As filed with the Securities and Exchange Commission
on September 24, 1997.
Securities Act File No. 333-34387
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /_x_ /
Pre-Effective Amendment No. 1 /__x__/
Post-Effective Amendment No. /_____/
SCUDDER INTERNATIONAL FUND, INC.
(Exact Name of Registrant as Specified in Charter)
345 Park Avenue, New York, NY 10154
(Address of Principal Executive Offices) (Zip Code)
(617) 295-2567
(Registrant's Area Code and Telephone Number)
with copies to:
Paula M. Gaccione, Esq. Sheldon A. Jones, Esq.
Scudder, Stevens & Clark, Inc. Dechert Price &
Rhoads Ten Post Office Square - South
345 Park Avenue Boston, MA 02109-4603
New York, NY 10154
Approximate Date of Proposed Public Offering:
As soon as practicable after
this Registration Statement becomes effective.
_________________________________________________________________
It is proposed that this filing will become effective on
September 26, 1997 pursuant to Rule 488
under the Securities Act of 1933.
_________________________________________________________________
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No filing fee is required because the Registrant has previously
registered an indefinite number of its shares under the
Securities Act of 1933, as amended, pursuant to Rule 24f-2 under
the Investment Company Act of 1940, as amended. The notice
required by such Rule for the Registrant's fiscal year ended
March 31, 1997 was filed on May 29, 1997.
The registrant hereby amends this registration statement on such
date or dates as may be necessary to delay its effective date
until the registrant shall file a further amendment which
specifically states that this registration statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
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CROSS REFERENCE SHEET
Pursuant to Rule 481(a) Under the Securities Act of 1933
Item of Form N-14 Location in the Prospectus
- ----------------- --------------------------
PART A
1.Beginning of Registration Cross Reference Sheet;
Statement and Outside Front Notice of Special Meeting of
Cover Page of Prospectus Stockholders
2.Beginning and Outside Back Cover Table of Contents
Page of Prospectus
3.Fee Table, Synopsis Information, Synopsis - Fees and
and Risk Factors Expenses; Special
Considerations and Risk
Factors
4.Information About the Transactions Synopsis - The Proposed
Reorganization
5.Information About the Registrant Synopsis; Special
Considerations and Risk
Factors; Additional
Information
6.Information About the Company Synopsis; Special
Being Acquired Considerations and Risk
Factors; Additional
Information
7.Voting Information Notice of Special Meeting of
Stockholders; Introduction
8.Interest of Certain Persons and Special Considerations and
Experts Risk Factors
9.Additional Information Required (Not Applicable)
for Reoffering by Persons Deemed
to be Underwriters
PART B Statement of Additional
Information Caption
-------------------
10. Cover Page Outside Cover Page
11. Table of Contents Table of Contents
12. Additional Information about the Incorporation of Documents
Registrant by Reference in Statement of
Additional Information
13. Additional Information about the Not Applicable
Company Being Acquired
14. Financial Statements Exhibits to Statement of
Additional Information
PART C
15 - 17 Information required to be
included in Part C is set
forth under the appropriate
Item, so numbered, in Part C
of this Registration
Statement.
3
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PART A
INFORMATION REQUIRED IN THE PROXY STATEMENT/PROSPECTUS
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SCUDDER INSTITUTIONAL FUND, INC.
IMPORTANT NEWS
SEPTEMBER [ ], 1997
FOR SCUDDER FUND STOCKHOLDERS
While we encourage you to read the full
text of the enclosed proxy
statement/prospectus, here's a brief overview
of some matters affecting your Fund which
require a stockholder vote.
Q & A: QUESTIONS AND ANSWERS
Q. WHAT IS HAPPENING?
A. You are being asked to vote on an Agreement
and Plan of Reorganization whereby all or
substantially all of the assets of your Fund
would be transferred in a tax-free
reorganization to Scudder International Fund,
a series of Scudder International Fund, Inc.,
in exchange for shares of stock of the
Barrett International Shares class of Scudder
International Fund. If the Agreement and Plan
of Reorganization is approved and
consummated, you would no longer be a
stockholder of the Fund, but would become a
stockholder of the Barrett International
Shares class of Scudder International Fund,
which has substantially similar investment
objectives and policies to your Fund. The
following pages give you additional
information on the proposed reorganization
and several other matters you are being asked
to vote on. The Board members of your Fund,
including those who are not affiliated with
the Fund or Scudder, recommend that you vote
FOR the proposed reorganization.
Q. WHAT ELSE AM I BEING ASKED TO VOTE ON?
A. Scudder, Stevens & Clark, Inc. ("Scudder"),
your Fund's investment manager, has agreed to
form an alliance with Zurich Insurance
Company ("Zurich"). Zurich is a leading
international insurance and financial
services organization. As a result of the
proposed alliance, there will be a change in
ownership of Scudder. In order for Scudder
to continue to serve as investment manager of
your Fund, it is necessary for the Fund's
stockholders to approve a new investment
management agreement. A vote is also being
sought for the election of Directors to serve
on the Board of Directors of the Corporation
listed above and for the ratification of the
selection of the Fund's accountants. With
the exception of the ratification of the
selection of the Fund's accountants, you are
being asked to vote on these additional
matters in the event that the proposed
reorganization is not approved. The Board
members of your Fund, including those who are
not affiliated with the Fund or Scudder,
recommend that you vote FOR these proposals.
Q. WHY AM I BEING ASKED TO VOTE ON THE PROPOSED
NEW INVESTMENT MANAGEMENT AGREEMENT?
A. The Investment Company Act of 1940, which
regulates investment companies such as the
Fund, requires a vote whenever there is a
change in control of a fund's investment
manager. Zurich's alliance with Scudder will
result in such a change of control and
requires stockholder approval of a new
investment management agreement with your
Fund.
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Q. HOW WILL THE SCUDDER-ZURICH ALLIANCE AFFECT
ME AS A FUND STOCKHOLDER?
A. Your Fund and your Fund's investments will
not change as a result of the Scudder-Zurich
alliance (except to the extent the proposed
reorganization noted above is approved). The
terms of the new investment management
agreement are the same in all material
respects as the current investment management
agreement. Similarly, the other service
arrangements between your Fund and Scudder
will not be affected. You should continue to
receive the same level of services that you
have come to expect from Scudder over the
years. If stockholders do not approve the
new investment management agreement, the
current investment management agreement will
terminate upon the closing of the Scudder-
Zurich transaction and the Board of Directors
will take such action as it deems to be in
the best interests of your Fund and its
stockholders.
Q. WHY HAS SCUDDER DECIDED TO ENTER INTO THIS
ALLIANCE?
A. Scudder believes that the Scudder-Zurich
alliance will enable Scudder to enhance its
capabilities as a global asset manager.
Scudder further believes that the alliance
will enable it to enhance its ability to
deliver the level of services currently
provided to you and your Fund and to fulfill
its obligations under the new investment
management agreement consistent with current
practices.
Q. WILL THE INVESTMENT MANAGEMENT FEES BE THE
SAME?
A. The investment management fees will not
change as a result of the Scudder-Zurich
transaction. If the proposed reorganization
is approved, the investment management fees
will change as described more fully in this
proxy statement/prospectus.
Q. WILL I CONTINUE TO BE ABLE TO PURCHASE SHARES
WITHOUT ANY SALES LOAD?
A. Yes, you will be able to continue to purchase
shares of your Fund without any sales load.
If the proposed reorganization is
consummated, however, you will become a
stockholder of Scudder International Fund and
will be able to purchase shares of that Fund
without any sales load.
Q. HOW DO THE BOARD MEMBERS OF MY FUND RECOMMEND
THAT I VOTE?
A. After careful consideration, the Board
members of your Fund, including those who are
not affiliated with the Fund or Scudder,
recommend that you vote in favor of all the
proposals on the enclosed proxy card.
Q. WHOM DO I CALL FOR MORE INFORMATION?
A. Please call Shareholder Communications
Corporation, your Fund's information agent,
at 1-800-733-8481 ext. 488.
Q. WILL THE FUND PAY FOR THE PROXY SOLICITATION
AND LEGAL COSTS ASSOCIATED WITH THESE
TRANSACTIONS?
6
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A. No, Scudder will bear these costs.
ABOUT THE PROXY CARD
If you have more than one account in the
Fund in your name at the same address, you
will receive separate proxy cards for each
account but only one proxy statement for the
Fund. Please vote all issues on each proxy
card that you receive.
THANK YOU FOR MAILING YOUR PROXY CARD(S) PROMPTLY.
7
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SCUDDER INSTITUTIONAL FUND, INC.
345 Park Avenue
New York, New York 10154
September [ ], 1997
Dear Stockholder:
A Special Meeting of Stockholders (the "Special
Meeting") of Scudder Institutional Fund, Inc.
