, and at least two, checks
(if sent by first class mail) in payment of dividends on Shares during a
twelve-month period have been mailed to such Shareholder's address and have been
returned as undeliverable or (iii) in any other case in which a proxy statement
concerning a meeting of security holders is not required to be given pursuant to
the Commission's proxy rules as from time to time in effect under the Securities
Exchange Act of 1934. However, delivery of such proxy statements, annual reports
and other communications shall resume if and when such Shareholder delivers or
causes to be delivered to the Trust written notice setting forth such
Shareholder's then current address.
Section 5.8. Treasury Shares. Shares held in the treasury shall, until
reissued pursuant to Section 5.4, not confer any voting rights on the Trustees,
nor shall such Shares be entitled to any dividends or other distributions
declared with respect to the Shares.
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 the
Shareholders; (ix) with respect to any plan
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adopted pursuant to Rule 12b-l (or any successor rule) under the 1940 Act; and
(x) with respect to such additional matters relating to the Trust as may be
required by this Declaration, the By-laws or any registration of the Trust as an
investment company under the 1940 Act with the Commission (or any successor
agency) or as the Trustees may consider necessary or desirable. Each whole Share
shall be entitled to one vote as to any matter on which it is entitled to vote
and each fractional Share shall be entitled to a proportionate fractional vote,
except that the Trustees may, in conjunction with the establishment of any
Series of Shares, establish or reserve the right to establish conditions under
which the several Series shall have separate voting rights or, if a Series 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
Bylaws to be taken by Shareholders. The By-laws may include further provisions
for Shareholders' votes and meetings and related matters.
Section 5.10. Meetings of Shareholders. Meetings of Shareholders may be
called at any time by the President, and shall be called by the President and
Secretary at the request in writing or by resolution, of a majority of Trustees,
or at the written request of the holder or holders of ten percent (10%) or more
of the total number of Shares then issued and outstanding of the Trust entitled
to vote at such meeting. Any such request shall state the purpose of the
proposed meeting.
Section 5.11. Series Designation. The Trustees, in their discretion, may
authorize the division of Shares into two or more Series, and the different
Series shall be established and designated, and the variations in the relative
rights and preferences as between the different Series shall be fixed and
determined, by the Trustees; provided, that all Shares shall be identical except
that there may be variations so fixed and determined between different Series as
to investment objective, purchase price, allocation of expenses, right of
redemption, special and relative rights as to dividends and on liquidation,
conversion rights, and conditions under which the several Series shall have
separate voting rights. All references to Shares in this Declaration shall be
deemed to be Shares of any or all series as the context may require.
If the Trustees shall divide the Shares of the Trust into two or more
Series, the following provisions shall be applicable:
(a) All provisions herein relating to the Trust shall apply equally to each
Series of the Trust except as the context requires otherwise.
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(b) The number of authorized Shares and the number of Shares of each Series
that may be issued shall be unlimited. The Trustees may classify or reclassify
any unissued Shares or any Shares previously issued and reacquired of any Series
into one or more Series that may be established and designated from time to
time. The Trustees may hold as treasury Shares (of the same or some other
Series), reissue for such consideration and on such terms as they may determine,
or cancel any Shares of any Series reacquired by the Trust at their discretion
from time to time.
(c) All consideration received by the Trust for the issue or sale of Shares
of a particular Series, together with all assets in which such consideration is
invested or reinvested, all income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any reinvestment of such proceeds
in whatever form the same may be, shall irrevocably belong to that Series for
all purposes, subject only to the rights of creditors of such Series and except
as may otherwise be required by applicable laws, and shall be so recorded upon
the books of account of the Trust In the event that there are any assets,
income, earnings, profits, and proceeds thereof, funds, or payments which are
not readily identifiable as belonging to any particular Series, the Trustees
shall allocate them among any one or more of the Series established and
designated from time to time in such manner and on such basis as they, in their
sole discretion, deem fair and equitable. Each such allocation by the Trustees
shall be conclusive and binding upon the shareholders of all Series for all
purposes.
(d) The assets belonging to each particular Series shall be charged with
the liabilities of the Trust in respect of that Series and all expenses, costs,
charges and reserves attributable to that Series, and any general liabilities,
expenses, costs, charges or reserves of the Trust which are not readily
identifiable as belonging to any particular Series shall be allocated and
charged by the Trustees to and among any one or more of the Series established
and designated from time to time in such manner and on such basis as the
Trustees in their sole discretion deem fair and equitable. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the Shareholders of all Series for all purposes. The
Trustees shall have full discretion, to the extent not inconsistent with the
1940 Act, to determine which items are capital; and each such determination and
allocation shall be conclusive and binding upon the Shareholders. The assets of
a particular Series of the Trust shall, under no circumstances, be charged with
liabilities attributable to any other Series of the Trust. All persons extending
credit to, or contracting with or having any claim
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against a particular Series of the Trust shall look only to the assets of that
particular Series for payment of such credit, contract or claim. No Shareholder
or former Shareholder of any Series shall have any claim on or right to any
assets allocated or belonging to any other series.
(e) Each Share of a Series of the Trust shall represent a beneficial
interest in the net assets of such Series. Each holder of Shares of a Series
shall be entitled to receive his pro rata share of distributions of income and
capital gains made with respect to such Series. Upon redemption of his Shares or
indemnification for liabilities incurred by reason of his being or having been a
Shareholder of a Series, such shareholder shall be paid solely out of the funds
and property of such Series of the Trust. Upon liquidation or termination of a
Series of the Trust, Shareholders of such Series shall be entitled to receive a
pro rata share of the net assets of such Series. A Shareholder of a particular
Series of the Trust shall not be entitled to participate in a derivative or
class action on behalf of any other Series or the Shareholders of any other
Series of the Trust.
(f) The establishment and designation of any Series of Shares shall be
effective upon the execution by a majority of the then Trustees of an instrument
setting forth such establishment and designation and the relative rights and
preferences of such Series, or as otherwise provided in such instrument. The
Trustees may by an instrument executed by a majority of their number abolish any
Series and the establishment and designation thereof. Except as otherwise
provided in this Article V, the Trustees shall have the power to determine the
designations, preferences, privileges, limitations and rights, of each class and
Series of Shares. Each instrument referred to in this paragraph shall have the
status of an amendment to this Declaration.
Section 5.12. Assent to Declaration of Trust. Every Shareholder, by virtue
of having become a shareholder, shall be held to have expressly assented and
agreed to the terms hereof and to have become a party hereto.
ARTICLE VI
REDEMPTION AND REPURCHASE OF SHARES
Section 6.1. Redemption of Shares. All Shares of the Trust shall be
redeemable, at the redemption price determined in the manner set out in this
Declaration. Redeemed or repurchased Shares may be resold by the Trust.
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The Trust shall redeem the Shares upon the appropriately verified written
application of the record holder thereof (or upon such other form of request as
the Trustees may determine) at such office or agency as may be designated from
time to time for that purpose in the Trust's then effective registration
statement under the Securities Act of 1933. The Trustees may from time to time
specify additional conditions, not inconsistent with the 1940 Act, regarding the
redemption of Shares in the Trust's then effective registration statement under
the Securities Act of 1933.
Section 6.2. Price. Shares shall be redeemed at their net asset value
determined as set forth in Section 7.1 hereof as of such time as the Trustees
shall have theretofore prescribed by resolution. In the absence of such
resolution, the redemption price of Shares deposited shall be the net asset
value of such Shares next determined as set forth in Section 7.1 hereof after
receipt of such application.
Section 6.3. Payment. Payment for such Shares shall be made in cash or in
property out of the assets of the relevant series of the Trust to the
Shareholder of record at such time and in the manner, not inconsistent with the
1940 Act or other applicable laws,. as may be specified from time to time in the
Trust's then effective registration statement under the Securities Act of 1933,
subject to the provisions of Section 6.4 hereof.
Section 6.4. Effect of Suspension of Determination of Net Asset Value. If,
pursuant to Section 6.9 hereof, the Trustees shall declare a suspension of the
determination of net asset value, the rights of Shareholders (including those
who shall have applied for redemption pursuant to Section 6.1 hereof but who
shall not yet have received payment) to have Shares redeemed and paid for by the
Trust shall be suspended until the termination of such suspension is declared.
Any record holder who shall have his redemption right so suspended may, during
the period of such suspension, by appropriate written notice of revocation at
the office or agency where application was made, revoke any application for
redemption not honored and withdraw any certificates on deposit. The redemption
price of Shares for which redemption applications have not been revoked shall be
the net asset value of such Shares next determined as set forth in Section 7.1
after the termination of such suspension, and payment shall be made within seven
(7) days after the date upon which the application was made plus the period
after such application during which the determination of net asset value was
suspended.
Section 6.5. Repurchase by Agreement. The Trust may repurchase Shares
directly, or through the Distributor or another agent designated for the
purpose, by agreement with the
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owner thereof at a price not exceeding the net asset value per share determined
as of the time when the purchase or contract of purchase is made or the net
asset value as of any time which may be later determined pursuant to Section 7.1
hereof, provided payment is not made for the Shares prior to the time as of
which such net asset value is determined.
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 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.
Section 6.7. Redemption of Shares in Order to Qualify as Regulated
Investment Company; Disclosure of Holding. If the Trustees shall, at any time
and in good faith, be of the opinion that direct or indirect ownership of Shares
or other securities of the Trust has or may become concentrated in any Person to
an extent which would disqualify any Series of the Trust as a regulated
investment company under the Internal Revenue Code, then the Trustees shall have
the power by lot or other means deemed equitable by them (i) to call for
redemption by any such Person a number, or principal amount, of Shares or other
securities of the Trust sufficient to maintain or bring the direct or indirect
ownership of Shares or other securities of the Trust into conformity with the
requirements for such qualification and (ii) to refuse to transfer or issue
Shares or other securities of the Trust to any Person whose acquisition of the
Shares or other securities of the Trust in question would result in such
disqualification. The redemption shall be effected at the redemption price and
in the manner provided in Section 6.1.
The holders of Shares or other securities of the Trust shall upon demand
disclose to the Trustees in writing such information with respect to direct and
indirect ownership of Shares or other securities of the Trust as the Trustees
deem necessary to comply with the provisions of the Internal Revenue Code, or to
comply with the requirements of any other taxing authority.
Section 6.8. Reductions in Number of Outstanding Shares Pursuant to Net
Asset Value Formula. The Trust may also reduce the number of Outstanding Shares
pursuant to the provisions of Section 7.3.
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Section 6.9. Suspension of Right of Redemption. The Trust may declare a
suspension of the right of redemption or postpone the date of payment or
redemption for the whole or any part of any period (i) during which the New York
Stock Exchange is closed other than customary week-end and holiday closings,
(ii) during which trading on the New York Stock Exchange is restricted, (iii)
during which an emergency exists as a result of which disposal by the Trust of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Trust fairly to determine the value of its net assets, or
(iv) during any other period when the Commission may for the protection of
Shareholders of the Trust by order permit suspension of the right of redemption
or postponement of the date of payment or redemption; provided that applicable
rules and regulations of the Commission shall govern as to whether the
conditions prescribed in (ii), (iii), or (iv) exist. Such suspension shall take
effect at such time as the Trust shall specify but not later than the close of
business on the business day next following the declaration of suspension, and
thereafter there shall be no right of redemption or payment on redemption until
the Trust shall declare the suspension at an end, except that the suspension
shall terminate in any event on the first day on which said stock exchange shall
have reopened or the period specified in (ii) or (iii) shall have expired (as to
which in the absence of an official ruling by the Commission, the determination
of the Trust shall be conclusive). In the case of a suspension of the right of
redemption, a Shareholder may either withdraw his request for redemption or
receive payment based on the net asset value existing after the termination
of the suspension.
ARTICLE VII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
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 which shall be deemed appropriate. The resulting amount
which shall represent the total net assets of the Trust
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or the Series shall be divided by the number of Shares of the Trust or such
Series outstanding at the time and the quotient so obtained shall be deemed to
be the net asset value of the Shares. The net asset value of 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.
Section 7.2. Distributions to Shareholders. The Trustees shall from time to
time distribute ratably among the Shareholders of the Trust or a Series such
proportion of the net profits, surplus (including paid-in surplus), capital, or
assets of the Trust or such Series held by the Trustees as they may deem proper.
Such distributions may be made in cash or property (including without limitation
any type of obligations of the Trust or such Series or any assets thereof), and
the Trustees may distribute ratably among the Shareholders additional Shares of
the Trust or such Series issuable hereunder in such manner, at such times, and
on such terms as the Trustees may deem proper. Such distributions may be among
the Shareholders of record at the time of declaring a distribution or among the
Shareholders of record at such other date or time or dates or times as the
Trustees shall determine. The Trustees may in their discretion determine that,
solely for the purposes of such distributions, Outstanding Shares shall exclude
Shares for which orders have been placed subsequent to a specified time on the
date the distribution is declared or on the next preceding day if the
distribution is declared as of a day on which Boston banks are not open for
business, all as described in the registration statement under the Securities
Act of 1933. The Trustees may always retain from the net profits such amount as
they may deem necessary to pay the debts or expenses of the Trust or the Series
or to meet obligations of the Trust or the Series, or as they may deem desirable
to use in the conduct of its affairs or to retain for future requirements or
extensions of the business. The Trustees may adopt and offer to Shareholders
such dividend reinvestment plans, cash dividend payout plans or related plans as
the Trustees shall deem appropriate.
Inasmuch as the computation of net income and gains for Federal income tax
purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts
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sufficient to enable the Trust or the Series to avoid or reduce liability for
taxes.
Section 7.3. Determination of Net Income; Constant Net Asset Value;
Reduction of. Outstanding Shares. Subject to Section 5.11 hereof, the net income
of the Trust or any Series shall be determined in such manner as the Trustees
shall provide by resolution. Expenses of the Trust or a Series, including the
advisory or management fee, shall be accrued each day. Such net income may be
determined by or under the direction of the Trustees as of the close of trading
on the New York Stock Exchange on each day on which such Exchange is open or as
of such other time or times as the Trustees shall determine, and, except as
provided herein, all the net income of the Trust or any Series, as so
determined, may be declared as a dividend on the Outstanding Shares of the Trust
or such Series. If, for any reason, the net income of the Trust or any Series,
determined at any time is a negative amount, the Trustees shall have the power
with respect to the Trust or such Series (i) to offset each Shareholder's pro
rata share of such negative amount from the accrued dividend account of such
Shareholder, or (ii) to reduce the number of Outstanding Shares of the Trust or
such Series by reducing the number of Shares in the account of such Shareholder
by that number of full and fractional Shares which represents the amount of such
excess negative net income, or (iii) to cause to be recorded on the books of the
Trust or such Series an asset account in the amount of such negative net income,
which account may be reduced by the amount, provided that the same shall
thereupon become the property of the Trust or such Series with respect to the
Trust or such Series and shall not be paid to any Shareholder, of dividends
declared thereafter upon the Outstanding Shares of the Trust or such Series on
the day such negative net income is experienced, until such asset account is
reduced to zero; or (iv) to combine the methods described in clauses (i) and
(ii) and (iii) of this sentence, in order to cause the net asset value per Share
of the Trust or such Series to remain at a constant amount per Outstanding Share
immediately after each such determination and declaration. The Trustees shall
also have the power to fail to declare a dividend out of net income for the
purpose of causing the net asset value per Share to be increased to a constant
amount. The Trustees shall not be required to adopt, but may at any time adopt,
discontinue or amend the practice of maintaining the net asset value per Share
of the Trust or a Series at a constant amount.
Section 7.4. Allocation Between Principal and Income. The Trustees shall
have full discretion to determine whether any cash or property received shall be
treated as income or as principal and whether any item of expense shall be
charged to the income or the principal account, and their determination made
in good faith shall be conclusive upon the Shareholders.
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<PAGE>
In the case of stock dividends received, the Trustees shall have full discretion
to determine, in the light of the particular circumstances, how much if any of
the value thereof shall be treated as income, the balance, if any, to be treated
as principal.
Section 7.5. Power to Modify Foregoing Procedures. Notwithstanding any of
the foregoing provisions of this Article VII, the Trustees may prescribe, in
their absolute discretion, such other bases and times for determining the per
Share net asset value or net income, or the declaration and payment of dividends
and distributions as they may deem necessary or desirable.
ARTICLE VIII
DURATION; TERMINATION OF TRUST;
AMENDMENT; MERGERS, ETC
Section 8.1. Duration. The Trust shall continue without limitation of time
but subject to the provisions of this Article VIII.
Section 8.2. Termination of Trust. (a) The Trust or any Series of the Trust
may be terminated by an instrument in writing signed by a majority of the
Trustees, or by the affirmative vote of the holders of a majority of the Shares
of the Trust or Series outstanding and entitled to vote, at any meeting of
Shareholders. Upon the termination of the Trust or any Series,
(i) the Trust or any Series shall carry on no business except for the
purpose of winding up its affairs;
(ii) the Trustees shall proceed to wind up the affairs of the Trust or
Series and all of the powers of the Trustees under this Declaration shall
continue until the affairs of the Trust or Series shall have been wound up,
including the power to fulfill or discharge the contracts of the Trust or
Series, collect its assets, sell, convey, assign, exchange, transfer or
otherwise dispose of all or any part of the remaining Trust Property or
property of the Series to one or more persons at public or private sale for
consideration which may consist in whole or in part of cash, securities or
other property of any kind, discharge or pay its liabilities, and do all
other acts appropriate to liquidate its business; and
(iii) after paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements as they deem necessary for their protection, the Trustees may
distribute the
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<PAGE>
remaining Trust Property or property of the Series, in cash or in kind or
partly each, among the Shareholders of the Trust or Series according to
their respective rights.
(b) After termination of the Trust or any Series and distribution to the
Shareholders as herein provided, a majority of the Trustees shall execute and
lodge among the records of the Trust an instrument in writing setting forth the
fact of such termination, and the Trustees shall thereupon be discharged from
all further liabilities and duties hereunder, and the rights and interests of
all Shareholders of the Trust or Series shall thereupon cease.
Section 8.3. Amendment Procedure. (a) This Declaration may be amended by a
vote of the holders of a majority of the Shares outstanding and entitled to
vote. Amendments shall be effective upon the taking of action as provided in
this section or at such later time as shall be specified in the applicable vote
or instrument. The Trustees may also amend this Declaration without the vote or
consent of Shareholders if they deem it necessary to conform this Declaration to
the requirements of applicable federal or state laws or regulations or the
requirements of the regulated investment company provisions of the Internal
Revenue Code (including those provisions of such Code relating to the retention
of the exemption from federal income tax with respect to dividends paid by the
Trust out of interest income received on Municipal Bonds), but the Trustees
shall not be liable for failing so to do. The Trustees may also amend this
Declaration without the vote or consent of Shareholders if they deem it
necessary or desirable to change the name of the Trust or to make any other
changes in the Declaration which do not materially adversely affect the rights
of Shareholders hereunder.
(b) No amendment may be made under this Section 8.3 which would change any
rights with respect to any Shares of the Trust or Series by reducing the amount
payable thereon upon liquidation of the Trust or Series or by diminishing or
eliminating any voting rights pertaining thereto, except with the vote or
consent of the holders of two-thirds of the Shares of the Trust or Series
outstanding and entitled to vote. Nothing contained in this Declaration shall
permit the amendment of this Declaration to impair the exemption from personal
liability of the Shareholders, Trustees, officers, employees and agents of the
Trust or to permit assessments upon Shareholders.
(c) A certificate signed by a majority of the Trustees. setting forth an
amendment and reciting that it was duly adopted by the Shareholders or by the
Trustees as aforesaid or a copy of the Declaration, as amended, and executed by
a majority of the Trustees, shall be conclusive evidence of such amendment when
lodged among the records of the Trust.
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<PAGE>
Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of securities of the Trust shall have become
effective, this Declaration may be terminated or amended in any respect by the
affirmative vote of a majority of the Trustees or by an instrument signed by a
majority of the Trustees.
Section 8.4. Merger, Consolidation and Sale of Assets. The Trust or any
Series thereof may merge or consolidate with any other corporation, association,
trust or other organization or may sell, lease or exchange all or substantially
all of the Trust Property or the property of any Series, including its good
will, upon such terms and conditions and for such consideration when and as
authorized at any meeting of Shareholders of the Trust or Series called for the
purpose by the affirmative vote of the holders of a majority of the Shares of
the Trust or Series.
Section 8.5. Incorporation. With the approval of the holders of a majority
of the Shares of the Trust or any Series outstanding and entitled to vote, the
Trustees may cause to be organized or assist in organizing a corporation or
corporations under the laws of any jurisdiction or any other trust, partnership,
association or other organization to take over all of the Trust Property or the
property of any Series or to carry on any business in which the Trust or the
Series shall directly or indirectly have any interest, and to sell, convey and
transfer the Trust Property or the property of any Series to any such
corporation, trust, association or organization in exchange for the Shares or
securities thereof or otherwise, and to lend money to, subscribe for the Shares
or securities of, and enter into any contracts with any such corporation, trust,
partnership, association or organization, or any corporation, partnership,
trust, association or organization in which the Trust or the Series holds or is
about to acquire shares or any other interest. The Trustees may also cause a
merger or consolidation between the Trust or any Series or any successor thereto
and any such corporation, trust, partnership, association or other organization
if and to the extent permitted by law, as provided under the law then in effect.
Nothing contained herein shall be construed as requiring approval of
Shareholders for the Trustees to organize or assist in organizing one or more
corporations, trusts, partnerships, associations or other organizations and
selling, conveying or transferring a portion of the Trust Property to such
organization or entities.
ARTICLE IX
REPORTS TO SHAREHOLDERS
The Trustees shall at least semi-annually submit to the Shareholders a
written financial report, which may be included
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<PAGE>
in the Trust's prospectus or statement of additional information, of the
transactions of the Trust, including financial statements which shall at least
annually be certified by independent public accountants.
ARTICLE X
MISCELLANEOUS
Section 10.1. Filing. This Declaration and any amendment hereto shall be
filed in the office of the Secretary of the Commonwealth of Massachusetts and in
such other places as may be required under the laws of Massachusetts and may
also be filed or recorded in such other places as the Trustees deem appropriate.
Unless the amendment is embodied in an instrument signed by a majority of the
Trustees, each amendment filed shall be accompanied by a certificate signed and
acknowledged by a Trustee stating that such action was duly taken in a manner
provided herein. A restated Declaration, integrating into a single instrument
all of the provisions of the Declaration which are then in effect and operative,
may be executed from time to time by a majority of the Trustees and shall, upon
filing with the Secretary of the Commonwealth of Massachusetts, be conclusive
evidence of all amendments contained therein and may hereafter be referred to in
lieu of the original Declaration and the various amendments thereto. The
restated Declaration may include any amendment which the Trustees are empowered
to adopt, whether or not such amendment has been adopted prior to the execution
of the restated Declaration.
Section 10.2. Governing Law. This Declaration is executed by the Trustees
and delivered in the Commonwealth of Massachusetts and with reference to the
internal laws thereof, and the rights of all parties and the validity and
construction of every provision hereof shall be subject to and construed
according to the internal laws of said State without regard to the choice of law
rules thereof.
Section 10.3 Counterparts. This Declaration may be simultaneously executed
in several counterparts, each of which shall be deemed to be an original, and
such counterparts, together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any such original counterpart.
Section 10.4. Reliance by Third Parties. Any certificate executed by an
individual who, according to the records of the Trust appears to be a Trustee
hereunder, certifying to: (a) the number or identity of Trustees or
Shareholders, (b) the due authorization of the execution of any instrument or
writing,
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<PAGE>
(c) the form of any vote passed at a meeting of Trustees or Shareholders, (d)
the fact that the number of Trustees or Shareholders present at any meeting or
executing any written instrument satisfies the requirements of this Declaration,
(e) the form of any By-laws adopted by or the identity of any officers elected
by the Trustees, or (f) the existence of any fact or facts which in any manner
relate to the affairs of the Trust, shall be conclusive evidence as to the
matters so certified in favor of any Person dealing with the Trustees and their
successors.
Section 10.5. Provisions in Conflict with Law or Regulations.
(a) The provisions of this Declaration are severable, and if the Trustees
shall determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code or with other applicable laws and regulations, the
conflicting provision shall be deemed never to have constituted a part of this
Declaration; provided, however, that such determination shall not affect any of
the remaining provisions of this Declaration or render invalid or improper any
action taken or omitted prior to such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provisions in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this instrument this 21st
day of December, 1987.
/s/ Paul Bancroft III /s/ Stephen R. Beckwith
- --------------------------- ---------------------------------
Paul Bancroft III Stephen R. Beckwith
/s/ Thomas J. Devine /s/ George S. Johnson
- --------------------------- ---------------------------------
Thomas J. Devine George S. Johnson
/s/ Robert W. Lear /s/ Wilson Nolen
- --------------------------- ---------------------------------
Robert W. Lear Wilson Nolen
/s/ Daniel Pierce /s/ Gordon Shillinglaw
- --------------------------- ---------------------------------
Daniel Pierce Gordon Shillinglaw
/s/ Edmund R. Swanberg
- ---------------------------
Edmund R. Swanberg
THE STATE OF NEW YORK
County of New York December 21, 1987
Then personally appeared the above-named Paul Bancroft III, Stephen R.
Beckwith, Thomas J. Devine, George S. Johnston, Robert W. Lear, Wilson Nolen
Daniel Pierce, Gordon Shillinglaw, Edmund R. Swanberg, who acknowledged the
foregoing instrument to be their free act and deed.
Before me,
/S/ Kathryn L. Quirk
--------------------------------------
Notary Public
My commission expires: KATHRYN L. QUIRK
NOTARY PUBLIC - State of New York
No. 24-479015
Qualified in Kings County
Commission Expires Dec. 31, 1989
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RECEIVED OFFICE OF THE CLERK
JAN 29 1991 CITY HALL
SECRETARY OF STATE BOSTON, MA 08201
Exhibit 1(a)(2)
SCUDDER DEVELOPMENT FUND
CERTIFICATE OF AMENDMENT
The undersigned, being at least a majority of the duly elected and qualified
Trustees of Scudder Development Fund, a business trust organized under the laws
of The Commonwealth of Massachusetts pursuant to a Declaration of Trust dated
December 21, 1987, as amended, do hereby certify that the Shareholders of said
Trust, by the favorable vote on December 13, 1990 of a majority of the shares
outstanding and entitled to vote, adopted amendments to the Declaration of Trust
striking out Section 1.2 subsections (k), (m) and (r), Sections 5.1, 5.9 and
5.13, Section 8.6 and Section 7.1 and inserting in lieu thereof the following:
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 1 2b-1 (or any successor rule) under the 1940
Act; and (x) with respect to such additional matters relating to the Trust as
may be required by this Declaration, the By-laws or any registration of the
Trust as an investment company under the 1940 Act with the Commission (or any
successor agency) or as the Trustees may consider necessary or desirable. Each
whole Share shall be entitled to one vote as to any matter on which it is
entitled to vote and each fractional Share shall be entitled to a proportionate
fractional vote, except that the Trustees may, in conjunction with the
establishment of any Series or Class of Shares, establish or reserve the right
to establish conditions under which the several Series or Classes shall have
separate voting rights or, if a Series or Class would not, in the sole judgment
of the Trustees, be materially affected by a proposal, no voting rights. There
shall be no cumulative voting in the election of Trustees. Until Shares are
issued, the Trustees may exercise all rights of Shareholders and may
1
<PAGE>
take any action required by law, this Declaration or the By-laws to be taken by
Shareholders. The By-laws may include further provisions for Shareholders' votes
and meetings and related matters.
Section 5.13. Class Designation. The Trustees, in their discretion, may
authorize the division of the Shares of the Trust, or, if any Series be
established, the Shares of any Series, into two or more Classes, and the
different Classes shall be established and designated, and the variations in the
relative rights and preferences as between the different Classes shall be fixed
and determined by the Trustees; provided, that all Shares of the Trust or of any
Series shall be identical to all other Shares of the Trust or the same Series,
as the case may be, except that there may be variations between different
classes as to allocation of expenses, right of redemption, special and relative
rights as to dividends and on liquidation, conversion rights, and conditions
under which the several Classes shall have separate voting rights. All
references to Shares in this Declaration shall be deemed to be Shares of any or
all Classes as the context may require.
If the Trustees shall divide the Shares of the Trust or any Series into two or
more Classes, the following provisions shall be applicable:
(a) All provisions herein relating to the Trust, or any Series of the Trust,
shall apply equally to each Class of Shares of the Trust or of any Series of the
Trust, except as the context requires otherwise.
(b) The number of Shares of each Class that may be issued shall be unlimited.
The Trustees may classify or reclassify any unissued Shares of the Trust or any
Series or any Shares previously issued and reacquired of any Class of the Trust
or of any Series into one or more Classes that may be established and designated
from time to time. The Trustees may hold as treasury Shares (of the same or some
other Class), reissue for such consideration and on such terms as they may
determine, or cancel any Shares of any Class reacquired by the Trust at their
discretion from time to time.
(c) Liabilities, expenses, costs, charges and reserves related to the
distribution of, and other identified expenses that should properly be allocated
to, the Shares of a particular Class may be charged to and borne solely by such
Class and the bearing of expenses solely by a Class of Shares may be
appropriately reflected (in a manner determined by the Trustees) and cause
differences in the net asset value attributable to, and the dividend, redemption
and liquidation rights of, the Shares of different Classes. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the Shareholders of all Classes for all purposes.
(d) The establishment and designation of any Class of Shares shall be effective
upon the execution of a majority of the then Trustees of an instrument setting
forth such establishment and designation and the relative rights and preferences
of such Class, or as otherwise provided in such instrument. The Trustees may, by
an instrument executed by a majority of their number, abolish any Class and the
establishment and designation thereof. Each instrument referred to in this
paragraph shall have the status of an amendment to this Declaration.
Article VI, Section 6.6:
Section 6.6. Redemption of Shareholder's Interest. The Trust shall have the
right at any time without prior notice to the shareholder to redeem Shares of
any shareholder for their then current net asset value per Share if at such time
the shareholder owns Shares having an aggregate net asset value of less than 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
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
2
<PAGE>
forth in the most recent Registration Statement of the Trust as flied 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.
This Certificate may be executed in several counterparts, each of which
shall be deemed an original, but all taken together shall constitute one
certificate.
IN WITNESS WHEREOF, the undersigned have this day signed this Certificate.
DATE: December 31, 1990
/s/ Paul Bancroft III
-----------------------------------------
Paul Bancroft III
/s/ Thomas J. Devine
-----------------------------------------
Thomas J. Devine
-----------------------------------------
George S. Johnston
-----------------------------------------
Douglas M. Loudon
/s/ Wilson Nolen
-----------------------------------------
Wilson Nolen
/s/ Juris Padegs
-----------------------------------------
Juris Padegs
/s/ Daniel Pierce
-----------------------------------------
Daniel Pierce
/s/ Gordon Shillinglaw
-----------------------------------------
Gordon Shillinglaw
/s/ Robert G. Stone Jr.
-----------------------------------------
Robert G. Stone, Jr.
3
Exhibit 2(a)
SCUDDER DEVELOPMENT FUND
On December 12, 1991, the Trustees of the Fund adopted the following
amending the By-Laws of the Fund:
RESOLVED, that pursuant to the provisions of Article XI of the Fund's
By-Laws, Section 1.0 of Article IV of the Fund's By-Laws is hereby
amended to read in its entirety as follows (additions have been
underlined):
ARTICLE IV
TRUSTEES
Section 1. Meetings of the Trustees. The Trustees may in their
discretion provide for regular or stated meetings of the Trustees.
Notice of regular or stated meetings need not be given. Meetings of
the Trustees other than regular or stated meetings shall be held
whenever called by the President, or by any one of the Trustees, at
the time being in office. Notice of the time and place of each meeting
other than regular or stated meetings shall be given by the Secretary
or an Assistant Secretary or by the officer or Trustee calling the
meeting and shall be mailed to each Trustee at least two days before
the meeting, or delivered to him personally or transmitted by
telegraph, cable or other communication leaving a visual record at
least one day before the meeting. Such notice may, however, be waived
by any Trustee, Notice of a meeting need not be given to any Trustee
if a written waiver of notice, executed by him before or after the
meeting, is filed with the records of the meeting, or to any Trustee
who attends the meeting without protesting prior thereto or at its
commencement the lack of notice to him. A notice or waiver of notice
need not specify the purpose of any meeting. Meetings can be held in
conjunction with investment companies having the same investment
adviser or an interested investment adviser. The Trustees may meet by
means of a telephone conference circuit or similar communications
equipment; participation by such means shall constitute presence in
person at such meeting and shall be deemed to have occurred at a place
designated by the Trustees at the meeting. Any action required or
permitted to be taken at any meeting of the Trustees may be taken by
the Trustees without a meeting if all the Trustees consent to the
action in writing and the written consents are filed with the records
of the Trustees' meetings. Such consents shall be treated as a vote
for all purposes.
Exhibit 2(b)
BY-LAWS
OF
SCUDDER DEVELOPMENT FUND
October 16, 1985
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I - DEFINITIONS 1
ARTICLE II - OFFICES 1
Section 1. Principal Office 1
Section 2. Other Offices 1
ARTICLE III - SHAREHOLDERS 1
Section 1. Meetings 2
Section 2. Notice of Meetings 2
Section 3. Record Date for Meetings
and Other Purposes 2
Section 4. Proxies 3
Section 5. Inspection of Records 4
Section 6. Action without Meeting 4
ARTICLE IV. - TRUSTEES 4
Section 1. Meetings of the Trustees 4
Section 2. Meeting, Quorum and
Manner of Acting 5
ARTICLE V - COMMITTEES
Section 1. Executive and Other Committees 6
Section 2. Meeting, Quorum and Manner
of Acting 6
ARTICLE VI - OFFICERS 7
Section 1. General Provisions 7
Section 2. Term of Office and
Qualifications 7
Section 3. Removal 8
Section 4. Powers and Duties of
the President 8
Section 5. Powers and Duties of
Vice Presidents 9
Section 6. Powers and Duties
of the Treasurer 9
Section 7. Powers and Duties of the
Secretary 9
Section 8. Powers and Duties of Assistant
Treasurers 10
Section 9. Powers and Duties of Assistant
Secretaries 10
Section 10. Compensation of Officers
and Trustees and Members of
Advisory Board 10
-i-
<PAGE>
TABLE OF CONTENTS--CONT.
Page
----
ARTICLE VII - FISCAL YEAR 11
ARTICLE VIII - SEAL 11
ARTICLE IX - WAIVERS OF NOTICE 11
ARTICLE X - CUSTODY OF SECURITIES 12
Section 1. Employment of A Custodian 12
Section 2. Action Upon Termination of
Custodian Agreement 12
Section 3. Provisions of Custodian
Contract 13
Section 4. Central Certificate
System 13
Section 5. Acceptance of Receipts
in Lieu of Certificate 14
ARTICLE XI - AMENDMENTS 14
ARTICLE XII - MISCELLANEOUS 15
-ii-
<PAGE>
BY-LAWS
OF
SCUDDER DEVELOPMENT FUND
ARTICLE I
DEFINITIONS
The terms "Commission", "Custodian", "Declaration", "Distributor",
"Investment Adviser", "Municipal Bonds", "1940 Act", "Shareholder", "Shares",
"Transfer Agent", "Trust", "Trust Property", "Trustees", and "vote of a majority
of the Shares outstanding and entitled to vote", have the respective meanings
given them in the Declaration of Trust of Scudder Development Fund dated October
16, 1985, as amended from time to time.
ARTICLE II
OFFICES
Section 1. Principal Office. Until changed by the Trustees, the principal
office of the Trust in the Commonwealth of Massachusetts shall be in the City of
Boston, County of Suffolk.
Section 2. Other Offices. The Trust may have offices in such other places
without as well as within the Commonwealth as the Trustees may from time to time
determine.
<PAGE>
ARTICLE III
SHAREHOLDERS
Section 1. Meetings. Meetings of the Shareholders shall be held as provided
in the Declaration at such place within or without the Commonwealth of
Massachusetts as the Trustees shall designate. The holders of a majority of
outstanding Shares present in person or by proxy shall constitute a quorum at
any meeting of the Shareholders.
Section 2. Notice of Meetings. Notice of all meetings of the Shareholders,
stating the time, place and purposes of the meeting, shall be given by the
Trustees by mail to each Shareholder at his address as recorded on the register
of the Trust mailed at least (10) days and not more than sixty (60) days before
the meeting. Only the business stated in the notice of the meeting shall be
considered at such meeting. Any adjourned meeting may be held as adjourned
without further notice. No notice need be given to any Shareholder who shall
have failed to inform the Trust of his current address or if a written waiver of
notice, executed before or after the meeting by the Shareholder or his attorney
thereunto authorized, is filed with the records of the meeting.
Section 3. Record Date for Meetings and Other Purposes. For the purpose of
determining the Shareholders who are entitled to notice of and to vote at any
meeting, or to participate in any distribution, or for the purpose of any other
action, the Trustees may from time to time close the transfer
-2-
<PAGE>
books for such period, not exceeding thirty (30) days, as the Trustees may
determine; or without closing the transfer books the Trustees may fix a date
not more than sixty (60) days prior to the date of any meeting of Shareholders
or distribution or other action as a record date for the determinations of the
persons to be treated as Shareholders of record for such purposes, except for
dividend payments which shall be governed by the Declaration.
Section 4. Proxies. At any meeting of Shareholders, any holder of Shares
entitled to vote threat may vote by proxy, provided that no proxy shall be voted
at any meeting unless it shall have been placed on file with the Secretary, or
with such other officer or agent of the Trust as the Secretary may direct, for
verification prior to the time at which such vote shall be taken. Proxies may be
solicited in the name of one or more Trustees or one or more of the officers of
the Trust. Only Shareholders of record shall be entitled to vote. Each whole
share shall be entitled to one vote as to any matter on which it is entitled by
the Declaration to vote, and each fractional Share shall be entitled to a
proportionate fractional vote. When any Share is held jointly by several
persons, any one of them may vote at any meeting in person or by proxy in
respect of such Share, but if more than one of them shall be present at such
meeting in person or by proxy, and such joint owners or their proxies so present
disagree as to any vote to be cast, such vote shall not be received in respect
of such
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Share. A proxy purporting to be executed by or on behalf of a Shareholder shall
be deemed valid unless challenged at or prior to its exercise, and the burden of
proving invalidity shall rest on the challenger. If the holder of any such share
is a minor or a person of unsound mind, and subject to guardianship or the legal
control of any other person as regards the charge or management of such Share,
he may vote by his guardian or such other person appointed or having such
control, and such vote may be given in person or by proxy.
Section 5. Inspection of Records. The records of the Trust shall be open to
inspection by Shareholders to the same extent as is permitted shareholders of a
Massachusetts business corporation.
Section 6. Action without Meeting. Any action which may be taken by
Shareholders may be taken without a meeting if a majority of Shareholders
entitled to vote on the matter (or such larger proportion thereof as shall be
required by law, the Declaration or these By-Laws for approval of such matter)
consent to the action in writing and the written consents are filed with the
records of the meetings of Shareholders. Such consents shall be treated for all
purposes as a vote taken at a meeting of Shareholders.
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ARTICLE IV
TRUSTEES
Section 1. Meetings of the Trustees. The Trustees may in their discretion
provide for regular or stated meetings of the Trustees. Notice of regular or
stated meetings need not be given. Meetings of the Trustees other than regular
or stated meetings shall be held whenever called by the President, or by any one
of the Trustees, at the time being in office. Notice of the time and place of
each meeting other than regular or stated meetings shall be given by the
Secretary or an Assistant Secretary or by the officer or Trustee calling the
meeting and shall be mailed to each Trustee at least two days before the
meeting, or shall be telegraphed, cabled, or wirelessed to each Trustee at his
business address, or personally delivered to him at least one day before the
meeting. Such notice may, however, be waived by any Trustee. Notice of a meeting
need not be given to any Trustee if a written waiver of notice, executed by him
before or after the meeting, is filed with the records of the meeting, or to any
Trustee who attends the meeting without protesting prior thereto or at its
commencement the lack of notice to him. A notice or waiver of notice need not
specify the purpose of any meeting. The Trustees may meet by means of a
telephone conference circuit or similar communications equipment by means of
which all persons participating in the meeting shall be deemed to have been held
at a place designated by the Trustees at the meeting. Participation in a
telephone confer-
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ence meeting shall constitute presence in person at such meeting. Any action
required or permitted to be taken at any meeting of the Trustees may be taken by
the Trustees without a meeting if all the Trustees consent to the action in
writing and the written consents are filed with the records of the Trustees'
meetings. Such consents shall be treated as a vote for all purposes.
Section 2. Quorum and Manner of Acting. A majority of the Trustees shall be
present in person at any regular or special meeting of the Trustees in order to
constitute a quorum for the transaction of business at such meeting and (except
as otherwise required by law, the Declaration of these By-Laws) the act of a
majority of the Trustees present at any such meeting, at which a quorum is
present, shall be the act of the Trustees. In the absence of a quorum, a
majority of the Trustees present may adjourn the meeting from time to time until
a quorum shall be present. Notice of an adjourned meeting need not be given.
ARTICLE V
COMMITTEES
Section 1. Executive and Other Committees. The Trustees by vote of a
majority of all the Trustees may elect from their own number an Executive
Committee to consist of not less than three (3) to hold office at the pleasure
of the Trustees, which shall have the power to conduct the current and ordinary
business of the Trust while the Trustees are not in session,
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including the purchase and sale of securities and the designation of securities
to be delivered upon redemption of Shares of the Trust, and such other powers of
the Trustees as the Trustees may, from time to time, delegate to them except
those powers which by law, the Declaration or these By-Laws they are prohibited
from delegating. The Trustees may also. elect from their own number other
Committees from time to time, the number composing such Committees, the powers
conferred upon the same (subject to the same limitations as with respect to the
Executive Committee) and the term of membership on such Committees to be
determined by the Trustees. The Trustees may designate a chairman of any such
Committee. In the absence of such designation the Committee may elect its own
Chairman.
Section 2. Meetings, Quorum and Manner of Acting. The Trustees may (1)
provide for stated meetings of any Committee (2) specify the manner of calling
and notice required for special meetings of any Committee, (3) specify the
number of members of a Committee required to constitute a quorum and the number
of members of a Committee required to exercise specified powers delegated to
such Committee, (4) authorize the making of decisions to exercise specified
powers by written assent of the requisite number of members of a Committee
without a meeting, and (5) authorize the members of a Committee to meet by means
of a telephone conference circuit.
The Executive Committee shall keep regular minutes of its meetings and
records of decisions taken without a meeting and
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cause them to be recorded in a book designated for that purpose and kept in the
Office of the Trust.
ARTICLE VI
OFFICERS
Section 1. General Provisions. The officers of the Trust shall be a
President, a Treasurer and a Secretary, who shall be elected by the Trustees.
The Trustees may elect or appoint such other officers or agents as the business
of the Trust may require, including one or more Vice Presidents, one or more
Assistant Secretaries, and one or more Assistant Treasurers. The Trustees may
delegate to any officer or committee the power to appoint any subordinate
officers or agents.
Section 2. Term of Office and Qualifications. Except as otherwise provided
by law, the Declaration or these By-Laws, the President, the Treasurer and the
Secretary shall each hold office until his successor shall have been duly
elected and qualified, and all other officers shall hold office at the pleasure
of the Trustees. The Secretary and Treasurer may be the same person. A Vice
President and the Treasurer or a Vice President and the Secretary may be the
same person, but the offices of Vice President, Secretary and Treasurer shall
not be held by the same person. The President shall hold no other office. Except
as above provided, any two offices may be held by the same person. Any officer
may be but none need be a Trustee or Shareholder.
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Section 3. Removal. The Trustees, at any regular or special meeting of the
Trustees, may remove any officer without cause, by a vote of a majority of the
Trustees then in office; Any officer or agent appointed by an officer or
committee may be removed with or without cause by such appointing officer or
committee.
Section 4. Powers and Duties of the President. The President may call
meetings of the Trustees and of any Committee thereof when he deems it necessary
and shall preside at all meetings of the Shareholders. Subject to the control of
the Trustees and to the control of any Committees of the Trustees, within their
respective spheres, as provided by the Trustees, he shall at all times exercise
a general supervision and direction over the affairs of the Trust. He shall have
the power to employ attorneys and counsel for the Trust and to employ such
subordinate officers, agents, clerks and employees as he may find necessary to
transact the business of the Trust. He shall also have the power to grant,
issue, execute or sign such powers of attorney, proxies or other documents as
may be deemed advisable or necessary in furtherance of the interests of the
Trust. The President shall have such other powers and duties, as from time to
time may be conferred upon or assigned to him by the Trustees.
Section 5. Powers and Duties of Vice Presidents. In the absence or
disability of the President, the Vice President or, if there be more than one
Vice President, any Vice President
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designated by the Trustees shall perform all the duties and may exercise any of
the powers of the President, subject to the control of the Trustees. Each Vice
President shall perform such other duties as may be assigned to him from time to
time by the Trustees and the President.
Section 6. Powers and Duties of the Treasurer. The Treasurer shall be the
principal financial and accounting officer of the Trust. He shall deliver all
funds of the Trust which may come into his hands to such Custodian as the
Trustees may employ pursuant to Article X of these By-Laws. He shall render a
statement of condition of the finances of the Trust to the Trustees as often as
they shall require the same and he shall in general perform all the duties
incident to the office of Treasurer and such other duties as from time to time
may be assigned to him by the Trustees. The Treasurer shall give a bond for the
faithful discharge of his duties, if required so to do by the Trustees, in such
sum and with such surety or sureties as the Trustees shall require.
Section 7. Powers and Duties of the Secretary. The Secretary shall keep the
minutes of all meetings of the Trustees and of the Shareholders in proper books
provided for that purpose; he shall have custody of the seal of the Trust; he
shall have charge of the Share transfer books, lists and records unless the same
are in the charge of the Transfer Agent. He shall attend to the giving and
serving of all notices by the Trust in accordance with the provisions of these
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<PAGE>
By-Laws and as required by law; and subject to these By-Laws, he shall in
general perform all duties incident to the office of Secretary and such other
duties as from time to time may be assigned to him by the Trustees.
Section 8. Powers and Duties of Assistant Treasurers. In the absence or
disability of the Treasurer, any Assistant Treasurer designated by the Trustees
shall perform all the duties, and may exercise any of the powers, of the
Treasurer. Each Assistant Treasurer shall perform such other duties as from time
to time may be assigned to him by the Trustees. Each Assistant Treasurer shall
give a bond for the faithful discharge of his duties, if required so to do by
the Trustees, in such sum and with such surety or sureties as the Trustees shall
require.
Section 9. Powers and Duties of Assistant Secretaries. In the absence or
disability of the Secretary, any Assistant Secretary designated by the Trustees
shall perform all the duties, and may exercise any of the powers, of the
Secretary. Each Assistant Secretary shall perform such other duties as from time
to time may be assigned to him by the Trustees.
Section 10. Compensation of Officers and Trustees and Members of the
Advisory Board. Subject to any applicable provisions of the Declaration, the
compensation of the officers and Trustees and members of the Advisory Board
shall be fixed from time to time by the Trustees or, in the case of officers, by
any Committee or officer upon whom such power may be
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conferred by the Trustees. No officer shall be prevented from receiving such
compensation as such officer by reason of the fact that he is also a Trustee
ARTICLE VIII
FISCAL YEAR
The fiscal year of the Trust shall begin on the first day of July in each
year and shall end on the thirtieth day of June in each year, provided, however,
that the Trustees may from time to time change the fiscal year.
ARTICLE VIII
SEAL
The Trustees may adopt a seal which shall be in such form and shall have
such inscription thereon as the Trustees may from time to time prescribe.
ARTICLE IX
WAIVERS OF NOTICE
Whenever any notice whatever is required to be given by law, the
Declaration or these By-Laws, a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto. A notice shall be deemed to have
been telegraphed, cabled or wirelessed for the purposes of these By-Laws when it
has been delivered to a representative of
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<PAGE>
any telegraph, cable or wireless company with instructions that it be
telegraphed, cabled or wirelessed
ARTICLE X
CUSTODY OF SECURITIES
Section 1. Employment of a Custodian. The Trust shall place and at all
times maintain in the custody of a Custodian (including any sub-custodian for
the Custodian) all funds, securities and similar investments included in the
Trust Property. The Custodian (and any sub-custodian) shall be a bank having not
less than $2,000,000 aggregate capital, surplus and undivided profits and shall
be appointed from time to time by the Trustees, who shall fix its remuneration.
Section 2. Action Upon Termination of Custodian Agreement. Upon termination
of a Custodian Agreement or inability of the Custodian to continue to serve, the
trustees shall promptly appoint a successor custodian, but in the event that no
successor custodian can be found who has the required qualifications and is
willing to serve, the Trustees shall call as promptly as possible a special
meeting of the Shareholders to determine whether the Trust shall function
without a custodian or shall be liquidated. If so directed by vote of the
holders of a majority of the outstanding voting securities, the Custodian shall
deliver and pay over all Trust Property held by it as specified in such vote.
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<PAGE>
Section 3. Provisions of Custodian Contract. The following provisions
shall apply to the employment of a Custodian and to any contract entered into
with the Custodian so employed:
The Trustees shall cause to be delivered to the Custodian all securities
included in the Trust Property or to which the Trust may become entitled,
and shall order the same to be delivered by the Custodian only in
completion of a sale, exchange, transfer, pledge, loan of portfolio
securities to another person, or other disposition thereof, all as the
Trustees may generally or from time to time require or approve or to a
successor Custodian; and the Trustees shall cause all funds included in the
Trust Property or to which it may become entitled to be paid to the
Custodian, and shall order the same disbursed only for investment against
delivery of the securities acquired, or the return of cash held as
collateral for loans of portfolio securities, or in payment of expenses,
including management compensation, and liabilities of the Trust, including
distributions to shareholders, or to a successor Custodian.
Section 4. Central Certificate System. Subject to such rules, regulations
and orders as the Commission may adopt, the Trustees may direct the Custodian to
deposit all or any part of the securities owned by the Trust in a system for the
central handling of securities established by a national securities exchange or
a national securities association registered with the Commission under the
Securities Exchange Act of 1934, or
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<PAGE>
such other person as may be permitted by the Commission, or otherwise in
accordance with the 1940 Act, pursuant to which system all securities of any
particular class or series of any issuer deposited within the system are treated
as fungible and may be transferred or pledged by bookkeeping entry without
physical delivery of such securities, provided that all such deposits shall be
subject to withdrawal only upon the order of the Trust.
Section 5. Acceptance of Receipts in Lieu of Certificates. Subject to such
rules, regulations and orders as the Commission may adopt, the Trustees may
direct the Custodian to accept written receipts or other written evidences
indicating purchases of securities held in book-entry form in the Federal
Reserve System in accordance with regulations promulgated by the Board of
Governors of the Federal Reserve System and the local Federal Reserve Banks in
lieu of receipt of certificates representing such securities.
ARTICLE XI
AMENDMENTS
These By-Laws, or any of them, may be altered, amended or repealed, or new
By-Laws may be adopted by (a) vote of a majority of the Shares outstanding and
entitled to vote or (b) by the Trustees, provided, however, that no By-Law may
be amended, adopted or repealed by the Trustees if such amendment, adoption or
repeal requires, pursuant to law, the Declaration or these By-Laws, a vote of
the Shareholders.
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ARTICLE XII
MISCELLANEOUS
(A) Except as hereinafter provided, no officer or Trustees of the Trust and
no partner, officer, director or shareholder of the Investment Adviser of the
Trust (as that term is defined in the Investment Company Act of 1940) or of the
underwriter of the Trust, and no Investment Adviser or underwriter of the Trust,
shall take long or short positions in the securities issued by the Trust.
(1) The foregoing provisions shall not prevent the underwriter from
purchasing Shares from the Trust if such purchases are limited (except for
reasonable allowances for clerical errors, delays and errors of
transmission and cancellation of orders) to purchase for the purpose of
filling order for such Shares received by the underwriter, and provided
that orders to purchase from the Trust are entered with the Trust or the
Custodian promptly upon receipt by the underwriter of purchase orders for
such Shares, unless the underwriter is otherwise instructed by its
customer.
(2) The foregoing provision shall not prevent the underwriter from
purchasing Shares of the Trust as agent for the account of the Trust
(3) The foregoing provisions shall not prevent the purchase from the
Trust or from the underwriter of Shares issued by the Trust, by any
officer, or Trustee of the Trust or by any partner, officer, director or
shareholder
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of the Investment Adviser of the Trust or of the underwriter of the Trust
at the price available to the public generally at the moment of such
purchase, or as described in the then currently effective Prospectus of the
Trust.
(4) The foregoing shall not prevent the Investment Adviser, or any
affiliate thereof, of the Trust from purchasing Shares prior to the
effectiveness of the first registration statement relating to the Shares
under the Securities Act of 1933.
(B) The Trust shall not lend assets of the Trust to any officer or Trustee
of the Trust, or to any partner, officer, director or shareholder of, or person
financially interested in, the Investment Adviser of the Trust, or the
underwriter of the Trust, or to the Investment Adviser of the Trust or to the
underwriter of the Trust.
(C) The Trust shall not impose any restrictions upon the transfer of the
Shares of the Trust except as provided in the Declaration, but this requirement
shall not prevent the charging of customary transfer agent fees.
(D) The Trust shall not permit any officer or Trustee of the Trust, or any
partner, officer or director of the Investment Adviser or underwriter of the
Trust to deal for or on behalf of the Trust with himself as principal or agent,
or with any partnership, association or corporation in which he has a financial
interest; provided that the foregoing provisions shall not prevent (a) officers
and Trustees of the Trust
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or partners, officers or directors of the Investment Adviser or underwriter of
the Trust from buying, holding or selling shares in the Trust, or from being
partners, officers or directors or otherwise financially interested in the
Investment Adviser or underwriter of the Trust; (b) purchases or sales of
securities or other property by the Trust from or to an affiliated person or to
the Investment Advisers or underwriters of the Trust if such transaction is
exempt from the applicable provisions of the 1940 Act; (c) purchases of
investments for the portfolio of the Trust or sales of investments owned by the
Trust through a security dealer who is, or one or more of whose partners,
shareholders, officers or directors is, an officer or Trustee of the Trust, or a
partner, officer or director of the Investment Adviser or underwriter of the
Trust, if such transactions are handled in the capacity of broker only and
commissions charged do not exceed customary brokerage charges for such services;
(d) employment of legal counsel, registrar, Transfer Agent, dividend disbursing
agent or Custodian who is, or has a partner, shareholder, officer, or director
who is, an officer or Trustee of the Trust, or a partner, officer or director of
the Investment Adviser or underwriter of the Trust, if only customary fees are
charged for services to the Trust; (e) sharing statistical research, legal and
management expenses and office hire and expenses with any other investment
company in which an officer or Trustee of the Trust, or a partner,
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officer or director of the Investment Adviser or underwriter of the Trust, is an
officer or director or otherwise financially interested.
END OF BY-LAWS
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Exhibit 2(c)
On December 9, 1985, the Trustees of Scudder Development Fund amended the
By-Laws of the Trust by the addition of the following Article IVA:
ARTICLE IVA
HONORARY TRUSTEES
Section 4A.01. Number; Qualification; Term: The Trustees may from time to
time designate and appoint one or more qualified persons to the position of
"honorary trustee". Each honorary trustee shall serve for such term as shall be
specified in the resolution of the Trustees appointing him or until his earlier
resignation or removal. An honorary trustee may be removed from such position
with or without cause by the vote of a majority of the Trustees given at any
regular meeting or special meeting.
Section 4A.02. Duties; Remuneration: An honorary trustee shall be invited
to attend all meetings of the Trustees but shall not be present at any portion
of a meeting from which the honorary trustee shall have been excluded by, vote
of the Trustees. An honorary trustee shall not be a "Trustee" or "officer"
within the meaning of the Trust's Declaration of Trust or of these By-Laws,
shall not be deemed to be a member of an "advisory board" within the meaning of
the Investment Company Act of 1940, as amended from time to time, shall not hold
himself out as any of the foregoing, and shall not be liable to any person for
any act of the Trust. Notice of special meetings may be given to an honorary
trustee but the failure to give such notice shall not affect the validity of any
meeting or the action taken thereat. An honorary trustee shall not have the
powers of a Trustee, may not vote at meetings of the Trustees and shall not take
part in the operation or governance of the Trust. An honorary trustee shall not
receive any compensation but may, in the discretion of the Trustees be
reimbursed for expenses incurred in attending meetings of the Trustees or
otherwise.
Exhibit 5(a)
Scudder Development Fund
175 Federal Street
Boston, Massachusetts 02110
June 9, 1992
Scudder, Stevens & Clark, Inc.
345 Park Avenue
New York, NY 10154
Investment Management Agreement
Scudder Development Fund
Dear Sirs:
Scudder Development Fund (the "Trust") has been established as a
Massachusetts business trust to engage in the business of an investment company.
The Trust has selected you to act as the sole investment manager of the
Trust 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 agrees with you as follows:
1. Delivery of Documents. The Trust engages in the business of investing
and reinvesting the assets of the Trust 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") 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:
(a) Declaration of Trust of the Trust dated December 21, 1987, as amended
to date (the "Declaration").
(b) By-Laws of the Trust as in effect on the date hereof (the "By-Laws").
(c) Resolutions of the Trustees and the shareholders of the Trust
selecting you as investment manager and approving the form of this
Agreement.
The Trust will furnish you from time to time with copies, properly
certified or authenticated, of all amendments of or supplements, if any, to the
foregoing, including the Prospectus, the SAI and the Registration Statement.
2. Name of Trust. The Trust may use any name derived from the name
"Scudder, Stevens & Clark", if the Trust elects to do so, only for so long as
this Agreement, any other investment management agreement between you and the
Trust or any extension, renewal or amendment hereof or thereof remains in
effect, including any similar agreement with any organization which shall have
succeeded to your business as investment manager. At such time as such an
agreement shall no longer be in effect, the Trust shall (to the extent the Trust
has the legal power to cause it to be done) cease to use such a name or any
other name indicating that it is managed by or otherwise connected with you or
any organization which shall have so succeeded to your business.
3. Portfolio Management Services. As manager of the assets of the Trust,
you shall provide continuing investment management of the assets of the Trust in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations thereunder; and all other
applicable federal and state laws and regulations of which you have knowledge;
subject always to policies and instructions adopted by the Trust's Board of
Trustees. In connection therewith, you shall use reasonable efforts to manage
the Trust so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Trust 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
Trust 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
<PAGE>
Trust'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 Trust and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Trust policies
as expressed in the Registration Statement. You shall determine what portion of
the Trust'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 Trust 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 Trust such office space and facilities in the United States as the
Trust 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
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 Trust shareholders; supervising, negotiating contractual
arrangements with, to the extent appropriate, and monitoring the performance of,
custodians, depositories, transfer and pricing agents, accountants, attorneys,
printers, underwriters, brokers and dealers, insurers and other persons in any
capacity deemed to be necessary or desirable to Trust 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
Trust's transfer agent; assisting in the preparation and filing of the Trust's
federal, state and local tax returns; preparing and filing the Trust's federal
excise tax return pursuant to Section 4982 of the Code; providing assistance
with investor and public relations matters; monitoring the valuation of
portfolio securities, the calculation of net asset value and the calculation and
payment of distributions to Trust shareholders; monitoring the registration of
the Trust's shares of beneficial interest, par value $.01 per share, ("shares")
under applicable federal and state securities laws; maintaining or causing to be
maintained for the Trust 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 Trust's custodian or
other agents of the Trust; assisting in establishing the accounting policies of
the Trust; assisting in the resolution of accounting issues that may arise with
respect to the Trust's operations and consulting with the Trust's independent
accountants, legal counsel and the Trust's other agents as necessary in
connection therewith; establishing and monitoring the Trust's operating expense
budgets; reviewing the Trust's bills; processing the payment of bills that have
been approved by an authorized person; assisting the Trust in determining the
amount of dividends and distributions available to be paid by the Trust to its
shareholders, preparing and arranging for the printing of dividend notices to
shareholders, and providing the transfer and dividend paying agent and the
custodian with such information as is required for such parties to effect the
payment of dividends and distributions; and otherwise assisting the Trust as it
may reasonably request in the conduct of the Trust'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 Trust or any other person not a party to this Agreement which is
obligated to provide services to the Trust.
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 Trust's
share of payroll taxes) who are affiliated persons of you, and you shall make
available, without expense to the Trust, 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 Trust 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 Trust's Trustees and
2
<PAGE>
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Trust: organization expenses of the
Trust (including out-of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Trust advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Trust's custodian
or other agents of the Trust; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Trust in connection with membership in investment company trade
organizations; fees and expenses of the Trust's custodians, subcustodians,
transfer agents, dividend disbursing agents and registrars; payment for
portfolio pricing or valuation services to pricing agents, accountants, bankers
and other specialists, if any; expenses of preparing share certificates and,
except as provided below in this section 5, other expenses in connection with
the issuance, offering, distribution, sale, redemption or repurchase of
securities issued by the Trust; expenses relating to investor and public
relations; expenses and fees of registering or qualifying Shares of the Trust
for sale; interest charges, bond premiums and other insurance expense; freight,
insurance and other charges in connection with the shipment of the Trust'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 Trust;
expenses of printing and distributing reports, notices and dividends to
shareholders; expenses of printing and mailing Prospectuses and SAIs of the
Trust 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 Trust 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 Trust's Shares pursuant to an
underwriting agreement which provides that the underwriter shall assume some or
all of such expenses, or (ii) the Trust shall have adopted a plan in conformity
with Rule 12b-1 under the 1940 Act providing that the Trust (or some other
party) shall assumed 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 Trust (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
shall pay you on the last day of each month the unpaid balance of a fee equal to
the excess of (a) 1/12 of 1% of the average daily net assets as defined below of
the Trust for such month; provided that, for any calendar month during which the
average of such values exceeds $500,000,000, the fee payable for that month
based on the portion of the average of such values in excess of $500,000,000
shall be 1/12 of .95 of 1% of such portion; provided that, for any calendar
month during which the average of such values exceeds $1,000,000,000 the fee
payable for that month based on the portion of the average of such values in
excess of $1,000,000,000 shall be 1/12 of .90 of 1% of such portion over (b) the
greater of (i) the amount by which the Trust's expenses exceed the lowest
applicable expense limitation (as more fully described below) or (ii) any
compensation waived by you from time to time (as more fully described below).
You shall be entitled to receive during any month such interim payments of your
fee hereunder as you shall request, provided that no such payment shall exceed
75% of the amount of your fee then accrued on the books of the Trust and unpaid.
The "average daily net assets" of the Trust shall mean the average of the
values placed on the Trust's net assets as of 4:00 p.m. (New York time) on each
day on which the net asset value of the Trust is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Trust 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 Trust 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 Trust as last determined shall be deemed to be the value of its
net assets as of 4:00 p.m. (New York time), or as of such other time as the
value of the net assets of the Trust's portfolio may be lawfully determined on
that day. If the Trust 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 Trust,
shall cause the aggregate expenses of the Trust 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 Trust may
3
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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 Trust 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 Trust 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 Trust; 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 Trust'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 Trust, 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 Trust's account with
brokers or dealers selected by you in accordance with Trust 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 Trust, you
shall act solely as investment counsel for such clients and not in any way on
behalf of the Trust.
Your services to the Trust 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 Trust in connection with the matters to which
this Agreement relates, provided that nothing in this Agreement shall be deemed
to protect or purport to protect you against any liability to the Trust, 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 Trust shall be deemed, when acting within the scope of his or
her employment by the Trust, to be acting in such employment solely for the
Trust and not as your employee or agent.
9. Duration and Termination of This Agreement. This Agreement shall remain
in force until September 30, 1992 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 Trust. The aforesaid requirement that continuance of
this Agreement be "specifically approved at least annually" shall be construed
in a manner consistent with the 1940 Act and the rules and regulations
thereunder.
This Agreement may be terminated with respect to the Trust at any time,
without the payment of any penalty, by the vote of a majority of the outstanding
voting securities of the Trust 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 Trust and by the Trust's Board of Trustees, including a
majority of the Trustees who are not parties to this Agreement or interested
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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
Development Fund" refers to the Trustees under the Declaration collectively as
trustees and not as individuals or personally, and that no shareholder, Trustee,
officer, employee or agent of the Trust, shall be subject to claims against or
obligations of the Trust to any extent whatsoever, but that the Trust estate
only shall be liable.
You are hereby expressly put on notice of the limitation of liability as
set forth in the Declaration and you agree that the obligations assumed by the
Trust pursuant to this Agreement shall be limited in all cases to the Trust and
its assets, and you shall not seek satisfaction of any such obligation from the
shareholders or any shareholder of the Trust 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 series under the Declaration are
separate and distinct from those of any and all other series.
12. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
This Agreement shall not apply to the management of assets allocated to any
series of the Trust's shares hereafter established by the Trust's Board of
Trustees.
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
Trust 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.
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 Development Fund
By /s/Daniel Pierce
------------------------------
President
The foregoing Agreement is hereby accepted as of the date thereof.
SCUDDER, STEVENS & CLARK, INC.
By /s/David S. Lee
------------------------------
Managing Director
5
Exhibit 5(b)
Scudder Development Fund
175 Federal Street
Boston, Massachusetts 02110
Investment Management Agreement
Scudder Development Fund
December 14, 1990
Scudder, Stevens & Clark, Inc.
345 Park Avenue
New York, NY 10154
Dear Sirs:
Scudder Development Fund (the "Trust") has been established as a
Massachusetts business trust to engage in the business of an investment company.
The Trust has selected you to act as the sole investment manager of the
Trust 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 agrees with you as follows:
1. Delivery of Documents. The Trust engages in the business of investing
and reinvesting the assets of the Trust 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") included in the Trust's Registration Statement on Form N-1 A, 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:
(a) Declaration of Trust of the Trust dated December 21,1987, as
amended to date (the "Declaration").
(b) By-Laws of the Trust as in effect on the date hereof (the "By-Laws").
(c) Resolutions of the Trustees and the shareholders of the Trust
selecting you as investment manager and approving the form of this
Agreement.
The Trust will furnish you from time to time with copies, properly
certified or authenticated, of all amendments of or supplements, if any, to the
foregoing, including the Prospectus, the SAI and the Registration Statement.
2. Name of Trust. The Trust may use any name derived from the name
"Scudder, Stevens & Clark", if the Trust elects to do so, only for so long as
this Agreement, any other investment management agreement between you and the
Trust or any extension, renewal or amendment hereof or thereof remains in
effect, including any similar agreement with any organization which shall have
succeeded to your business as investment manager. At such time as such an
agreement shall no longer be in effect, the Trust shall (to the extent the Trust
has the legal power to cause it to be done) cease to use such a name or any
other name indicating that it is managed by or otherwise connected with you or
any organization which shall have so succeeded to your business.
3. Portfolio Management Services. As manager of the assets of the Trust,
you shall provide continuing investment management of the assets of the Trust in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations thereunder; and all other
applicable federal and state laws and regulations of which you have knowledge;
subject always to policies and instructions adopted by the Trust's Board of
Trustees. In connection therewith, you shall use reasonable efforts to manage
the Trust so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Trust 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
Trust 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
<PAGE>
Trust'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 Trust and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Trust policies
as expressed in the Registration Statement. You shall determine what portion of
the Trust'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 Trust 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 Trust such office space and facilities in the United States as the
Trust 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
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 Trust shareholders; supervising, negotiating contractual
arrangements with, to the extent appropriate, and monitoring the performance of,
custodians, depositories, transfer and pricing agents, accountants, attorneys,
printers, underwriters, brokers and dealers, insurers and other persons in any
capacity deemed to be necessary or desirable to Trust 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
Trust's transfer agent; assisting in the preparation and filing of the Trust's
federal, state and local tax returns; preparing and filing the Trust's federal
excise tax return pursuant to Section 4982 of the Code; providing assistance
with investor and public relations matters; monitoring the valuation of
portfolio securities, the calculation of net asset value and the calculation and
payment of distributions to Trust shareholders; monitoring the registration of
the Trust's shares of beneficial interest, par value $.01 per share, ("shares")
under applicable federal and state securities laws; maintaining or causing to be
maintained for the Trust 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 Trust's custodian or
other agents of the Trust; assisting in establishing the accounting policies of
the Trust; assisting in the resolution of accounting issues that may arise with
respect to the Trust's operations and consulting with the Trust's independent
accountants, legal counsel and the Trust's other agents as necessary in
connection therewith; establishing and monitoring the Trust's operating expense
budgets; reviewing the Trust's bills; processing the payment of bills that have
been approved by an authorized person; assisting the Trust in determining the
amount of dividends and distributions available to be paid by the Trust to its
shareholders, preparing and arranging for the printing of dividend notices to
shareholders, and providing the transfer and dividend paying agent and the
custodian with such information as is required for such parties to effect the
payment of dividends and distributions; and otherwise assisting the Trust as it
may reasonably request in the conduct of the Trust'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 Trust or any other person not a party to this Agreement which is
obligated to provide services to the Trust.
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 Trust's
share of payroll taxes) who are affiliated persons of you, and you shall make
available, without expense to the Trust, 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 Trust 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 Trust's Trustees and
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<PAGE>
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Trust: organization expenses of the
Trust (including out-of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Trust advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Trust's custodian
or other agents of the Trust; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Trust in connection with membership in investment company trade
organizations; fees and expenses of the Trust's custodians, subcustodians,
transfer agents, dividend disbursing agents and registrars; payment for
portfolio pricing or valuation services to pricing agents, accountants, bankers
and other specialists, if any; expenses of preparing share certificates and,
except as provided below in this section 5, other expenses in connection with
the issuance, offering, distribution, sale, redemption or repurchase of
securities issued by the Trust; expenses relating to investor and public
relations; expenses and fees of registering or qualifying Shares of the Trust
for sale; interest charges, bond premiums and other insurance expense; freight,
insurance and other charges in connection with the shipment of the Trust'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 Trust;
expenses of printing and distributing reports, notices and dividends to
shareholders; expenses of printing and mailing Prospectuses and SAls of the
Trust 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 Trust 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 Trust's Shares pursuant to an
underwriting agreement which provides that the underwriter shall assume some or
all of such expenses, or (ii) the Trust shall have adopted a plan in conformity
with Rule 1 2b-1 under the 1940 Act providing that the Trust (or some other
party) shall assumed 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 Trust (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
shall pay you on the last day of each month the unpaid balance of a fee equal to
the excess of (a) 1/12 of 1% of the average daily net assets as defined below of
the Trust for such month over (b) the greater of (i) the amount by which the
Trust's expenses exceed the lowest applicable expense limitation (as more fully
described below) or (ii) any compensation waived by you from time to time (as
more fully described below). You shall be entitled to receive during any month
such interim payments of your fee hereunder as you shall request, provided that
no such payment shall exceed 75% of the amount of your fee then accrued on the
books of the Trust and unpaid.
The "average daily net assets" of the Trust shall mean the average of the
values placed on the Trust's net assets as of 4:00 p.m. (New York time) on each
day on which the net asset value of the Trust is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Trust 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 Trust 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 Trust as last determined shall be deemed to be the value of its
net assets as of 4:00 p.m. (New York time), or as of such other time as the
value of the net assets of the Trust's portfolio may be lawfully determined on
that day. If the Trust 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 Trust,
shall cause the aggregate expenses of the Trust 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 Trust 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 Trust 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 Trust an amount greater than the fee paid to
you in respect of such year pursuant to this Agreement. As used in this section
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<PAGE>
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 Trust; 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 Trust'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 Trust, 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 safe
of portfolio securities end other investments for the Trust's account with
brokers or dealers selected by you in accordance with Trust 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 Trust, you
shall act solely as investment counsel for such clients and not in any way on
behalf of the Trust.
Your services to the Trust 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 Trust in connection with the matters to which
this Agreement relates, provided that nothing in this Agreement shall be deemed
to protect or purport to protect you against any liability to the Trust, 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 Trust shall be deemed, when acting within the scope of his or
her employment by the Trust, to be acting in such employment solely for the
Trust and not as your employee or agent.
9. Duration and Termination of This Agreement This Agreement shall remain
in force until September 30, 1992 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 Trust. The aforesaid requirement that continuance of
this Agreement be "specifically approved at least annually" shall be construed
in a manner consistent with the 1940 Act and the rules and regulations
thereunder.
This Agreement may be terminated with respect to the Trust at any time,
without the payment of any penalty, by the vote of a majority of the outstanding
voting securities of the Trust 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 Trust 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
Development Fund" refers to the Trustees under the Declaration collectively as
4
<PAGE>
trustees and not as individuals or personally, and that no shareholder, Trustee,
officer, employee or agent of the Trust, shall be subject to claims against or
obligations of the Trust to any extent whatsoever, but that the Trust estate
only shall be liable.
You are hereby expressly put on notice of the limitation of liability as
set forth in the Declaration and you agree that the obligations assumed by the
Trust pursuant to this Agreement shall be limited in all cases to the Trust and
its assets, and you shall not seek satisfaction of any such obligation from the
shareholders or any shareholder of the Trust 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 series under the Declaration are
separate and distinct from those of any and all other series.
12. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
This Agreement shall not apply to the management of assets allocated to any
series of the Trust's shares hereafter established by the Trust's Board of
Trustees.
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
Trust 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.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter end 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 Development Fund
By /s/Daniel Pierce
-------------------------------
President
The foregoing Agreement is hereby accepted as of the date thereof.
SCUDDER, STEVENS & CLARK, INC.
By /s/David S. Lee
-------------------------------
Managing Director
5
EXHIBIT 6
SCUDDER CAPITAL GROWTH FUND
175 Federal Street
Boston, Massachusetts 02110
March 31, 1986
Scudder Fund Distributors, Inc.
175 Federal Street
Boston, Massachusetts 02110
Underwriting Agreement
Dear Sirs:
Scudder Capital Growth Fund (hereinafter called the "Fund") is a business
trust organized under the laws of Massachusetts and is engaged in the business
of an investment company. The authorized capital of the Fund consists of shares
of beneficial interest, with $.0l par value ("Shares"), of one series. The Fund
has selected you to act as principal underwriter (as such term is defined in
Section 2(a)(29) of the Investment Company Act of 1940, as amended (the "1940
Act")) of the Shares and you are willing to act as such principal underwriter
and to perform the duties and functions of underwriter in the manner and on the
terms and conditions hereinafter set forth. Accordingly, the Fund hereby agrees
with you as follows:
1. Delivery of Documents. The Fund has furnished you with copies properly
certified or authenticated of each of the following:
(a) Declaration of Trust of the Fund, dated October 16, 1985.
<PAGE>
(b) By-Laws of the Fund as in effect on the date hereof.
(c) Resolutions of the Board of Trustees of the Fund selecting you as
principal underwriter and approving this form of Agreement.
The Fund will furnish you from time to time with copies, properly certified
or authenticated, of all amendments of or supplements to the foregoing, if any.
The Fund will furnish you promptly with properly certified or authenticated
copies of any registration statement filed by it with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, (the "1933
Act") or the 1940 Act, together with any financial statements and exhibits
included therein, and all amendments or supplements thereto hereafter filed.
2. Registration and Sale of Additional Shares. The Fund will from time to
time use its best efforts to register under the 1933 Act such number of Shares
not already so registered as you may reasonably be expected to sell on behalf of
the Fund You and the Fund will cooperate in taking such action as may be
necessary from time to time to qualify Shares so registered for sale by you or
the Fund in any states mutually agreeable to you and the Fund, and to maintain
such qualification. This Agreement relates to the issue and sale of Shares that
are duly authorized and registered and available for sale by the Fund, including
redeemed or repurchased Shares if and to the extent that they may be legally
sold and if, but only if, the Fund sees fit to sell them.
-2-
<PAGE>
3. Sale of Shares. Subject to the provisions of paragraphs 5 and 7 hereof
and to such minimum purchase requirements as may from time to time be currently
indicated in the Fund's prospectus or statement of additional information, you
are authorized to sell as agent on behalf of the Fund Shares authorized for
issue and registered under the 1933 Act. You may also purchase as principal
Shares for resale to the public. Such sales will be made by you on behalf of the
Fund by accepting unconditional orders to purchase Shares placed with you by
investors and such purchases will be made by you only after acceptance by you of
such orders. The sales price to the public of Shares shall be the public
offering price as defined in paragraph 6 hereof.
4. Solicitation of Orders. You will use your best efforts (but only in
states in which you may lawfully do so) to obtain from investors unconditional
orders for Shares authorized for issue by the Fund and registered under the 1933
Act, provided that you may in your discretion refuse to accept orders for Shares
from any particular applicant.
5. Sale of Shares by the Fund. Unless you are otherwise notified by the
Fund, any right granted to you to accept orders for Shares or to make sales on
behalf of the Fund or to purchase Shares for resale will not apply to (i) Shares
issued in connection with the merger or consolidation of any other investment
company with the Fund or its acquisition, by purchase or otherwise, of all or
substantially all of the assets
-3-
<PAGE>
of any investment company or substantially all the outstanding shares of any
such company, and (ii) to Shares that may be offered by the Fund to shareholders
of the Fund by virtue of their being such shareholders.
6. Public Offering Price. All Shares sold to investors by you will be sold
at the public offering price. The public offering price for all accepted
subscriptions will be the net asset value per Share, determined, in the manner
provided in the Fund's registration statements as from time to time in effect
under the 1933 Act and the 1940 Act, next after the order is accepted by you.
7. Suspension of Sales. If and whenever the determination of net asset
value is suspended and until such suspension is terminated, no further orders
for Shares shall be accepted by you except unconditional orders placed with you
before you had knowledge of the suspension. In addition, the Fund reserves the
right to suspend sales and your authority to accept orders for Shares on behalf
of the Fund if, in the judgment of a majority of the Board of Trustees or a
majority of the Executive Committee of such Board, if such body exists, it is in
the best interests of the Fund to do so, such suspension to continue for such
period as may be determined by such majority; and in that event, no Shares will
be sold by you on behalf of the Fund while such suspension remains in effect
except for Shares necessary to cover unconditional orders accepted by you before
you had knowledge of the suspension.
-4-
<PAGE>
8. Portfolio Securities. Portfolio securities of the Fund may be bought or
sold by or through you and you may participate directly or indirectly in
brokerage commissions or "spread" in respect of transactions in portfolio
securities of the Fund; provided, however, that all sums of money received by
you as a result of such purchases and sales or as a result of such participation
must, after reimbursement of your actual expenses in connection with such
activity, be paid over by you to or for the benefit of the Fund.
9. Expenses. (a) The Fund will pay (or will enter into arrangements
providing that others than you will pay) all fees and expenses:
(1) in connection with the preparation, setting in type and filing of
any registration statement (including a prospectus and statement
of additional information) under the 1933 Act or the 1940 Act, or
both, and any amendments or supplements thereto that may be made
from time to time;
(2) in connection with the registration and qualification of Shares
for sale in the various jurisdictions in which the Fund shall
determine it advisable to qualify such Shares for sale (including
registering the Fund as a broker or dealer or any officer of the
Fund or other person as agent or salesman of the Fund in any such
jurisdictions);
-5-
<PAGE>
(3) of preparing, setting in type, printing and mailing any notice,
proxy statement, report, prospectus or other communication to
shareholders of the Fund in their capacity as such;
(4) of preparing, setting in type, printing and mailing prospectuses
annually, and any supplements thereto, to existing shareholders;
(5) in connection with the issue and transfer of Shares resulting
from the acceptance by you of orders to purchase Shares placed
with you by investors including the expenses of printing and
mailing confirmations of such purchase orders and the expenses of
printing and mailing a prospectus included with the confirmation
of such orders;
(6) of any issue taxes or any initial transfer taxes;
(7) of WATS (or equivalent) telephone lines other than the portion
allocated to you in this paragraph 9;
(8) of wiring funds in payment of Share purchases or in satisfaction
of redemption or repurchase requests, unless such expenses are
paid for by the investor or shareholder who initiates the
transaction;
-6-
<PAGE>
(9) of the cost of printing and postage of business reply envelopes
sent to Fund shareholders;
(10) of one or more CRT terminals connected with the computer
facilities of the transfer agent other than the portion allocated
to you in this paragraph 9;
(11) permitted to be paid or assumed by the Fund pursuant to a plan
("12b-l Plan"), if any, adopted by the Fund in conformity with
the requirements of Rule 12b-l under the 1940 Act ("Rule 12b-1")
or any successor rule, notwithstanding any other provision to the
contrary herein;
(12) of the expense of setting in type, printing and postage of the
periodic newsletter to shareholders other than the portion
allocated to you in this paragraph 9; and
(13) of the salaries and overhead of persons employed by you as
shareholder representatives other than the portion allocated to
you in this paragraph 9.
(b) You shall pay or arrange for the payment of all fees and expenses:
(1) of printing and distributing any prospectuses or reports prepared
for your
-7-
<PAGE>
use in connection with the offering of Shares to the public;
(2) of preparing, setting in type, printing and mailing any other
literature used by you in connection with the offering of Shares
to the public;
(3) of advertising in connection with the offering of Shares to the
public;
(4) incurred in connection with your registration as a broker or
dealer or the registration or qualification of your officers,
directors, agents or representatives under Federal and state
laws;
(5) of that portion of WATS (or equivalent) telephone lines,
allocated to you on the basis of use by investors (but not
shareholders) who request information or prospectuses;
(6) of that portion of the expense of setting in type, printing and
postage of the periodic newsletter to shareholders attributable
to promotional material included in such newsletter at your
request concerning investment companies other than the Fund or
concerning the Fund to the extent you are required to assume the
expense thereof pursuant to para-
-8-
<PAGE>
graph 9(b)(8), except such material which is limited to
information, such as listings of other investment companies and
their investment objectives, given in connection with the
exchange privilege as from time to time described in the Fund's
prospectus;
(7) of that portion of the salaries and overhead of persons employed
by you as shareholder representatives attributable to the time
spent by such persons in responding to requests from investors,
but not shareholders, for information about the Fund; and
(8) of any activity which is primarily intended to result in the sale
of Shares, unless a 12b-l Plan shall be in effect which provides
that the Fund shall bear some or all of such expenses, in which
case the Fund shall bear such expenses in accordance with such
Plan;
(9) of that portion of one or more CRT terminals connected with the
computer facilities of the transfer agent attributable to your
use of such terminal(s) to gain access to such of the transfer
agent's records as also serve as your records.
Expenses which are to be allocated between you and the Fund shall be
allocated pursuant to reasonable procedures or
-9-
<PAGE>
formulae mutually agreed upon from time to time, which procedures or formulae
shall to the extent practicable reflect studies of relevant empirical data.
10. Conformity with Law. You agree that in selling Shares you will duly
conform in all respects with the laws of the United States and any state in
which Shares may be offered for sale by you pursuant to this Agreement and to
the rules and regulations of the National Association of Securities Dealers,
Inc., of which you are a member.
11. Independent Contractor. You shall be an independent contractor and
neither you nor any of your officers or employees is or shall be an employee of
the Fund in the performance of your duties hereunder. You shall be responsible
for your own conduct and the employment, control and conduct of your agents and
employees and for injury to such agents or employees or to others through your
agents or employees. You assume full responsibility for your agents and
employees under applicable statutes and agree to pay all employee taxes
thereunder.
12. Indemnification. You agree to indemnify and hold harmless the Fund and
each of its Trustees and officers and each person, if any, who controls the Fund
within the meaning of Section 15 of the 1933 Act, against any and all losses,
claims, damages, liabilities or litigation (including legal and other expenses)
to which the Fund or such Trustees, officers, or controlling person may become
subject under such Act, under any other statute, at common law or otherwise,
arising out of
-10-
<PAGE>
the acquisition of any Shares by any person which (i) may be based upon any
wrongful act by you or any of your employees or representatives, or (ii) may be
based upon any untrue statement or alleged untrue statement of a material fact
contained in a registration statement (including a prospectus or statement of
additional information) covering Shares or any amendment thereof or supplement
thereto or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement therein not
misleading if such statement or omission was made in reliance upon information
furnished to the Fund by you, or (iii) may be incurred or arise by reason of
your acting as the Fund's agent instead of purchasing and reselling Shares as
principal in distributing the Shares to the public, provided, however, that in
no case (i) is your indemnity in favor of a Trustee or officer or any other
person deemed to protect such Trustee or officer or other person against any
liability to which any such person would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of his
duties or by reason of his reckless disregard of obligations and duties under
this Agreement or (ii) are you to be liable under your indemnity agreement
contained in this paragraph with respect to any claim made against the Fund or
any person indemnified unless the Fund or such person, as the case may be, shall
have notified you in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the
-11-
<PAGE>
claims shall have been served upon the Fund or upon such person (or after the
Fund or such person shall have received notice of such service on any designated
agent), but failure to notify you of any such claim shall not relieve you from
any liability which you may have to the Fund or any person against whom such
action is brought otherwise than on account of your indemnity agreement
contained in this paragraph. You shall be entitled to participate, at your own
expense, in the defense, or, if you so elect, to assume the defense of any suit
brought to enforce any such liability, but if you elect to assume the defense,
such defense shall be conducted by counsel chosen by you and satisfactory to the
Fund, to its officers and Trustees, or to any controlling person or persons,
defendant or defendants in the suit. In the event that you elect to assume the
defense of any such suit and retain such counsel, the Fund, such officers and
Trustees or controlling person or persons, defendant or defendants in the suit
shall bear the fees and expenses of any additional counsel retained by them,
but, in case you do not elect to assume the defense of any such suit, you will
reimburse the Fund, such officers and Trustees or controlling person or persons,
defendant or defendants in such suit for the reasonable fees and expenses of any
counsel retained by them. You agree promptly to notify the Fund of the
commencement of any litigation or proceedings against it in connection with the
issue and sale of any of Shares.
-12-
<PAGE>
The Fund agrees to indemnify and hold harmless you and each of your
directors and officers and each person, if any, who controls you within the
meaning of Section 15 of the 1933 Act, against any and all losses, claims,
damages, liabilities or litigation (including legal and other expenses) to which
you or such directors, officers or controlling person may become subject under
such Act, under any other statute, at common law or otherwise, arising out of
the acquisition of any Shares by any person which (i) may be based upon any
wrongful act by the Fund or any of its employees or representatives, or (ii) may
be based upon any untrue statement or alleged untrue statement of a material
fact contained in a registration statement (including a prospectus or statement
of additional information) covering Shares or any amendment thereof or
supplement thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading if such statement or omission was made in reliance upon
information furnished to you by the Fund; provided, however, that in no case (i)
is the Fund's indemnity in favor of a director or officer or any other person
deemed to protect such director or officer or other person against any liability
to which any such person would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his duties or
by reason of his reckless disregard of obligations and duties under this
Agreement or (ii) is the Fund to be liable under its indemnity
-13-
<PAGE>
agreement contained in this paragraph with respect to any claims made against
you or any such director, officer or controlling person unless you or such
director, officer or controlling person, as the case may be, shall have notified
the Fund in writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall have been
served upon you or upon such director, officer or controlling person (or after
you or such director, officer or controlling person shall have received notice
of such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve it from any liability which it may have to the
person against whom such action is brought otherwise than on account of its
indemnity agreement contained in this paragraph. The Fund will be entitled to
participate at its own expense in the defense, or, if it so elects, to assume
the defense of any suit brought to enforce any such liability, but if the Fund
elects to assume the defense, such defense shall be conducted by counsel chosen
by it and satisfactory to you, your directors, officers or controlling persons
or persons, defendant or defendants in the suit. In the event that the Fund
elects to assume the defense of any such suit and retain such counsel, you, your
directors, officers or controlling person or persons, defendant or defendants in
the suit, shall bear the fees and expenses of any additional counsel retained by
them, but, in case the Fund does not elect to assume the defense of any such
suit, it will
-14-
<PAGE>
reimburse you or such directors, officers or controlling person or persons,
defendant or defendants in the suit, for the reasonable fees and expenses of any
counsel retained by them. The Fund agrees promptly to notify you of the
commencement of any litigation or proceedings against it or any of its officers
or Trustees in connection with the issuance or sale of any Shares.
13. Authorized Representations. The Fund is not authorized to give any
information or to make any representations on behalf of you other than the
information and representations contained in a registration statement (including
a prospectus or statement of additional information) covering Shares, as such
registration statement and prospectus may be amended or supplemented from time
to time.
You are not authorized to give any information or to make any
representations on behalf of the Fund or in connection with the sale of Shares
other than the information and representations contained in a registration
statement (including a prospectus or statement of additional information)
covering Shares, as such registration statement may be amended or supplemented
from time to time. No person other than you is authorized to act as principal
underwriter (as such term is defined in the 1940 Act) for the Fund.
14. Duration and Termination of this Agreement. This Agreement shall become
effective upon the date first written above and will remain in effect until
September 30, 1987 and
-15-
<PAGE>
from year to year thereafter, but only so long as such continuance is
specifically approved at least annually by the vote of a majority of the
Trustees who are not interested persons of you or of the Fund, cast in person at
a meeting called for the purpose of voting on such approval, and by vote of the
Board of Trustees or of a majority of the outstanding voting securities of the
Fund. This Agreement may, on 60 days' written notice, be terminated at any time
without the payment of any penalty, by the Board of Trustees of the Fund, by a
vote of a majority of the outstanding voting securities of the Fund, or by you.
This Agreement will automatically terminate in the event of its assignment. In
interpreting the provisions of this paragraph 14, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of "interested
person", "assignment" and "majority of the outstanding voting securities"), as
modified by any applicable order of the Securities and Exchange Commission,
shall be applied.
15. Amendment of this Agreement. No provisions of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. If the Fund should at any time deem it
necessary or advisable in the best interests of the Fund that any amendment of
this Agreement be made in order to comply with the recommendations or
requirements of the Securities and Exchange Commission or other governmental
-16-
<PAGE>
authority or to obtain any advantage under state or federal tax laws and should
notify you of the form of such amendment, and the reasons therefor, and if you
should decline to assent to such amendment, the Fund may terminate this
Agreement forthwith. If you should at any time request that a change be made in
the Fund's Declaration of Trust or By-laws or in its methods of doing business,
in order to comply with any requirements of federal law or regulations of the
Securities and Exchange Commission or of a national securities association of
which you are or may be a member relating to the sale of shares of the Fund, and
the Fund should not make such necessary change within a reasonable time, you may
terminate this Agreement forthwith.
16. Termination of Prior Agreements. This Agreement upon its effectiveness
terminates and supersedes all prior underwriting contracts between the parties.
17. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit 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.
The name "Scudder Capital Growth Fund" is the designation of the Trustees
for the time being under a Declaration of Trust dated October 16, 1985, as
amended from time to time, and all persons dealing with the Fund must look
solely to the property
-17-
<PAGE>
of the Fund for the enforcement of any claims against the Fund as neither the
Trustees, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund.
If you are in agreement with the foregoing, please sign the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Fund, whereupon this letter shall become a binding contract.
very truly yours,
SCUDDER CAPITAL GROWTH FUND
BY: /s/ David S. Lee
-----------------------------------
The foregoing Agreement is hereby accepted as of the date thereof.
SCUDDER FUND DISTRIBUTORS, INC.
BY: /s/ Daniel Pierce
-----------------------------------
-18-
Exhibit 6(b)
SCUDDER SECURITIES TRUST
Two International Place
Boston, Massachusetts 02110
Date: September 30, 1995
Scudder Investor Services, Inc.
Two International Place
Boston, Massachusetts 02110
Underwriting Agreement
Ladies and Gentlemen:
Scudder Securities Trust, formerly known as Scudder Development Fund,
(hereinafter called the "Trust"), is a business trust organized under the laws
of Massachusetts and is engaged in the business of an investment company. The
authorized capital of the Trust consists of shares of beneficial interest, with
$.01 par value ("Shares"), currently divided into two series (each a
"Portfolio") ; however, shares may be divided into additional Portfolios of the
Trust and the Portfolios may be terminated from time to time by action of the
Trustees. The Trust has selected you to act as principal underwriter (as such
term is defined in Section 2(a) (29) of the Investment Company Act of 1940, as
amended (the: "1940 Act")) of the Shares and you are willing to act as such
principal underwriter and to perform the duties and functions of underwriter in
the manner and oh the terms and conditions hereinafter set forth. Accordingly,
the Trust hereby agrees with you as follows:
1. Delivery of Documents. The Trust has furnished you with copies properly
certified or authenticated of each of the following:
(a) Amended and Restated Declaration of Trust of the Trust, dated December
21, 1987, as amended to date.
(b) By-Laws of the Trust as in effect on the date hereof.
<PAGE>
(c) Resolutions of the Board of Trustees of the Trust selecting you as
principal underwriter and approving this form of Agreement.
(d) The Establishment and Designation of Series of Beneficial Interest,
$.01 Par Value, dated July 21, 1995.
The Trust will furnish you from time to time with copies, properly
certified or authenticated, of all amendments of or supplements to the
foregoing, if any.
The Trust will furnish you promptly with properly certified or
authenticated copies of any registration statement filed by it with the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
(the "1933 Act") or the 1940 Act, together with any financial statements and
exhibits included therein, and all amendments or supplements thereto hereafter
filed.
2. Registration and Sale of Additional Shares. The Trust will from time to
time use its best efforts to register under the 1933 Act such number of Shares
not already so registered as you may reasonably be expected to sell on behalf of
the Trust. You and the Trust will cooperate in taking such action as may be
necessary from time to time to qualify Shares so registered for sale by you or
the Trust in any states mutually agreeable to you and the Trust, and to maintain
such qualification. This Agreement relates to the issue and sale of Shares that
are duly authorized and registered and available for sale by the Trust,
including redeemed or repurchased Shares if and to the extent that they may be
legally sold and if but only if, the Trust sees fit to sell them.
3. Sale of Shares. Subject to the provisions of paragraphs 5 and 7 hereof
and to such minimum purchase requirements as may from time to time be currently
indicated in the Trust's prospectus or statement of additional information, you
are authorized to sell as agent on behalf of the Trust Shares authorized for
issue and registered under the 1933 Act. You may also purchase as principal
Shares for resale to the public. Such sales will be made by you on behalf of the
Trust by accepting unconditional orders to purchase Shares placed with you by
investors and such purchases will be made by you only after acceptance by you of
such orders. The sales price to the public of Shares shall be the public
offering price as defined in paragraph 6 hereof.
4. Solicitation of Orders. You will use your best efforts (but only in
states in which you may lawfully do so) to obtain from
2
<PAGE>
investors unconditional orders for Shares authorized for issue by the Trust and
registered under the 1933 Act, provided that you may in your discretion refuse
to accept orders for Shares from any particular applicant.
5. Sale of Shares by the Trust. Unless you are otherwise notified by the
Trust, any right granted to you to accept orders for Shares or to make sales on
behalf of the Trust or to purchase Shares for resale will not apply to (i)
Shares issued in connection with the merger or consolidation of any other
investment company with the Trust or its acquisition, by purchase or otherwise,
of all or substantially all of the assets of any investment company or
substantially all the outstanding shares of any such company, and (ii) to Shares
that may be offered by the Trust to shareholders of the Trust by virtue of their
being such shareholders.
6. Public Offering Price. All Shares sold to investors by you will be sold
at the public offering price. The public offering price for all accepted
subscriptions will be the net asset value per Share, determined, in the manner
provided in the Trust's registration statements as from time to time in effect
under the 1933 Act and the 1940 Act, next after the order is accepted by you.
7. Suspension of Sales. If and whenever the determination of net asset
value is suspended and until such suspension is terminated, no further orders
for Shares shall be accepted by you except unconditional orders placed with you
before you had knowledge of the suspension. In addition, the Trust reserves the
right to suspend sales and your authority to accept orders for Shares on behalf
of the Trust if, in the judgment of a majority of the Board of Trustees or a
majority of the Executive Committee of such Board, if such body exists, it is
in the best interests of the Trust to do so, such suspension to continue for
such period as may be determined by such majority; and in that event, no Shares
will be sold by you on behalf of the Trust while such suspension remains in
effect except for Shares necessary to cover unconditional orders accepted by you
before you had knowledge of the suspension.
8. Portfolio Securities. Portfolio securities of any Portfolio of the Trust
may be bought or sold by or through you and you may participate directly or
indirectly in brokerage commissions or "spread" in respect to transactions in
portfolio securities of any Portfolio of the Trust; provided, however, that all
sums of money received by you as a result of such purchases and sales or as a
result of such participation must, after reimbursement of your
3
<PAGE>
actual expenses in connection with such activity, be paid over by you to or for
the benefit of the Trust.
9. Expenses. (a) The Trust, on behalf of each Portfolio, will pay (or will
enter into arrangements providing that others than you will pay) all fees and
expenses:
(1) in connection with the preparation, setting in type and filing of any
registration statement (including a prospectus and statement of
additional information) under the 1933 Act or the 1940 Act, or both,
and any amendments or supplements thereto that may be made from time
to time;
(2) in connection with the registration and qualification of Shares for
sale in the various jurisdictions in which the Trust shall determine
it advisable to qualify such Shares for sale (including registering
the Trust as a broker or dealer or any officer of the Trust or other
person as agent or salesman of the Trust in any such jurisdictions);
(3) of preparing, setting in type, printing and mailing any notice, proxy
statement, report, prospectus or other communication to shareholders
of the Trust in their capacity as such;
(4) of preparing, setting in type, printing and mailing prospectuses
annually, and any supplements thereto, to existing shareholders;
(5) in connection with the issue and transfer of Shares resulting from the
acceptance by you of orders to purchase Shares placed with you by
investors, including the expenses of printing and mailing
confirmations of such purchase orders and the expenses of printing and
mailing a prospectus included with the confirmation of such orders;
(6) of any issue taxes or any initial transfer taxes;
(7) of WATS (or equivalent) telephone lines other than the portion
allocated to you in this paragraph 9;
(8) of wiring funds in payment of Share purchases or in satisfaction of
redemption or repurchase requests, unless
4
<PAGE>
such expenses are paid for by the investor or shareholder who
initiates the transaction;
(9) of the cost of printing and postage of business reply envelopes sent
to Trust shareholders;
(10) of one or more CRT terminals connected with the computer facilities of
the transfer agent other than the portion allocated to you in this
paragraph 9;
(11) permitted to be paid or assumed by the Trust pursuant to a plan
("12b-l Plan"), if any, adopted by the Trust in conformity with the
requirements of Rule 12b-1 under the 1940 Act ("Rule 12b-1") or any
successor rule, notwithstanding any other provision to the contrary
herein;
(12) of the expense of setting in type, printing and postage of the
periodic newsletter to shareholders other than the portion allocated
to you in this paragraph 9; and
(13) of the salaries and overhead of persons employed by you as shareholder
representatives other than the portion allocated to you in this
paragraph 9.
b) You shall pay or arrange for the payment of all fees and expenses:
(1) of printing and distributing any prospectuses or reports prepared for
your use in connection with the offering of Shares to the public;
(2) of preparing, setting in type, printing and mailing any other
literature used by you in connection with the offering of Shares to
the public;
(3) of advertising in connection with the offering of Shares to the
public;
(4) incurred in connection with your registration as a broker or dealer or
the registration or qualification of your officers, trustees, agents
or representatives under Federal and state laws;
(5) of that portion of WATS (or equivalent) telephone lines, allocated to
you on the basis of use by investors (but
5
<PAGE>
not shareholders) who request information or prospectuses;
(6) of that portion of the expenses of setting in type, printing and
postage of the periodic newsletter to shareholders attributable to
promotional material included in such newsletter at your request
concerning investment companies other than the Trust or concerning the
Trust to the extent you are required to assume the expense thereof
pursuant to paragraph 9(b)(8), except such material which is limited
to information, such as listings of other investment companies and
their investment objectives, given in connection with the exchange
privilege as from time to time described in the Trust's prospectus;
(7) of that portion of the salaries and overhead of persons employed by
you as shareholder representatives attributable to the time spent by
such persons in responding to requests from investors, but not
shareholders, for information about the Trust;
(8) of any activity which is primarily intended to result in the sale of,
Shares, unless a 12b-1 Plan shall be in effect which provides that the
Trust shall bear some or all of such expenses, in which case the Trust
shall bear such expenses in accordance with such Plan; and
(9) of that portion of one or more CRT terminals connected with the
computer facilities of the transfer agent attributable to your use of
such terminal(s) to gain access to such of the transfer agent's
records as also serve as your records.
Expenses which are to be allocated between you and the Trust shall be
allocated pursuant to reasonable procedures or formulae mutually agreed upon
from time to time, which procedures or formulae shall to the extent practicable
reflect studies of relevant empirical data.
10. Conformity with Law. You agree that in selling Shares you will duly
conform in all respects with the laws of the United States and any state in
which Shares may be offered for sale by you pursuant to this Agreement and to
the rules and regulations of the National Association of Securities Dealers,
Inc., of which you are a member.
6
<PAGE>
11. Independent Contractor. You shall be an independent contractor and
neither you nor any of your officers or employees is or shall be an employee of
the Trust in the performance of your duties hereunder. You shall be responsible
for your own conduct and the employment, control and conduct of your agents and
employees and for injury to such agents or employees or to others through your
agents or employees. You assume full responsibility for your agents and
employees under applicable statutes and agree to pay all employee taxes
thereunder.
12. Indemnification. You agree to indemnify and hold harmless the Trust and
each of its trustees and officers and each person, if any, who controls the
Trust within the meaning of Section 15 of the 1933 Act, against any and all
losses, claims, damages, liabilities or litigation (including legal and other
expenses) to which the Trust or such trustees, officers, or controlling person
may become subject under such Act, under any other statute, at common law or
otherwise, arising out of the acquisition of any Shares by any person which (i)
may be based upon any wrongful act by you or any of your employees or
representatives, or (ii) may be based upon any untrue statement or alleged
untrue statement of a material fact contained in a registration statement
(including a prospectus or statement of additional information) covering Shares
or any amendment thereof or supplement thereto or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statement therein not misleading if such statement or
omission was made in reliance upon information furnished to the Trust by you, or
(iii) may be incurred or arise by reason of your acting as the Trust's agent
instead of purchasing and reselling Shares as principal in distributing the
Shares to the public, provided, however, that in no case (i) is your indemnity
in favor of a trustee or officer or any other person deemed to protect such
trustee or officer or other person against any liability to which any such
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of his duties or by reason of his
reckless disregard of obligations and duties under this Agreement or (ii) are
you to be liable under your indemnity agreement contained in this paragraph with
respect to any claim made against the Trust or any person indemnified unless the
Trust or such person, as the case may be, shall have notified you in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claims shall have been served upon the Trust or
upon such person (or after the Trust or such person shall have received
7
<PAGE>
notice of such service on any designated agent), but failure to notify you of
any such claim shall not relieve you from any liability which you may have to
the Trust or any person against whom such action is brought otherwise than on
account of your indemnity agreement contained in this paragraph. You shall be
entitled to participate, at your own expense, in the defense, or, if you so
elect, to assume the defense of any suit brought to enforce any such liability,
but if you elect to assume the defense, such defense shall be conducted by
counsel chosen by you and satisfactory to the Trust, to its officers and
trustees, or to any controlling person or persons, defendant or defendants in
the suit. In the event that you elect to assume the defense of any such suit and
retain such counsel, the Trust, such officers and trustees or controlling person
or persons, defendant or defendants in the suit shall bear the fees and expenses
of any additional counsel retained by them, but, in case you do not elect to
assume the defense of any such suit, you will reimburse the Trust, such officers
and trustees or controlling person or persons, defendant or defendants in such
suit for the reasonable fees and expenses of any counsel retained by them. You
agree promptly to notify the Trust of the commencement of any litigation or
proceedings against it in connection with the issue and sale of any Shares.
The Trust agrees to indemnify and hold harmless you and each of your
trustees and officers and each person, if any, who controls you within the
meaning of Section 15 of the 1933 Act, against any and all losses, claims,
damages, liabilities or litigation (including legal and other expenses) to which
you or such trustees, officers or controlling person may become subject under
such Act, under any other statute, at common law or otherwise, arising out of
the acquisition of any Shares by any person which (i) may be based upon any
wrongful act by the Trust or any of its employees or representatives, or (ii)
may be based upon any untrue statement or alleged untrue statement of a material
fact contained in a registration statement (including a prospectus or statement
of additional information) covering Shares or any amendment thereof or
supplement thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading if such statement or omission was made in reliance upon
information furnished to you by the Trust; provided, however, that in no case
(i) is the Trust's indemnity in favor of a trustee or officer or any other
person deemed to protect such trustee or officer or other person against any
liability to which any such person would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of his
duties or by reason of his reckless
8
<PAGE>
disregard of obligations and duties under this Agreement or (ii) is the Trust to
be liable under its indemnity agreement contained in this paragraph with respect
to any claims made against you or any such trustee, officer or controlling
person unless you or such trustee, officer or controlling person, as the case
may be, shall have notified the Trust in writing within a reasonable time after
the summons or other first legal process giving information of the nature of the
claim shall have been served upon you or upon such trustee, officer or
controlling person (or after you or such trustee, officer or controlling person
shall have received notice of such service on any designated agent), but failure
to notify the Trust of any such claim shall not relieve it from any liability
which it may have to the person against whom such action is brought otherwise
than on account of its indemnity agreement contained in this paragraph. The
Trust will be entitled to participate at its own expense in the defense, or, if
it so elects, to assume the defense of any suit brought to enforce any such
liability, but if the Trust elects to assume the defense, such defense shall be
conducted by counsel chosen by it and satisfactory to you, your trustees,
officers, or controlling person or persons, defendant or defendants in the suit.
In the event that the Trust elects to assume the defense of any such suit and
retain such counsel, you, your trustees, officers or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel retained by them, but, in case the Trust does not
elect to assume the defense of any such suit, it will reimburse you or such
trustees, officers or controlling person or persons, defendant or defendants in
the suit, for the reasonable fees and expenses of any counsel retained by them.
The Trust agrees promptly to notify you of the commencement of any litigation or
proceedings against it or any of its officers or trustees in connection with the
issuance or sale of any Shares.
13. Authorized Representations. The Trust is not authorized to give any
information or to make any representations on behalf of you other than the
information and representations contained in a registration statement (including
a prospectus or statement of additional information) covering Shares, as such
registration statement and prospectus may be amended or supplemented from time
to time.
You are not authorized to give any information or to make any
representations on behalf of the Trust or in connection with the sale of Shares
other than the information and representations contained in a registration
statement (including a prospectus or statement of additional information)
covering Shares, as such
9
<PAGE>
registration statement may be amended or supplemented from time to time. No
person other than you is authorized to act as principal underwriter (as such
term is defined in the 1940 Act) for the Trust.
14. Duration and Termination of this Agreement. This Agreement shall become
effective upon the date first written above and will remain in effect until
September 30, 1997 and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually by the vote of a majority
of the trustees who are not interested persons of you or of the Trust, cast in
person at a meeting called for the purpose of voting on such approval, and by
vote of the Board of Trustees or of a majority of the outstanding voting
securities of the Trust. This Agreement may, on 60 days' written notice, be
terminated at any time without the payment of any penalty, by the Board of
Trustees of the Trust, by a vote of a majority of the outstanding voting
securities of the Trust or by you. This Agreement will automatically terminate
in the event of its assignment. In interpreting the provisions of this paragraph
14, the definitions contained in Section 2(a) of the 1940 Act (particularly the
definitions of "interested person", "assignment" and "majority of the
outstanding voting securities"), as modified by any applicable order of the
Securities and Exchange Commission, shall be applied.
15. Amendment of this Agreement No provisions of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. If the Trust should at any time deem it
necessary or advisable in the best interests of the Trust that any amendment of
this Agreement be made in order to comply with the recommendations or
requirements of the Securities and Exchange Commission or other governmental
authority or to obtain any advantage under state or federal tax laws and should
notify you of the form of such amendment, and the reasons therefor, and if you
should decline to assent to such amendment, the Trust may terminate this
Agreement forthwith. If you should at any time request that a change be made in
the Trust's Declaration of Trust or By-laws or in its methods of doing business,
in order to comply with any requirements of federal law or regulations of the
Securities and Exchange Commission or of a national securities association of
which you are or may be a member relating to the sale of shares of the Trust,
and the Trust should not make such necessary change within a reasonable time,
you may terminate this Agreement forthwith.
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<PAGE>
16. Termination of Prior Agreements. This Agreement upon its effectiveness
terminates and supersedes all prior underwriting contracts between the parties.
17. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit 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.
The name "Scudder Securities Trust" is the designation of the Trustees for
the time being under an Amended and Restated Declaration of Trust dated December
21, 1987, as amended from time to time, and all persons dealing with the Trust
must look solely to the property of the Trust for the enforcement of any claims
against the Trust as neither the Trustees, officers, agents or shareholders
assume any personal liability for obligation entered into on behalf of the
Trust.
If you are in agreement with the foregoing, please sign 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.
Very truly yours,
SCUDDER SECURITIES TRUST
By: /s/ Daniel Pierce
-------------------------------------
Daniel Pierce, President
The foregoing agreement is hereby accepted as of the foregoing date
thereof.
SCUDDER INVESTOR SERVICES, INC.
By: /s/ David S. Lee
-------------------------------------
David S. Lee, President
11
EXHIBIT 8(a)(1)
<PAGE>
CUSTODIAN CONTRACT
This Contract between Scudder Development Fund, a corporation organized and
existing under the laws of Delaware, hereinafter called the "Fund", and Brown
Brothers Harriman & Co., hereinafter called the "Custodian",
WITNESSETH: That in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
I. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the Custodian of its assets
pursuant to the provisions of the Certificate of Incorporation. The Fund agrees
to deliver to the Custodian all securities and cash owned by it, and all
payments of income, payments of principal or capital distributions received by
it with respect to all securities owned by the Fund from time to time, and the
cash consideration received by it for such new or treasury shares of Capital
Stock, $1.00 par value, ("Shares") of the Fund as may be issued or sold from
time to time. The Custodian shall not be responsible for any property of the
Fund held or received by the Fund and not delivered to the Custodian.
The Custodian may from time to time employ one or more subcustodians, but
only in accordance with an applicable vote by the Directors of the Fund, and
provided that the Custodian shall have no more or less responsibility or
liability to the Fund on account of any actions or omissions of any
sub-custodian so employed than any such sub-custodian has to the Custodian.
<PAGE>
II. Duties of the Custodian with Respect to Property of the Fund Held by the
Custodian
A. Holding Securities. The Custodian shall hold and physically segregate for
the account of the Fund all non-cash property, including all securities
owned by the Fund, other than securities which are maintained pursuant to
Section L of Article II in a clearing agency which acts as a securities
depository or in a book-entry system authorized by the U.S. Department of
the Treasury, collectively referred to herein as "Securities Systems".
B. Delivery of Securities. The Custodian shall release and deliver securities
owned by the Fund held by the Custodian or in a Securities System account
of the Custodian only upon receipt of proper instructions, which may be
continuing instructions when deemed appropriate by the parties, and only in
the following cases:
1) Upon sale of such securities for the account of the Fund and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Fund.
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section L hereof.
4) To the depository agent in connection with tender or other
similar offers for portfolio securities of the Fund.
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5) To the Issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided
that, in any such case, the cash or other consideration is to be
delivered to the Custodian;
6) To the Issuer thereof, or its agent, for transfer into the name
of the Fund or into the name of any nominee or nominees of the
Custodian or into the name or nominee name of any agent appointed
pursuant to Section K of Article II or into the name or nominee
name of any sub-custodian appointed pursuant to Article I; or for
exchange for a different number of bonds, certificates or other
evidence representing the same aggregate face amount or number of
units; provided that, in any such case, the new securities are to
be delivered to the Custodian;
7) To the broker selling the same for examination in accordance with
the "street delivery" custom; provided that the Custodian shall
adopt such procedures, as the Fund from time to time shall
approve, to ensure their prompt return to the Custodian by the
broker in the event the broker elects not to accept them;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment
of the securities of the
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<PAGE>
Issuer of such securities, or pursuant to provisions for
conversion contained in such securities, or pursuant to any
deposit agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that, in
any such case, the new securities and cash, if any are to be
delivered to the Custodian;
10) For delivery in connection with any loans of securities made by
the Fund, but only against receipt of adequate collateral as
agreed upon from time to time by the Custodian and the Fund,
which may be in the form of cash or obligations issued by the
United States government, its agencies or instrumentalities;
11) For delivery as security in connection with any borrowings by the
Fund requiring a pledge of assets by the Fund, but only against
receipt of amounts borrowed;
12) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to
holders of shares in con-
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<PAGE>
nection with distributions in kind, as may be described from time
to time in the Fund's currently effective prospectus, in
satisfaction of requ6sts by holders of Shares for repurchase or
redemption; and
13) For any other proper corporate purposes, but only upon receipt
of, in addition to proper instructions, a certified copy of a
resolution of the Directors or of the Executive Committee signed
by an officer of the Fund and certified by the Secretary or an
Assistant Secretary, specifying the securities to be delivered,
setting forth the purpose for which such delivery is to be made,
declaring such purposes to be proper corporate purposes, and
naming the person or persons to whom delivery of such securities
shall be made.
C. Registration of Securities. Securities held by the Custodian (other than
bearer securities) shall be registered in the name of the Fund or in the
name of any nominee of the Fund or of any nominee of the Custodian which
nominee shall be assigned exclusively to the Fund, unless the Fund has
authorized in writing the appointment of a nominee to be used in common
with other registered investment companies having the same investment
adviser as the Fund, or in the name or nominee name of any agent appointed
pursuant to Section K of Article II or in the name or nominee name of any
sub-custodian
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<PAGE>
appointed pursuant to Article I. All securities accepted by the Custodian
on behalf of the Fund under the terms of this Contract shall be in "street"
or other good delivery form.
D. Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the name of the Fund, subject only to draft or order
by the Custodian acting pursuant to the terms of this Contract, and shall
hold in such account or accounts, subject to the provisions hereof, all
cash received by it from or for the account of the Fund, other than cash
maintained by the Fund in a bank account established and used in accordance
with Rule 17f-3 under the Investment Company Act of 1940. Funds held by the
Custodian for the Fund may be deposited by it to its credit as Custodian in
the Banking Department of the Custodian or in such other banks or trust
companies as it may in its discretion deem necessary or desirable;
provided, however, that every such bank or trust company shall be qualified
to act as a custodian under the Investment Company Act of 1940 and that
each such bank or trust company and the funds to be deposited with each
such bank or trust company shall be approved by vote of a majority of the
Directors of the Fund. Such funds shall be deposited by the Custodian in
its capacity as Custodian and shall be withdrawable by the Custodian only
in that capacity.
E. Payments for Shares. The Custodian shall receive from the distributor of
the Fund's Shares or from the Transfer Agent of the Fund and deposit into
the Fund's account such payments
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<PAGE>
as are received for Shares of the Fund issued or sold from time to time by
the Fund. The Custodian will provide timely notification to the Fund and
the Transfer Agent of any receipt by it of payments for Shares of the Fund.
F. Investment and Availability of Federal Funds. Upon mutual agreement between
the Fund and the Custodian, the Custodian shall, upon the receipt of proper
instructions, which may be continuing instructions when deemed appropriate
by the parties,
1) invest in such instruments as may be set forth in such
instructions on the same day as received all federal funds
received after a time agreed upon between the Custodian and the
Fund; and
2) make federal funds available to the Fund as of specified times
agreed upon from time to time by the Fund and the Custodian in
the amount of checks received in payment for Shares of the Fund
which are deposited into the Fund's account.
G. Collection of Income. The Custodian shall collect on a timely basis all
income and other payments with respect to registered securities held
hereunder to which the Fund shall be entitled either by law or pursuant to
custom in the securities business, and shall collect on a timely basis all
income and other payments with respect to bearer securities if on the date
of payment by the Issuer, such securities are held by the Custodian or
agent thereof and shall credit such income, as
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<PAGE>
collected, to the Fund1s custodian account. Without limiting the generality
of the foregoing, the Custodian shall detach and present for payment all
coupons and other income items requiring presentation as and when they
become due and shall collect interest when due on securities held
hereunder.
H. Payment of Fund Moneys. Upon receipt of proper instructions, which may be
continuing instructions when deemed appropriate by the parties, the
Custodian shall pay out moneys of the Fund in the following cases only:
1) Upon the purchase of securities for the account of the Fund but
only (a) against the delivery of such securities to the Custodian
(or any bank, banking firm or trust company doing business in the
United States or abroad which is qualified under the Investment
Company Act of 1940, as amended, to act as a custodian and has
been designated by the Custodian as its agent for this purpose)
registered in the name of the Fund or in the name of a nominee of
the Custodian referred to in Section C of Article II hereof or in
proper form for transfer; (b) in the case of a purchase effected
through a Securities System, in accordance with the conditions
set forth in Section L of Article II hereof or (c) in the case of
repurchase agreements entered into between the Fund and the
Custodian, or another bank, (i) against delivery of the
securities either in
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<PAGE>
certificate form or through an entry crediting the Custodian's
account at the Federal Reserve Bank with such securities or (ii)
against delivery of the receipt evidencing purchase by the Fund
of securities owned by the Custodian or other bank along with
written evidence of the agreement by the Custodian or other bank
to repurchase such securities from the Fund;
2) In connection with conversion, exchange or surrender of
securities owned by the Fund as set forth in Section B of Article
II hereof;
3) For the redemption or repurchase of Shares issued by the Fund as
set forth in Section J of Article II hereof;
4) For the payment of any expense or liability incurred by the Fund,
including but not limited to the following payments for the
account of the Fund: interest, taxes management, accounting,
transfer agent and legal fees, and operating expenses of the Fund
whether or not such expenses are to be in whole or part
capitalized or treated as deferred expenses;
5) For the payment of any dividends declared pursuant to the
governing documents of the Fund;
6) For any other proper purposes, but only upon receipt of, in
addition to proper instructions, a certified
-9-
<PAGE>
copy of a resolution of the Directors or of the Executive
Committee of the Fund signed by an officer of the Fund and
certified by its Secretary or an Assistant Secretary, specifying
the amount of such payment, setting forth the purpose for which
such payment is to be made, declaring such purpose to be a proper
purpose, and naming the person or persons to whom such payment is
to be made.
I. Liability for Payment in Advance of Receipt of Securities Purchased. In any
and every case where payment for purchase of securities for the account of
the Fund is made by the Custodian in advance of receipt of the securities
purchased in the absence of specific written instructions from the Fund to
so pay in advance, the Custodian shall be absolutely liable to the Fund for
such securities to the same extent as if the securities had been received
by the Custodian, except that in the case of repurchase agreements entered
into by the Fund with a bank which is a member of the Federal Reserve
System, the Custodian may transfer funds to the account of such bank prior
to the receipt of written evidence that the securities subject to such
repurchase agreement have been transferred by book-entry into a segregated
non-proprietary account of the Custodian maintained with the Federal
Reserve Bank of Boston or of the safe-keeping receipt, provided that such
securities have in fact been so transferred by book-entry.
-10-
<PAGE>
J. Payments for Repurchases or Redemptions of Shares of the Fund. From such
funds as may be available for the purpose but subject to the limitations of
the Certificate of Incorporation and any applicable votes of the Directors
of the Fund pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for payment to
holders of Shares who have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the redemption
or repurchase of Shares of the Fund, the Custodian, if authorized by the
Directors of the Fund, may, upon receipt of instructions from the Transfer
Agent, wire funds to or through a commercial bank designated by the
redeeming shareholders. In connection with the redemption or repurchase of
Shares of the Fund, the Custodian shall, upon receipt of proper
instructions, honor checks drawn on the Custodian by a holder of Shares,
which checks have been furnished by the Fund to the holder of Shares, when
presented to the Custodian in accordance with such procedures and controls
as are mutually agreed upon from time to time between the Fund and the
Custodian.
K. Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of 1940,
as amended, to act as a custodian, as its agent to carry out such of the
provisions of this Article II as the Custodian may from time to time
-11-
<PAGE>
direct; provided, however, that the appointment of any agent shall not
relieve the Custodian of any of its responsibilities or liabilities
hereunder.
L. Deposit of Fund Assets in Securities Systems. The Custodian may deposit
and/or maintain securities owned by the Fund in a clearing agency
registered with the Securities and Exchange Commission under Section 17A of
the Securities Exchange Act of 1934, which acts as a securities depository,
or in the book-entry system authorized by the U.S. Department of the
Treasury and certain federal agencies, collectively referred to herein as
"Securities Systems" in accordance with applicable Federal Reserve Board
and Securities and Exchange Commission rules and regulations, if any, and
subject to the following provisions:
1) The Custodian may keep securities of the Fund in a Securities
System provided that such securities are represented in an
account ("Account") of the Custodian in the Securities System
which shall not include any assets of the Custodian other than
assets held as a fiduciary, custodian, or otherwise for
customers.
2) The records of the Custodian with respect to securities of the
Fund which are maintained in a Securities System shall identify
by book-entry those securities belonging to the Fund.
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<PAGE>
3) The Custodian shall pay for securities purchased for the account
of the Fund upon (i) receipt of advice from the Securities System
that such securities have been transferred to the Account, and
(ii) the making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of the Fund.
The Custodian shall transfer securities sold for the account of
the Fund upon (i) receipt of advice from the Securities System
that payment for such securities has been transferred to the
Account, and (ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the account of
the Fund. Copies of all advices from the Securities System of
transfers of securities for the account of the Fund shall
identify the Fund, be maintained for the Fund by the Custodian
and be provided to the Fund at its request. The Custodian shall
furnish the Fund confirmation of each transfer to or from the
account of the Fund in the form of a written advice or notice and
shall furnish to the Fund copies of daily transaction sheets
reflecting each day's transactions in the Securities System for
the account of the Fund on the next business day.
4) The Custodian shall provide the Fund with any report obtained by
the Custodian on the Securities System's
-13-
<PAGE>
accounting system, internal accounting control and procedures for
safeguarding securities deposited in the Securities System.
5) The Custodian shall have received the initial or annual
certificate, as the case may be, required by Article IX hereof.
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for any loss or damage to
the Fund resulting from use of the Securities System by reason of
any negligence, misfeasance or misconduct of the Custodian or any
of its agents or of any of its or their employees or from any
failure of the Custodian or any such agent to enforce effectively
such rights as it may have against the Securities System; at the
election of the Fund, it shall be entitled to be subrogated to
the rights of the Custodian with respect to any claim against the
Securities System or any other person which the Custodian may
have as a consequence of any such loss or damage if and to the
extent that the Fund has not been made whole for any such loss or
damage.
M. Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and state
tax purposes in connection with receipt of income or other payments with
respect to securities of
-14-
<PAGE>
the Fund held by it and in connection with transfers of securities.
N. Proxies. The Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed by the registered holder of such
securities, if the securities are registered otherwise than in the name of
the Fund or a nominee of the Fund, all proxies, without indication of the
manner in which such proxies are to be voted, and shall promptly deliver to
the Fund such proxies, all proxy soliciting materials and all notices
relating to such securities.
0. Communications Relating to Fund Portfolio Securities. The Custodian shall
transmit promptly to the Fund all written information (including, without
limitation, pendency of calls and maturities of securities and expirations
of rights in connection therewith) received by the Custodian from issuers
of the securities being held for the Fund. With respect to tender or
exchange offers, the Custodian shall transmit promptly to the Fund all
written information received by the Custodian from issuers of the
securities whose tender or exchange is sought and from the party (or his
agents) making the tender or exchange offer. If the Fund desires to take
action with respect to any tender offer, exchange offer or any other
similar transaction, the Fund shall notify the Custodian at least three
business days prior to the date on which the Custodian is to take such
action.
-15-
<PAGE>
P. Proper Instructions. "Proper instructions" as used throughout this Article
II means a writing signed or initialled by one or more person or persons as
the Directors shall have from time to time authorized. Each such writing
shall set forth the specific transaction or type of transaction involved,
including a specific statement of the purpose for which such action is
requested. Oral instructions will be considered proper instructions if the
Custodian reasonably believes them to have been given by a person
authorized to give such instructions with respect to the transaction
involved. The Fund shall cause all oral instructions to be confirmed in
writing. Upon receipt of a certificate of the Secretary or an Assistant
Secretary as to the authorization by the Directors of the Fund accompanied
by a detailed description of procedures approved by the Directors, "proper
instructions" may include communications effected directly between
electro-mechanical or electronic devices provided that the Directors and
the Custodian are satisfied that such procedures afford adequate safeguards
for the Fund's assets.
Q. Actions Permitted without Express Authority. The Custodian may in its
discretion, without express authority from the Fund:
1) make payments to itself or others for minor expenses of handling
securities or other similar relating to its duties under this
contract, provided that all such payments shall be accounted for
to the Fund;
-16-
<PAGE>
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Fund, checks, drafts
and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and
other dealings with the securities and property of the Fund
except as otherwise directed by the Directors of the Fund.
R. Evidence of Authority. The Custodian shall be protected in acting upon any
instructions, notice, request, consent, certificate or other instrument or
paper believed by it to be genuine and to have been properly executed by or
on behalf of the Fund. The Custodian may receive and accept a certified
copy of a vote of the Directors of the Fund as conclusive evidence (a) of
the authority of any person to act in accordance with such vote or (b) of
any determination or of any action by the Directors pursuant to the
Certificate of Incorporation as described in such vote, and such vote may
be considered as in full force and effect until receipt by the Custodian of
written notice to the contrary.
III. Duties of Custodian with Respect to Books of Account and Calculation of Net
Asset Value and Net Income
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Directors of the Fund to keep the books of
account of the Fund and/or com-
-17-
<PAGE>
pute the net asset value per share of the outstanding shares of the Fund or, if
directed in writing to do so by the Fund, shall itself keep such books of
account and/or compute such net asset value per share. The calculations of the
net asset value per share of the Fund shall be made at the time or times
described from time to time in the Fund's currently effective prospectus.
IV. Records
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31a-l and 31a-2 thereunder,
applicable federal and state tax laws and any other law or administrative rules
or procedures which may be applicable to the Fund. All such records shall be the
property of the Fund and shall at all times during the regular business hours of
the Custodian be open for inspection by duly authorized officers, employees or
agents of the Fund and employees and agents of the Securities and Exchange
Commission. The Custodian shall, at the Fund's request, supply the Fund with a
tabulation of securities owned by the Fund and held by the Custodian and shall,
when requested to do so by the Fund and for such compensation as shall be agreed
upon between the Fund and the Custodian, include certificate numbers in such
tabulations.
V. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the Fund may from time
to time request, to obtain from year to year favor-
-18-
<PAGE>
able opinions from the Fund's independent accountants with respect to its
activities hereunder in connection with the preparation of the Fund's Form N-l,
and Form N-1R or other annual reports to the Securities and Exchange Commission
and with respect to any other requirements of such Commission.
VI. Reports to Fund by Independent Public Accountants
The Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for safeguarding
securities, including securities deposited and/or maintained in a Securities
System, relating to the services provided by the Custodian under this Contract;
such reports, which shall be of sufficient scope and in sufficient detail, as
may reasonably be required by the Fund, to provide reasonable assurance that any
material inadequacies would be disclosed, shall state in detail material
inadequacies disclosed by such examination, and, if there are no such
inadequacies, shall so state.
VII. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its services
and expenses as Custodian, as agreed upon from time to time between the Fund and
the Custodian.
VIII. Responsibility of Custodian
So long as and to the extent that it is in the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of
-19-
<PAGE>
title thereto received by it or delivered by it pursuant to this Contract and
shall be held harmless in acting upon any notice, request1 consent, certificate
or other instrument reasonably believed by it to be genuine and to be signed by
the proper party or parties. The Custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Contract, but shall be
kept indemnified by and shall be without liability to the Fund for any action
taken or omitted by it in good faith without negligence. It shall be entitled to
rely on and may act upon advice of counsel (who may be counsel for the Fund) on
all matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice. Notwithstanding the foregoing, the
responsibility of the Custodian with respect to redemptions effected by check
shall be in accordance with a separate Agreement entered into between the
Custodian and the Fund.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned to
the Fund being liable for the payment of money or incurring liability of some
other form, the Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
IX. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution, shall continue in
full force and effect until terminated as here-
-20-
<PAGE>
inafter provided, may be amended at any time by mutual agreement of the parties
hereto and may be terminated by either party by an instrument in writing
delivered or mailed, postage prepaid to the other party, such termination
to take effect not sooner than thirty (30) days after the date of such delivery
or mailing; provided, however that the Custodian shall not act under Section L
of Article II hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Directors of the Fund have approved
the initial use of a particular Securities System and the receipt of an annual
certificate of the Secretary or an Assistant Secretary that the Directors have
reviewed the use by the Fund of such Securities System, as required in each case
by Rule 17f-4 under the Investment Company Act of 1940, as amended; provided
further, however, that the Fund shall not amend or terminate this Contract in
contravention of any applicable federal or state regulations, or any provision
of the Certificate of Incorporation, and further provided, that the Fund may at
any time by action of its Directors (i) substitute another bank or trust company
for the Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the Currency or
upon the happening of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian such
compensation as may be due as of the date of such
-21-
<PAGE>
termination and shall likewise reimburse the Custodian for its costs, expenses
and disbursements.
X. Successor Custodian
If a successor custodian shall be appointed by the Directors of the Fund,
the Custodian shall, upon termination, deliver to such successor custodian at
the office of the Custodian, duly endorsed and in the form for transfer, all
securities then held by it hereunder.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Directors of the
Fund, deliver at the office of the Custodian such securities, funds and other
properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Directors shall have been delivered to the
Custodian on or before the date when such termination shall become effective,
then the Custodian shall have the right to deliver to a bank or trust company,
which is a "bank" as defined in the Investment Company Act of 1940, doing
business in Boston, Massachusetts, of its own selection, having an aggregate
capital, surplus, and undivided profits, as shown by its last published report,
of not less than $25,000,000, all securities, funds and other properties held by
the Custodian and all instruments held by the Custodian relative thereto and all
other property held by it under this Contract. Thereafter, such bank or trust
company shall be the successor of the Custodian under this Contract.
-22-
<PAGE>
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of vote referred to or of the
Directors to appoint a successor custodian, the Custodian shall be entitled to
fair compensation for its services during such period as the Custodian retains
possession of such securities, funds and other properties and the provisions of
this Contract relating to the duties and obligations of the Custodian shall
remain in full force and effect.
XI. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and the
Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the Certificate of Incorporation of the Fund. No interpretive or additional
provisions made as provided in the preceding sentence shall be deemed to be an
amendment of this Contract.
XII. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with the laws of the Commonwealth of Massachusetts.
-23-
<PAGE>
XIII. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund and the Custodian relating to the custody of the
Fund's assets.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 1st day of April, 1980.
SEAL SCUDDER DEVELOPMENT FUND
By /s/ David S. Lee
-------------------------------------
SEAL per pro BROWN BROTHERS HARRIMAN & CO.
By /s/ C.A. Doyle
-------------------------------------
-24-
EXHIBIT 8(a)(2)
<PAGE>
BROWN BROTHERS, HARRIMAN & CO.
10 Post Office Square
Boston, Massachusetts
October 26, 1970
Scudder Development Fund
345 Park Avenue
New York, New York 10022
Schedule of Fees
Dear Sirs:
With reference to Section 21 of the Custodian Agreement between you and
Brown Brothers, Harriman & Co. (the "Custodian") dated October 12, 1970, this is
to confirm that the quarterly fee of the Custodian will be calculated by
reference to the following schedule until further notice from the Custodian:
Average Assets Quarterly Fee as a Per
during Quarter Percentage of Such Assets
-------------- -------------------------
First $ 1,000,000 ..................... 0.050%
Next $29,000,000 ..................... 0.010%
Next $10,000,000 ..................... 0.009%
Next $10,000,000 ..................... 0.008%
Next $50,000,000 ..................... 0.007%
The Custodian agrees that until further notice from it the quarterly fee
otherwise payable to it under the above schedule will be reduced by an amount
equal to (a) 33 1/3%* of the brokerage commissions earned by the Custodian on
orders for the purchase and sale of portfolio securities placed by you with the
Custodian in the fiscal year of the Custodian in which such quarter falls, less
(b) the amount by which the fee for any prior quarter of such
* 1/2 as of July 1, 1978.
<PAGE>
Scudder Development Fund -2- October 26, 1970
fiscal year may have been so reduced, provided that no such quarterly fee will
be reduced by more than 75%.
Very truly yours,
BROWN BROTHERS, HARRIMAN & CO.
By /s/ [ILLEGIBLE]
--------------------------------------
The foregoing schedule and
agreement to reduce the fee
otherwise payable to the
Custodian is hereby agreed
to.
SCUDDER DEVELOPMENT FUND
By /s/ David S. Lee
--------------------------
EXHIBIT 8(b)(1)
<PAGE>
SUBCUSTODIAN AGREEMENT
AGREEMENT dated as of January 30, 1979, between Brown Brothers Harriman &
Co. (the "Custodian"), and The Bank of New York, London office (the
"Subcustodian").
WITNESSETH:
WHEREAS, the Custodian has entered into a custodian agreement with Scudder
Development Fund ("Fund") dated October 12, 1970;
WHEREAS, the Custodian desires to utilize Subcustodian for the purpose of
holding cash and securities outside the United States;
WHEREAS, the Subcustodian is a bank within the meaning of Section 2(a)(5)
of the Investment Company Act of 1940 having an aggregate capital, surplus and
undivided profits of not less than Two Million Dollars ($2,000,000);
NOW, THEREFORE, the Custodian and Subcustodian hereby agree as follows:
I. The Custodian may from time to time deposit securities or cash with the
Subcustodian. The Subcustodian shall not be responsible for any property of the
Fund not delivered to the Subcustodian.
<PAGE>
II. The Subcustodian shall hold and dispose of the securities hereafter held by
or deposited with the Subcustodian as follows:
A. The Subcustodian shall hold in a separate account, and physically
segregated at all times from those of any other persons, firms or corporations,
pursuant to the provisions hereof, all securities received by it for the account
of the Custodian as custodian for the Fund. If any securities are registered in
nominee name, such nominee name shall be used solely for the Fund. All such
securities are to be held or disposed of by the Subcustodian for, and subject at
all times to, the instructions of the Custodian pursuant to the terms of this
Agreement.
B. Upon receipt of instructions from the Custodian, the Subcustodian shall
release or deliver securities owned by the Fund only for the following purposes:
(1) upon sale of securities for the account of the Fund against
receipt of payment therefor by cash, certified or cashier's check, or bank
credit;
(2) to the issuer thereof or its agent when securities are called,
redeemed, retired or otherwise become payable, provided that the cash is to
be delivered to the Subcustodian;
(3) for exchange for a different number of bonds or certificates
representing the same aggregate face amount or number of units, for
exchange or conversion pursuant to any plan of merger, consolidation,
recapitalization, reorganization or readjustment of the securities of the
issuer of such securities, or pursuant to provisions for conversion
contained
2
<PAGE>
in such securities, or pursuant to any deposit agreement; provided that, in
any such case, the new securities and cash, if any, are to be delivered to
the Subcustodian;
(4) in the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or similar
securities; provided that the surrender of interim receipts or temporary
securities for definitive securities may be made at any time; provided
that, in any such case, the new securities are to be delivered to the
Sub-custodian;
(5) in the case of tender offers or similar offers to purchase
received in writing, the delivery of securities to the designated
depository or other receipt agent. The Sub-custodian shall have full
responsibility for transmitting to the Custodian any such offers received
by it. Thereafter, the Custodian, if it desires to respond to such offer,
shall have full responsibility for providing the Subcustodian with all
necessary instructions in timely enough fashion for the Subcustodian to act
thereon prior to any expiration time for such offer;
(6) upon receipt from the Custodian of instructions directing
disposition of securities in a manner other than or for purposes other than
the manners and purposes enumerated in the foregoing five items; provided,
however, that disposition pursuant to this item (6) shall be made by the
Subcustodian only upon receipt of instructions from the Custodian
specifying
-3-
<PAGE>
the amount of such securities to be delivered, the purpose for which the
delivery is to be made, and the name of the person or persons to whom such
delivery is to be made.
III. The Subcustodian shall hold and dispose of cash hereafter held by or
deposited with the Subcustodian as follows:
A. The Subcustodian shall open and maintain a separate account or accounts
in the name of the Custodian as custodian for the Fund, subject only to draft or
order by the Subcustodian acting pursuant to the terms of this Agreement. The
Subcustodian shall hold in such account or accounts, subject to the provisions
hereof, all cash received by it for the account of the Custodian as custodian
for the Fund.
B. Upon receipt of instructions from the Custodian, the Subcustodian shall
make payments of cash for the account of the Fund from such cash only for the
following purposes:
(1) upon the purchase of securities for the account of the Fund but
only against the delivery of such securities to the Subcustodian;
(2) in connection with the subscription, conversion, exchange, tender
or surrender of securities owned by the Fund as set forth in Paragraph IIB
hereof; and
(3) for deposit with the Custodian or with such other banking
institutions as may from time to time be approved by the Fund.
IV. All instructions shall be in writing executed by the Custodian, and the
Subcustodian shall not be required to act on instructions otherwise
communicated; provided, however, that the Sub-
-4-
<PAGE>
custodian may in its discretion act on the basis of instructions received via
telecommunications facilities if the Subcustodian reasonably be1ieves such
instructions to have been dispatched by the Custodian. The Subcustodian may
require that instructions received via telecommunications facilities be
authenticated. The Subcustodian shall be protected in acting upon any
instructions, notice, request, consent, certificate or other instrument or paper
reasonably believed by it to be genuine and to have been properly executed. The
Subcustodian may receive and accept a signature circular signed by a partner of
the Custodian as conclusive evidence of the authority of any person to act on
behalf of the Custodian, and such signature circular may be considered as in
full force and effect until receipt by the Subcustodian of written notice to the
contrary.
V. Unless and until the Subcustodian receives instructions from the Custodian to
the contrary, the Subcustodian shall:
A. Present for payment all coupons and other income items held by it for
the account of the Custodian as custodian for the Fund which call for payment
upon presentation and hold the cash received by it upon such payment for the
account of the Custodian as custodian for the Fund;
B. Collect interest and cash dividends received, with notice to the
Custodian, for the account of the Custodian as custodian for the Fund;
C. Hold for the account of the Custodian as custodian for the Fund
hereunder all stock dividends, rights and similar securities issued with respect
to any securities held by it hereunder.
-5-
<PAGE>
VI. The Subcustodian shall execute on behalf of the Custodian, in the Fund's
name, any declarations, affidavits, or certificates of ownership which may be
necessary or useful from time to time for the Subcustodian to perform any or
several of its obligations arising under the provisions of this Agreement.
VII. If the Subcustodian shall receive any notices or reports in respect of
securities held by it hereunder, it shall promptly upon receipt thereof transmit
to the Custodian by airmail, telecommunications facilities, or comparable means
any such notices or reports.
VIII. The Subcustodian may, from time to time, appoint (and may at any time
remove) any bank or trust company as its agent for purposes of acquiring or
disposing of securities or carrying out such provisions of this Agreement as the
Subcustodian may, from time to time, direct; provided that the Subcustodian
shall be fully liable to the Custodian for the acts or omissions of such agents
to the same extent as if the acts or omissions of the agents were the acts or
omissions of the Subcustodian.
IX. On each day on which there is a cash or securities transaction over the
account of the Custodian as custodian for the Fund, the Subcustodian shall
dispatch to the Custodian (and to the Fund if requested) separate cash and
securities advices. The Subcustodian shall furnish to the Custodian, as
Custodian for the Fund, at the end of every month a statement of the cash and
securities held by the Subcustodian and any agent for the Subcustodian. Such
statements shall be sent by air mail, telecommunications facilities or
comparable means to the Custodian within 15 days after the end of each month.
-6-
<PAGE>
The Subcustodian shall furnish the Custodian with such additional statements as
the Custodian may reasonably request.
X. As compensation for the services rendered pursuant to this Agreement, the
Custodian shall pay the Subcustodian a fee computed in accordance with the
schedule attached hereto as Exhibit A, as such schedule may be amended from time
to time by written agreement between the Custodian and the Subcustodian. The
Custodian shall reimburse the Subcustodian for any reasonable out-of-pocket
expenses incurred by the Subcustodian in connection with its obligations
hereunder.
XI. Upon request, the Custodian shall deliver, or shall request the Fund to
deliver, to the Subcustodian, such proxies, powers-of-attorney or other
instruments as may be necessary or desirable in connection with the performance
by the Subcustodian of its obligations under this Agreement.
XII. So long as and to the extent that it is in the exercise of reasonable care,
the Subcustodian shall not be responsible for the title, validity or genuineness
of any property or evidence of title thereto received by it or delivered by it
pursuant to this Agreement. The Subcustodian shall not be liable for any action
taken or omitted in good faith upon any notice, request, certificate or other
instrument reasonably believed by it to be genuine and to be signed by the
proper party or parties. The Subcustodian shall be obligated to exercise
reasonable care and diligence in carrying out the provisions of this Agreement
and shall be without liability for any action taken or thing done by it in good
faith
-7-
<PAGE>
and without negligence, the standard for which shall be that applicable to a
bailee for hire under Massachusetts law. Notwithstanding the foregoing, the
Subcustodian shall not be liable for (a) any violation by the Fund of any
limitation applicable to its powers to make expenditures, to invest in or pledge
securities or to borrow which does not involve action by the Subcustodian, and
(b) any violation by the Fund of any limitation applicable to its powers to make
investments, to invest in or pledge securities or to borrow which involves
action by the Subcustodian, provided that such action was authorized in
accordance with Paragraphs II, III or IV hereof. The Sub-custodian shall be
entitled to and may act upon advice of counsel (who may be counsel for the Fund)
on all matters, and shall be without liability for any action reasonably taken
or omitted pursuant to such advice.
XIII. This Agreement may be terminated at any time by the Custodian or the
Subcustodian by giving written notice to the other party at least thirty (30)
days prior to the date on which such termination is to become effective. In the
event of termination, the Subcustodian will deliver any securities held by it or
any agent to the Custodian or to such successor subcustodian as the Custodian
shall instruct in a manner to be mutually agreed upon by the parties hereto or,
in the absence of such agreement, in a reasonable manner. Further in the event
of termination, the Subcustodian shall be entitled to receive prior to the
delivery of the securities held by it or any agent all accrued fees and
unreimbursed expenses the payment of which is contemplated by
-8-
<PAGE>
Paragraph X hereof upon receipt by the Custodian of a final statement setting
forth such fees and expenses.
XIV. Except as the parties shall from time to time otherwise agree, all
instructions, notices, reports and other communications contemplated by this
Agreement shall be dispatched as follows:
If to the Custodian: Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
Attention: Manager, Securities
Department
Telex No.: 940709
If to the Subcustodian: The Bank of New York
147 Leadenhall Street
London EC3V 4PN, England
Attention: Derrick H. Stubbs
Telex No.: 884501
XV. This Agreement constitutes the entire understanding and agreement of the
parties hereto, and neither this Agreement nor any provisions hereof may be
changed, waived, discharged or terminated except by a statement in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought.
XVI. This Agreement shall be binding upon and shall inure to the benefit of the
Custodian and the Subcustodian and their successors and assignees provided that
neither the Custodian nor the Subcustodian may assign this Agreement or any of
the rights or obligations hereunder without the prior written consent of the
other party.
XVII. This Agreement shall be construed in accordance with and governed by the
laws of the Commonwealth of Massachusetts. The parties hereto agree that
notwithstanding any provision or provisions of this Agreement of apparent
contrary effect, the Sub-custodian shall have no obligation to take any action
which is
-9-
<PAGE>
contrary to any one or several provisions of the laws, orders or regulations of
England. The Subcustodian shall not be liable for any expense or damage to the
Custodian or the Fund that may result from violation of any or several of the
foregoing laws, orders and regulations, except as such expense or damage is
caused by the wilful misconduct or negligence of the Subcustodian.
XVIII. This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which shall constitute one and the same
instrument. This Agreement shall become effective when one or more counterparts
have been signed and delivered by each of the parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
BROWN BROTHERS HARRIMAN & CO.
(the "Custodian")
Per Pro /s/ C. A. Doyle
---------------------------------
THE BANK OF NEW YORK
(the "Subcustodian")
By /s/ [ILLEGIBLE]
--------------------------------------
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EXHIBIT 8(b)(2)
<PAGE>
SCHEDULE A
TO SUBCUSTODIAN AGREEMENT
BETWEEN BROWN BROTHERS HARRIMAN & CO.
AND THE BANK OF NEW YORK
The fee pursuant to Section X shall be $25.00 for each transfer of a
security into or out of the Subcustodian account.
Dated: January 30, 1979
-11-
EXHIBIT 9(a)(1)
TRANSFER AGENCY AND SERVICE AGREEMENT
between
SCUDDER DEVELOPMENT FUND
and
SCUDDER SERVICE CORPORATION
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of October 2, 1989, by and between SCUDDER DEVELOPMENT
FUND, a Massachusetts business trust, having its principal office and place of
business at 175 Federal Street, Boston, Massachusetts 02110 (the "Company") and
SCUDDER SERVICE CORPORATION, a Massachusetts corporation, having its principal
office and place of business at 160 Federal Street, Boston, Massachusetts 02110
(the "Agent").
WHEREAS, the Company desires to appoint the Agent as a transfer agent,
dividend disbursing agent and agent in connection with certain other activities
and the Agent desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
Article 1. Terms of Appointment: Duties of the Agent.
1.01. Subject to the terms and conditions set forth in this Agreement, the
Company hereby employs and appoints the Agent to act as, and the Agent agrees to
act as, transfer agent for the Company's authorized and issued shares of
beneficial interest ("Shares"), dividend disbursing agent and agent in
connection with any accumulation, open-account or similar plans provided to the
shareholders of the Company ("Shareholders") set out in a currently effective
prospectus ("Prospectus") or currently effective statement of additional
information ("Statement of Additional Information") of the Company, including
without limitation any periodic investment plan or periodic withdrawal program.
If the Company offers two or more series of Shares as of the date hereof, the
term "Company" shall be deemed to apply to each series of Shares, unless the
context otherwise requires.
1.02. The Agent agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Company and the Agent, the Agent shall:
(i) Receive for acceptance orders for the purchase of Shares and
promptly deliver payment and appropriate documentation
thereof to the duly authorized custodian of the Company (the
"Custodian").
(ii) Pursuant to orders for the purchase of Shares, record the
purchase of the appropriate number of Shares in the
Shareholder's account and, if requested by the Shareholder,
and if the Trustees of the Company have authorized the
issuance of stock certificates, issue a certificate for the
appropriate number of Shares;
<PAGE>
(iii) Pursuant to instructions provided by the Shareholders,
reinvest income dividends and capital gain distributions;
(iv) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation thereof
to the Custodian;
(v) Provide an appropriate response to Shareholders with respect
to all correspondence and rejected trades;
(vi) At the appropriate time as and when it receives monies paid
to it by the Custodian with respect to any redemption, pay
over or cause to be paid over in the appropriate manner such
monies as instructed by the redeeming Shareholders;
(vii) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(viii) Prepare and transmit payments for dividends and
distributions declared by the Company;
(ix) Report abandoned property to the various states as
authorized by the Company in accordance with policies and
principles agreed upon by the Company and Agent;
(x) Maintain records of account for and advise the Company and
its Shareholders as to the foregoing;
(xi) Record the issuance of Shares of the Company and maintain an
accurate control book with respect to Shares pursuant to SEC
Rule 17Ad-10(e) under the Securities Exchange Act of 1934.
The Agent shall also provide the Company on a regular basis
with the total number of Shares which are issued and
outstanding and shall have no obligation, when recording the
issuance of Shares, to monitor the issuance of such Shares
or to take cognizance of any laws relating to the issue or
sale of such Shares, which functions shall be the sole
responsibility of the Company;
(xii) Respond to all telephone inquiries from shareholders or
their authorized representatives regarding the status of
Shareholder accounts;
(xiii) Respond to correspondence from Shareholders or their
authorized representatives regarding the status of
Shareholder accounts or information related to Shareholder
accounts; and
-2-
<PAGE>
(xiv) Perform all Shareholder account maintenance updates.
(b) In addition to and neither in lieu nor in contravention of the
services set forth in the above paragraph (a), the agent shall: (i) perform the
customary services of a transfer agent, dividend disbursing agent and, as
relevant, agent in connection with accumulation, open-account or similar plans
(including without limitation any periodic investment plan or periodic
withdrawal program). The detailed definition, frequency, limitations and
associated costs (if any) set out in the attached fee schedule, include but are
not limited to: maintaining all Shareholder accounts, preparing Shareholder
meeting lists, mailing proxy statements and proxies, receiving and tabulating
proxies, mailing shareholder reports and prospectuses to current Shareholders,
and withholding all applicable taxes (including but not limited to all
withholding taxes imposed under the U.S. Internal Revenue Code and Treasury
regulations promulgated thereunder, and applicable state and local laws to the
extent consistent with good industry practice), preparing and filing U.S.
Treasury Department Forms 1099, Form 941 when applicable and other appropriate
forms required with respect to dividends, distributions, and taxes withheld on
Shareholder accounts by federal authorities for all registered Shareholders,
preparing and mailing confirmation forms and statements of account to
Shareholders for all purchases and redemptions of Shares and other confirmable
transactions in Shareholder accounts, preparing and mailing activity statements
for Shareholders, and providing Shareholder account information, (ii) provide
daily and monthly a written report and access to information which will enable
the Company to monitor the total number of shares sold and the aggregate public
offering price thereof in each State by the Company, added by sales in each
State of the registered Shareholder or deader branch office, as defined by the
Company, and (iii) if directed by the Company, (A) each confirmation of the
purchase which establishes a new account will be accompanied by a Prospectus and
any amendment or supplement thereto, and (B) a Prospectus, and any amendment or
supplement thereto, will be mailed to each Shareholder at the time a
confirmation of the first purchase by such Shareholder, subsequent to the
effective date of a Prospectus or any amendment or supplement thereto, is mailed
to such Shareholders.
(c) In addition, the Company shall (i) identify to the Agent in
writing those transactions and assets to be treated as exempt from blue sky
reporting to the Company for each state and approve those transactions to be
included for each state on the blue sky system prior to activation and
thereafter monitor the daily activity for each state. The responsibility of the
Agent for the Company's blue sky State registration status is solely limited to
the initial establishment of transactions subject to blue sky compliance by the
Company and the reporting of such transactions as provided above.
-3-
<PAGE>
(d) The Agent shall utilize a system to identify all share
transactions which involve purchase and redemption orders that are processed at
a time other than the time of the computation of net asset value per share next
computed after receipt of such orders, and shall compute the net effect upon the
Company of such transactions so identified on a daily and cumulative basis.