("Institutional Fund Inc."), the sole active series of which
is the Institutional International Equity Portfolio
("International Equity Portfolio"), will be held at 8:30
a.m., Eastern time, on Thursday, October 23, 1997, at the
offices of Scudder, Stevens & Clark, Inc. ("Scudder"), 25th
Floor, 345 Park Avenue (at 51st Street), New York, New York
10154. Stockholders who are unable to attend this meeting
are strongly encouraged to vote by proxy, which is customary
in corporate meetings of this kind. A Proxy
Statement/Prospectus regarding the Special Meeting, a proxy
card(s) for your vote at the meeting and an envelope -
postage prepaid - in which to return your proxy card are
enclosed.
As you read in the Questions and Answers (Q&A) on the
outside cover, you are being asked to vote on an Agreement
and Plan of Reorganization whereby all or substantially all
of the assets of the International Equity Portfolio would be
transferred in a tax-free reorganization to Scudder
International Fund, a series of Scudder International Fund,
Inc., in exchange for shares of stock of the Barrett
International Shares class of Scudder International Fund. If
the Agreement and Plan of Reorganization is approved and
consummated, you would no longer be a stockholder of the
International Equity Portfolio, but would become a
stockholder of the Barrett International Shares class of
Scudder International Fund, which has substantially similar
investment objectives and policies as the International
Equity Portfolio.
In addition, Scudder has agreed to form an alliance
with Zurich Insurance Company ("Zurich"). Zurich is a
leading international insurance and financial services
organization. (More information about Zurich can be found
inside the Proxy Statement/Prospectus.) Because of the
Scudder-Zurich alliance, it is necessary for the
International Equity Portfolio's stockholders to approve a
new investment management agreement. You are being asked to
approve the new investment management agreement in the event
that the proposed reorganization is not approved.
You are also being asked to vote for the election of
Directors to serve on the Board of Directors of
Institutional Fund Inc. and for the ratification of the
selection of the International Equity Portfolio's
accountants. You are being asked to vote for the election
of Directors in the event that the proposed reorganization
is not approved.
The Board members of your Fund believe that each of the
proposals set forth in the Notice of Meeting for your Fund
is important and recommend that you read the enclosed
materials carefully and then vote FOR all proposals.
Since all of the funds for which Scudder acts as
investment manager are required to conduct shareholder
meetings, if you own shares of more than one fund, you will
receive more than one proxy card. Please sign and return
each proxy card you receive.
Your vote is important. Please take a moment now to
sign and return your proxy card(s) in the enclosed postage-
paid return envelope. If we do not receive your signed
proxy card(s) after a reasonable amount of time you may
receive a telephone call from our proxy solicitor,
Shareholder Communications Corporation, reminding you to
vote your shares.
Respectfully,
Daniel Pierce
President and Chairman of the Board of Directors
8
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STOCKHOLDERS ARE URGED TO SIGN THE PROXY CARD(S) AND RETURN
IT IN THE POSTAGE-PAID ENVELOPE TO ENSURE A QUORUM AT THE
MEETING. YOUR VOTE IS IMPORTANT REGARDLESS OF THE SIZE OF
YOUR STOCKHOLDINGS.
9
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SCUDDER INSTITUTIONAL FUND, INC.
Notice of Special Meeting of Stockholders
Please take notice that a Special Meeting of
Stockholders (the "Special Meeting") of Scudder
Institutional Fund, Inc. ("Institutional Fund Inc."),
the sole active series of which is the Institutional
International Equity Portfolio ("International Equity
Portfolio"), will be held at the offices of Scudder,
Stevens & Clark, Inc., 25th Floor, 345 Park Avenue (at
51st Street), New York, New York 10154, on Thursday,
October 23, 1997, at 8:30 a.m., Eastern time, for the
following purposes:
(1) To approve or disapprove an Agreement and Plan of Reorganization;
(2) To approve or disapprove a new investment management agreement between
International Equity Portfolio and its investment manager;
(3) To elect Directors of Institutional Fund Inc.;
(4) To ratify or reject the selection of Price Waterhouse LLP as the
independent accountants for the International Equity Portfolio's
current fiscal year.
The appointed proxies will vote on any other
business as may properly come before the Special
Meeting or any adjournments thereof.
Holders of record of shares of common stock of the
International Equity Portfolio at the close of business
on August 15, 1997 are entitled to vote at the Special
Meeting and at any adjournments thereof.
In the event that the necessary quorum to transact
business or the vote required to approve or reject any
proposal is not obtained at the Special Meeting, the
persons named as proxies may propose one or more
adjournments of the Special Meeting in accordance with
applicable law to permit further solicitation of
proxies. Any such adjournment will require the
affirmative vote of the holders of a majority of the
International Equity Portfolio's shares present in
person or by proxy at the Special Meeting. The persons
named as proxies will vote in favor of such adjournment
those proxies which they are entitled to vote in favor
and will vote against any such adjournment those
proxies to be voted against that proposal.
By Order of the Board of Directors,
Thomas F. McDonough, Secretary
September [ ], 1997
IMPORTANT -- We urge you to sign and date the enclosed
proxy card(s) and return it in the enclosed addressed
envelope which requires no postage and is intended for
your convenience. Your prompt return of the enclosed
proxy card(s) may save the necessity and expense of
further solicitations to ensure a quorum at the Special
Meeting. If you can attend the Special Meeting and
wish to vote your shares in person at that time, you
will be able to do so.
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TABLE OF CONTENTS
PROPOSAL 1: APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION .............. 15
SYNOPSIS .................................................................. 15
SPECIAL CONSIDERATIONS AND RISK FACTORS ................................... 19
ADDITIONAL INFORMATION .................................................... 29
PROPOSAL 2: APPROVAL OF NEW INVESTMENT MANAGEMENT AGREEMENT ............... 29
PROPOSAL 3: ELECTION OF DIRECTORS FOR THE CORPORATION ..................... 37
PROPOSAL 4: RATIFICATION OR REJECTION OF THE SELECTION OF INDEPENDENT
ACCOUNTANTS ............................................................... 41
ADDITIONAL INFORMATION .................................................... 42
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PROXY STATEMENT/PROSPECTUS
SEPTEMBER [ ], 1997
SCUDDER INTERNATIONAL FUND ("INTERNATIONAL FUND"),
A series of SCUDDER INTERNATIONAL FUND, INC. ("INTERNATIONAL FUND
INC.")
345 PARK AVENUE
NEW YORK, NEW YORK 10154
(800) 225-2470
to acquire the assets of
INSTITUTIONAL INTERNATIONAL EQUITY PORTFOLIO ("INTERNATIONAL
EQUITY PORTFOLIO"),
A series of SCUDDER INSTITUTIONAL FUND, INC. ("INSTITUTIONAL FUND
INC.")
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to stockholders of the
International Equity Portfolio in connection with a proposed reorganization in
which all or substantially all of the assets of the International Equity
Portfolio would be acquired by the International Fund, in exchange solely for
voting shares of common stock of the Barrett International Shares class of the
International Fund (known as the "Barrett Shares") and the assumption by the
International Fund of all of the identified and stated liabilities of the
International Equity Portfolio (the "Reorganization"). Barrett Shares of the
International Fund thereby received would then be distributed to the
stockholders of the International Equity Portfolio in liquidation of the
International Equity Portfolio, and Institutional Fund Inc. would then be
deregistered as an investment company under the Investment Company Act of 1940,
as amended (the "1940 Act"), and terminated under applicable state law. As a
result of the Reorganization, each stockholder of the International Equity
Portfolio would receive that number of full and fractional Barrett Shares of the
International Fund having an aggregate net asset value equal to the aggregate
net asset value of such stockholder's stock of the International Equity
Portfolio held as of the close of business on the business day preceding the
closing of the Reorganization. Stockholders of the International Equity
Portfolio are being asked to vote on an Agreement and Plan of Reorganization
pursuant to which such transactions, as described more fully below, would be
consummated. (In the descriptions of the various proposals below, the word
"fund" is sometimes used to mean investment companies or series thereof in
general, and not the Fund whose proxy statement/prospectus this is.)