(e) The Agent shall supply to the Company from time to time, as
mutually agreed upon, reports summarizing the transactions identified pursuant
to paragraph (d) above, and the daily and cumulative net effects of such
transactions, and shall advise the Company at the end of each month of the net
cumulative effect at such time. The Agent shall promptly advise the Company if
at any time the cumulative net effect exceeds a dollar amount equivalent to 1/2
of 1 cent per outstanding Share.
(f) The Agent shall make appropriate arrangements with banking
institutions in connection with effecting timely redemptions of shares by the
Write-A-Check redemption feature described in the Company's Prospectus and
Statement of Additional Information.
1.03. The Agent's offices, personnel and computer and other equipment shall
be adequate to perform the services contemplated by this Agreement for the
Company and for other investment companies advised by Scudder, Stevens & Clark,
Inc. and its affiliates. The Agent shall notify the Company in the event that it
proposes to provide such services for any investment companies or other entities
other than those managed by Scudder, Stevens & Clark, Inc. and its affiliates.
Article 2. Fees and Expenses
2.01. For the performance by the Agent pursuant to this Agreement, the
Company agrees to pay the Agent an annual maintenance fee for each Shareholder
account as set out in a fee schedule agreed to by both parties in writing. Such
fees and out-of-pocket expenses and advances identified under Section 2.02 below
may be charged from time to time subject to mutual written agreement between the
Company and the Agent, as approved by a majority of the Trustees who are not
"interested persons" (as defined in the Investment Company Act of 1940) of the
Company.
2.02. In addition to the fee paid under Section 2.01. above, the Company
agrees to reimburse the Agent for out-of-pocket expenses or advances incurred by
the Agent for the items set out in the fee schedule agreed to by both parties in
writing. In addition, any other expenses incurred by the Agent at the request or
with the consent of the Company will be reimbursed by the Company.
2.03. The Company agrees to pay all fees and reimbursable expenses
promptly, the terms, method and procedures for which are detailed on the fee
schedule agreed to by both parties in writing. Postage for mailing of dividends,
proxy statements, Company reports and other mailings to all Shareholders
accounts shall be advanced to
-4-
<PAGE>
to the Agent by the Company at least two (2) days prior to the mailing date o
such materials.
2.04. The Company may engage accounting firms or other consultants to
evaluate the fees paid by the Company and quality of services rendered by the
Servicing Company hereunder, and such firms or other consultants shall be
provided access by the Servicing Company to such information as may be
reasonably required in connection with such engagement. The Servicing Company
will give due consideration and regard to the recommendations to the Company in
connection with such engagement, but shall not be bound thereby.
Article 3. Representations and Warranties of the Agent.
The Agent represents and warrants to the Company that:
3.01. It is a corporation duly organized and existing and in good standing
under the laws of The Commonwealth of Massachusetts.
3.02. It has the legal power and authority to carry on its business in The
Commonwealth of Massachusetts.
3.03. It is empowered under applicable laws and by its charter and by-laws
to enter into and perform this Agreement.
3.04. All requisite proceedings have been taken to authorize it to enter
into and perform this Agreement.
3.05. It is duly registered as a transfer agent under Section 17A of the
Securities Exchange Act of 1934, as amended.
3.06. It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
Article 4. Representations and Warranties of the Company.
The Company represents and warrants to the Agent that:
4.01. It is a business trust duly organized and existing an in good
standing under the laws of Massachusetts.
4.02. It is empowered under applicable laws and by its Declaration of Trust
and By-Laws to enter into and perform this Agreement.
4.03. All proceedings required by said Declaration of Trust and By-Laws
have been taken to authorize it to enter into and perform this Agreement.
4.04. It is an investment company registered under the Investment Company
Act of 1940, as amended.
-5-
<PAGE>
4.05. A registration statement under the Securities Act of 1933 is
currently effective (or will be effective prior to commencement by the Agent of
performance of services hereunder) and will remain effective, and appropriate
state securities law filings have been made and/or will continue to be made,
with respect to all Shares of the company being offered for sale.
Article 5. Indemnification
5.01. To the extent that the Agent acts in good faith and without
negligence or willful misconduct, the Agent shall not be responsible for, and
the Company shall indemnify and hold the Agent harmless from and against, any
and all losses, damages, costs, charges, counsel fees, payments, expenses and
liabilities arising out of or attributable to:
(a) All actions of the Agent or its agents or subcontractors required
to be taken and correctly executed pursuant to this Agreement.
(b) The Company's lack of good faith, negligence or willful misconduct
or which arise out of the breach of any representation or warranty of the
Company hereunder.
(c) The reasonable reliance on or use by the Agent or its agents or
subcontractors of information, records and documents or services which are
received or relied upon by the Agent or its agents or subcontractors and
furnished to it or performed by or on behalf of the Company.
(d) The reasonable reliance on, or the carrying out by the Agent or
its agents or subcontractors and furnished to it or performed by or on behalf of
the Company.
(e) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations, or the securities laws or
regulations of any state that such Shares be registered in such state, or in
violation of any stop order or other determination or ruling by any federal
agency or any state with respect to the offer or sale of such Shares in such
state, unless such violation is the result of the Agent's negligent or willful
failure to comply with the provisions of Section 1.02(b) of this Agreement.
5.02. The Agent shall indemnify and hold the Company harmless from and
against any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liabilities arising out of or attributable to the Agent's refusal
or failure to comply with the terms of this Agreement (whether as a result of
the acts or omissions of the agent or of its agents or subcontractors) or
arising out of the lack of good faith, negligence or willful misconduct of the
Agent, or its agents or subcontractors, or arising out of the breach of any
representation or warranty of the Agent hereunder.
-6-
<PAGE>
5.03. At any time the Agent may apply to any officer of the Company for
instructions, and may consult with outside legal counsel with respect to any
matter arising in connection with the services to be performed by the Agent
under this Agreement, and the Agent and its agents or subcontractors shall not
be liable and shall be indemnified by the Company for any action reasonably
taken or omitted by it in reliance upon such instructions or upon the opinion of
such counsel. The Agent, its agents and subcontractors shall be protected and
indemnified in acting upon any paper or document furnished by or on behalf of
the Company, reasonably believed to be genuine and to have been signed by the
proper person or persons, or upon any instruction, information, data, records or
documents provided to the Agent or its agents or subcontractors by
machine-readable input, telex, CRT data entry or other similar means authorized
by the Company, and shall not be held to have notice of any change of authority
of any person, until receipt by the Agent of written notice thereof from the
Company. The Agent, its agents and subcontractors shall also be protected and
indemnified in recognizing stock certificates which are reasonably believed to
bear the proper manual or facsimile signatures of the officers of the Company,
and the proper countersignature of any former transfer agent or registrar, or of
a co-transfer agent or co-registrar.
5.04. In the event either party is unable to perform its obligations under
the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable to the other for
any damages resulting from such failure to perform or otherwise from such
causes.
5.05. Neither party to this Agreement shall be liable to the other party
for consequential damages under any provision of this Agreement, but each shall
be liable for general damages resulting from breach of this Agreement. For the
purposes of this Agreement, the term "general damages" shall include but shall
not be limited to:
(a) All costs of correcting errors made by the Agent or its agents or
subcontractors in Company shareholder accounts, including the
expense of computer time, computer programming and personnel;
(b) Amounts which the Company is liable to pay to a person (or his
representative) who has purchased or redeemed, or caused to be
repurchased, Shares at a price which is higher, in the case of a
purchase, or lower, in the case of a redemption or repurchase,
than correct net asset value per Share, but only to the extent
that the price at which such Shares were purchased, redeemed or
repurchased was incorrect as a result of either (i) one or more
errors caused by the Agent or its agents or subcontractors in
processing shareholder accounts of the Company or (ii) the
posting by the Agent of the purchase, redemption or repurchase of
Shares subsequent to the time such purchase, redemption or
repurchase
-7-
<PAGE>
should have been posted pursuant to laws and regulations
applicable to open-end investment companies, if the delay is
caused by the agent, its agents or subcontractors;
(c) The value of dividends and distributions which were not credited
on Shares because of the failure of the agent or its agents or
subcontractors to timely post the purchase of such Shares;
(d) The value of dividends and distributions which were incorrectly
credited on Shares because of the failure of the Agent or its
agents or subcontractors to timely post the redemption or
repurchase of such Shares;
(e) The value of dividends and distributions, some portion of which
was incorrectly credited, or was not credited, on Shares because
of the application by the Agent or its agents or subcontractors
of an incorrect dividend or distribution factor or otherwise;
(f) Penalties and interest which the Company is required to pay
because of the failure of the Agent or its agents or
subcontractors to comply with the information reporting and
withholding (including backup withholding) requirements of the
Internal Revenue Code of 1986, as amended, and applicable
Treasury regulations thereunder, applicable to Company
Shareholder accounts; and
(g) Interest in accordance with the laws of The Commonwealth of
Massachusetts on any damages from the date of the breach of this
Agreement.
5.06. In order that the indemnification provisions contained in this
Article 5 shall apply, upon the assertion of a claim or loss for which either
party may be required to indemnify the other, the party seeking indemnification
shall promptly notify the other party of such assertion or loss, and shall keep
the other party advised with respect to all developments concerning such claim.
The party who may be required to indemnify shall have the option to participate
at its expense with the party seeking indemnification in the defense of such
claim. The party seeking indemnification shall in no case confess any claim or
make any compromise in any case in which the other party may be required to
indemnify it except with the other party's prior written consent.
5.07. Losses incurred by the Company arising from the Agent effecting a
share transaction at a trade (pricing) date prior to the processing date shall
be governed by a separate agreement between the Agent and the Company.
The obligations of the parties hereto under this Article 5 shall survive
the termination of this Agreement.
-8-
<PAGE>
Article 6. Covenants of the Company and the Agent.
6.01. The Company shall promptly furnish to the Agent the following:
(a) A certified copy of the resolution of the Board of Trustees of the
Company authorizing the appointment of the Agent and the execution and delivery
of this Agreement.
(b) a copy of the Declaration of Trust and By-Laws of the Company and
all amendments thereto.
6.02. The Agent hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Company for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account, of such certificates,
forms and devices.
6.03. The Agent shall at all times maintain insurance coverage which is
reasonable and customary in light of its duties hereunder and its other
obligations and activities.
6.04. the Agent shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended, (the
"Act") and the Rules thereunder, the Agent agrees that all such records prepared
or maintained by the Agent relating to the services to be performed by the Agent
hereunder and those records that the Company and the Agent agree from time to
time to be the records of the Company are the property of the Company and will
be preserved, maintained and made available in accordance with such Section and
Rules, and will be surrendered promptly to the Company on and in accordance with
its request. Records surrendered hereunder shall be in machine readable form,
except to the extent that the Agent has maintained such a record only in paper
form.
6.05. The Agent and the Company agree that all books, records, information
and data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement shall
remain confidential and shall not be voluntarily disclosed to any other person,
except as may be required by law.
6.06. In case of any requests or demands for the inspection of the
Shareholders records of the Company, the Agent will endeavor to notify the
Company and to secure instructions from an authorized officer of the Company as
to such inspection. The Agent reserves the right, however, to exhibit the
Shareholders records to any person whenever it is reasonably advised by its
counsel that it may be held liable for the failure to exhibit the shareholders
records to such person.
-9-
<PAGE>
6.07. The Agent agrees to maintain or provide for redundant facilities or a
compatible configuration and to maintain or provide for backup of the Company's
master and input files and to store such files in a secure off-premises location
so that in the event of a power failure or other interruption of whatever cause
at the location of such files the Company's records are maintained intact and
transactions can be processed at another location.
6.08. The Agent acknowledges that the Company, as a registered investment
company under the Act, is subject to the provisions of the Act and the rules and
regulations thereunder, and that the offer and sale of the Company's Shares are
subject to the provisions of federal and state laws and regulations applicable
to the offer and sale of securities. The company acknowledges that the Agent is
not responsible for the Company's compliance with such laws and regulations. If
the Company advises the Agent that a procedure of the Agent related to the
discharge of its obligations hereunder has or may have the effect of causing the
Company to violate any of such laws or regulations, the Agent shall use its best
efforts to develop a mutually agreeable alternative procedure which does not
have such effect.
Article 7. Termination of Agreement.
7.01. This Agreement may be terminated by either party upon one hundred
twenty (120) days written notice to the other.
7.02. Should the Company exercise its right to terminate, all reasonable
out-of-pocket expenses of the Agent associated with the movement of records and
materials required by this Agreement will be borne by the Company. Additionally,
the Agent reserves the right to charge for any other reasonable expenses
associated with such termination.
Article 8. Additional Series.
8.01. In the event that the Company establishes one or more series of
Shares with respect to which it desires to have the Agent render services as
transfer agent under the terms hereof, it shall so notify the Agent in writing,
and unless the agent objects in writing to providing such services, the term
"Company" hereunder, unless the context otherwise requires, shall be deemed to
include each such series of Shares. All recordkeeping and reporting shall be
done separately for each series. Unless the Company and the Agent agree to an
amended fee schedule, the fee schedule attached hereto shall apply to each
series separately.
Article 9. Assignment.
9.01. Except as provided in Section 9.03 below, neither this Agreement nor
any rights or obligations hereunder may be assigned by either party without the
written consent of the other party.
-10-
<PAGE>
9.02. This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
9.03. The Agent may, with notice to and consent on the part of the Company,
which consent shall not be unreasonably withheld, subcontract for the
performance of certain services under this Agreement to qualified service
providers, which shall be registered as transfer agents under Section 17A of the
Securities Exchange Act of 1934 if such registration is required; provided,
however, that the Agent shall be as fully responsible to the company for the
acts and omissions of any subcontractor as it is for its own acts and omissions.
Article 10. Amendment.
10.01 This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of the Board
of Directors or Trustees of each party.
Article 11. Massachusetts Law to Apply.
11.01. This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
Article 12. Form N-SAR.
12.01. The Agent shall maintain such records as shall enable the company to
fulfill the requirements of Form N-SAR or any successor report which must be
filed with the Securities and Exchange Commission.
Article 13. Merger of Agreement.
13.01. This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject hereof
whether oral or written.
Article 14. Counterparts.
14.01. This Agreement may be executed by the parties hereto in any number
of counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
-11-
<PAGE>
Article 15. Limitation of Liability of the Trustees and the Shareholders
It is understood and expressly stipulated that one of the trustees,
officers, agents, or shareholders of the Company shall be personally liable
hereunder. The name of the Company is the designation of the Trustees for the
time being under the Company's Declaration of Trust, as the same is now stated
or may hereafter be amended, and all persons dealing with the trust must look
solely to the property of the trust for the enforcement of any claims against
the trust as neither the Trustees, officers, agents or shareholders assume any
personal liability for obligations entered into on behalf of the trust. No
series of the Company, if any, shall be liable for the obligations of any other
series.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and year first above written.
ATTEST: SCUDDER DEVELOPMENT FUND
/s/ Marilyn A. Hayes BY: /s/ David S. Lee
- -------------------------- -------------------------
Title: Vice President
ATTEST: SCUDDER SERVICE CORPORATION
/s/ Marilyn A. Hayes BY: /s/ Daniel Pierce
- ------------------------ --------------------------
Title: Vice President
-12-
EXHIBITS 9(a)(2)
SCUDDER SERVICE CORPORATION
FEE INFORMATION FOR SERVICES PROVIDED UNDER
TRANSFER AGENCY AND SERVICE AGREEMENT
Scudder Family of Funds
Annual maintenance fee for each account
1/12th of the annual maintenance fee shall he charged and payable each month. It
will be charged for any account which at any time during the month had a share
balance in the fund. The minimum monthly charge to any portfolio is $1,000.
Money Market Funds $28.90
Monthly Income Funds 25.00
Quarterly Distribution Funds 20.40
Annual Distribution Funds 17.55
Other fees
New Account Set Up $ 3.15 each
Disaster Recovery 0.25 per year
Closed Accounts 1.20 per year
TIN Certificates 0.15 each
TIN Maintenance 0.25 each
Check Writing:
Set Up 5.00 per account
Retail Check Clearance 0.96 per check
Corporate Check Clearance 0.46 per check
Payroll Deduction Processing System (PDPS):
Annual Base Fee 240,000.00
Annual Maintenance:
IRA 6.00 per account
403B 7.00 per account
401K 8.00 per account
Out of pocket expenses shall be reimbursed by the fund to Scudder Service
Corporation or paid directly by the fund. Such expenses include but are not
limited to the following:
Telephone (portion allocable to servicing accounts)
Postage, overnight service or similar services
Stationery and envelopes
Shareholder Statements - printing and postage
Checks - stock supply, printing and postage
Data circuits
Lease and maintenance of S.A.I.L. and Easy Access
Forms
Microfilm and microfiche
Expenses incurred at the specific direction of the fund
Payment
The above will be billed within the first five(s) business days of each month
and will be paid by wire within five (5) business days of receipt.
On behalf of the Funds listed in Attachment A: Scudder Service Corporation:
By /s/ David S. Lee By /s/ Daniel Pierce
--------------------------- -------------------------
Date October 2, 1989 Date October 2, 1989
------------------------- -----------------------
* SCIT per account change is $25.78
<PAGE>
ATTACHMENT A
TRANSFER AGENCY AND SERVICE AGREEMENT
Money Market Accounts
Scudder California Tax Free Money Fund
Scudder Cash Investment Trust
Scudder Government Money Fund
Scudder New York Tax Free Money Fund
Scudder Tax Free Money Fund
Monthly Income Funds
Scudder California Tax Free Fund
Scudder GNMA Fund
Scudder High Yield Tax Free Fund
Scudder International Bond Fund
Scudder Managed Municipal Bonds
Scudder Massachusetts Tax Free Fund
Scudder New York Tax Free Fund
Scudder Ohio Tax Free Fund
Scudder Pennsylvania Tax Free Fund
Scudder Short Term Bond Fund
Scudder Tax Free Target Fund - 1990 Portfolio
Scudder Tax Free Target Fund - 1993 Portfolio
Scudder Tax Free Target Fund - 1996 Portfolio
Quarterly Distribution Funds
Scudder Equity Income Fund
Scudder Growth and Income Fund
Scudder Income Fund
Annual Distribution Funds
Scudder Capital Growth Fund
Scudder Development Fund
Scudder Global Fund
Scudder Gold Fund
Scudder International Fund
Scudder U.S. Government Zero Coupon Target 1990 Portfolio
Scudder U.S. Government Zero Coupon Target 1995 Portfolio
Scudder U.S. Government Zero Coupon Target 2000 Portfolio
October 2, 1989
EXHIBIT 9(b)(1)
COMPASS SERVICE AGREEMENT
THIS AGREEMENT made as of this 1st day of January, 1990, by and between
SCUDDER TRUST COMPANY, a New Hampshire banking corporation ("Trust Company") and
SCUDDER DEVELOPMENT FUND, a Massachusetts business trust ("the Fund").
WITNESSETH:
WHEREAS, Trust Company is engaged in the business of providing certain
recordkeeping and other services; and
WHEREAS, the Fund is engaged in business as an open-end investment company
registered under the Investment Company Act of 1940, as amended; and
WHEREAS, Trust Company is willing to provide to the Fund certain
recordkeeping and other services in connection with certain omnibus accounts
maintained with the Fund on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties hereto as set forth, the parties covenant and agree as follows:
Article 1. Terms of Appointment: Duties of the Service.
1.01. Subject to the terms and conditions set forth in this Agreement, the
Fund employs and appoints Trust Company to act as, and Trust Company agrees to
act as, recordkeeping agent with respect to the authorized and issued shares of
beneficial interest of the Fund ("Shares") or units representing such Shares
("Units") which are held in plan-level omnibus accounts (individually an
"Account" or collectively the "Accounts") in connection with certain retirement
and employee benefit plans established under the Internal Revenue Code of 1986
including but not limited to defined contribution plans, Section 403(b) plans,
individual retirement accounts and deferred compensation plans (each a "Plan" or
collectively the "Plans"), utilizing the Comprehensive Participant Accounting
Services ("COMPASS"), and established by plan administrators, employers,
trustees, custodians and other persons (each individually an "Administrator" or
collectively the "Administrators") on behalf of employers (each individually an
"Employer" or collectively the "Employers") and individuals for certain
participants in such Plans (each individually a "Participant" or collectively
the "Participants").
1.02. Trust Company agrees that it will perform the following services in
accordance with procedures established from time to time by agreement between
the Fund and Trust Company. Subject to instructions from the Administrators,
Trust Company shall:
(i) receive from Administrators instructions for the purchase of
Shares of the Fund, confirm compliance with such instructions and, as agent of
the respective Administrators, deliver
<PAGE>
within a reasonable time such instructions and any appropriate documentation
therefor to the Transfer Agent of the Fund duly appointed by the Trustees of the
Fund (the "Transfer Agent");
(ii) record the purchase by Plans of the appropriate number of
Shares or Units and within a reasonable time allocate such Shares or Units among
the Participants' Accounts;
(iii) record dividends and capital gains distributions on behalf of
Participants;
(iv) receive from Administrators instructions for redemption and
repurchase requests and directions, confirm compliance with such instructions
and as agent of the respective Administrators deliver within a reasonable time
such instructions and any appropriate documentation therefor to the Transfer
Agent;
(v) record the redemption or repurchase by Plans of the appropriate
number of Shares or Units and within a reasonable time make the appropriate
adjustments among the Participants' accounts;
(vi) certify to the Fund no less frequently than annually the number
of Participants accounts for which records are maintained hereunder;
(vii) maintain records of account for and advise the Fund and
Administrators and Participants, when appropriate, as to the foregoing;
(viii) maintain all Plan and Participant accounts other than
accounts maintained by the Transfer Agent; and
(ix) maintain and mail administrative reports and Participant
statements.
Procedures applicable to certain of these services may be established from
time to time by agreement between the Fund and Trust Company.
Article 2. Fees and Expenses
2.01. For performance by Trust Company of services pursuant to this
Agreement, the Fund agrees to pay Trust Company an annual maintenance fee for
each Participant account as set out in the fee schedule, as amended from time to
time. Such fee schedule and out-of-pocket expenses and advances identified under
Section 2.02 below may be changed from time to time by mutual agreement between
the Fund and Trust Company.
-2-
<PAGE>
2.02. In addition to the fee paid under Section 2.01 above, the Fund
agrees to reimburse Trust Company for out-of-pocket expenses or advances
incurred by Trust Company for the items set out in the fee schedule. In
addition, any other expenses incurred by Trust Company, at the request or with
the consent of the Fund, will be reimbursed by the Fund.
2.03. The Fund agrees to pay all fees and reimbursable expenses promptly.
Postage and the cost of materials for mailing of administrative reports,
Participant statements and other mailings to all Employer accounts or
Participants shall be advanced to Trust Company by the Fund at least two (2)
days prior to the mailing date of such materials or paid within two (2) days of
the receipt by the Fund of a bill thereof.
Article 3. Representations and Warranties of Trust Company.
Trust Company represents and warrants to the Fund that:
3.01. It is a banking corporation duly organized and existing and in good
standing under the laws of The State of New Hampshire.
3.02. It has the legal power and authority to carry on its business in any
jurisdiction where it does business.
3.03. It is empowered under applicable laws and by its charter and by-laws
to enter into and perform this Agreement.
3.04. All requisite corporate proceedings have been taken to authorize it
to enter into and perform this Agreement.
3.05. It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
Article 4. Representations and Warranties of the Fund.
The Fund represents and warrants to Trust Company that:
4.01. It is a business trust duly organized and existing and in good
standing under the laws of The Commonwealth of Massachusetts.
4.02. It is empowered under applicable laws and by its Declaration of
Trust and By-Laws to enter into and perform this Agreement.
-3-
<PAGE>
4.03. All proceedings required by said Declaration of Trust and By-Laws
have been taken to authorize it to enter into and perform this Agreement.
4.04. It is an investment company registered under the Investment Company
Act of 1940, as amended (the "Act").
4.05. It makes available its Shares in connection with certain Plans.
4.06. A majority of the Trustees of the Fund who are not interested
persons have made findings to the effect that:
(a) the Agreement is in the best interest of the Fund and its
shareholders;
(b) the services to be performed pursuant to the Agreement are
services required for the operation of the Fund;
(c) Trust Company can provide services the nature and quality of
which are at least equal to those provided by others offering the same or
similar services; and
(d) the fees charged by Trust Company for such services are fair and
reasonable in the light of the usual and customary charges made by others for
services of the same nature and quality.
4.07. A registration statement under the Securities Act of 1933, as
amended, has been filed and has become effective, and appropriate state
securities law filings have been made with respect to all Shares of the Fund
being offered for sale. The Fund shall notify Trust Company (i) if such
registration statement or any state securities registration or qualification has
been terminated or a stop order has been entered with respect to the Shares or
(ii) if such registration statement shall have been amended to cover Shares of
any additional Series (as hereinafter defined in Section 8.01).
Article 5. Indemnification
5.01. Trust Company shall not be responsible for, and the Fund shall
indemnify and hold Trust Company harmless from and against, any and all losses,
damages, costs, charges, counsel fees, payments, expenses and liabilities
arising out of or attributable to:
(a) All actions of Trust Company or its agents required to be taken
pursuant to this Agreement, provided that such actions are taken in good faith
and without negligence or willful misconduct.
(b) The Fund's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Fund's lack of good faith, negligence or
willful misconduct or which arise out of the breach of any representation or
warranty of the Fund hereunder.
-4-
<PAGE>
(c) The reliance on or use by Trust Company or its agents of
information, records and documents which (i) are received by Trust Company or
its agents and furnished to it by or on behalf of the Fund, and (ii) have been
prepared and/or maintained by the Fund or any other person or firm (except Trust
Company) on behalf of the Fund.
(d) The reliance on or the carrying out by Trust Company or any of
its agents of any written instructions or requests of the Fund or any person
acting on behalf of the Fund.
(e) The offer or sale of Shares in violation of any requirement
under the federal securities laws or regulations, or the securities laws on
regulations of any state that such Shares be registered in such state, or in
violation of any stop order or other determination or ruling by any federal
agency or any state with respect to the offer or sale of such Shares in such
state.
5.02. Trust Company shall indemnify and hold the Fund harmless from and
against any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liabilities arising out of or attributable to Trust Company's
refusal or failure to comply with the terms of this Agreement, or which arise
out of Trust Company's lack of good faith, negligence or willful misconduct or
which arise out of the breach of any representation or warranty of Trust Company
hereunder.
5.03. At any time Trust Company may apply to any officer of the Fund for
instructions, and may consult with legal counsel (which may also be legal
counsel for the Fund) with respect to any matter arising in connection with the
services to be performed by Trust Company under this Agreement, and Trust
Company shall not be liable and shall be indemnified by the Fund for any action
taken or omitted by it in reliance upon such instructions or upon the opinion of
such counsel. Trust Company and its agents shall be protected and indemnified in
acting upon any paper or document furnished by or on behalf of the Fund,
reasonably believed to be genuine and to have been signed by the proper person
or persons, or upon any instruction, information, data, records or documents
provided Trust Company or its agents by telephone, in person, machine-readable
input, telex, CRT data entry or other similar means authorized by the Fund, and
shall not be held to have notice of any change of authority of any person, until
receipt of written notice thereof from the Fund.
5.04. Trust Company may at any time or times in its discretion appoint
(and may at any time remove) another individual, corporation, partnership, trust
or company as its agent to carry out such of the provisions of this Agreement as
Trust Company shall from time to time direct.
5.05. In the event either party is unable to perform its obligations under
the terms of this Agreement because of acts of God, strikes, equipment or
transmission failur or damage resonably
-5-
<PAGE>
beyond its control, or other causes reasonably beyond its control, such party
shall not be liable to the other for any damages resulting from such failure to
perform or otherwise from such cases.
5.06. In order that the indemnification provisions contained in this
Article 5 shall apply, under the assertion of a claim for which either party may
be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's written consent.
Article 6. Covenants of the Fund and Trust Company.
6.01. Trust Company hereby agrees to establish and maintain facilities and
procedures resaonably acceptable to the Fund for safekeeping of records and for
the preparation or use, and for keeping account of, such records.
6.02. Trust Company shall at all times maintain insurance coverage which
is reasonable and customary in light of its duties hereunder and its other
obligations and activities, and shall notify the Fund of any changes in its
insurance coverage unless the Fund is covered by the same policy and such change
is also applicable to the Fund.
6.03. Trust Company shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable.
6.04. Trust Company and the Fund agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential, and shall not be voluntarily disclosed to
any other person, except as may be required by law.
6.05. In case of any requests or demands for the inspection of the records
relating to Plan Accounts and Participant accounts with the Fund, Trust Company
will endeavor to notify the Fund and to secure instructions from an authorized
officer of the Fund as to such inspection. Trust Company reserves the right,
however, to exhibit such records to any person whenever it is reasonably advised
by counsel to the Fund that it may be held liable for the failure to exhibit
such records to such person.
6.06. Trust Company acknowledges that the Fund, as a registered investment
company under the Act, is subject to the provisions of the Act and the rules and
regulations thereunder, and
-6-
<PAGE>
that the offer and sale of the Fund's Shares are subject to the provisions of
federal and state laws and regulations applicable to the offer and sale of
securities. The Fund acknowledges that Trust Company is not responsible for the
Fund's compliance with such laws, rules and regulations. If the Fund advises
Trust Company that a procedure of Trust Company related to the discharge of its
obligations hereunder has or may have the effect of causing the Fund to violate
any of such laws or regulations, Trust Company shall use its best efforts to
develop an alternative procedure which does not have such effect.
6.07. Trust Company acknowledges to the Fund that, as the offeror of
COMPASS, Trust Company does not act as a plan administrator or as a fiduciary
under the Employee Retirement Income Security Act of 1974, as amended from time
to time, with respect to any Plan. Trust Company shall not be responsible for
determining whether the terms of a particular Plan or the Shares of the Fund are
appropriate for the Plan or Participant and does not guarantee the performance
of the Fund.
Article 7. Termination of Agreement.
7.01. This Agreement may be terminated by either party on the last day of
the month next commencing after thirty (30) days written notice to the other
party.
7.02. Upon termination of this Agreement, the Fund shall pay to Trust
Company such fees and expenses as may be due as of the date of such termination.
7.03. Should the Fund exercise its right to terminate this Agreement,
Trust Company reserves the right to charge for any other reasonable expenses
associated with such termination.
Article 8. Additional Series of the Fund.
8.01. Shares of the Fund are of a single class; however, Shares may be
divided into additional series ("Series") that may be established from time to
time by action of the Trustees of the Fund. If the context requires and unless
otherwise specifically provided herein, the term "Fund" as used in this
Agreement shall mean in addition each separate Series currently existing or
subsequently created, and the term "Shares" shall mean all shares of beneficial
interest of the Fund, whether of a single class or dividend into separate Series
of the Fund currently existing or hereinafter created.
8.02. In the event that the Fund establishes one or more or additional
Series of Shares in addition to the original Series with respect to which it
desires to have Trust Company render services as recordkeeping agent under the
terms hereof, it shall so notify Trust
-7-
<PAGE>
Company in writing, and upon the effectiveness of a registration statement under
the Securities Act of 1933, as amended, relating to such Series and unless Trust
Company objects in writing to providing such services, such Series shall be
subject to this Agreement.
8.03. In the event that the Fund suspends the offering of Shares of any
one or more Series, it shall so notify Trust Notify in writing to such effect.
Article 9. Assignment.
9.01. Neither this Agreement nor any rights or obligations hereunder may
be assigned by either party without the written consent of the other party.
9.02. This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
Article 10. Amendment.
10.01. This Agreement may be amended or modified by a written agreement
executed by both parties.
Article 11. Massachusetts Law to Apply.
11.01. This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
Article 12. Entire Agreement.
12.01. This Agreement constitutes the entire agreement between the parties
hereto.
Article 13. Correspondence.
13.01. Trust Company will answer correspondence from Administrative
relating to Accounts and such other correspondence as may from time to time be
mutually agreed upon and notify the Fund of any correspondence which may require
an answer from the Fund.
Article 14. Further Actions.
14.01. Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes hereof.
-8-
<PAGE>
Article 15. Interpretive Provisions.
15.01. In connection with the operation of this Agreement, Trust Company
and the Fund may agree from time to time on such provisions interpretive of or
in addition to the provisions of this Agreement as may in their joint opinion be
consistent with the general tenor of this Agreement. Any such interpretive or
additional provisions are to be signed by the parties and annexed hereto, but no
such provisions shall contravene any applicable federal or state law or
regulation and no such interpretive or additional provision shall be deemed to
be an amendment of this Agreement.
Article 16. Miscellaneous.
16.01. The name Scudder Development Fund is the designation of the
Trustees for the time being under a Declaration of Trust dated December 21,
1987, as amended, and all persons dealing with the Fund must look solely to the
Fund property for the enforcement of any claims against the Fund as neither the
Trustees, officers, agents nor shareholders assume any personal liability for
obligations entered into on behalf of the Fund. No Series of the Fund shall be
liable for any claims against any other Series of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first above
written.
SCUDDER TRUST COMPANY
BY: /s/ [ILLEGIBLE]
-----------------------------------
Title: Vice President/Treasurer
--------------------------------
SCUDDER DEVELOPMENT FUND
BY: /s/ David S. Lee
-----------------------------------
Title: Vice President
--------------------------------
comp-ma
-9-
EXHIBIT 9(b)(2)
SCUDDER TRUST COMPANY
FEE INFORMATION FOR SERVICES PROVIDED UNDER
COMPASS SERVICE AGREEMENT
Annual maintenance fee for each participant in a retirement and employee benefit
plan:
First Each
Participant Additional
Account Account
------- -------
Money Market Funds $ 28.90 $ 14.45
Monthly Income Funds 25.00 12.50
Quarterly Distribution Funds 20.00 10.20
Annual Distribution Funds 17.55 8.78
1/12th of the annual maintenance fee shall be charged and payable each month. It
will be charged for any participant who at any time during the month had a share
or unit account balance in the fund.
Out of pocket expenses shall be reimbursed by the fund to Scudder Trust Company.
Such expenses include but are not limited to the following:
Supplies:
Paper and envelopes in connection with participant statements and
administrative reports
Telephone (portions allocable to servicing accounts)
Postage, overnight service or similar services
Microfilm
Microfiche
On behalf of the Funds listed in
Attachment A: Scudder Trust Company:
By: /s/ David Lee By: /s/ Dennis M. [illegible]
--------------------------- --------------------------------
Date January 1, 1990 Date January 1, 1990
--------------------------- -------------------------------
<PAGE>
ATTACHMENT A
COMPASS SERVICE AGREEMENT
Money Market Accounts
Scudder Cash Investment Trust
Scudder Government Money Fund
Monthly Income Funds
Scudder GNMA Fund
Scudder International Bond Fund
Scudder Short Term Bond Fund
Scudder U.S. Government Zero Coupon Target Portfolios
Quarterly Distribution Funds
Scudder Equity Income Fund
Scudder Growth and Income Fund
Scudder Income Fund
Annual Distribution Funds
Scudder Capital Growth Fund
Scudder Development Fund
Scudder Global Fund
Scudder Gold Fund
Scudder International Fund
January 1, 1990
Exhibit 9(d)
SHAREHOLDER
SERVICES AGREEMENT
This Agreement, made as of the 1st day of June, 1990 between SCUDDER
DEVELOPMENT FUND (the "Fund") an open-end Investment company which is registered
under the Investment Company Act of 1940, as amended, ("1940 Act"), and CHARLES
SCHWAB & CO, INC. ("Schwab"), a corporation organized under the laws of
California which is a Securities and Exchange Commission licensed transfer agent
which has its principal place of business at 101 Montgomery Street, San
Francisco, California 94104.
WHEREAS, Schwab has established the Charles Schwab & Co., Inc. Defined
Contribution Prototype Plan (the "Prototype Plan") pursuant to which employers
may establish or amend employee benefit plans and their related Trusts
("Trusts"), and Schwab will offer to provide record keeping and trustee services
with respect to participants in Prototype Plans; and
WHEREAS, participants in Prototype Plans may direct that all or a portion
of their accounts may be invested in shares of the Fund; and
WHEREAS, the Fund desires that Schwab perform certain services for it; and
WHEREAS, the performance of such services by Schwab will benefit the Fund
and those participants in Prototype Plans who have directed that all or a
portion of their accounts be invested in shares of the Fund; and
WHEREAS, Schwab is willing to perform such services on the terms and
conditions set forth in this Agreement.
NOW THEREFORE, in consideration of mutual promises set forth below, the
parties agree as follows:
1. Omnibus Account. The Fund will cause to be maintained on its shareholder
records a single account in the name of Schwab, which account shall include
all shares of the Fund held by "Trust Client Shareholders", as defined
below, for the benefit of participants in the Prototype Plans.
<PAGE>
2. Trust Client Shareholders. Trusts which are related to Prototype Plans and
which acquire an interest in the Fund shall herein be referred to as
Schwab's "Trust Client Shareholders."
3. Services. Schwab will perform for the Fund the shareholder services set
forth in Exhibit A hereto. Schwab also agrees to perform for the Fund such
special services incidental to the performance of the services set forth
herein as agreed to by the parties from time to time. Schwab will perform
such additional services as are provided on an amendment to Exhibit A
hereof, in consideration of the fees set forth in Section 7 below.
4. Agents of Schwab. Upon 60 days prior written notice to the Fund, unless
waived by the Fund, Schwab may, in its discretion, appoint in writing other
parties qualified to perform shareholder services to carry out some or all
of its responsibilities under this Agreement.
5. Compliance With Law. The Fund assumes full responsibility for the
preparation and contents of each prospectus, annual report or proxy
statement of the Fund and for compliance thereof with all applicable
requirements of the Securities Act of 1933, as amended, the Investment
Company Act of 1940, as amended, and any other laws, rules and regulations
of governmental authorities having jurisdiction. Schwab will comply with
all regulatory requirements applicable to it with respect to transmitting
orders to purchase or redeem Fund shares.
6. Mailing of Materials and Tabulation of Proxies. Subject to Section 5
hereof, the Fund specifically agrees that Schwab may designate a party for
the purpose of mailing the materials described in Section 5 hereof on
behalf of the Fund to Schwab's Trust Client Shareholders and for tabulation
of returned proxy ballots, with the Fund bearing the reasonable costs of
postage and mail house handling. Within a reasonable period prior to the
record date, the Fund shall contact such designated party to establish the
procedures for such mailing and tabulation of all returned proxy ballots.
7. Fee. For the services provided under this Agreement, the Fund will compute
and pay Schwab a monthly fee as follows:
$1.50 per month per participant account in each Trust Client Shareholder.
The fee shall be charged only for participant accounts which held shares in
the Fund during the month.
2
<PAGE>
Schwab, through the recordkeeper for adopters of the Prototype Plan, will
provide the Fund with a monthly accounting of the assets and the number of
participants accounts on whose behalf Schwab's Trust Client Shareholders
have invested in Fund Shares. Such accounting shall be for the purpose of
computing the fee to be paid Schwab. Each month's fee shall be determined
independently of every other month's fee, and shall be paid to Schwab
monthly.
8. Nonexclusivity. The services furnished to the Fund by Schwab under this
agreement are not to be deemed exclusive and Schwab shall be free to
furnish similar services to other investment companies registered under the
1940 Act so long as its services under this Agreement are not impaired
thereby. Nothing under this Agreement shall limit or restrict the right of
any employee, officer or director of Schwab to engage in any other business
or to devote his or her time and attention in part of the management or
other aspects of any other business, whether of a similar or dissimilar
nature.
9. Proprietary Information. The Fund agrees that neither it nor its
representatives or agents will use or distribute the names of Schwab's
Trust Client Shareholders that it may obtain by reason of the relationship
with Schwab under this Agreement.
10. Schwab's Reliance on Records and Instructions. Schwab may rely on any
written records or instructions provided to it by the Fund.
11. Uncontrollable Events. Schwab assumes no responsibility hereunder, and will
not be liable, for any damage, loss of data, delay or any other loss
whatsoever caused by events beyond its reasonable control.
12. Standard of Care. Schwab will use its best efforts to ensure the accuracy
of all services performed under this Agreement, but will not be liable to
the Fund for any action taken or omitted by Schwab in the absence of bad
faith, willful misconduct or negligence. Schwab shall not be liable for any
losses to the Fund caused by the Fund but shall use reasonable efforts to
recover losses to the Fund.
3
<PAGE>
13. Reports. Schwab will furnish to the Fund and to the Fund's properly
authorized auditors, investment advisers, examiners, distributors, dealers,
underwriters, salesmen, insurance companies and others designated by the
Fund in writing, such reports at such times as are I reasonably agreed upon
by the Fund and Schwab.
14. Rights of Ownership. All computer programs and procedures developed by
Schwab to perform services required to be provided by Schwab under this
Agreement are the property of Schwab, except such programs and procedures
developed by the Fund or Scudder Stevens & Clark, Inc. and its affiliates.
15. Assignment. This Agreement and the rights and duties hereunder shall not be
assignable by either of the parties hereto except by the specific written
consent of the other party. This Section shall not limit or in any way
affect Schwab's right to appoint an agent pursuant to Section 4 hereof.
16 Terms. This Agreement may be terminated by either party upon sixty (60)
days written notice mailed to the Fund at: c/o D.M. Cronin, Scudder Fund
Distributors Inc., 1 75 Federal Street; Boston, MA 02110 and to Schwab at
101 Montgomery Street, San Francisco, California 94101, Attention: General
Counsel.
17. If the Fund is a Massachusetts Business trust the obligations of the Fund
under this agreement are not binding upon any of the Trustees, officers,
agents or shareholders of the Fund individually, but bind only the trust
estate of the Fund, and all persons dealing with the Fund must look solely
to the Fund property for the enforcement of any claims against the Fund.
Furthermore, the parties hereto acknowledge that the Fund may be an
investment company whose assets may be allocated to two or more series. In
such a case, Schwab agrees to seek satisfaction of all obligations
hereunder solely out of the assets of the series on whose behalf the
transaction giving rise to the obligation was entered into.
18. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized officers
as of the date and year first above written.
CHARLES SCHWAB & CO., INC.
Dated: June 4, 1990 By: /s/ David Krimm
----------------------- ------------------------------
David Krimm
Vice President
----------------------------------
(Typed Name)
SCUDDER DEVELOPMENT FUND
Dated: 6/1/90 By: /s/ David S. Lee
----------------------- ------------------------------
David S. Lee
----------------------------------
(Typed Name)
5
<PAGE>
EXHIBIT A
SHAREHOLDER SERVICES
I. Record Maintenance
Schwab will provide full maintenance of all shareholder records for each
Trust Client Shareholder account in the Fund. Such records will include:
A. Share balance;
B. Account transaction history, including dividends and other
distributions paid and the date and price for all transactions;
C. Name and address of the record shareholder, including zip codes and
tax identification numbers but will not include responsibility for
obtaining certified tax identification numbers or impending back-up
withholding;
D. Records of distributions and dividend payments;
E. Transfer records; and
F. Overall control records.
II. Controls
A. Schwab shall maintain all balance controls daily and produce monthly
summaries of the Trust Client Shareholder accounts expressed in:
1. shares; and
2. dollar amounts.
III. Special Services Included.
A. Prepare envelopes/labels and mail proxy statements; tabulate votes
from returned ballots.
B. Mail Fund reports and prospectuses and Statements of Additional
Information.
6
| Coopers | Coopers & Lybrand L.L.P.
| & Lybrand |
| a professional services firm
Consent of Independent Accountants
To the Trustees of Scudder Securities Trust:
We consent to the incorporation by reference in the Post-Effective Amendment No.
36 to the Registration Statement of Scudder Securities Trust on Form N-1A of our
report dated October 7, 1996 on our audit of the financial statements and
financial highlights of Scudder Small Company Value Fund, which report is
included in the Annual Report to Shareholders for the period October 6, 1995
(commencement of operations to August 31, 1996 which is incorporated by
reference in the Post Effective Amendment to the Registration Statement.
We also consent to the reference to our Firm under the caption, "Experts."
Boston, Massachusetts Coopers & Lybrand L.L.P.
December 20, 1996
Coopers & Lybrand L.L.P. is a member of Coopers & Lybrand International, a
limited liability association incorporated in Switzerland.
THE
SCUDDER
FLEXI-PLAN
---------------------
Plan Document
A profit sharing plan and
money purchase pension
plan
SCUDDER
SERVING INVESTORS SINCE 1919
<PAGE>
SCUDDER PROTOTYPE PLAN
TABLE OF CONTENTS
Page
----
SECTION 1 Introduction .................................................. 2
SECTION 2 Definitions ................................................... 2
SECTION 3 Eligibility ................................................... 3
SECTION 4 Contributions ................................................. 3
SECTION 5 Code Section 415 Limitations on Allocations ................... 4
SECTION 6 Time and Manner of Making Contributions ....................... 6
SECTION 7 Vesting ....................................................... 6
SECTION 8 Distribution Upon Death ....................................... 6
SECTION 9 Other Distributions ........................................... 6
SECTION 10 Loans ......................................................... 7
SECTION 11 Trust Provisions .............................................. 7
SECTION 12 Administration ................................................ 9
SECTION 13 Fees and Expenses ............................................. 9
SECTION 14 Benefit Recipient Incompetent or Difficult to
Ascertain or Locate .......................................... 9
SECTION 15 Designation of Beneficiary .................................... 9
SECTION 16 Spendthrift Provision ......................................... 10
SECTION 17 Necessity of Qualification .................................... 10
SECTION 18 Amendment or Termination ...................................... 10
SECTION 19 Transfers ..................................................... 10
SECTION 20 Owner-Employee Provisions ..................................... 10
SECTION 21 Top-Heavy Provisions .......................................... 10
SECTION 22 Waiver of Minimum Funding Standard ............................ 11
SECTION 23 Miscellaneous ................................................. 12
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SCUDDER PROTOTYPE PLAN
SECTION 1.
INTRODUCTION
The Employer has established this Plan (the "Plan"), consisting of the
Adoption Agreement and the following provisions (the "Prototype Plan") for the
exclusive benefit of its Employees and their Beneficiaries.
SECTION 2.
DEFINITIONS
Where the following words and phrases appear in this Plan, they shall have
the respective meanings set forth below, unless their context clearly indicates
a contrary meaning. The singular herein shall include the plural, and vice
versa, and the masculine gender shall include the feminine gender, and vice
versa, where the context requires.
2.1 "Account" shall mean the Trust assets held by the Trustee for the
benefit of a Participant, which shall be the sum of the Participant's Employer
Contribution Account, Nondeductible Voluntary Contribution Account, Deductible
Voluntary Contribution Account and Rollover Account.
2.2 "Act" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
2.3 "Administrator" shall mean the person or persons specified in Section
12.1.
2.4 "Adoption Agreement" shall mean the agreement by which the Employer has
most recently adopted or amended the Plan.
2.5 "Beneficiary" shall mean any person or legal representative entitled to
receive benefits on or after the death of a Participant.
2.6 "Code" shall mean the Internal Revenue Code of 1954, as amended.
Reference to a section of the Code shall include any comparable section or
sections of future legislation that amends, supplements or supersedes such
section.
2.7 "Compensation" shall mean the amount paid during the Plan Year by the
Employer to the Employee for services rendered while a Participant, as
reportable to the Federal Government for the purpose of withholding Federal
income taxes, but not including amounts attributable to any category specified
in the Adoption Agreement. If so specified in the Adoption Agreement,
Compensation shall also mean amounts paid to the Employee for services rendered
for the entire Plan Year in which an Employee became a Participant whether or
not such an Employee was a Participant for the entire Plan Year. In the case of
a Self-Employed Individual, the above determination of Compensation shall be
made on the basis of the Self-Employed Individual's Earned Income.
Notwithstanding the previous sentence, for the purposes of the limitations
imposed by Section 4.1(a)(i)(B) below, Compensation of a Self-Employed
Individual shall be determined on the basis of the Self-Employed Individual's
Earned Income determined in accordance with the rules provided by Code Section
404(a)(8)(D).
2.8 "Current or Accumulated Earnings and Profits" of an Employer other than
a sole-proprietorship or partnership shall mean the Employer's current or
accumulated earnings and profits, as determined on the basis of the Employer's
books of account in accordance with generally accepted accounting practices,
without any deductions for Employer Contributions under the Plan (or any other
qualified plan) for the current Year or for income taxes for the current Year,
and without regard to the Employer's election to be taxed as a small business
corporation, if it has so elected. If the Employer is a sole-proprietorship or
partnership, "Current or Accumulated Earnings and Profits" shall mean the net
income of such Employer before deduction for income taxes and contributions made
hereunder.
2.9 "Deductible Voluntary Contribution Account" shall mean the separate
account maintained pursuant to Section 6.3(c) hereof for the Deductible
Voluntary Contributions made by the Participant and the income, expenses, gains
and losses attributable thereto.
2.10 "Deductible Voluntary Contributions" shall mean the contributions made
by Participants in accordance with Section 4.2 hereof, which respective
contributing Participants designate as "Deductible Voluntary Contributions" at
the time of contribution, and which comply with the requirements of Code Section
219.
2.11 "Designated Investment Company" shall mean a regulated investment
company for which Scudder, Stevens & Clark, its successor or any of its
affiliates, acts as investment adviser and which is designated by Scudder Fund
Distributors, Inc. or its successors, as eligible for investment under the Plan.
2.12 "Designation of Beneficiary" or "Designation" shall mean the document
executed by a Participant under Section 15.
2.13 "Disability" shall mean the inability to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment that can be expected to last for a continuous period of 12 months or
more, as certified by a licensed physician selected by the Participant and
approved by the Employer.
2.14 "Distributee" shall mean the Beneficiary or other person entitled to
receive the undistributed portion of the Participant's Account under Section 8
because of death or under Section 14 because of incompetency or inability to
ascertain or locate such individual.
2.15 "Distributor" shall mean Scudder Fund Distributors, Inc. or its
successor.
2.16 "Earned Income" shall mean the net earnings from self-employment in
the trade or business with respect to which the Plan is established, for which
personal services of the Owner-Employee or Self-Employed Individual are a
material income-producing factor. Net earnings will be determined without regard
to items not included in gross income and the deductions allocable to such
items. Net earnings are reduced by contributions by the Employer to a qualified
plan, including this Plan, to the extent deductible under Code Section 404.
2.17 "Effective Date" shall mean the date specified by the Employer in the
Adoption Agreement.
2.18 "Employee" shall mean an individual who performs services in the
business of the Employer in any capacity except for, (a) if specified in the
Adoption Agreement, non-resident aliens who receive no earned income from United
States sources (as described in Code Section 410(b)(3)(C)), (b) if specified in
the Adoption Agreement, individuals who are covered by a collective bargaining
contract between the Employer and a recognized bargaining agent, if contract
negotiations considered retirement benefits in good faith and unless such
contract specifically provides for participation in the Plan, and (c) such other
individuals as are excluded under the Adoption Agreement.
2.19 "Employer" shall mean the organization or other entity named as such
in the Adoption Agreement and any successor organization or entity which adopts
the Plan. Any two or more organizations or entities which are "related
businesses" within the meaning of Section 3.6 hereof may adopt and maintain the
plan as a single Plan.
2.20 "Employer Contribution Account" shall mean the separate account
maintained pursuant to Section 6.3(a) hereof for the Employer Contributions
allocated to a Participant and the income, expenses, gains and losses
attributable thereto.
2.21 "Employer Contributions" shall mean the contributions made by the
Employer in accordance with Section 4.1 hereof.
2.22 "Hour of Service" shall mean:
(a) Each hour for which an Employee is paid, or entitled to payment, for
the performance of duties for the Employer. These hours shall be credited to the
Employee for the computation period in which the duties are performed;
(b) Each hour for which an Employee is paid, or entitled to payment, by the
Employer on account of a period of time during which no duties are performed
(irrespective of whether the employment relationship has terminated) due to
vacation, holiday, illness, incapacity (including Disability), layoff, jury
duty, military duty or leave of absence. No more than 501 Hours of Service shall
be credited under this paragraph for any single continuous period (whether or
not such period occurs in a single computation period). Hours under this
paragraph shall be calculated and credited pursuant to section 2530.200b-2 of
the Department of Labor Regulations which are incorporated herein by this
reference; and
(c) Each hour for which back pay, irrespective of mitigation of damages, is
either awarded or agreed to by the Employer. The same Hours of Service shall not
be credited both under paragraph (a) or paragraph (b), as the case may be, and
under this paragraph (C). These hours shall be credited to the Employee for the
computation period or periods to which the award or agreement pertains rather
than the computation period in which the award, agreement or payment is made.
Where the Employer maintains the plan of a predecessor employer, service
for such predecessor employer shall be treated as Service of the Employer. Where
the Employer does not maintain the plan of a predecessor employer, employment by
a predecessor employer, upon the written election of the Employer made in a
uniform and non-discriminatory manner, shall be treated as Service for the
Employer.
2.23 "Integration Level" for a Plan Year shall mean the lesser of the
Social Security Wage Base or the dollar amount specified in the Adoption
Agreement.
2.24 "Integration Rate" for a Plan Year shall mean the lesser of the OASDI
Rate or the rate specified in the Adoption Agreement.
2.25 "Loan Trustee" shall mean the Trustee or, if the Employer has
specified otherwise in the Adoption Agreement, the individual or individuals so
appointed to act as trustee solely for the purpose of administering the
provisions of Section 10 and holding the Trust assets to the extent that they
are invested in loans pursuant to such Section.
2.26 "Nondeductible Voluntary Contribution Account" shall mean the separate
account maintained pursuant to the Section 6.3(b) hereof for Nondeductible
Voluntary Contributions made by the Participant and the income, expenses, gains
and losses attributable thereto.
2.27 "Nondeductible Voluntary Contributions" shall mean all Contributions
by Participants which are not Deductible Voluntary Contributions, Rollover
Contributions, or contributions of accumulated deductible employee contributions
made pursuant to Section 4.2(b)(vi) hereof.
2.28 "Normal Retirement Date" or "Normal Retirement Age" shall mean the
earlier of (a) the date selected by the Employer in the Adoption Agreement or,
(b) if the Employer enforces a mandatory retirement age, the first day of the
month in which the Participant reaches such age.
2.29 "OASDI Rate" for a Plan Year shall mean the tax rate applicable, on
the first day of the Plan Year, to employer contributions for old age,
survivors, and disability insurance under the Social Security Act.
2.30 "One-Year Break in Service" shall mean a 12-consecutive-month period
in which an Employee does not complete more than 500 Hours of Service unless the
number of Hours of Service specified in the Adoption Agreement for purposes of
determining a Year of Service is less than 501, in which case a
12-consecutive-month period in which an Employee has fewer than that number of
Hours of Service shall be a One-Year Break in Service. The computation period
over which One-Year Breaks in Service shall be measured shall be the same
computation period over which Years of Service are measured as selected in the
Adoption Agreement.
2.31 "Owner-Employee" shall mean an Employee who is a sole proprietor
adopting this Plan as the Employer, or who is a partner owning more than 10% of
either the capital or profits interest of a partnership adopting this Plan as
the Employer.
2.32 "Participant" shall mean an Employee who is eligible to participate in
the Plan under Section 3 and who has not, since becoming a Participant, died,
retired, otherwise terminated employment with the Employer or transferred from
an eligible class to a class of Employees ineligible to participate in the Plan.
2.33 "Plan" shall mean the Prototype Plan and Adoption Agreement.
2.34 "Plan Year" shall mean the fiscal year of the Employer or a different
12-consecutive-month period as specified in the Adoption Agreement.
2.35 "Prototype Plan" shall mean these Sections 1-23.
2.36 "Rollover Account" shall mean the separate account maintained pursuant
to Section 6.3(d) hereof for any Rollover Contributions (as described in Section
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4.3 hereof) made by the Participant and the income, expenses, gains and losses
attributable thereto.
2.37 "Rollover Contributions" shall mean contributions made to the Trust by
Participants in accordance with Section 4.3 hereof.
2.38 "Self-Employed Individual" shall mean an Employee who has Earned
Income for the Plan Year from the trade or business for which the Plan is
established, or an individual who would have had Earned Income but for the fact
that the trade or business had no Current or Accumulated Earnings and Profits
for the Plan Year.
2.39 "Service" shall mean employment by the Employer and, if the Employer
is maintaining the plan of a predecessor employer, or if the Employer is not
maintaining the plan of a predecessor employer but has so elected in the manner
described in Section 2.22 above, employment by such predecessor employer.
2.40 "Social Security Wage Base" for a Plan Year means the maximum amount
of annual earnings which may be considered wages under Code Section 3121(a)(1)
as in effect on the first day of such Plan Year.
2.41 "Sponsor" shall mean any of the organizations (a) which have requested
a favorable opinion letter from the National Office of the Internal Revenue
Service for this Plan or (b) to which a favorable opinion letter for this Plan
has been issued by the National Office of the Internal Revenue Service.
2.42 "Trust" shall mean the trust established under Section 11 of this Plan
for investment of Trust assets.
2.43 "Trust Fund" shall mean the contribution to the Trust and any assets
into which such contributions shall be invested or reinvested in accordance with
Sections 11.1 and 11.3 of this Plan.
2.44 "Trustee" shall mean the person or persons, including any successor or
successors thereto, named in the Adoption Agreement to act as trustee of the
Trust and hold the Trust assets in accordance with Section 11 hereof.
2.45 "Valuation Date" shall mean the last day of each Plan Year.
2.46 "Vesting Years" shall be measured on the 12-consecutive-month period
specified in the Adoption Agreement. A Participant will have a Vesting Year
during such computation period only if the Participant completes the number of
Hours of Service selected in the Adoption Agreement for purposes of computing a
Year of Service or, if so specified in the Adoption Agreement, the Participant
will have a Vesting Year for each Plan Year for which the Participant shares in
the allocation of Employer Contributions for the Plan Year. However, when
determining Vesting Years, unless the Employer has otherwise specified in the
Adoption Agreement, there shall be excluded: (a) if this Plan is a continuation
of an earlier plan which would have disregarded such service, Service before the
first Plan Year to which the Act is applicable; (b) Service after a One-Year
Break in Service (but this exclusion shall apply only for the purpose of
computing the vested percentage of Employer Contributions made before such
break); (c) Service before a One-Year Break in Service, if the Participant had
no vested interest at the time of such break and the number of consecutive
One-Year Breaks in Service equals or exceeds the number of Vesting Year before
such break without counting Vesting Years excluded by an earlier application of
this provision; (d) Service before the first Plan Year in which the Participant
attained age 22; (e) Service before the Employer maintained this Plan or a
predecessor plan; and (f) Service before January 1, 1971, unless the Participant
has completed at least 3 Vesting Years after December 31, 1970.
2.47 "Year" shall mean the fiscal year of the Employer.
2.48 "Year of Service" shall mean a 12-consecutive-month period, beginning
on an Employee's initial date of employment or an anniversary thereof during
which the Employee completes the number of Hours of Service specified in the
Adoption Agreement. The initial date of employment is the first day on which the
Employee performs an Hour of Service.
SECTION 3.
ELIGIBILITY
3.1 Entry. Each Employee of the Employer, who on the Effective Date of this
Plan meets the conditions specified in the Adoption Agreement, shall become
eligible to participate in the Plan commencing with the Effective Date. Each
other Employee of the Employer, including future Employees, shall become
eligible to participate in the Plan when the eligibility requirements specified
in the Adoption Agreement are met.
3.2 Interrupted Service. All Years of Service with the Employer are counted
towards eligibility except the following:
(a) If the Employer has specified in the Adoption Agreement that more than
one Year of Service is required before becoming a Participant, and if the
individual has a One-Year Break in Service before satisfying the Plan's
eligibility requirements, Service before such break will not be taken into
account.
(b) In the case of a Participant who does not have any nonforfeitable right
to the Employer Contribution Account, Years of Service before a One-Year Break
in Service will not be taken into account in computing Years of Service for
purposes of eligibility if the number of consecutive One-Year Breaks in Service
equals or exceeds the aggregate number of such Years of Service before such
break. Such aggregate number of Years of Service before such break will not
include any Years of Service disregarded under this Section by reason of a prior
break in service.
3.3 Reentry. If a former Participant either (a) had a nonforfeitable right
to all or a portion of his or her Employer Contribution Account at the time of
termination from Service or (b) did not have any nonforfeitable right to his or
her Employer Contribution Account but does not have Service prior to the break
in Service disregarded by operation of Section 3.2(b) hereof, such former
Participant shall become a Participant immediately upon return to the employ of
the Employer as a member of an eligible class of Employees.
3.4 Transfer to Eligible Class. In the event an Employee who is not a
member of an eligible class of Employees becomes a member of an eligible class,
such Employee shall participate immediately if such Employee has satisfied the
minimum age and Service requirements and would have previously become a
Participant had he or she been a member of an eligible class throughout the
period of employ with the Employer.
3.5 Determination by Administrator. Eligibility shall be determined by the
Administrator and the Administrator shall notify each Employee upon his or her
admission as a Participant in the Plan.
3.6 Related Businesses. If the Employer is a member of (a) a controlled
group of corporations (as defined under Code Section 414(b)), (b) group of
trades or businesses (whether or not incorporated) which are under common
control (as defined under Code Section 414(c)), or (c) an affiliated service
group (as defined under Code Section 414(m)), all service of an Employee for any
member of such a group shall be treated as if it were Service for the Employer
for purposes of the eligibility requirements of the Adoption Agreement and this
Section 3.
In addition, all service for any individual who is considered a leased
employee of the Employer under Code Section 414(n) shall be treated as if it
were Service for the Employer for purposes of the eligibility requirements of
the Adoption Agreement and this Section 3. However, qualified plan contributions
or benefits provided by the leasing organization which are attributable to
Services performed for the Employer shall be treated as provided by the
Employer. The provisions of this paragraph shall not apply to any leased
employee if such employee is covered by a money purchase pension plan maintained
by the leasing organization providing: (a) a non-integrated employer
contribution rate of at least 7-1/2% of compensation, (b) immediate
participation, and (c) full and immediate vesting. For purposes of this section
3.6, the term "leased employee" means any person who pursuant to an agreement
between the recipient and any other person ("leasing organization") has
performed services for the Employer (or for the Employer and related persons
determined in accordance with Code Section 414(n)(6)) on a substantially
full-time basis for a period of at least 1 year and such services are of a type
historically performed by employees in the business field of the Employer.
SECTION 4.
CONTRIBUTIONS
4.1 Employer Contributions and Allocation.
(a) Profit Sharing Plan. If the Employer has adopted this Plan as a profit
sharing plan, the following provisions shall apply:
(i) Contribution. Beginning in the Plan Year in which the Plan is adopted,
and for each Plan Year thereafter, the Employer will contribute the amount
determined by it, in its discretion, for the Plan Year in question; provided,
however, that such Employer Contributions may not exceed the lesser of (A) the
Employer's Current or Accumulated Earnings and Profits for the Plan Year or (B)
15% (or such larger percentage as may be permitted by the Code as a current
deduction to the Employer with respect to any Plan Year) of the total
Compensation (disregarding any exclusion from Compensation specified by the
Employer in the Adoption Agreement) paid to, or accrued by the Employer for,
Participants for that Plan Year plus any unused credit carryovers from previous
Plan Years. For this purpose, a "credit carryover" is the amount by which
Employer Contributions for a previous Plan Year was less than 15% of the total
Compensation (disregarding any exclusion from Compensation specified by the
Employer in the Adoption Agreement) paid or accrued by the Employer to
Participants for such Plan Year, but such unused credit carryover shall in no
event permit the Employer Contributions for a Plan Year to exceed 25% (or such
larger percentage as may be permitted by the Code as a deduction to the
Employer) of the total Compensation (disregarding any exclusion from
Compensation specified by the Employer in the Adoption Agreement) paid or
accrued by the Employer to Participants for the Plan Year in question.
(ii) Allocation Under Non-Integrated, Profit Sharing Plan. If the Employer
has adopted this Plan as a profit sharing plan under which allocations shall be
made on a non-integrated basis, Employer Contributions, plus any forfeitures
under Section 7.3, for a Plan Year shall be allocated according to the
provisions of this subsection (ii) as of the Valuation Date for such Plan Year.
Unless the Employer has specified otherwise in the Adoption Agreement, such
amount shall be allocated among the Employer Contribution Accounts of all
Participants and former Participants who were employed by the Employer during
the Plan Year. If the Employer has specified in the Adoption Agreement that a
minimum number of Hours of Service are necessary to share in the allocation of
Employer Contributions and forfeitures for a Plan Year in which the Plan is not
Top Heavy, Participants and former Participants, as the case may be, who fail to
complete the required number of Hours of Service during such a Plan Year shall
not share in the allocation. If the Employer has so specified in the Adoption
Agreement, Employer Contributions and forfeitures shall be allocated only among
otherwise entitled Participants who are employed by the Employer on such
Valuation Date. Employer Contributions and forfeitures shall be allocated to
Participants entitled to share in the allocation of Employer Contributions and
forfeitures for that Plan Year in proportion to their Compensation for such Plan
Year.
(iii) Allocation Under Integrated, Profit Sharing Plan. If the Employer has
adopted this Plan as a profit sharing plan under which allocations shall be made
on an integrated basis, Employer Contributions, plus any forfeitures under
Section 7.3, for a Plan Year shall be allocated according to the provisions of
this subsection (iii) as of the Valuation Date for such Plan Year. Unless the
Employer has specified otherwise in the Adoption Agreement, such amount shall be
allocated among all Participants and former Participants who were employed by
the Employer during the Plan Year. If the Employer has specified in the Adoption
Agreement that a minimum number of Hours of Service are necessary to share in
the allocation of Employer Contributions and forfeitures for a Plan Year in
which the Plan is not Top Heavy, Participants and former Participants, as the
case may be, who fail to complete the required number of Hours of Service during
such a Plan Year shall not share in the allocation. If the Employer has so
specified in the Adoption Agreement, Employer Contributions and forfeitures
shall be allocated only among otherwise entitled Participants who are employed
by the Employer on such Valuation Date. Employer Contributions and forfeitures
shall be allocated to Participants
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entitled to share in the allocation of Employer Contributions and forfeitures
for that Plan Year as follows:
(A) First, Employer Contributions and forfeitures will be allocated to
the Employer Contribution Account of each Participant entitled to share in
the allocation of such amounts in the ratio that each such Participant's
Compensation for the Plan Year in excess of the Integration Level bears to
the Compensation in excess of the Integration Level for all such
Participants, provided that the amount so credited to any such
Participant's Employer Contribution Account for the Plan Year shall not
exceed the product of the Integration Rate times the Participant's
Compensation in excess of the Integration Level.
(B) Next, any remaining Employer Contributions or forfeitures will be
allocated to the Employer Contribution Accounts of all Participants
entitled to share in the allocation of the Employer Contributions for the
Plan Year in the ratio that each such Participant's Compensation for the
Plan Year bears to all such Participants' Compensation for that Plan Year.
(b) Money Purchase Pension Plan. If the Employer has adopted this Plan as a
money purchase pension plan, the Employer will, beginning for the Plan Year in
which the Plan is adopted, and for each Plan year thereafter, contribute, for
allocation to the Employer Contribution Account of each Participant entitled to
share in the allocation of Employer Contributions, the amount specified in the
Adoption Agreement reduced by any forfeitures arising during the preceding Plan
Year pursuant to Section 7.3 hereafter.
(i) Employer has specified otherwise in the Adoption Agreement, the
amount of the Employer Contribution shall be calculated on the basis of the
Compensation of all Participants and former Participants who were employed
by the Employer during the Plan Year. If the Employer has specified in the
Adoption Agreement that a minimum number of Hours of Service are necessary
to receive an Employer Contribution in a Plan Year in which the Plan is not
Top Heavy, Participants and former Participants, as the case may be, who
fail to complete the required number of Hours of Service during such a Plan
Year shall not be considered when calculating the amount of the Employer
Contribution. If the Employer has so specified in the Adoption Agreement,
only Participants who are employed by the Employer on such Valuation Date
and who are otherwise entitled to receive an allocation shall be considered
when calculating the amount of the Employer Contribution. Employer
Contributions shall be allocated to the Employer Contribution Accounts of
only those Participants who were included in the calculation of the amount
of the Employer Contribution.
(ii) To the extent that the Employer Contribution for a Plan Year is
reduced by forfeitures, such forfeitures shall be added to such Employer
Contribution and allocated as a part thereof.
(iii) Any excess forfeitures not allocated pursuant to this Section
4.1(b) shall be carried over to future Plan Years.
4.2 Participant Contributions. If, in the Adoption Agreement, the Employer
has specified that Participants may make either Deductible Voluntary
Contributions or Nondeductible Voluntary Contributions, or both, a Participant
may make such permitted contributions to his or her Account; provided, however,
that a Participant's right to make such contribution(s) shall be subject to the
conditions and limitations specified below.
(a) The following conditions and limitations shall apply if the Employer
has specified that Participants may make Nondeductible Voluntary Contributions:
(i) The aggregate amount of a Participant's Nondeductible Voluntary
Contributions, plus any nondeductible voluntary contributions he or she
makes under any other qualified retirement plan maintained by the Employer,
shall not exceed 10% of his or her Compensation (disregarding any
exclusions from Compensation specified by the Employer in the Adoption
Agreement) for the period in which he or she has been a Participant in the
Plan.
(ii) The aggregate amount of a Participant's Nondeductible Voluntary
Contributions shall not cause the Annual Addition (as defined in Section
5.5(a) hereof) to his or her Account to exceed the limitations set forth in
Section 5.
(iii) A Participant's Nondeductible Voluntary Contributions shall be
allocated to his or her Nondeductible Voluntary Contribution Account under
Section 6.3 hereof.
(iv) A Participant's right to his or her Nondeductible Voluntary
Contribution Account shall be nonforfeitable and the Participant may
withdraw all or a portion of his or her Nondeductible Voluntary
Contribution Account upon 30 days written notice to the Administrator.
(b) The following conditions and limitations shall apply if the Employer
has specified that Participants may make Deductible Voluntary Contributions:
(i) The aggregate amount of a Participant's Deductible Voluntary
Contributions in any calendar year may not exceed the lesser of (1) $2,000
or (2) the Participant's compensation for calendar year for which the
contribution is made. Compensation for this purpose means all wages,
salaries, earned income and other amounts received or derived from personal
services actually rendered and includible in gross income, but does not
include amounts derived from or received as earnings or profits from
property or amounts received as a pension or annuity or as deferred
compensation. This limitation applies to all the Participants' Deductible
Voluntary Contributions made for the calendar year to all qualified
retirement plans maintained by the Employer.
(ii) A Participant may not make Deductible Voluntary Contributions for
the calendar year in which he or she attains age 70-1/2 or any calendar
year thereafter.
(iii) A Deductible Voluntary Contribution will be considered
contributed for the calendar year in which it is actually made. However, if
a Participant makes a Deductible Voluntary Contribution on or before April
15, he or she may notify the Administrator at the time the Deductible
Voluntary Contribution is made that it is made for the preceding calendar
year. A Deductible Voluntary Contribution may only be made for a calendar
year in which the Employee was a Participant, and in no event may a
Deductible Voluntary Contribution be made by an Employer after he or she
has ceased to be a Participant.
(iv) A Participant's Deductible Voluntary Contributions shall be
allocated to his or her Deductible Voluntary Contribution Account under
Section 6.3 hereof.
(v) A Participant's right to his or her Deductible Voluntary
Contribution Account shall be nonforfeitable and the Participant may
withdraw all or a portion of his or her Deductible Voluntary Contribution
Account upon written application to the Administrator. However, if at the
time the Participant receives the withdrawal, he or she has not attained
age 59-1/2 and is not disabled, the Participant will be subject to a
federal income tax penalty unless he or she rolls over the amount withdrawn
to a qualified retirement plan or individual retirement plan within 60 days
of the date he or she receives it.
(vi) The Administrator may, in its discretion, accept accumulated
deductible employee contributions (as defined in Code Section 72(o)(5))
that were distributed from a qualified retirement plan and rolled over
pursuant to Code Sections 402(a)(5), 402(a)(7), 403(a)(4), or 408(d)(3).
The rolled over amount will be added to the Participant's Deductible
Voluntary Contribution Account, but will not be taken into account in
applying the restrictions specified in Section 4.2(b)(i) and (ii) above. In
no case may the Administrator authorize the Plan to accept rollovers of
accumulated deductible employee contributions from a qualified plan under
which the Participant was covered as a Self-Employed Individual.
4.3 Rollover Contributions. The Administrator may, in its discretion,
direct the Trustee to accept a Rollover Contribution upon the express request of
the Participant wishing to make such Rollover Contribution, the same to be held,
administered and distributed by the Trustee in accordance with the terms of this
Plan, provided that the Trustee consents if the contribution includes property
other than cash. A Rollover Contribution shall only be a contribution, comprised
of money and/or property, which is a "rollover amount" within the meaning of
Code Section 402(a)(5) or a "rollover contribution" within the meaning of Code
Section 408(d)(3)(A)(ii) (as modified by Code Section 408(d)(3)(C)with respect
to which both of the following conditions are met:
(a) The transfer of such amount is being made within 60 days of its receipt
by the Participant and
(b) No part of such amount is attributable to contributions made on behalf
of the Participant while he or she was a Key Employee (as defined in Section
21.2(a) and applied to such other employer) in a Top-Heavy Plan (as defined in
Section 21.2(b) and applied to such other plan).
All Rollover Contributions made under this Section 4.3 must be accepted by
the Trustee within the 60-day period referred to in paragraph (a) above. A
Participant's Rollover Contribution shall at no time be included in the
computation of the maximum allocation to a Participant's Account as set forth in
Section 5 hereof. Each Rollover Contribution made by a Participant shall be
allocated to his or her Rollover Account pursuant to Section 6.3(d) hereof. Such
Rollover Account shall be invested by the Trustee as part of the Trust Fund,
pursuant to Section 11 hereafter, except as it may be held in kind as permitted
above. A Participant may withdraw all or a portion of his or her Rollover
Account upon 30 days' written notice to the Administrator.
4.4 Transfers from other Qualified Plans. The Administrator may, in its
discretion, direct the Trustee to accept the transfer of any assets held for a
Participant's benefit under a qualified retirement plan of a former employer of
such Participant. Such a transfer shall be made directly between the trustee or
custodian of the former employer's plan and the Trustee in the form of cash or
its equivalent, and shall be accompanied by written instruction showing
separately the portion of the transfer attributable to contributions by the
former employer and by the Participant respectively. To the extent that the
amount transferred is attributable to contributions by the former employer, it
shall be maintained in a Participant's Rollover Account. To the extent that the
amount transferred is attributable to contributions by the Participant, it shall
be maintained in the Participant's Nondeductible Voluntary Contribution Account
or Deductible Voluntary Contribution Account as is appropriate.
SECTION 5.
CODE SECTION 415 LIMITATIONS ON ALLOCATIONS
5.1 Employers Maintaining No Other Plan.
(a) If a Participant does not participate in, and has never participated in
another qualified plan maintained by the Employer, the amount of the Annual
Addition which may be credited to the Participant's Account for any Limitation
Year shall not exceed the lesser of the Maximum Permissible Amount or any other
limitation contained in the Plan.
(b) If the Employer Contribution that would otherwise be allocated to a
Participant's Account would cause the Annual Addition for the Limitation Year to
exceed the Maximum Permissible Amount, the amount allocated will be reduced so
that any Excess Amount shall be eliminated and, consequently, the Annual
Addition for the Limitation Year will equal the Maximum Permissible Amount.
(c) Any Excess Amount shall be eliminated pursuant to the following
procedure:
(i) The portion of the Excess Amount consisting of Nondeductible
Voluntary Contributions which are a part of the Annual Addition (as defined
in Section 5.5(a)) shall be returned to the Participant as soon as
administratively feasible;
(ii) If after the application of subparagraph (i) an Excess Amount
still exists and the Participant is covered by the Plan at the end of the
Limitation Year, the Excess Amount in the Participant's Account will be
used to reduce Employer Contributions (including any allocation of
forfeitures) for such Participant in the next Limitation Year, and each
succeeding Limitation Year if necessary;
(iii) If after the application of subparagraph (i) an Excess Amount
still exists and the Participant is not covered by the Plan at the end of
the Limitation Year, the Excess Amount will be held unallocated in a
suspense account. The
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suspense account will be applied to reduce proportionately future
Employer Contributions (including any allocation of forfeitures) for all
remaining Participants in the next Limitation Year, and each succeeding
Limitation Year, if necessary. If a suspense account is in existence at any
time during the Limitation Year pursuant to this subparagraph, it will not
participate in the allocation of the Trust's investment gains and losses.
In the event of termination of the Plan, the suspense account shall revert
to the Employer to the extent it may not then be allocated to any
Participant's Account.
(d) Notwithstanding any other provision in subsections (a) through
(c), the Employer shall not contribute any amount that would cause an
allocation to the suspense account as of the date the contribution is
allocated.
5.2 Employers Maintaining Other Master or Prototype Defined Contribution
Plans.
(a) This Section applies if, in addition to this Plan, a Participant is
covered under another qualified Master or Prototype defined contribution plan
maintained by the Employer during any Limitation Year. The Annual Addition which
may be allocated to any Participant's Account for any such Limitation Year shall
not exceed the Maximum Permissible Amount, reduced by the sum of any portion of
the Annual Addition credited to the Participant's account under such other plans
for the same Limitation Year.
(b) If the Annual Addition with respect to a Participant under other
defined contribution plans maintained by the Employer of what would be portions
of the Annual Addition (if the allocations were made under the Plan) are less
than the Maximum Permissible Amount and the Employer Contribution that would
otherwise be contributed or allocated to the Participant's Account under this
Plan would cause the Annual Addition for the Limitation Year to exceed this
limitation, the amount contributed or allocated will be reduced so that the
Annual Addition under all such plans for the Limitation Year will equal the
Maximum Permissible Amount.
(c) If the Annual Addition with respect to the Participant under such other
defined contribution plans in the aggregate are equal to or greater than the
Maximum Permissible Amount, no amount will be contributed or allocated to the
Participant's Account under this Plan for the Limitation Year.
(d) If an Excess Amount was allocated to a Participant under this Plan on a
date which coincides with the date an allocation was made under another plan,
the Excess Amount attributed to this Plan will be the product of,
(i) the total Excess Amount allocated as of such date, multiplied by
(ii) the quotient obtained by dividing
(A) the portion of the Annual Addition allocated to the
Participant for the Limitation Year as of such date by
(B) the total would-be and actual Annual Addition allocations to
the Participant for the Limitation Year as of such date under this and
all the other qualified Master or Prototype defined contribution plans
maintained by the Employer.
(e) Any Excess Amount attributed to the Plan will be disposed in the manner
described in Section 5.1.
5.3 Employers Maintaining Other Defined Contribution Plans. If a
Participant is covered under another qualified defined contribution plan which
is not a Master or Prototype plan, the Annual Addition credited to the
Participant's Account under this Plan for any Limitation Year will be in
accordance with the provisions of Section 5.2 as though the plan were a Master
or Prototype Plan, unless the Employer provides other limitations pursuant to
the Adoption Agreement.
5.4 Employers Maintaining Defined Benefit Plans. If the Employer maintains,
or at any time maintained, a qualified defined benefit plan covering any
Participant in this Plan, the sum of the Participant's Defined Benefit Plan
Fraction and Defined Contribution Plan Fraction will not exceed 1.0 in any
Limitation Year. The Annual Addition which may be credited to the Participant's
Account under this Plan for any Limitation Year will be limited in accordance
with the provisions of Section 5.2, unless the Employer provides other
limitations pursuant to the Adoption Agreement.
5.5 Definitions. For the purposes of this Section 5, the following terms
shall be defined as follows:
(a) Annual Addition. With respect to any Participant, the "Annual Addition"
shall be the sum of the following amounts credited to a Participant's Account
for the Limitation Year:
(i) Employer Contributions;
(ii) forfeitures; and
(iii) the lesser of
(A) one-half (1/2) the allocated Nondeductible Voluntary
Contributions or
(B) the amount of allocated Nondeductible Voluntary Contributions
in excess of 6% of the Participant's Compensation for the Limitation
Year.
Any Excess Amount applied under subparagraphs (ii) or (iii) of subsection (c) of
Section 5.1 or subsection (e) of Section 5.2 in a Limitation Year to reduce
Employer Contributions will be considered part of the Annual Addition for such
Limitation Year.
(b) Compensation. For the purposes of this Section 5, a Participant's
"Compensation" shall include any earned income, wages, salaries, and fees for
professional services and other amounts received for personal services actually
rendered in the course of employment with the Employer maintaining the Plan
(including, but not limited to commissions paid salesmen, compensation for
services on the basis of a percentage of profits, commissions on insurance
premiums, tips and bonuses), and excluding the following:
(i) Employer contributions to a plan of deferred compensation which
are not includible in the Participant's gross income for the taxable year
in which contributed, or Employer contributions under a simplified employee
pension plan to the extent such contributions are deductible by the
Participant, or any distributions from a plan of deferred compensation;
(ii) Amounts realized from the exercise of a nonqualified stock
option, or when restricted property held by the Participant either becomes
freely transferable or is no longer subject to a substantial risk of
forfeiture;
(iii) Amounts realized from the sale, exchange or other disposition of
stock acquired under a qualified stock option; and
(iv) other amounts which received special tax benefits, or
contributions made by the Employer (whether or not under a salary reduction
agreement) towards the purchase of an annuity described in Code Section
403(b) (whether or not the amounts are actually excludable from the gross
income of the Participant).
For purposes of applying the limitations of this Section 5, Compensation
for a Limitation Year is the Compensation actually paid or includible in gross
income during such year.
Notwithstanding the preceding sentence, Compensation for a Participant who
is permanently and totally disabled (as defined in Code Section 37(e)(3)) is the
Compensation such Participant would have received for the Limitation Year if the
Participant was paid at the rate of Compensation paid immediately before
becoming permanently and totally disabled; such imputed compensation for the
disabled Participant may be taken into account only if the Participant is not an
officer, an owner, or highly compensated, and contributions made on behalf of
such a Participant are nonforfeitable when made.
(c) Defined Benefit Fraction. The "Defined Benefit Fraction" shall be a
fraction, the numerator of which is the sum of the Participant's Projected
Annual Benefits under all the defined benefit plans (whether or not terminated)
maintained by the Employer, and the denominator of which is the lesser of 125%
of the dollar limitation in effect for the Limitation Year under Code Section
415(b)(1)(A) or 140% of the Participant's Highest Average Compensation.
Notwithstanding the above, if the Participant was a participant in one or
more defined benefit plans maintained by the Employer which were in existence on
July 1, 1982, the denominator of this fraction will not be less than 125% of the
sum of the annual benefits under such plans which the Participant had accrued as
of the later of the end of the last Limitation Year beginning before January 1,
1983. The preceding sentence applies only if the defined benefit plans
individually and in the aggregate satisfied the requirements of Code Section 415
as in effect at the end of the 1982 Limitation Year. For purposes of this
paragraph, a Master or Prototype plan with an opinion letter issued before
January 1, 1983, which was adopted by the Employer on or before June 30, 1983,
is treated as a plan in existence on July 1, 1982.
(d) Defined Contribution Fraction. The "Defined Contribution Fraction"
shall be a fraction, the numerator of which is the sum of the Annual Additions
to the Participant's account under all the defined contribution plans (whether
or not terminated) maintained by the Employer for the current and all prior
Limitation Years (including the Annual Additions attributable to the
Participant's nondeductible employee contributions to all defined benefit plans,
whether or not terminated, maintained by the Employer), and the denominator of
which is the sum of the Maximum Aggregate Amounts for the current and all prior
Limitation Years of service with the Employer (regardless of whether a defined
contribution plan was maintained by the Employer). The Maximum Aggregate Amount
in any Limitation Year is the lesser of 125% of the dollar limitation in effect
under Code Section 415(C)(1)(A) or 35% of the Participant's Compensation for
such year.
If the Participant was a participant in one or more defined contribution
plans maintained by the Employer which were in existence on July 1, 1982, the
numerator of this fraction will be adjusted if the sum of this Defined
Contribution Fraction and the Defined Benefit Fraction would otherwise exceed
1.0 under the terms of this Plan. Under the adjustment, an amount equal to the
product of
(i) the excess of the sum of the fractions over 1.0, multiplied by
(ii) the denominator of this Defined Contribution Fraction, will be
permanently subtracted from the numerator of this fraction. The adjustment
is calculated using the fractions as they would be computed as of the later
of the end of the last Limitation Year beginning before January 1, 1983 or
September 30, 1983. This adjustment also will be made if at the end of the
last Limitation Year beginning before January 1, 1984, the sum of the
fractions exceeds 1.0 because of accruals or additions that were made
before the limitations of this Section 5 became effective to any plans of
the Employer in existence on July 1, 1982. For purposes of this paragraph,
a Master or Prototype plan with an opinion letter issued before January 1,
1983, which is adopted by the Employer on or before September 30, 1983, is
treated as a plan in existence on July 1, 1982.
(e) Employer. "Employer" means the Employer that adopts this Plan and all
members of (i) a controlled group of corporations (as defined in Code Section
414(b) as modified by Code Section 415(h)), (ii) commonly controlled trades or
businesses (whether or not incorporated) (as defined in Code Section 414(c) as
modified by Code Section 415(h)), or (iii) affiliated service groups (as defined
in Code Section 414(m)) of which the Employer is a part.
(f) Excess Amount. The "Excess Amount" is the excess of what would
otherwise be a Participant's Annual Addition for the Limitation Year over the
Maximum Permissible Amount. If at the end of a Limitation Year when the Maximum
Permissible Amount is determined on the basis of the Participant's actual
Compensation for the year, an Excess Amount results, the Excess Amount will be
deemed to consist of the portion of the Annual Addition last allocated.
(g) Highest Average Compensation. A Participant's "Highest Average
Compensation" is his or her average Compensation for the 3 consecutive Years of
Service with the Employer that produces the highest average. A Year of Service
with the Employer is the 12-consecutive-month period defined in the Adoption
Agreement.
(h) Limitation Year. A Limitation Year is the Plan Year or any other
12-consecutive-month period specified by the Employer in the Adoption Agreement.
All qualified plans maintained by the Employer must use the same Limitation
Year. If the Limitation Year is amended to a different 12-consecutive-month
period, the new Limitation Year must begin on a date within the Limitation Year
in which the amendment is made.
(i) Master or Prototype Plan. A "Master or Prototype" plan is a plan the
form of which is the subject of a favorable opinion letter from the Internal
Revenue Service.
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(j) Maximum Permissible Amount. For a Limitation Year, the "Maximum
Permissible Amount" with respect to any Participant shall be the lesser of
(i) $30,000 (or beginning January 1, 1986, such larger amount
determined by the Commissioner of Internal Revenue for the Limitation Year)
or
(ii) 25% of the Participant's Compensation for the Limitation Year.
If a short Limitation Year is created because of an amendment changing the
Limitation Year to a different 12-consecutive-month period, the Maximum
Permissible Amount will not exceed the quotient determined by first
multiplying $30,000 by the number of months in the short Limitation Year
and then dividing the product by 12. Prior to determining the Participant's
actual Compensation for the Limitation Year, the Employer may determine the
Maximum Permissible Amount for a Participant on the basis of a reasonable
estimation of the Participant's Compensation for the Limitation Year,
uniformly determined for all Participants similarly situated. As soon as is
administratively feasible after the end of each Limitation Year, the
Maximum Permissible Amount for the Limitation Year will be determined on
the basis of Participants' actual Compensation for the Limitation Year.
(k) Projected Annual Benefit. The "Projected Annual Benefit" is the annual
retirement benefit (adjusted to an actuarilly equivalent straight life annuity
if such benefit is expressed in a form other than a straight life annuity or
qualified joint and survivor annuity) to which the Participant would be entitled
under the terms of the plan assuming:
(i) the Participant will continue employment until normal retirement
date under the plan (or current age, if later), and
(ii) the Participant's compensation for the current Limitation Year
and all other relevant factors used to determine benefits under the plan
will remain constant for all future Limitation Years.
SECTION 6.
TIME AND MANNER OF MAKING CONTRIBUTIONS
6.1 Manner. Unless otherwise agreed to by the Trustee, contributions to
said Trustee shall be made only in cash. All contributions may be made in one or
more installments.
6.2 Time. Employer Contributions and Participant Contributions with respect
to a Plan Year shall be made before the time limit, including extensions
thereof, for filing the Employer's federal income tax returns for the Year with
or within which the particular Plan Year ends (or such later time as permitted
by regulations authorized by the Secretary of the Treasury or delegate).
Rollover Contributions may be made at any time acceptable to the Administrator
in accordance with Section 4.3 hereof. All contributions shall be paid to the
Administrator for transfer to the Trustee, as soon as possible, or, if
acceptable to the Administrator and the Trustee, such contributions may be paid
directly to the Trustee. The Administrator shall transfer such contributions to
the Trustee as soon as possible. The Administrator may establish a payroll
deduction system or other procedure to assist the making of Participant
Contributions to the Trust, and the Administrator may from time to time adopt
rules or policies governing the manner in which such contributions may be made
so that the Plan may be conveniently administered.
6.3 Separate Accounts. For each Participant, a separate account shall be
maintained for each of the following types of contributions and the income,
expenses, gains and losses attributable thereto:
(a) Employer Contributions;
(b) Nondeductible Voluntary Contributions, if selected in the Adoption
Agreement;
(c) Deductible Voluntary Contributions, if selected in the Adoption
Agreement; and
(d) Rollover Contributions, if the Administrator accepts such contributions
pursuant to Section 4.3 hereof.
Notwithstanding the above, if a Participant's rights to Employer Contributions
are immediately and fully nonforfeitable, Employer Contributions allocated on
behalf of such Participant and his or her Nondeductible Voluntary Contributions
may be maintained in a single account.
SECTION 7.
VESTING
7.1 When Vested. A Participant's interest in his or her Nondeductible
Voluntary Contribution Account, Deductible Voluntary Contribution Account and
Rollover Account shall always be fully vested and nonforfeitable. A
Participant's interest in his or her Employer Contribution Account shall be
vested and nonforfeitable at Normal Retirement Date, death, Disability, upon
termination (including a complete discontinuance of Employer Contributions) or
partial termination of the Plan and otherwise only to the extent specified in
the Adoption Agreement.
7.2 Amendment of Vesting Schedule. If the Adoption Agreement has been
executed as an amendment to an existing plan, Participants with 5 or more
Vesting Years before the expiration of the election period described in the next
sentence shall have the right to elect the vesting schedule in effect on the day
before the election period. The election period shall commence on the date the
amendment is adopted and end on the latest of (a) 60 days after the amendment is
adopted, (b) 60 days after the Effective Date, or (c) 60 days after the
Participant is issued written notice of the amendment by the Administrator.
Failure to so elect shall be treated as a rejection and such election or
rejection shall be final.
7.3 Forfeitures. If a Participant's employment with the Employer is
terminated before his or her Employer Contribution Account is fully vested in
accordance with Section 7.1 hereof, the portion of the Employer Contribution
Account which is not vested shall be held in suspense until the Participant
becomes reemployed, dies, becomes disabled or completes a One-Year Break in
Service, whichever occurs first. If the Participant is reemployed, dies or
becomes disabled before a One-Year Break in Service, the amount held in suspense
shall be restored to the Employer Contribution Account. If the Participant is
reemployed by the Employer before a One-Year Break in Service and thereafter has
a One-Year Break in Service before the Employer Contribution Account has become
fully vested, the portion of the Employer Contribution Account which is then
vested shall be determined by adding to the then value of the Employer
Contribution Account, the amount, if any, previously distributed, applying the
vesting percentage then applicable, and then subtracting the amount previously
distributed. If a One-Year Break in Service occurs before reemployment with the
Employer, death or Disability, the portion of the Participant's Employer
Contribution Account held in suspense shall be forfeited and (a) if this Plan is
adopted as a profit sharing plan, allocated as of the next Valuation Date in the
same manner, and to the same Participants' Employer Contribution Accounts as the
Employer Contribution for that Plan Year is allocated pursuant to Section 4.1
hereof, or (b) if this Plan is adopted as a money purchase pension plan, applied
to reduce the Employer Contributions for the next Plan Year.
SECTION 8.
DISTRIBUTION UPON DEATH
8.1 Distribution to Beneficiary. If a Participant's employment terminates
because of death, the Trustee shall, upon the direction of the Administrator,
distribute the Participant's Account or the undistributed remainder thereof, as
the case may be, in accordance with the provisions of Section 8.2, to the
Beneficiary or Beneficiaries validly named in the most recent Designation of
Beneficiary form filed by the Participant with the Trustee before death in
compliance with Section 15. The Administrator's direction shall include
notification of the Participant's death, the identity of the Beneficiary or
Beneficiaries so named, and the appropriate manner of distribution.
8.2 Manner of Distribution. A distribution made under this Section 8 shall
be made in such manner as the Participant shall in his or her most recent
Designation of Beneficiary have validly elected. In the absence of such an
election, such distribution shall be made in such manner as the Participant's
Beneficiary (or Beneficiaries) may elect, or in the absence of such an election,
in such manner as the Administrator shall determine. If a Participant dies
before benefits commence and the surviving spouse is not the Beneficiary, the
Participant's entire Account balance must be distributed to the Participant's
Beneficiary within 5 years. However, if distributions have commenced to the
Participant before the Participant's death, distributions to the Participant's
surviving spouse, Beneficiary or estate may continue over the period selected by
the Participant.
SECTION 9.
OTHER DISTRIBUTIONS
9.1 Normal Distributions. The Account of any Participant, to the extent it
is vested pursuant to Section 7.1 hereof, will normally be distributed in
monthly installments which must commence at or within 60 days after the end of
the Plan Year in which occurs his or her Normal Retirement Date or in which his
or her Employment ceases, whichever is later, to continue over a period of 120
months; provided, however, that in the case of a Participant who is a Key
Employee (as defined in Section 21.2 hereafter), monthly installments to such a
Participant must commence no later than the last day of the Participant's
taxable year in which such Participant attains age 70-1/2, but only if this Plan
is Top-Heavy (as defined in Section 21.2 hereafter). The monthly amount shall
normally be the vested balance of the Participant's Account divided by the
remaining number of months in such 120 months, all rounded to the nearest cent.
However, the amount of each monthly installment may be recomputed and adjusted
from time to time no more frequently than monthly as the Trustee may reasonably
determine.
9.2 Optional Distribution. All Participants may request the Administrator
to approve, in its sole discretion, any of the following variations from the
normal pattern of distribution:
(a) Distribution made or commencing before the Participant's Normal
Retirement Date.
(b) Distributions made or commencing after the normal time of distribution
described in Section 9.1; provided, however, that any such deferred distribution
must commence no later than the last day of the Participant's taxable year in
which the Participant attains age 70-1/2.
(c) Distribution of the Participant's entire Account at one time.
(d) Installment payments of a fixed amount, such payments to be made until
exhaustion of the Participant's Account.
(e) Distribution in kind.
(f) Any reasonable combination of the foregoing or any reasonable time or
manner of distribution within the above stated limitations.
Notwithstanding the above, if this Plan is adopted as an integrated, profit
sharing plan, such distribution may not commence before termination of Service.
Furthermore, the minimum distribution to be made each calendar year shall be the
amount equal to the quotient obtained by dividing the Participant's Account
balance at the beginning of the year by the greater of the life expectancy of
the Participant or the joint life and last survivor expectancy of the
Participant and spouse. For purposes of this minimum distribution rule, life
expectancy and joint life and last survivor expectancy shall be determined as of
the date the Participant attained age 70, reduced by one for each calendar year
commencing after the Participant's attainment of age 70-1/2, reduced by one for
each calendar year commencing after the Participant's attainment of age 70-1/2.
In the case of a Participant who becomes a Key Employee (as defined in Section
21.2 hereafter) after age 70-1/2 but before termination of Employment, and if
this Plan is Top-Heavy (as defined in Section 21.2 hereafter), such Participant
must begin to receive distribution of his or her Account by the end of the
calendar year in which Participant becomes such a Key Employee.
9.3 Special One-Time Distribution Election. Notwithstanding any Plan
provision to the contrary, distribution on behalf of any Employee, including a
Key Employee (as defined in Section 21.2(a) below) in a Plan Year in which this
Plan is Top-Heavy, may be made in accordance with the following requirements
(regardless of when such distribution commences):
(a) The distribution is one which would not have disqualified the Plan
under Code Section 401(a)(9) as it was in effect prior to its amendment by the
Tax Equity
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and Fiscal Responsibility Act of 1982.
(b) The distribution is in accordance with a method of distribution
designated by the Participant whose interest in the Plan is being distributed
or, if the Participant has died, by a beneficiary of such Participant.
(c) Such designation was in writing, was signed by the Participant or the
beneficiary, and was made before January 1, 1984.
(d) The Participant had accrued a benefit under the Plan as of December 31,
1983.
(e) The method of distribution designated by the Participant or the
beneficiary specifies the time at which distribution will commence, the period
over which distributions will be made, and in the case of any distribution upon
the Participant's death, the Beneficiaries of the Participant are listed in
order of priority.
A distribution upon death will not be covered by this Section 9.3 unless the
information in the designation contains the required information described above
with respect to the distributions to be made upon the death of the Participant.
For any distribution which commences before January 1, 1984, but continues
after December 31, 1983, the Participant, or the Beneficiary, to whom such
distribution is being made, will be presumed to have designated the method of
distribution under which the distribution is being made if the method of
distribution was specified in writing and the distribution satisfies the
requirement in subsection (a) above.
If a designation is revoked, any subsequent distribution must satisfy the
requirements of Code Section 401(a)(9) as amended by the Tax Equity and Fiscal
Responsibility Act of 1982. Any changes in the designation will be considered to
be a revocation of the designation. However, the mere substitution or addition
of another Beneficiary (one not named in the designation) under the designation
will not be considered to be a revocation of the designation, so long as such
substitution or addition does not alter the period over which distributions are
to be made under the designation, directly or indirectly (for example, by
altering the relevant measuring life).
SECTION 10.
LOANS
10.1 Availability of Loans. If, in the Adoption Agreement, the Employer has
specified that loans to Participants are permitted, the Loan Trustee shall, upon
the direction of the Administrator, make one or more loans, including any
renewal thereof, to a Participant (other than a Participant who is an
Owner-Employee). Any such loan shall be subject to such terms and conditions as
the Administrator shall determine pursuant to a uniform policy adopted by the
Administrator for this purpose, which policy shall be at least as restrictive as
required by this Section 10.
10.2 Equivalent Basis. No such loan may be made to a disqualified person
within the meaning of Code Section 4975(3), unless such loans are available to
all Participants on a reasonably equivalent basis and are not made available to
officers, shareholders or highly paid Participants in an amount which, when
stated as a percentage of such Participant's Account, if greater than is
available to other Participants.
10.3 Limitation on Amount. The amount of any such loan, when added to the
outstanding balance of all other loans from the Plan (and any other qualified
retirement plans of the Employer's) to the Participant, shall not exceed the
following:
Participant's Vested Maximum Amount
Account Balance of Loan
- ------------------- -------------------------
$0-$10,000 100% of vested Account balance
$10,000-$20,000 $10,000
$20,000-$100,000 50% of vested Account balance
over $100,000 $50,000
The value of the Participant's Account balance shall be as determined by the
Administrator; provided, however, that such determination in no event take into
account the portion of the Participant's Account attributable to the
Participant's Deductible Voluntary Contribution Account.
10.4 Maximum Term. The term of any such loan shall not exceed 5 years;
provided, however, that such limitation shall not apply to any loan used to
acquire, construct, reconstruct, or substantially rehabilitate any dwelling unit
which within a reasonable time is to be used (determined at the time the loan is
made) as a principal residence of the Participant or a member of the
Participant's family (within the meaning of Code Section 267(c)(4)).
10.5 Promissory Note. Any such loan shall be evidenced by a promissory note
executed by the Participant and payable to the Loan Trustee, on the earliest of
(i) a fixed maturity date meeting the requirements of Section 10.4 above, but in
no event later than the Participant's Normal Retirement Date, (ii) the
Participant's death, or (iii) when distribution hereunder is to be made to the
Participant (other than a withdrawal which will not reduce the value of his or
her Account to the extent that the aggregate amount owing could not be made as a
new loan within the limitation set forth in Section 10.3 above). Such promissory
note shall be secured by an assignment of the Participant's Account to the Loan
Trustee. Such promissory note shall evidence such terms as are required by this
Section 10.
10.6 Interest. Any such loan shall be subject to a reasonable rate of
interest.
10.7 Repayment. If a note is not paid when the Participant's benefits
hereunder are to be distributed, then any unpaid portion of such loan and unpaid
interest thereon shall be deducted by the Loan Trustee from the Participant's
Account before benefits are paid from or purchased out of the Account. Such
deduction shall, to the extent thereof, cancel the indebtedness of the
Participant. If a note is not paid when it otherwise becomes payable under
Section 10.5, or if at any time the Administrator determines that the aggregate
amounts owing by a Participant upon such notes exceed the vested value of the
Participant's Account, the Participant shall be promptly notified in writing
that unless such loan or excess is repaid within 30 days, action will be taken
to collect the same plus any cost of collections.
10.8 Accounting. Loans shall be made only from the Account of the
Participant (exclusive of that portion of the Account attributable to the
Participant's Deductible Voluntary Contribution Account) requesting the loan,
and shall be treated as an investment of such Account. All interest payments
made with respect to such loan shall be credited to the Participant's Account.
10.9 Precedence. This Section 10 overrides Section 16 below.
SECTION 11.
TRUST PROVISIONS
11.1 Manner of Investment. All contributions to the Account of a
Participant shall be held in trust by the Trustee designated in the Adoption
Agreement. Except to the extent that a Participant's Account is invested in a
loan pursuant to Section 10 hereof, the Account of a Participant may only be
invested and reinvested in shares of Designated Investment Companies, unless the
Distributor permits less than 100% of the Trust assets to be so invested. If the
Administrator or the Participant, as the case may be, has elected to have a
portion of an Account invested in other than shares of Designated Investment
Companies and the Distributor has authorized the investment of less than 100% of
Trust assets in such shares, the Trustee shall invest such amount in such
investments as it is empowered to invest in under Section 11.3 hereof. The
Designated Investment Companies available for investment may be limited by the
Employer. Investment in the shares of more than one Designated Investment
Company is not permitted unless the value of the Participant's Account and the
value of the investment in each additional Designated Investment Company exceed
amounts from time to time determined by the Distributor.
11.2 Investment Decision.
(a) The decision as to the investment of an Account shall be made by the
person designated in the Adoption Agreement, and the Trustee shall have no
responsibility for determining how an Account is to be invested or to see that
investment directions communicated to it comply with the terms of the Plan. If
the decision is made by the Participant, the Participant shall convey investment
instructions to the Trustee. Further, if the decision is to be made by the
Participant, the right to make such a decision shall remain with the Participant
upon retirement and shall pass to the Distributee upon death.
(b) The person designated to make the decision as to the investment of an
Account may direct that the investment medium of an Account be changed, provided
that no such change may be made from or to an investment other than a Designated
Investment Company except to the extent permitted under Section 11.1 above and
by the terms of that other investment vehicle. If the Distributor determines in
its own judgment that there has been trading of shares of Designated Investment
Companies in the Accounts of the Participants, any Designated Investment Company
may refuse to sell its shares to such Accounts. When an investment is being made
or changed, the person designated to do so shall specify the type of Account to
which the change refers.
(c) If any decision as to investments is to be made by the Administrator,
it shall be made on a uniform basis with respect to all Participants.
(d) The Administrator and the Trustee may adopt procedures permitting
Participants to convey their investment instructions directly to the Trustee or
to the transfer agent for the Designated Investment Company or Companies or for
any other investment permitted by the Distributor.
(e) Whenever a Participant is the person designated to make the decision as
to the investment of an Account, the Administrator shall ascertain that the
Participant has received a copy of the current prospectus relating to the shares
of any Designated Investment Company in which such Account is to be invested
plus, where required by any state or federal law, the current prospectus
relating to any other investment in which the Account is to be invested. With
respect to contributions designated for investment by a Participant, by
remitting such a contribution to the Trustee, the Administrator shall be deemed
to warrant to the Trustee that the Participant has received all such
prospectuses. By remitting any other contribution to the Trustee, the
Administrator shall be deemed to warrant to the Trustee that the Administrator
has received a current prospectus of any Designated Investment Company in which
the contribution is to be invested, plus, where required by any state or federal
law, the current prospectus relating to any other investment in which
contributions are to be invested.
11.3 Investment Powers. To the extent that a portion of the Trust assets
are invested other than in shares of Designated Investment Companies pursuant to
Section 11.1 above, the Trustee is hereby granted full power and authority to
invest and reinvest the Trust assets in any property of any kind or nature
whatsoever (speculative or otherwise) or in any rights or interests therein, or
in any evidences or indicia thereof and whether real, personal or mixed, or
whether tangible or intangible (including for illustration but not to be limited
to the following, or anything of a similar kind, character or class: common or
preferred stocks, evidences or ownership in so-called Massachusetts business
trusts, fees, beneficial interests, leaseholds, bonds, mortgages, leases, notes
or obligations, oil and gas payments, oil and gas contracts and other
securities, instruments or commodities) without regard to any rule of law or
statute of the state of the Trustee designating investments eligible for trust
funds, and without respect to any custom or practice either as to types of
investments or diversification of investments, and to hold cash uninvested at
any time and from time to time in such amounts and to such extent as the Trustee
in its own uncontrolled discretion and judgment deems advisable; provided,
however, that the Trustee is to act with the care, skill and diligence, under
the circumstances then prevailing, which would characterize the actions of a
prudent man who is acting as such a Trustee and who is familiar with the duties
of such a Trustee; further provided that the Trustee shall diversify the
investments of the Trust Fund so as to minimize the risk of large losses unless,
under the circumstances, such diversification would not be prudent; further
provided that the Trustee is not empowered to enter into any investment which
would be prohibited under the Act or otherwise by the provisions of this Plan.
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Notwithstanding the above, the following restrictions on he investment of a
Participant's Accounts shall apply:
(a) No part of a Participant's Deductible Voluntary Contribution Account
may be used to purchase life insurance.
(b) No more than one-half of the aggregate Employer Contributions allocated
to a Participant's Employer Contributions Account may be used to pay premiums
attributable to the purchase of ordinary life insurance contracts (life
insurance contracts with both nondecreasing death benefits and nonincreasing
premiums).
(c) No more than one-quarter of aggregate Employer Contributions allocated
to a Participant's Employer Contribution Account may be used to pay premiums on
term life insurance contracts, universal life insurance contracts, and all other
life insurance contracts which are not ordinary life insurance contracts.
(d) One-half of the amount used to pay premiums on ordinary life insurance
contracts plus the amount used to pay premiums on all other life insurance
contracts may not exceed an amount equal to one-quarter of the aggregate
Employer Contributions allocated to a Participant's Employer Contribution
Account.
11.4 Appointment of Investment Manager. To the extent that a portion of the
Trust assets is invested other than in shares of Designated Investment Companies
pursuant to Sections 11.1 and 11.3 above, the Employer may designate Scudder,
Stevens & Clark, or its successor or any affiliate, to act as investment manager
(within the meaning of the Act), and may at any time revoke such designation. If
an investment manager is so designated, the Trustee shall follow all investment
directions given by the investment manager with respect to the retention,
investment and reinvestment of the Plan assets to the extent they are under the
control of such investment manager. If permitted by the Trustee, the investment
manager may issue orders for the purchase and sale of securities, including
orders through any affiliate of such investment manager. Such an investment
manager is specifically allowed to direct or make investments in shares of any
Designated Investment Company. The Trustee shall not be liable for following any
direction given by, or any actions of, an investment manager so appointed.
11.5 Trustee: Number, Qualifications and Majority Action.
(a) The number of Trustees shall be one, two or three. Any natural person
and any corporation having power under applicable law to act as a trustee of a
pension or profitsharing plan may be a Trustee. No person shall be disqualified
from being a Trustee by being employed by the Employer, by being the
Administrator, by being a trustee under any other qualified retirement plan of
the Employer or by being a Participant in this Plan or such other qualified
plan.
(b) A Trustee holding office as sole Trustee hereunder shall have all the
powers and duties herein given the Trustees. When the number of Trustees
hereunder is three, any two of them may act, but the third Trustee shall be
promptly informed of the action. When there are two or three Trustees hereunder,
they may, by written instrument communicated to the Employer and the
Administrator, allocate among themselves the powers and duties herein given to
the Trustee hereunder. If such an allocation is made, to the extent permitted by
applicable law, no Trustee shall be liable either individually or as a trustee
for loss to the Plan from the acts or omissions of another Trustee with respect
to duties allocated to such other Trustee.
11.6 Change of Trustee.
(a) Any Trustee may resign as Trustee upon notice in writing to the
Employer, and the Employer may remove any Trustee upon notice in writing to each
Trustee. The removal of a Trustee shall be effective immediately, except that a
corporation serving as a Trustee shall be entitled to 60 days' notice which it
may waive, and the resignation of a Trustee shall be effective immediately,
provided that, if the Trustee is the sole Trustee, neither a removal nor a
resignation of the Trustee shall be effective until a successor Trustee has been
appointed and has accepted the appointment. If within 60 days of the delivery of
the written resignation or removal of a sole Trustee another Trustee shall not
have been appointed and have accepted, the resigning or removed Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Trustee or may terminate the Plan pursuant to Section 18 of the Prototype Plan.
The Trustee shall not be liable for the acts and omissions of any successor
trustee.
(b) At any time when the number of Trustees is one or two the Employer may
but need not appoint one or two additional Trustees, provided that the number of
Trustees shall not be more than three. Such an appointment and the acceptance
thereof shall be in writing, and shall take effect upon the delivery of written
notice thereof to all the Trustees and the Administrator and such acceptance by
the appointed Trustee, provided that if a corporation is a Trustee then in the
absence of its consent, such an appointment of an additional or successor
Trustee shall not become effective until 60 days after its receipt of notice.
(c) Although any Employer adoption the Plan may choose any Trustee who is
willing to accept the Trust, the Distributor or its successors may make or may
have made tentative standard arrangements with any bank or trust company with
the expectation it will be used as the Trustee by a substantial group of
Employers. It is also contemplated that more favorable results can be obtained
with a substantial volume of business, and that it may become advisable to
remove such bank or trust company as Trustee and substitute another Trustee.
Therefore, anything in the prior two subsections of this Section 11.6
notwithstanding, each Employer adopting this Plan hereby agrees that the
Distributor may, upon a date specified in a notice of at least 30 days to the
affected Employer and in absence of written objection by the Employer received
by the Distributor before such date, (i) remove any such Trustee and in that
case, or if such a Trustee has resigned as to a group of Employers, (ii) appoint
such a successor Trustee, provided such action is taken with respect to all
Employers similarly circumstanced of which the Distributor has knowledge, and
provided such notice is given in writing mailed postage prepaid to the Employer
at the latest address furnished to the Distributor directly or supplied to it by
such Trustee which is to be succeeded. If within 60 days after such Trustee's
resignation or removal, the Employer has not appointed a successor which has
accepted such appointment (unless the appointment of a successor Trustee is
waiting for action by the Distributor pursuant to the next preceding sentence
according to notice which has been given), the Trustee may petition an
appropriate court for the appointment of its successor. The Trustee shall not be
liable for the acts and omissions of such successor.
(d) Successor Trustees qualifying under this Section 11.5 shall have all
rights and powers and all the duties and obligations of original Trustees.
11.7 Valuation. Annually, on the Valuation Date, or more frequently in the
discretion of the Trustee, the assets of the Trust shall be revalued at fair
market value and the accounts of the Trust shall be proportionately adjusted to
reflect income, gains, losses or expenses, if the system of accounting does not
directly accomplish all such adjustments. The Trust Fund shall be administered
separately from, and shall not include any assets being administered under, any
other plan of an Employer. Interim valuations, if any, shall be applied
uniformly and in a non-discriminatory manner for all Employees.
11.8 Registration. Any assets in the Trust Fund may be registered in the
name of the Trustee or any nominee designated by the Trustee.
11.9 Certifications and Instructions.
(a) Any pertinent vote or resolution of the Board of Directors of the
Employer (if it is a corporation) shall be certified to the Trustee over the
signature of the Secretary or an Assistant Secretary of the Employer and under
its corporate seal. The Employer shall promptly furnish to the Trustee
appropriate certification evidencing the appointment and termination of the
individual or individuals serving as Administrator under Section 12.1 of the
Plan.
(b) The Administrator shall furnish to the Trustee appropriate
certification of the individual or individuals authorized to give notice on
behalf of the Administrator and providing specimens of their signatures. All
requests, directions, requisitions for money and instructions by the
Administrator to the Trustee shall be in writing and signed. There may be
standing requests, directions, requisitions or instructions to the extent
acceptable to the Trustee.
11.10 Accounts and Approval.
(a) The Trustee shall keep accurate and detailed accounts of all
investments, receipts and disbursements and other transactions hereunder, and
all books and record relating thereto shall be open at all reasonable times to
inspection and audit by any person or persons designated by the Administrator or
by the Employer.
(b) Within 90 days following the close of each Plan Year the Trustee may,
and upon the request of the Employer or the Administrator shall, file with the
Administrator and the Employer a written report setting forth all securities or
other investments (including insurance contracts) purchased and sold, all
receipts, disbursements and other transactions effected by it during the period
since the date covered by the next prior report, and showing the securities and
other property held at the end of such period, and such other information about
the Trust Fund as the Administrator shall request. Unless the Employer or
Administrator, within 90 days from the date of mailing of such report, objects
to the contents of such report, the report shall be deemed approved. Any such
objection shall set forth the specific grounds on which they are based.
11.11 Taxes. The Trustee may assume that any taxes assessed on or in
respect of the Trust Fund are lawfully assessed unless the Administrator shall
in writing advise the Trustee that in the opinion of counsel for the Employer
such taxes are not lawfully assessed. In the event that the Administrator shall
so advise the Trustee, the Trustee, if so requested by the Administrator and
suitable provision for their indemnity having been made, shall contest the
validity of such taxes in any manner deemed appropriate by the Administrator or
counsel for the Employer. The word "taxes" in this Section 11 shall be deemed to
include any interest or penalties that may be levied or imposed in respect to
any taxes assessed. Any taxes, including transfer taxes incurred in connection
with the investment or reinvestment of the assets of the Trust Fund that may be
levied or assessed in respect to such assets shall, if allocable to the Accounts
of specific Participants, be charged to such Accounts, and if not so allocable,
they shall be equitably apportioned among all such Participants' Accounts.
11.12 Employment of Counsel. The Trustee may employ legal counsel (who may
be counsel for the Employer) and shall be fully protected in acting or
refraining from acting, upon such counsel's advice in respect to any legal
questions.
11.13 Compensation of Trustee. An individual Trustee who is an Employee of
the Employer shall not be compensated for services as Trustee. A corporation, or
an individual who is not an Employee of the Employer, serving as a Trustee shall
be entitled to reasonable compensation for services; such compensation shall be
paid in accordance with Section 13.
11.14 Limitation of Trustee's Liability.
(a) The Trustee shall have no duty to take any action other than as herein
specified, unless the Administrator shall furnish it with instructions in proper
form and such instructions shall have been specifically agreed to by it, or to
defend or engage in any suit unless it shall have first agreed in writing to do
so and shall have been fully indemnified to its satisfaction.
(b) The Trustee may conclusively rely upon and shall be protected in acting
in good faith upon any written representation or order from the Administrator or
any other notice, request, consent, certificate or other instrument or paper
believed by the Trustee to be genuine and properly executed, or any instrument
or paper if the Trustee believes the signature thereon to be genuine.
(c) The Trustee shall not be liable for interest on any reasonable cash
balances maintained in the Trust.
(d) The Trustee shall not be obligated to, but may, in its discretion,
receive a contribution from a Participation unless forwarded by the
Administrator.
11.15 Successor Trustee. Any corporation into which a corporation acting as
a Trustee hereunder may be merged or with which it may be consolidated, or any
corporation resulting from any merger, reorganization or consideration to which
such Trustee may be a party, shall be the successor of the Trustee hereunder,
without the necessity of any appointment or other action, provided the Trustee
does not resign and is not removed.
11.16 Enforcement of Provisions. To the extent permitted by applicable law,
the Employer and the Administrator shall have the exclusive right to enforce any
and all provisions of this Agreement on behalf of all Employees or former
Employees of the Employer or their Beneficiaries or other persons having or
claiming to have
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an interest in the Trust Fund or under the Plan. In any action or proceeding
affecting the Trust Fund or any property constituting a part or all thereof, or
the administration thereof or for instructions to the Trustee, the Employer, the
Administrator and the Trustee shall be the only necessary parties and shall be
solely entitled to any notice of process in connection therewith; any judgment
that may be entered in such action or proceeding shall be binding and conclusive
on all persons having or claiming to have any interest in the Trust Fund or
under the Plan.
11.17 Voting. The Trustee shall deliver, or cause to be executed and
delivered, to the Administrator all notices, prospectuses, financial statements,
proxies and proxy soliciting materials received by the Trustee relating to
securities held by the Trust. The Administrator shall deliver these to the
appropriate Participant or Beneficiary of a deceased Participant, but only if
the Employer has specified in the Adoption Agreement that investment decisions
shall be made by Participants pursuant to Section 11.2 hereof. The Trustee shall
not vote any securities held by the Trust except in accordance with the written
instructions of the person or persons entitled to make investment decisions
pursuant to Section 11.2.
11.18 Applicability to Loan Trustee. Where appropriate, the foregoing
provisions of this Section 11 shall apply to the Loan Trustee on the same basis
as if the Loan Trustee were the Trustee.
SECTION 12.
ADMINISTRATION
12.1 Appointment of Administrator. From time to time, the Employer may, by
identifying such person(s) in writing to both the Trustee and the Participants,
appoint one or more persons as Administrator (hereinafter referred to in the
singular). Such Administrator shall have all power and authority necessary to
carry out the terms of the Plan. A person appointed as Administrator may also
serve in any other fiduciary capacity, including that of Trustee, with respect
to the Plan. The Administrator may resign upon 15 days advance written notice to
the Employer, and the Employer may at any time revoke the appointment of the
Administrator with or without cause. The Employer shall exercise the power and
fulfill the duties of the Administrator if at any time, an Administrator has not
been properly appointed in accordance with this Section 12.1 or the position is
otherwise vacant.
12.2 Named Fiduciaries. The "Named Fiduciaries" within the meaning of the
Act shall be the Administrator and the Trustee.
12.3 Allocation of Responsibilities. Responsibilities under the Plan shall
be allocated among the Trustee, the Administrator and the Employer as follows:
(a) Trustee: The Trustee shall have exclusive responsibility to hold,
manage and invest, pursuant to instructions communicated to it in accordance
with Section 11.2 above, the funds received by it subject to the powers granted
to it under Section 11 hereof. To the extent that loans are made to Participants
in accordance with Section 10 hereof, these responsibilities shall fall to the
Loan Trustee.
(b) The Administrator: The Administrator shall have the responsibility and
authority to control the operation and administration of the Plan in accordance
with its terms including, without limiting the generality of the foregoing, (i)
any investment decisions assigned to it under the Adoption Agreement or
transmission to the Trustee of any Participant investment decision under Section
11.2; (ii) interpretation of the Plan, conclusive determination of all questions
of eligibility, status, benefits and rights under the Plan and certification of
the Trustee of all benefit payments under the Plan; (iii) hiring of persons to
provide necessary services to the Plan not provided by Employees; (iv)
preparation and filing of all statements, returns and reports required to be
filed by the Plan with any agency of Government; (v) compliance with all
disclosure requirements of all state or federal law; (vi) maintenance and
retention of all Plan records as required by law, except those required to be
maintained by the Trustee; and (vii) all functions otherwise assigned to it
under the terms of the Plan.
(c) Employer: The Employer shall be responsible for the design of the Plan,
as adopted or amended, the designation of the Administrator and Trustee (and, if
appropriate, the Loan Trustee) as provided in the Plan, the delivery to the
Administrator and the Trustee of Employee information necessary for operation of
the Plan, the timely making of the Employer Contributions pursuant to Section
4.1 hereof, and the exercise of all functions provided in or necessary to the
Plan except those assigned in the Plan to other persons.
(d) This Section 12.3 is intended to allocate individual responsibility for
the prudent execution of the functions assigned to each of the Trustees, the
Loan Trustee, the Administrator and the Employer and none of such
responsibilities or any other responsibility shall be shared among them unless
specifically provided in the Plan. Whenever one such person is required by the
Plan to follow the directions of another, the two shall not be deemed to share
responsibility, but the person who gives the direction shall be responsible for
giving it and the responsibility of the person receiving the direction shall be
to follow it insofar as it is on its face proper under applicable law.
12.4 More Than One Administrator. If more than one individual is appointed
as Administrator under Section 12.1, such individuals shall either exercise the
duties of the Administrator in concert, acting by a majority vote or allocate
such duties among themselves by written agreement delivered to the Employer and
the Trustee. In such a case, the Trustee may rely upon the instruction of any
one of the individuals appointed as Administrator regardless of the allocation
of duties among them.
12.5 No Compensation. The Administrator shall not be entitled to receive
any compensation from the funds held under the Plan for its services in that
capacity unless so determined by the Employer or required by law.
12.6 Record of Acts. The Administrator shall keep a record of all its
proceedings, acts and decisions, and all such records and all instruments
pertaining to Plan administration shall be subject to inspection by the Employer
at any time. The Employer shall supply, and the Administrator may rely on the
accuracy of, all Employee data and other information needed to administer the
Plan.
12.7 Bond. The Administrator shall be required to give bond for the
faithful performance of its duties to the extent, if any, required by the Act,
the expense to be borne by the Employer.
12.8 Agent for Service of Legal Process. The Administrator shall be agent
for service of legal process on the Plan.
12.9 Rules. The Administrator may adopt or amend and shall publish to the
Employees such rules and forms for the administration of the Plan, and may
employ or retain such attorneys, accountants, physicians, investment advisors,
consultants and other persons to assist in the administration of the Plan as it
deems necessary or advisable.
12.10 Delegation. To the extent permitted by applicable law, the
Administrator may delegate all or part of its responsibilities hereunder and at
any time revoke such delegation, by written statement communicated to the
delegate and the Employer. The Trustee may, but need not, act on the
instructions of such a delegate. The Administrator shall annually review the
performance of all such delegates.
12.11 Claims Procedure. It is anticipated that the Administrator will
administer the Plan to provide Plan benefits without waiting for them to be
claimed, but the following procedure is established to provide additional
protection to govern unless and until a different procedure is established by
the Administrator and published to the Participants and Beneficiaries.
(a) Manner of Making Claim. A claim for benefits by a Participant or
Beneficiary to be effective under this procedure must be made to the
Administrator and must be in writing unless the Administrator formally or by
course of conduct waives such requirements.
(b) Notice of Reason for Denial. If an effective claim is wholly or
partially denied, the Administrator shall furnish such Participant or
Beneficiary with written notice of the denial within 60 days after the original
claim was filed. This notice of denial shall set forth in a manner calculated to
be understood by the claimant (i) the reason or reasons for denial, (ii)
specific reference to pertinent plan provisions on which the denial is based,
(iii) a description of any additional information needed to perfect the claim
and an explanation of why such information is necessary, and (iv) an explanation
of the Plan's claim procedure.
(c) The Participant or Beneficiary shall have 60 days from receipt of the
denial notice in which to make written application for review by the
Administrator. The Participant or Beneficiary may request that the review be in
the nature of a hearing. The Participant or Beneficiary shall have the rights
(i) to have representation, (ii) to review pertinent documents, and (iii) to
submit comments in writing.
(d) The Administrator shall issue a decision on such review within 60 days
after receipt of an application for review, except that such period may be
extended for a period of time not to exceed an additional 60 days if the
Administrator determines that special circumstances (such as the need to hold a
hearing) requires such extension. The decision on review shall be in writing and
shall include specific reasons for the decision, written in a manner calculated
to be understood by the claimant, and specific references to the pertinent Plan
provisions on which the decision is based.
SECTION 13.
FEES AND EXPENSES
All reasonable fees and expenses of the Administrator or Trustee incurred
in the performance of their duties hereunder or under the Trust shall be paid by
the Employer; and to the extent not so paid by the Employer, said fees and
expenses shall be deemed to be an expense of the Trust and the Trustee is
authorized to charge the same to the Accounts of the Participants, and unless
allocable to the Accounts of specific Participants, they shall be charged
against the respective accounts of all or a reasonable group of Participants in
such reasonable manner as the Trustee shall determine.
SECTION 14.
BENEFIT RECIPIENT INCOMPETENT OR DIFFICULT TO
ASCERTAIN OR LOCATE
14.1 Incompetency. If any portion of the Trust Fund becomes distributable
to a minor or to a Participant or Beneficiary who, as determined in the sole
discretion of the Administrator, is physically or mentally incapable of handling
his or her financial affairs, the Administrator may direct the Trustee to make
such distributions either to the legal representative or custodian of, or any of
the relatives and friends of, the incompetent or to apply such distribution
directly for the incompetent's support and maintenance. Payments which are made
in good faith shall completely discharge the Employer, Administrator and Trustee
from liability therefore.
14.2 Difficulty to Ascertain or Locate. If it is impossible or difficult to
ascertain the person who is entitled to receive any benefit under the Plan, the
Administrator in its discretion may direct that such benefit be (i) paid to
another person in order to carry out the Plan's purposes; or (ii) retained in
the Trust; or (iii) paid to a court pending judicial determination of the right
thereto.
SECTION 15.
DESIGNATION OF BENEFICIARY
Each Participant may submit to the Trustee a properly executed Designation
of Beneficiary form. In order to be effective, such Designation must have been
properly executed and submitted to the Trustee before the death of the
Participant. The last effective Designation accepted by the Trustee shall be
controlling, and whether or not fully dispositive of the Participant's Account,
thereupon shall revoke all Designations previously submitted by the Participant.
Each such executed Designation is hereby specifically incorporated herein by
reference and shall be construed and enforced in accordance with the laws of the
state in which the Employer has its principal place of business. To the extent
that any portion of an Account of
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a deceased Participant is not governed by an effective Designation which names
at least one living Beneficiary designated by the Participant, that portion of
the Account shall be distributed to the deceased Participant's surviving spouse,
or if that is not possible, to the estate of the deceased Participant.
SECTION 16.
SPENDTHRIFT PROVISION
No interest of any Participant or Beneficiary shall be assigned,
anticipated or alienated in any manner nor shall it be subject to attachment,
bankruptcy proceedings or to any other legal process or to the interference or
control of creditors or others, except to the extent that Participants may
secure loans from the Trust with their Accounts pursuant to Section 10 hereof.
SECTION 17.
NECESSITY OF QUALIFICATION
This Plan is established with the intent that it shall qualify under Code
Section 401(a) as that Section exists at the time the Plan is established. If
the Plan as adopted by the Employer fails to attain such qualification, the Plan
will no longer participate in this Prototype Plan and will be considered an
individually designed plan. If that the Plan as adopted by the Employer fails to
attain or retain such qualification, the Employer shall promptly either amend
the Plan under Code Section 401(b) so that it does qualify, or direct the
Trustee to terminate the Plan and distribute all the assets of the Trust
equitably among the contributors thereto in proportion to their contributions,
and the Plan shall be considered to be rescinded and of no force and effect.
SECTION 18.
AMENDMENT OR TERMINATION
18.1 Amendment or Termination. The Employer may at any time, and from time
to time amend this Prototype Plan and the Adoption Agreement (including a change
in any election it has made in the Adoption Agreement), or suspend or terminate
this Plan by giving written notice to the Trustee, but the Trust may not thereby
be diverted from the exclusive benefit of the Participants, their Beneficiaries,
survivors or estates, or the administrative expenses of the Plan, nor revert to
the Employer, nor may an allocation or contribution theretofore made be changed
thereby, nor may any amendment directly or indirectly deprive a Participant of
such Participant's nonforfeitable rights to benefits accrued to the date of the
amendment, nor may any amendment otherwise operate retroactively beyond the
first day of the Plan Year in which such amendment is made except as the same
may be deemed necessary in order to make the Plan qualify under Code Section
401(a). An amendment shall be deemed necessary for this purpose if counsel for
the Employer certifies and advises that in its opinion the written ruling of the
Commissioner of Internal Revenue that the Plan meets such requirements can be
obtained within a reasonable time only with such retroactive amendment. Any
amendment by the Employer which is other than the amendment of the Employer's
prior designation of an option or provision set forth or referred to in the
Adoption Agreement will constitute a substitution by the Employer of an
individually designed plan for this Prototype Plan and the general amendment
procedure of the Internal Revenue Service governing individually designed plans
will be applicable. Nothing contained herein shall constitute an agreement or
representation by the Distributor that it will continue to maintain its
sponsorship of the Plan indefinately.
18.2 Delegation. The Employer hereby delegates to the Sponsor the authority
to amend so much of the Adoption Agreement and this Prototype Plan as is in
prototype form and, to the extent to which the Employer could effect such
amendment, the Employer shall be deemed to have consented to any amendment so
made. The Sponsor, in turn, delegates to the Distributor such authority to amend
so much of the Adoption Agreement and this Prototype Plan as is in prototype
form and, to the extent to which the Sponsor could effect such amendment, it
shall be deemed to have consented to any amendment so made. When an election
within the prototype form has been made by the Employer, it shall be deemed to
continue after amendment of the prototype form unless and until the Employer
expressly further amends the election, notwithstanding that the provision for
the election in the amended prototype form is in a different form or place;
provided, however, that if the amended form inadvertently fails to provide means
to duplicate exactly the earlier election, such earlier election shall continue
until such further amendment. The immediately preceding sentence is subject to
the qualification that each Employer hereby delegates to the Distributor, in the
event of such an amendment of the prototype form, authority to determine
conclusively that such a continuation of an earlier election by the Employer is
not advisable and to make the election for the Employer in the amended prototype
form which in the judgment of the Distributor most nearly corresponds with the
election made by the Employer before the amendment of the prototype form,
provided the following procedure is followed: the election for the Employer may
be made with respect to any specified Employers as to whom it may be applicable
singly, or such election may be made with respect to all Employers as to whom it
may be applicable as a group; and the election shall be made as of an effective
date which has been specified in a notice mailed or delivered, at the last
address(es) of the Employer(s) on the records of the Distributor, to the
Employer(s) at least 20 days before the end of the remedial amendment period.
Such notice may be mailed to Employers to whom it cannot be applicable by reason
of a previous election made by the Employer or otherwise, but it shall be
effective only as to those Employers who have received the notice and have not
themselves made a new election with respect to that item since the amendment of
the prototype form and previous to the effective date of such election by the
Distributor. The foregoing delegations of authority to make elections, or to
make amendments, shall not impose any duty on the Distributor to make them nor
shall it affect the interpretation of the Plan if they are not used.
18.3 Distribution of Accounts Upon Termination. Upon termination of the
Plan or complete discontinuance of Employer Contributions under it, the
Administrator shall determine whether to pay the interests of Participants,
former Participants and Beneficiaries immediately, to retain such interest in
the Trust and pay them in the future according to Section 9, or to use what
other methods the Administrator deems advisable in order to furnish whatever
benefits the Trust will provide, subject to the limitations of Section 9.2
limiting the length of the period over which an Account can be paid.
SECTION 19.
TRANSFERS
Nothing contained herein shall prevent the merger or consolidation of the
Plan with, or transfer of assets or liabilities of the Plan to, another plan
meeting the requirements of Code Section 401(a) or the transfer to the Plan of
assets or liabilities of another such plan so qualified under the Code. Any such
merger, consolidation or transfer shall be accompanied by the transfer of such
existing records and information as may be necessary to properly allocate such
assets among Participants, including any tax or other information necessary for
the Participants or persons administering the plan which is receiving the
assets. The terms of such merger, consolidation or transfer must be such that if
this Plan is then terminated, each Participant would receive a benefit
immediately after the merger, consolidation or transfer equal to or greater than
the benefit he or she would have received if the Plan had terminated immediately
before the merger, consolidation or transfer.
SECTION 20.
OWNER-EMPLOYEE PROVISIONS
20.1 Purpose of Section. This Section is intended to insure that the Plan
complies with Code Section 401(d). Any ambiguity herein will be construed to
that end, and this Section 20 will override any other provision of the Plan with
which it may be inconsistent.
20.2 Control. For purposes of this Section 20, "Control" means the
ownership directly or indirectly of more than 50% of either the capital interest
or the profits interest in a partnership or on unincorporated trade or business.
20.3 Limitations. No benefits shall be provided to an Owner-Employee under
this Plan unless:
(a) if an Owner-Employer or group of Owner-Employees Controls the trade or
business covered by this Plan and also Control as an Owner-Employee or
Owner-Employees one or more other trades or businesses, this Plan and the plans
established for such other trades or businesses, when taken together, form a
single plan which satisfies the requirements of Section 401(a) and (d) of the
Code with respect to the employees of all the controlled trades or businesses;
and
(b) if an Owner-Employee or group of Owner-Employees controls another trade
or business but does not control the trade or business covered by this Plan, the
employees of such other trades or businesses are included in a plan which
satisfies the requirements of Sections 401(a) and (d) of the Code and which
provides contributions and benefits for such employees which are not less
favorable than those provided for Owner-Employees under this Plan.
SECTION 21.
TOP-HEAVY PROVISIONS
21.1 Purposes of Section. This Section is intended to insure that the Plan
complies with Code Section 4.16. If the Plan is or becomes Top-Heavy in any Plan
Year beginning after December 31, 1983, the provisions of this Section will
supersede any conflicting provision in the Plan.
21.2 Definitions. The terms used in this Section shall have the following
meanings:
(a) Key Employee: Any Employee or former Employee (and the Beneficiaries of
such Employee) who at any time during the determination period was an officer of
the Employer having an annual compensation greater than 1.5 multiplied by the
amount in effect under Code Section 415(C)(1)(A) for the Plan Year, an owner (or
considered an owner under Code Section 318) of 1 of the 10 largest interests in
the Employer if such individual's compensation exceeds the dollar limitation
under Code Section 415(C)(1)(A), a five-percent owner of the Employer, or a
one-percent owner of the Employer who has an annual compensation of more than
$150,000. The determination period is the Plan Year containing the Determination
Date and the 4 preceding Plan Years. The determination of who is a Key Employee
will be made in accordance with Code Section 416(i)(1) and the regulations
thereunder.
(b) Top-Heavy Plan. For any Plan Year beginning after December 31, 1983,
this Plan is Top-Heavy if any of the following conditions exists:
(i) If the Top-Heavy Ratio for this Plan exceeds 60% and this Plan is
not part of any Required Aggregation Group or Permissive Aggregation Group
of plans.
(ii) If this Plan is a part of a Required Aggregation Group and part
of a Permissive Aggregation Group and the Top-Heavy Ratio for the Required
Aggregation Group of plans exceeds 60%.
(iii) If this Plan is a part of a Required Aggregation Group and part
of a Permissive Aggregation Group of plans and the Top-Heavy Ratio for the
Permissive Aggregation Group exceeds 60%.
(c) Top-Heavy Ratio.
(i) If the Employer maintains one or more defined contribution plans
(including any Simplified Employee Pension Plan within the meaning of Code
Section 408(k)) and the Employer has never maintained any defined benefit
plan which has covered or could cover a Participant in this Plan, the
Top-Heavy Ratio is a fraction, the numerator of which is the sum of the
account balances of all Key Employees under all of the plans as of the
Determination
10
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Date (including any part of any account balance distributed in the
five-year period ending on the Determination Date), and the denominator of
which is the sum of all account balances (including any part of any account
balance distributed in the five-year period ending on the Determination
Date) of all Participants as of the Determination Date. Both the numerator
and denominator of the Top-Heavy Ratio are adjusted to reflect any
contribution which is due but unpaid as of the Determination Date.
(ii) If the Employer maintains one or more defined contribution plans
(including any Simplified Employee Pension Plan within the meaning of Code
Section 408(k)) and the Employer maintains or has maintained one or more
defined benefit plans which have covered or could cover a Participant in
this Plan, the Top-Heavy Ratio is a fraction, the numerator of which is the
sum of account balances under the defined contribution plans for all Key
Employees and the present value of accrued benefits under the defined
benefit plans for all Key Employees, and the denominator of which is the
sum of the account balances under the defined contribution plans for all
participants and the present value of accrued benefits under the defined
benefit plans for all participants. Both the numerator and denominator of
the Top-Heavy Ratio are adjusted for any distribution of an account balance
or an accrued benefit made in the five-year period ending on the
Determination Date and any contribution due but unpaid as of the
Determination Date.
(iii) For purposes of (i) and (ii) above, the value of account
balances and the present value of accrued benefits will be determined as of
the most recent Valuation Date and falls within or ends with the
twelve-month period ending on the Determination Date. The account balances
and accrued benefits of a Participant who is not a Key Employee but who was
a Key Employee in a prior Plan Year will be disregarded. The calculation of
the Top-Heavy Ratio, and the extent to which distributions, rollovers, and
transfers are taken into account will be made in accordance with Code
Section 416 and the regulations thereunder. Deductible Voluntary
Contributions and any deductible employee contributions under any other
qualified plan maintained by the Employer will not be taken into account
for purposes of computing the Top-Heavy Ratio. When aggregating plans the
value of account balances and accrued benefits will be calculated with
reference to the Determination Dates that fall within the same calendar
year.
(d) Permissive Aggregation Group. The Required Aggregation Group of plans
plus any other plan or plans of the Employer which, when considered as a group
with the Required Aggregation Group, would continue to satisfy the requirements
of Code Sections 401(a)(4) and 410.
(e) Required Aggregate Group. (i) Each qualified plan of the Employer in
which at least one Key Employee participates, and (ii) any other qualified plan
of the Employer which enables a plan described in (I) to meet the requirements
of Code Sections 401(a)(4) and 410.
(f) Determination Date. For any Plan Year subsequent to the first Plan
Year, the last day of the preceding Plan Year. For the first Plan Year, the last
day of that Year.
(g) Valuation Date. See Section 2.45.
(h) Present Value. Present value shall be based only on the interest rate
employed as of the date in question by the Pension Plan Benefit Guaranty
Corporation to value immediate annuities and the mortality rate specified in
Table LN at Treas. Reg. [s]20.2031-10, unless otherwise specified in the most
recently adopted or amended defined benefit plan maintained by the Employer.
21.3 Minimum Allocation.
(a) In any Plan Year in which this Plan is Top-Heavy, except as otherwise
provided in (d), (e) and (f) below, the Employer Contributions and forfeitures
allocated on behalf of any Participant who is not a Key Employee shall not be
less than the lesser of 3% of such Participant's Compensation or, in the case
where the Employer has no defined benefit plan which designates this Plan to
satisfy Code Section 401, the largest percentage of Employer Contributions and
forfeitures stated as a percentage of the first $200,000 of a Key Employee's
Compensation, allocated on behalf of any Key Employee for that Plan Year. The
minimum allocation is determined without regard to any Social Security
contribution by the Employer.
(b) For purposes of computing the minimum allocation, "Compensation" will
have the same meaning as in Section 2.7, disregarding any exclusion from
Compensation specified by the Employer in the Adoption Agreement.
(c) During any Plan Year for which a minimum allocation is required under
subsections (a) or (f) to a plan under which allocations shall be made on an
integrated basis, Employer Contributions and forfeitures will be allocated to
each Participant's Employer Contribution Account in the ratio that each
Participant's Compensation for the Plan Year bears to all Participants'
Compensation for the Plan Year but not in excess of 3% of such Compensation. The
provisions of this Section 21.3(C) shall take precedence over any conflicting
provisions of Section 4.1. To the extent any amount of Employer Contributions
and forfeitures remains unallocated after the application of this Subsection
(C), such amount shall be allocated in accordance with the provisions of Section
4.1 hereof.
(d) The provision in subsection (a) above shall not apply to any
Participant who was not employed by the Employer on the last day of the Plan
Year.
(e) The provision in subsection (a) above shall not apply to any
Participant to the extent the Participant is covered under any other plan (other
than a plan which incorporates this Prototype Plan) or plans of the Employer,
and the Employer has provided in the Adoption Agreement that the minimum
allocation or benefit requirement applicable to Top-Heavy Plans will be met in
such other plan or plans.
(f) The provision in subsection (a) above shall not apply in the case of a
Participant who is an Employee of an Employer who has adopted both a profit
sharing plan and a money purchase pension plan which incorporates this Prototype
Plan. In such case, the aggregate total of the Employer Contributions and
forfeitures under both plans allocated to the Employer Contribution Account of a
Participant who is not a Key Employee shall not be less than 3% of such
Participant's Compensation. Unless the Employer has specified otherwise in the
Adoption Agreement and such specification is sufficient to satisfy the minimum
allocation requirement referred to in the preceding sentence, subsection (c)
above shall apply to the allocation of Employer Contributions and forfeitures
under the money purchase pension plan and, only to the extent that such
allocation is insufficient to satisfy the minimum allocation requirement
referred to in the preceding sentence, the profit sharing plan.
21.4 Non-forfeitability of Minimum Allocation. The minimum allocation
required (to the extent required to be nonforfeitable under Code Section 416(b))
may not be forfeited under Code Section 411(a)(3)(B) or 411(A)(3)(D).
2.15 Limitation on Compensation. For any Plan Year in which the Plan is
Top-Heavy, only the first $200,000 (or such larger amount as may be prescribed
by the Secretary of the Treasury or his or her delegate) of a Participant's
Compensation for the Plan Year shall be taken into account for purposes of
allocation Employer Contributions under the Plan.
21.6 Minimum Vesting Schedule. Unless the Employer has specified a more
rapid vesting schedule in the Adoption Agreement, for any Plan Year in which
this Plan is Top-Heavy, the following minimum vesting schedule shall apply:
Nonforfeitable Percentage
Vesting Years of Employer Contribution Account
- ------------------------------- -----------------------------------
1 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
The minimum vesting schedule applies to all benefits within the meaning of Code
Section 411(a)(7) attributable to Employer Contributions and forfeitures,
including benefits accrued before the effective date of Code Section 416 and
benefits accrued before the Plan became Top-Heavy. Further, no reduction in
vested benefits may occur in the event the Plan's status as Top-Heavy changes
for any Plan Year. However, this Section 21.6 does not apply to the Employer
Contribution Account balances of any former Participant who does not have an
Hour of Service after the Plan has initially become Top-Heavy and such former
Participant's vested Employer Contribution Account balance will be determined
without regard to this Section.
21.7 Effect on Code Section 415 Limitations. Notwithstanding anything to
the contrary in Section 5 above, the following provisions apply if the Plan is
Top-Heavy.
(a) In any Plan Year in which the Top-Heavy ratio exceeds 90% (and the Plan
therefore becomes super Top-Heavy) the denominators of the Defined Benefit
Fraction (as defined in Section 5.5(C) above) and the Defined Contribution
Fraction (as defined in Section 5.5(d) above) shall be computed using 100% of
the dollar limitation stated therein instead of 125%.
(b) In any Plan Year in which the Top-Heavy Ratio exceeds 60%, but is less
than 90%, the denominators of the Defined Benefit Fraction (as defined in
Section 5.5(c) above) and the Defined Contribution Fraction (as defined in
Section 5.5(d) above) shall be computed using 100% of the dollar limitation
described therein instead of 125%, unless the Employer has specified in the
Adoption Agreement that the minimum allocation provisions of Section 21.3 above
shall be computed using 4% of a Participant's Compensation instead of 3%, in
which case the dollar limitations of the Defined Benefit Fraction (as defined in
Section 5.5(c) above) and the Defined Contribution Fraction (as defined in
Section 5.5(d) above) shall continue to be computed using 125% of the dollar
limitations.
21.8 Termination of Top-Heavy Status. If the Plan ceases to be Top-Heavy
for any Plan Year and if the Employer has not specified otherwise in the
Adoption Agreement, the minimum vesting schedule described in Section 21.6 shall
continue to apply. If the Employer has specified in the Adoption Agreement that,
upon conversion of the Plan to non-Top-Heavy status, Participants' vested
benefits are to be determined according to a schedule other than the minimum
vesting schedule described in Section 21.6, such change in vesting schedules
shall be treated as an amendment, and the election referred to in Section 7.2
hereof shall apply.
SECTION 22.
WAIVER OF MINIMUM FUNDING STANDARD
If an Employer who has adopted this Prototype Plan as a money purchase
pension plan is unable to satisfy the minimum funding standard (as described in
Code Section 412) for a given Plan Year, it may apply to the Internal Revenue
Service for a waiver of such minimum funding standard. If the waiver is granted,
the following provisions apply:
(a) An adjusted Account balance shall be maintained for each Participant
whose actual Account balance is less than or equal to his or her adjusted
Account balance.
(i) For the Plan Year for which the first waiver is granted, the
adjusted Account balance as of the Valuation Date for each affected
Participant equals:
(A) the Participant's actual Account balance, plus
(B) the amount that such Participant would have received if the
amount waived had been contributed.
(ii) For each Plan Year following the Plan Year for which a waiver is
granted, the adjusted Account balance for each Participant affected by such
waiver (calculated as of the Valuation Date for that Plan Year) equals:
(A) the adjusted Account balance as of the Valuation Date in the
prior Plan Year, plus
(B) the amount equal to the actual investment return credited or
charged to the Participant's actual Account balance, plus
(C) the amount equal to 5% of the excess of the amount in (A)
over the Participant's actual Account balance calculated as of the
same date, plus
(D) the amount equal to such Participant's allocated share of the
11
<PAGE>
required Employer Contribution (whether or not waived) for the Plan
Year (determined without regard to adjusted waiver payments and
discretionary Employer Contributions), minus
(E) the amount of the Participant's adjusted Account balance
forfeited during the Plan Year under the Plan's provisions.
(b) For a given Year, the Employer is required to contribute a certain
amount in order to satisfy the minimum funding standard for such Plan Year. For
each Plan Year which follows a Plan Year for which a waiver of the minimum
funding standard was granted the amount equals:
(i) the amount due as determined under Section 4.1(b) above (without
regard to this Section), plus
(ii) the adjusted waiver amount.
(c) The adjusted waiver amount for given Plan Year equals:
(i) the sum of the amounts necessary to amortize each waived funding
deficiency over a period of 15 Plan Years (measured from the Valuation Date
of the Plan Year for which the corresponding waiver was granted) at 5%
interest, compounded annually, minus
(ii) the sum of the amounts necessary to amortize the total of each
Plan Year's forfeitures (which have arisen since the first waiver was
granted) over a period of 15 Plan Years (measured from the Valuation Date
of the Plan Year in which the corresponding forfeitures arose) at 5%
interest, compounded annually.
(d) An amount equal to the adjusted waiver amount must be contributed only
until each Participant's actual Account balance equals the Participant's
adjusted Account balance.
(e) Any Plan provision which provides that Employer Contributions shall be
reduced immediately by forfeitures is revoked until each Participant's actual
Account balance equals that Participant's adjusted Account balance.
(f) Discretionary Employer Contributions, which are in addition to the
amounts contributed to satisfy the minimum funding standard, can be made in any
given Plan Year. However, the total Employer Contribution for the Plan Year
cannot exceed the then remaining underfunded amount (the sum of Participants'
adjusted Account balances minus total Plan assets).
(g) The adjusted waiver payments, discretionary Employer contributions and
the forfeitures of actual Account balances for the current Plan Year shall be
allocated as of that Plan Year's Valuation Date to the actual Account balances
of the affected Participants.
(h) Each time a waiver is granted, an original waiver account ("OWA") will
be determined for each affected Participant. The OWA equals the Participant's
portion of the amount which was waived.
(i) Commencing with the Valuation Date of the Plan Year for which a waiver
is granted, a remaining original waiver amount ("ROWA") must be calculated for
each affected Participant. As of such Valuation Date the OWA equals the ROWA. On
the Valuation Date of a succeeding Plan Year the ROWA equals the prior Plan
Year's ROWA multiplied by 1.05, minus the forfeiture of amounts in the prior
Plan Year's ROWA incurred in the current Plan Year. For each waiver that is
granted one OWA and a corresponding ROWA will be established for each affected
Participant.
(j) The sum of the adjusted waiver payments, discretionary Employer
Contributions and forfeitures of actual Account balances for a given Plan Year
are allocated to those Participants who have ROWAs by multiplying the sum of
these three amounts by the fraction:
(i) the numerator of which equals the sum of OWAs for a particular
Participant, and
(ii) the denominator of which equals the sum of the OWAs for all
Participants.
To determine the portion of this allocation which is to be assigned to a given
ROWA, multiply the allocation by the corresponding OWA, then divide by the sum
of the OWAs for the particular Participant.
(k) If the calculation of a ROWA results in a value which is less than
zero, then
(i) the ROWA is set equal to zero,
(ii) the corresponding OWA is set equal to zero, and
(iii) the excess payments will be reallocated to the remaining ROWAs.
(l) A distribution is determined by multiplying a Participant's vested
percentage by his or her adjusted Account balance. However, distributions from
the Plan may not exceed a Participant's actual Account balance. If so limited,
plan Participants shall receive subsequent distributions derived from future
adjusted waiver payments.
SECTION 23.
MISCELLANEOUS
23.1 Misrepresentation. Notwithstanding any other provisions herein, if an
Employee misrepresents his or her age or any other fact, any benefit payable
hereunder shall be the smaller of: (i) the amount that would be payable if no
facts had been misrepresented, or (ii) the amount that would be payable if the
facts were as misrepresented.
23.2 Legal or Equitable Action. If any legal or equitable action with
respect to the Plan is brought by or maintained against any person, and the
results of such action are adverse to that person, attorney's fees and all other
costs to the Employer, the Administrator or the Trust of defending or bringing
such action shall be charged against the interest, if any, of such person under
the Plan.
23.3 No Enlargement of Plan Rights. It is a condition of the Plan, and each
Participant by participating herein expressly agrees, that he or she shall look
solely to the assets of the Trust for the payment of any benefit under the Plan.
23.4 No Enlargement of Employment Rights. Nothing appearing in or done
pursuant to the Plan shall be construed (a) to give any person a legal or
equitable right or interest in the assets of the Trust or distribution
therefrom, nor against the Employer, except as expressly provided herein or (b)
to create or modify any contract of employment between the Employer and any
Employee or obligate the Employer to continue the services of any Employee.
23.5 Written Orders. In taking or omitting to take any action under this
Plan, the Trustee may conclusively rely upon and shall be protected in acting
upon any written orders from or determinations by the Employer or the
Administrator as appropriate, or upon any other notices, requests, consents,
certificates or other instruments or papers believed by it to be genuine and to
have been properly executed, and so long as it acts in good faith, in taking or
omitting to take any other action.