This Proxy Statement/Prospectus, which should be retained for future
reference, sets forth concisely the information about the International Fund
that a prospective investor should know before investing. For a more detailed
discussion of the investment objectives, policies, restrictions and risks of the
International Fund, see the prospectus for the International Fund dated August
1, 1997, which is included herewith and incorporated herein by reference. For a
more detailed discussion of the investment objectives, policies, restrictions
and risks of the International Equity Portfolio, see the prospectus for the
International Equity Portfolio dated May 1, 1997, which is incorporated herein
by reference and a copy of which may be obtained without charge by writing to
Scudder Investor Services, Inc., Two International Place, Boston, MA 02110-4103
or by calling toll-free (800) 225-2470. A Statement of Additional Information
dated September [ ], 1997 containing additional information about the
Reorganization and the parties thereto has been filed with the Securities and
Exchange Commission (the "SEC") and is incorporated by reference into this Proxy
Statement/Prospectus. A copy of the Statement of Additional Information is
available upon request and without charge by writing to Scudder Investor
Services, Inc., Two International Place, Boston, MA 02110-4103, or by calling
(800) 225-2470. Financial statements for the International Fund will be provided
upon request of the Statement of Additional Information to this Proxy
Statement/Prospectus. Stockholder inquiries regarding the International Equity
Portfolio or regarding the International Fund may be made by calling (800)
225-2470. The information contained herein concerning the International Equity
Portfolio has been provided by, and is included herein in reliance upon, the
International Equity Portfolio. The information contained herein concerning the
International Fund has been provided by, and is included herein in reliance
upon, the International Fund. The Barrett Shares will be a newly established
class of shares of the International Fund and will be identical in all material
respects to the International Fund shares currently offered and sold, as
described in the Prospectus and Statement of Additional Information for the
International Fund dated August 1, 1997, except as otherwise described herein.
The International Fund is a series of shares of common stock of
International Fund Inc., an open-end management investment company organized as
a Maryland corporation. The International Equity Portfolio is a series of shares
of common stock of Institutional Fund Inc., an open-end management investment
company organized as a Maryland corporation. The principal investment objective
of each of the International Fund and the International Equity Portfolio is to
seek long-term growth of capital primarily through a diversified portfolio of
marketable foreign equity securities.
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 PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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In addition, this Proxy Statement/Prospectus is being furnished to
stockholders of the International Equity Portfolio in connection with a
transaction in which Scudder, Stevens & Clark, Inc. ("Scudder" or the
"Investment Manager") has agreed to form an alliance with Zurich Insurance
Company ("Zurich"). Zurich is a leading international insurance and financial
services organization. As a result of the proposed alliance, there will be a
change in ownership in the International Equity Portfolio's investment manager,
Scudder. In order for Scudder to continue to serve as investment manager of the
International Equity Portfolio, it is necessary for the International Equity
Portfolio's stockholders to approve a new investment management agreement. A
vote is also being sought for the election of Directors to serve on the Board of
Directors of Institutional Fund Inc. and for the ratification of the selection
of the International Equity Portfolio's accountants. With the exception of the
ratification of the selection of the International Equity Portfolio's
accountants, stockholders are being asked to vote on these additional matters in
case the Reorganization is not approved.
This Proxy Statement/Prospectus, the Notice of Special Meeting to
Stockholders and the proxy card(s) are first being mailed to stockholders on or
about September [ ], 1997 or as soon as practicable thereafter. Any stockholder
giving a proxy has the power to revoke it by mail (addressed to the Secretary at
the principal executive office of the International Equity Portfolio, c/o
Scudder, Stevens & Clark, Inc., 345 Park Avenue, New York, New York 10154), or
in person at the Special Meeting, by executing a superseding proxy or by
submitting a notice of revocation to the International Equity Portfolio. All
properly executed proxies received in time for the Special Meeting will be voted
as specified in the proxy or, if no specification is made, in favor of each
proposal referred to in the Proxy Statement.
The presence at any stockholders' meeting, in person or by proxy, of the
holders of one-third of the shares entitled to be cast of the International
Equity Portfolio shall be necessary and sufficient to constitute a quorum for
the transaction of business. In the event that the necessary quorum to transact
business or the vote required to approve or reject any proposal is not obtained
at the Special Meeting, the persons named as proxies may propose one or more
adjournments of the Special Meeting in accordance with applicable law to permit
further solicitation of proxies with respect to any proposal which did not
receive the vote necessary for its passage or to obtain a quorum with respect to
those proposals for which there is represented a sufficient number of votes in
favor. Actions taken at the Special Meeting will be effective irrespective of
any adjournments with respect to any other proposals. Any such adjournment will
require the affirmative vote of the holders of a majority of the International
Equity Portfolio's shares present in person or by proxy at the Special Meeting.
The persons named as proxies will vote in favor of such adjournment those
proxies which they are entitled to vote in favor and will vote against any such
adjournment those proxies to be voted against that
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proposal. For purposes of determining the presence of a quorum for transacting
business at the Special Meeting, abstentions and broker "non-votes" will be
treated as shares that are present but which have not been voted. Broker
non-votes are proxies received by the International Equity Portfolio from
brokers or nominees when the broker or nominee has neither received instructions
from the beneficial owner or other persons entitled to vote nor has
discretionary power to vote on a particular matter. Accordingly, stockholders
are urged to forward their voting instructions promptly.
Abstentions and broker non-votes will have the effect of a "no" vote for
Proposals 1 and 2, which require the approval of a specified percentage of the
outstanding shares of the International Equity Portfolio. Abstentions and broker
non-votes will not be counted in favor of, but will have no other effect on the
vote for Proposals 3 and 4, which require the approval of a plurality and a
majority, respectively, of shares of the International Equity Portfolio voting
at the Special Meeting.
Proposal 1 requires the affirmative vote of the holders of a majority of
the International Equity Portfolio's shares outstanding and entitled to vote
thereon.
Proposal 2 requires the affirmative vote of a "majority of the outstanding
voting securities" of the International Equity Portfolio. The term "majority of
the outstanding voting securities" as defined in the 1940 Act and as used in
this Proxy Statement/Prospectus means: the affirmative vote of the lesser of (1)
67% of the voting securities of the International Equity Portfolio present at
the meeting if more than 50% of the outstanding shares of the International
Equity Portfolio are present in person or by proxy or (2) more than 50% of the
outstanding shares of the International Equity Portfolio.
The following table summarizes those voting requirements:
Vote Required for Approval
--------------------------
Proposal 1 (Approval Approved by a
of Agreement and majority of the
Plan of Fund's shares
Reorganization) outstanding and
entitled to vote
thereon
Proposal 2 Approved by a
(Approval of New "majority of the
Investment outstanding voting
Management securities" of the
Agreement) Fund
Proposal 3 Each nominee must be
(Election of elected by a
Directors) plurality of the
shares voting at the
Special Meeting
Proposal 4 Approved by a
(Ratification of majority of the
Selection of shares voting at the
Accountants) Special Meeting
Holders of record of the shares of common stock of the International Equity
Portfolio at the close of business on August 15, 1997 (the "Record Date"), as to
any matter on which they are entitled to vote, will be entitled to one vote per
share on all business of the Special Meeting. There were 1,453,101 shares of the
International Equity Portfolio outstanding as of August 15, 1997.
The International Fund provides periodic reports to all of its stockholders
which highlight relevant information including investment results and a review
of portfolio changes. You may receive a copy of the most recent annual report
for the International Fund and a copy of any more recent semi-annual report,
without charge, by calling 800-225-2470 or writing the
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International Fund, c/o Scudder, Stevens & Clark, Inc., 345 Park Avenue, New
York, New York 10154.
The International Equity Portfolio provides periodic reports to all of its
stockholders which highlight relevant information including investment results
and a review of portfolio changes. You may receive a copy of the most recent
annual report for the International Equity Portfolio and a copy of any more
recent semi- annual report, without charge, by calling 800-854-8525 or writing
the International Equity Portfolio, c/o Scudder, Stevens & Clark, Inc., 345 Park
Avenue, New York, New York 10154.
PROPOSAL 1: APPROVAL OF
AGREEMENT AND PLAN OF REORGANIZATION
The Board of Directors of Institutional Fund Inc., including all of the
Directors who are not "interested persons" of Institutional Fund Inc. (as
defined in the 1940 Act) (the "Non- interested Directors"), approved on August
6, 1997 an Agreement and Plan of Reorganization dated as of September 18, 1997
(the "Reorganization Agreement"). Subject to its approval by the stockholders of
the International Equity Portfolio, the Reorganization Agreement provides for
(a) the transfer of all or substantially all of the assets and all of the
identified and stated liabilities of the International Equity Portfolio to
International Fund, a series of shares of common stock of International Fund
Inc., in exchange solely for Barrett Shares of the International Fund; (b) the
distribution of such Barrett Shares to the stockholders of the International
Equity Portfolio in complete liquidation of the International Equity Portfolio;
and (c) the deregistration of Institutional Fund Inc. as an investment company
under the 1940 Act and its termination under state law (the "Reorganization").
As a result of the Reorganization, each stockholder of the International
Equity Portfolio will become a stockholder of the International Fund and will
hold, immediately after the closing of the Reorganization (the "Closing"), that
number of full and fractional Barrett Shares of the International Fund having an
aggregate net asset value equal to the aggregate net asset value of such
stockholder's shares held in the International Equity Portfolio as of the close
of business on the business day preceding the Closing. The investment objective,
policies and restrictions of the Barrett Shares class of International Fund will
be substantially similar to those of the International Equity Portfolio at the
time of the Closing.