23.6 No Release from Liability. Nothing in the Plan shall relieve any
person from liability for any responsibility under Part 4 of Title I of the Act.
Subject thereto, neither the Trustee, the Loan Trustee, or the Administrator nor
any other person shall have any liability under the Plan, except as a result of
negligence or willful misconduct, and in any event the Employer shall fully
indemnify and save harmless all persons from any liability except that resulting
from their negligence or willful misconduct.
23.7 Discretionary Actions. Any discretionary action, including the
granting of a loan pursuant to Section 10 hereof, to be taken by the Employer or
the Administrator under this Plan shall be non-discriminatory in nature and all
Employees similarly situated shall be treated in a uniform manner.
23.8 Headings. Headings herein are primarily for convenience of reference,
and if they conflict with the text, the text shall control.
23.9 Applicable Law. This Plan shall, to the extent state law is
applicable, be construed and enforced in accordance with, and the rights of the
parties shall be governed by, the laws of the state in which (a) if the Trustee
is a corporation, the Trustee has its principal place of business; (b) if the
Trustee is an individual, the Trustee resides; or (c) if the Trustee is
individuals, where a majority of the individuals serving as Trustees reside. The
Employer's execution of the Adoption Agreement may be acknowledged where
required by applicable law.
23.10 No Reversion. Notwithstanding any other contrary provision of the
Plan, but subject nevertheless to Sections 5 and 16, no part of the assets in
the Trust shall revert to the Employer, and no part of such assets, other than
that amount required to pay taxes or administrative expenses, shall be used for
any purpose other than exclusive benefit of Employees or their Beneficiaries.
23.11 Notices. The Employer will provide the notice to other interested
parties contemplated under Code Section 7476 before requesting a determination
by the Secretary of the Treasury or his or her delegate with respect to the
qualification of the Plan.
23.12 Conflict. In the event of any conflict between the provisions of this
Plan and the terms of any contract or agreement issued thereunder or with
respect thereto, the provisions of the Plan shall control.
12
<PAGE>
SCUDDER
- -------
This booklet is not to be used in connection
with the offering of any of the Scudder funds
unless preceded or accompanied by the
appropriate current prospectuses. Scudder
Fund Distributors, Inc. is the underwriter
of the Scudder no-load mutual funds.
11-10-104 (C) Scudder Fund Distributors, Inc.
Scudder
IRA
============================
Plan and
Disclosure Statement
- ----------------------------
SCUDDER
SERVING INVESTORS SINCE 1919
<PAGE>
Introduction
When Congress approved IRAs as a tax incentive to save for retirement, it
required that all IRA investments be held by an IRA Custodian or Trustee. The
job of the Custodian or Trustee is to hold and safeguard your IRA assets until
you withdraw them.
The Custodian of the Scudder IRA is State Street Bank and Trust Company.
As Custodian, State Street Bank and Trust Company is the registered owner of
your investments in Scudder fund shares and holds them for your benefit.
This booklet and the accompanying adoption agreement comprise the agreement
between you and State Street Bank and Trust Company. It gives a detailed
explanation of the procedures governing the Scudder IRA. These procedures are
set by Congress and the Internal Revenue Service and are common to all IRAs.
Accompanying this document is "Scudder IRA: A guide to saving taxes while
building retirement income", which explains the Scudder IRA in plain English.
It is intended for your use as an easy reference guide for your Scudder IRA
investment.
If you have any questions, please call 1-800-225-2470.
2
<PAGE>
Form 5305-A OMB No. 1545-0365
(Rev. November 1983) -----------------
Department of the Treasury DO NOT FILE
Internal Revenue Service with Internal
Revenue Service
READ BUT DO NOT COMPLETE
Individual Retirement Custodial Account
Scudder IRA Form 12084 for use with the Scudder Funds
(Under Section 408(a) of the Internal Revenue Code)
- --------------------------------------------------------------------------------
See Adoption Agreement, Article IX,
Paragraph 1 hereof (hereafter referred
to as A/A)
State of ____________________________________________________ SS
County of ____________________________________________________
[_] Amendment
- --------------------------------------------------------------------------------
Depositor's name See A/A
------------------------------------------------------------
Depositor's date of birth See A/A
-----------------------------------------------------
Depositor's social security number See A/A
-------------------------------------------
Depositor's address See A/A
----------------------------------------------------------
Custodian's name State Street Bank & Trust Company
--------------------------------------------------------------
Custodian's address or principal place of business
Boston, Massachusetts
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Depositor whose name appears above is establishing an individual
retirement account (under section 408(a) of the Internal Revenue Code) to
provide for his or her retirement and for the support of his or her
beneficiaries after death.
The Custodian named above had given the Depositor the disclosure statement
required under the Income Tax Regulations under section 408(i) of the Code.
The Depositor has deposited with the Custodian See A/A dollars
($ See A/A ) in cash.
The Depositor and the Custodian make the following agreement:
Article I
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in section 402(a)(5), 402(a)(7), 403(a)(4), 403(b)(8),
405(d)(3), 408(d)(3), or 409(b)(3)(C) of the Code or an employer contribution to
a simplified employee pension plan as described in section 408(k).
Article II
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
- --------------------------------------------------------------------------------
For Paperwork Reduction Act Notice, see back of this form.
3
<PAGE>
Article III
1. No part of the custodial funds may be invested in life insurance
contracts, nor may the assets of the custodial account be commingled with other
property except in a common trust fund or common investment fund (within the
meaning of section 408(a)(5) of the Code).
2. No part of the custodial funds may be invested in collectibles (within
the meaning of section 408(m) of the Code).
Article IV
1. The Depositor's entire interest in the custodial account must be, or
begin to be, distributed before the end of the tax year in which the Depositor
reaches age 70 1/2. By the end of that tax year, the Depositor may elect, in a
manner acceptable to the Custodian, to have the balance in the custodial account
distributed in:
(a) A single-sum payment.
(b) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the life of the Depositor.
The payments must begin by the end of that tax year.
(c) An annuity contract that provides equal monthly, quarterly, or annual
payments over the joint and last survivor lives of the Depositor and
his or her spouse. The payments must begin by the end of the tax
year.
(d) Equal or substantially equal monthly, quarterly, or annual payments
over a specified period that may not be longer than the Depositor's
life expectancy.
(e) Equal or substantially equal monthly, quarterly, or annual payments
over a specified period that may not be longer than the joint life and
last survivor expectancy of the Depositor and his or her spouse.
Even if distributions have begun to be made under option (d) or (e), the
Depositor may receive a distribution of the balance in the custodial account at
any time by giving written notice to the Custodian. If the Depositor does not
choose any of the methods of distribution described above by the end of the tax
year in which he or she reaches age 70 1/2, distribution to the Depositor will
be made before the end of that tax year by a single-sum payment. If the
Depositor elects as a means of distribution (b) or (c) above, the annuity
contract must satisfy the requirements of section 408(b)(1), (3), (4), and (5)
of the Code. If the Depositor elects as a means of distribution (d) or (e)
above, figure the payments made in tax years beginning in the tax year the
Depositor reaches age 70 1/2 as follows:
(i) For the minimum payment, divide the Depositor's entire interest in the
custodial account at the beginning of each year by the life expectancy
of the Depositor (or the joint life and last survivor expectancy of
the Depositor and his or her spouse, or the period specified under (d)
or (e), whichever applies). Determine the life expectancy in either
case on the date the Depositor reaches 70 1/2 minus the number of
whole years passed since the Depositor became 70 1/2.
(ii) For the minimum monthly payment, divide the result in (i) above by 12.
(iii) For the minimum quarterly payment, divide the result in (i) above by
4.
2. If the Depositor dies before his or her entire interest in the account
is distributed to him or her, or if distribution is being made as provided in
(e) above to his or her surviving spouse, and the surviving spouse dies before
the entire interest is distributed, the entire remaining undistributed interest
will, within 5 years after
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the Depositor's death or the death of the surviving spouse, be distributed to
the beneficiary or beneficiaries of the Depositor or the Depositor's surviving
spouse.
Article V
Unless the Depositor dies, is disabled (as defined in section 72(m) of the
Code), or reaches age 59 1/2 before any amount is distributed from the account,
the Custodian must receive from the Depositor a statement explaining how he or
she intends to dispose of the amount distributed.
Article VI
1. The Depositor agrees to provide the Custodian with information
necessary for the Custodian to prepare any reports required under section 408(i)
of the Code and the related regulations.
2. The Custodian agrees to submit reports to the Internal Revenue Service
and the Depositor as prescribed by the Internal Revenue Service.
Article VII
Notwithstanding any other articles which may be added to or incorporated,
the provisions of Articles I through III and this sentence will be controlling.
Any additional articles that are not consistent with section 408(a) of the Code
and related regulations will be invalid.
Article VIII
This agreement will be amended from time to time to comply with the
provisions of the Code and related regulations. Other amendments may be made
with the consent of the persons whose signatures appear below.
- --------------------------------------------------------------------------------
Note: The following space (Article IX) may be used for any other provisions
you wish to add. If you do not wish to add any other provisions, draw
a line through this space. If you add provisions, they must comply
with applicable requirements of State law and the Internal Revenue
Code.
- --------------------------------------------------------------------------------
Article IX
1. These provisions of Article IX are set forth in the Adoption Agreement
which is incorporated herein by reference and which Depositor acknowledges
having received and read.
2.-13. The remaining provisions of Article IX are set forth in Appendix
"A" to this Adoption Agreement, which is incorporated herein by reference, and
which Depositor acknowledges having received and read. Paragraph 7 thereof
amplifies Article IV and Paragraph 9 thereof amplifies Article VIII.
- --------------------------------------------------------------------------------
Depositor's Signature See A/A
-------------------------------------------------------
Custodian's Signature See A/A
-------------------------------------------------------
Date See A/A
-----------------------------------------
Witness See A/A
----------------------------------------------------------------------
(Use only if signature of Depositor or Custodian is required to be witnessed.)
- --------------------------------------------------------------------------------
Instructions
(Section references are to the Internal Revenue Code unless otherwise noted.)
Paperwork Reduction Act Notice
The Paperwork Reduction Act of 1980 says that we must tell you why we are
collecting this information, how it is to be used, and whether you have to
provide it. The information is
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used to determine if you are entitled to a deduction for contributions to this
custodial account. Your completing this information is only required if you
want to adopt this model custodial account.
Purpose of Form
This model custodial account may be used by an individual who wishes to
adopt an individual retirement account under section 408(a). When fully
executed by the Depositor and the Custodian not later than the time prescribed
by law for filling the federal income tax return for the Depositor's tax year, a
Depositor will have an individual retirement account (IRA) custodial account
which meets the requirements of Section 408(a). This custodial account must be
created in the United States for the exclusive benefit of the Depositor or
his/her beneficiaries.
Definitions
Custodian. -- The Custodian must be a bank or a savings and loan
association, as defined in section 408(n), or other person who has the approval
of the Internal Revenue Service to act as Custodian.
Depositor. -- The Depositor is the person who establishes the account.
IRA for Non-Working Spouse
Contributions to an IRA custodial account for a non-working spouse must be
made to a separate IRA custodial account established by the non-working spouse.
This form may be used to establish the IRA custodial account for the non-
working spouse.
An employee's social security number will serve as the identification
number of his or her individual retirement account. An employer identification
number is not required for each individual retirement account, nor for a common
fund created for individual retirement accounts.
For more information get a copy of the required disclosure statement from
your Custodian or get Publication 590, Individual Retirement Arrangements,
IRA's.
Specific Instructions
Article IV. -- Distributions made under this Article may be made in a
single sum, periodic payment, or a combination of both. The distribution option
should be reviewed in the year the Depositor reaches age 70 1/2 to make sure the
requirements of section 408(a)(6) have been met. For example, if a Depositor
elects distributions over a period permitted in (d) or (e) of Article IV, the
period may not extend beyond the life expectancy of the Depositor at age 70 1/2
(under option (d)) or the joint life and last survivor expectancy of the
Depositor (at age 70 1/2) and the Depositor's spouse (under option e)). For
this purpose, life expectancies must be determined by using the expected return
multiples in section 1.72-9 of the Income Tax Regulations (26 CFR Part 1). The
balance in the account as of the beginning of each tax year beginning on or
after the Depositor reaches age 70 1/2 will be used in computing the payments
described in (d) and (e) of Article IV. Article IV does not preclude a mode of
distribution different from those described in (a) through (e) of Article IV
prior to the close of the tax year of the Depositor in which he/she attains age
70 1/2.
Article IX. -- This article and any that follow it may incorporate
additional provisions that are agreed upon by the Depositor and Custodian to
complete the agreement. These may include, for
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example: definitions, investment powers, voting rights, exculpatory provisions,
amendment and termination, removal of custodian, custodian's fees, state law
requirements, beginning date of distributions, accepting only cash, treatment of
excess contributions, prohibited transactions with the depositor, etc. Use
additional pages if necessary, and add them to this form.
Note: This form may be reproduced and reduced in size for adoption to
passbook or card purposes.
U.S. Government Printing Office: 1984--421-108/258.
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Appendix "A" Incorporated Into
Article IX of Agreement on
Scudder IRA Form 12-84
Between Custodian and Depositor
----------------------
1. Please refer to Scudder IRA Adoption Agreement.
2. Depositor's Selection of Investments
Depositor directs Custodian to invest all custodial funds in
investment funds issued by the "Mutual Fund(s)," or in the other investments
which have been designated by Scudder Fund Distributors, Inc. (or its
successors) as eligible for investment hereunder, which have been selected by
Depositor until Depositor hereafter gives Custodian contrary instructions
pursuant to Article IX, paragraph ("para.") 6 below, which governs investment of
the custodial account in "Mutual Fund" shares or other investments.
3. Contributions
(a) Period Contributions. Periodic contributions which Depositor
intends to be tax-deductible under Internal Revenue Code Section 219 shall be in
cash and are to be invested under this Agreement. Depositor contemplates future
periodic contributions within the tax-deductible limits and in accordance with
the rules for tax-deductibility specified in the Internal Revenue Code.
Depositor assumes full and sole responsibility for making sure that the sum of
periodic contributions during a single taxable year of Depositor does not exceed
those limits or violate those rules. Depositor should not contribute to the
custodial account after it ceases to be exempt by reason of either section
408(e) or 415(g) of the Internal Revenue Code.
(b) Rollover Contributions From an Individual Retirement Account or
Individual Retirement Annuity Funded Exclusively With Deductible Contributions.
A rollover contribution by Depositor from an individual retirement account or
individual retirement annuity funded exclusively with deductible contributions
shall be a deposit in cash to be invested under this agreement, with respect to
which contribution, Depositor warrants that
(1) it meets the requirements for a rollover contribution from such an
individual retirement account or individual retirement annuity as are contained
in Code Section 408(d) and that
(2) no portion of such rollover contribution is attributable to a distribution
from an employees' trust, an employee annuity, an annuity contract or a U.S.
retirement bond as described in Internal Revenue Code Sections 402(a)(5),
403(a)(4), 403(b)(8), 405(d)(3), or 409(b)(3)(C).
(c) Rollover Contributions Attributable to Distributions From
Employer Plans. A rollover contribution by Depositor other than a contribution
described in paragraph (b) above shall be a deposit in cash to be invested under
this Agreement with respect to which contribution Depositor warrants that (1)
the amount rolled over is attributable to a distribution from an employees'
trust, an employee annuity, an annuity contract, a qualified bond purchase plan,
or a U.S. retirement bond, which meets the requirements of Code sections
402(a)(5), 403(a)(4), 403(b)(8), 405(d)(3), or 409(b)(3)(C); and (2) Depositor
will make no additional contributions to the custodial account in which such
contribution is deposited, except as otherwise permitted by Scudder Fund
Distributors, Inc.
If permitted by Scudder Fund Distributors, Inc., rollover
contributions may be received under this Agreement with respect to qualified
voluntary employee contributions as defined in Internal Revenue Code Section
219(e)(2) and such contributions shall thereafter be held and administered
hereunder by the Custodian in accordance with all applicable law with respect to
accumulated deductible employee contributions as defined in Internal Revenue
Code Section 72(o)(5)(B).
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<PAGE>
(d) Transfer from an Individual Retirement Account or Individual
Retirement Annuity. Depositor may make an opening contribution hereunder by
directing the transfer of a cash amount from a custodian or trustee of an
individual retirement account or individual retirement annuity to the Custodian
be made for investment under this Agreement.
(1) From IRA Funded with Deductible Contributions. Where no portion
of such transferred amount is attributable to a distribution from an
employees' trust, an employee annuity, an annuity contract or a U.S.
retirement bond as described in Internal Revenue Code Sections
402(a)(5), 403(a)(4), 403(b)(8), 405(d)(3), or 409(b)(3)(C), Depositor
warrants that Depositor did not inherit the account or annuity, or if
Depositor did inherit the account or annuity, that Depositor is the
surviving spouse of the individual for whose benefit the account was
originally maintained or the annuity was originally purchased.
(2) From IRA Funded with Distributions Attributable to an Employer
Plan. With respect to any other transferred amount, Depositor:
(A) agrees that no additional contributions will be made to the
custodial account in which such contribution is deposited, except
as otherwise permitted by Scudder Fund Distributors, Inc.;
(B) that the entire amount of such transferred amount is
attributable to a distribution from an employees' trust, an
employee annuity, an annuity contract, a qualified bond purchase
plan, or a U.S. retirement bond, as described in Internal Revenue
Code Sections 402(a)(5), 403(a)(4), 403(b)(8), 405(d)(3), or
409(b)(3)(C), or other applicable law:
(3) that if the transferred amount had been a rollover contribution,
it would have complied with the requirements of subparagraph (b) or
(c) above.
4. Tax and Other Legal Matters
DEPOSITOR ACKNOWLEDGES HAVING READ THE SECTIONS ENTITLED
"INSTRUCTIONS" AT BOTTOM ON PAGE 5 OF I.R.S. FORM 5305-A (of which this is a
part), which describe some of the tax and other matters important to Depositor,
and "ADDITIONAL INSTRUCTIONS" preceding Appendix "A".
5. Custodian's Fees
(a) Custodian shall be entitled to receive such reasonable fees with
respect to the establishment and administration of this custodial account as are
established by it from time to time.
(b) Upon thirty (30) days prior written notice, Custodian may change
its fee schedule.
Custodian's fees, any income, gift, estate and inheritance taxes or
other taxes of any kind whatsoever, including transfer taxes incurred in
connection with the investment or reinvestment of the assets of the custodial
account, that may be levied or assessed in respect to such assets, and all other
administrative expenses incurred by Custodian in the performance of its duties
including fees for legal services rendered to Custodian, may be charged to the
custodial account, with the right to liquidate Mutual Fund shares or other
investments for this purpose, or (at Custodian's option) to the Depositor.
6. Custodial Account
(a) This Agreement shall take effect only when accepted and signed by
Custodian. As directed, Custodian shall then open and maintain a separate
custodial account for Depositor and invest the initial contribution hereunder in
shares of the Mutual Fund(s) or other investments selected by Depositor in
Article IX Para. 1. "Mutual Fund" means a regulated investment company which is
defined in Internal Revenue Code Section 851(a) and which has been designated by
Scudder Fund Distributors, Inc. (or its successors) as appropriate for
investment hereunder.
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<PAGE>
(b) Every subsequent contribution shall be invested in accordance
with instructions authorized by Depositor indicating Depositor's choice of the
Mutual Funds or other investments designated by Scudder Fund Distributors, Inc.
(or its successors) as appropriate for investment hereunder. Depositor agrees
that the listing shall not be construed as an endorsement by Custodian of the
Mutual Funds or other investments in which contributions may be invested, final
choice of which is in the sole discretion of Depositor. The Custodian does not
undertake to render any investment advice whatsoever to Depositor; its sole
duties are those prescribed in Article IX, para. 8(c).
(c) The Custodian shall invest subsequent contributions as directed.
However, if any such instructions authorized by Depositor are not received as
required, or if received, are in the opinion of Custodian unclear, or if the
accompanying contribution would cause the Depositor to exceed the maximum
limitation on tax deductibility, Custodian may hold or return all or a portion
of the contribution uninvested without liability for loss of income or
appreciation or for other loss, and without liability for interest, pending
receipt of written instructions or clarification.
(d) All dividends and capital gains distributions received on shares
of a Mutual Fund held in the custodial account shall (unless received in
additional such shares) be reinvested in shares of that Mutual Fund, if
available, which shall be credited to the account. If any distribution on such
shares may be received at the election of the shareholder in additional such
shares or in cash or other property, Custodian shall elect to receive it in
additional such shares. All accumulations on account of other investments shall
be reinvested in Depositor's custodial account.
(e) All Mutual Fund shares or other investments acquired by Custodian
hereunder shall be registered in the name of Custodian (with or without
identifying Depositor) or of its nominee. Custodian shall deliver, or cause to
be executed and delivered, to Depositor all notices, prospectuses, financial
statements, proxies, and proxy soliciting materials relating to such Mutual Fund
shares or other investments held in the custodial account. Custodian shall not
vote any such Mutual Fund shares or other investments except in accordance with
any written instructions received from Depositor.
7. Distributions.
(This paragraph 7 supplements Article IV on Scudder IRA Form 12-84 of
the Agreement and must be read in conjunction with it.)
(a) Distribution of the custodial account assets in accordance with
Article VI shall be made in a manner set forth in subparagraph (c)(1) or (2),
whichever applies, except as Article IV otherwise requires and at such time as
Depositor (or Depositor's Beneficiary if Depositor is deceased) shall elect by
written order to Custodian, provided that distribution (except for distribution
on account of Depositor's disability or death, return of an "excess
contribution" referred to in subparagraph (d) or a "rollover" from this
account), must be no earlier than age 59 1/2 if Depositor wants to avoid an
"early distribution additional tax" under Code section 408(f) or other
applicable law. For that purpose, Depositor will be considered disabled if
Depositor can prove, as provided in Code section 72(m)(7), that Depositor is
unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or be of long-continued and indefinite duration. Depositor (or
Depositor's Beneficiary if Depositor is deceased) will order distribution in the
manner and at the time permitted or required by Article IV and this paragraph.
Custodian assumes no responsibility for the tax treatment of any distribution
from the custodial account; such responsibility accrues solely to the person
ordering the distribution.
(b) Custodian assumes (and shall have) no responsibility to make any
distribution on order of Depositor (or Depositor's Beneficiary if Depositor is
deceased) unless and until such order specifies the occasion for
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<PAGE>
such distribution, the elected manner of distribution, and any declaration
required by Article V. Also, before making any such distribution or before
honoring any assignment of the custodial account, Custodian shall be furnished
with any and all application, certificates, tax waivers, signature guarantees,
and other documents (including proof of any legal representative's authority)
deemed necessary or advisable by Custodian, but Custodian shall not be
responsible for complying with an order which appears on its face to be genuine,
or for refusing to comply if not satisfied it is genuine, and assumes no duty of
further inquiry.
(c) Upon receipt of a proper written order as required above,
Custodian shall distribute the assets of the custodial account in cash or kind
as follows:
(1) Distribution to Depositor. If the distribution order calls for
the custodial account to be paid to Depositor under Article IV, then
distribution shall be made in one or more of the following ways as
specified in the order.
(A) In a lump sum.
(B) In installments pursuant to a cash withdrawal plan, provided
that such a plan suitable for prearranging the distributions
described in this subparagraph (B) is available for Custodian's
use under the rules governing the investments held in the
custodial account. A suitable cash withdrawal plan will provide
for periodic liquidation of some of investments held in the
custodial account to yield the cash necessary to pay each
installment. Prior to January 1, 1985, a suitable cash
withdrawal plan will provide for payment of installments over a
period not longer than the life expectancy of Depositor and
Depositor's spouse. Subsequent to December 31, 1984, a suitable
cash withdrawal plan will provide for payment of installments
ratably over a period of not longer than the life expectancy of
the Depositor or the joint life and last survivor expectancy of
the Depositor and the Depositor's Beneficiary (as defined in
subparagraph (c)(2) of this Para. 7). The life expectancies
referred to in this Agreement shall be determined by using
applicable Internal Revenue Service tables. The amount
distributed each year shall be at least equal to the quotient
obtained by dividing the entire custodial account remaining at
the beginning of that year by the adjusted life expectancy of
Depositor and Depositor's spouse, or the joint life and last
survivor expectancy of Depositor's Beneficiary (whichever is
applicable). Prior to January 1, 1985, the life or joint life
expect and last survivor expectancy used to calculate the minimum
amount to be distributed in a given year shall be equal to the
relevant expectancy as it was determined as of when Depositor
attained age 70 1/2 reduced by the number of whole years elapsed,
if any, since Depositor attained age 70 1/2. Subsequent to
December 31, 1984, the adjusted life or joint life and last
survivor expectancy used to calculate the minimum amount to be
distributed in a given year shall be, at the Depositor's
election, either determined by referring to the applicable
Internal Revenue Service table and determining the relevant
expectancy as of the particular year in question or by using a
previously determined expectancy and reducing such expectancy by
the number of whole years elapsed since it was determined.
Notwithstanding any implication to the contrary in this
subsection (B), no distribution need be made in any year, or a
lesser amount may be distributed during such year, if the
aggregate amounts distributed through the end of such year are at
least equal to the aggregate of the minimum amounts required by
this sub-
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paragraph (B) to have been so distributed. Moreover, during
Depositor's lifetime the entire custodial account remaining for
distribution at any time under this subparagraph (B) may,
pursuant to a proper supplementary written order as specified
above, be distributed to Depositor.
(c) By the purchase and distribution of a single-premium
contract meeting the requirements of Code section 408(b)(1), (3),
(40 and, prior to January 1, 1985, (5) applicable to an
"individual retirement annuity".
(2) Distribution upon Death of Depositor or Depositor's Spouse. Prior
to January 1, 1985, if Custodian receives a proper written order for
distribution on account of the Depositor's death, or the spouse's
death, if distributions were being made to the spouse over the joint
life and last survivor expectancy, Custodian shall distribute the
then- remaining custodial account to Depositor's (of, if applicable,
the spouse's) Beneficiary within five (5) years of Depositor's (or, if
applicable, the spouse's) death either in a lump sum or installments;
provided, however, that if distributions have already begun before
Depositor's death for a specified term, the Custodian may instead
continue to make the distribution in the same manner and without
regard to the foregoing five-year limitation; provided further, that
if Depositor's Beneficiary is Depositor's spouse and if Depositor's
Beneficiary elects to treat the account as if Depositor's Beneficiary
were the Depositor, then the Custodian may distribute the account as
directed by the Depositor's Beneficiary as if such person were the
Depositor and in accordance with Articles IV and IX. Subsequent to
December 31, 1984, if Custodian receives a proper written order for
distribution on account of the Depositor's death or, the spouse's
death, if distributions were being made to the Depositor's surviving
spouse, then the Custodian shall distribute the then-remaining
custodial account to the Depositor's (or, if applicable, the spouse's)
Beneficiary over the life of the Depositor's (or, if applicable, the
spouse's) Beneficiary or within a period not greater than the greater
of five (5) years after the Depositor's (or, if applicable, the
spouse's) death or the life expectancy of Depositor's (or, if
applicable, the spouse's) Beneficiary; provided, however, that if
distributions have already begun before Depositor's death for a
specified term, Custodian shall continue to distribute the custodial
account over a period at least as rapid as that specified term. The
term "Depositor's Beneficiary" means the person or persons designated
as such by the "designating person" (as defined below) on a form
acceptable to Custodian for use in connection with this Agreement,
signed by the designating person, and filed with the Custodian in
accordance with this subparagraph (2). The form may name persons or
estates to take upon the contingency of survival. However, the term
"Depositor's Beneficiary" means the designating person's estate to the
extent no such designation on such a form effectively disposes of the
custodial account as of when such distribution is to commence.
Moreover, a form shall not become effective for that purpose until it
is filed with the Custodian during the lifetime of the designating
person. The form last accepted by Custodian before such distribution
is to commence, upon becoming effective during the designating
person's lifetime, shall be controlling, and, whether or not fully
dispositive of the custodial account, thereupon shall revoke all such
forms previously filed by that person. The term "designating person"
means Depositor; after Depositor's death, it also means the person or
persons (other than Depositor's estate) who begin to receive a portion
of the custodial account pursuant to such a designation by Depositor,
and designations by such a person shall relate solely to the balance
of that
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portion remaining in the custodial account as of when distribution
pursuant to a designation by that person is to commence. The
Custodian shall accept all such forms only in the Commonwealth of
Massachusetts, and they shall be considered part of this Agreement for
purposes of Article IX, para. 13(c).
(3) Any annuity which Custodian is to purchase and distribute under
this Agreement may be fixed or variable, but Custodian shall not be
required to distribute in that manner unless the premium for that
annuity is at least $1,000.
(4) Depositor's Beneficiary shall not have the right or power to
anticipate any part of the custodial account or to sell, assign,
transfer, pledge or hypothecate any part thereof. The custodial
account shall not be liable for the debts of Depositor's Beneficiary
or subject to any seizure, attachment, execution or other legal
process in respect thereto.
(d) If during a taxable year under Article 1 a total amount is
contributed which exceeds the amount deductible for that year, either because
such amount exceeds the tax-deductible limits specified in the Internal Revenue
Code, or because of attainment of age 70 1/2 in that year, or for some other
reason, then upon receiving written notice specifying the year in question, the
amount of the excess, the reason it is an excess, and the amount of net income
in the custodial account attributable to such excess -- Custodian shall
distribute cash to Depositor in an amount equal to the sum of such excess and
earnings. If the excess contribution did not arise because of attainment of age
70 1/2. then (in Custodian's discretion unless otherwise instructed by
Depositor) in lieu of being distributed, said sum shall be treated by Depositor
as a contribution in the then current or a succeeding taxable year, in
accordance with applicable law.
8. Additional Provisions Regarding the Custodian
(a) When and after distributions of the custodial account to
Depositor's Beneficiary commence, all rights and obligations assigned to
Depositor by provisions of this Agreement shall inure to, and be enjoyed and
exercised by, Depositor's Beneficiary instead of Depositor. Until such
distributions commence to such a person, the Custodian shall not be responsible
for treating such person's predecessor to such rights and obligations as still
possessing the same.
(b) Custodian shall keep adequate records of transactions it is
required to perform hereunder. Not later than sixty (60) days after the close
of each calendar year or after the Custodian's resignation or removal pursuant
to Article IX, para. 10(a), Custodian shall render to Depositor a written report
or reports reflecting the transactions effected by it during such period and the
assets of the custodial account at the close of the period. Sixty (60) days
after rendering such report(s), Custodian shall be forever released and
discharged from all liability and accountability to anyone with respect to its
acts and transactions shown in or reflected by such report(s), except with
respect to those as to which the recipient of such report(s) shall have filed
written objections with the Custodian within the latter such sixty-day period.
(c) Custodian shall be an agent for Depositor to receive and invest
contributions as authorized by Depositor, hold and distribute such investments,
and keep adequate records and report thereon, all in accordance with this
Agreement. The parties do not intend to confer any fiduciary duties on
Custodian, and none shall be implied. Custodian may perform any of its
administrative duties through other persons designated by Custodian from time to
time, except that Mutual Fund shares or other investments must be registered as
stated in para. 6(e) of this Article IX; and Custodian intends initially to
delegate all such duties to Boston Financial Data Services, Inc., which is
partially owned by Custodian's parent company; but no such delegation or future
change therein shall be considered as an amendment to this Agreement. Custodian
shall not be liable (and assumes no responsibility) for the collection of
contributions, the
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<PAGE>
deductibility of any contribution or its propriety under this Agreement, or the
purpose or propriety of any distribution ordered in accordance with Article IX,
para. 7, or made in accordance with Article IX, para. 12, which matters are the
sole responsibility of Depositor and Depositor's Beneficiary.
(d) Depositor shall always fully indemnify Custodian and save it
harmless from any and all liability whatsoever which may arise either (1) in
connection with this Agreement and matters which it contemplates, except that
which arises due to Custodian's negligence or willful misconduct, or (2) with
respect to making or failing to make any distribution, other than for failure to
make distribution in accordance with an order therefor which is in full
compliance with both Article IV and para. 7(a) and (b) of Article IX. Custodian
shall not be obligated or expected to commence or defend any legal action or
proceeding in connection with this Agreement or such matters unless agreed upon
by Custodian and Depositor, and unless fully indemnified for so doing to
Custodian's satisfaction.
(e) Custodian may conclusively rely upon and shall be protected in
acting upon any written order from or authorized by Depositor or Depositor's
Beneficiary or any other notice, request, consent, certificate or other
instrument, paper, or other communication believed by it to be genuine and to
have been issued in proper form and with proper authority, and, so long as it
acts in good faith, in taking or omitting to take any other action in reliance
thereon.
9. Amendment
(This paragraph 9 supplements Article VIII on Scudder IRA Form 12-84
of the Agreement and must be read in conjunction with it.)
(a) Depositor retains the right to amend this Agreement in any
respect at any time, effective on a stated date which shall be at least sixty
(60) days after giving written notice of the amendment (including its exact
terms) to Custodian by registered or certified mail unless Custodian waives such
notice as to that amendment. If Custodian does not wish to continue serving in
that capacity under this Agreement as so amended, it may resign in accordance
with Article IX, para. 10. Depositor also delegates, to the distributor
(principal underwriter) of a plurality of the Mutual Funds described in Article
IX, para. 6(b), Depositor's right so to amend including retroactively, as
necessary or appropriate in the opinion of counsel satisfactory to the
distributor, in order to conform with pertinent provisions of the Code and other
laws or successor provisions of law or to obtain a governmental ruling that such
requirements are met, to adopt a prototype or master plan (when one becomes
available) for investment in shares of such Mutual Funds or other investments,
or as otherwise may be advisable in the opinion of such counsel, provided the
distributor amends in the same manner all agreements comparable to this one,
having the same Custodian, permitting investment in shares of such Mutual Funds
or other investments, and under which such power has been delegated to it. Such
an amendment by the distributor shall be communicated in writing to Depositor
and Custodian, and Depositor shall be deemed to have consented thereto unless,
within thirty (30) days after such communication to Depositor is mailed,
Depositor either (1) gives Custodian a proper written order for a lump-sum
distribution of the custodial account, or (2) removes Custodian and
simultaneously appoints a Successor Custodian under Article IX, para. 10.
(b) This paragraph 9 shall not be construed to restrict Custodian's
freedom to agree with distributors of Mutual Fund shares, or others, upon the
terms by which shares of additional Mutual Funds or other investments may be
chosen for investment as contemplated in Article IX, para. 6(b), or Custodian's
freedom to change fee schedules in the manner proved by Article IX, para. 5(b),
and no such agreement or change shall be deemed to be an amendment of this
Agreement.
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10. Resignation or Removal of Custodian.
(a) Custodian may resign at any time upon at least thirty (30) days
prior notice in writing to Depositor, and may be removed by Depositor at any
time upon at least thirty (30) days prior notice in writing to Custodian. Upon
such resignation or removal, Depositor shall appoint a Successor Custodian to
serve under this Agreement. Upon receipt by Custodian of written acceptance of
such appointment by the Successor Custodian, Custodian shall transfer to such
Successor the assets of the custodial account and all necessary records (or
copies thereof) pertaining thereto, provided that (if so requested by Custodian)
any Successor Custodian agrees not to dispose of any such records without
Custodian's consent. Custodian is authorized, however, to reserve such a
portion of such assets as it may deem advisable for payment of all its fees,
compensation, costs, and expenses, or for payment of any other liabilities
constituting a charge on or against the assets of the custodial account or on or
against Custodian, with any balance of such reserve remaining after the payment
of all such items to be paid over to the Successor Custodian.
(b) If within thirty (30) days after Custodian's resignation or
removal or such longer time as Custodian may agree to, Depositor has not
appointed a Successor Custodian which has accepted such appointment, Custodian
shall terminate the custodial account pursuant to Article IX, para. 11, unless
within that time the distributor referred to in Article IX, para. 9(a), appoints
such Successor and gives written notice thereof to Depositor and Custodian.
(c) Custodian shall not be liable for the acts or omissions of such
Successor.
(d) The Custodian, and every Successor Custodian appointed to serve
under this Agreement, must be a bank as defined in Code section 408(n) or such
other person who qualifies to serve in the manner prescribed by Code section
408(a)(2) and satisfies the Depositor, distributor, or Custodian, upon request,
as to such qualification.
(e) After Custodian has transferred the custodial account assets
(including any reserve balance as contemplated above) to the Successor
Custodian, Custodian shall be relieved of all further liability with respect to
this Agreement, the custodial account, and the assets thereof.
11. Termination of Account
(a) Custodian shall terminate the custodial account if, within the
time specified in Article IX, para. 10(b), after Custodian's resignation or
removal, neither Depositor nor the distributor has appointed a Successor
Custodian which has accepted such appointment. Termination of the custodial
account shall be effected by distributing all assets thereof in a lump sum in
cash or in kind to Depositor subject to Custodian's right to reserve funds as
provided in Article IX, para. 10(a).
(b) Upon termination of the custodial account, this Agreement shall
terminate and have no further force and effect, and Custodian shall be relieved
from all further liability with respect to this Agreement, the custodial
account, and all assets thereof so distributed.
12. Liquidation of Account
(a) Notwithstanding anything contained in this Agreement to the
contrary, Scudder Fund Distributors, Inc. shall have the right to direct
Custodian, by written order to Custodian, to liquidate the custodial account if
the value of the account at the time of such written order is less than a
minimum value established on a non-discriminatory basis from time to time by
Scudder Fund Distributors, Inc., and upon receipt of such written order (which
Scudder Fund Distributors, Inc. shall have no duty to make and which, if made,
may be made with respect to any specified accounts as to which it may be made
applicable singly or to all accounts as to which it may be made applicable as a
group), Custodian shall forthwith proceed to liquidate the custodial account by
distributing all assets thereof in a lump sum in cash or in kind to Depositor,
subject to Custodian's right to reserve such a portion of such assets as it may
deem advis-
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<PAGE>
able for payment of all its fees, compensation, costs, and expenses, or for
payment of any other liabilities constituting a charge on or against the assets
of the custodial account or on or against Custodian, with any balance of such
reserve remaining after the payment of all such items to be paid over to
Depositor.
(b) Neither Scudder Fund Distributors, Inc. nor Custodian shall be
liable for, or in any way responsible with respect to, any penalty or any other
loss incurred by any person with respect to a distribution made hereunder and
upon liquidation of the custodial account as aforesaid, this Agreement shall
terminate and have no further force and effect, and Custodian and Scudder Fund
Distributors, Inc. shall be relieved from all further liability with respect to
this Agreement, the custodial account, and all assets thereof so distributed.
13. Miscellaneous
(a) References herein to the "Internal Revenue Code" or "Code" and
sections thereof shall mean the same as amended from time to time hereafter,
including successors to such sections.
(b) Except where otherwise specifically required in this Agreement,
any notice from Custodian to any person provided for in this Agreement shall be
effective if sent by first-class mail to such person at that person's last
address on Custodian's records.
(c) This agreement is accepted by Custodian in, and shall be
construed and administered in accordance with the laws of the Commonwealth of
Massachusetts. This Agreement is intended to qualify under section 408 of the
Code as an Individual Retirement Account and for the Retirement Savings
deduction under section 219 of the Code, and if any provision hereof is subject
to more than one interpretation or any term used herein is subject to more than
one construction, such ambiguity shall be resolved in favor of that
interpretation or construction which is consistent with that intent. However,
neither the Custodian, nor any Mutual Fund (or company associated therewith)
shall be responsible for whether or not such intentions are achieved through use
of this Agreement, and Depositor is referred to Depositor's attorney for any
such assurances.
CUSTODIAN
DISCLOSURE STATEMENT
The following information is being provided to you by the State Street Bank
and Trust Company, the Custodian of the Scudder Individual Retirement Accounts,
in accordance with the requirements of the Internal Revenue Service. Please
read it together with the Individual Retirement Plan and the prospectus for the
shares of each Mutual Fund selected by you for the investment of your
contributions to that Plan, copies of which you should have already received
from the distributor of those shares. The provisions of the Plan and prospectus
must prevail over this statement in any instance where the statement is
incomplete or appears to conflict.
The Employee Retirement Income Security Act of 1974 has provided an
entirely new program that may enable you to plan for your retirement by creating
a "retirement plan" with federally tax-deductible dollars. This federal income
tax deduction is available even if you do not otherwise itemize your deductions.
In addition, any earnings on the assets held in your individual retirement
account will not be subject to federal income tax until you actually begin to
receive a distribution from your account. The state income tax treatment of
your account may differ, and details should be available from your state taxing
authority or your own tax adviser.
As with most other laws that provide special tax treatment, there are
certain restrictions and limitations involved with respect to your individual
retirement account:
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1. Only a limited amount of savings can qualify for the preferential tax
treatment -- 100% of your compensation or earnings from self-
employment up to an annual maximum of $2,000. Under certain
conditions, an individual and his or her non-employed spouse may each
open an IRA. Annual deductions for contributions are allowable if a
joint income tax return is filed and the deductions are limited to the
lesser of 100% of the employed spouse's compensation or $2,250, and
the amount contributed to either individual retirement account may not
exceed $2,000.
In the case of an individual retirement account which meets the
requirements of a so-called Simplified Employee Pension Plan, an
employer may contribute a deductible amount equal to 15% of the
employee's compensation up to an annual maximum of $30,000, the amount
of such contribution is includible in the employee's income as wages
(for federal income tax purposes) but is deductible by him or her.
The employee is also allowed an annual deduction for his or her own
individual retirement account contributions limited to the lesser of
100% of the employee's compensation or $2,000.
There is a 6% penalty tax on any so-called "excess contribution" if
you make one, that is, on the portion of a contribution made to your
IRA in excess of the amount which can be currently deducted. Some
examples of when this can occur are when you make a contribution to
your IRA in excess of the allowable deduction limitations, or your
contribute during or after the calendar year in which you reach 70
1/2, or in the case of a spousal IRA, if the non-employed spouse
receives any compensation during the calendar year. The 6% penalty
tax on any "excess contribution" also attaches for each following year
until the excess is withdrawn or used up. If an excess contribution
plus earnings on it is withdrawn before the time for filing the
individual's tax return for the year of the contribution (including
extensions), there will be no 6% penalty tax. The amount withdrawn
will not be considered a premature distribution nor taxed as ordinary
income, except the earnings withdrawn will be included in the income
of the taxpayer. In addition, in certain cases an excess contribution
may be withdrawn after the time for filing the individual's tax return
without resulting in taxable income to the individual. Also, excess
contributions for one year may be carried forward and deducted in the
next year.
2. Contributions must be made to a Trust or Custodial Account in which
the Trustee/Custodian is either a bank or such other person who has
been approved by the Secretary of the Treasury. No part of your
contribution may be invested in life insurance or be commingled with
other property except in a common trust fund or common investment
fund.
3. No deduction is allowed for (a) contribution other than in cash; (b)
contributions (other than those by an employee to a Simplified
Employee Pension Plan) made during your calendar year in which you
attain age 70 1/2 or thereafter; or (c) for any amount you contribute
which was a distribution from another retirement plan ("rollover"
contribution). However, the limitations in paragraph 1 do not apply
to such rollovers.
4. Individuals receiving compensation may establish their own individual
retirement accounts even if they are already covered under tax-
qualified plans (including Keogh plans for self-employed individuals),
government plans, or certain annuities.
5. Your interest in the account must be nonforfeitable at all times.
6. An individual is allowed to transfer, as a so-called "rollover"
contribution, such individual's investment in one type of individual
retirement plan to another without any tax liability. Also,
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<PAGE>
under certain conditions, an individual may so roll over (tax-free) a
distribution received from a qualified plan or a tax-sheltered
annuity. However, strict limitations apply to such rollovers, and you
should seek competent tax advice in order to comply with all the rules
governing rollovers.
7. Since the purpose of the IRA savings plan is to accumulate funds for
retirement, your receipt or use of any portion of this account (for
example, as collateral for a loan) before you attain age 59 1/2 would
be considered as an early distribution unless the distribution is a
result of death or disability. The amount of early distribution would
be includable in your gross income and would also subject you to a
penalty tax equal to 10% of the distribution unless you transfer it to
another IRA under circumstances whereby it qualifies as a rollover.
8. If you or your beneficiary were to engage in any prohibited
transaction (such as any sale, exchange or leasing of any property
between you and the account, or any interference with the independent
status of the account) then the account would lose its exemption from
tax and be treated as having been distributed to you. The value of
the entire account would be includable in your gross income, and if
your then under age 59 1/2 you would also be subject to the 10%
penalty tax on early distributions.
9. If you attain age 70 1/2 before the end of 1984, your entire interest
in your account must be distributed to you, or begin to be distributed
to you, before the close of the year in which you attain age 70 1/2.
The distribution may be made at once in a lump sum, or it may be made
in installments. However, installment payments cannot be scheduled to
be made over a period which extends beyond your life expectancy, or
the combined life expectancy of you and your spouse. If the amount
distributed during a calendar year is less than the minimum amount
required to be distributed, the recipient would be subject to a
penalty tax equal to 50% of the difference between the amount required
to be distributed and the amount actually distributed. If you die
before the entire interest is distributed to you, similar rules
require prompt, level payments to your beneficiary.
10. If you do not attain age 70 1/2 until January 1, 1985 or later, your
entire interest in your account must be distributed, or begin to be
distributed, to you no later than the first April 1st of the year
following the later of the year in which you attain age 70 1/2 or
retire. Distribution may be made at once in a lump sum, or it may be
made in installments. However, installment payments cannot be
schedule to be made over a period which extends beyond your life
expectancy (as determined annually), or the joint life and last
survivor expectancy of you and the beneficiary your designate (as
redetermined annually, if that beneficiary is your spouse). If the
amount distributed during a calendar year is less than the minimum
amount required to be distributed, the recipient would be subject to a
penalty tax equal to 50% of the difference between the amount required
to be distributed and the amount actually distributed. If you die
before the entire interest is distributed to you, but after you have
begun to receive distributions, your entire account must be
distributed to your beneficiary over a period no longer than the last
determined life expectancy or life and last survivor expectancy over
which your account was being distributed prior to your death. If you
die before the entire interest has begun to be distributed to you and
your spouse is your beneficiary, distributions to your spouse must
either (a) be completed within 5 years of your death or (b) commence
before the later of one year after your death or the
18
<PAGE>
date on which you would have attained age 70 1/2, and continue over
his or her life or a period not exceeding his or her life expectancy.
If you die before the entire interest has begun to be distributed to
you and your spouse is not your beneficiary, distributions to your
beneficiary must either (a) be completed within five years of your
death of (b) commence within one year after your death and continue
over your beneficiary's life or a period not exceeding his or her life
expectancy.
11. Amounts distributed to you are includable in your gross income when
you receive them and are taxable as ordinary income without any
special lump-sum distribution privileges. However, normal four-year
income averaging may be available.
12. If you die before the end of 1984, the first $100,00 worth of
distributions paid to your beneficiary (other than your estate) are
not subject to federal estate and gift tax when they are paid in a
series of substantially equal period statements over the life of the
beneficiary or over a period of at least 36 months after your death.
After December 31, 1984, this special federal estate and gift tax
exclusion will no longer be available.
13. You must file Treasury Form 5329 with the Internal Revenue Service for
each calendar year during which there is an excess contribution,
premature distribution, or during which there is an insufficient
distribution as referred to in paragraphs 9 and 10 above.
14. The Individual Retirement Account Plan has been approved as to form by
the Internal Revenue Service. This approval is a determination only
as to the form of the account and does not represent a determination
of the merits of such account.
15. Information about the shares of each mutual fund available for
investment by your individual retirement account must be furnished to
you in the form of a prospectus governed by rules of the Securities
and Exchange Commission. Please refer to the prospectus for detailed
information concerning your mutual fund. Growth in the value of your
account cannot be guaranteed or projected. However, the income and
operating expenses of a mutual fund will affect the value of its
shares, and hence the value of your account, as does any increase or
decrease in the value of the assets of the mutual fund. The fund's
prospectus contains information regarding current income and expenses
of your mutual fund.
Fees and other expenses of maintaining your account may be charged to
you or your account. The Custodian's fee schedule is referred to in
Article IX of the Plan document and is distributed to you with it.
If you have not received this Disclosure Statement at least seven calendar
days before the establishment of your Individual Retirement Account, you have
the right to revoke your Individual Retirement Account during the seven calendar
day period following the establishment of it. In order to so revoke your
Individual Retirement Account, you must do so in writing and you must mail or
deliver your revocation to Scudder Fund Distributors, Inc., c/o State Street
Bank and Trust Company, P.O. Box 1912, Boston, Massachusetts 02105. If your
revocation is mailed, the date of the postmark (or the date of certification or
registration if sent by certified or registered mail) will be considered your
revocation date. If you so revoke your individual retirement account during the
seven-day period, the entire amount of your account, without any adjustments
(for items such as administrative expenses, fees, or fluctuation in market
value) will be returned to you.
You may obtain further information from any district office of the Internal
Revenue Service.
(C)1984 Scudder Fund Distributors, Inc.
All rights reserved
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SCUDDER
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12/34-3-15
SCUDDER
403(b)
PLANS
Plan Agreement
SCUDDER
SERVING INVESTORS SINCE 1919
<PAGE>
Scudder 403(b) Agreement
This Scudder 403(b) Agreement ("the Agreement") is entered into by and
among (i) each employer who executes a Scudder 403(b) Application ("the
Employer") and thereby certifies that the Employer is duly qualified as an
organization described in section 403(b)(1)(A) of the Internal Revenue Code of
1954, as amended ("the Code"), (ii) the Custodian which executes a Scudder
403(b) Application and thereby certifies that it is duly qualified as a bank
described in section 401(d)(1) of the Code, and (iii) each employee who executes
a Scudder 403(b) Application ("the Employee") and thereby certifies that the
Employee is an employee of the Employer, and this Agreement shall be effective
as of the date acknowledgment of the receipt by the Custodian of such Scudder
403(b) Application is mailed by the Custodian to the Employee.
ARTICLE 1. DEFINITIONS
A. Code means the Internal Revenue Code of 1954, as amended.
B. Contribution means the amount to be transmitted by the Employer to
the Custodian for addition to the Employee's Custodial Investment Account.
C. Custodial Investment Account or Account means the account or
accounts established and maintained by the Custodian for an Employee pursuant to
this Agreement and, when the contect so implies, may mean the assets, if any, at
the time held therein by the Custodian.
D. Scudder 403(b) Agreement or Agreement means this document,
incorporating by reference the Scudder 403(b) Application and Designation of
Beneficiary.
E. Custodian shall mean the bank, or any successor thereto, set forth
in the Scudder 403(b) Application.
F. Designation of Beneficiary or Designation means the document
executed by the Employee pursuant to Article II, Part C.
G. Employee means each person employed by the Employer who has properly
executed an Application.
H. Employer means the organization, state, political subdivision of a
state, or agency or instrumentality of such state or political subdivision named
in this Agreement.
I. Regulated Investment Company or Company means a domestic corporation
which is a regulated investment company within the meaning of Section 851(a) of
the Code and which issues only redeemable stock for which Scudder, Stevens and
Clark (or its successor) is acting as the investment adviser and which has been
designated by Scudder Fund Distributors, Inc. (or its successor) as appropriate
for investment hereunder.
J. Scudder 403(b) Application or Application means the document
executed by the Employer, the Employee and the Custodian pursuant to Article II,
Part A.
K. Normal Retirement Age means age 59 1/2.
ARTICLE II. ESTABLISHMENT OF CUSTODIAL INVESTMENT ACCOUNTS
A. Request for participation. Each Employee who properly executes an
Application thereby becomes a party to this Agreement with the right to enforce
its terms against any other party. Such executed Application is hereby
specifically incorporated herein by reference. An Application is properly
executed when signed by the Employer, the Employee and the Custodian. The
Custodian may rely on the validity of the signatures thereon, on the existence
of the employment relation thereby affirmed, and on the irrevocable subscription
to the provisions of this Agreement therein contained.
B. Opening of Account. Upon acceptance of an Application by the
Custodian, the Custodian shall open a separate Custodial Investment Account
("the Account") for the benefit of the Employee. The Account shall be maintained
pursuant to the terms of this Agreement, including the documents incorporated
herein by reference.
C. Employee's Designation of Beneficiary. Each Employee may submit to
the Custodian a properly executed Employee's Designation of Beneficiary form or
other written instrument acceptable to the Custodian for use in connection with
this Agreement (which are referred to hereinafter interchangeably as a
"Designation") which shall not become effective until it is filed with the
Custodian at the Custodian's home office during the lifetime of the Employee.
The last effective Designation accepted by the Custodian shall be controlling,
and whether or not fully dispositive of the Account, thereupon shall revoke all
other such Designations previously filed by the Employee. Each such executed
Designation is hereby specifically incorporated herein by reference and shall be
construed, enforced and administered according to the laws of the state in which
the home office of the Custodian is located.
ARTICLE III. CONTRIBUTIONS
A. Adjustment of compensation, transmittal of Contributions, and
exclusion allowance. Each agreement between the Employer and the Employee as to
the adjustment of the Employee's compensation, whether made pursuant to an
Application or pursuant to a separate written agreement between the Employer and
the Employee, shall be effective only as to amounts earned by the Employee after
such an agreement becomes effective. Each such agreement between the Employer
and the Employee as to the adjustment of the Employee's compensation, whether
made pursuant to an Application or pursuant to a separate written agreement
between the Employer and the Employee, shall be irrevocable as to both the
Employer and the Employee except that either of them may terminate such
agreement as of the end of any payroll period so that it will not apply to
compensation subsequently earned. Subject to the immediately preceding sentence,
the Employee may, in the manner provided for in subpart (a) of Part B of Article
VIII, change such agreement between the Employer and the Employee as to the
adjustment of the Employee's compensation, but such change may be made no more
than once in each taxable year of the Employee. All Contributions shall be
transmitted to the Custodian. The Employee shall be responsible for computing
the maximum amount that may be contributed on his behalf for each tax year in
accordance with the Employee's "exclusion allowance" as that term is defined in
section 403(b)(2) of the Code. The Employee shall determine the applicable
limitation(s) on contributions under section 415(c) of the Code, and the
Employee shall have the right to avail himself of and make any of the elections
provided under said section 415. Such computations and determinations shall be
made at least annually, and the Employee shall communicate the results to the
Employer no later than thirty (30) days before the last day on which the
Employee can execute a new Application or other written agreement with the
Employer for the taxable year without violating the pertinent rules and
regulations promulgated by the Treasury Department. Neither the Custodian,
Scudder Fund Distributors, Inc., any Regulated Investment Company, nor the
Employer shall have any obligation to verify the correctness of the Employee's
computation of the Employee's exclusion allowance or limitations on
contributions under section 415 of the Code or any responsibility with respect
to any election available to the Employee under said section 415 or any matters
relating to any tax consequences with respect to the Employee's contributions,
including the identification and correction of an "excess contribution" as that
term is defined in section 4973 of the Code, all of which foregoing matters
shall be solely the responsibility of the Employee.
B. Transfers and rollovers.
(a) Transfers from and to other Accounts. The Employer or the Employee
may cause the transfer of assets acceptable to the Custodian and
available from an existing custodial account qualified under section
403(b)(7) of the Code and/or from an existing annuity contract
qualified under section 403(b) of the Code to his Custodial Investment
Account. Once transferred into the Employee's Custodial Investment
Account, such assets shall be treated as a Contribution for purposes of
this Agreement and shall be invested, distributed and otherwise dealt
with as such. The Employer or Employee may cause the transfer of assets
agreed to by the Custodian from the Employee's Custodial Investment
Account to a custodial account established under section 403(b)(7) of
the Code and/or to an annuity qualified under section 403(b) of the
Code.
(b) Rollover contributions. The Custodian may accept contributions in
the form of assets acceptable to the Custodian received from an annuity
contract or a custodial account described in section 403(b) of the
Code, an individual retirement account described in section 408(a) of
the Code, an individual retirement annuity described in section 408(b)
of the Code, or a retirement bond described in section 409(a) of the
Code, provided that such contribution qualifies in all respects as a
rollover contribution in accordance with the requirements of section
403(b)(8), section 408(d)(3) or section 409(b)(3)(C) of the Code
(including the requirement that no part of the amount received from an
individual retirement account, individual retirement annuity or
retirement bond be attributable to any source other than a rollover
contribution from any annuity contract or custodial account described
in section 403(b) of the Code) or other applicable provisions of the
Code in effect from time to time. Such rollover contribution shall be
held by the Custodian in a separate Account for the benefit of the
Employee which consists only of such rollover contributions and the
earnings thereon. Once transferred into the Employee's Custodial
Account, such assets shall be treated as a Contribution for purposes of
this Agreement and shall be invested, distributed and otherwise dealt
with as such. The right is reserved to transfer the assets of the
Custodial Investment Account to another form of annuity contract or
custodial account described in section 403(b) of the Code or to an
individual retirement account, individual retirement annuity, or
retirement bond plan established pursuant to section 408 or 409 of the
Code.
If permitted by Scudder Fund Distributors, Inc., in accordance with
applicable law, rollover contributions with respect to qualified voluntary
employee contributions as defined in section 219(e)(2) of the Code may be
received under this Agreement with respect to taxable years
2
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beginning after December 31, 1981, and such contributions shall thereafter
be held and administered hereunder by the Custodian in accordance with all
applicable law with respect to accumulated deductible employee
contributions as defined in section 72(o)(5)(B) of the Code.
(c) Limitation of liabilities. Neither the Custodian nor Scudder Fund
Distributors, Inc. shall have any responsibility with respect to any
matters relating to the tax consequences with respect to any transfer or
rollover made under this Part B of Article III.
ARTICLE IV. INVESTMENT
A. Purchase. The Custodian shall receive and, as soon as practical,
shall invest all contributions in accordance with the Employee's investment
instructions which are then in effect for the Employee.
B. Registration and safekeeping. Any stock of a Regulated Investment
Company held under this Agreement shall be held by the Custodian. Such stock may
be registered in the name of the Custodian or its nominee, but the Custodian
need not require issuance of certificates for such stock.
C. Eligibility. The Custodian shall invest only in stock of a Regulated
Investment Company. Nothing in this Agreement shall prevent the Employer from
purchasing an annuity policy which qualifies under section 403(b) of the Code,
but such a policy, if selected by the Employee, shall be issued directly to such
Employee.
A Custodial Investment Account shall be limited to investment in stock
of one Regulated Investment Company, except that the Employee may choose that
the investment be divided between the stock of more than one Regulated
Investment Company if the value of the stock of each Company in which an
investment is being made is, upon completion of the investment, equal to a
minimum value established from time to time by a designation by Scudder Fund
Distributors, Inc. (including a designation that there shall be no such minimum
investment limitation).
If a Company in whose stock investments have been made is no longer
designated by Scudder Fund Distributors, Inc as appropriate for investment
hereunder, Scudder Fund Distributors, Inc. shall advise the Employee for whose
Account the investments were made and shall provide said Employee with a current
list of Companies available for investment. If, within 30 days of providing of
such current list, the Employee does not submit new investment instructions, the
Employee's investment in the deleted Company shall be changed to an investment
for the Employee's Account in stock of Scudder Cash Investment Trust or in stock
of another Regulated Investment Company or Companies designated by Scudder Fund
Distributors, Inc. and no additional investments shall be made in said deleted
Company.
D. Reports and voting of securities. The Custodian shall deliver to the
Employee all notices, reports, prospectuses, financial statements, proxies and
proxy-soliciting materials received by it as to investments made for the
Employee's Account. The Custodian shall vote all shares only in accordance with
the instructions of the Employee as expressed in the executed proxy. If the
Employee desires to attend a meeting at which securities held in this account
may be voted, the Custodian shall furnish a proxy at the Employee's request.
E. Dividends. All capital gain distributions and dividends received on
the stock of a Regulated Investment Company shall be reinvested in the stock of
that Regulated Investment Company. The Custodian shall elect to receive any such
distribution in the stock of the distributing Company whenever possible.
F. Change of investments. An Employee or his designated beneficiary or
beneficiaries who has (have) survived the Employee and to whom distributions are
being made (by unanimous agreement if there is more than one beneficiary) may
direct in writing (or by any other manner of direction designated by Scudder
Fund Distributors, Inc.) that the investment medium of the Accout be changed to
stock of another Regulated Investment Company or Companies. However, if Scudder
Fund Distributors, Inc. determines in its own judgment that there has been
trading within the Account, any Regulated Investment Company may refuse to sell
its shares to such Account. If the Employee's Account is invested in stock of
more than one Regulated Investment Company, a separate account shall be kept
with respect to the stock of each such Company, and he or they may designate the
portion of any new contribution, withdrawal, or change of investment which is to
be allocated to each such separate account.
ARTICLE V. CUSTODIAN
A. Duties. The Custodian shall:
(1) Receive contributions transmitted by the Employer;
(2) Provide safekeeping for the securities and other assets in the
Custodial Investment Account;
(3) Collect income;
(4) Execute orders for purchase, sale or exchange of securities and
make settlement in accordance with general practice;
(5) Maintain records of all transactions in the Account;
(6) Transmit to each Employee, not less frequently than annually,
appropriate statements of the amount of the Custodian's compensation,
if any, charged to the account.
(7) File with the Internal Revenue Service and/or any other government
agency such returns, reports, forms, and other information as may be
required of it as Custodian;
(8) Perform all other duties and services consistent with the purposes
and intentions of this Agreement. The Custodian may perform any of its
administrative duties through other persons designated by the Custodian
from time to time, except that all assets in the Account shall be held
by the Custodian; and if State Street Bank and Trust Company is the
Custodian, it intends initially to delegate all such duties to Boston
Financial Data Services, Inc., which is partially owned by the
Custodian's parent company; but no such delegation or future change
therein shall be considered as an amendment of this Agreement.
B. Cash requirements. If cash funds are required to pay taxes, fees, or
other expenses pursuant to Article VI or to make payments to the Employee or his
beneficiaries (other than withdrawals under Article VII, Part C), the Employee
shall instruct the Custodian in writing which Regulated Investment Company
shares shall be redeemed or sold if there is more than one account, unless the
item for which cash is required is clearly allocable to an investment in a
specific Regulated Investment Company. In the absence of such written
instructions, the Custodian shall exercise its own discretion. However, the
Custodian's fee, if any, for each account within a Custodial Investment Account
shall be charged to such account.
C. Limitation of liabilities and duties.
(1) The Custodian shall be fully protected in acting or omitting to
take any action in reliance upon any order or other direction believed
by the Custodian to be genuine and properly given.
(2) To the extent permitted by law, upon the expiration of a 30-day
period after providing to the Employee the statements required under
Article V, Part A(6), the Custodian shall be released and discharged
from all liability to the Employee or any third party as to the matters
contained in such statement unless the Employee files written
objections with the Custodian within such 30-day period.
(3) In no event shall the Custodian be under a fiduciary duty to the
Employee in regard to the selection of investments or be liable for any
loss so incurred.
(4) The Custodian shall have no responsibility to see to the initial or
continued qualification of the Custodial Investment Account under
section 403(b)(7) of the Code.
(5) The Custodian shall not be obligated to determine the amount of any
contribution due or collect such contribution from the Employer.
(6) The Custodian shall not be held responsible for determining the
amount, character, or timing of any distribution to the Employee except
as provided in Article IX.
(7) The Custodian shall have no responsibility with respect to the
computation of the Employee's "exclusion allowance" as defined in
Section 403(b)(2) of the Code, any applicable limitation(s) on
contributions under Section 415(c) of the Code, any election available
to the Employee under said section 415, or any matters relating to any
tax consequences with respect to the Employee's contributions,
including the identification and correction of an "excess contribution"
as that term is defined in section 4973 of the Code, all of which
foregoing matters shall be solely the responsibility of the Employee.
(8) The Custodian shall not be required to carry out any instructions
not given in accordance with this Agreement and the various documents
incorporated herein by reference. If such instructions are not received
as required or if received, are in the opinion of the Custodian
unclear, the Custodian shall not be liable for loss of income or
appreciation or depreciation and shall not be liable for interest,
pending receipt of written instructions or other clarification.
Furthermore, the Custodian assumes (and shall have) no responsibility
to make any distribution (or process a withdrawal) by order of the
Employer, the Employee or a Beneficiary unless and until the requisite
instructions specify the occasion for such action and the Custodian is
furnished with any and all applications, certificates, tax waivers,
signature guarantees and other documents (including proof of any legal
representative's authority) deemed necessary or advisable to the
Custodian. The Custodian shall not be responsible for complying with
any instructions or acting in accordance with any other documents which
appear on their face to be genuine, or for refusing to comply or so act
if not satisfied to that effect, and assumes no further duty of
inquiry. The Custodian shall have no liability to the Employee (or the
Employee's beneficiary) for any tax penalty or other damages resulting
from any inadvertent failure by the Custodian to make a distribution
under this Agreement.
(9) The Custodian shall not be liable (and assumes no responsibility)
for the collection of contributions or the deductibility of
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any contribution, or its propriety under this Agreement, or the purpose
or propriety of any distribution made pursuant to this Agreement, which
matters are the responsibility of the Employer and the Employee.
(10) The Custodian shall not be liable for interest on temporary cash
balances, if any, maintained in the Account.
(11) To the extent permitted by law, the Employee shall always fully
idemnify the Custodian and save it harmless from any and all liability
whatsoever which may arise either (i) in connection with this Agreement
and matters which it contemplates, except that which arises due to the
Custodian's negligence or willful misconduct, or (ii) with respect to
making or failing to make any distribution, other than for failure to
make distribution in accordance with an order therefor which is in full
compliance with Article IX or Article VII, Part C or this Part C of
Article V. Except as required by law, the Custodian shall not be
obligated or expected to commence or defend any legal action or
proceeding in connection with this Agreement or such matters unless
agreed upon by the Custodian and the Employee, and unless fully
indemnified for so doing to the Custodian's satisfaction.
(12) The Employer assumes neither any responsibility nor any liability
for any acts or omissions of the Custodian hereunder.
D. Compensation. In consideration for its services hereunder, the
Custodian shall be entitled to receive the fees specified in its then current
fee schedule for the services specified on the schedule. The Custodian may
substitute a revised fee schedule from time to time upon thirty (30) days'
written notice to the Employer or Employee. A Custodian shall be entitled to
such reasonable additional fees as it may from time to time determine for
additional services required of it, if such additional services are not clearly
identified on the fee schedule.
E. Resignation and removal. The Custodian may resign by giving at least
30 days' written notice to the Employer. The Employer or Scudder Fund
Distributors, Inc. may remove the Custodian hereunder by giving at least 30
days' written notice to the Custodian. In each case, the Employer or Scudder
Fund Distributors, Inc. shall designate a successor custodian qualified under
section 403(b)(7) of the Code, which successor custodian shall accept such
appointment by a writing to be submitted to the Employer and the Custodian.
If, within 30 days after the giving of notice of resignation or
removal, neither the Employer nor Scudder Fund Distributors, Inc. designates a
successor custodian which accepts the appointment, this Agreement shall
terminate, and all assets in the Account shall be distributed in kind to the
Employee, or in the event of his death, to his designated beneficiary or
beneficiaries subject to the Custodian's right to reserve funds as provided in
this Part E of Article V.
On the effective date of its resignation or removal, the Custodian
shall transfer to the designated successor the assets and records (or copies
thereof) of the Custodial Investment Accounts provided, however, that the
Custodian may retain whatever assets it deems necessary for payment of its fees,
costs and expenses, compensation, and any other liabilities which constitute a
charge on or against the assets of the Account or on or against the Custodian.
ARTICLE VI. FEES, TAXES, AND OTHER EXPENSES
A. Fees, taxes, and other expenses. Any income taxes of any kind
whatsoever that may be levied or assessed upon or in respect of a Custodial
Investment Account created hereunder (including any transfer taxes incurred in
connection with the investment and reinvestment of the assets), and all other
expenses, fees, and administrative costs incurred by the Custodian in the
performance of its duties, including fees for legal services rendered to the
Custodian, and the compensation to the Custodian as determined under Article V,
Part D of this Agreement shall constitute a charge upon the assets of the
Custodial Investment Account and be paid from the assets held in such Account,
or (at the Custodian's option) be paid by the Employee.
ARTICLE VII. PROTECTION OF EMPLOYEE BENEFITS
A. Non-forfeitable. At no time shall it be possible for any part of the
assets held by the Custodian in the Employee's Account to be used for or
diverted to purposes other than for the exclusive benefit of the Employee. The
Employee's rights to or derived from the Employer's contributions to the
Custodian for addition to the Employee's Account shall be non-forfeitable at all
times after such payments are made to the Custodian.
B. Non-alienable. Any right or benefit which shall be payable under the
terms of this Agreement shall not be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any
attempt at such shall be void, and any such right or benefit shall not in any
way be subject to the debts, contracts, liabilities, engagements or torts of the
person who is entitled to such right or benefit, nor shall Such right or benefit
be subject to attachment or legal process for or against such person, except as
provided in Part C of this Article VII.
C. Employee withdrawals.
(a) At any time or times prior to the completion of distributions
pursuant to Article IX, an Employee who has attained age 59 1/2 may
withdraw amounts of cash from his Account, including the entire balance
thereof, if the Employee submits to the Custodian written proof
satisfactory to the Custodian of the attainment of such age and, also,
written instructions to the Custodian as to the amounts to be so
withdrawn. If the Employee makes any withdrawal at any time pursuant to
the provisions of this subpart (a) of this Part C of Article VII, no
additional contributions may be made to the Employee's Account for a
period of one (1) year after such withdrawal and the employee may not
participate in any other custodial account for regulated investment
company stock involving the Employer under section 403(b) of the Code
for a period of one (1) year after such withdrawal.
(b) In addition to the foregoing, at any time or times prior to the
completion of distributions pursuant to Article IX, an Employee may
withdraw amounts of cash from his Account, including the entire balance
thereof, if the Employee encounters financial hardship, as determined
under rules of uniform application and in accordance with applicable
law, governmental regulations or rulings, by a person designated by the
Employer in accordance with applicable legal authority, and if the
Employee submits to the Custodian written proof satisfactory to the
Custodian of such determination of hardship and, also, written
instructions to the Custodian as to the amounts to be so withdrawn.
(c) Any withdrawal made pursuant to the provisions of either subparts
(a) or (b) of this Part C may not be in kind but may only be in the
cash proceeds received by the Custodian from redemptions or sales of
shares of the Regulated Investment Companies held in the Employee's
Account. If there is more than one account, the Employee shall instruct
the Custodian in writing as to which Regulated Investment Company
shares shall be redeemed or sold before any distribution is made under
this Part C of Article VII.
ARTICLE VIII. AMENDMENT.
A. By Employer. This Agreement and/or the various documents
incorporated herein may be modified or amended by the Employer by delivering to
the Employee and to the Custodian a written copy of such modification or
amendment signed by the Employer.
B. By Employee. The Employee may amend this Agreement by making any of
the following changes:
(a) No more than one in each taxable year of the Employee, and subject
to other applicable provisions of Part A of Article III, the Employee
may change the agreement between the Employer and the Employee as to
the adjustment of the Employee's compensation either by submitting to
the Employer and the Custodian, in accordance with Article II, Part A,
a revised Application or in lieu thereof, by the execution of a
separate written agreement between the Employer and the Employee;
(b) The Employee may change investments pursuant to Article IV, Part F;
or
(c) The Employee may change his designated beneficiary or beneficiaries
by submitting to the Custodian at any time a revised Designation of
Beneficiary pursuant to Article II, Part C.
C. By Scudder Fund Distributors, Inc. The Employer hereby delegates
authority to Scudder Fund Distributors, Inc. to modify or amend this Agreement
and/or the various documents incorporated herein, including authority to adopt a
prototype or master plan (if one becomes available) for investment in shares of
Regulated Investment Companies, and the Employer shall be deemed to have
consented to any such modification or amendment. Scudder Fund Distributors, Inc.
shall provide copies of such modification or amendment to the Employer or the
Employee, and the Custodian. However, Scudder Fund Distributors, Inc. has no
affirmative obligation to amend any of the foregoing documents pursuant to this
portion of the Agreement.
D. Limitations. Notwithstanding the powers granted in Parts A, B, and C
above, no amendment shall be made which would:
(a) Cause or permit any part of the assets in the Account to be
diverted to purposes other than for the exclusive benefit of the
Employee and/or his beneficiaries, or cause or permit any portion of
such assets to revert to or become the property of the Employer.
(b) Place any greater burden on a Custodian without its written
consent, or
(c) Retroactively deprive any Employee of any benefit to which he was
entitled under this Agreement by reason of contributions made by the
Employer, unless such modification or amendment is necessary to conform
the Agreement to, or satisfy the conditions of any law, governmental
regulation or ruling, and to permit the Agreement and Account to meet
the requirements of Section 403(b) of the Code, or any similar statute
enacted in lieu thereof, and any such retroactive modification or
amendment must be pursuant to an opinion of counsel that it is
necessary or advisable to conform the Agreement to the requirements for
qualification under Section 403(b) of the Code and Regulations
prescribed thereunder.
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ARTICLE IX. DISTRIBUTION
A. Time of distribution.
(a) Subject to the remaining provisions of this Article IX and to the
provisions of Part C of Article VII, distribution of assets held in the
Employee's Investment Account shall be made or shall commence at the
earliest time of the occurrence of one of the following events:
(1) The disability of the Employee within the meaning of Section
72(m)(7) of the Code. An Employee shall be considered to be so
disbabled if he is unable to engage in any substantial gainful
activity because of any medically determinable physical or mental
impairment which can be expected to result in death or to be of
long-continued and indefinite duration and an individual shall not
be considered to be disabled, and, therefore, the Custodian shall
not be required to make distribution on account of the Employee's
disability, unless and until the Custodian has received a
physician's certificate to that effect;
(2) The Employee's actual retirement or attainment of the Normal
Retirement Age, whichever is later; or
(3) The Employee's death.
(b) In addition to the foregoing, distribution shall be made or shall
commence upon the Employee's separation from the service of the
Employer, prior to the occurrence of any of the events listed in
subpart (a) of this Part A or Article IX, if the Employee, either at
any time prior to or upon the Employee's separation from the service of
the Employer, files with the Custodian a written, irrevocable election
to have distribution commence upon such separation from service.
(c) The Custodian shall not be responsible for making any distributions
until such time as it has been notified in writing by either the
Employer or the Employee of the occurrence of one of the events set
forth in subparts (a)(1),(a)(2), or (b) of this Part A, or by the
designated beneficiary or beneficiaries (or by the Employee's Executor
or other personal representative if no such beneficiary survives the
Employee) of the occurrence of the event set forth in subpart (a)(3) of
this Part A.
B. Mode of distribution to Employee. Distributions to the Employee of
amounts held by the Custodian in his Custodial Investment Account shall normally
be made in the form of annual, quarterly or monthly installments in cash or in
kind or in the form of a lump sum, provided that:
(a) Installment payments in cash or in kind shall be made in
approximately equal amounts or approximately equal fractions of the
Employee's Custodial Investment Account;
(b) If payments to the Employee are made in the form of installments,
there shall be credited to such Employee's Custodial Investment Account
all earnings thereon during the period of such installments; and
(c) Except in the case where the distribution is made in the form of an
annuity for a period measured by the life of the Employee and his
spouse (regardless of whether the Employee's beneficiary is someone
other than his spouse), the present value of the payments to be made to
the Employee must be more than 50 percent of the present value of total
payments to be made to the Employee and his beneficiaries.
Stock of a Regulated Investment Company shall not be distributed in
kind unless at the time distribution is made or, if it is to be made in
installments, at the time it commences, the value of such stock held in the
Custodial Investment Account is five hundred ($500) dollars or more.
Distribution may also be made by distributing an annuity contract which
qualifies under section 403(b)(1)(A) of the Code.
C. Election. The Employee may elect or alter his election of the method
of distribution to the Employee by filing with the Custodian a written election
of a method of distribution which is consistent with the provisions of Part B of
this Article IX at any time prior to seven (7) days before the time of
distribution determined under Part A of this Article IX. Such election may be
changed at any time prior to the beginning of said seven (7)-day period.
In the event that an Employee fails to properly elect a method of
distribution of his Account, unless the Custodian in its absolute discretion
chooses another method of distribution consistent with the provisions of Part B
of this Article IX, installment payments pursuant to said Part B will be made in
cash or in kind to the Employee on a monthly basis over a 10-year-period, if a
systematic withdrawal plan is available for the Regulated Investment Company
stock held in the Account and if the assets in such Account are determined to be
sufficient by Scudder Fund Distributors, Inc. If such a plan is unavailable or
if such assets are deemed to be insufficient by Scudder Fund Distributors, Inc.,
the shares of the Regulated Investment Company stock held in the Account will be
distributed in cash or in kind promptly to the Employee, unless the Custodian in
its absolute discretion chooses another method of distribution consistent with
the provisions of said Part B of this Article IX.
D. Method of distribution to beneficiaries. In the event of the death
of the Employee either before or after the occurrence of any of the times for
distribution listed in Part A of this Article IX, any amounts held by the
Custodian in the Employee's Account shall be distributed to the beneficiary or
beneficiaries named in the Employee's Designation by the method acceptable to
the Custodian and stipulated in such form, but only after such beneficiary or
beneficiaries have notified the Custodian in writing of the Employee's death and
provided the Custodian with adequate verification of such death, as provided in
subpart (8) of Part C of Article V. Until such distributions commence to such
beneficiary or beneficiaries, the Custodian shall not be responsible for
treating such person's predecessor to such rights and obligations as still
possessing the same.
In the event that the Employee fails to properly stipulate a method of
distribution of his Account to such beneficiary or beneficiaries, unless the
Custodian in its absolute discretion chooses another mode of distribution,
installment payments will be made in cash or in kind to such beneficiary or
beneficiaries on a monthly basis over a 10-year period from the date of the
Employee's death, if a systematic withdrawal plan is available for the Regulated
Investment Company stock held in the Account and if the assets in such Account
are determined to be sufficient by Scudder Fund Distributors, Inc. If such a
plan is unavailable or if such assets are deemed to be insufficient by Scudder
Fund Distributors, Inc., the shares of the Regulated Investment Company stock
held in the Account will be distributed in cash or in kind promptly to such
beneficiary or beneficiaries, unless the Custodian in its absolute discretion
chooses another method of distribution.
If the Employee so elects in the Designation of Beneficiary form in
effect at the time of his death, his designated beneficiary or beneficiaries who
has (have) survived him and to whom distributions are to be made, may direct the
Custodian in writing (by unanimous agreement if there is more than one
beneficiary) to change the method of distribution to such beneficiary or
beneficiaries (that is, the method either selected in the Employee's Designation
or provided for in this Part D of Article IX, as the case may be), but only
within sixty (60) days after the day on which such beneficiary or beneficiaries
first became entitled to any distribution from the Account and only if such
change is acceptable to the Custodian.
If a distribution is payable to a person known by the Custodian to be a
minor or a person under a legal disability, the Custodian may in its absolute
discretion make the whole or any part of the distribution to (i) a parent of
such person, (ii) the guardian, committee or other legal representative,
wherever appointed, of such person, including a custodian for such person under
a Uniform Gifts to Minors Act or similar act, (iii) any person having the
control and custody of such person, or (iv) to such person directly, the receipt
of the distributee to whom any such payment or distribution is so being made a
sufficient discharge therefor.
Insofar as the disposition of the Account of a deceased Employee is not
governed by a valid Designation which names at least one beneficiary who
survives the Employee, the Account shall be distributed to the estate of the
deceased Employee. Any portion of an Account of a deceased Employee remaining
undisposed of after the death of an Employee's designated beneficiary who has
survived the Employee, shall be distributed to the estate of such deceased
beneficiary.
ARTICLE X. TERMINATION.
A. Voluntary termination. With respect to amounts not yet earned by an
Employee, this Agreement may be terminated by either such Employee or the
Employer by giving written notice to the other.
Copies of such notice shall be sent forthwith to the Custodian. Unless
otherwise mutually agreed upon by the Employer and the Employee, any such
termination shall take effect as of the last day of the month next following the
month in which such written notice shall have been given, the Employee's
compensation level shall be increased by the amount by which it otherwise would
be reduced pursuant to the Application, or other written agreement between the
Employer and the Employee as to the adjustment of the Employee's compensation,
and the obligations under this Agreement of the Employer with respect to future
pay periods shall cease.
B. Termination on distribution. This Agreement shall terminate as to an
Employee when all the assets held in the Custodial Investment Account
established for him hereunder have been distributed.
C. Termination on disqualification. This Agreement shall terminate as
to an Employee, if after notification by the Internal Revenue Service that the
Employee's Account does not qualify under section 403(b)(7) of the Code, Scudder
Fund Distributors, Inc. fails or is unable to make the amendments necessary to
so qualify the Account. On such termination of this Agreement, all assets in an
Account shall be distributed in kind by the Custodian to the Employee or, in the
event of his death, to his designated beneficiaries, subject to the Custodian's
right to reserve funds as provided in Article V, Part E, except that where the
value of such assets is less than five hundred ($500) dollars, the distribution
shall be in cash.
ARTICLE XI. MISCELLANEOUS
A. Adjustment regarding other employee benefits. Unless provided
otherwise in a separate written agreement between the Employer and the Employee,
all employee benefits furnished (either wholly or in part) by the Employer for
the benefit of the Employee(other than those provided for under this Agreement)
which are based on the amount of compensation payable to an employee, and which
would ordinarily be subject to reduction in the event of any salary adjustment
other than that provided for
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under this Agreement, shall continue to be based on the Employee's compensation
level without regard to any adjustment in compensation provided for under this
Agreement, if such employee benefits arrangements themselves are consistent with
this Part A of Article XI.
B. Qualified Voluntary Employee Contributions. If permitted by Scudder
Fund Distributors, Inc., qualified voluntary employee contributions as defined
in section 219(e)(2) of the Code may be received under this Agreement with
respect to taxable years beginning after December 31, 1981, and such
contributions shall thereafter be held and administered hereunder by the
Custodian in accordance with all applicable law with respect to accumulated
deductible employee contributions as defined in section 72(o)(5)(B) of the Code.
C. Applicable law. This Agreement and all documents incorporated herein
by reference shall be construed and administered in accordance with the laws of
the state in which the home office of the Custodian is located.
D. Terminology. Any masculine terminology in this Agreement shall
include the feminine.
E. Headings. Headings herein are primarily for convenience of
reference, and if they conflict with the text, the text shall control.
F. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed and delivered, shall be an original,
but such counterparts shall together constitute one and the same instrument.
G. Change of address. The Employer shall notify the Custodian in
writing of any change of address within 30 days of such change.
H. Notice. Any notice from the Custodian to the Employee pursuant to
this Agreement shall be effective if sent by first class mail to the business
address of the Employer until the Employer specifies a different address
acceptable to the Custodian. Any notice to the Custodian pursuant to this
Agreement shall be by first class mail addressed to its home office.
I. Successors. This Agreement shall be binding upon and shall inure to
the benefit of the successors in interest of the parties hereto.
J. Not employment contract. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Employer to discharge the Employee or
of the Employee to terminate his employment.
K. Construction. No provision of this Agreement, including the
documents incorporated herein by reference, shall be construed to conflict with
any provision of a Treasury Department or Internal Revenue Service regulation,
ruling, release or other order which affects the terms of this Agreement or its
qualification under section 403(b)(7) of the Code. It is intended that this
Agreement, including the documents incorporated herein by reference, qualify as
a custodial account under said section 403(b)(7) and this Agreement, including
said documents, shall be construed and limited and the powers and discretions
conferred hereunder and by applicable laws shall be exercised in a manner
consistent with that purpose. Subject to the foregoing provisions of this Part K
of Article XI, in the event of any conflict between this Agreement and the
documents incorporated herein by reference, the provisions of this Agreement
shall prevail.
L. Tax treatment. The tax treatment of any contributions to the Account
and of any earnings of the Account depends, among other things, upon the nature
of the Employer, and the amount and nature of contributions made in any year to
the Account (and to other plans, accounts or contracts with the benefit of
special tax treatment) for the benefit of the Employee. The Custodian and
Scudder Fund Distributors, Inc. assume no responsibility with respect to such
matters, nor shall any term or provision of this Agreement be construed so as to
place any such responsibility upon any one of them. Furthermore, the Employer
and the Employee shall file and shall have sole responsibility for filing with
the Internal Revenue Service and/or any other government agency such returns,
reports, forms, and other information as may be required of them.
M. Separability. If any provision of this Agreement shall be held
invalid or illegal for any reason, such determination shall not affect any
remaining provisions of this Agreement, but this Agreement shall be construed
and enforced as if such invalid or illegal provision had never been included in
this Agreement.
N. If the Employer does not sign the Application and is not required to
do so under the Code and the regulations thereunder, the Employee, to the extent
allowed by law, assumes all obligations and responsibilities of the Employer
under the Application and this Agreement.
O. Separate Employer Plan. If the Employer has established a written
separate 403(b) plan, intending to provide for the investment in Regulated
Investment Companies, the terms of such plan will supersede any provisions of
this Agreement which conflict with such terms. This provision shall not be
effective until the Employer has provided Scudder Fund Distributors, Inc. with a
copy of such written plan and the Custodian has agreed in writing to be bound by
terms thereof.
6
<PAGE>
Telephone
numbers and
addresses
- --------------------------------------------------------------------------------
National Toll Free
Telephone Numbers
and Addresses
------------------------------------------------------------
For general information,
CALL (toll-free) 1-800-225-2470
(within Massachusetts, call collect 617-426-8300)
or
WRITE to: Scudder Fund Distributors, Inc.
175 Federal Street
Boston, MA 02110
Shareholder representatives from Scudder Fund Distributors,
Inc., underwriter for the Scudder funds, will answer your
calls and letters.
------------------------------------------------------------
------------------------------------------------------------
For prospectuses, call 1-800-453-3305.
For questions about an existing account and to arrange
transactions,
CALL (toll-free) 1-800-225-5163
(in Boston, call 328-5000)
WRITE to: The Scudder Funds
c/o Boston Financial Data Services
P.O. Box 1912
Boston, MA 02105
Account representatives from the transfer agent for the
Scudder funds will answer your calls and letters.
------------------------------------------------------------
- --------------------------------------------------------------------------------
Local Telephone
Numbers and Addresses
of Scudder Fund
Distributors, Inc.
Boca Raton
150 East Palmetto Park Road
Boca Raton, Florida 33432
305-395-0040
Los Angeles
333 South Hope Street
Los Angeles, California 90071
213-628-1144
Boston
175 Federal Street
Boston, Massachusetts 02110
617-426-8300
New York
345 Park Avenue
New York, New York 10154
212-350-8370
Chicago
Suite 2200, 111 East Wacker Drive
Chicago, Illinois 60601
312-861-2700
Philadelphia
Three Mellon Bank Center
Philadelphia, Pennsylvania 19102
215-864-7200
Cincinnati
540 Carew Tower
Cincinnati, Ohio 45202
513-621-4200
Portland, Oregon
1211 S.W. Fifth Avenue
Portland, Oregon 97204
503-224-3999
Cleveland
Suite 700, 1801 East Ninth Street
Cleveland, Ohio 44114
216-241-7744
San Francisco
Suite 4100, 101 California Street
San Francisco, California 94111
415-981-8191
Houston
1530 Bank of the Southwest Building
Houston, Texas 77002
713-659-3838
7
<PAGE>
SCUDDER [LOGO]
- --------------
This booklet is not to be used in
connection with the offering of any of
the Scudder funds unless preceded or
accompanied by the appropriate current
prospectus. The prospectus will be sent
to you by the fund's underwriter,
Scudder Fund Distributor's, Inc.
14-6-84 (C) Scudder Fund Distributors, Inc.
THE
SCUDDER
FUNDS
Plan agreement, The Scudder
sample plan Employer-Select
documents 403(b) plan
SCUDDER
SCUDDER, STEVENS & CLARK INVESTMENT COUNSEL
<PAGE>
Contents
- --------------------------------------------------------------------------------
How employers establish
a Scudder Employer-
Select 403(b) program 3
- ------------------------------------
Explanation of employer
selections 4
- ------------------------------------
Worksheet for employer
to select plan options 7
- ------------------------------------
Sample employer
adoption agreement 10
- ------------------------------------
Sample employee
application 12
- ------------------------------------
Sample designation of
beneficiary form 13
- ------------------------------------
Sample salary reduction
agreement 14
- ------------------------------------
Plan agreement 15
- ------------------------------------
Telephone numbers and
addresses 23
- ------------------------------------
- ------------------------------------
The term "Scudder 403(b) Plan"
refers to the Scudder 403(b) Plan
and includes functions performed by:
o Scudder Fund Distributors,
Inc. which offers Scudder
403(b) Plans and acts as
principal underwriter for
each Scudder fund,
o State Street Bank and
Trust Company, as
custodian and transfer
agent of the Scudder funds
and as custodian of the
Scudder 403(b) Plans, and
o Boston Financial Data
Services, Inc. (an
affiliate of State Street
Bank), the service agent
responsible for
maintaining shareholder
account records for the
Scudder funds.
Scudder, Stevens & Clark acts
as investment adviser to the Scudder
funds.
- ------------------------------------
Introduction
- --------------------------------------------------------------------------------
The Scudder Funds booklet "Tax Deferred Annuity Plans (TDAs and TSAs) under
Section 403(b)(7)" describes the Scudder 403(b) program. This program consists
of eight Scudder no-load mutual funds, a processing and record keeping system
that segregates contributions by contribution type and by individual employee,
and either the Scudder Employee-Select or the Scudder Employer-Select 403(b)
plan.
The Employer-Select plan described in this booklet is a flexible plan that
allows employers to select among many options to tailor a plan in accordance
with their objectives and the needs of their employees. It is designed to
accept direct employer contributions as well as various types of employee
contributions and permits the employer to impose certain controls over the
investment and withdrawal of contributions.
This booklet explains how employers establish a Scudder Employer-Select
program. In addition to the plan itself, the booklet includes a worksheet
showing how employers select various plan options.
The booklet also contains samples of an employer adoption agreement, an
employee application form, a designation of beneficiary form, and an employee
salary reduction agreement.
2
<PAGE>
How employers establish
a Scudder Employer-
Select 403(b) program
- --------------------------------------------------------------------------------
Plan adoption The Scudder Employer-Select 403(b) plan
permits employers to select among various
options that determine many of the important
terms of their plan. The employer makes
these elections on a worksheet provided by a
Scudder Group Retirement Specialist, as
illustrated on pages 7-9. Scudder then
prepares an individually-designed adoption
agreement that reflects all selections made
and eliminates any reference to options not
selected. The plan becomes effective after
the employer and State Street Bank and Trust
Company, acting as custodian, sign the
adoption agreement.
- --------------------------------------------------------------------------------
Employee applications Based on the employer's selections,
Scudder prepares a package of individually
designed employee applications and
information. The employee applications
specify which Scudder fund or funds the
employees are permitted to select for
contributions and the allocation of
contributions among funds. Depending on how
the employer completes the worksheet,
employees may also be able to make other
selections such as normal retirement age. A
designation of beneficiary form can be
printed on the reverse side of the
application. Salary reduction agreements, if
desired by the employer, can also be
provided.
The Scudder information package also
includes prospectuses and information about
the investment characteristics of the funds
designated by the employer. This information
acquaints employees with the nature of mutual
funds and helps them select the fund or funds
most suited to their investment objectives.
Scudder can also provide copies of the plan
agreement and the completed adoption
agreement for distribution to participants if
the employer wishes.
- --------------------------------------------------------------------------------
Establishing the plan on the To establish a 403(b) plan on the
Scudder processing system Scudder processing system, the employer needs
only to provide certain background
information about the plan and payroll
processing details. Thereafter the employer
remits funds and information about how the
amount submitted should be allocated among
participants and how it is broken down by
contribution type, if more than one type of
contribution is involved. The booklet "The
Scudder Processing System" provides more
information.
- --------------------------------------------------------------------------------
Reporting and disclosure A 403(b) plan sponsored by an employer
is subject to the reporting and disclosure
requirements of ERISA. Scudder will provide
information to help comply with the reporting
requirements. In addition, Scudder will
prepare a sample summary plan description
tailored to the selections made by the
employer and suitable for distribution to
employees.
3
<PAGE>
Explanation of
employer selections
- --------------------------------------------------------------------------------
How to use the worksheet The plan agreement beginning on page 15
contains the provisions of the Scudder
Employer-Select 403(b) plan. Employers are
urged to review it to develop a full
understanding of the plan and of the various
selections available to them.
Employers first indicate the selections
which they wish to make on a worksheet
provided for the employer's convenience by a
Scudder Group Retirement Specialist. Later,
Scudder prepares an individually-designed
employer adoption agreement reflecting only
the selections made by the employer and
eliminating references to unselected options.
A copy of the worksheet begins on page 7.
The selections made by the employer include
the determination of which contribution types
in addition to direct employer contributions
the employer wishes to permit. Employer
selections also establish certain fundamental
procedures such as those involving changes of
investment, withdrawal of contributions by
employees, and distribution of benefits to
employees.
- --------------------------------------------------------------------------------
Normal retirement age The employer can determine whether
employees may select normal retirement age.
Section II This section gives employers the option
of selecting the normal retirement age for
all their employees. Alternatively,
employers may give individual employees the
right to select their own. The normal
retirement age is the age at which employees
usually begin to receive distributions from
their plans. It cannot be less than age
59 1/2.
- --------------------------------------------------------------------------------
Determination of Employers can elect to permit various
employer and employee types of contributions in a Scudder Employer-
contribution types Select 403(b) plan in addition to direct
employer contributions. (Direct employer
contributions are automatically permitted but
are not required). Optional contribution
types include employer contributions pursuant
to employee salary reduction agreements,
mandatory contributions, employer matching
thrift contributions, thrift contributions,
employee non-deductible voluntary
contributions, and employee deductible
voluntary contributions (often called
"QVECs"). Rollover and transfer
contributions are also permitted.
The Scudder processing system segregates
all contribution types in order to maintain
the identity of each and to permit different
investment selections, investment procedures,
and distribution and withdrawal provisions to
apply to some contribution types than apply
to others.
Section III This section determines whether
employees may make contributions to the plan
by means of a salary reduction agreement. If
the employer permits either mandatory
contributions or matching thrift
contributions, the employer must permit
salary reduction contributions.
4
<PAGE>
- --------------------------------------------------------------------------------
Section IV Employers have the option under this
section of requiring employees to make
"mandatory contributions", (defined as
employee contributions of up to 6% of
compensation) to be eligible to receive
employer contributions. The employer may
make contributions on behalf of those
employees who contribute the mandatory
contributions, although there is no
requirement for the employer to make such
contributions.
Section V This section permits employers to offer
matching thrift contributions in order to
encourage employees to make salary reduction
contributions. Employers must match any
employee contributions made under the terms
of the matching agreement. The amount of the
employer's matching contribution may vary
from employee to employee but must then be
based on a formula established and
implemented by the employer that applies to
all employees. Employees with 20 years of
service, for example, could be offered a
higher matching contribution than employees
with five years of service.
Section VI The Scudder Employer-Select 403(b) plan
allows employees to make non-deductible
voluntary contributions to their plan if
permitted by the employer. Although not
deductible, employee contributions accumulate
tax-free until withdrawn. Non-deductible
voluntary contributions (but not earnings
from these contributions) may be withdrawn
from the plan.
The plan also permits employees to make
deductible voluntary contributions ("QVECs")
to the plan which are normally in lieu of IRA
contributions. These contributions are fully
tax-deductible but subject to certain
limitations concerning maximum contribution
amounts and withdrawals.
- --------------------------------------------------------------------------------
Investment selection The Scudder Employer-Select plan permits
employers to limit the Scudder funds eligible
for new contributions and to limit the funds
available to employees who wish to change the
investment of already-contributed amounts.
The plan also permits the employer to set
different fund-selection limitations for
different contribution types.
Section VII This selection permits employers to
limit the number of Scudder funds available
for contributions. Some employers, for
example, might wish to limit the selection to
one money market fund, an income fund, and a
common stock fund investing in large
established companies.
- --------------------------------------------------------------------------------
Investment changes Under the plan, new contributions are
invested identically. If, for example, a
monthly plan contribution consists of a
direct employer contribution and a salary
reduction contribution, the contributions
would be invested in two contribution
accounts and the investment allocation within
each contribution account would be in the
same proportions. Changes in the allocation
among funds of new contributions in the
future apply to all contribution types until
instructions are issued to the contrary.
5
<PAGE>
Explanation of
employer selections, cont.
- --------------------------------------------------------------------------------
However, the plan permits investment
changes involving already-contributed amounts
to be made in different proportions among
contribution types if allowed by the
employer. The employer, for example, could
permit employees to arrange investment
changes in their salary reduction accounts
without restriction. These investment
changes could result in money being invested
in funds other than those permitted for new
contributions. Employers could also permit
employees to make investment changes in their
salary reduction accounts by telephone at any
time while requiring that investment changes
in their direct employer contribution
accounts be arranged in writing no more
frequently than quarterly.
Section VIII This section permits employers to
require investment changes to be made through
the plan administrator, and enables employers
to limit the frequency with which employees
make investment changes.
Under this section, if employees are
given the right to make investment changes
directly with the custodian, the employer
cannot limit the frequency of investment
changes.
- --------------------------------------------------------------------------------
Withdrawals and Employers may select various provisions
distributions affecting the timing and manner of
distributions.
Section IX This section permits employers to decide
whether employees who have not reached normal
retirement age will be allowed to make
withdrawals from the plan upon attainment of
age 59 1/2.
Section X This section permits employers to decide
whether employees will be able to receive
distributions from the plan for reasons of
financial hardship before distribution would
normally begin.
Section XI This section permits employers to decide
whether employees are automatically entitled
to distributions upon separation from
service, or whether distributions would be
subject to guidelines imposed by the
employer.
Section XII The employer may select whether the
employer or the employee is to determine the
method of distribution of benefits to
employees.
6
<PAGE>
Worksheet for Scudder 403(b) Plan,
Employer Adoption Agreement, and
Summary Plan Description
- --------------------------------------------------------------------------------
The undersigned Employer will be establishing a custodial account, under
Internal Revenue Code Section 403(b)(7), and will be adopting a Scudder 403(b)
Plan pursuant to the provisions of the Scudder 403(b) Agreement and the
provisions selected below by the Employer in this worksheet. This worksheet is
provided only for the convenience of the Employer and is not a part of any Plan
or any Scudder 403(b) Agreement, nor is any portion of this worksheet
incorporated by reference into any Scudder 403(b) Agreement.
This plan will be for the benefit of each employee of the employer who signs a
Scudder 403(b) Plan Employee Application which is accepted by the Custodian.
However, if the Employer specifies in a writing pertaining to eligibility that
only employees of a certain class or classes are eligible to participate in this
403(b) plan, then this plan will be for the benefit of only such employees who
sign a Scudder 403(b) Plan Employee Application which is accepted by the
Custodian.
I. NAME OF PLAN
The Name of the 403(b) Plan to be adopted shall be the
___________________________________ 403(b) Plan.
(insert name of Employer)
II. NORMAL RETIREMENT AGE
An Employee's Normal Retirement Age (which may not be less than
age 59 1/2) shall be:
Select One [] (1) age 65 unless another age is indicated by the Employer
and Complete here: _________________________________
if Applicable (may not be less than age 59 1/2)
and if
Desired [] (2) age 65 unless another age is indicated by the Employee
in the Scudder 403(b) Plan Employee Application.
III. EMPLOYER CONTRIBUTIONS BY SALARY REDUCTION AGREEMENT
[NOTE: If either Mandatory Contributions by Salary Reduction Agreement
under Section IV(2) or Employer Matching Thrift Contributions under Section
V(2) are selected, Section III(1) must be selected to permit Employer
Contributions by means of a Salary Reduction Agreement.]
Select One [] (1) Employer Contributions made in accordance with a Salary
Reduction Agreement, made between the Employer and
Employee, described in Article III, Part B of the Scudder
403(b) Agreement.
[] (2) Employer contributions by means of a Salary Reduction
Agreement made between the Employer and the Employee are
not permitted.
IV. MANDATORY CONTRIBUTIONS BY SALARY REDUCTION AGREEMENT
[NOTE: Section IV(2) should NOT be completed to require Mandatory
Contributions if Employer Matching Thrift Contributions have been selection
under Section V(2), or if Employer Contributions by means of a Salary
Reduction Agreement are not permitted under Section III(2).]
Select One and [] (1) Mandatory Contributions are not required.
Complete if
Necessary [] (2) In order to participate in any Employer Contributions
which the Employer may wish to (but need not) make, with
respect to a taxable year of the Employee, directly to
the Employee's Employer Contribution Account, the
Employee must agree with the Employer for Mandatory
Contributions to be made, in accordance with a Salary
Reduction Agreement between the Employer and the
Employee, to the Employee's Mandatory Contribution
Account, with the total of such Mandatory Contributions
for such taxable year of the Employee to be an amount
equal to __________% (insert not over 6%) of the
Employee's Compensation with respect to such taxable year
of the Employee.
7
<PAGE>
V. MATCHING THRIFT CONTRIBUTIONS
[NOTE: Section V(2) should NOT be completed to permit Employer Matching
Thrift Contributions if Mandatory Contributions have been selected under
Section IV(2), or if Employer Contributions by means of a Salary Reduction
Agreement are not permitted under Section III(2).]
Select Either [] (1) Matching Thrift Contributions are not permitted.
(1) or (2);
and, if (2) [] (2) For each taxable year of the Employee with respect to
is Selected, which the Employee has agreed with the Employer for Thrift
Complete it Contributions to be made, in accordance with a Salary
and, if Reduction Agreement between the Employer and the Employee,
Desired, to the Employee's Thrift Contribution Account in a total
Select (3) amount not exceeding __________% (insert not over 6%) of
the Employee's Compensation for such taxable year of the
Employee, the Employer will make Employee Matching Thrift
Contributions directly to the Employer Matching Thrift
Contribution Account in a total amount equal to _____% of
the total amount of the Employee's Thrift Contributions
for such taxable year of the Employee.
[] (3) The preceding sentence of this Section V to the
contrary notwithstanding, the total amount of the
Employer Matching Thrift Contributions for the Employee
for such taxable year of the Employee shall not exceed an
amount designated in writing by the Employer and
communicated to the Employee based on a written formula
established by the Employer and applied in a uniform and
nondiscriminatory manner with respect to all Employees, a
copy of which formula is to be attached to the Scudder
403(b) Plan Employer Adoption Agreement before it is
signed by the Employer and the Custodian.
VI. EMPLOYEE CONTRIBUTIONS
A. Employee Non-deductible Voluntary Contributions:
Select One [] (1) Employee Non-deductible Voluntary Contributions, subject
to the provisions of Article III, Part A(e) of the
Scudder 403(b) Agreement, are permitted.
[] (2) Employee Non-deductible Voluntary Contributions are not
permitted.
B. Employee Deductible Voluntary Contributions:
Select One [] (1) Employee Deductible Voluntary Contributions, subject to
the provisions of Article III, Part A(f) of the Scudder
403(b) Agreement, are permitted.
[] (2) Employee Deductible Voluntary Contributions are not
permitted.
VII. PERMITTED INVESTMENTS
Select as Scudder Fund
Many as [] Government Money Fund
are Desired [] Cash Investment Trust
[] Income Fund
[] Target Fund (multi Portfolios)
[] Capital Growth Fund
[] Common Stock Fund
[] Development Fund
[] International Fund
[] Such other Scudder Fund or Funds, if
any, as may be designated from time to
time by Scudder Fund Distributors,
Inc. (or its successor) as appropriate
for investment hereunder
8
<PAGE>
VIII. PROCEDURES FOR CHANGE OF INVESTMENTS BY EMPLOYEE OR BENEFICIARY
[NOTE: Section VIII(3), concerning telephone exchange instructions, may be
selected ONLY if Section VIII(2) has been selected to permit Account
investment changes by directions given directly to the Custodian.]
Select Either [] (1) An Employee or the Employee's designated beneficiary or
(1) or (2); beneficiaries may change the investment medium of an
and, if (2) Account by directions given to the Plan Administrator in
is Selected such fashion and at such times as provided in Article IV,
and, if Part F of the Scudder 403(b) Agreement.
Desired,
Select (3) [] (2) An Employee or the Employee's designated beneficiary or
beneficiaries may change the investment medium of an
Account by directions given to the Custodian in such
fashion and at such times as provided in Article IV, Part
F of the Scudder 403(b) Agreement.
[] (3) The preceding sentence of this Section VIII to the
contrary notwithstanding, an Employee or the Employee's
designated beneficiary or beneficiaries is permitted to
change the investment medium of an Account, by
exchanging, by telephone, telegram or TWX instructions
given directly to the Custodian, shares in one Scudder
fund for shares of another Scudder fund for which
telephone exchange is available, unless the Employee
elects otherwise in Item 3C of the Scudder 403(b) Plan
Employee Application.
IX. WITHDRAWALS BY AN EMPLOYEE WHO HAS ATTAINED AGE 59 1/2
Withdrawals from an Account by an Employee who has attained age
59 1/2, subject to the provisions of Article VII, Part C(a) of
the Scudder 403(b) Agreement:
Select One [] (1) are permitted, except that such withdrawals are permitted
and Complete only if the Employee has attained another age if another
if Applicable age is indicated here: _________________________________
and if Desired (may not be less than age 59 1/2)
[] (2) are not permitted.
X. WITHDRAWALS BY AN EMPLOYEE IN CASE OF FINANCIAL HARDSHIP
Withdrawals from an Account by an Employee who encountered
financial hardship, subject to the provisions of Article VII,
Part C(b) of the Scudder 403(b) Agreement:
Select One [] (1) are permitted.
[] (2) are not permitted.
XI. DISTRIBUTION TO AN EMPLOYEE UPON SEPARATION FROM SERVICE
Distribution from an Account to an Employee, subject to the
provisions of Article IX, Part A(b) of the Scudder 403(b)
Agreement:
Select One [] (1) shall be made or shall commence upon the Employee's
separation from the service of the Employer if so
determined by the Employer in a uniform and
nondiscriminatory manner with respect to all Employees.
[] (2) shall be made or shall commence upon the Employee's
separation from the service of the Employer, if the
Employee so elects.
XII. DETERMINATION OF METHOD OF DISTRIBUTION OF BENEFITS TO AN EMPLOYEE
The method of distribution of benefits to an Employee from an
Account, subject to the provisions of Article IX, Part C of the
Scudder 403(b) Agreement:
Select One [] (1) shall be determined by the Employer.
[] (2) shall be determined by the Employee.
- ------------------------------------- -------------------------------------
Signature of Employer Printed name of Employer
- ------------------------------------- -------------------------------------
Date Date
9
<PAGE>
Sample employer
adoption agreement
- --------------------------------------------------------------------------------
The adoption agreement appearing below reflects one possible combination of
worksheet selections which an employer might choose.
- --------------------------------------------------------------------------------
Employer Adoption Agreement
The undersigned Employer by completing this Employer Adoption Agreement and the
undersigned Custodian hereby establish a custodial account, under section
403(b)(7) of the Internal Revenue Code of 1954, as amended (the "Code"), as
follows. (For definition of terms, see Article 1 of the Scudder 403(b)
Agreement.)
I. NAME OF PLAN
The Name of the 403(b) Plan hereby adopted shall be The Sample Organization
403(b) Plan.
II. NORMAL RETIREMENT AGE
An Employee's Normal Retirement Age shall be 65.
III. EMPLOYER CONTRIBUTIONS BY SALARY REDUCTION AGREEMENT
Employer Contributions may be made in accordance with a Salary Reduction
Agreement, made between the Employer and Employee, described in Article
III, Part B of the Scudder 403(b) Agreement.
IV. MANDATORY CONTRIBUTIONS BY SALARY REDUCTION AGREEMENT
Mandatory Contributions are not required.
V. MATCHING THRIFT CONTRIBUTIONS
For each taxable year of the Employee with respect to which the Employee
has agreed with the Employer for Thrift Contributions to be made, in
accordance with a Salary Reduction Agreement between the Employer and the
Employee, to the Employee's Thrift Contribution Account in a total amount
not exceeding 6% of the Employee's Compensation for such taxable year of
the Employee, the Employer will make Employer Matching Thrift Contributions
directly to the Employee's Employer Matching Thrift Contribution Account in
a total amount to equal 50% of the total amount of the Employee's Thrift
Contributions for such taxable year of the Employee.
VI. EMPLOYEE CONTRIBUTIONS
A. Employee Non-deductible Voluntary Contributions:
Employee Non-deductible Voluntary Contributions, subject to the
provisions of Article III, Part A(e) of the Scudder 403(b) Agreement,
are permitted.
B. Employee Deductible Voluntary Contributions:
Employee Deductible Voluntary Contributions, subject to the provisions
of Article III, Part A(f) of the Scudder 403(b) Agreement, are
permitted.
VII. PERMITTED INVESTMENTS
Initial and subsequent contributions to an account, subject to the
provisions of Article IV of the Scudder 403(b) Agreement, are permitted in
stock of the following Regulated Investment Companies:
Scudder Fund
Government Money Fund
Income Fund
Capital Growth Fund
Common Stock Fund
VIII. PROCEDURES FOR CHANGE OF INVESTMENTS BY EMPLOYEE OR BENEFICIARY
An Employee or the Employee's designated beneficiary or beneficiaries may
change the investment medium of an Account by directions given to the Plan
Administrator in such fashion and at such times as provided in Article IV,
Part F of the Scudder 403(b) Agreement.
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
IX. WITHDRAWALS BY AN EMPLOYEE WHO HAS ATTAINED AGE 59 1/2
Withdrawals from an Account by an Employee who has attained age 50 1/2,
subject to the provisions of Article VII, Part C(a) of the Scudder 403(b)
Agreement are not permitted.
X. WITHDRAWALS BY AN EMPLOYEE IN CASE OF FINANCIAL HARDSHIP
Withdrawals from an Account by an Employee who has encountered financial
hardship, subject to the provisions of Article VII, Part C(b) of the
Scudder 403(b) Agreement are permitted.
XI. DISTRIBUTION TO AN EMPLOYEE UPON SEPARATION FROM SERVICE
Distribution from an Account to an Employee, subject to the provisions of
Article IX, Part A(b) of the Scudder 403(b) Agreement shall be made or
shall commence upon the Employee's separation from the service of the
Employer if so determined by the Employer in a uniform and
nondiscriminatory manner with respect to all Employees.
XII. DETERMINATION OF METHOD OF DISTRIBUTION OF BENEFITS
The method of distribution of benefits to an Employee from an Account,
subject to the provisions of Article IX, Part C of the Scudder 403(b)
Agreement shall be determined by the Employer.
XIII. ADOPTION OF AGREEMENT BY EMPLOYER AND CUSTODIAN
By this Employer Adoption Agreement, the Employer, duly qualified as an
organization described in section 403(b)(1)(A) of the Code, hereby agrees
with the Custodian, duly qualified as a bank described in Section 401(d)(1)
of the Code, to open a separate Custodial Investment Account (the
"Account"), for the benefit of each Employee of the Employer who signs a
Scudder 403(b) Plan Employee Application which is accepted by the
Custodian, pursuant to the Scudder 403(b) Agreement (the "Agreement")
hereby adopted by the Employer and the Custodian, and the Employer and the
Custodian further agree to the provisions contained in this Employer
Adoption Agreement.
STATE STREET BANK AND TRUST COMPANY
- ------------------------------------- By -------------------------------------
Signature of Employer Custodian
Sample Organization
- ------------------------------------- By -------------------------------------
Employer Date
Anytown, USA IMPORTANT: The Scudder 403(b) Agreement,
- ------------------------------------- including this Employer Adoption
Address of Employer Agreement, becomes effective upon the
date this Employer Adoption Agreement is
signed by the Employer and the
Custodian.
- --------------------------------------------------------------------------------
11
<PAGE>
Sample
Employee Application
- --------------------------------------------------------------------------------
The employee application appearing below reflects the selections set forth
in the sample adoption agreement on pages 10-11.
- --------------------------------------------------------------------------------
Employee Application
Return this form to:
Employee Benefits Dept.
1. NAME AND ADDRESS OF EMPLOYEE
Name ______________________________________________________________________
Address ___________________________________________________________________
City ___________________ State _______ Zip _______ Date of Birth __________
Social Security Number __________ Employee Identification Number __________
2. NAME AND ADDRESS OF EMPLOYER
Name ______________________________________________________________________
Address ___________________________________________________________________
City ____________________________ State _______________ Zip _______________
Employer Group Number ______________ Tax Identification Number ____________
3. INVESTMENT INSTRUCTIONS BY EMPLOYEE
A.Initial contribution to come B.Fund selection for initial
from (check one): contribution listed in
[] Employer check for Item 3A and for subsequent
$____________________ contributions (make your
or Fund selection below,
[] transfer or rollover choosing only among the
check from existing Funds which are permitted
plan for investment under
for $________________ Section VII of the Scudder
403(b) Plan Employer
Adoption Agreement)
Amount
$ %
Scudder Fund ---------- ---------
[] Government Money Fund __________ or _________
[] Income Fund __________ or _________
[] Capital Growth Fund __________ or _________
[] Common Stock Fund __________ or _________
Total 100%
---------- ---------
(amount
from 3A)
4. DESIGNATION OF BENEFICIARY BY EMPLOYEE (see form on reverse side of this
page)
[] If this box is checked, I have completed the Designation of
Beneficiary form on the reverse side.
5. ADOPTION OF AGREEMENT BY EMPLOYEE
By this Employee Application, I hereby agree to the establishment of a
separate Custodial Investment Account (the "Account") for my benefit,
pursuant to the Scudder 403(b) Agreement (the "Agreement") adopted by my
Employer and by State Street Bank and Trust Company as Custodian and hereby
adopted by me, and I hereby agree to the terms and conditions of that
Agreement and the completed Employer Adoption Agreement therefor, and to
the provisions contained above in this Employee Application. I also
acknowledge receipt of the prospectus for each Fund selected by me.
---------------------------------- ----------------------------------
Date Signature of Employee
IMPORTANT: Once acknowledgment of the receipt of this Employee Application
has been mailed by the Custodian to the Employee, this Employee Application
shall be deemed accepted by the Custodian, and, therefore, effective, as of
the date this Employee Application was signed by the Employee.
- --------------------------------------------------------------------------------
12
<PAGE>
Sample designation
of beneficiary form
- --------------------------------------------------------------------------------
The designation of beneficiary form appearing below reflects the worksheet
selections made by a sample employer. Normally this form would be printed on
the reverse side of the employee application form.
- --------------------------------------------------------------------------------
Designation of Beneficiary Form
IMPORTANT INFORMATION
Before executing this Designation form you may wish to consult an attorney
or tax advisor to determine whether use of the form, or another written
instrument acceptable to the Custodian, will accomplish your goals. Please also
review the applicable provisions of the Agreement. This form may be used as a
Designation form. It is effective if filed with the Custodian, State Street
Bank and Trust Company, during your lifetime.
This Designation form is for your use, if desired, in naming the
Beneficiary or Beneficiaries who are to receive the amounts in your Account at
your death; also, if desired, in electing the method of distribution of such
amounts; and, also, if desired, in permitting your designated Beneficiary or
Beneficiaries to change the method of distribution to such Beneficiary or
Beneficiaries. The Agreement (in Article IX, Part D) contains provisions which
govern as to death benefits if no surviving Beneficiary is designated by you, or
if no method of distribution is elected by you, in a valid Designation form.
You should, if desired, complete, date and sign this Designation form and
forward it to State Street Bank and Trust Company, P.O. Box 1912, Boston, MA
02105. We suggest you retain a copy for your records and review it
periodically. Additional copies can be obtained from any office of Scudder Fund
Distributors, Inc.
- --------------------------------------------------------------------------------
Designation of Beneficiary and Election of Method of Distribution
(under Article II, Part C, and Article IX, Part D, of Agreement).
Print Name of Employee: ________________________________________________________
Print Name of Employer: ________________________________________________________
Upon my death, the following person or persons shall receive the undistributed
amount in my Account under Article IX, Part D, of the Agreement. If a
Beneficiary or Beneficiaries fail to survive me, their interests shall lapse and
the surviving Beneficiaries shall take such interest proportionately. If more
than one named Beneficiary shall survive me, such Beneficiaries shall receive
equal portions unless otherwise indicated by me below. All previous Designation
forms of any kind of mine are hereby revoked. I reserve the right to change
this Designation form by executing a new Designation form or other written
instrument acceptable to the Custodian and filing it with the Custodian during
my lifetime.
Beneficiary: __________________________ Social Security Number _________________
(%)
Beneficiary: __________________________ Social Security Number _________________
(%)
Address of each Beneficiary specifically named above:
________________________________________________________________________________
The undistributed amount in my Account under Article IX, Part D of the Agreement
shall be paid to the appropriate Beneficiary or Beneficiaries in one of the
following methods (if desired, check and, where applicable, complete one -- the
selected method of distribution must be acceptable to the Custodian):
[] 1. _____ monthly installments consisting of the dollar value of
the Account divided by the remaining number of monthly
installments.
[] 2. _____ annual installments consisting of the dollar value of
the Account divided by the remaining number of annual
installments.
[] 3. A single lump sum.
Any undistributed balance in the Account which becomes payable to an estate of a
deceased Beneficiary shall be paid, as soon as practical, in a lump sum to such
estate, unless a valid direction as to a method of distribution to such estate
is made in accordance with Article IX, Part D, and Article II, Part C, of the
Agreement.
Option Right Of Beneficiary To Change Method Of Distribution
[] Check if this option is desired.
I agree that my designated Beneficiary or Beneficiaries surviving me may direct
the Custodian in writing (by unanimous agreement if there is more than one
Beneficiary) to change the method of distribution to such Beneficiary or
Beneficiaries (that is, the method either selected in my Designation or provided
for in Article IX, Part D, of the Agreement, as the case may be), but only
within sixty (60) days after the day on which such Beneficiary or Beneficiaries
first became entitled to any distribution from the Account and only if such
change is acceptable to the Custodian.
Date: _______________________ Signature of Employee: _______________________
- --------------------------------------------------------------------------------
13
<PAGE>
Sample salary
reduction agreement
- --------------------------------------------------------------------------------
This sample salary reduction agreement may be used with the Scudder
Employer-Select 403(b) plan. It contains language suitable for each eligible
contribution type. An Employer may reproduce the agreement using the portions
relevant to the options selected on the worksheet or may substitute its own
salary reduction agreement which is consistent with the plan.
- --------------------------------------------------------------------------------
Salary Reduction Agreement Return this form to:
Employee Benefits Dept.
Check one:
() This is an original Salary Reduction Agreement
() This is a subsequent Salary Reduction Agreement.
By this Salary Reduction Agreement, made between
_____________________________ and ___________________________, the Employer
(insert name of Employer) (insert name of Employee)
and the Employee hereby make the following agreement as to the adjustment of the
Employee's Compensation.
1. As of the ______________________________________ payroll period ending
(weekly, monthly, semi-monthly, etc.)
on _________________________________________________ the Employee's Compensation
(date)
(the first day of this period must be after the effective date of this Salary
Reduction Agreement)
shall be reduced by the Employer for each such payroll period by the amount(s)
or by the percentage(s) selected below in subparagraphs (a) or (b) and (c), or
by the amount or by the percentage selected below in subparagraph (d), as the
case may be (if more than one selection is made, all selections must be made in
the same manner, that is, either by selecting an amount or by selecting a
percentage; if neither Mandatory nor Thrift Contributions are selected below in
subparagraph (a) or subparagraph (b), then only subparagraph (d) may be
completed):
(a) Mandatory Contributions (Complete only if (1) Mandatory Contributions
are provided for under Section IV of the Scudder 403(b) Plan Employer
Adoption Agreement ["the Adoption Agreement"], (2) Mandatory
Contributions are desired by the Employee, and (3) Thrift
Contributions are not selected below in subparagraph (b).)
The Employee's Compensation shall be reduced by the Employer for each
such payroll period by $____________ or by ____________%, and the
amount of each such reduction shall be treated, under the Scudder
403(b) Agreement adopted by the Employer, the Custodian, and the
Employee (the "Scudder 403(b) Agreement"), as a Mandatory Contribution
made to the Employee's Mandatory Contribution Account.
(b) Thrift Contributions (Complete only if (1) Thrift Contributions are
permitted under Section V of the Adoption Agreement, (2) Thrift
Contributions are desired by the Employee, and (3) Mandatory
Contributions are not selection above in subparagraph (a).)
The Employee's Compensation shall be reduced by the Employer for each
such payroll period by $____________ or by ____________%, and the
amount of each such reduction shall be treated under the Scudder
403(b) Agreement as a Thrift Contribution made to the Employee's
Thrift Contribution Account.
(c) Contributions in Addition to Mandatory or Thrift Contributions
(Complete only if (1) either Mandatory Contributions or Thrift
Contributions are selected above, in either subparagraph (a) or
subparagraph (b), and (2) additional Contributions are desired by the
Employee.)
In addition to the reduction of Compensation provided for above under
either subparagraph (a) or subparagraph (b), the Employee's
Compensation shall be reduced by the Employer for each such payroll
period by $____________ or by ____________%, and the amount of each
such reduction shall be treated under the Scudder 403(b) Agreement as
a Contribution made to the Employee's Employer Contribution Account.
(d) Other Contributions (Complete only if (1) neither Mandatory
Contributions nor Thrift Contributions are selected above in either
subparagraph (a) or subparagraph (b) and (2) Contributions by means of
a Salary Reduction Agreement are desired by the Employee.)
The Employee's Compensation shall be reduced by the Employer for each
such payroll period by $____________ or by ____________%, and the
amount of each such reduction shall be treated under the Scudder
403(b) Agreement as a Contribution made by means of a Salary Reduction
Agreement to the Employee's Employer Contribution Account.
2. The amount(s) of such reduction(s) shall be transmitted by the
Employer to State Street Bank and Trust Company as Custodian under the Scudder
403(b) Agreement to be held in a separate Custodial Investment Account for the
benefit of the Employee pursuant to the terms and conditions of the Scudder
403(b) Agreement.
3. This Salary Reduction Agreement shall be irrevocable as to both the
Employer and the Employee except that either of them may terminate this Salary
Reduction Agreement as of the end of any pay period so that it will not apply to
Compensation subsequently earned. Subject to the preceding sentence, the
Employee may change tis agreement as to the adjustment of the Employee's
Compensation by the execution of a subsequent written Salary Reduction Agreement
between the Employer and the Employee, but such change may be made no more than
once in each taxable year of the Employee.
4. If Section V of the Employer Adoption Agreement provides for a written
formula to be used with respect to Employer Matching Thrift Contributions, the
Employee acknowledges having received and read a copy of that formula.
5. The Employee is responsible for determining that the total amount of
the salary reduction or reductions in Paragraph I above does not exceed the
Employee's "exclusion allowance" as defined in section 403(b)(2) of the Internal
Revenue Code of 1954, as amended (the "Code"), and for determining the
applicable limitation(s) on Contributions under section 415 of the Code, all as
provided in Article III, Part C of the Scudder 403(b) Agreement.
___________________________________ ___________________________________
Signature of Employer Signature of Employee
___________________________________ IMPORTANT: This Salary Reduction
Date Agreement becomes effective upon the
date it is signed by the Employer and
the Employee. Such signature date must
be a date which is on or after the date
upon which the Employee signs the
Scudder 403(b) Plan Employee
Application.
- --------------------------------------------------------------------------------
14
<PAGE>
Scudder 403(b) Agreement
- --------------------------------------------------------------------------------
INTRODUCTION
This Scudder 403(b) Agreement (the "Agreement") is entered into by and
among (i) each employer who executes a Scudder 403(b) Plan Employer Adoption
Agreement (the "Employer") and thereby certifies that the Employer is duly
qualified as an organization described in section 403(b)(1)(A) of the Internal
Revenue Code of 1954, as amended (the "Code"), (ii) the Custodian which executes
a Scudder 403(b) Plan Employer Adoption Agreement and thereby certifies that it
is duly qualified as a bank described in section 401(d)(1) of the Code (the
"Custodian"), and (iii) each employee who is eligible to participate in this
Agreement and who executes a Scudder 403(b) Plan Employee Application which is
accepted by the Custodian (the "Employee") and thereby certifies that the
Employee is an employee of the Employer. Any person employed by the Employer is
eligible to participate in this Agreement unless the Employer specifies in a
writing pertaining to eligibility, a copy of which writing is attached to the
Scudder 403(b) Plan Employer Adoption Agreement prior to execution thereof by
the Employer and the Custodian, that only Employees of a certain class or
classes are eligible to participate in this Agreement, in which event only such
Employees shall be eligible to participate in this Agreement. This Agreement,
including the Scudder 403(b) Plan Employer Adoption Agreement, becomes effective
upon the date such Employer Adoption Agreement is properly executed by the
Employer and the Custodian. Once acknowledgment of the receipt of the Scudder
403(b) Plan Employee Application has been mailed by the Custodian to the
Employee, such Employee Application shall be deemed accepted by the Custodian,
and, therefore, effective, as of the date such Employee Application was executed
by the Employee.
ARTICLE I. DEFINITIONS
A. Act means the Employee Retirement Income Security Act of 1974, as
amended.
B. Administrator or Plan Administrator means the person or persons
appointed under Article X, Part A.
C. Agreement or Scudder 403(b) Agreements means this document,
incorporating by reference the Scudder 403(b) Plan Employer Adoption Agreement,
the Scudder 403(b) Plan Employee Application, the Designation of Beneficiary,
the Salary Reduction Agreement, if Section V of the Employer Adoption Agreement
provides for a written formula to be used with respect to Employer Matching
Thrift Contributions any such written formula which is attached to the Employer
Adoption Agreement as required by said Section V thereof, and, if a writing
pertaining to eligibility is attached to the Employer Adoption Agreement under
the provisions of Section XIII thereof, any such writing pertaining to
eligibility.
D. Code means the Internal Revenue Code of 1954, as amended. Reference
to a section of the Code shall include any comparable section or sections of
future legislation amending, supplementing, or superseding such section.
E. Compensation means, unless provided otherwise in a separate written
agreement between the Employer and the Employee, the total amount for services
received by the Employee from the Employer for the taxable year or portion
thereof involved which is includible in the gross income of the Employee,
including, without limitation, basic salary or wages, bonuses, commissions, and
overtime payments, without regard to any adjustment in compensation provided for
under the Agreement.
F. Contribution means the amount to be transmitted to the Custodian for
addition to the Employee's Custodial Investment Account.
G. Custodial Investment Account or Account means the cash and securities
held by the Custodian for the benefit of an Employee pursuant to this Agreement,
which shall be the sum of the Employee's Employer Contribution Account, Employer
Matching Thrift Contribution Account, Thrift Contribution Account, Mandatory
Contribution Account, Employee Non-deductible Voluntary Contribution Account,
Employee Deductible Voluntary Contribution Account, and Rollover Contribution
Account.
H. Custodian means the bank or any successor thereto, set forth in the
Scudder 403(b) Employer Adoption Agreement.
I. Designation of Beneficiary or Designation means the document executed
by the Employee pursuant to Article II, Part C.
J. Employee means each person employed by the Employer who is eligible to
participate in this Agreement and who has properly executed an Employee
Application.
K. Employee Application or Scudder 403(b) Plan Employee Application means
the document executed by the Employee pursuant to Article II, Part A.
L. Employee Non-deductible Voluntary Contributions means the
Contributions made to the Custodial Investment Account by the Employee in
accordance with Article III, Part A(e). These after-tax Contributions are
intended not to be "qualified voluntary employee contributions" within the
meaning of Code Section 219(e)(2).
M. Employee Non-deductible Voluntary Contribution Account means the
separate account maintained pursuant to Article II, Part B for Employee Non-
deductible Voluntary Contributions made by the Employee and the income,
expenses, gains, and losses attributable thereto.
N. Employee Deductible Voluntary Contributions means the Contributions
made to the Custodial Investment Account by the Employee in accordance with
Article III, Part A(f). Such Contributions are intended to be "qualified
voluntary employee contributions" within the meaning of Code Section 219(e)(2).
O. Employee Deductible Voluntary Contribution Account means the separate
Account maintained pursuant to Article II. Part B for Employee Deductible
Voluntary Contributions made by the Employee and the income, expenses, gains,
and losses attributable thereto.
P. Employer means the organization, state, political subdivision of a
state, or agency or instrumentality of such state or political subdivision named
in the Employer Adoption Agreement.
Q. Employer Adoption Agreement or Scudder 403(b) Plan Employer Adoption
Agreement means the agreement executed by the Employer and the Custodian
providing for the establishment of the Custodial Investment Account in
accordance with the terms and conditions of this Agreement.
R. Employer Contributions means the Contributions made to the Custodial
Investment Account in accordance with Article III, Part A(a).
S. Employer Contribution Account means the separate Account maintained
pursuant to Article II, Part B for Employer Contributions made and the income,
expenses, gains, and losses attributable thereto.
T. Employer Matching Thrift Contributions means the Contributions made to
the Custodial Investment Account by the Employer in accordance with Article III,
Part A(b).
U. Employer Matching Thrift Contribution Account means the separate
Account maintained pursuant to Article II, Part B for Employer Matching Thrift
Contributions made by the Employer and the income, expenses, gains, and losses
attributable thereto.
V. Mandatory Contributions means the Contributions made to the Custodial
Investment Account by the Employer in accordance with Article III, Part A(d).
W. Mandatory Contribution Account means the separate Account maintained
pursuant to Article II, Part B for Mandatory Contributions made and the income,
expenses, gains, and losses attributable thereto.
X. Normal Retirement Age means age 65 unless another age is properly
indicated by the Employer in Section II of the Employer Adoption Agreement, or,
if the Employee is permitted by the Employer by Section II of the Employer
Adoption Agreement to indicate another age, unless another age is properly
indicated by the Employee in the Employee Application. In any event, Normal
Retirement Age cannot be less than 59 1/2.
Y. Plan means the Agreement, the Employer Adoption Agreement, the
Employee Application, the Designation of Beneficiary, the Salary Reduction
Agreement, if Section V of the Employer Adoption Agreement provides for a
written formula to be used with respect to Employer Match Thrift Contributions,
any such written formula which is attached to the Employer Adoption Agreement as
required by said Section V thereof, and, if a writing pertaining to eligibility
is attached to the Employer Adoption Agreement under the provisions of Section
XIII thereof, any such writing pertaining to eligibility.
Z. Regulated Investment Company or Company means a domestic corporation
which is a regulated investment company within the meaning of Section 851(a) of
the Code and which issues only redeemable stock for which Scudder, Stevens &
Clark (or its successor) is acting as the investment adviser and which has been
designated by Scudder Fund Distributors, Inc. (or its successor) as appropriate
for investment hereunder.
AA. Rollover Contributions means the Contributions made to the Custodial
Investment Account by the Employee in accordance with Article III, Part D(b).
BB. Rollover Contribution Account means the separate Account maintained
pursuant to Article II, Part B for Rollover Contributions made by the Employee
and the income, expenses, gains, and losses attributable thereto.
CC. Salary Reduction Agreement or Scudder 403(b) Plan Salary Reduction
Agreement means the document executed by the Employer and the Employee and
referred to in Article III, Part B.
DD. Thrift Contributions means the Contributions made to the Custodial
Investment Account in accordance with Article III, Part A(c).
15
<PAGE>
- --------------------------------------------------------------------------------
EE. Thrift Contribution Account means the separate Account maintained
pursuant to Article II, Part B for Thrift Contributions made and the income,
expenses, gains, and losses attributable thereto.
ARTICLE II. ESTABLISHMENT OF CUSTODIAL INVESTMENT ACCOUNTS
A. Request for participation. Each Employee who is eligible to
participate in this Agreement and properly executes an Employee Application
which is accepted by the Custodian thereby becomes a party to this Agreement
with the right to enforce its terms against any other party. Such executed
Employee Application is hereby specifically incorporated herein by reference.
An Employee Application is properly executed when completed and signed by the
Employee. The Custodian may rely on the validity of the signature thereon, on
the existence of the employment relation thereby affirmed, and on the
irrevocable subscription to the provisions of this Agreement therein contained.
B. Opening and administration of Account. The Custodian shall open a
separate Custodial Investment Account (the "Account") for the benefit of each
Employee whose Employee Application has been accepted by the Custodian. The
Account shall be maintained pursuant to the terms of this Agreement, including
the documents incorporated herein by reference. For each Employee, the
Custodian shall maintain a separate Account for each of the following types of
Contributions and the income, expenses, gains, and losses attributable thereto:
(a) Employer Contributions, involving, without limitation, the
following: (1) those types of Employer Contributions made in accordance with a
separate Salary Reduction Agreement made between the Employer and the Employee,
including, without limitation, Contributions exceeding the amount of Mandatory
Contributions made, or exceeding the amount of Thrift Contributions made, and
which are neither Employee Non-deductible Voluntary Contributions nor Employee
Deductible Voluntary Contributions; and (2) those types of Employer
Contributions made by the Employer directly to the Employee's Account,
including, without limitation, Employer Contributions made for Employees who
have made Mandatory Contributions, Employer Contributions made in addition to
Employer Matching Thrift Contributions, and Employer Contributions made in
addition to any made in accordance with a Salary Reduction Agreement. The
various types of Employer Contributions may be accounted for in separate sub-
accounts by the Custodian;
(b) Employer Matching Thrift Contributions, if such Contributions are
required by Section V of the Employer Adoption Agreement;
(c) Thrift Contributions, if such Contributions are permitted by
Section V of the Employer Adoption Agreement;
(d) Mandatory Contributions, if such Contributions are provided for
by Section IV of the Employer Adoption Agreement;
(e) Employee Non-deductible Voluntary Contributions, if such
Contributions are permitted by Section VI-A of the Employer Adoption Agreement;
(f) Employee Deductible Voluntary Contributions, if such
Contributions are permitted by Section VI-B of the Employer Adoption Agreement;
and
(g) Rollover Contributions, if the Custodian accepts such
Contributions pursuant to Article III, Part D(b).
Each Contribution shall be accompanied or preceded by clear
instructions specifying the Account to which it is to be credited. If such
clear instructions are not received by the Custodian, the Custodian may hold
such Contributions in a separate suspense account until it receives the proper
clear instructions. Such suspense account may be invested or left uninvested by
the Custodian as it deems fit.
C. Employee's Designation of Beneficiary. Each Employee may submit to
the Custodian a properly executed Employee's Designation of Beneficiary form or
other written instrument acceptable to the Custodian for use in connection with
this Agreement (which is referred to hereinafter interchangeably as a
"Designation") which shall not become effective until it is filed with the
Custodian during the lifetime of the Employee. The last effective Designation
accepted by the Custodian shall be controlling, and whether or not fully
dispositive of the Account, thereupon shall revoke all other such Designations
previously filed by the Employee. Each such executed Designation is hereby
specifically incorporated herein by reference and shall be construed, enforced
and administered according to the laws of the state in which the home office of
the Custodian is located.
ARTICLE III. CONTRIBUTIONS
A. Types of Contributions
(a) Employer Contributions. The Employer may make Employer
Contributions in cash to be held by the Custodian in a separate Employer
Contribution Account for the benefit of the Employee.
Such Employer Contributions may be made by the Employer to the
Employer Contribution Account in accordance with a separate Salary Reduction
Agreement made between the Employer and the Employee, if Employer Contributions
by means of a Salary Reduction Agreement are permitted by Section III of the
Employer Adoption Agreement. Such Employer Contributions made by means of a
Salary Reduction Agreement may include, without limitation, contributions which
exceed the amount of Mandatory Contributions made (if Mandatory Contributions
are provided for by Section IV of the Employer Adoption Agreement), or which
exceed the amount of the Thrift Contributions made (if Thrift Contributions are
permitted by Section V of the Employer Adoption Agreement) and which are neither
Employee Non-deductible Voluntary Contributions nor Employee Deductible
Voluntary Contributions.
Such Employer Contributions may also be made by the Employer directly
to the Employer Contribution Account and they may include, without limitation,
the following: Employer Contributions made for Employees who have made Mandatory
Contributions (if Mandatory Contributions are provided for by Section IV of the
Employer Adoption Agreement); Employer Contributions made in addition to
Employer Matching Thrift Contributions (if Employer Matching Thrift
Contributions are permitted by Section V of the Employer Adoption Agreement);
and Employer Contributions made in addition to any Contributions made in
accordance with a Salary Reduction Agreement made between the Employer and the
Employee.
(b) Employer Matching Thrift Contributions. If Employer Matching
Thrift Contributions are required by Section V of the Employer Adoption
Agreement, the Employer shall make to the Employee's Account the Employer
Matching Thrift Contributions required by that Section, including, without
limitation, if Section V of the Employer Adoption Agreement provides for a
written formula to be used with respect to Employer matching Thrift
Contributions, such Matching Thrift Contributions made in accordance with such
written formula. All Employer Matching Thrift Contributions shall be maintained
in the Employee's Employer Matching Thrift Contribution Account pursuant to
Article II, Part B.
(c) Thrift Contributions. If Thrift Contributions are permitted by
Section V of the Employer Adoption Agreement, they may be made to the Employee's
Account. All Thrift Contributions shall be maintained in the Employee's Thrift
Contribution Account pursuant to Article II, Part B.
(d) Mandatory Contributions. If Mandatory Contributions are provided
for by Section IV of the Employer Adoption Agreement, they may be made to the
Employee's Account. All Mandatory Contributions shall be maintained in the
Employee's Mandatory Contribution Account pursuant to Article II, Part B.
(e) Employee Non-deductible Voluntary Contributions. If Employee Non-
deductible Voluntary Contributions are permitted by Section VI-A of the Employer
Adoption Agreement, an Employee may make Employee Non-deductible Voluntary
Contributions to the Employee's Account; provided, however, that the aggregate
amount of such Employee Non-deductible Voluntary Contributions, plus any Non-
deductible Voluntary Contributions made by the Employee under any other plan
maintained by the Employer and intended to meet the requirements of Code section
401, shall not exceed ten percent (10%) of the Employee's total Compensation for
the period in which the Employee has been a party to this Agreement and,
therefore, a covered participant in this Plan. An Employee's Employee Non-
deductible Voluntary Contributions shall be maintained in the Employee's
Employee Non-deductible Voluntary Contribution Account pursuant to Article II,
Part B. An Employee may withdraw all or a portion of the Employee's Employee
Non-deductible Voluntary Contribution Account (but not including any earnings
thereon) upon at least thirty (30) days' written notice to the Custodian.
(f) Employee Deductible Voluntary Contributions. If Employee
Deductible Voluntary Contributions are permitted by Section VI-B of the Employer
Adoption Agreement, an Employee may make Employee Deductible Voluntary
Contributions to the Employee's Account; provided, however that with respect to
each taxable year of the Employee, the aggregate amount of such Employee
Deductible Voluntary Contributions, plus any other "qualified retirement
contributions" as that term is defined in Code section 219(e)(1) made by the
Employee, shall not exceed the lesser of $2,000 or 100% of the Employee's total
Compensation includible in the Employee's gross income for such taxable year (or
such higher limitation as permitted under Code section 219). An Employee's
Employee Deductible Voluntary Contributions shall be maintained in the
Employee's Employee Deductible Voluntary Contribution Account pursuant to
Article II, Part B. An Employee may withdraw all or a portion of his Employee
Deductible Voluntary Contribution Account (including the earnings thereon) upon
at least thirty (30) days' written notice to the Custodian. All such Employee
Deductible Voluntary Contributions received by the Custodian under this
Agreement shall be held and administered by it in accordance with all applicable
law with respect to "qualified voluntary employee contributions" as that
16
<PAGE>
- --------------------------------------------------------------------------------
term is defined in Code Section 219(e)(2) including, without limitation, any law
with respect to the redesignation thereof as non-deductible contributions in
connection with any withdrawal thereof by the Employee from the Employee's
Employee Deductible Voluntary Contribution Account.
B. Salary Reduction Agreements. If Employer Contributions by means of a
Salary Reduction Agreement are permitted by Section III of the Employer Adoption
Agreement, Employer Contributions may be made in accordance with a separate
written Salary Reduction Agreement made between the Employer and the Employee
providing for an adjustment of the Employee's Compensation and for transmittal
of the resultant Employer Contribution to the Custodian, which such Salary
Reduction Agreement shall become effective upon the date it is signed by the
Employer and the Employee. Such Salary Reduction Agreement may provide for an
adjustment of the Employee's Compensation with respect to either Mandatory
Contributions (if Mandatory Contributions are provided for by Section IV of the
Employer Adoption Agreement) or Thrift Contributions (if Thrift Contributions
are permitted by Section V of the Employer Adoption Agreement) and/or other
Contributions which the Employee may wish to have made by means of the Salary
Reduction Agreement.
Each such Salary Reduction Agreement between the Employer and the Employee
as to the adjustment of the Employee's Compensation shall be effective only as
to amounts earned by the Employee after such Salary Reduction Agreement becomes
effective. Each such Salary Reduction Agreement between the Employer and the
Employee as to the adjustment of the Employee's Compensation shall be
irrevocable as to both the Employer and the Employee except that either of them
may terminate such Salary Reduction Agreement as of the end of any payroll
period so that it will not apply to Compensation subsequently earned. Subject
to the immediately preceding sentence, the Employee may, in the manner provided
for in subpart (a) of Part B of Article VIII, change such Salary Reduction
Agreement between the Employer and the Employee as to the adjustment of the
Employee's Compensation, but such change may be made no more than once in each
taxable year of the Employee.
C. Transmittal of Contributions and Employee's responsibility regarding
Contributions. All Contributions shall be transmitted to the Custodian. The
Employee shall be responsible for the computation and the proper making of
Employee Contributions provided for under the terms of the Plan including, if
desired, Mandatory Contributions, Thrift Contributions, Employee Non-deductible
Contributions, and Employee Deductible Voluntary Contributions. The Employee
shall be responsible for computing the maximum amount that may be contributed on
the Employee's behalf for each tax year in accordance with the Employee's
"exclusion allowance" as that term is defined in section 403(b)(2) of the Code.
The Employee shall determine the applicable limitation(s) on Contributions under
section 415 of the Code, and the Employee shall have the right to make any of
the elections provided under said section 415. Such computations and
determinations shall be made at least annually, and the Employee shall
communicate the results to the Employer no later than thirty (30) days before
the last day on which the Employee can execute a new Salary Reduction Agreement
with the Employer for the taxable year without violating the pertinent rules and
regulations promulgated by the Treasury Department. Neither the Custodian,
Scudder Fund Distributors, Inc., any Regulated Investment Company, nor the
Employer shall have any obligation to verify the correctness of the Employee's
computations with respect to Contributions or the correctness of the Employee's
computation of the Employee's exclusion allowance or limitations on
Contributions under section 415 of the Code or any responsibility with respect
to any election available to the Employee under said section 415 or any matters
relating to any tax consequences with respect to any Contributions made to the
Custodial Account for the benefit of the Employee, including, without
limitation, the identification and correction of an "excess contribution" as
that term is defined in section 4973 of the Code, all of which foregoing matters
shall be solely the responsibility of the Employee.
D. Transfers and rollovers.
(a) Transfers from and to other Accounts. The Employer or the
Employee may cause the transfer of assets acceptable to the Custodian and
available from an existing custodial account qualified under section 403(b)(7)
of the Code and/or from an existing annuity contract qualified under section
403(b) of the Code to the Employee's Custodial Investment Account. Once
transferred into the Employee's Custodial Investment Account, such assets shall
be treated as a Contribution for purposes of this Agreement and shall be
invested, distributed and otherwise dealt with as such. The Employer or the
Employee may cause the transfer of assets agreed to by the Custodian from the
Employee's Custodial Investment Account to a custodial account established under
section 403(b)(7) of the Code and/or to an annuity qualified under section
403(b) of the Code.
(b) Rollover Contributions. The Custodian may in its discretion
accept contributions in the form of assets acceptable to the Custodian received
from an annuity contract or a custodial account described in section 401(b) of
the Code, an individual retirement account described in section 408(a) of the
Code, and individual retirement annuity described in section 408(b) of the Code,
or a retirement bond described in section 409(a) of the Code, provided that such
Contribution qualifies in all respects as a Rollover Contribution in accordance
with the requirements of section 403(b)(8), section 408(d)(3) or section
409(b)(3)(C) of the Code (including the requirement that no part of the amount
received from an individual retirement account, individual retirement annuity or
retirement bond be attributable to any source other than a rollover contribution
from any annuity contract or custodial account described in section 403(b) of
the Code) or other applicable provisions of the Code in effect from time to
time. Such rollover contribution shall be held by the Custodian in a separate
Rollover Account for the benefit of the Employee which consists only of such
rollover contributions and the earnings thereon. Once transferred into the
Employee's Custodial Account, such assets shall be treated as a Contribution for
purposes of this Agreement and shall be invested, distributed and otherwise
dealt with as such. The right is reserved to transfer the assets of the
Custodial Investment Account to another form of annuity contract or custodial
account described in section 403(b) of the Code or to an individual retirement
account, individual retirement annuity, or retirement bond plan established
pursuant to section 408 or 409 of the Code.
If permitted by Scudder Fund Distributors, Inc. in accordance with
applicable law, rollover contributions with respect to "qualified voluntary
employee contributions" as that term is defined in section 219(e)(2) of the Code
may be received under this Agreement with respect to taxable years beginning
after December 31, 1981, and such contributions shall thereafter be held and
administered hereunder by the Custodian in accordance with all applicable law
with respect to "accumulated deductible employee contributions" as that term is
defined in section 72(o)(5)(B) of the Code.
(c) Limitation of liabilities. Neither the Custodian nor Scudder
Fund Distributors, Inc. shall have any responsibility with respect to any
matters relating to the tax consequences with respect to any transfer or
rollover made under this part D of Article III.
ARTICLE IV. INVESTMENT
A. Purchase. The Custodian shall receive and, as soon as practical,
shall invest all Contributions in accordance with the investment instructions
which are then in effect for the Employee.
B. Registration and safekeeping. Any stock of a Regulated Investment
Company held under this Agreement shall be held by the Custodian. Such stock
may be registered in the name of the Custodian or its nominee, but the Custodian
need not require issuance of certificates for such stock.
C. Eligibility. The Custodian shall invest only in stock of a Regulated
Investment Company.
A Custodial Investment Account shall be limited to investment in stock of
one Regulated Investment Company, except that the investment may be divided
between the stock of more than one Regulated Investment Company if the value of
the stock of each Company in which an investment is being made is, upon
completion of the investment, equal to a minimum value established from time to
time by a designation by Scudder Fund Distributors, Inc. (including a
designation that there shall be no such minimum investment limitation).
If a Company in whose stock investments have been made is no longer
designated by Scudder Fund Distributors, Inc. as appropriate for investment
hereunder, Scudder Fund Distributors, Inc. shall advise the Employee for whose
Account the investments were made and shall give a current list of Companies
available for investment to the Employee or, if the Employer pursuant to Article
IV, Part G wishes to make the investment determination, to the Employer. If,
within 30 days of providing of such current list, the Employee, or the Employer
as the case may be, does not submit new investment instructions, the Employee's
investment in the deleted Company shall be changed to an investment for the
Employee's Account in stock of Scudder Cash Investment Trust or in stock of
another Regulated Investment Company or Companies designated by Scudder Fund
Distributors, Inc. and no additional investments shall be made in said deleted
Company.
D. Reports and voting of securities. The Custodian shall deliver to the
Employee or to the Employee's designated beneficiary all notices, reports,
prospectuses, financial statements, proxies and proxy-soliciting materials
received by it as to investments made for the Employee's Account. The Custodian
shall vote all shares only in accordance with the written instructions of the
Employee or the Employee's designated beneficiary. If the Employee desires to
attend a meeting at which securities held in his Account may be voted, the
Custodian shall furnish a proxy at the Employee's request.
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E. Dividends. All capital gain distributions and dividends received on
the stock of a Regulated Investment Company shall be reinvested in the stock of
that Regulated Investment Company. The Custodian shall elect to receive any
such distribution in the stock of the distributing Company whenever possible.
F. Change of investments. An Employee or his designated beneficiary or
beneficiaries who has (have) survived the Employee and to whom distributions are
being made (by unanimous agreement if there is more than one beneficiary) may
direct that the investment medium of the Account or any portion thereof be
changed to stock of another Regulated Investment Company or Companies which have
been selected by the Employer as permitted investments under Section VII of the
Employer Adoption Agreement. If the Employer determines in Section VIII of the
Employer Adoption Agreement that such changes in the investment medium of the
Account are to be made by such directions given to the Plan Administrator, such
directions shall be given in writing by the Employee or by the Employee's said
designated beneficiary or beneficiaries to the Administrator who shall instruct
the Custodian in writing as to any such directed changes, and any such
investment changes may be made at such times as are determined from time to time
by the Employer in a uniform and nondiscriminatory manner with respect to all
Employees. If the Employer determines in Section VIII of the Employer Adoption
Agreement that such changes in the investment medium of the Account are to be
made by such directions to be given directly to the Custodian, such directions
shall be given by the Employee or by the Employee's said designated beneficiary
or beneficiaries directly to the Custodian, either in writing or by any other
manner of direction designated from time to time by the Employer in a uniform
and nondiscriminatory manner with respect to all Employees, and such investment
changes may be made at any time or times. However, if Scudder Fund
Distributors, Inc. determines in its own judgment that there has been trading
within the Account, any Regulated Investment Company may refuse to sell its
shares to such Account. If the Employee's Account invested in stock of more
than one Regulated Investment Company, a separate account shall be kept with
respect to the stock of each such Company, and he or they may designate the
portion of any new Contribution, withdrawal, or change of investment which is to
be allocated to each such separate account. The provisions of this Part F of
Article IV are subject to the provisions of Part G of this Article IV.
G. Employer determinations as to investments. Anything in this Agreement
to the contrary notwithstanding, the Employer may, if permitted by Scudder Fund
Distributors, Inc., decide from time to time to make any or all determinations
with respect to the investment of an Employee's Account or any portion thereof
in stock of a Regulated Investment Company or Companies, including without
limitation determinations as to initial investments, subsequent investments, and
changes in the investment medium of an Account or portion thereof, as to the
frequency and manner of direction of any changes in the investment medium of an
Account or portion thereof, and as to whether the Employer or the Employee shall
make any determinations with respect to the investment of an Employee's Account
or any portion thereof. Any such determination by the Employer shall be
communicated by the Employer to the Employee, shall be made in a uniform and
nondiscriminatory manner with respect to all Employees, and shall be subject to
the further requirement that if Scudder Fund Distributors, Inc. determines in
its own judgment that there has been trading within an Account, any Regulated
Investment Company may refuse to sell its shares to such Account.