A copy of the Reorganization Agreement is attached to this Proxy
Statement/Prospectus as Exhibit C, and the description of the Reorganization
Agreement which follows is qualified in its entirety by reference to Exhibit C.
SYNOPSIS
The following is a summary of certain information contained in this Proxy
Statement/Prospectus. This summary is qualified by reference to the more
complete information contained elsewhere in this Proxy Statement/Prospectus, the
Prospectus of the International Fund, the Prospectus of the International Equity
Portfolio and the Reorganization Agreement, which is attached to this Proxy
Statement/Prospectus as Exhibit C. Stockholders should read this entire Proxy
Statement/Prospectus carefully.
The Proposed Reorganization. The Board of Directors of Institutional Fund
Inc., including a majority of the Non- interested Directors, has approved the
Reorganization Agreement pursuant to which all or substantially all of the
assets of the International Equity Portfolio would be acquired by the
International Fund, in exchange solely for Barrett Shares of the International
Fund and the assumption by the International Fund of all of the identified and
stated liabilities of the International Equity Portfolio. Barrett Shares of the
International Fund thereby received would then be distributed to the
stockholders of the International Equity Portfolio in liquidation of the
International Equity Portfolio, and Institutional Fund Inc. would then be
deregistered as an investment company under the 1940 Act and terminated under
applicable state law. As a result of the Reorganization, each stockholder of the
International Equity Portfolio would become a stockholder of the International
Fund and would hold, immediately after the Closing, that number of full and
fractional Barrett Shares of the International Fund having an aggregate net
asset
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value equal to the aggregate net asset value of such stockholder's shares
held in the International Equity Portfolio as of the close of business on the
business day preceding the Closing.
The exchange of all or substantially all of the International Equity
Portfolio's assets for Barrett Shares of International Fund and the assumption
of all of the identified and stated liabilities of the International Equity
Portfolio by the International Fund are expected to occur on December 15, 1997,
or on such later date as the parties may agree in writing (the "Closing Date").
For the reasons set forth below under "The Proposed Transaction - Reasons
for the Proposed Transaction," the Board of Directors of Institutional Fund
Inc., including the Non- interested Directors, has concluded that the
Reorganization is in the best interests of the International Equity Portfolio
and its stockholders and that the interests of stockholders of the International
Equity Portfolio will not be diluted as a result of the transactions
contemplated by the Reorganization Agreement. Accordingly, the Board of
Directors recommends approval of the Reorganization Agreement. If the
Reorganization Agreement is not approved, the International Equity Portfolio
will continue in existence, unless the Board of Directors advocates other
action, which may include the termination and liquidation of the International
Equity Portfolio.
Approval of the Reorganization Agreement with respect to the International
Equity Portfolio requires the affirmative vote of the holders of a majority of
the shares of stock of the International Equity Portfolio outstanding and
entitled to vote thereon.
Form of Organization. The International Fund is a diversified series of
International Fund Inc., an open-end management investment company registered
under the 1940 Act. International Fund Inc. is a Maryland corporation whose
predecessor was organized in 1953. International Fund Inc. offers five (5) other
existing portfolios, none of which is involved in the Reorganization: Scudder
Emerging Markets Growth Fund, Scudder Greater Europe Growth Fund, Scudder
International Growth and Income Fund, Scudder Latin America Fund and Scudder
Pacific Opportunities Fund. The International Equity Portfolio is a diversified
series of Institutional Fund Inc., an open-end management investment company
registered under the 1940 Act. Institutional Fund Inc. was formed as a
corporation on January 2, 1986 under the laws of the State of Maryland.
Investment Objectives and Policies. Each of the International Fund and the
International Equity Portfolio (each also referred to herein as a "Fund" and
collectively the "Funds") seeks long-term growth of capital primarily through a
diversified portfolio of marketable foreign equity securities. These securities
are selected primarily to permit each Fund to participate in non-United States
companies and economies with prospects for growth. Each Fund invests in
companies, wherever organized, which do business primarily outside the United
States. Each Fund intends to diversify investments among several countries and
to have represented in the portfolio, in substantial proportions, business
activities in not less than five different countries in the case of the
International Equity Portfolio, and not less than three different countries in
the case of the International Fund.
The International Fund generally invests in equity securities of
established companies, listed on foreign exchanges, which the Investment Manager
believes have favorable characteristics. When the Investment Manager believes
that it is appropriate to do so in order to achieve the International Fund's
investment objective of long-term capital growth, the International Fund may
invest up to 20% of its total assets in debt securities. The International Fund
may purchase "investment- grade" bonds, which are those rated Aaa, Aa, A or Baa
by Moody's Investor Services, Inc. ("Moody's") or AAA, AA, A or BBB by Standard
& Poor's Corporation ("S&P") or, if unrated, judged by the Investment Manager to
be of equivalent quality. The International Fund may also invest up to 5% of its
total assets in debt securities which are rated below investment grade.
The International Equity Portfolio generally invests at least 90% of its
total assets in equity securities of established companies, listed on foreign
exchanges, which the Investment Manager believes have favorable characteristics.
When the Investment Manager believes that it is appropriate to do so in order to
achieve the International Equity Portfolio's investment objective of long-term
capital growth, the International Equity Portfolio may invest up to 10% of its
total assets in debt securities. The International Equity Portfolio may purchase
"investment-grade" bonds, which are those rated Aaa, Aa, A or Baa by Moody's or
AAA, AA, A or BBB by S&P or, if unrated, judged by
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the Investment Manager to be of equivalent quality. The International
Equity Portfolio may also invest up to 5% of its total assets in debt securities
which are rated below investment grade.
When the Investment Manager determines that exceptional conditions exist
abroad, each Fund may, for temporary defensive purposes, invest all or a portion
of its assets in Canadian or U.S. Government obligations or currencies, or
securities of companies incorporated in and having their principal activities in
Canada or the U.S. See "Special Considerations and Risk Factors" and "Comparison
of Policies and Restrictions" below.
Fees and Expenses. The International Fund retains as its investment manager
the investment management firm of Scudder, Stevens & Clark, Inc., a Delaware
corporation located at 345 Park Avenue, New York, New York 10154, to manage its
daily investment and business affairs subject to the policies established by the
Directors of International Fund Inc. The management fee payable under the
current Investment Management Agreement for International Fund is equal to an
annual rate of 0.90% on the first $500 million of average daily net assets,
0.85% of such assets in excess of $500 million, 0.80% of such assets in excess
of $1 billion, 0.75% of such assets in excess of $2 billion and 0.70% of such
assets in excess of $3 billion. The International Fund's fee is graduated so
that increases in the Fund's net assets may result in a lower fee rate and
decreases in the Fund's net assets may result in a higher fee rate. The fee is
payable monthly, provided the Fund will make such interim payments as may be
requested by the Investment Manager 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 that
charged to many funds which invest primarily in U.S. securities, but not
necessarily higher than the fees charged to funds with investment objectives
similar to that of the International Fund. As of March 31, 1997, the
International Fund had total net assets of $2,583,030,686. The total fees
incurred by the International Fund to the Investment Manager for the fiscal year
ended March 31, 1997 were $20,989,160, which includes fees paid under the
International Fund's investment management agreement which was in effect prior
to September 5, 1996.
For the fiscal year ended March 31, 1997, the International Fund's total
expense ratio (total annual operating expenses as a percentage of average net
assets) was 1.15%. The Investment Manager projects that after the proposed
Reorganization is effected, the expense ratio of the Barrett Shares class of the
International Fund will be approximately 1.10%. The actual expense ratio for the
Barrett Shares class of International Fund for the fiscal years ending March 31,
1998 and March 31, 1999 may be higher or lower than 1.10% depending upon the
International Fund's performance, general stock market and economic conditions,
sales and redemptions of International Fund shares (including redemptions by
former International Equity Portfolio stockholders), and other factors.
The International Equity Portfolio also retains the Investment Manager to
manage its daily investment and business affairs subject to the policies
established by the Directors of Institutional Fund Inc. The management fee
payable under the current Investment Management Agreement for International
Equity Portfolio is equal to an annual rate of .90% of the Fund's average daily
net assets. The fee is payable monthly, provided the Fund will make such interim
payments as may be requested by the Investment Manager 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 that charged to many funds which invest primarily in U.S.
securities, but not necessarily higher than the fees charged to funds with
investment objectives similar to that of the International Equity Portfolio. As
of March 31, 1997, the International Equity Portfolio had total net assets of
$18,323,531. For the period April 3, 1996 (commencement of operations) to
December 31, 1996, the Investment Manager did not impose any of its fee
amounting to $104,861.
For the fiscal year ended December 31, 1996, the International Equity
Portfolio's total expense ratio (total annual operating expenses as a percentage
of average net assets) was 0.95%, including waivers and reimbursements. The
International Equity Portfolio's estimated total expense ratio for the fiscal
year ended December 31, 1997 includes an investment management fee of 0.00%,
Rule 12b-1 fees of 0.00% and other expenses of 1.04%, including waivers and
reimbursements.
Until July 31, 1997, the Investment Manager had agreed to waive its
investment management fee and reimburse other expenses to the extent necessary
so that the total annualized expenses of the International Equity Portfolio did
not exceed 0.95% of average daily net assets. Effective August 1, 1997 through
December 31, 1997, the Investment Manager has agreed to waive its
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<PAGE>
management fee and reimburse other expenses to the extent necessary so that the
total annualized expenses of the International Equity Portfolio do not exceed
1.15% of average daily net assets. If the Investment Manager had not agreed to
waive its fee and reimburse other expenses, it is estimated that the annualized
expenses of the International Equity Portfolio would be: investment management
fee 0.90%, other expenses 1.36% and total operating expenses 2.26% for the
fiscal year ended December 31, 1997. Estimated expenses for the fiscal year
ended December 31, 1997 include the effect of a new transfer agency fee which
took effect July 1, 1997. The Investment Manager is not obligated to continue
its fee waivers and expense reimbursements after December 31, 1997. As
demonstrated by the table below, stockholders of the International Equity
Portfolio may experience an increase in expenses with respect to the Barrett
Class of shares of International Fund received pursuant to the Reorganization.
The current expenses of each Fund and pro forma expenses following the
proposed restructuring are outlined below:
Annual Fund Operating Expenses (as a percentage of average net assets)1
International International Pro Forma
Equity Fund (Barrett
Portfolio Shares)
Investment Management 0.00% 0.82% 0.82%
Fee
12b-1 Fees NONE NONE NONE
Other Expenses 0.95% 0.33% 0.28%
---- ---- ----
Total Fund Operating 0.95% 2 1.15% 1.10%
Expenses
1 The percentages in the above table expressing annual fund operating
expenses for the International Equity Portfolio and the International Fund
are based on amounts incurred during the year ended March 31, 1997,
International Fund's most recent fiscal year end.
2 Until July 31, 1997, the Investment Manager had agreed to waive its
investment management fee and reimburse other expenses to the extent
necessary so that the total annualized expenses of the International Equity
Portfolio did not exceed 0.95% of average daily net assets. If the
Investment Manager had not agreed to waive its fee and reimburse other
expenses for the period ended March 31, 1997, annualized expenses of the
International Equity Portfolio would be: investment management fee 0.90%,
other expenses 1.54% and total operating expenses 2.44%.
Example. Based on the level of total operating expenses for each of the
Funds listed in the table above for the year ended March 31, 1997, 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 stockholders. Actual expenses may be greater or less than
those shown. Federal regulations require the example to assume a 5% annual
return, but actual annual return will vary.
International International Pro Forma
Equity Portfolio Fund
1 Year $10 $12 $11
3 Years $30 $37 $35
5 Years $53 $63 $61
10 Years $117 $140 $134
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Purchase, Redemption, and Exchange Information. The purchase, redemption
and exchange procedures and privileges for the International Equity Portfolio
and the Barrett Shares class of the International Fund are substantially
similar, except as discussed below. For example:
There is a $1,000 minimum initial investment requirement in the
International Equity Portfolio and a minimum account size requirement of $1,000.
The minimum investment requirement may be waived or lowered. The minimum
subsequent investment required for the International Equity Portfolio is $1,000.
The Barrett Shares class of the International Fund will have a $25,000
minimum initial investment requirement and a $1,000 minimum subsequent
investment requirement, which may be changed by the Board of Directors.
Shareholders of the International Equity Portfolio receiving shares of stock of
the Barrett Shares class of the International Fund in connection with the
proposed Reorganization will not be subject to the $25,000 minimum initial
investment requirement.
The Barrett Shares of the International Fund will not be exchangeable with
other funds within the Scudder Family of Funds. Shares of the International
Equity Portfolio currently are not exchangeable with other funds within the
Scudder Family of Funds.
Dividends and Other Distributions. Each of the Funds intends to distribute
dividends from its net investment income and any net realized capital gains
after utilization of capital loss carryforwards, if any, in December to prevent
application of a federal excise tax. 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 during the
following January will be treated by stockholders for federal income tax
purposes as if received on December 31 of the calendar year in which it is
declared. Dividends and distributions of each Fund will be invested in
additional shares of the Fund at net asset value and credited to the
stockholder's account on the payment date or, at the stockholder's election,
paid in cash.
If the Reorganization Agreement is approved by the International Equity
Portfolio's stockholders, then as soon as practicable before the Closing Date
the International Equity Portfolio will pay its stockholders a cash distribution
of all undistributed 1997 net investment income and undistributed realized net
capital gains.
Federal Income Tax Consequences of the Reorganization. The International
Fund and the International Equity Portfolio will have received an opinion of
Dechert Price & Rhoads, counsel to the International Equity Portfolio, to the
effect that the Reorganization will constitute a tax-free reorganization within
the meaning of section 368(a)(1) of the Internal Revenue Code of 1986, as
amended (the "Code"). If the Reorganization constitutes a tax-free
reorganization, no gain or loss will be recognized by the International Equity
Portfolio or its stockholders as a result of the Reorganization. See "The
Proposed Transaction - Tax Considerations."
SPECIAL CONSIDERATIONS AND RISK FACTORS
The principal investment risk of an investment in either the International
Equity Portfolio or the International Fund is fluctuations in the net asset
value of the Fund's shares. Portfolio management, market conditions, use of
investment policies, and other factors affect such fluctuations. Although the
investment objectives, policies and restrictions of the International Equity
Portfolio and the International Fund are substantially similar, there are
differences between them, which differences are outlined below. There can be no
assurance that either Fund will achieve its stated objective.
Comparison of Objectives. The principal investment objective of each of the
International Fund and the International Equity Portfolio is long-term growth of
capital primarily through a diversified portfolio of marketable foreign equity
securities.
Comparison of Policies and Restrictions. The securities in which the Funds
invest are selected primarily to permit each Fund to participate in non-United
States companies and economies with prospects for growth. Each Fund invests in
companies, wherever
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organized, which do business primarily outside the United States. Each Fund
intends to diversify investments among several countries and to have represented
in the portfolio, in substantial proportions, business activities in not less
than five different countries in the case of the International Equity Portfolio,
and not less than three different countries in the case of the International
Fund.
The International Fund generally invests in equity securities of
established companies, listed on foreign exchanges, which the Investment Manager
believes have favorable characteristics. When the Investment Manager believes
that it is appropriate to do so in order to achieve the International Fund's
investment objective of long-term capital growth, the International Fund may
invest up to 20% of its total assets in debt securities. The International Fund
may purchase "investment- grade" bonds, which are those rated Aaa, Aa, A or Baa
by Moody's or AAA, AA, A or BBB by S&P or, if unrated, judged by the Investment
Manager to be of equivalent quality. The International Fund may also invest up
to 5% of its total assets in debt securities which are rated below investment
grade.
The International Equity Portfolio generally invests at least 90% of its
total assets in equity securities of established companies, listed on foreign
exchanges, which the Investment Manager believes have favorable characteristics.
When the Investment Manager believes that it is appropriate to do so in order to
achieve the International Equity Portfolio's investment objective of long-term
capital growth, the International Equity Portfolio may invest up to 10% of its
total assets in debt securities. The International Equity Portfolio may purchase
"investment-grade" bonds, which are those rated Aaa, Aa, A or Baa by Moody's or
AAA, AA, A or BBB by S&P or, if unrated, judged by the Investment Manager to be
of equivalent quality. The International Equity Portfolio may also invest up to
5% of its total assets in debt securities which are rated below investment
grade.
When the Investment Manager determines that exceptional conditions exist
abroad, each of the International Fund and the International Equity Portfolio
may, for temporary defensive purposes, invest all or a portion of its assets in
Canadian or U.S. Government obligations or currencies, or securities of
companies incorporated in and having their principal activities in Canada or the
U.S.