ARTICLE V. CUSTODIAN.
A. Duties. The Custodian shall:
(1) Receive Contributions transmitted by the Employer or the
Employee;
(2) Provide safekeeping for the securities and other assets in the
Custodial Investment Account;
(3) Collect income;
(4) Execute orders for purchase, sale or exchange of securities and
make settlement in accordance with general practice;
(5) Maintain records of all transactions in the Account;
(6) Transmit to each Employee, not less frequently than annually,
appropriate statements of the amount of the Custodian's compensation, if any,
charged to the Account;
(7) File with the Internal Revenue Service and/or any other
government agency such returns, reports, forms, and other information as may be
required of it as Custodian;
(8) Perform all other duties and services consistent with the
purposes and intentions of this Agreement. The Custodian may perform any of its
administrative duties through persons designated by the Custodian from time to
time, except that all assets in the Account shall be held by the Custodian; and
if State Street Bank and Trust Company is the Custodian, it intends initially to
delegate all such duties to Boston Financial Data Services, Inc., which is
partially owned by the Custodian's parent company; but no such delegation or
future change therein shall be considered as an amendment of this Agreement.
B. Cash requirements. If cash funds are required to pay taxes, fees, or
other expenses pursuant to Article VI or to make payments to the Employee or his
beneficiaries (other than withdrawals under Article VII, Part C), the Employee
shall instruct the Custodian in writing which Regulated Investment Company
shares shall be redeemed or sold if there is more than one account, unless the
item for which cash is required is clearly allocable to an investment in a
specific Regulated Investment Company. In the absence of such written
instructions, the Custodian shall exercise its own discretion. However, the
Custodian's fee, if any, for each Account within a Custodial Investment Account
shall be charged to such Account.
C. Limitation of liabilities and duties.
(1) The Custodian shall be fully protected in acting or omitting to
take any action in reliance upon any order or other direction believed by the
Custodian to be genuine and properly given.
(2) To the extent permitted by law, upon the expiration of a 30-day
period after providing to the Employee the statements required under Article V,
Part A(6), the Custodian shall be released and discharged from all liability to
the Employee or any third party as to the matters contained in such statement
unless the Employee files written objections with the Custodian within such 30-
day period.
(3) In no event shall the Custodian be under a fiduciary duty to the
Employee in regard to the selection of investments or be liable for any loss so
incurred.
(4) The Custodian shall have no responsibility to see to the initial
or continued qualification of the Custodial Investment Account under section
403(b)(7) of the Code.
(5) The Custodian shall not be obligated to determine the amount or
type of any contribution due or to collect any Contribution from the Employer.
(6) The Custodian shall not be held responsible for determining the
amount, character, or timing of any distribution to the Employee except as
provided in Article IX.
(7) The Custodian shall have no responsibility with respect to the
computation of the Employee's "exclusion allowance" as defined in section
403(b)(2) of the Code, any applicable limitation(s) on Contributions under
section 415 of the Code, any election available to the Employee under said
section 415, or any matters including the identification and correction of an
"excess contribution" as that term is defined in section 4973 of the Code, all
of which foregoing matters shall be solely the responsibility of the Employee.
(8) The Custodian shall not be required to carry out any instructions
not given in accordance with this Agreement and the various documents
incorporated herein by reference. If such instructions are not received as
required or if received, are in the opinion of the Custodian unclear, the
Custodian shall not be liable for loss of income or appreciation or depreciation
and shall not be liable for interest, pending receipt of written instructions or
other clarification. Furthermore, the Custodian assumes (and shall have) no
responsibility to make any distribution (or process a withdrawal) by order of
the Employer, the Employee or a Beneficiary unless and until the requisite
instructions specify the occasion for such action and the Custodian is furnished
with any and all applications, certificates, tax waivers, signature guarantees
and other documents (including proof of any legal representative's authority)
deemed necessary or advisable to the Custodian. The Custodian shall not be
responsible for complying with any instructions or acting in accordance with any
other documents which appear on their face to be genuine, or for refusing to
comply or so act if not satisfied to that effect, and assumes no further duty of
inquiry. The Custodian shall have no liability to the Employee (or the
Employee's beneficiary) for any tax penalty or other damages resulting from any
inadvertent failure by the Custodian to make a distribution under the Agreement.
(9) The Custodian shall not be liable (and assumes no responsibility)
for the collection of Contributions or the making or the deductibility of any
Contribution, or its purpose or propriety under this Agreement, or the purpose
or propriety of any distribution made pursuant to this Agreement, which matters
are the responsibility of the Employer and the Employee.
(10) The Custodian shall not be liable for interest on temporary cash
balances, if any, maintained in the Account.
(11) To the extent permitted by law, the Employee shall always fully
indemnify the Custodian and save it harmless from any and all liability
whatsoever which may arise either (i) in connection with this Agreement and
matters which it contemplates, except that which arises due to the Custodian's
negligence or willful misconduct, or (ii) with respect to making or failing to
make any distribution, other
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than for failure to make distribution in accordance with an order therefor which
is in full compliance with Article IX or Article VII, Part C or this Part C of
Article V. Except as required by law, the Custodian shall not be obligated or
expected to commence or defend any legal action or proceeding in connection with
this Agreement or such matters unless agreed upon by the Custodian and the
Employee, and unless fully indemnified for so doing to the Custodian's
satisfaction.
(12) The Employer assumes neither any responsibility nor any liability
for any acts or omissions of the Custodian hereunder.
D. Compensation. In consideration for its services hereunder, the
Custodian may be entitled to receive the fees specified in its then current fee
schedule for the services specified on the schedule. The Custodian may
substitute a revised fee schedule from time to time upon thirty (30) days'
written notice to the Employer or Employee. A Custodian may be entitled to such
reasonable additional fees as it may from time to time determine for additional
services required of it, if such additional services are not clearly defined on
the fee schedule.
E. Resignation and removal. The Custodian may resign by giving at least
30 days' written notice to the Employer. The Employer or Scudder Fund
Distributors, Inc. may remove the Custodian hereunder by giving at least 30
days' written notice to the Custodian. In each case, the Employer or Scudder
Fund Distributors, Inc. shall designate a successor custodian qualified under
section 403(b)(7) of the Code, which successor custodian shall accept such
appointment by a writing to be submitted to the Employer and the Custodian.
If, within 30 days after the giving of notice of resignation or removal,
neither the Employer nor Scudder Fund Distributors, Inc. designates a successor
custodian which accepts the appointment, this Agreement shall terminate, and all
assets in the Account shall be distributed in kind to the Employee, or in the
event of his death, to his designated beneficiary or beneficiaries subject to
the Custodian's right to reserve funds as provided in this Part E of Article V.
On the effective date of its resignation or removal, the Custodian shall
transfer to the designated successor the assets and records (or copies thereof)
of the Custodial Investment Accounts provided, however, that the Custodian may
retain whatever assets it deems necessary for payment of its fees, costs and
expenses, compensation, and any other liabilities which constitute a charge on
or against the assets of the Accounts or on or against the Custodian.
ARTICLE VI. FEES, TAXES, AND OTHER EXPENSES
A. Fees, taxes, and other expenses. Any income taxes or other taxes of
any kind whatsoever that may be levied or assessed upon or in respect of a
Custodial Investment Account created hereunder (including any transfer taxes
incurred in connection with the investment and reinvestment of the assets), and
all expenses, fees and administrative costs incurred by the Custodian in the
performance of its duties, including fees for legal services rendered to the
Custodian, and the compensation to the Custodian as determined under Article V,
Part D of this Agreement shall constitute a charge upon the assets of the
Custodial Investment Account and be paid from the assets held in such Account,
or (at the Custodian's option) be paid by the Employee.
ARTICLE VII. PROTECTION OF EMPLOYEE BENEFITS AND WITHDRAWALS BY EMPLOYEES
A. Non-forfeitable. At no time shall it be possible for any part of the
assets held by the Custodian in the Employee's Account be used for or diverted
to purposes other than for the exclusive benefit of the Employee. The
Employee's rights to or derived from all Contributions to the Custodian for
addition to the Employee's Account shall be non-forfeitable at all times after
such payments are made to the Custodian.
B. Non-alienable. Any right or benefit which shall be payable under the
terms of this Agreement shall not be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any
attempt at such shall be void, and any such right or benefit shall not in any
way be subject to the debts, contracts, liabilities, engagements or torts of the
person who is entitled to such right or benefit, nor shall such right or benefit
be subject to attachment or legal process for or against such person, except as
provided in Part C of this Article VII and in subparts (e) and (f) of Part A of
Article III.
C. Employee withdrawals.
(a) If withdrawals from an Account by an Employee, pursuant to this
subpart (a) of this Part C of Article VII, are permitted by Section IX of the
Employer Adoption Agreement, then at any time or times prior to the completion
of distributions pursuant to Article IX, an Employee who has attained age 59
1/2, or who has attained the age indicated by the Employer in Section IX of the
Employer Adoption Agreement if an age other than 59 1/2 is so indicated by the
Employer, may withdraw amounts of cash from his Account, including the entire
balance thereof, if the Employee submits to the Custodian written proof
satisfactory to the Custodian of the attainment of such age and, also, written
instructions to the Custodian as to the amounts to be so withdrawn. If the
Employee makes any withdrawal at any time pursuant to the provisions of this
subpart (a) of this Part C of Article VII, no additional contributions may be
made to the Employee's Account for a period of one (1) year after such
withdrawal and the Employee may not participate in any other custodial account
for regulated investment company stock involving the Employer under section
403(b) of the Code for a period of one (1) year after such withdrawal.
(b) In addition to the foregoing, if withdrawals from an Account by
an Employee who has encountered financial hardship, pursuant to this subpart (b)
of this Part C of Article VII, are permitted by Section X of the Employer
Adoption Agreement, at any time or times prior to the completion of
distributions pursuant to Article IX, an Employee may withdraw amounts of cash
from the Employee's Account, including the entire balance thereof, if the
Employee encounters financial hardship, as determined in a uniform and
nondiscriminatory manner with respect to all Employees and in accordance with
applicable law, governmental regulations or rulings, by a person designated by
the Employer in accordance with applicable legal authority, and if the Employee
submits to the Custodian written proof satisfactory to the Custodian of such
determination of hardship and, also, written instructions to the Custodian as
the amounts to be so withdrawn.
(c) Any withdrawal made pursuant to the provisions of either subparts
(a) or (b) of this Part C may not be in kind but may only be in the cash
proceeds received by the Custodian from redemptions or sales of shares of the
Regulated Investment Companies held in the Employee's Account. If there is more
than one account, the Employee shall instruct the Custodian in writing as to
which Regulated Investment Company shares shall be redeemed or sold before any
distribution is made under either subparts (a) or (b) of this Part C of Article
VII.
ARTICLE VIII. AMENDMENT OR MODIFICATION
A. By Employer. This Agreement and/or the various documents incorporated
herein may be modified or amended by the Employer by delivering to the Employee
and to the Custodian a written copy of such modification or amendment signed by
the Employer.
B. By Employee. The Employee may modify this Agreement by making any of
the following changes:
(a) If Employer Contributions by means of a Salary Reduction
Agreement are permitted by Section III of the Employer Adoption Agreement, and
subject to other applicable provisions of Part B of Article III, then no more
than once in each taxable year of the Employee, the Employee may change the
Salary Reduction Agreement between the Employer and the Employee as to the
adjustment of the Employee's Compensation by the execution of a subsequent
written Salary Reduction Agreement between the Employer and the Employee;
(b) The Employee may change investments pursuant to Article IV, Part
F; or
(c) The Employee may change the Employee's designated beneficiary or
beneficiaries by submitting to the Custodian at any time a revised Designation
of Beneficiary pursuant to Article II, Part C.
C. By Scudder Fund Distributors, Inc. The Employer hereby delegates
authority to Scudder Fund Distributors, Inc. to modify or amend this Agreement
and/or various documents incorporated herein, including authority to adopt a
prototype or master plan (if one becomes available) for investment in shares of
Regulated Investment Companies, and the Employer shall be deemed to have
consented to any such modification or amendment. Scudder Fund Distributors,
Inc. shall provide copies of such modification or amendment to the Employer or
the Employee, and the Custodian. However, Scudder Fund Distributors, Inc. has
no affirmative obligation to amend any of the foregoing documents pursuant to
this portion of the Agreement.
D. Limitations. Notwithstanding the powers granted in Parts A, B, and C
above, no amendment shall be made which would:
(a) Cause or permit any part of the assets in the Account to be
diverted to purposes other than for the exclusive benefit of the Employee and/or
the Employee's beneficiaries, or cause to permit any portion of such assets to
revert to or become the property of the Employer,
(b) Place any greater burden on a Custodian without its written
consent, or
(c) Retroactively deprive any Employee of any benefit to which the
Employee was entitled under the Agreement by reason of Contributions made by the
Employer or the Employee, unless such modification or amendment is necessary to
conform the Agreement to, or satisfy the conditions of any law, governmental
regulation or ruling, and to permit the Agreement and Account to meet the
requirements
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of Section 403(b) of the Code, or any similar statute enacted in lieu thereof,
and any such retroactive modification or amendment must be pursuant to an
opinion of counsel that it is necessary or advisable to conform the Agreement to
the requirements for qualification under Section 403(b) of the Code and
Regulations prescribed thereunder.
ARTICLE IX. DISTRIBUTIONS
A. Time of distribution.
(a) Subject to the remaining provisions of this Article IX, and to
the provisions of Part C of Article VII and to the provisions of subparts (e)
and (f) of Part A of Article III, distribution of assets held in the Employee's
Investment account shall be made or shall commence at the earliest time of the
occurrence of one of the following events:
(1) The disability of the Employee within the meaning of Section
72(m)(7) of the Code. An Employee shall be considered to be so disabled if the
Employee is unable to engage in any substantial gainful activity because of any
medically determinable physical or mental impairment which can be expected to
result in death or to be of long-continued and indefinite duration and an
individual shall not be considered to be disabled, and, therefore, the Custodian
shall not be required to make distribution on account of the Employee's
disability, unless and until the Custodian has received a physician's
certificate to that effect;
(2) The Employee's actual retirement or attainment of the Normal
Retirement Age, whichever is later; or
(3) The Employee's death.
(b) In addition to the foregoing, distribution shall be made or shall
commence upon the Employee's separation from the service of the Employer, prior
to the occurrence of any of the events listed in subpart (a) of this Part A of
Article IX, subject to whichever one of the following two provisions of this
subpart (b) of this Part A of Article IX is applicable:
(1) If Section XI of the Employer Adoption Agreement provides
for a determination by the Employer with respect to such distribution upon the
Employee's separation from the service of the Employer, such distribution upon
the Employee's separation from the service of the Employer shall be made or
shall commence if so determined by the Employer in a uniform and
nondiscriminatory manner with respect to all Employees; or
(2) If Section XI of the Employer Adoption Agreement provides
for an election by the Employee with respect to such distribution upon the
Employee's separation from the service of the Employer, such distribution upon
the Employee's separation from the service of the Employer shall be made or
shall commence only if the Employee, either at any time prior to or upon the
Employee's separation from the service of the Employer, files with the Custodian
a written irrevocable election to have distribution commence upon such
separation from service.
(c) The Custodian shall not be responsible for making any
distributions until such time as it has been notified in writing by either the
Employer or the Employee of the occurrence of one of the events set forth in
subparts (a)(1), (a)(2), or (b) of this Part A, or by the designated beneficiary
or beneficiaries (or by the Employee's Executor or other personal representative
if no such beneficiary survives the Employee) of the occurrence of the event set
forth in subpart (a)(3) of this Part A.
B. Method of distribution to Employee. Distributions to the Employee of
amounts held by the Custodian in the Employee's Custodial Investment Account
shall normally be made in the form of annual, quarterly or monthly installments
in cash or in kind or in the form of a lump sum, provided that:
(a) Installment payments in cash or in kind shall be made in
approximately equal amounts or approximately equal fractions of the Employee's
Custodial Investment Account;
(b) If payments to the Employee are made in the form of installments,
there shall be credited to such Employee's Custodial Investment Account all
earnings thereon during the period of such installments; and
(c) Except in the case where the distribution is made for a period
measured by the life of the Employee and the Employee's spouse (regardless of
whether the Employee's beneficiary is someone other than the Employee's spouse),
the present value of the payments to be made to the Employee must be more than
50 percent of the present value of total payments to be made to the Employee and
the Employee's beneficiaries.
Stock of a Regulated Investment Company shall not be distributed in kind
unless at the time distribution is made or, if it is to be made in installments,
at the time it commences, the value of such stock held in the Custodial
Investment Account is five hundred ($500) dollars or more.
C. Election. The method of distribution of the Employee's Account to the
Employee shall be determined as follows:
(a) In the event that Section XII of the Employer Adoption Agreement
provides that the method of distribution of the Employee's Account to the
Employee shall be determined by the Employer, the Employer may, in such event,
at any time prior to thirty (30) days after the time of distribution determined
under Part A of this Article IX, file with the Custodian a written election of a
method of distribution to the Employee which is consistent with the provisions
of Part B of this Article IX, which election may be changed at any time prior to
the end of said thirty (30)-day period; or
(b) In the event that Section XII of the Employer Adoption Agreement
provides that the method of distribution of the Employee's Account to the
Employee shall be determined by the Employee, the Employee may, in such event,
elect or alter the Employee's election of the method of distribution to the
Employee by filing with the Custodian a written election of a method of
distribution to the Employee which is consistent with the provisions of Part B
of this Article IX at any time prior to seven (7) days before the time of
distribution determined under Part A of this Article IX, which election may be
changed at any time prior to the beginning of said seven (7)-day period.
In the event that the Employer or the Employee, as the case may be, fails
to properly elect a method of distribution of the Employee's Account, unless the
Custodian in its absolute discretion chooses another method of distribution
consistent with the provisions of Part B of this Article IX, installment
payments pursuant to said Part B will be made in cash or in kind to the Employee
on a monthly basis over a 10-year period, if a systematic withdrawal plan is
available for the Regulated Investment Company stock held in the Account and if
the assets in such Account are determined to be sufficient by Scudder Fund
Distributors, Inc. If such a plan is unavailable or if such assets are deemed
to be insufficient by Scudder Fund Distributors, Inc., the shares of the
Regulated Investment Company stock held in the Account will be distributed in
cash or in kind promptly to the Employee, unless the Custodian in its absolute
discretion chooses another method of distribution consistent with the provisions
of said Part B of this Article IX.
D. Method of distribution to beneficiaries. In the event of the death of
the Employee either before or after the occurrence of any of the times for
distribution listed in Part A of this Article IX, any amounts held by the
Custodian in the Employee's Account shall be distributed to the beneficiary or
beneficiaries named in the Employee's Designation by the method acceptable to
the Custodian and stipulated in such form, but only after such beneficiary or
beneficiaries have notified the Custodian in writing of the Employee's death and
provided the Custodian with adequate verification of such Death, as provided in
subpart (8) of Part C of Article V. Until such distributions commence to such
beneficiary or beneficiaries, the Custodian shall not be responsible for
treating such person's predecessor to such rights and obligations as still
possessing the same.
In the event that the Employee fails to properly elect a method of
distribution of the Employee's Account to such beneficiary or beneficiaries,
unless the Custodian in its absolute discretion chooses another method of
distribution, installment payments will be made in cash or in kind to such
beneficiary or beneficiaries on a monthly basis over a 10-year period from the
date of the Employee's death, if a systematic withdrawal plan is available for
the Regulated Investment Company stock held in the Account and if the assets in
such Account are determined to be sufficient by Scudder Fund Distributors, Inc.
If such a plan is unavailable or if such assets are deemed to be insufficient by
Scudder Fund Distributors, Inc., the shares of the Regulated Investment Company
stock held in the Account will be distributed in cash or in kind promptly to
such beneficiary or beneficiaries, unless the Custodian in its absolute
discretion chooses another method of distribution.
In the event the Employee so elects in the Designation of Beneficiary form
in effect at the time of his death, his designated beneficiary or beneficiaries
who has (have) survived him an to whom distributions are to be made, may direct
the Custodian in writing (by unanimous agreement if there is more than one
beneficiary) to change the method of distribution to such beneficiary or
beneficiaries (that is, the method either selected in the Employee's Designation
or provided for in this Part D of Article IX, as the case may be), but only
within sixty (60) days after the day on which such beneficiary or beneficiaries
first became entitled to any distribution from the Account and only if such
change is acceptable to the Custodian.
If a distribution is payable to a person known by the Custodian to be a
minor or a person under a legal disability, the Custodian may in its absolute
discretion made the whole or any part of the distribution to (i) a parent of
such person, (ii) the guardian, committee or other legal representative,
wherever appointed, of such person, including a custodian for such person under
a Uniform Gifts to Minors Act or similar act, (iii) any person having the
control and custody of such person, or (iv) to such person directly, the receipt
of the distributee to whom any such payment or distribution is so made being a
sufficient discharge therefor.
20
<PAGE>
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Insofar as the disposition of the Account of a deceased Employee is not
governed by a valid Designation which names at least one beneficiary who
survives the Employee, the Account shall be distributed to the estate of the
deceased Employee. Any portion of an Account of a deceased Employee remaining
undisposed of after the death of an Employee's designated beneficiary who has
survived the Employee, shall be distributed to the estate of such deceased
beneficiary.
ARTICLE X. ADMINISTRATION
A. Appointment of Administrator. The Employer may from time to time in
writing appoint one or more individuals as Administrator (hereinafter referred
to in the singular) who shall have all power and authority necessary to carry
out the terms of the Plan. The Administrator may resign upon fifteen (15) days
advance written notice to the Employer, and the Employer may at any time revoke
the appointment of the Administrator with or without cause. The Employer shall
exercise the power and fulfill the duties of the Administrator if at any time
the position is vacant.
B. Named Fiduciary. The "Named Fiduciary" within the meaning of the Act
shall be the Administrator.
C. Allocations of responsibilities. Responsibilities under the Plan
shall be allocated among the Custodian, the Administrator, and the Employer as
follows:
(a) Custodian: The Custodian shall have exclusive responsibility to
hold, manage, and invest, pursuant to instructions communicated to it under
parts A and F of Article IV by the Administrator or by the Employee as the case
may be, the funds received by it subject to the terms of the Agreement under
which it serves, and the Custodian shall also have all functions otherwise
assigned to it under the terms of the Plan.
(b) Administrator: The Administrator shall have the responsibility
and authority to control the operation and administration of the Plan in
accordance with its terms including, without limiting the generality of the
foregoing: (1) the transmission to the Custodian of any Employee or beneficiary
investment decision under Part F of Article IV; (2) interpretation of the Plan
and conclusive determination of all questions of eligibility and status under
the Plan; (3) hiring of persons to provide necessary services to the Plan not
provided by Employees; (4) preparation and filing of all statements, returns and
reports required to be filed by the Plan with any agency of Government; (5)
compliance with all disclosure requirements of all state or federal law; (6)
maintenance and retention of all Plan records as required by law, except those
required to be maintained by the Custodian; and (7) all functions otherwise
assigned to it under the terms of the Plan.
(c) Employer: The Employer shall be responsible for the design of the
Plan, as adopted or amended, the selection of the Custodian and the designation
of the Administrator as provided in the Plan, the delivery to the Administrator
and the Custodian of Employee information necessary for operation of the Plan,
the computation and the proper making of Employer Contributions and Employer
Matching Thrift Contributions, if any, provided for under the terms of the Plan
(including without limitation, if Section V of the Employer Adoption Agreement
provides for a written formula to be used with respect to Employer Matching
Thrift Contributions, the establishment and application of such written formula
in accordance with applicable law), the selection in a writing pertaining to
eligibility under Section XIII of the Employer Adoption Agreement of Employees
eligible to participate in this Agreement if such selection is made by the
Employer, any determinations as to investments made by the Employer under the
provisions of Part G of Article IV, and the exercise of all functions provided
in or necessary to the Plan except those assigned in the Plan to others.
(d) This part C of Article X is intended to allocate individual
responsibility for the prudent execution of the functions assigned to each of
the Custodian, the Administrator, and the Employer and none of such
responsibilities or any other responsibility shall be shared among them unless
specifically provided in the Plan. Whenever one such person is required by the
Plan to follow the directions of another, the two shall not be deemed to share
responsibility, but the person who gives the direction shall be responsible for
giving it and the responsibility of the person receiving the direction shall be
to follow it insofar is it is on its face proper under applicable law.
D. More than one Administrator. If more than one individual is appointed
as Administrator under Part A of this Article X, such individuals shall either
exercise the duties of the Administrator in concert, acting by a majority vote
or allocate such duties among themselves by written agreement delivered to the
Employer and the Custodian. In such case, the Custodian may rely upon the
instruction of any one of the individuals appointed as Administrator regardless
of the allocation of duties among them.
E. No compensation. The Administrator shall not be entitled to receive
any compensation from the funds held under the Plan for its services in that
capacity unless so determined by the Employer or required by law.
F. Record of acts. The Administrator shall keep a record of all
proceedings, acts and all such records and instruments pertaining to the Plan
administration and shall be subject to inspection by the Employer at any time.
The Employer shall supply, and the Administrator may rely on the accuracy of,
all Employee data and other information needed to administer the Plan.
G. Bond. The Administrator shall be required to give bond for the
faithful performance of his duties to the extent, if any, required by the Act,
the expense to be borne by the Employer.
H. Agent for service of process. The Administrator shall be agent for
service of legal process on the Plan.
I. Rules. The Administrator may adopt or amend and shall publish to the
Employees such rules and forms for the administration of the Plan, and may
employ or retain such attorneys, accountants, physicians, investment advisors,
consultants and other persons to assist in the administration of the Plan as it
deems necessary or advisable.
J. Delegation. To the extent permitted by applicable law, the
Administrator may delegate all or part of his responsibilities hereunder and at
any time revoke such delegation, by written statement communicated to the
delegate and the Employer. The Custodian may, but need not, act on the
instructions of such a delegate. The Administrator shall annually review the
performance of such delegate.
K. Claims procedure. It is anticipated that the Administrator will
administer the Plan to provide Plan benefits without waiting for them to be
claimed, but the following procedure is established to provide additional
protection to govern unless and until a different procedure is established by
the Administrator and published to the Employees and Employees' beneficiaries.
(a) Manner of making claim. A Claim for benefits by an Employee or
beneficiary to be effective under this procedure must be made to the
Administrator and must be in writing unless the Administrator formally or by
course of conduct waives such requirements.
(b) Notice of reason for denial. If an effective claim is wholly or
partially denied, the Administrator shall furnish such Employee or beneficiary
with written notice of the denial within sixty (60) days after the original
claim was filed. This notice of denial shall set forth in a manner calculated
to be understood by the claimant (1) the reason or reasons for denial, (2)
specific reference to pertinent plan provisions on which the denial is based,
(3) a description of any additional information needed to perfect the claim and
an explanation of why such information is necessary, and (4) an explanation of
the Plan's claim procedure.
(c) Application for review. The Employee or beneficiary shall have
sixty (60) days from receipt of the denial notice in which to make written
application for review by the Administrator. The Employee or beneficiary may
request that the review be in the nature of a hearing. The Employee or
beneficiary shall have the rights (1) to have representation, (2) to review
pertinent documents, and (3) to submit comments in writing.
(d) Decision on review. The Administrator shall issue a decision on
such review within sixty (60) days after receipt of an application for review,
except that such period may be extended for a period of time not to exceed an
additional sixty (60) days if the Administrator determines that special
circumstances (such as the need to hold a hearing) requires such extension. The
decision on review shall be in writing and shall include specific reasons for
the decision, written in a manner calculated to be understood by the claimant,
and specific references to the pertinent Plan provisions on which the decision
is based.
L. Fees and expenses of Administrator. All reasonable expenses, fees,
and administrative costs incurred by the Administrator in the performance of its
duties hereunder, including fees for legal services rendered to the
Administrator, shall be paid by the Employer; and to the extent not so paid by
the Employer, said fees and expenses shall be deemed to be an expense of the
Custodial Investment Account and the Custodian is authorized to charge the same
to the Accounts of the Employees, and unless allocable to the Accounts of
specific Employees, they shall be charged against the respective Accounts of all
or a reasonable group of Employees in such reasonable manner as the Custodian
shall determine.
ARTICLE XI. TERMINATION
A. Voluntary termination. With respect to amounts not yet earned by an
Employee, this Agreement may be terminated by either such Employee or the
Employer by giving written notice to the other. Copies of such notice shall be
sent forthwith tot he Custodian. Unless otherwise mutually agreed upon by the
Employer and the Employee, any such termination shall take effect as of the last
day of the
21
<PAGE>
- --------------------------------------------------------------------------------
month next following the month in which such written notice shall have been
given, the Employee's compensation level shall be increased by the amount by
which it otherwise would be reduced pursuant to any applicable Salary Reduction
Agreement, and the obligations under this Agreement of the Employer with respect
to future pay periods shall cease.
B. Termination on distribution. This Agreement shall terminate as to an
Employee when the assets held in the Custodial Investment Account established
for the Employee hereunder have been distributed.
C. Termination on disqualification. This Agreement shall terminate as to
an Employee if, after notification by the Internal Revenue Service that the
Employee's Account does not qualify under section 403(b)(7) of the Code, Scudder
Fund Distributors, Inc. fails to or is unable to make the amendments necessary
to so qualify the Account. On such termination of this Agreement, all assets in
an Account shall be distributed in kind by the Custodian to the Employee or, in
the event of his death, to his designated beneficiaries, subject to the
Custodian's right to reserve funds as provided in Article V, Part E, except that
where the value of such assets is less than five hundred ($500) dollars, the
distribution shall be in cash.
ARTICLE XII. MISCELLANEOUS
A. Adjustment regarding other employee benefits. Unless provided
otherwise in a separate written agreement between the Employer and the Employee,
all employee benefits furnished (either wholly or in part) by the Employer for
the benefit of the Employee (other than those provided for under this Agreement)
which are based on the amount payable to an employee, and which would ordinarily
be subject to reduction in the event of any salary adjustment other than that
provided for under this Agreement, shall continue to be based on the Employee's
compensation level without regard to any adjustment in Compensation provided for
under this Agreement, if such employee benefits arrangements themselves are
consistent with this Part A of Article XII.
B. No release from liability. Nothing in this Plan shall relieve any
person from liability for any responsibility under Part 4 of Title I of the Act.
Subject thereto neither the Custodian, the Administrator nor any other person
shall have any liability under the Plan, except as a result of his negligence or
willful misconduct, and in any event the Employer shall fully indemnify and save
harmless all person from any such liability except that resulting from their
negligence or willful misconduct.
C. Applicable law. This Agreement and all documents incorporated herein
by reference shall be construed and administered in accordance with the laws of
the state in which the home office of the Custodian is located.
D. Terminology. Any masculine terminology in this Agreement shall
include the feminine.
E. Headings. Headings herein are primarily for convenience of reference,
and if they conflict with the text, the text shall control.
F. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed and delivered, shall be an original,
but such counterparts shall together constitute one and the same instrument.
G. Change of address. The Employer shall notify the Custodian in writing
of any change of address within 30 days of such change.
H. Notice. Notice from the Custodian to the Employee pursuant to this
Agreement shall be effective if sent by first class mail to the business address
of the Employer until the Employer specifies a different address acceptable to
the Custodian. Any notice to the Custodian pursuant to this Agreement shall be
by first class mail addressed to its home office.
I. Successors. This Agreement shall be binding upon and shall inure to
the benefit of the successors in interest of the parties hereto.
J. Not employment contract. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Employer to discharge the Employee or
of the Employee to terminate his employment.
K. Discretionary actions. Any discretionary action to be taken by the
Employer or the Administrator under this Plan shall be nondiscriminatory in
nature and all Employees similarly situated shall be treated in a uniform
manner.
L. Department of Labor requirements. If the Custodial Investment Account
and this Agreement constitutes a plan subject to Title I of the Act, then the
Employer, Administrator, Employee, and Custodian shall comply with the
applicable requirements of Title I and shall furnish to each other such
information as may be required in that respect.
M. Construction. No provision of this Agreement, including the documents
incorporated herein by reference, shall be construed to conflict with any
provision of a Labor Department, Treasury Department or Internal Revenue Service
regulation, ruling, release or other order which affects the terms of this
Agreement or its qualification under section 403(b)(7) of the Code. It is
intended that this Agreement, including the documents incorporated herein by
reference, qualify as a custodial account under said section 403(b)(7) and this
Agreement, including said documents, shall be construed and limited and the
powers and discretions conferred hereunder and by applicable laws shall be
exercised in a manner consistent with that purpose. Subject to the foregoing
provisions of this Part M of Article XII, the following constructional
principles shall govern: (1) in the event of any conflict between the Employer
Adoption Agreement and the Employee Application, the provisions of the Employer
Adoption Agreement shall prevail; and (2) in the event of any conflict between
this Agreement and the documents incorporated herein by reference, the
provisions of this Agreement shall prevail.
N. Tax treatment. The tax treatment of any contributions to the Account
and of any earnings of the Account depends, among other things, upon the nature
of the Employer, and the amount and nature of contributions made in any year to
the Account (and to other plans, accounts or contracts with the benefit of
special tax treatment) for the benefit of the Employee. The Custodian and
Scudder Fund Distributors, Inc. assume no responsibility with respect to such
matters, nor shall any term or provision of this Agreement be construed so as to
place any such responsibility upon any one of them. Furthermore, the Employer,
the Employee, and the Administrator shall file and shall have sole
responsibility for filing with the Internal Revenue Service and/or any other
governmental agency such returns, reports, forms, and other information as may
be required of them.
O. Separability. If any provision of this Agreement shall beheld invalid
or illegal for any reason, such determination shall not affect any remaining
provisions of this Agreement, but this Agreement shall be construed and enforced
as if such invalid or illegal provision had never been included in this
Agreement.
22
<PAGE>
Telephone
numbers and
addresses
- --------------------------------------------------------------------------------
National toll free
telephone numbers
and addresses
For information about the Scudder Employer-Select 403(b) program,
CALL (toll-free) 1-800-225-2471
(within Massachusetts, call collect 617-482-3990)
or
WRITE to: Scudder Funds Group Retirement Plans
175 Federal Street
Boston, MA 02110
A Group Retirement Specialist from Scudder Fund Distributors, Inc.,
underwriter for the Scudder funds, will answer your calls and letters.
- --------------------------------------------------------------------------------
Local addresses Boca Raton
of Scudder Fund 150 East Palmetto Park Road
Distributors, Inc. Boca Raton, Florida 33432
305-395-0040
Boston
175 Federal Street
Boston, Massachusetts 02110
617-426-8300
Chicago
Suite 2200, 111 East Wacker Drive
Chicago, Illinois 60601
312-861-2700
Cincinnati
540 Carew Tower
Cincinnati, Ohio 45202
513-621-2733
Cleveland
Suite 700, 1801 East Ninth Street
Cleveland, Ohio 44114
216-241-7744
Dallas
Suite 2124, Plaza of the Americas
700 North Pearl
Dallas, Texas 75201
214-742-1465
Houston
1530 Bank of the Southwest Building
Houston, Texas 77002
713-659-3838
Los Angeles
333 South Hope Street
Los Angeles, California 90071
213-628-1144
New York
345 Park Avenue
New York, New York 10154
212-350-8200
Philadelphia
Three Girard Plaza
Philadelphia, Pennsylvania 19102
215-864-7200
Portland, Oregon
Benjamin Franklin Plaza
1 S.W. Columbia St.
Portland, Oregon 97258
503-224-3999
San Francisco
Suite 4100, 101 California Street
San Francisco, California 94111
415-981-8191
23
<PAGE>
Scudder
- ---------------------------------------------
This booklet is not to be used in connection
with the offering of any of the Scudder funds
unless preceded or accompanied by the
appropriate current prospectuses. Scudder
Fund Distributors, Inc. is the underwriter
of the Scudder no-load mutual funds.
BES-23 (C)Scudder Fund Distributors, Inc.
THE
SCUDDER
FUNDS
Employer Adoption Agreement, Cash or Deferred
Prototype Plan, and Profit Sharing Plan
Trust Agreement under Section 401(k)
SCUDDER
SCUDDER, STEVENS & CLARK INVESTMENT COUNSEL
<PAGE>
Contents
- --------------------------------------------------------------------------------
Advantages of a 401(k) plan 3
- ----------------------------------------------
Features of the Scudder
prototype 401(k) plan 4
- ----------------------------------------------
How to establish a Scudder
401(k)plan 6
- ----------------------------------------------
Instructions for completing
the Adoption Agreement 7
- ----------------------------------------------
Adoption Agreement 9
- ----------------------------------------------
Prototype Plan 13
- ----------------------------------------------
Trust Agreement 21
- ----------------------------------------------
Introduction
- --------------------------------------------------------------------------------
The Scudder Funds booklet "Cash or Deferred Arrangements under Section 401(k)"
describes Scudder's 401(k) program. This program consists of eight Scudder
no-load mutual funds, a specially-designed administrative system, and a flexible
prototype plan that can be tailored to fit the needs of corporations not
requiring an individually designed plan.
The Scudder prototype 401(k) plan has not received a determination with
respect to its qualified status from the National Office of the IRS. The IRS
will not consider prototype 401(k) plans at the present time. Scudder believes
its prototype qualifies under Section 401(k) and the proposed IRS regulations
and will apply for a determination letter as soon as the IRS National Office
will accept it. Scudder will revise the prototype plan as necessary to meet IRS
requirements.
This booklet contains the Scudder prototype 401(k) plan, the Adoption
Agreement to be completed by the employer, and the Trust Agreement which sets
forth the responsibilities of the trustee of the plan.
2
<PAGE>
Advantages of a 401(k) profit sharing plan
- --------------------------------------------------------------------------------
Advantages over traditional
profit sharing plans
Section 401(k) profit sharing plans offer many advantages over traditional
profit sharing plans, as described in more detail in our general information
booklet. Four of the most important advantages for employers and participants
are listed below.
- --------------------------------------------------------------------------------
Tax savings for participants
and employers
Contributions to a 401(k) plan are made before taxes, so participants pay
no federal income taxes on contributions. Earnings accumulate tax-free until
withdrawal. Lump-sum distributions from a 401(k) plan are eligible for 10-year
averaging, which substantially reduces the taxes paid upon distribution. If
contributions are made through salary reduction, employers also save Social
Security taxes, unemployment insurance, and workmen's compensation payments.
- --------------------------------------------------------------------------------
High ceiling on contributions
401(k) contributions are subject to the same limitations imposed on any
profit sharing plan. There is no $2,000 annual maximum, as with Individual
Retirement Account contributions.
Participants in a 401(k) plan may also make a tax-deductible contribution
of up to $2,000 per year to an Individual Retirement Account.
- --------------------------------------------------------------------------------
Employee contributions to
thrift plans with pre-tax
dollars
Employers may make matching contributions to a 401(k) plan. This feature
allows employers to use a 401(k) plan in place of a traditional thrift plan, so
that employees contribute pre-tax dollars to the plan.
- --------------------------------------------------------------------------------
No penalty for distributions
Distributions from a 401(k) plan can be made without penalty upon
retirement, separation from service, death, disability, or attainment of age
59 1/2. In addition, distributions may be made in cases of hardship, subject to
restrictions required by law.
3
<PAGE>
The Scudder prototype 401(k) plan -
summary of features
- --------------------------------------------------------------------------------
The Scudder family of no-load
mutual funds
The Scudder prototype 401(k) plan is used with eight Scudder no-load
(commission-free) mutual funds. These funds offer a wide range of investment
choice, and include money market, growth, income, and international funds.
Transfers among the funds may easily be made, so, if the employer permits,
participants can tailor their 401(k) portfolios to meet changes in investment
requirements and the economic environment.
- --------------------------------------------------------------------------------
Flexible administrative
system
Scudder offers a flexible administrative system for use with the prototype
plan. Some companies may choose to use the Scudder processing system, which was
specially designed to facilitate the administrative work involved in operating a
401(k) plan. It maintains separate files for each participant and segregates
contributions by type, allowing each type of contribution to be invested
separately. Other companies may require more detailed benefit plan
administrative services which may be arranged through Scudder. These services
include consolidated statements to participants, information for government
reports and discrimination testing.
- --------------------------------------------------------------------------------
Eligibility
The employer may choose to have all employees eligible to participate in
the plan, or participation may be limited by age, years of service, or class of
service (e.g., salaried or piece-rate employees).
- --------------------------------------------------------------------------------
Contribution options
Salary reduction
An employer may make contributions to the plan on behalf of an
employee instead of paying salary, based on a salary reduction agreement
between the employer and the employee.
Cash deferred
profit sharing
An employer may make a profit sharing contribution to the plan and
permit an employee to elect to receive some or all of that contribution in
cash. The employer may use this option to meet the IRS "fail-safe" test.
Social Security
integration
The plan may be integrated with Social Security.
Non-deductible voluntary
contributions
If the employer chooses, the employee may make non-deductible
voluntary contributions of up to 10% of total compensation. These
contributions may be withdrawn by the employee for any reason upon 30 days'
notice.
4
<PAGE>
- --------------------------------------------------------------------------------
Deductible voluntary
contributions (QVECs)
Employees may also make deductible voluntary contributions (QVECs) to
the plan of up to $2,000. These contributions may also be withdrawn upon 30
days' notice, subject to the same penalties for premature distribution as
apply to IRAs.
Matching contributions
Employers may choose to make matching contributions in proportion to
any or all of these contributions (except QVECs).
Rollover contributions
Under certain circumstances, distributions from other qualified plans
may be rolled over into this plan.
Vesting
All contributions including Employer Matching Contributions, are 100%
vested immediately.
- --------------------------------------------------------------------------------
Investment decisions
Employers may choose to give the plan administrator control over how
contributions and subsequent earnings on these contributions are to be invested,
or they may allow participants to make their own investment decisions.
- --------------------------------------------------------------------------------
Loans and hardship distributions
If selected as an option by the employer, loans may be made to participants
from the plan.
The employer may also choose to make distributions to participants in cases
of hardship. These distributions are made without penalty upon determination of
hardship by the administrator of the plan.
- --------------------------------------------------------------------------------
Appointment of trustee
The employer may designate one or more individuals, a bank, or trust
company as trustee. The Trust Agreement (p.21) is the document under which the
trustee accepts appointment, and it details the responsibilities of the trustee.
- --------------------------------------------------------------------------------
No separate charges
Employers pay no charges for using the Scudder processing system.
Participants are not charged any fees for opening or maintaining 401(k)
plan investments in the Scudder funds. These and other fund expenses are paid
out of the gross investment income of each fund, as detailed in each fund
prospectus.
5
<PAGE>
How to establish a Scudder 401(k) plan
- --------------------------------------------------------------------------------
Scudder Group Representative
A Scudder Group Representative, a retirement plan specialist familiar with
the issues involved in adopting a plan under Section 401(k), will help you
complete the Adoption Agreement (p.9) and determine the appropriate
administrative and information processing procedures. These representatives are
located in most of the twelve Scudder offices throughout the country.
- --------------------------------------------------------------------------------
Adopting the plan
The first step in adopting the plan is to complete the Adoption Agreement
(instructions are found on pages 7-8), sign it, and send it to Scudder Fund
Distributors, Inc. Scudder will execute the Adoption Agreement to acknowledge
its acceptance and return it to you.
Scudder will also provide various forms which may be required once the plan
is in effect, including Designation of Beneficiary, a Summary Plan Description,
and sample agreements whereby participants may elect to defer portions of their
salaries or profit sharing bonuses.
- --------------------------------------------------------------------------------
IRS determination letter
The Scudder prototype 401(k) plan has not yet received a determination with
respect to its qualified status from the National Office of the IRS. If you wish
to apply for a determination with respect to your plan before the Scudder
prototype 401(k) plan becomes qualified, you should submit your plan to the
appropriate Key District Director of the IRS as if it were an
individually-designed plan rather than a prototype plan. Your Scudder Group
Representative will provide you with the necessary forms and instructions.
- --------------------------------------------------------------------------------
Advice of attorney
It is important that an employer adopting this plan first consult with its
attorney for advice in connection with the adoption and operation of the plan
and in selecting the options available.
- --------------------------------------------------------------------------------
Establishing administrative processing procedures
A 401(k) plan requires that separate accounts be maintained for each
participant. The Scudder processing system, which maintains participant
subaccounts, is available for this purpose. Other administrative options include
an employer's in-house processing system and a benefit plan administrative
service, which may be arranged through Scudder.
The appropriate administrative and processing procedures for your plan
depend on a number of factors, such as the number of participants, the number of
different types of contributions your plan permits, and your company's
processing capabilities. Your Scudder Group Representative will discuss the
options with you and help you determine which is best suited to your needs.
6
<PAGE>
Instructions for completing the Adoption Agreement
- --------------------------------------------------------------------------------
Before completing the Adoption Agreement, please carefully read it and the
following comments about the various options you may select.
I. Eligibility
This option determines who will be covered by the plan. You may select a
waiting period of up to 3 years and a minimum age requirement up to 25 years.
You may also elect to exclude certain classes of employees, such as hourly paid
employees, so long as such exclusion does not discriminate in favor of officers,
shareholders or highly compensated employees.
II. Normal retirement date
Indicate the normal retirement date under the plan by completing this
section.
III. Definition of compensation
This option limits the definition of "compensation" under the plan. Under
part A, you determine whether compensation includes amounts paid during the
entire year in which the employee first becomes eligible to participate in the
plan, or only amounts paid after the employee becomes eligible to participate.
Under part B, you may exclude certain amounts paid, such as commissions, from
the definition of compensation so long as such exclusion does not result in
discrimination in favor of officers, shareholders or highly-paid employees.
IV. Employer salary deferral and profit sharing deferral contributions
This option determines the type of employer contribution that will be made
to the plan. You may select either "Employer Salary Deferral Contributions" or
"Employer Profit Sharing Deferral Contributions," or both.
Employer Salary Deferral Contributions. If you select this option,
participants will be able to elect to reduce their compensation and have a
portion of it contributed to the plan. You must specify under Part 1 the maximum
percentage by which participants may reduce their compensation by selecting and
completing option (a) or (b):
Option (a) permits a participant to elect a percentage reduction of
his entire compensation.
Option (b) only permits a participant to elect a percentage reduction
of that portion of his compensation in excess of the social security
taxable wage base.
In completing Part 1, keep in mind the limitations under Code Section 415
(as described in Section 5 of the plan) which generally limit contributions on
behalf of any participant to 25% of compensation, as well as the limitations
under Code Section 404(a)(3) which limit an employer's deduction for employer
contributions to 15% of the aggregate compensation paid or accrued during its
taxable year to all participants as shown on the W-2 forms. Compensation for
these purposes is calculated after salary reductions under the plan. For this
reason, although you may elect a percentage limitation greater than 15% (because
it is unlikely that all participants will elect the maximum reduction),
employers may want to select a limit less than 15% to be safe. Furthermore, if
an employer maintains another qualified plan, consideration must be given to the
effect of that plan on the contribution and allocation limitations of Code
Section 415 and the deductibility limitations of code Section 404.
Employer Profit Sharing Deferral Contributions. If you select this option,
a profit sharing contribution will be made to the plan except to the extent that
you permit participants to elect to receive a portion of their profit sharing
allocation in cash. You must specify under Part 2 how profit sharing allocations
will be determined each year:
Option (a) specifies that the profit sharing allocation will be a
fixed percentage of compensation.
Option (b) specifies that the profit sharing allocation will be a
percentage of compensation determined each year by your Board of Directors.
Furthermore, you must specify under Part 2 the extent to which participants
may elect to receive cash instead of having their profit sharing
contributions deferred and contributed to the plan:
Option (c) does not permit participants to receive any cash.
Option (d) permits participants to receive in cash only that portion
of their profit sharing allocation which exceeds the percentage of
compensation you specify (thus requiring participants to defer part of
their profit sharing allocations).
Option (e) permits participants to receive in cash up to the
percentage of their profit sharing allocations that you specify.
The comments above about the limitations under Code Section 404 and 415 as
discussed above for Employer Salary Deferral contributions also apply to
Employer Profit Sharing Contributions.
Anti-Discrimination Rules. In completing Part IV, you should also keep in
mind that the anti-discrimination requirements of Code Section 401(k) may limit
the percentage of compensation highly-paid participants may elect to defer
through Employer Salary Deferral Contributions or Employer Profit Sharing
Deferral Contributions. These anti-discrimination rules are described in Section
6 of the prototype plan and you should review them carefully before completing
Section IV of the Adoption Agreement. The following are examples of some of the
ways to meet these anti-discrimination requirements:
Fail-Safe. You can meet the so-called "fail-safe" rule of the proposed
regulations by completing Part 2 so that the profit sharing allocation is a
fixed percentage of compensation which the participant cannot receive in
cash. If you then complete Part 1 so that the maximum salary reduction a
participant can elect will be a percentage of compensation not greater,
when compared to the percentage of compensation represented by the profit
sharing allocation under Part 2, than permitted under the special
anti-discrimination requirements of Code Section 401(k), the fail-safe rule
will be satisfied. For example, you could complete Part 2 so that the
Employer Profit Sharing Deferral Contributions will be 5% and Part 1 so
that the maximum salary reduction can be no more than 3% of compensation.
Social Security Integration. Some employers will be able to meet the
general anti-discrimination rules of Code Section 401(k) by selecting
option (b) of Part 1 so that the maximum salary reduction a participant can
elect will be limited to not more than 7% in excess of the taxable wage
base.
Other Alternatives. You may want to limit the percentage of
compensation which participants may defer through Employer Salary Deferral
contributions to a modest amount, such as 5%. So long as the actual
deferral percentage for the lower 2/3 is 2% or more, your plan will meet
the anti-discrimination rule under code Section 401(k). Alternatively, you
may decide to hold Employer Salary Deferral contributions or Employer
Profit Sharing Deferral contributions for the highest paid one-third (top
1/3) of your employees in suspense outside the plan before contributing
them to the plan to first verify that the anti-discrimination rules not be
violated. The IRS does not permit a refund of such contributions after they
have been contributed to the plan in order to meet the anti-discrimination
rules. Or you may decide to permit only the lower paid two-thirds (lower
2/3) of your employees to have Employer Salary Deferral contributions made
for them through payroll deduction during the year and limit the Employer
Salary Deferral contributions for the top 1/3 to a one-time only
contribution at the end of the year after the maximum permissible
contributions have been determined. Another alternative might be to permit
the top 1/3 to withdraw a portion of their Participant Non-Deductible
Voluntary Contributions and then use those amounts to have Employer Salary
Deferral Contributions made on their behalf once the maximum contributions
for the top 1/3 have been determined at the end of the year on the basis of
the percentage actually contributed for the lower 2/3 of your employees.
The flexibility of the Scudder prototype plan and processing system permits
these as well as other possible solutions to the anti-discrimination rules.
7
<PAGE>
V. Employer thrift contributions
This option permits you to make Employer Thrift Contributions that will
match the percentage you select of either Employer Salary Deferral
contributions, Employer Profit Sharing Deferral contributions or Participant
Non-Deductible Voluntary contributions, or any combination of these types of
contributions. For example, you might elect to make an Employer Thrift
contribution equal to 50% of each participant's Employer Salary Deferral
Contribution and Employer Profit Sharing Deferral Contribution.
VI. Participant non-deductible and deductible voluntary contributions
Under this option, you may permit participants to make either Participant
Non-Deductible Voluntary contributions or Participant Deductible Voluntary
contributions. If you select Participant Non-Deductible Voluntary contributions,
participants will be permitted to make voluntary contributions each year in an
amount not greater than 10% of their total compensation. These contributions
will be nondeductible. If you select Participant Deductible Voluntary
Contributions, participants will be permitted to make voluntary contributions
each year up to $2,000. These contributions will be deductible but are subject
to the special rules under the Code relating to "qualified voluntary employee
contributions" (QVECs) which are generally similar to the rules applicable to
individual retirement accounts (IRAs).
VII. Determination of investment
Indicate in this section whether investment decisions will be made by the
Administrator (whom you appoint) or by participants themselves.
VIII. Tax-option corporations (Subchapter S)
This option pertains to Subchapter S corporations. Indicate in part A
whether or not the employer is a Subchapter S corporation. If so, also complete
part B to indicate how the limitations of Code Section 1379(b) on Subchapter S
corporations are to apply.
IX. Loans to participants
By this Option you may permit participants to borrow out of their accounts,
subject to the limitations of Section 12 of the prototype plan.
X. Hardship distributions
By this option you may permit participants to receive early distribution of
their account in case of hardship, subject to the limitations of Section 9 of
the prototype plan (which describes special rules attributable to such
distributions under Code Section 401(k)).
XI. Effective date of plan
Insert the effective date of the plan in this section.
XII. Plan year
Indicate in this section either that the plan year is the same as the
fiscal year of the employer or insert another date if you prefer.
XIII. Amendment
Indicate in this section whether this is a new plan or an amendment of an
existing plan.
XIV. Appointment of trustee
Insert the name or names of the Trustee(s) in this Section. One or more
individuals, a bank, or a trust company may be designated.
XV. Statement of Employer
Please read this section of the Adoption Agreement carefully.
XVI. Limitation on allocations
If this plan is the only retirement plan which you maintain, do not
complete this section of the Adoption Agreement; it applies only in certain
cases where employees participate in more than one plan maintained by the same
employer. Complete this section only it you maintain another plan which is a
qualified defined contribution plan other than a model, master or prototype
plan; and you may prefer not to complete it, which is permitted, in which case
the provisions of Section 5.2 of the prototype plan will automatically apply to
this plan.
THE ADOPTION AGREEMENT SHOULD BE SIGNED BY THE EMPLOYER AND THE TRUSTEE(S).
Under the Employer's signature, insert the Federal Employer Identification
Number, the Plan Serial Number (001 if you maintain no other plan), the
employer's fiscal year and the employer's telephone number.
8
<PAGE>
SCUDDER CASH OR DEFERRED PROFIT-SHARING PLAN
ADOPTION AGREEMENT
The undersigned (the "Employer") hereby establishes, or amends the
______________________ [insert name of Employer] CASH OR DEFERRED PROFIT-SHARING
PLAN, by completing this Adoption Agreement adopting or amending the
profit-sharing plan and trust agreement in the form of the Prototype Plan and
the Trust Agreement attached. (For definition of terms, see Section 2 of the
Prototype Plan.)
I. ELIGIBILITY
A. To become a Participant an Employee:
Select One
(_) (1) Need not complete any waiting period.
(_) (2) Must complete [insert no more than 3] Years of Service.
B. To become a Participant an Employee:
Select One
(_) (1) Need not attain any minimum age.
(_) (2) Must be at least ________[insert 25 or less] years of age.
C. Employees in all classes are entitled to be Participants except:
[NOTE: If Employees are excluded from the Plan under one or more of
the classifications below (not including the last two
classifications), the exclusion must NOT result in discrimination in
favor of officers, shareholders or highly-paid Employees.]
One or More May be Selected
(_) (1) Salaried Employees
(_) (2) Hourly-paid Employees
(_) (3) Piece-rate Employees
(_) (4) Employees paid by commission
(_) (5) Employees covered by another retirement plan to which the Employer
is required to contribute
(_) (6) Employees in the following classification [must be
nondiscriminatory] ______________________________________________
_________________________________________________________________
(_) (7) Non-resident aliens who receive no earned income from United
States sources (as permitted under Code Section 410(b)(3)(c).)
(_) (8) Employees covered by a collective bargaining contract between the
Employer and a recognized bargaining agent, if contract
negotiations considered retirement benefits in good faith, unless
such contract specifically provides for participation in the
Plan.
This must be Completed
D. A Year of Service shall mean a 12-month period beginning on an
Employee's initial date of Employment or an anniversary thereof during
which the Employee has __ [insert 1,000 or less] Hours of Service.
E. The Participants eligible for Profit Sharing Allocations under Section
IV below or Employer Thrift Contributions under Section V below for
any Plan Year shall be:
Select One
(_) (1) All Participants
(_) (2) All Participants except those who have not completed the
number of Hours of Service required under D above during
such Plan Year.
II. NORMAL RETIREMENT DATE
A Participant's Normal Retirement Date shall be:
Select and Complete One
(_) (1) The first day of the month preceding his ___th [insert not
less than 55 nor more than 65] birthday.
(2) The first day of the month preceding his ___th [insert not
less than 55 nor more than 65] birthday or the ___th
[insert 10 or less] anniversary of the date he became a
Participant, whichever is later.
III. COMPENSATION
A. "Compensation" shall include amounts paid as described in B
below:
Select One
(_) (1) For the entire Plan Year in which the Employee became a
Participant whether or not he was a Participant for the
entire Plan Year.
(_) (2) For the portion of the Plan Year after the Employee became a
Participant.
B. "Compensation" shall mean the amount paid by the Employer to the
Employee for his services as reportable to the Federal Government
for the purposes of withholding Federal income taxes, or which
would be reportable if it were not deferred by the Employee's
election hereunder to have it contributed to the Plan as an
Employer Salary Deferral Contribution described in Section IV
below, but excluding any portion of the Profit Sharing Allocation
described in Section IV below which the Participant has elected
to receive in cash and also excluding the following:
Select One or More Desired
(_) (1) Bonuses
(_) (2) Commissions
(_) (3) Overtime Payments
(_) (4) Other(specify) ________________________________
[NOTE: If one or more of the above are chosen the exclusion must
NOT result in discrimination in favor of officers, shareholders
or highly-paid Employees.]
9
<PAGE>
IV. EMPLOYER CONTRIBUTIONS
For each Year the Employer will make the following contribution to the
Trust established pursuant to the Plan on behalf of each Participant:
Select and Complete
if Desired
(_) (1) Subject to Section 4.1 of the Prototype Plan, an Employer
Salary Deferral Contribution equal to the portion of the
Compensation otherwise payable by the Employer for the Plan
Year that the Participant has elected to be deferred and
contributed to the Trust. Such election shall specify the
amount of the Compensation to be deferred, which amount
shall be:
Select and Complete
One if Salary Deferral
Contribution has been
Selected
(_)(a) not less than ___% nor more than __% of the
Participant's Compensation.
(_)(b) not more than ____ % [insert 7% or less] of that
portion of the Participant's Compensation which
exceeds the Taxable Wage Base.
Select and
Complete if
Desired
(_) (2) Subject to Section 4.2 of the Prototype Plan, an Employer
Profit Sharing Deferral Contribution equal to that portion
of the Profit Sharing Allocation for the Plan Year which the
Participant has not elected to receive in cash, if permitted
below, instead of having it deferred and contributed to the
Trust. The Profit Sharing Allocation for this purpose shall
be an amount equal to:
Select and Complete
One if Profit Sharing
Deferral Contribution
has been Selected
(_) (a) __ % of the Participant's Compensation, or
(_) (b) the percentage of the Participant's Compensation as
is determined by a vote of the Board of Directors
of the Employer for each Year (which percentage
shall be the same for each Participant), but in no
event more than _____%.
Select and Complete
One if Profit Sharing
Deferral Contribution
has been Selected
A Participant:
(_) (c) may not elect to receive any portion of his Profit
Sharing Allocation in cash instead of having it
deferred and contributed to the Trust.
(_) (d) may elect to receive that portion of his Profit
Sharing Allocation which exceeds ________ % of his
Compensation in cash instead of having it deferred
and contributed to the Trust.
(_) (e) may elect to receive not more than __% of his
Profit Sharing Allocation in cash instead of having
it deferred and contributed to the Trust.
[NOTE: Code Section 404(a)(3) generally limits the
Employer's deduction for Employer Contributions to 15% of
the aggregate compensation otherwise paid or accrued during
its taxable year to all Participants as shown on the W-2
forms. Employers should not complete Section IV in such a
way that this limitation will likely be exceeded.]
V. EMPLOYER THRIFT CONTRIBUTION
Select and
Complete if
Desired
(_) In addition to the Employer Salary Deferral or Profit Sharing Deferral
Contributions in Section IV above, the Employer shall make an Employer
Thrift Contribution pursuant to Section 4.5 of the Prototype Plan on
behalf of each Participant equal to __% of the aggregate:
Select One or more if
Thrift Contribution
has been Selected
(_) (1) Employer Salary Deferral Contribution
(_) (2) Employer Profit Sharing Deferral Contribution
(_) (3) Participant Non-Deductible Voluntary Contribution allocated to
such Participant's Account for the Plan Year, but only to the extent
that the aggregate amount of the Contributions designated in (1), (2)
or (3) above which are allocated to the Participant's Account for such
Plan Year does not exceed __% [insert 6% or less] of the Participant's
Compensation.
[NOTE: Code Section 404(a)(3) generally limits the Employer's
deduction for Employer Contributions to 15% of the aggregate
compensation otherwise paid or accrued during its taxable year to all
Participants as shown on the W-2 forms. Employers should not complete
Section V in such a way that this limitation will likely be exceeded.]
VI. PARTICIPANT CONTRIBUTIONS
A. Participant Non-Deductible Voluntary Contributions:
Select One
(_)(1) Participant Non-Deductible Voluntary contributions pursuant to
Section 4.3 of the Prototype Plan are permitted.
(_)(2) Participant Non-Deductible Voluntary contributions are not
permitted.
B. Participant Deductible Voluntary Contributions:
Select One
(_) (1) Participant Deductible Voluntary Contributions pursuant to Section
4.4 of the Prototype Plan are permitted.
(_) (2) Participant Deductible Voluntary Contributions are not permitted.
[NOTE: Participant Non-Deductible Contributions made hereunder
shall not be allowed to the extent they would otherwise exceed
the limitations of Section 5 of the Prototype Plan.]
10
<PAGE>
VII. INVESTMENT
Pursuant to Section 11 of the Prototype Plan, all contributions
under this Plan and any earnings thereon shall be invested as
determined by:
Select One
(_) (1) the Administrator.
(_) (2) the Participant.
VIII. TAX-OPTION CORPORATIONS (Subchapter S)
A. The Employer:
Select One
(_) (1) is an electing small business corporation under Code Section 1371.
(_) (2) is not an electing small business corporation under Code Section
1371.
Complete ONLY if the Employer is an Electing Small Business Corporation
B. With respect to any Year in which the Employer is an electing small
business corporation, the Employer Contributions for each
shareholder-employee (as defined in Code Section 1379(d)) otherwise
payable under the Plan for such Year shall be limited as follows:
Select One
(_) (1) No limitation on the amount to be allocated to a
shareholder-employee.
(_) (2) No allocations to any shareholder-employee.
(_) (3) The statutory limit permitted under Code Section 1379(b) which may
be deducted by the Employer without inclusion in the gross income
of the shareholder-employee.
IX. LOANS
Loans to a Participant pursuant to Section 12 of the Prototype Plan:
Select One
(_) (1) are permitted.
(_) (2) are not permitted.
X. EARLY DISTRIBUTION IN CASES OF HARDSHIP
Early distributions to Participants in cases of hardship pursuant to
Section 9 of the Prototype Plan:
Select One
(_) (1) are permitted.
(_) (2) are not permitted.
XI. EFFECTIVE DATE
Complete
The Effective Date of this Plan or amendment shall be ___.
XII. PLAN YEAR
The Plan year shall:
Select One and, if Applicable, Complete
(_) (1) be the same as the fiscal year of the Employer.
(_) (2) end on the last day of the month of _________.
XIII. AMENDMENT
Execution of this Adoption Agreement:
Select One
(_) (1) is an amendment to an existing plan.
(_) (2) is not an amendment to an existing plan.
XIV. APPOINTMENT OF TRUSTEES
The Employer hereby designates the following person or persons as
Trustee(s) under the Trust:
Complete:_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
XV. STATEMENT OF EMPLOYER
The Employer (i) covenants and agrees that whenever a Participant makes a
contribution the Employer shall ascertain that the Participant has received a
copy of the current prospectus relating to the shares of any Designated
Investment Company in which such contribution is to be invested plus, where
required by any state or federal law, the current prospectus relating to any
other investment in which contributions are to be invested, and (ii) by
remitting such a contribution to the Trustee the Employer shall be deemed to
represent that the Participant has received such a prospectus, and (iii) by
remitting any other contribution to the Trustee the Employer shall be deemed
to represent that the Employer has received a current prospectus of any
Designated Investment Company in which it is to be invested, plus, where
required by any state or federal law, the current prospectus relating to any
other investment in which contributions are to be invested.
11
<PAGE>
XVI. LIMITATION ON ALLOCATIONS
[NOTE: Complete this Section only if the Employer maintains either (i)
another plan which is a qualified defined contribution plan other than a Model,
Master or Prototype plan, or (ii) a qualified defined benefit Plan. If the
Employer maintains such a plan, failure to complete this Section may adversely
affect the qualification of the plans the Employer maintains. If the Employer
does not complete this Section, the provisions of Section 5.2 of the Prototype
Plan will automatically apply to this Plan.]
The amount of Annual Additions allocated to any Participant's Account under
this Plan shall be limited as follows: [Use a Rider to provide appropriate
provisions to comply with the Code.]
IN WITNESS WHEREOF, the Employer has hereunto executed this Adoption
Agreement as of the __ day of ______, 19__.
____________________________________
Name of Employer
By____________________________________
Authorized Signature
Address ____________________________________
____________________________________
Employer Identification ____________________________
Plan Serial Number ____________________________
Employer Fiscal Year ____________________________
Employer Telephone Number ____________________________
TRUSTEE ACCEPTANCE
The undersigned accept(s) appointment as Trustee(s) under the Trust
Agreement.
____________________________________
____________________________________
____________________________________
DESIGNATED INVESTMENT COMPANY ACKNOWLEDGEMENT
Scudder Fund Distributors, Inc. acknowledges receipt of a copy of the
executed Adoption Agreement and agrees to accept, on behalf of the Designated
Investment Company or Companies, contributions under the Plan for investment in
accordance with Section VII of the Adoption Agreement.
____________________________________
Scudder Fund Distributors, Inc.
Return this form to:
Scudder Fund Distributors, Inc.
Group Representatives
175 Federal Street
Boston, Massachusetts 02110
12
<PAGE>
SCUDDER CASH OR DEFERRED PROFIT-SHARING PLAN
SECTION 1. INTRODUCTION
The Employer has established this Plan (the "Plan"), consisting of the
Adoption Agreement, the following provisions (the "Prototype Plan") and the
Trust Agreement for the exclusive benefit of its Employees and their
Beneficiaries.
SECTION 2. DEFINITIONS
Where the following words and phrases appear in the Plan, they shall have
the respective meanings set forth below, unless their context clearly indicates
a contrary meaning. The singular herein shall include the plural, and vice
versa, and the masculine gender shall include the feminine gender, and vice
versa, where the context requires.
2.1 "Account" shall mean the cash and securities held by the Trustee for
the benefit of a Participant, which shall be the sum of his Employer Salary
Deferral Account, Employer Profit Sharing Deferral Account, Employer Thrift
Account, Participant Non-Deductible Voluntary Account, Participant Deductible
Voluntary Account, and Rollover Account.
2.2 "Act" shall mean the Employer Retirement Income Security Act of 1974,
as amended.
2.3 "Administrator" shall mean the person or persons appointed under
Section 13.1.
2.4 "Adoption Agreement" shall mean the agreement by which the Employer has
most recently adopted or amended the Plan.
2.5 "Beneficiary" shall mean any person or legal representative entitled to
receive benefits on or after the death of a Participant.
2.6 "Code" shall mean the Internal Revenue Code of 1954, as amended.
Reference to a section of the Code shall include any comparable section or
sections of future legislation that amends, supplements or supersedes such
section.
2.7 "Compensation" shall mean the amount paid by the Employer to the
Employee for his services as reportable to the Federal Government for the
purpose of withholding Federal income taxes, or which would be reportable if it
were not deferred by the Employee's election to have it contributed to the Plan
as an Employer Salary Deferral Contribution, but excluding any portion of the
Profit Sharing Allocation which a Participant elects to receive in cash and (i)
amounts attributable to services rendered by an Employee when he was not a
Participant, except to the extent specified in Section III-A of the Adoption
Agreement, (ii) the amounts attributable to any category specified by the
Employer to be excluded in Section III-B of the Adoption Agreement, and (iii),
in the case of an Employer who has one or more shareholder-employees within the
meaning of Section 1379(b) of the Code as Participants, amounts paid to any
Employee in excess of $200,000.
2.8 "Current or Accumulated Earnings and Profits" of the Employer, shall
mean the Employer's current or accumulated earnings and profits, as determined
on the basis of the Employer's books of account in accordance with generally
accepted accounting practices, without any deductions for Employer Contributions
under the Plan for the current Year or for Federal income taxes for the current
Year and without regard to the Employer's election to be taxed as a small
business corporation, if it has so elected.
2.9 "Designated Investment Company" shall mean a regulated investment
company for which Scudder, Stevens & Clark, or its successor or any of its
affiliates, acts as investment adviser and which is designated by Scudder Fund
Distributors, Inc., or its successors, as eligible for investment under the
Plan.
2.10 "Designation of Beneficiary" or "Designation" shall mean the document
executed by a Participant under Section 16.
2.11 "Distributee" shall mean the Beneficiary or other person entitled to
receive the undistributed portion of the Participant's Account because of death
under Section 8 or because of his incompetency or the inability to ascertain or
locate him under Section 15.
2.12 "Distributor" shall mean Scudder Fund Distributors, Inc. or its
successor.
2.13 "Effective Date" shall mean the date selected by the Employer in
Section XI of the Adoption Agreement.
2.14 "Employee" shall mean an individual who performs services in the
business of the Employer in any capacity except as a self-employed individual.
2.15 "Employer" shall mean the organization named as such in the Adoption
Agreement and any successor organization which adopts the Plan. Any two or more
members of a controlled group of corporations as defined in Code Section 414(b)
may adopt and maintain the plan as a single Plan.
2.16 "Employer Contributions" shall mean the sum of the Employer Profit
Sharing Deferral Contributions, Employer Salary Deferral Contributions and
Employer Thrift Contributions.
2.17 "Employer Profit Sharing Deferral Account", shall mean the separate
account maintained pursuant to Section 7.3 hereof for the Employer Profit
Sharing Deferral Contributions (as described in Section IV of the Adoption
Agreement) allocated to a Participant and the income, expenses, gains and losses
attributable thereto.
2.18 "Employer Profit Sharing Deferral Contributions" shall mean
contributions made to the Trust by the Employer in accordance with Section 4.2
as that part of the Profit Sharing Allocations which Participants have not
elected to receive in cash.
2.19 "Employer Salary Deferral Account" shall mean the separate account
maintained pursuant to Section 7.3 hereof for the Employer Salary Deferral
Contributions allocated to a Participant and the income, expenses, gains and
losses attributable thereto.
2.20 "Employer Salary Deferral Contributions" shall mean contributions made
to the Trust by the Employer in accordance with Section 4.1 hereof as a result
of the election by Participants to defer part of their Compensation.
2.21 "Employer Thrift Account" shall mean the separate account maintained
pursuant to Section 7.3 hereof for the Employer Thrift Contributions allocated
to a Participant and the income, expenses, gains and losses attributable
thereto.
2.22 "Employer Thrift Contributions" shall mean contributions made to the
Trust by the Employer in accordance with Section 4.5 hereof as matching
contributions.
2.23 "Hour of Service" shall mean:
(a) Each hour for which an Employee is paid, or entitled to payment, for
the performance of duties for the Employer. These hours shall be
credited to the Employee for the computation period in which the
duties are performed; and
(b) Each hour for which an Employee is paid, or entitled to payment, by
the Employer on account of a period of time during which no duties are
performed (irrespective of whether the employment relationship has
terminated) due to vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty or leave of absence. No
more than 501 Hours of Service shall be credited under this paragraph
for any single continuous period (whether or not such period occurs in
a single computation period). Hours under this paragraph shall be
calculated and credited pursuant to section 2530.200b-2 of the
Department of Labor Regulations which are incorporated herein by this
reference; and
(c) Each hour for which back pay, irrespective of mitigation of damages,
is either awarded or agreed to by the Employer. The same Hours of
Service shall not be credited both under paragraph (a) or paragraph
(b), as the case may be, and under this paragraph (c). These hours
shall be credited to the Employee for the computation period or
periods to which the award or agreement pertains rather than the
computation period in which the award, agreement or payment is made.
(d) Where the Employer maintains the plan of a predecessor employer,
service for such predecessor employer shall be treated as service of
the Employer. Where the Employer does not maintain the plan of a
predecessor employer, employment by a predecessor employer, upon the
written election of the Employer made in a uniform and
non-discriminatory manner, shall be treated as service for the
Employer.
2.24 "Normal Retirement Date" or "Normal Retirement Age" shall mean the
date selected by the Employer in Section II of the Adoption Agreement.
2.25 "Participant" shall mean an Employee who is eligible to participate in
the Plan under Section 3 and who has not, since becoming a Participant, died,
become disabled, retired or otherwise terminated employment with the Employer.
2.26 "Participant Contributions" shall mean the sum of the Participant
Non-Deductible Voluntary Contributions and the Participant Deductible Voluntary
Contributions.
2.27 "Participant Deductible Voluntary Account" shall mean the separate
account maintained pursuant to Section 7.3 hereof for the Participant Deductible
Voluntary Contributions (as described in Section VI-B of the Adoption Agreement)
made by the Participant and the income, expenses, gains and losses attributable
thereto.
2.28 "Participant Deductible Voluntary Contributions" shall mean
contributions made to the Trust by Participants in accordance with Section 4.4
hereof. Such contributions are intended to be "qualified voluntary employee
contributions" within the meaning of Code Section 219(e)(2).
2.29 "Participant Non-Deductible Voluntary Account" shall mean the separate
account maintained pursuant to Section 7.3 hereof for the Participant
Non-Deductible Voluntary Contributions (as described in Section VI-A of the
Adoption Agreement) made by the Participant and the income, expenses, gains and
losses attributable thereto.
2.30 "Participant Non-Deductible Voluntary Contributions" shall mean
contributions made to the Trust by Participants in accordance with Section 4.3
hereof. Such contributions are intended not to be "qualified
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voluntary employee contributions" within the meaning of Code Section 219(e)(2).
2.31 "Plan" shall mean the Prototype Plan, the Adoption Agreement and the
Trust Agreement.
2.32 "Plan Year" shall mean the fiscal year of the Employer or a different
period as specified in Section XIV of the Adoption Agreement.
2.33 "Profit Sharing Allocation" shall mean the contribution payable by the
Employer to the Trust on behalf of a Participant out of the Employer's Current
or Accumulated Earnings in accordance with Section 4.2 hereof subject to the
Participant's right to elect, if permitted by Section IV of the Adoption
Agreement, to receive all or a portion of such contribution in cash in lieu of
having it deferred and contributed to the Trust on his behalf.
2.34 "Prototype Plan" shall mean these Sections 1-21.
2.35 "Rollover Account" shall mean the separate account maintained pursuant
to Section 7.3 hereof for any Rollover Contributions (as described in Section
4.6 hereof) made by the Participant and the income, expenses, gains and losses
attributable thereto.
2.36 "Rollover Contributions" shall mean contributions made to the Trust by
Participants in accordance with Section 4.6 hereof out of "qualifying rollover
distributions" within the meaning of Code Section 402(a)(5)(D)(i).