Primary Investments:
Foreign Securities. Each of the Funds invests primarily in foreign
securities. Investments in foreign securities involve special considerations due
to limited information, higher brokerage costs, different accounting standards,
thinner trading markets as compared to domestic markets and the likely impact of
foreign taxes on the income from securities. Such investments may also entail
other risks, such as the possibility of one or more of the following; imposition
of dividend or interest withholding or confiscatory taxes; currency blockages or
transfer restrictions; expropriation, nationalization or other adverse political
or economic developments; less governmental supervision and regulation of
securities exchanges, brokers and listed companies; and the difficulty of
enforcing obligations in other countries. Purchases of foreign securities are
usually made in foreign currencies and, as a result, the Fund may incur currency
conversion costs and may be affected favorably or unfavorably by changes in the
value of foreign currencies against the U.S. dollar. Further, it may be more
difficult for a Fund's agents to keep currently informed about corporate actions
which may affect the prices of portfolio securities. Communications between the
U.S. and foreign countries may be less reliable than within the U.S., increasing
the risk of delayed settlements of portfolio transactions or loss of
certificates for portfolio securities. A Fund's ability and decisions to
purchase and sell portfolio securities may be affected by laws or regulations
relating to the convertibility and repatriation of assets.
Repurchase Agreements. Each of the Funds may enter into repurchase
agreements. If the seller under a repurchase agreement becomes insolvent, a
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, a Fund may encounter delay and incur costs, including a decline in
the value of the securities, before being able to sell the securities.
Securities Lending. From time to time, International Fund may lend its
portfolio securities to registered broker/dealers as described above. The risks
of lending portfolio securities, as with other extensions of secured credit,
consist of possible
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delays in receiving additional collateral or in the recovery of the
securities or possible loss of rights in the collateral should the borrower fail
financially. Loans will be made to registered broker/dealers deemed by the
Investment Manager to be in good standing and will not be made unless, in the
judgment of the Investment Manager, the consideration to be received in exchange
for such loans would justify the risk.
Debt Securities. Each of the Funds may, as described above, invest to a
limited extent in debt securities rated below investment grade, i.e. below Baa
by Moody's and below BBB by S&P. (commonly referred to as "junk bonds"). The
lower the ratings of such debt securities, the greater their risks render them
like equity securities. Moody's considers bonds it rates Baa to have speculative
elements as well as investment-grade characteristics. Each of the Funds may
invest in securities which are rated D by S&P or, if unrated, are of equivalent
quality. Securities rated D may be in default with respect to payment of
principal or interest. The International Fund may invest up to 20% of its total
assets in debt securities. The International Equity Portfolio may invest up to
10% of total assets in debt securities. Each Fund may invest up to 5% of its
total assets in debt securities which are rated below investment grade ("junk
bonds").
Illiquid and Restricted Securities. Each of the Funds may invest in
illiquid and restricted securities. The absence of a trading market can make it
difficult to ascertain a market value for illiquid and restricted securities.
Disposing of illiquid and restricted securities may involve time-consuming
negotiation and legal expenses, and it may be difficult or impossible for a Fund
to sell them promptly at an acceptable price. The risk factors involved in the
use of illiquid and restricted securities is substantially the same for each of
the Funds.
Strategic Transactions and Derivatives. From time to time, each of the
Funds may engage in 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 Investment Manager'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 a 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 a Fund can realize on its investments or cause
the Fund to hold a security it might otherwise sell. The use of currency
transactions can result in a Fund's incurring losses as a result of a number of
factors including the imposition of exchange controls, suspension of settlements
or the inability to deliver or receive a specified currency. The use of options
and futures transaction entails certain other risks. In particular, the variable
degree of correlation between price movements in the related portfolio position
of a Fund creates the possibility that losses on the hedging instrument may be
greater than gains in the value of a 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, a
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 the 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. The risk factors involved in the use of
strategic transactions and derivatives is substantially the same for each of the
Funds.
Fundamental Policies. Each Fund has "fundamental" investment policies which
may be changed only with stockholder approval and "nonfundamental" investment
policies which may be changed only with the approval of a Fund's Board of
Directors. Following is a description of certain of the Funds' current
fundamental investment policies which are substantially similar:
Neither Fund may, with respect to 75% of its total assets taken at market
value, purchase more than 10% of the voting securities of any one issuer or
invest more than 5% of the value of its total assets in the securities of any
one issuer, except obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and except securities of other investment
companies.
Neither Fund may 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.
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Neither Fund may act as an underwriter of securities issued by others,
except to the extent that the Fund may be deemed an underwriter in connection
with the disposition of its portfolio securities.
Neither Fund may make loans to other persons, except (a) loans of portfolio
securities, and (b) to the extent that the entry into repurchase agreements and
the purchase of debt securities in accordance with the Fund's investment
objectives and investment policies may be deemed to be loans.
Neither Fund may purchase or sell real estate (except that each 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 reserves
freedom of action to hold and to sell real estate acquired as a result of the
Fund's ownership of securities).
Neither Fund may purchase or sell physical commodities or contracts
relating to physical commodities.
Stockholders of the International Fund are being asked at a Special Meeting
of Stockholders on October 27, 1997 to approve certain changes to the
International Fund's fundamental investment restrictions. Except for the policy
on borrowing, none of the proposed policies differs from the International
Fund's current comparable policy in a material way. The current policy of
International Fund prohibits borrowing money, except as a temporary measure for
extraordinary or emergency purposes and except in connection with reverse
repurchase agreements; provided that the Fund maintains asset coverage of 300%
for all borrowings. Under its proposed borrowing policy, International Fund
would not be limited to borrowing for temporary or emergency purposes; however,
if the International Fund Inc. Directors determine with respect to International
Fund to permit borrowing for other purposes, which they currently do not intend
to do, the Fund's disclosure documents would be amended to disclose that fact.
Although the International Fund Inc. directors do not currently intend to permit
International Fund to borrow for investment leverage purposes, such borrowings
would increase the Fund's volatility and the risk of loss in a declining market.
Borrowings under reverse repurchase agreements are now permitted, and would be
permitted under the proposed policy. The 1940 Act requires borrowings to have
300% asset coverage, which requirement would, therefore, remain unchanged under
the proposed policy, except to the extent that reverse repurchase agreements
would not be subject, under the proposed policy, to the 300% asset coverage
requirement. Consequently, the proposed policy would permit International Fund
to engage in reverse repurchase agreements to a greater extent than under the
current policy. If approved, International Fund's foregoing policies would be
revised as follows.
International Fund will not:
(a) concentrate its investments in a particular industry, as that term is
used in the Investment Company Act of 1940, as amended and interpreted
by regulatory authority having jurisdiction from time to time;
(b) borrow money, except as permitted under the Investment Company Act of
1940, as amended and interpreted by regulatory authority having
jurisdiction from time to time;
(c) issue senior securities, except as permitted under the Investment
Company Act of 1940, as amended and interpreted by regulatory
authority having jurisdiction from time to time;
(d) engage in the business of underwriting securities issued by others,
except to the extent that the Fund may be deemed to be an underwriter
in connection with the disposition of portfolio securities;
(e) purchase or sell real estate, which term does not include securities
of companies which deal in real estate or mortgages or investments
secured by real estate or interests therein, except that the Fund
reserves freedom of action to hold and to sell real estate acquired as
a result of the Fund's ownership of securities;
(f) make loans to other persons, except (i) loans of portfolio securities,
and (ii) to the extent that entry into repurchase agreements and the
purchase of debt instruments or interests in indebtedness in
accordance with the Fund's investment objective and policies may be
deemed to be loans; or
(g) purchase physical commodities or contracts relating to physical
commodities.
In addition, International Fund will continue to be classified as a
diversified series of an open-end management investment company.
The nonfundamental investment restrictions of the International Equity
Portfolio and the International Fund are substantially similar, except as
described herein.
Description of the Reorganization Agreement. As stated above, the
Reorganization Agreement provides for the transfer of all or substantially all
of the assets of the International Equity Portfolio to the International Fund in
exchange for that number of full and fractional Barrett Shares in the
International Fund having an aggregate net asset value equal to the aggregate
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net asset value of each International Equity Portfolio stockholder's stock
held in the International Equity Portfolio as of the close of business on the
business day preceding the Closing. International Fund will assume all of the
identified and stated liabilities of the International Equity Portfolio. In
connection with the Closing, Institutional Fund Inc., on behalf of the
International Equity Portfolio, will distribute the shares of the International
Fund received in the exchange to the stockholders of the International Equity
Portfolio in complete liquidation of the International Equity Portfolio.
Institutional Fund Inc. will subsequently be deregistered as an investment
company under the 1940 Act and terminated under Maryland law.
Upon completion of the Reorganization, each stockholder of the
International Equity Portfolio will own that number of full and fractional
Barrett Shares in the International Fund having an aggregate net asset value
equal to the aggregate net asset value of such stockholder's stock held in the
International Equity Portfolio immediately as of the close of business on the
business day preceding the Closing. Each stockholder's account with Intenational
Fund Inc. will be identical in all material respects to the accounts currently
maintained by Institutional Fund Inc. for each stockholder. In the interest of
economy and convenience, shares of the International Equity Portfolio generally
are not represented by physical certificates, and shares of the International
Fund similarly generally will be in uncertificated form.
Until the closing, stockholders of the International Equity Portfolio will,
of course, continue to be able to redeem their shares at the net asset value
next determined after receipt by the International Equity Portfolio's Transfer
Agent of a redemption request in proper form. Redemption requests received by
Institutional Fund Inc. thereafter will be treated as requests received by
International Fund Inc. for the redemption of shares of the International Fund
received by the stockholder in the Reorganization.
The obligations of Institutional Fund Inc. and International Fund Inc.
under the Reorganization Agreement are subject to various conditions, as stated
therein. Among other things, the Reorganization requires that all filings be
made with, and all authority be received from, the SEC and state securities
commissions as may be necessary in the opinion of counsel to permit the parties
to carry out the transactions contemplated by the Reorganization Agreement.
Institutional Fund Inc. and International Fund Inc. are in the process of making
the necessary filings. To provide against unforeseen events, the Reorganization
Agreement may be terminated or amended at any time prior to the Closing by
action of the Directors of Institutional Fund Inc. and the Directors of
International Fund Inc., notwithstanding the approval of the Reorganization
Agreement by the stockholders of the International Equity Portfolio. However, no
amendment may be made that materially adversely affects the interests of the
stockholders of the International Equity Portfolio. Institutional Fund Inc. and
International Fund Inc. may at any time waive compliance with any of the
covenants and conditions contained in the Reorganization Agreement. For a
complete description of the terms and conditions of the Reorganization, see the
Reorganization Agreement at Exhibit C.
Reasons for the Reorganization. The proposed Reorganization was presented
to the Board of Directors of Institutional Fund Inc. for consideration and
approval at a special meeting on August 6, 1997. All of the Directors were
present at the meeting. For the reasons discussed below, the Board of Directors
of Institutional Fund Inc., including all of the Non-interested Directors, has
determined that the interests of the stockholders of the International Equity
Portfolio will not be diluted as a result of the proposed Reorganization, and
that the proposed Reorganization is in the best interests of the International
Equity Portfolio and its stockholders.
The proposed combination of the International Equity Portfolio and the
International Fund will allow the International Equity Portfolio's stockholders
to continue to participate in a professionally-managed portfolio consisting
primarily of foreign equity investments. The Directors of the International
Equity Portfolio believe that International Equity Portfolio stockholders will
benefit from the proposed Reorganization because the International Fund, while
guided by substantially similar investment objectives and policies, offers the
following benefits:
Increased Investment Opportunities: The International Fund is currently
approximately more than 100 times larger than the International Equity
Portfolio. Because of its much larger asset base, the International Fund can
acquire and dispose of securities on more favorable terms than the International
Equity Portfolio. Also, because of its larger size, the International Fund can
obtain a wider variety of investments. Moreover, it is
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<PAGE>
anticipated that combining the International Equity Portfolio and the
International Fund will further enhance trading efficiency and investment
flexibility.
Lower Fund Expenses Over Time: While total fund expenses of the
International Fund will be higher than those currently paid by stockholders of
the International Equity Portfolio on account of expense limitations currently
in place, if the proposed transaction is approved, such stockholders may benefit
from lower total fund expenses over the long-term. There can be no assurance
that the Investment Manager will continue its expense limitation arrangement
currently in effect for the International Equity Portfolio once such expense
limitation expires after December 31, 1997.
Due to the small size of the International Equity Portfolio, the Directors
and management of such Fund believe that the Fund cannot grow to a sufficient
size through the sale of additional stock to provide investors with significant
economies of scale. Accordingly, the Directors of Institutional Fund Inc.
recommend that the International Equity Portfolio's stockholders approve the
Reorganization with the International Fund.
The Board of Directors of the International Equity Portfolio, in
recommending the proposed transaction, considered a number of factors, including
the following:
(1) the capabilities and resources of the Investment Manager and its
affiliates in the areas of investment management and stockholder
servicing;
(2) expense ratios and information regarding fees and expenses of the
International Equity Portfolio and the International Fund;
(3) the terms and conditions of the Reorganization and whether it would
result in dilution of the interests of the International Equity
Portfolio's stockholders;
(4) the compatibility of the International Fund, its investment
objectives, policies and restrictions with those of the International
Equity Portfolio;
(5) the growth opportunities afforded by the proposed consolidation with
the International Fund; and
(6) the tax consequences to the International Equity Portfolio and its
stockholders.
Description of Securities To Be Issued. The authorized capital stock of
International Fund Inc. consists of 700,000,000 shares, $0.01 par value per
share. The Directors of International Fund Inc. are authorized to divide the
shares into separate series, of which the International Fund is one. Shares of
International Fund Inc. entitle their holders to one vote per share; however,
separate votes will be taken by each series on matters affecting an individual
series. Shares have noncumulative voting rights and no preemptive or
subscription rights. International Fund Inc. is not required to hold stockholder
meetings annually, although stockholder meetings may be called for purposes such
as electing or removing Directors, changing fundamental policies or approving an
investment management agreement.
The Directors of International Fund Inc., in their discretion, may
authorize the division of shares of International Fund Inc. (or shares of a
series) into different classes permitting shares of different classes to be
distributed by different methods. Although stockholders of different classes of
a series would have an interest in the same portfolio of assets, stockholders of
different classes may bear different expenses in connection with different
methods of distribution, which may affect performance. Consistent with the
Directors' authority, the Directors of International Fund Inc. have authorized
the creation of the Barrett Shares class of the International Fund. It is
anticipated that the Barrett Shares class of the International Fund will be
created prior to the Closing Date. If the Barret shares class of the
International FUnd is not so created, the Reorganization will not be
consummated.
International Fund Inc.'s By-Laws provide that meetings of stockholders may
be called at any time by the President, and shall be called by the President or
Secretary at the request, in writing or by resolution, of a majority of
Directors, or at the
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<PAGE>
written request of the holder or holders of twenty-five percent (25%) or more of
the total number of shares of International Fund Inc. then issued and
outstanding and entitled to vote at such meeting. Any such request shall state
the purpose of the proposed meeting. In the event that stockholders of
International Fund Inc. wish to communicate with other stockholders concerning
the removal of any Director of International Fund Inc., such stockholders shall
be assisted in communicating with other stockholders for the purpose of
obtaining signatures to request a meeting of stockholders, all in the manner
provided in Section 16(c) of the 1940 Act as if that section were applicable.
Tax Considerations. The Reorganization is conditioned upon the receipt by
Institutional Fund Inc. and International Fund Inc. of an opinion from Dechert
Price & Rhoads, substantially to the effect that, based upon the facts,
assumptions and representations of the parties, for federal income tax purposes:
(i) the transfer to International Fund of all of the assets of the International
Equity Portfolio in exchange solely for International Fund Barrett Shares and
the assumption by the International Fund of all of the identified and stated
liabilities of the International Equity Portfolio, followed by the distribution
of such Barrett Shares to the International Equity Portfolio stockholders in
exchange for their shares of the International Equity Portfolio in complete
liquidation of the International Equity Portfolio, will constitute a
"reorganization" within the meaning of Section 368(a)(1) of the Code, and the
International Fund and the International Equity Portfolio will each be "a party
to a reorganization" within the meaning of Section 368(b) of the Code; (ii) no
gain or loss will be recognized by the International Equity Portfolio upon the
transfer of all of its assets to the International Fund in exchange solely for
International Fund Barrett Shares and the assumption by the International Fund
of the identified and stated liabilities of the International Equity Portfolio;
(iii) the basis of the assets of the International Equity Portfolio in the hands
of the International Fund will be the same as the basis of such assets of the
International Equity Portfolio immediately prior to the transfer; (iv) the
holding period of the assets of the International Equity Portfolio in the hands
of the International Fund will include the period during which such assets were
held by the International Equity Portfolio; (v) no gain or loss will be
recognized by the International Fund upon the receipt of the assets of the
International Equity Portfolio in exchange for International Fund Barrett Shares
and the assumption by the International Fund of the identified and stated
liabilities of the International Equity Portfolio; (vi) no gain or loss will be
recognized by the stockholders of the International Equity Portfolio upon the
receipt of International Fund Barrett Shares solely in exchange for their shares
of the International Equity Portfolio as part of the transaction; (vii) the
basis of the International Fund Barrett Shares received by the stockholders of
the International Equity Portfolio will be the same as the basis of the shares
of the International Equity Portfolio exchanged therefor; and (viii) the holding
period of the International Fund Barrett Shares received by the stockholders of
the International Equity Portfolio will include the holding period during which
the shares of the International Equity Portfolio exchanged therefor were held,
provided that at the time of the exchange the shares of the International Equity
Portfolio were held as capital assets in the hands of the stockholders of the
International Equity Portfolio.