2.37 "Service" generally shall mean Employment by the Employer or, if the
Employer is maintaining the plan of a predecessor employer or has so elected,
employment by such predecessor employer. (See "Hour of Service").
2.38 "Taxable Wage Base" shall mean, for any Plan Year, the maximum amount
of earnings which may be considered wages for the calendar year ending within or
coincident with such Plan Year for purposes of determining F.I.C.A. tax
liability under Code Section 3121(a)(1).
2.39 "Trust" shall mean the trust established under the Trust Agreement
entered into pursuant to this Plan for investment as provided in Section VII of
the Adoption Agreement.
2.40 "Trust Agreement" shall mean the agreement under which the Trustee
accepts appointment to establish a Trust for the investment of contributions
under the Plan.
2.41 "Trustee" shall mean the person or persons, including any successor or
successors thereto, designated pursuant to Section XIV of the Adoption Agreement
to act as trustee of the Trust.
2.42 "Valuation Date" shall mean the last day of each Plan Year.
2.43 "Year" shall mean the fiscal year of the Employer.
2.44 "Year of Service" shall mean a twelve (12) month period, beginning on
an Employee's initial date of Employment or an anniversary thereof in which the
Employee had the number of Hours of Service specified in Section 1-D of the
Adoption Agreement. The date of initial employment is the first day on which the
Employee performs an Hour of Service.
SECTION 3. ELIGIBILITY
3.1 Entry. Each Employee of the Employer who on the Effective Date of this
Plan meets the conditions specified in Section I of the Adoption Agreement shall
become eligible to participate in the Plan commencing with that Effective Date,
Each other Employee of the Employer, including future Employees, shall become
eligible to participate in the Plan on the first business day of the month next
following the month in which he meets such conditions.
3.2 Reentry. A former Participant shall become a Participant immediately
upon his return to the employ of the Employer or his return to an eligible class
of employees, whichever is applicable.
3.3 Transfer to Eligible Class. In the event an Employee who is not a
member of an eligible class of Employees becomes a member of an eligible class
such Employee shall participate immediately if such Employee has satisfied the
minimum age and service requirements and would have previously become a
Participant had he been in the eligible class.
3.4 Determination by Administrator. Eligibility shall be determined by the
Administrator and the Administrator shall notify each Employee upon his
admission as a Participant in the Plan.
3.5 Related Businesses. If the Employer is a member of (a) a controlled
group of corporations (as defined under Code Section 414(h)), (b) a group of
trades or businesses (whether or not incorporated) which are under common
control (as defined under Code Section 414(c)), or (c) an affiliated service
group (as defined under Code Section 414(m)), all service of an Employee for any
member of such a group shall be treated as if it were service for the Employer
for purposes of the eligibility requirements of Section I of the Adoption
Agreement and this Section 3.
SECTION 4. CONTRIBUTIONS
4.1 Employer Salary Deferral Contributions. If selected by the Employer in
Section IV of the Adoption Agreement, the Employer will make an Employer Salary
Deferral Contribution to the Trust on behalf of each Participant who has elected
to defer a portion of the Compensation otherwise payable to him for the Plan
Year and have it contributed to the Trust. Such an election may only be made
pursuant to a written salary reduction agreement between the Participant and the
Employer. The agreement shall be in such form and subject to such rules as the
Administrator may prescribe, and the agreement shall specify the amount of
Compensation that the Participant desires to defer (but in no event may such
deferral exceed the percentage of Compensation specified in Section IV (1) of
the Adoption Agreement). A salary reduction agreement may be amended or
terminated prospectively during the Plan Year at such times and in such manner
as permitted by the rules of the Administrator. The Employer Salary Deferral
Contribution made for a Participant shall be in an amount equal to the amount
specified in the Participant's salary reduction agreement; provided, however,
that the Employer Salary Deferral Contribution otherwise to be made for a
Participant shall be reduced to the extent necessary, if any, to comply with the
limitations of Section 4.7, 5 and 6 hereof (and Section VIII of the Adoption
Agreement if applicable). Any amount which cannot be contributed to the Trust
because of those limitations shall be paid to the Participant in cash no later
than the last day that such amount could otherwise have been contributed to the
Trust for the Plan Year in respect to which it has been deferred, and such
payment shall be subject to federal income and other tax withholding by the
Employer. An Employer Salary Deferral Contribution made for a Participant shall
be allocated to his Employer Salary Deferral Account pursuant to Section 7.3
hereof.
4.2 Employer Profit Sharing Deferral Contributions. If selected by the
Employer in Section IV of the Adoption Agreement, the Employer will make an
Employer Profit Sharing Deferral Contribution to the Trust in an amount equal to
the Profit Sharing Allocation specified in Section IV (2) of the Adoption
Agreement as expressed as a percentage of the Participant's Compensation;
provided, however, that if and to the extent permitted by Section IV (2) of the
Adoption Agreement, each Participant may elect to receives portion of the Profit
Sharing Allocation in cash in lieu of having it deferred and contributed to the
Trust as an Employer Profit Sharing Deferral Contribution. Such an election may
only be made pursuant to a written agreement between the Participant and the
Employer. The agreement shall be in such form and subject to such rules as the
Administrator may prescribe, and the election shall specify the amount of the
Profit Sharing Allocation that the Participant desires to receive in cash. The
amount which a Participant has elected to receive in cash pursuant to such an
election shall be paid to the Participant by the Employer no later than the last
day on which the Employer Profit Sharing Deferral Contributions for the Plan
Year in question must be paid to the Trust under Section 7.2 hereof,
Notwithstanding the above, the Employer Profit Sharing Deferral Contribution
otherwise to be made for a Participant shall be reduced to the extent necessary,
if any, to comply with the limitations of Sections 4.7, 5 and 6 hereof (and
Section VIII of the Adoption Agreement, if applicable). Any amount which cannot
be contributed to the Trust because of those limitations shall be paid to the
Participant in cash no later than the last day that such amount could otherwise
have been contributed to the Trust for the Plan Year in the respect to which it
has been deferred, and such payment shall be subject to federal income and other
tax withholding by the Employer. An Employer Profit Sharing Deferral
Contribution made for a participant shall be allocated to his Employer Profit
Sharing Deferral Account pursuant to Section 7.3 hereof.
4.3 Participant Non-Deductible Voluntary Contributions. If selected by the
Employer in Section VI A of the Adoption Agreement, a Participant may make
Participant Non-Deductible Voluntary Contributions to his Account in any Plan
Year; provided, however, that the aggregate amount of such Participant
Non-Deductible Voluntary Contributions, plus any Participant Non-Deductible
Voluntary Contributions made by him under any other plan maintained by the
Employer and intended to meet the requirements of Code Section 401, shall not
exceed ten percent (10%) of his total compensation (disregarding any exclusions
from Compensation specified by the Employer in Section III-B of the Adoption
Agreement) for the period in which he has been a Participant in the Plan;
provided, further, that in no event shall a Participant be permitted to makes
Participant Non-Deductible Voluntary Contribution in an amount which would cause
the annual addition to his Account to exceed the limitations set forth in
Section 5 hereof. A Participant's Participant Non-Deductible Voluntary
Contributions shall be allocated to his Participant Non-Deductible Voluntary
Account pursuant to Section 7.3 hereof. A Participant may withdraw all or 5
portion of his Participant Non-Deductible Voluntary Account upon 30 days'
written notice to the Administrator.
4.4 Participant Deductible Voluntary Contributions. If selected by the
Employer in Section VI-B of the Adoption Agreement, a Participant may make
Participant Deductible Voluntary Contributions to his Account in any Year;
provided, however, that the aggregate amount of such Participant Deductible
Voluntary Contributions, plus any other "qualified retirement contributions" (as
that term is defined in Code Section 219(e)(1)) made by the Participant, shall
not, in any taxable year of the Participant, exceed the lesser of $2,000 or 100%
of the Participant's total compensation includible in his gross income for his
taxable year (or such higher limitation as is permitted under Code Section 219).
A Participant's Participant Deductible Voluntary Contributions shall at no time
be included in the computation of the maximum allocation to a Participant's
Account as set forth
14
<PAGE>
in Section 5 and 6 hereof. A Participant's Participant Deductible Voluntary
Contributions shall be allocated to his Participant Deductible Voluntary Account
pursuant to Section 7.3 hereof. A Participant may withdraw all or a portion of
his Participant Deductible Voluntary Account upon 30 days' written notice to the
Administrator, who may also permit, to the extent allowed by applicable law, the
Participant to redesignate his Participant Deductible Voluntary Account as his
Participant Non-Deductible Voluntary Account prior to the withdrawal thereof.
4.5 Employer Thrift Contributions. If selected by the Employer in Section V
of the Adoption Agreement, the Employer will make an Employer Thrift
Contribution to the Trust for each Participant for each Plan Year that one or
more of contribution categories selected by the Employer in Section V of the
Adoption Agreement for matching (i.e., Employer Profit Sharing Deferral
Contributions, Employer Salary Deferral Contributions or Participant
Non-Deductible Voluntary Contributions) is allocated to the Participant's
Account. The Employer Thrift Contribution made for a Participant shall be in an
amount equal to the percentage specified in Section V of the Adoption Agreement
of the aggregate of the contributions categories selected by the Employer in
Section V of the Adoption Agreement (i.e., Employer Profit Sharing Deferral
Contributions, Employer Salary Deferral Contributions or Participant
Non-Deductible Voluntary Contributions) allocated to the Participant's Account
for the Year, but only to the extent that such aggregate amount does not exceed
the percentage of the Participant's Compensation specified in Section V of the
Adoption Agreement (not in excess of 6%); provided, however, that the Thrift
Contribution otherwise to be made for a Participant shall be reduced to the
extent necessary to comply with the limitations of Sections 4.7, 5 and 6 hereof
(and Section VIII of the Adoption Agreement, if applicable). Any amount which
cannot be contributed to the Trust because of these limitations will be retained
by the Employer, and the Employer shall have no obligation to contribute such
amount . An Employer Thrift Contribution made for a Participant shall be
allocated to his Employer Thrift Account pursuant to Section 7.3 hereof.
4.6 Rollover Contributions. The Administrator may, in his discretion,
direct the Trustee to accept a Rollover Contribution upon the express request of
the Participant wishing to make such Rollover Contribution, the same to be held,
administered and distributed by the Trustee in accordance with the terms of this
Plan provided the Trustee consents if the contribution includes property other
than cash. A Rollover Contribution shall only be a contribution, comprised of
money and/or property, which is all or a portion of a lump sum with respect to
which such Participant certifies in writing that all of the following conditions
are met:
(a) Such lump sum is such Participant's entire interest (or such lesser
amount as permitted by applicable law) in all qualified plans of the
same type of a prior employer of such Participant (within the meaning
of Code Section 402(e)(4)(C) as modified by Code Section
402(A)(6)(E)), including qualified annuity plans under Code Section
403(a), reduced by the amount, if any, considered as contributed by
him to such other plan or plans (as determined under Code Section
402(e)(4)(D)(i)) and augmented, if such be the case, by any earnings
on the aforesaid net amount accrued during any period when such net
amount was held in an intervening individual retirement account or
annuity (as defined in Code Sections 408(a) and (b));
(b) Such lump sum was received by such Participant as a lump sum
distribution from such other qualified plan or plans within the
meaning of Code Section 402(e)(4)(A) or as a payment within one
taxable year of the Participant on account of a termination of such
plan(s) or, in the case of a profit-sharing or stock bonus plan, a
complete discontinuance of contributions under such plan(s) (within
the meaning of Code Section 402(a)(6));
(c) The transfer of all or a portion of such lump sum is being made within
60 days of its receipt by him from the plan or plans referred to in
paragraph (a) above or, if the net amount referred to in paragraph (a)
above had previously been deposited in an intervening individual
retirement account or annuity (as defined in Code Sections 408 (a) and
(b)) within 60 days of its prior receipt from such plan or plans, the
transfer of such lump sum is being made within 60 days of its receipt
by him from such intervening individual retirement account or annuity;
and
(d) No part of such lump sum represents an amount derived from a plan in
which such Participant was a self-employed employee (within the
meaning of Code Section 401(c)(1)) at any time contributions were made
on his behalf under that plan.
All Rollover Contributions made under this Section 4.6 must be accepted by
the Trustee within the 60 day period referred to in paragraph (c) above. If the
sum accepted as a Rollover Contribution contains property other than cash, the
Trustee shall promptly sell it, and reinvest the proceeds as set forth in the
paragraph immediately below. However, the Trustee may nevertheless, in his
discretion, retain part or all of such property in kind at the Participant's
express request, provided the Participant reimburses the Trustee for any
additional expenses arising out of such retention. A Participant's Rollover
Contribution shall at no time be included in the computation of the maximum
allocation to a Participant's Account as set forth in Sections 5 and 6 hereof.
Each Rollover Contribution made by a Participant shall be allocated to his
Rollover Account pursuant to Section 7.3 hereof. Such Rollover Account shall be
invested by the Trustee as part of the Trust Fund, pursuant to the provisions of
the Trust Agreement, and shall share in the gains and losses of such fund,
except as it may be held in kind as permitted above. A Participant may withdraw
all or a portion of his Rollover Account upon 30 days' written notice to the
Administrator.
4.7 Limited by Profits. Notwithstanding anything to the contrary herein,
the total Employer Contributions for a Year shall not exceed the Current or
Accumulated Earnings and Profits of the Employer for the Year, whichever is
greater.
SECTION 5. CODE SECTION 415 LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS
5.1 Employers Maintaining No Other Plan.
(a) If an Employer does not maintain any other qualified plan, the amount
of Annual Addition which may be allocated under this Plan on a
Participant's behalf for a Limitation Year shall not exceed the
Maximum Permissible Amount.
(b) Prior to the determination of the Participant's actual compensation
for a Limitation Year, the Maximum Permissible Amount may be
determined on the basis of the Participant's estimated annual
compensation for such Limitation Year. Such estimated annual
compensation shall be determined on a reasonable basis and shall be
uniformly determined for all Participants similarly situated.
(c) As soon as is administratively feasible after the end of the
Limitation Year, the Maximum Permissible Amount for such Limitation
Year shall be determined on the basis of the Participant's actual
compensation for such Limitation Year.
(d) If, pursuant to Section 5.1(c) and notwithstanding the provisions of
Section 4 hereof which require Employer Contributions on behalf of a
Participant to be reduced so as out to exceed the limitations of this
Section 5, there is an Excess Amount with respect to a Participant for
a Limitation Year, such Excess Amount shall be disposed of as follows:
(i) First, any Participant Contributions, to the extent that the
return would reduce the Excess Amount, shall be returned to the
Participant.
(ii) Second, such Excess Amount, to the extent attributable to
Employer Thrift Contributions, must out be distributed to the
Participant, but shall be applied to reduce Employer Thrift
Contributions for the Limitation Year. To the extent such Excess
Amount is attributable to Employer Profit Sharing Deferral
Contributions or Employer Salary Deferral Contributions, it shall
be distributed to the Participant in accordance with Sections 4.1
and 4.2.
5.2 Employers Maintaining Other Model, Master or Prototype Defined
Contribution Plans.
(a) If, in addition to this Plan, the Employer maintains any other
qualified defined contribution plan (all of which are qualified Model,
Master or Prototype Plans), the amount of Annual Additions which may be
allocated under this Plan on a Participant's behalf for a Limitation Year,
shall out exceed the Maximum Permissible Amount, reduced by the sum of any
Annual Additions allocated to the Participant's account for the same
Limitation Year under such other defined contribution plan.
(b) Prior to the determination of the Participant's actual compensation for
the Limitation Year, the amounts referred to in Section 5.2(a) above may be
determined on the basis of the Participant's estimated annual compensation
for such Limitation Year. Such estimated annual compensation shall be
determined on a reasonable basis and shall be uniformly determined for all
Participants similarly situated.
(c) As soon as is administratively feasible after the end of the Limitation
Year, the amounts referred to in Section 5.2(a) shall be determined on the
basis of the Participant's actual compensation for such Limitation Year.
(d) If a Participant's Annual Additions under this Plan and all such other
plans result in an Excess Amount, such Excess Amount shall be deemed to
consist of the Amounts last allocated.
(e) If an Excess Amount was allocated to a Participant on an allocation
date of this Plan which coincides with an allocation date of another plan,
the Excess Amount attributed to this Plan will be the product of:
(i) the total Excess Amount allocated as of such date (including any
amount which would have been allocated but for the limitations of Code
Section 415), times
(ii) the ratio of (A) the amount allocated to the Participant as of such
date under this Plan, divided by (B) the total amount allocated as of
such date under all qualified defined contribution plans (determined
without regard to the limitations of Code Section 415).
(f) Any Excess Amounts attributed to this Plan shall be disposed of as
provided in Section 5.1(d).
15
<PAGE>
5.3 Employers Maintaining Other Defined Contribution Plans, If the Employer
also maintains another plan which is a qualified defined contribution plan other
than a Model, Master or Prototype Plan, Annual Additions allocated under this
Plan on behalf of any Participant shall be limited in accordance with the
provisions of Section 5.2 as though the other plan were a Model, Master or
Prototype Plan, unless the Employer provides other limitations in the Adoption
Agreement.
5.4 Definitions. For purposes of this Section 5, the following terms shall
be defined as follows:
(a) "Annual Additions" - The sum of the following amounts allocated on
behalf of a Participant for a Limitation Year:
(i) all employer contributions,
(ii) all forfeitures, and
(iii) the lesser of (A) one-half of all employee contributions, and (B) the
amount of all employee contributions in excess of six percent (6%) of
such Participant's actual compensation.
For the purposes of this Section 5, amounts reapplied to reduce employer
contributions shall also be included as Annual Additions.
(b)"Employer" - The employer that adopts this Plan. In the case of a group
of employers which constitutes a (i) controlled group of corporations (as
defined in Code Section 414(b) as modified by Code Section 415(h)), (ii)
trades or businesses (whether or not incorporated) which are under common
control (as defined in Code Section 414(c) as modified by Code Section
415(h)), or (iii) an affiliated service group (as defined in Code Section
414 (ml), all such employers shall be considered a single employer for
purposes of applying the limitations of this Section 5.
(c)"Excess Amount" - The excess of the Participant's Annual Additions for
the Limitation Year over the Maximum Permissible Amount, less loading and
other administrative charges allocable to such excess.
(d)"Limitation Year" - A calendar year (Or any other 12 consecutive month
period adopted for all plans of the Employer pursuant to a written
resolution adopted by the Employer).
(e)"Master or Prototype Plan" - A plan the form of which is the subject of
a favorable opinion letter from the Internal Revenue Service issued
pursuant to Rev. Proc. 80-29 or successor procedure.
(f) "Maximum Permissible Amount" - For a Limitation Year, with respect to
any Participant shall be the lesser of:
(1)(A) if the Plan was in existence on July 1, 1982, $25,000 for
Limitation Years beginning before January 1, 1983 and $30,000 for
Limitation Years beginning after December 31, 1982, or (B) if the Plan was
not in existence on July 1, 1982, $30,000; provided, however, that the
amounts described in (A) and (B) shall be increased to such larger amounts
as may be prescribed by regulation authorized by the Secretary of the
Treasury or his delegate; or
(2) 25% of the Participant's compensation for the Limitation Year.
(g)"Model Plan" - A plan the form of which has been published by the
Internal Revenue Service.
SECTION 6. CODE SECTION 401(1;) LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS
6.1 Limitation. In addition to any other limitations set forth in this
Plan, Code Section 401(k) requires that the Employer Contributions and the
allocation thereof must not result in discrimination in favor of the
shareholders, officers or highly compensated employees of the Employer. To meet
this requirement, one or more of the following tests must be met each Plan Year:
(a) If the Employer has not elected to make Employer Thrift Contributions
under Section V of the Adoption Agreement, the Employer Profit Sharing
Deferral Contributions and Employer Salary Deferral Contributions and the
allocation thereof must either:
(i) satisfy the General Cash or Deferred Discrimination Rule (as defined
below); or
(ii) satisfy the Special Cash or Deferred Discrimination Rule (as defined
below).
(b) If the Employer has elected to make Employer Thrift Contributions under
Section V of the Adoption Agreement, either:
(i) the combined Employer Thrift, Profit Sharing Deferral and Salary
Deferral Contributions must satisfy the General Cash or Deferred
Discrimination Rule; or
(ii) the Employer Thrift Contributions must satisfy the General Cash or
Deferred Discrimination Rule and the Employer Profit Sharing Deferral
and Salary Deferral Contributions must meet the Special Cash or
Deferred Discrimination Rule; or
(iii) the Employer Thrift Contributions must satisfy the General Cash or
Deferred Discrimination Rule and the combined Employer Thrift, Profit
Sharing Deferral and Salary Deferral Contributions must meet the
Special Cash or Deferred Discrimination Rule,
6.2 General Cash or Deferred Discrimination Rule Defined. To satisfy the
General Cash or Deferred Discrimination Rule, the Plan must satisfy either the
percentage test or the classification test described in Code Section 410(b)(1),
and the Employer Contributions (or relevant portion thereof) must also satisfy
the requirements of Code Section 401(a)(4). In testing whether the requirements
of Code Section 410(b)(1) are satisfied, the Employees who benefit from the Plan
may be either (a) the Employees eligible to participate in the Plan, or (b) the
Employees who participate in the Plan. In testing for discrimination under Code
Section 401(a)(4), the eligible or covered Employees will be considered
depending on the group used to satisfy Code Section 410(b)(1).
6.3 Special Cash or Deferred Discrimination Rule Defined. To satisfy the
Special Cash or Deferred Discrimination Rule, the Plan must satisfy either the
percentage test or the classification test described in Code Section 410(b)(1).
For this purpose, all eligible Employees are considered to benefit from the
Plan. In addition, the Employer Contributions (or relevant portion thereof) must
satisfy one of the following tests:
(a) the actual deferral percentage for the highly compensated Employees
eligible to participate in the Plan (the top 1/3) must not be more than the
actual deferral percentage of all other eligible Employees (lower 2/3)
multiplied by 1.5; or
(b) the excess of the actual deferral percentage for the top 1/3 over the
lower 2/3 is not more than 3 percentage points, and the actual deferral
percentage for the top 1/3 is not more than the actual deferral percentage
of the lower 2/3 multiplied by 2.5.
For purposes of the above, the term "highly compensated Employee" means any
eligible Employee who receives, with respect to the Compensation taken into
account for the Plan Year, more Compensation than two-thirds of all other
eligible Employees. Both 1/3 and 2/3 of all the eligible Employees shall be
rounded to the nearest integer. The "actual deferral percentage" for the top 3
and the lower 2/3 for a Plan Year is the average of the ratios, calculated
separately for each Employee in such group, of the amount of Employer
Contributions (or relevant portion thereof) paid under the Plan for such Plan
Year on behalf of each such Employee for such Plan Year, to the Employee's
Compensation for such Plan Year (prior to any deferral hereunder).
6.4 Responsibilities of Ad7nblistrator. The Administrator shall have the
responsibility of monitoring the Plan's compliance with the limitations of this
Section 6 and shall have the power to take any and all steps it deems necessary
or appropriate to ensure compliance, including, without limitation, restricting
the amount of salary or Profit Sharing Bonus which the highly compensated
Employees may elect to defer, or delaying or holding Employer Contributions in
suspense until it can be determined that no amount in excess of these
limitations will be contributed to the Trust. Any actions taken by the
Administrator under this Section 6.4 shall be pursuant to non-discriminatory
procedures consistently applied.
SECTION 7. TIME AND MANNER OF MAKING CONTRIBUTIONS
7.1 Manner. unless otherwise agreed to by the Trustee, contributions to
said Trustee shall be made only in cash. All contributions may be made in one or
more installments.
7.2 Time. Employer Profit Sharing Deferral or Salary Deferral Contributions
with respect to a Plan Year shall be made no later than 30 days after the end of
that Plan Year (or such later time as is permitted by regulations authorized by
the Secretary of the Treasury or delegate). Employer Thrift Contributions and
Participant Non-Deductible Contributions shall be made before the time limit,
including extensions thereof, for filing the Employer's federal income tax
returns for the Year with or within which the particular Plan Year ends (or such
later time as is permitted by regulations authorized by the Secretary of the
Treasury or delegate). Participant Deductible Voluntary Contributions shall be
made no later than April 15 following the Participant's taxable year for which
such contributions are made. All contributions shall be paid to the
Administrator for transfer to the Trustee. The Administrator shall transfer such
contributions to the Trustee as soon as possible, except to the extent permitted
by Section 6.4 hereof. The Administrator may establish a payroll deduction
system or other procedure to assist the making of Participant Contributions and
Employer Salary Deferral Contributions to the Trust, and the Administrator may
from time to time adopt rules or policies governing the manner in which such
contributions may be made so that the Plan may be conveniently administered.
7.3 Separate Accounts. For each Participant, a separate account shall be
maintained for each of the following types of contributions and the income,
expenses, gains and losses attributable thereto:
(a)Participant Non-Deductible Voluntary Contributions, if selected under
Section VI-A of the Adoption Agreement;
(b) Participant Deductible Voluntary Contributions, if selected under
Section VI-B of the Adoption Agreement;
(c) Employer Profit Sharing Deferral Contributions, if selected under
Section IV of the Adoption Agreement;
(d) Employer Salary Deferral Contributions, if selected under Section IV of
the Adoption Agreement;
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(e) Employer Thrift Contributions, if selected under Section V of the
Adoption Agreement; and
(f) Rollover Contributions, if the Administrator accepts such contributions
pursuant to Section 4.6 hereof.
7.4 Vesting. A Participant's interest in his Account shall always be fully
vested and nonforfeitable.
SECTION 8. DISTRIBUTION UPON DEATH
8.1 Distribution to Beneficiary. If a Participant's employment terminates
because of his death, the Trustee shall, upon the direction of the
Administrator, distribute the Participant's Account or the undistributed
remainder thereof, as the case may be, in accordance with the provisions of
Section 8.2, to the Beneficiary or Beneficiaries validly named in the most
recent Designation of Beneficiary form filed by the Participant with the
Administrator before his death in compliance with Section 16. The
Administrator's direction shall include notification of the Participant's death,
the identity of the Beneficiary or Beneficiaries so named, and the appropriate
manner of distribution.
8.2 Manner of Distribution. A distribution made under this Section 8 shall
be made in such manner as the Participant shall in his most recent Designation
have validly elected. In the absence of such an election, such distribution
shall be made in such manner as the Participant's Beneficiary (or Beneficiaries)
may elect, subject to the approval of the Administrator, or in the absence of
such an election, in such manner as the Administrator shall determine.
SECTION 9. DISTRIBUTION UPON HARDSHIP
If selected by the Employer in Section x of the Adoption Agreement, the
Trustee shall, upon the direction of the Administrator, distribute all or a
portion of a Participant's Employee Salary Deferral Account, Employer Profit
Sharing Deferral Account and Employer Thrift Account prior to the time such
Accounts are otherwise distributable in accordance with Sections 8 and 10
hereof, subject to the following:
9.1 Hardship Defined. Any such distribution shall be made only if, and the
amount of such distribution shall be limited to the extent that, the Participant
demonstrates that he is suffering from "hardship," as that term is defined in
proposed or final regulations (whichever are applicable) promulgated pursuant to
Code Section 401(k), or such other standard as may from time to time be
established or authorized by the Secretary of the Treasury or his delegate for
the purpose of determining the circumstances under and the extent to which
elective contributions to a cash or deferred profit-sharing plan may be
withdrawn on account of hardship without adverse effect upon such a plan's
continued qualification. Any determination of the existence of hardship and the
amount to be distributed on account thereof shall be made by the Administrator
(Or such other person as may be required to make such decisions under the
applicable regulations described above) in accordance with the foregoing rule as
applied in a uniform and non-discriminatory manner.
9.2 Manner of Distribution. A distribution under this Section 9 shall be
made in a lump sum payment to the Participant.
SECTION 10. OTHER DISTRIBUTIONS
10.1 Normal Distribution. The Account of any Participant will normally be
distributed in monthly installments which must commence at or within sixty (60)
days after the end of the Plan Year in which occurs his Normal Retirement Date
(as selected by the Employer in Section II of the Adoption Agreement) or in
which his Employment ceases, whichever is later, to continue over a period of
one hundred and twenty (120) months, The monthly amount shall normally be the
balance of the Participant's Account divided by the remaining number of months
in such one hundred and twenty (120) months, all rounded to the nearest cent,
However, the amount of each monthly installment may be recomputed and adjusted
from time to time no more frequently than monthly as the Trustee may reasonably
determine.
10.2 Optional Distribution. All Participants may request the Administrator
to approve, in its sole discretion, any of the following variations from the
normal pattern of distribution provided that the distribution (i) shall not
commence before the earlier of the Participant's retirement, death, disability,
separation from service, or attainment of age 59 1/2, (ii) extend beyond the
lifetime of the Participant or the joint lifetime of the Participant and his
spouse, as actuarially estimated either at the time of approval or periodically
in a consistent manner, and (iii) the present value of the distributions to be
made to the Participant is more than one-half (1/2) the value of his Account, as
determined at the time this distribution commences:
(a) Distribution made or commencing before his Normal Retirement Date,
(b) Distributions made or commencing after the normal time of distribution
described in Section 10.1.
(c) Distribution of his entire Account at one time,
(d) Installment payments of a fixed amount, such payments to be made until
exhaustion of the Participant's Account,
(e) Distribution in Kind,
(f) Any reasonable combination of the foregoing or any reasonable time or
manner of distribution within the above-stated limitations, including
purchase and distribution of bonds described in Code Section 405(d).
SECTION 11. INVESTMENT OF CONTRIBUTIONS
11.1 Manner of Investment. All contributions to the Account of a
Participant shall be held by the Trustee designated by the Employer in Section
XIV of the Adoption Agreement. The Account of a Participant may only be invested
and reinvested in shares of Designated Investment Companies (in such proportions
as tile Trustee is instructed in accordance with Section VII of the Adoption
Agreement) or such other investments as are permitted by the Distributor, except
to the extent that a Participant's Account is invested in a loan pursuant to
Section 112 hereof. Investment in the shares of more than one Designated
Investment Company is not permitted unless tile value of the Participant's
Account and the value of the investment in the second Designated Investment
Company exceed amounts from time to time determined by the Distributor.
11.2 Investment Decision.
(a) The decision as to the investment of an Account shall be made by the
person designated in Section VII of the Adoption Agreement. If the decision
is made by the Participant, the Participant shall convey investment
instructions to the Administrator and the Administrator shall promptly
transmit those instructions to the Trustee. Further, if the decision is to
be made by the Participant, the right to make such a decision shall remain
with the Participant upon his retirement and shall pass to the Distributee
upon such Participant's death.
(b) The person designated to make the decision as to the investment of an
Account may direct that the investment medium of an Account be changed,
provided that no such change may be made from or to an investment other
than a Designated Investment Company except to the extent permitted by the
terms of that other investment vehicle. If the Distributor determines in
its own judgment that there has been trading of Designated Investment
Companies in the Accounts of the Participants, any Designated Investment
Company may refuse to sell its shares to such Accounts. When an investment
is being made or changed the person designated to do so shall specify the
type of Account to which the change refers.
(c) If any decision as to investments is to be made by the Administrator,
it shall be made on a uniform basis with respect to all Participants.
(d) The Administrator and the Trustee may adopt procedures permitting
Participants to convey their investment instructions directly to the
transfer agent for the Designated Investment Company or Companies or for
any other investment permitted by the Distributor.
SECTION 12. LOANS
If selected by the Employer in Section IX of the Adoption Agreement, the
Trustee shall, upon the direction of the Employer, make one or more loans,
including any renewal thereof, to a Participant. Any such loan shall be subject
to such terms and conditions as the Employer shall determine pursuant to a
uniform policy adopted by the Employer for this purpose, which policy shall be
at least as restrictive as the following:
12.1 Equivalent Basis. No such loan may be made to a disqualified person
within the meaning of Code Section 4975(e), unless such loans are available to
all Participants on a reasonably equivalent basis and are not made available to
officers, shareholders or highly paid Participants in an amount which, when
stated as a percentage of such Participant's Account, is greater than is
available to other Participants.
12.2 Limitation on Amount. The amount of any such loan, when added to the
outstanding balance of all other loans from the Plan (and any other plan of the
Employer) to the Participant, shall not exceed the following:
Participant's Maximum Amount
Account Balance of Loan
$0 - $10,000 100% of Account balance
$110,000 - $20,000 $10,000
$20,000 - $100,000 50% of Account balance
over $100,000 $50,000
The value of the Participant's Account balance shall be as determined by the
Employer; provided, however, that such determination shall in no event take into
account the portion of the Participant's Account attributable to Participant
Deductible Voluntary Contributions.
12.3 Maximum Term, The term of any such loan shall not exceed 5 years;
provided, however, that such limitation shall not apply to any loan used to
acquire, construct, reconstruct, or substantially rehabilitate any dwelling unit
which within a reasonable time is to be used (determined at the time the loan is
made) as a principal residence of the Participant or a member of the family
(within the meaning of Code Section 267(c)(4)) of the Participant.
12.4 Promissory Note, Any such loan shall be evidenced by a promissory note
executed by the Participant and payable to the Trustee, on the earliest of (i) a
fixed maturity date meeting the requirements of Section 12.3 above, but in no
event later than the Participant's Normal Retirement Date,
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(ii) the Participant's death, or (iii) when distribution hereunder is to be made
to the Participant (other than a withdrawal which will not reduce the Value of
his Account to the extent that the aggregate amount owing could not be made as a
new loan within the limitation set forth in Section 12.2 above). Such promissory
note shall be secured by an assignment of the Participant's Account to the
Trustee. Such promissory note shall evidence such terms as are required by this
Section 12.
12.5 Interest. Any such loan shall be subject to a reasonable rate of
interest.
12.6 Repayment. If a note is not paid when the Participant's benefits
hereunder are to be distributed, then any unpaid portion of such loan and unpaid
interest thereon shall be deducted by the Trustee from the Participant's Account
before benefits are paid from or purchased out of the Account. Such deduction
shall, to the extent thereof, cancel the indebtedness of the Participant. If a
note is not paid when it otherwise becomes payable under Section 12.4, or if at
any time the Employer determines that the aggregate amounts owing by a
Participant upon such notes exceed the vested value of the Participant's
Account, the Participant shall be promptly notified in writing that unless such
loan or excess is repaid within 30 days, action will be taken to collect the
same plus any cost of collections.
12.7 Accounting. Loans shall be made only from the Account of the
Participant (exclusive of that portion of the Account attributable to
Participant Deductible Voluntary Contributions) requesting the loan, and shall
be treated as an investment of his Account. All interest payments made with
respect to such loan shall be credited to the Participant's Account.
12.8 Precedence. This Section 12 overrides Section 17 below.
SECTION 13. ADMINISTRATION
13.1 Appointment of Administrator. The Employer may from time to time in
writing appoint one of more persons as Administrator (hereinafter referred to in
the singular) who shall have all power and authority necessary to carry out the
terms of the Plan. A person appointed as Administrator may also serve in any
other fiduciary capacity, including that of Trustee, with respect to the Plan.
The Administrator may resign upon fifteen (15) days advance written notice to
the Employer, and the Employer may at any time revoke the appointment of the
Administrator with or without cause. The Employer shall exercise the power and
fulfill the duties of the Administrator if at any time the position is vacant.
13.2 Named Fiduciaries. The "Named Fiduciaries" within the meaning of the
Act shall be the Administrator and the Trustee.
13.3 Allocation of Responsibilities. Responsibilities upon the Plan shall
be allocated among the Trustee, the Administrator and the Employer as follows:
(a) Trustee: The Trustee shall have exclusive responsibility to hold,
manage and invest, pursuant to instructions communicated to it by the
Administrator under Section VII of the Adoption Agreement and Section 11.2
above, the foods received by it subject to the Trust Agreement under which
it serves.
(b) The Administrator: The Administrator shall have the responsibility sod
authority to control the operation and administration of the Plan in
accordance with its terms including, without limiting the generality of the
foregoing, (1) any investment decisions assigned to it under Section VII of
the Adoption Agreement or transmission to the Trustee of any Participant
investment decision under Section 11.2(2) interpretation of the Plan,
conclusive determination of all questions of eligibility, status, benefits
and rights under the Plan and certification to the Trustee of all benefit
payments under the Plan; (3) hiring of persons to provide necessary
services to the Plan not provided by Employees; (4) preparation and filing
of all statements, returns and reports required to be filed by the Plan
with any agency of Government; (5) compliance with all disclosure
requirements of all state or federal law; (6) maintenance and retention of
all Plan records as required by law, except those required to be maintained
by the Trustee; and (7) all functions otherwise assigned to it under the
terms of the Plan.
(c) Employer: The Employer shall be responsible for the design of the Plan,
as adopted or amended, the designation of the Administrator and Trustee as
provided in the Plan, the delivery to the Administrator and the Trustee of
Employee information necessary for operation of the Plan, the timely making
of the Employer Contributions specified in Sections IV or V of the Adoption
Agreement, and the exercise of all functions provided in or necessary to
the Plan except those assigned in the Plan to other persons. (d) This
Section 13.3 is intended to allocate individual responsibility for the
prudent execution of the functions assigned to each of the Trustee, the
Administrator and the Employer and none of such responsibilities or any
other responsibilty shall be shared among them unless specifically provided
in the Plan, Whenever one such person is required by the Plan to follow the
directions of another, the two shall not be deemed to share responsibility,
but the person who gives the direction shall be responsible for giving it
and the responsibility of the person receiving the direction shall be to
follow it insofar as it is on its face proper under applicable law.
13.4 More Than One Administrator, If more than one individual is appointed
as Administrator under Section 13.1, such individuals shall either exercise the
duties of the Administrator in concert, acting by a majority vote or allocate
such duties among themselves by written agreement delivered to the Employer and
the Trustee. In such a case, the Trustee may rely upon the instruction of any
one of the individuals appointed as Administrator regardless of the allocation
of duties among them.
13.5 No Compensation. The Administrator shall not be entitled to receive
any compensation from the funds held under the Plan for its services in that
capacity unless so determined by the Employer or required by law.
13.6 Record of Acts. The Administrator shall keep a record of all his
proceedings, acts and decisions, and all such records and all instruments
pertaining to Plan administration shall be subject to inspection by the Employer
at any time. The Employer shall supply, and the Administrator may rely on the
accuracy of, all Employee data and other information needed to administer the
Plan.
13.7 Bond. The Administrator shall be required to give bond for the
faithful performance of his duties to the extent, if any, required by the Act,
the expense to be borne by the Employer.
13.8 Agent for Service of Legal Process. The Administrator shall be agent
for service of legal process on the Plan.
13.9 Rules. The Administrator may adopt or amend and shall publish to the
Employees such rules and forms for the administration of the Plan, and may
employ or retain such attorneys, accountants, physicians, investment advisors,
consultants and other persons to assist in the administration of the Plan as it
deems necessary or advisable.
13.10 Delegation. To the extent permitted by applicable law, the
Administrator may delegate all or part of his responsibilities hereunder and at
any time revoke such delegation, by written statement communicated to the
delegate and the Employer. The Trustee may, but need not, act on the
instructions of such a delegate. The Administrator shall annually review the
performance of all such delegates.
13.11 Claims Procedure. It is anticipated that the Administrator will
administer the Plan to provide Plan benefits without waiting for them to be
claimed, but the following procedure is established to provide additional
protection to govern unless and until a different procedure is established by
the Administrator and published to the Participants and Beneficiaries.
(a) Manner of Making Claims. A claim for benefits by a Participant or
Beneficiary to be effective under this procedure must be made to the
Administrator and must be in writing unless the Administrator formally or
by course of conduct waives such requirements.
(b) Notice of Reason for Denial. If an effective claim is wholly or
partially denied, the Administrator shall furnish such Participant or
Beneficiary with written notice of the denial within sixty (60) days after
the original claim was filed. This notice of denial shall set forth in a
manner calculated to be understood by the claimant (1) the reason or
reasons for denial, (2) specific reference to pertinent plan provisions on
which the denial is based, (3) a description of any additional information
needed to perfect the claim and an explanation of why such information is
necessary, and (4) an explanation of the Plan's claim procedure.
(c) The Participant or Beneficiary shall have sixty (60) days from receipt
of the denial notice in which to make written application for review by the
Administrator, The Participant or Beneficiary may request that the review
be in the nature of a hearing. The Participant or Beneficiary shall have
the rights (1) to have representation, (2) to review pertinent documents,
and (3) to submit comments in writing. (d) The Administrator shall issues
decision on such review within sixty (60) days after receipt of an
application for review, except that such period may be extended for a
period of time not to exceed an additional sixty (60) days if the
Administrator determines that special circumstances (such as the need to
hold a hearing) requires such extension. The decision on review shall be in
writing and shall include specific reasons for the decision, written in a
manner calculated to be understood by the claimant, and specific references
to the pertinent Plan provisions on which the decision is based.
SECTION 14 FEES AND EXPENSES
All reasonable fees and expenses of the Administrator or Trustee incurred
in the performance of their duties hereunder or under the Trust shall be paid by
the Employer; and to the extent not so paid by the Employer, said fees and
expenses shall be deemed to be an expense of the Trust and the Trustee is
authorized to charge the same to the Accounts of the Participants, and unless
allocable to the Accounts of specific Participants, they shall be charged
against the respective accounts of all or a reasonable group of Participants in
such reasonable manner as the Trustee shall determine,
SECTION 15. BENEFIT RECIPIENT INCOMPETENT
OR DIFFICULT TO ASCERTAIN OR LOCATE
15.1 Incompetency. If, in the sole judgment of the Administrator a
Participant or Beneficiary is physically or mentally incapable of handling his
financial affairs, payment otherwise due him may be made for his benefit in the
sole discretion of the Administrator either to his legal
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representative or to any of his relatives or friends or maybe applied directly
for his support and maintenance, Payment so made in good faith shall completely
discharge the Employer, the Administrator and the Trustee from liability
therefor.
15.2 Difficulty to Ascertain or Locate, If it is impossible or difficult to
ascertain the person who is entitled to receive any benefit under the Plan, the
Administrator in its discretion may direct that such benefit be (i) paid to
another person in order to carry Out the Plan's purposes; or (ii) retained in
the Trust; or (iii) paid to a court pending judicial determination of the right
thereto.
SECTION 16. DESIGNATION OF BENEFICIARY
Each Participant may submit to the Administrator a properly-executed
Designation of Beneficiary form. In order to be effective, such Designation must
have been properly executed and submitted to the Administrator at the home
office thereof before the death of the Participant. The last effective
Designation accepted by the Administrator shall be controlling, and whether or
not fully dispositive of his Account, thereupon shall revoke all Designations
previously submitted by the Participant. Each such executed Designation is
hereby specifically incorporated herein by reference and shall be construed and
enforced in accordance with the laws of the state in which the Employer has its
principal place of business. To the extent that any portion of an Account of a
deceased Participant is not governed by a Designation which names at least one
living Beneficiary designated by the Participant, that portion of the Account
shall be distributed to the estate of the deceased Participant.
SECTION 17. SPENDTHRIFT PROVISION
No interest of any Participant or Beneficiary shall be assigned,
anticipated or alienated in any manner nor shall it be subject to attachment,
bankruptcy proceedings or to any other legal process or to the interference or
control of creditors or others, except to the extent that Participants may
secure loans from the Trust with their Accounts pursuant to Section 12 hereof.
SECTION 18. NECESSITY OF QUALIFICATION
This Plan is established with the intent that it shall qualify under Code
Section 401 (a) as that Section exists at the time the Plan is established. If
the Employer fails to obtain or retain such a determination that the Plan so
qualifies, the Plan shall cease to have any of the benefits of Revenue Procedure
80-29 or successor procedure which apply to the Plan as a prototype plan. The
Administrator shall promptly notify the Trustee in writing of any determination
made with respect to the qualified status of the Plan. Notwithstanding any other
provision contained in this Plan, if the Internal Revenue Service determines
that the Plan initially fails to so qualify, then the Employer shall promptly
either amend the Plan under Code Section 401(b) 50 that it does qualify, or
direct the Trustee to terminate the Plan and distribute all the assets of the
Trust equitably among the contributors thereto in proportion to their
contributions, and the Plan shall be considered to be rescinded and of no force
and effect.
SECTION 19. AMENDMENT OR TERMINATION
19.1 Amendment or Termination. The Employer may at any time, and from time
to time amend this Prototype Plan, the Adoption Agreement and the Trust
Agreement (including a change in any election it has made in the Adoption
Agreement), or suspend or terminate this Plan by giving written notice to the
Distributor and to the Trustee, but the Trust may not thereby be diverted from
the exclusive benefit of the Participants, their Beneficiaries, survivors or
estates, or the administrative expenses of the Plan, nor revert to the Employer,
nor may an allocation or contribution theretofore made be changed thereby or an
amendment otherwise operate retroactively except as the same may be deemed
necessary in order to make the Plan qualify under Code Section 401(a). An
amendment shall be deemed necessary for this purpose if counsel for the Employer
certifies that in its opinion the written ruling of the Commissioner of Internal
Revenue that the Plan meets such requirements can be obtained within a
reasonable time only with such retroactive amendment. Any amendment by the
Employer which is other than the amendment of the Employer's prior designation
of an option or provision set forth or referred to in the Adoption Agreement
will constitute a substitution by the Employer of an individually designed plan
for this prototype plan and the general amendment procedure of the Internal
Revenue Service governing individually designed plans will be applicable.
Nothing contained herein shall constitute an agreement or representation by the
Distributor that it will continue to maintain its sponsorship of the Plan
indefinitely.
19.2 Delegation. The Employer hereby delegates to the Distributor the
authority to amend so much of the Adoption Agreement, this Prototype Plan, and
the Trust Agreement, as is in prototype form and, to the extent to which the'
Employer could effect such amendment, the Employer shall be deemed to have
consented to any amendment so made, When an election within the prototype form
has been made by the Employer, it shall be deemed to continue after amendment of
the prototype form unless and until the Employer expressly further amends the
election, notwithstanding that the provision for the election in the amended
prototype form is in a different form or place; provided, however, that if the
amended form inadvertently fails to provide means to duplicate exactly the
earlier election, such earlier election shall continue until such further
amendment. The immediately preceding sentence is subject to the qualification
that each Employer hereby delegates to the Distributor, in the event of such an
amendment of the prototype form, authority to determine conclusively that such a
continuation of an earlier election by the employer is not advisable and to make
the election for the Employer in the amended prototype form which in the
judgment of the Distributor most nearly corresponds with the election made by
the employer before an amendment of the prototype form, provided the following
procedure is followed: the election for the Employer may be made with respect to
any specified Employers as to whom it may be made applicable singly, or such
election may be made with respect to all Employers as to whom it may be made
applicable as a group; and the election shall be made as of an effective date
which has been specified in a notice mailed or delivered, at the last
address(es) of the Employer(s) on the records of the Distributor, to the
Employer(s) at least twenty (20) days before the effective date of the election.
Such notice may be mailed to Employers to whom it cannot be applicable by reason
of a previous election made by the Employer or otherwise, but it shall be
effective only as to those Employers who have received the notice and have not
themselves made a new election with respect to that item since the amendment of
the prototype form and previous to the effective date of such election by the
Distributor. The foregoing delegations of authority to make elections, or to
make amendments, shall not impose any duty on the Distributor to make them nor
shall it affect the interpretation of the Plan if they are not used.
19.3 Distribution of Accounts Upon Termination. Upon termination of the
Plan or complete discontinuance of contributions under it, the Administrator
shall determine whether to pay the interests of Participants, former
Participants and Beneficiaries immediately, to retain such interest in the Trust
and pay them in the future according to Section 10, or to use what other methods
the Administrator deems advisable in order to furnish whatever benefits the
Trust will provide, subject to the limitations of Section 10.2 limiting the
length of the period over which an Account can be paid.
SECTION 20. TRANSFERS
Nothing contained herein or in the Trust shall prevent the merger or
consolidation of the Plan with, or transfer of assets or liabilities of the Plan
to, another plan meeting the requirements of Code Section 401(a) or the transfer
to the Plan of assets or liabilities of another such plan so qualified under the
Code. Any such merger, consolidation or transfer shall be accompanied by the
transfer of such existing records and information as may be necessary to
properly allocate such assets among Participants, including any tax or other
information necessary for the Participants or persons administering the plan
which is receiving the assets. The terms of such merger, consolidation or
transfer must be such that if this Plan then terminated, each Participant would
receive a benefit immediately after the merger, consolidation or transfer equal
to or greater than the benefit be would have received if the Plan had terminated
immediately before the merger, consolidation or transfer.
SECTION 21. MISCELLANEOUS
21.1 Misrepresentation. Notwithstanding any other provision herein, if an
Employee misrepresents his age or any other fact, any benefit payable to him
hereunder shall be the smaller of: (i) the amount that would be payable if no
facts had been misrepresented, or (ii) the amount that would be payable if the
facts were as misrepresented.
21.2 Legal or Equitable Action. If any legal or equitable action with
respect to the Plan is brought by or maintained against any person, and the
results of such action are adverse to that person, attorney's fees and all other
costs to the Employer, the Administrator or the Trust of defending or bringing
such action shall be charged against the interest, if any, of such person under
the Plan.
21.3 No Enlargement of Plan Rights. It is a condition of the Plan and Trust
Agreement, and each Participant by participating herein expressly agrees, that
he shall look solely to the assets of the Trust for the payment of any benefit
under the Plan.
21.4 No Enlargement of Employment Rights. Nothing appearing in or done
pursuant to the Plan shall be construed to (a) give any person a legal or
equitable right or interest in the assets of the Trust or distribution
therefrom, nor against the Employer, except as expressly provided herein; (b)
create or modify any contract of employment between the Employer and any
Employee or obligate the Employer to continue the services of any Employee; or
(c) allow service as a sole proprietor or partner, or compensation therefor, to
be taken into account for any purpose of the Plan.
21.5 Written Orders. In taking or omitting to take any action under this
Plan or under the Trust, the Trustee may conclusively rely upon and shall be
protected in acting upon any written orders from or determinations by the
Employer or the Administrator as appropriate, or upon any other notices,
requests, consents, certificates or other instruments or papers believed by it
to be genuine and to have been properly executed and, so long as it acts in good
faith, in taking or omitting to take any other action.
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21.6 No Release from Liability. Nothing in the Plan shall relieve any
person from liability for any responsibility under Part 4 of Title I of the Act,
Subject thereto neither the Trustee, the Administrator nor any other person
shall have any liability under the Plan, except as a result of his negligence or
wilful misconduct, and in any event the Employer shall fully indemnify and save
harmless all persons from any such liability except that resulting from their
negligence or wilful misconduct.
21.7 Discretionary Actions. Any discretionary action, including the
granting of a loan pursuant to Section 12 hereof, to be taken by the Employer or
the Administrator under this Plan shall be non-discriminatory in nature and all
Employees similarly situated shall be treated in a uniform manner.
21.8 Headings. Headings herein are primarily for convenience of reference,
and if they conflict with the text, the text shall control.
21.9 Applicable Law. This Plan shall, to the extent state law is
applicable, be construed and enforced in accordance with, and the rights of the
parties shall be governed by, the laws of the state in which the Employer has
its principal place of business.
21.10 No Reversion. Notwithstanding any other contrary provision of the
Plan, but subject nevertheless to Sections 5, 6 and 18, no part of the assets in
the Trust shall revert to the Employer, and no part of such assets, other than
that amount required to pay taxes or administrative expenses, shall be used for
any purpose other than exclusive benefit of Employees or their Beneficiaries.
21.11 Notices. The Employer will provide the notice to other interested
parties contemplated under Code Section 7476 before requesting a determination
by the Secretary of the Treasury or his delegate with respect to the
qualification of the Plan.
21.12 Conflict. In the event of any conflict between the provisions of this
Plan and the terms of any contract or agreement issued thereunder or with
respect thereto, the provisions of the Plan shall control.
20
<PAGE>
TRUST AGREEMENT
ESTABLISHED PURSUANT TO THE
SCUDDER CASH OR DEFERRED PROFIT SHARING PLAN
The Employer has established the Scudder Cash or Deferred Profit Sharing
Plan for the benefit of the Participants therein, As part of the Plan the
Employer has designated the person or persons specified in the Adoption
Agreement as Trustee(s) to maintain and administer a Trust upon the following
terms and conditions for the investment of contributions under the Plan, The
definitions in Section 2 of the Prototype Plan apply herein,
1. TRUST FUND
The Trustee shall open and maintain a Trust account for the Plan, with such
subdivisions as the Employer may specify pursuant to the Plan; provided,
however, that the maintaining of such subdivisions shall not require the
physical separation of assets.
Whenever a Participant makes a contribution the Administrator shall
ascertain that the Participant has received a copy of the current prospectus
relating to the shares of any Designated Investment Company in which such
contribution is to be invested plus, where required by any state or federal law,
the current prospectus relating to any other investment in which contributions
are to be invested, By remitting such a contribution to the Trustee the
Administrator shall be deemed to warrant to the Trustee that the Participant has
received such a prospectus, and by remitting any other contribution to the
Trustee the Administrator shall be deemed to warrant to the Trustee that the
Administrator has received a current prospectus of any Designated Investment
Company in which it is to be invested, plus, where required by any state or
federal law, the current prospectus relating to any other investment in which
contributions are to be invested.
All contributions to the Trust, and any assets into which such
contributions shall be invested or reinvested shall be hereinafter referred to
in this Trust Agreement as the "Trust Fund."
2. ADMINISTRATOR
The Plan shall be administered by the Administrator as provided for in
Section 13 of the Prototype Plan, and the Trustee shall have no duties with
respect to the administration of the Plan, (However an individual who is a
Trustee may also be Administrator.)
3. TRUSTEE: NUMBER, QUALIFICATIONS AND MAJORITY ACTION
The number of Trustees shall be one, two or three. Any natural person and
any corporation having power to act as a trustee in the premises may be a
Trustee. No person shall be disqualified from being a Trustee by being employed
by the Employer, by being Administrator, by being a trustee under any other plan
of the Employer or by being a Participant in this plan or such other plan.
A Trustee holding office as sole Trustee hereunder shall have all the
powers and duties herein given the Trustees. When the number of Trustees
hereunder is three, any two of them may act, but the third Trustee shall be
promptly informed of the action. When there are two or more Trustees hereunder,
they may, by written instrument communicated to the Employer and the
Administrator allocate among themselves the powers and duties herein given to
the Trustee. If such an allocation is made, to the extent permitted by
applicable law, no Trustee shall be liable either individually or as a trustee
for loss to the Plan from the acts or omissions of another Trustee with respect
to duties allocated to such other Trustee.
4. CHANGE OF TRUSTEE
Any Trustee may resign as Trustee upon notice in writing to the Employer
and the Administrator, and the Employer may remove Trustee upon notice in
writing to the Administrator, and to all the Trustees. The removal of a Trustee
shall be effective immediately, except that a corporation serving as a Trustee
shall be entitled to sixty (60) days' notice which it may waive, and the
resignation of a Trustee shall be effective immediately, provided that neither a
removal nor a resignation of a Trustee shall be effective if the Trustee is the
sole Trustee until a successor Trustee has been appointed and has accepted the
appointment. If within sixty (60) days of the delivery of the written
resignation or removal of a sole Trustee another Trustee shall not have been
appointed and have accepted, the resigning or removed Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee or
may terminate the Plan pursuant to Section 19 of the Prototype Plan. The Trustee
shall not be liable for the acts and omissions of such successor.
At any time when the number of Trustees is one or two the Employer may but
not need appoint one or two additional Trustees, provided that the number of
Trustees shall not be more than three. Such an appointment and the acceptance
thereof shall be in writing, and shall take effect upon the delivery of written
notice thereof to all the Trustees and the Administrator and such acceptance by
the appointed Trustee, provided that if a corporation is a Trustee then in the
absence of its consent such an appointment of an additional or successor Trustee
shall not have become effective until sixty (60) days after its receipt of
notice.
Although any Employer adopting the Plan may choose any Trustee who is
willing to accept the Trust, the Distributor or its successor, may make or may
have made tentative standard arrangements with any bank or trust company with
the expectation it will be used as the Trustee by a substantial group of
Employers. It is also contemplated that more favorable results can be obtained
with a substantial volume of business, and that it may become advisable to
remove such bank or trust company as Trustee and substitute another Trustee.
Therefore, anything else in the prior two paragraphs of this Section 4
notwithstanding, each Employer adopting this Plan hereby agrees that the
Distributor may, upon a date specified in a notice to the affected Employer of
at least thirty (30) days and in the absence of written objection by the
Employer received by the Distributor before such date, (i) remove any such
Trustee and in that case, or if such a Trustee has resigned to a group of
Employers, (ii) appoint such a successor Trustee, provided such action is taken
with respect to all Employers similarly circumstanced of which the Distributor
has knowledge, and provided such notice is given in writing mailed postage
prepaid to the Employer at the latest address which has been furnished the
Distributor directly or supplied to it by such Trustee which is to be succeeded.
If within sixty (60) days after such Trustee's resignation or removal the
Employer has not appointed a successor which has accepted such appointment,
unless the appointment of a successor Trustee is waiting for action by the
Distributor pursuant to the next-preceding sentence according to notice which
has been given, the Trustee may petition an appropriate court for the
appointment of its successor. The Trustee shall not be liable for the acts and
omissions of such successor.
Successor Trustees qualifying under this Section 4 shall have all rights
and powers and all duties and obligations of original Trustees.
5. INVESTMENT OF TRUST FUND
The Trust Fund shall be fully invested and reinvested pursuant to Section
VII of the Adoption Agreement. The Trustee shall have full power and authority
to invest in any property specified in instructions communicated to it by the
Administrator, and the Trustee may invest in property selected by it pursuant to
authority delegated to it and accepted by it, all without regard to the law of
any state regarding proper investment. The Trustee shall have no responsibility
for determining how the Trust Fund is to be invested or to see that investment
instructions communicated to it comply with the terms of the Plan. Annually, on
the Valuation Date or more frequently in the discretion of the Trustee, the
assets of the Trust shall be revalued at fair market value and the accounts of
the Trust shall be proportionately adjusted to reflect income, gains, losses or
expenses, if the system of accounting does not directly accomplish all such
adjustments. The Trust Fund shall be administered separately from, and shall not
include any assets being administered under, any other plan of an employer.
Interim valuations, if any, shall be applied uniformly and in a
non-discriminatory manner for all Employees.
Any assets in the Trust Fund may be registered in the name of the Trustee
or any nominee designated by the Trustee.
6. DISTRIBUTION FROM THE TRUST FUND
The Trustee shall make or cause to be made such distribution from the Trust
Fund as the Administrator may in writing direct upon certification by the
Administrator that the same is for the exclusive benefit of Employees or former
Employees of the Employer or their Beneficiaries, or for the payment of expenses
of administering the Plan.
7. CERTIFICATIONS AND INSTRUCTIONS
Any pertinent vote or resolution of the Board of Directors of the Employer
shall be certified to the Trustee over the signature of the Secretary or an
Assistant Secretary of the Employer and under its corporate seal. The Employer
shall promptly furnish the Trustee from time to time certificates of an officer
of the Employer evidencing the appointment and termination of office of the
individual or individuals appointed as Administrator under Section 13 of the
Prototype Plan.
The Administrator shall furnish the Trustee certificates signed by the
individual or individuals appointed as Administrator, naming the person or
persons authorized to give notice on behalf of the Administrator and providing
specimens of their signatures; and all requests, directions, requisitions for
moneys and instructions by the Administrator to the Trustee shall be writing,
signed by such person or persons as may be designated from time to time by the
Administrator; they may be standing requests, directions, requisitions or
instructions; and may be made to be contingent upon determination made by the
Trustee.
21
<PAGE>
8. ACCOUNTS AND APPROVAL
The Trustee shall keep accurate and detailed accounts of all investments,
receipts and disbursements and other transactions hereunder, and all books and
records relating thereto shall be open at all reasonable times to inspection and
audit by any person or persons designated by the Administrator or by the
Employer.
Within ninety (90) days following the close of each of the Plan Years
selected by the Employer in Section XII of the Adoption Agreement the Trustee
may, and upon the request of the Employer or the Administrator shall, file with
the Administrator and the Employer a written report setting forth all securities
or other investments (including insurance contracts) purchased and sold, all
receipts, disbursements and other transactions effected by them during the
period since the date covered by the next prior report, and showing the
securities and other property held at the end of such period, and such other
information about the Trust Fund as the Administrator shall request. Within
ninety (90) days from the date of mailing or delivery of such report the
Employer shall certify in writing to the Trustee that it has carefully reviewed
the contents of the report and has found therein no matter to which it objects
or takes exception other than those which it therewith sets forth accompanied by
the specific ground or grounds for such objections or exceptions.
9. TAXES
The Trustee may assume that any taxes assessed on or in respect of the
Trust Fund are lawfully assessed unless the Administrator shall in writing
advise the Trustee that in the opinion of counsel for the Employer such taxes
are not lawfully assessed. In the event that the Administrator shall so advise
the Trustee, the Trustee, if so requested by the Administrator and suitable
provision for their indemnity having been made, shall contest the validity of
such taxes in any manner deemed appropriate by the Administrator or counsel for
the Employer. The word "taxes" in this Section 9 shall be deemed to include any
interest or penalties that may be levied or imposed in respect to any taxes
assessed.
10. EMPLOYMENT OF COUNSEL
The Trustee may employ legal counsel (who may be counsel for the Employer)
and shall be fully protected in acting or refraining from acting, upon such
counsel's advice in respect to any legal questions.
11. REIMBURSEMENT AND COMPENSATION OF TRUSTEE
The Trustee shall be entitled to be reimbursed for his reasonable expenses.
An individual Trustee who is an Employee of the Employer shall not be
compensated for his services as Trustee, save as his compensation as an Employee
of the Employer may be such compensation. A corporation, or an individual who is
not an Employee of the Employer, which serves as a Trustee shall be entitled to
reasonable compensation for its or his services. Any taxes of any kind
whatsoever, including transfer taxes incurred in connection with the investment
or reinvestment of the assets of the Trust Fund that may be levied or assessed
in respect to such assets shall, if allocable to the Accounts of specific
Participants, be charged to such Accounts, and if not so allocable, they shall
be equitably apportioned among all such Participants' Accounts. All other
administrative expenses incurred by the Trustee in the performance of his duties
including fees for legal services rendered to them shall be paid by the Employer
within a reasonable time specified by the Trustee or at the Trustee's option may
be equitably apportioned among such Accounts.
12. LIMITATION OF TRUSTEE'S LIABILITY; INDEMNIFICATION
Nothing in this Trust Agreement or the Plan of which it is a part shall
relieve any person from liability for any responsibility under Part 4 of Title I
of the Act. Subject thereto, the Trustee shall have no liability under the Plan,
except as may arise from its negligence or wilful misconduct, and in any event,
the Employer shall fully indemnify the Trustee and save it harmless from any
such liability except that resulting from its negligence or wilful misconduct.
In the application of the foregoing, except as otherwise required by law:
12.1 The Trustee shall have no duty to take any action other than as herein
specified, unless the Administrator shall furnish it with instructions in proper
form and such instructions shall have been specifically agreed to by it, or to
defend or engage in any suit unless it shall have first agreed in writing to do
so and shall have been fully indemnified to its satisfaction.
12.2 The Trustee may conclusively rely upon and shall be protected in
acting in good faith upon any written representation or order from the
Administrator or any other notice, request, consent, certificate or other
instrument or paper believed by it to be genuine and properly executed, or any
instrument or paper if it believes the signature thereon to be genuine.
12.3 The Trustee shall not be liable for interest on any reasonable cash
balances maintained in the Trust.
12.4 The Trustee shall not be obligated to, but may, in its discretion,
receive a contribution from a Participant unless forwarded by the Administrator.
13. AMENDMENT
No part of the corpus or income of the Trust Fund shall be used for or
diverted to purposes other than the exclusive benefit of Participants or their
Beneficiaries or the administrative expenses of the Plan, or revert to the
Employer except as specifically permitted by the terms of the Plan. The right of
the Employer to amend or terminate the Trust Agreement and the delegation of
that right are set forth in Section 19 of the Prototype Plan, subject to the
foregoing and other limitations in the Plan.
The Employer will cause a copy of any amendment of the Adoption Agreement
to be delivered to the Trustee for the Trustee's information.
14. TERMINATION
Upon certification by the Board of Directors of the Employer that the
Employer has terminated the Plan as therein provided and that the Trust Fund or
part thereof is accordingly to be distributed in accordance with the termination
provisions thereof, the Trustee shall pay such amounts from the Trust Fund as
the Administrator may direct, either directly to the persons entitled to receive
such amounts or to the Administrator for distribution, provided the
Administrator further certifies that all such amounts are payable under the Plan
to Participants or their Beneficiaries or for administrative expenses of the
Plan or for other payments in accordance with the provisions thereof.
15. SUCCESSOR TRUSTEES
Any corporation into which a corporation acting as a Trustee hereunder may
be merged or with which it may be consolidated, or any corporation resulting
from any merger, reorganization or consolidation to which such Trustee may be a
party, shall be the successor of the Trustee hereunder, without the necessity of
any appointment or other action, provided it does not resign and is not removed.
16. ENFORCEMENT OF PROVISIONS
To the extent permitted by applicable law, the Employer and the
Administrator shall have the exclusive right to enforce any and all provisions
of this Agreement on behalf of all Employees or former Employees of the Employer
or their Beneficiaries or other persons having or claiming to have an interest
in the Trust Fund or under the Plan. In any action or proceeding affecting the
Trust Fund or any property constituting a part or all thereof, or the
administration thereof or for instructions to the Trustee, the Employer, the
Administrator and the Trustee shall be the only necessary parties; and shall be
solely entitled to any notice of process in connection therewith; and any
judgment that may be entered in such action or proceeding shall be binding and
conclusive on all persons having or claiming to have any interest in the Trust
Fund or under the Plan.
17. VOTING
The Trustee shall deliver, or cause to be executed and delivered, to the
Administrator all notices, prospectuses, financial statements, proxies and proxy
soliciting materials received by the Trustee relating to securities held by the
Trust, and the Administrator shall deliver these to the appropriate Participant
or the Beneficiary of a deceased Participant. The Trustee shall not vote any
securities held by the Trust except in accordance with the written instructions
of the Participant or the Beneficiary of the Participant, if the Participant is
deceased.
18. GOVERNING LAW
This instrument shall, to the extent state law is applicable, be governed
by and interpreted under the laws of the state in which the Employer has its
principal place of business.
19. ACCEPTANCE
The Trustee accepts the trust hereunder.
20. TRANSFER TO EMPLOYER
Anything contained elsewhere in this Agreement to the contrary
notwithstanding, the Employer reserves the right by action of its Board of
directors to direct the Trustee to transfer the Trust Fund to the Employer
subject to claims against it for administrative expenses if the Plan is properly
terminated in accordance with the terms and conditions of the original Plan upon
the Employer's receipt of a determination letter from the Director of Internal
Revenue determining that the Plan initially fails to qualify under Section 401
(a) of the Internal Revenue Code. The Employer shall direct the Trustee to
transfer to Employees such portion of the Trust Fund as the Plan requires to be
transferred to them on account of their contributions, but the Trustee shall not
be required to see to the application of the Trust Fund for this purpose. If
such termination ceases to be possible this section shall be of no further force
or effect.
22
<PAGE>
Telephone
numbers and
addresses
- --------------------------------------------------------------------------------
National toll free
telephone numbers
and addresses
----------------------------------------------------------------------
For information about the Scudder 401(k) program,
CALL (toll-free) 1-800-225-2471
(within Massachusetts, call collect 617-482-3990)
or
WRITE to: Scudder Funds Croup Retirement Plans
175 Federal Street
Boston, MA 02110
A Group Retirement Specialist from Scudder Fund Distributors, Inc.,
underwriter for the Scudder funds, will answer your calls and letters.
----------------------------------------------------------------------
- --------------------------------------------------------------------------------
Local addresses
of Scudder Fund
Distributors, Inc.
Boca Raton
150 East Palmetto Park Road
Boca Raton, Florida 33432
305-395-0040
Boston
175 Federal Street
Boston, Massachusetts 02440
617-482-3990
Chicago
Suite 2200, 111 East Wacker Drive
Chicago, Illinois 60604
312-861-2700
Cincinnati
540 Carew Tower
Cincinnati, Ohio 45202
513-621-2733
Cleveland
Suite 700, 1801 East Ninth Street
Cleveland, Ohio 44114
216-241-7744
Dallas
Suite 2124, Plaza of the Americas
700 North Pearl
Dallas, Texas 75201
214-742-1465
1530 Bank of the Southwest Building
Houston, Texas 77002
713-659-3838
Los Angeles
333 South Hope Street
Los Angeles, California 90071
243-6284444
New York
345 Park Avenue
New York, New York 10154
212-350-8200
Philadelphia
Three Girard Plaza
Philadelphia, Pennsylvania 19402
215-864-7200
Portland, Oregon
Benjamin Franklin Plaza
1 S.W. Columbia St.
Portland, Oregon 97258
503-224-3999
San Francisco
Suite 4100, 104 California Street
San Francisco, California 94144
415-981-8191
23
<PAGE>
Scudder
- ---------------------------------------------
This booklet is not to be used in connection
with the offering of any of the Scudder funds
unless preceded or accompanied by the
appropriate current prospectuses. Scudder
Fund Distributors, Inc. is the underwriter
of the Scudder no-load mutual funds.
K-S-33 (C) Scudder Fund Distributors, Inc.
Exhibit 16
SCUDDER DEVELOPMENT FUND TOTAL AND CAPITAL SERIES
JUNE YEARS
<TABLE>
<CAPTION>
TOTAL 1 YEAR
DISTRIBUTIONS REINV CAP TOTAL CAPITAL TOTAL JUNE DATE ADJUSTED TOTAL
DATE CAP GAIN INCOME PRICE SHARE AMT SHARE AMT SERIES SERIES PRICES JUNE PRICE RETURN
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1
8/6/71 0.035 49.86 0.00070 0.00070 1.00070 1.00070 36.78 674 37.072
7/31/72 0.58 80.23 0.00723 0.00723 1.00794 1.00794 44.46 675 44.813 20.9
8/13/75 0.21 39.89 0.00000 0.00526 1.00794 1.01324 48.36 676 49.000 9.3
8/6/76 0.35 46.85 0.00000 0.00747 1.00794 1.02081 53.04 677 54.144 10.5
8/1/77 0.69 53.82 0.00000 0.01282 1.00794 1.03390 81.40 678 84.159 55.4
8/1/78 0.55 87.62 0.00000 0.00620 1.00794 1.04039 30.18 679 94.197 11.9
10/31/78 3 FOR 1 SPLIT 3.00000 3.00000 3.02381 3.12117 36.87 680 116.772 24.0
8/1/79 0.45 30.54 0.00000 0.01473 3.02381 3.16713 56.85 681 182.518 56.3
8/14/80 0.56 40.88 0.00000 0.01370 3.02381 3.21051 42.92 682 152.197 -16.6
8/1/81 4.35 0.79 49.18 0.08845 0.10451 3.29127 3.54606 70.51 683 258.173 69.6
8/2/82 1.36 41.77 0.00000 0.03256 3.29127 3.66151 55.70 684 211.304 -18.2
8/1/83 1.31 1.03 64.86 0.02020 0.03608 3.35774 3.79361 61.21 685 240.002 13.6
8/15/84 1.056 0.854 56.96 0.01857 0.03357 3.42011 3.92095 75.34 686 311.813 29.9
8/1/95 2.755 0.51 58.78 0.04687 0.05555 3.58041 4.13875 25.39 687 335.227 7.5
8/86 3.995 63.04 0.06337 0.06337 3.00731 4.40103 22.00 688 317.275 -5.4
11/17/86 SPLIT 3 FOR 1 0 11.42193 13.20310 22.54 689 332.052 4.7
8/12/87 0.763 25.58 0.02983 0.02983 11.76262 13.59692
1287 1.1336 18.69 0.06065 0.06095 12.47696 14.42161
8/88 0.014 21.06 0.00066 0.00066 12.48435 14.43120
12/21/88 0.41 19.69 0.02082 0.02082 12.74431 14.73170
<CAPTION>
AGGREG ANNUALZ AGGREG ANNUAL Z AGGREG ANNUAL Z
5 YEAR 5 YEAR 10 YEAR 10 YEAR 15 YEAR 15 YEAR 15 YEARS 10 YEARS 5 YEARS 1 YEAR S&P 500 15 YEARS
TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL BEGIN BEGIN BEGIN BEGIN RETURNS BEGIN
DATE RETURN RETURN RETURN RETURN RETURN RETURN $1000 $1000 $1000 $1000 $1000
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8/6/71 $1,000 $1,000 674
7/31/72 $1,209 -14.5 $855 675
8/13/75 $1,322 16.3 $994 676
8/6/76 $1,461 14.2 $1,135 677
8/1/77 $2,270 0.5 $1,141 678
8/1/78 $2,541 $1,000 -0.5 $1,135 679
10/31/78 $3,150 $1,240 17.4 $1,333 680
8/1/79 $4,923 $1,938 20.6 $1,608 681
8/14/80 $4,105 $1,616 -11.6 $1,421 682
8/1/81 $6,964 $2,741 61.2 $2,291 683
8/2/82 $5,700 $2,243 $1,000 -4.7 $2,183 684
8/1/83 $6,474 $2,548 $1,136 31.1 $2,862 685
8/15/84 $8,411 $3,310 $1,476 35.8 $3,887 686
8/1/95 $9,043 $3,559 $1,586 25.2 $4.866 687
8/86 $8,558 $3,368 $1,502 $1,000 -6.9 $4,530 688
11/17/86 57.14 9.46 252.5 13.43 795.70 15.74 $8,957 $3,525 $1,571 $1,047 20.5 $5,459 689
8/12/87
1287 10.63 ANNUALIZE
8/88
12/21/88
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Scudder
Fund Small Company Value Fund Annual Report for the fiscal period ended August
31, 1996 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<SERIES>
<NUMBER> 2
<NAME> SCUDDER SMALL COMPANY VALUE FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> OCT-06-1995
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 39,256,706
<INVESTMENTS-AT-VALUE> 42,059,768
<RECEIVABLES> 536,793
<ASSETS-OTHER> 19,446
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 42,616,007
<PAYABLE-FOR-SECURITIES> 1,239,769
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 189,052
<TOTAL-LIABILITIES> 1,428,821
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 38,297,796
<SHARES-COMMON-STOCK> 3,034,156
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 93,313
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (6,985)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,803,062
<NET-ASSETS> 41,187,186
<DIVIDEND-INCOME> 444,857
<INTEREST-INCOME> 54,116
<OTHER-INCOME> 0
<EXPENSES-NET> 345,670
<NET-INVESTMENT-INCOME> 153,303
<REALIZED-GAINS-CURRENT> (6,985)
<APPREC-INCREASE-CURRENT> 2,803,062
<NET-CHANGE-FROM-OPS> 2,949,380
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (61,519)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,368,696
<NUMBER-OF-SHARES-REDEEMED> (339,432)
<SHARES-REINVESTED> 4,792
<NET-CHANGE-IN-ASSETS> 41,185,986
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 171,544
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 600,954
<AVERAGE-NET-ASSETS> 25,476,128
<PER-SHARE-NAV-BEGIN> 12.00
<PER-SHARE-NII> .07
<PER-SHARE-GAIN-APPREC> 1.53
<PER-SHARE-DIVIDEND> (.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.57
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