While Institutional Fund Inc. is not aware of any adverse state or local
tax consequences of the proposed Reorganization, it has not requested any ruling
or opinion with respect to such consequences and stockholders may wish to
consult their own tax advisers with respect to such matters.
Comparative Information on Stockholder Rights. Each of International Fund
Inc. and Institutional Fund Inc. is a Maryland corporation governed by its
Articles of Incorporation dated June 23, 1975 and January 2, 1986, respectively,
each as amended and restated, its By-Laws and applicable Maryland law. The
business and affairs of each of the Funds are managed under the direction of a
Board of Directors.
The number of shares of common stock of each of International Fund Inc. and
Institutional Fund Inc. authorized is 700,000,000 and 25,000,000,000,
respectively. Under the Articles of Incorporation of each of Institutional Fund
Inc. and International Fund Inc., the Board of Directors is authorized to create
new classes or series of shares without a vote of stockholders.
Interests in the International Fund and the International Equity Portfolio
are represented by transferable shares of common stock having $0.01 par value
and $0.001 par value, respectively. The Directors of each of International Fund
Inc. and Institutional Fund Inc. may from time to time divide or combine the
shares into a greater or lesser number without thereby
25
<PAGE>
changing the proportionate common stocks in that portfolio. The Directors of
International Fund Inc. and Institutional Fund Inc. each have the power to
create separate classes of shares for each portfolio and to create additional
classes in the future without a vote of stockholders.
Liquidation Expenses of The Fund. If the Reorganization is effected, the
International Equity Portfolio will liquidate, cease to operate as a business,
and dissolve its corporate existence. In this connection, the International
Equity Portfolio will incur certain expenditures, obligations, and liabilities
to be paid or discharged on and after the Closing Date ("Liquidation Expenses"),
for which it will retain a portion of its cash and cash equivalents as the
Expense Reserve.
Interest of Certain Persons. The Investment Manager has a financial
interest in the Reorganization, arising from the fact that its management fee
under its Investment Management Agreement with the International Fund will
increase as the amount of the International Fund's assets increases: the amount
of those assets will increase by virtue of the Reorganization. See "Synopsis -
Fees and Expenses." Similarly, Scudder Service Corporation, a subsidiary of the
Investment Manager, is the transfer, stockholder servicing and dividend-paying
agent for the International Fund, and its fees from the International Fund will
increase from the addition to the International Fund of new accounts.
Portfolio Turnover. The average annual portfolio turnover rate for the
International Fund, i.e. the ratio of the lesser of annual sales or purchases to
the monthly average value of the portfolio (excluding from both the numerator
and the denominator securities with maturities at the time of acquisition of one
year or less), for the fiscal year ended March 31, 1996 and March 31, 1997, was
45.2% and 35.8%, respectively. The average annual portfolio turnover rate for
the International Equity Portfolio for the period April 3, 1996 (commencement of
operations) to December 31, 1996 was 10.1% (annualized).
Capitalization and Performance. The following table shows on an unaudited
basis the capitalization of the International Equity Portfolio and the Barrett
Shares class of the International Fund as of March 31, 1997 and on a pro forma
basis as of March 31, 1997 giving effect to the Reorganization:
(In thousands, except per share values)
International International Pro Forma Pro Forma
Fund Equity Adjustments* for
Portfolio Reorganization*
Net Assets $2,583,031 $ 18,324 0 $2,601,355
Net Asset Value
per share $ 48.07 $ 12.68 0 $ 48.07
Shares outstanding 53,734 1,446 (1,064) 54,116
* The pro forma relates to the International Fund as a whole; the pro forma
for the Barrett Shares class of the International Fund (in thousands,
except per share value) is as follows: net assets of $18,324, net asset
value per share of $48.07 and shares outstanding of 382.
Total return is a measure of the change in value of an investment in a fund
over the period covered, which assumes that any dividends or capital gains
distributions are automatically reinvested in shares of the same class of that
fund rather than paid to the investor in cash. The formula for total return used
by a fund is prescribed by the SEC and includes three steps: (1) adding to the
total number of shares of the particular class that would be purchased by a
hypothetical $1,000 investment in the fund all additional shares that would have
been purchased if all dividends and distributions paid or distributed during the
period had been automatically reinvested; (2) calculating the redeemable value
of the hypothetical initial investment as of the end of the period by
multiplying the total number of shares owned at the end of the period by the net
asset value per share of the relevant class on the last trading day of the
period; and (3) dividing this account value for the hypothetical investor by the
amount of the initial investment, and annualizing the result for periods of less
than one year. Total return may be stated with or without giving effect to any
expense limitations in effect for a fund.
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<PAGE>
Average Annual Total Return. The following table reflects average annual
total returns for the one, five and ten year periods ending July 31, 1997 for
shares of the International Equity Portfolio and the International Fund:
Average Annual Total Return:
Period International Fund* International Equity Portfolio
------ ------------------- ------------------------------
One Year 29.21% 26.93%
Five Years 14.84% n/a
Ten Years 9.30% n/a
Since Inception n/a 17.66%
___________________________________
* Barrett Shares of International Fund were not offered during the period
covered. Performance shown is for shares of the International Fund in
existence during the periods covered.
Investment Manager. Scudder, Stevens & Clark, Inc., 345 Park Avenue, New
York, New York 10154 is the investment manager to the International Fund
pursuant to an Investment Management Agreement with International Fund Inc., on
behalf of the International Fund, substantially similar in all material respects
to that currently in place for the International Equity Portfolio.
Stockholders of the International Fund are being asked to approve a new
investment management agreement with Scudder Kemper in connection with the
transactions pursuant to the Scudder- Zurich alliance described more fully in
Proposal 2 below. If approved, the new investment management agreement between
the International Fund and Scudder Kemper is not expected to have a material
effect on the operations of the International Fund or on its stockholders. No
material change in the International Fund's investment philosophy, objectives or
strategies is currently envisioned.
The Directors and Executive Officers of International Fund Inc., their
business addresses and principal occupations during the past five years are:
Present Office with International Fund
Inc. (Date Became Director), Principal Occupation or
Name (Age) Employment and Directorships
- ---------- ----------------------------
Paul Bancroft III Director, Scudder International Fund, Inc.
(67) (1982). Venture Capitalist and Consultant
(1988 to present); Retired President,
Chief Executive Officer and Director,
Bessemer Securities Corp. (private
investment company); Director, Western
Atlas, Inc. (diversified oil services and
industrial automation company). Former
Director: Albany International, Inc.
(paper machine belt manufacturer); and
Measurex Corp. (process control systems
company). Mr. Bancroft serves on the
Boards of an additional 5 Trusts or
Corporations whose Funds are advised by
Scudder.
Nicholas Bratt* President and Director, Scudder
(49) International Fund, Inc. (1982). Managing
Director of Scudder, Stevens & Clark, Inc.
Mr. Bratt serves on the Boards of an
additional 14 Trusts or Corporations whose
Funds are advised by Scudder.
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<PAGE>
Present Office with International Fund
Inc. (Date Became Director), Principal Occupation or
Name (Age) Employment and Directorships
- ---------- ----------------------------
Thomas J. Devine Director, Scudder International Fund, Inc.
(70) (1978). Consultant. Mr. Devine serves on
the Boards of an additional 6 Trusts or
Corporations whose Funds are advised by
Scudder.
Keith R. Fox (43) Director, Scudder International Fund, Inc.
(1996). President, Exeter Capital
Management Corporation (private equity
investment firm). Mr. Fox serves on the
Boards of an additional 3 Trusts or
Corporations whose Funds are advised by
Scudder.
William H. Director, Scudder International Fund, Inc.
Gleysteen, Jr. (71) (1990). Consultant; Guest Scholar,
Brookings Institute; Former President, The
Japan Society, Inc. (until 1996). Mr.
Gleysteen serves on the Boards of an
additional 4 Trusts or Corporations whose
Funds are advised by Scudder.
David S. Lee* (63) Vice President, Assistant Treasurer and
Director, Scudder International Fund, Inc.
(1997). Managing Director, Scudder,
Stevens & Clark, Inc.; Trustee Emeritus,
New England Medical Center. Mr. Lee
serves on the Boards of an additional 38
Trusts or Corporations whose Funds are
advised by Scudder.
William H. Luers Director, Scudder International Fund, Inc.
(68) (1990). President, The Metropolitan
Museum of Art; Director: IDEX Corporation
(liquid handling equipment manufacturer)
and Wickes Lumber Company (building
materials for contractors); Former
Director: Transco Energy Company (natural
gas transmission company) (until 1995) and
The Discount Corporation of New York (bond
trading) (until 1993). Mr. Luers serves
on the Boards of an additional 3 Trusts or
Corporations whose Funds are advised by
Scudder.
Wilson Nolen (70) Director, Scudder International Fund, Inc.
(1975). Consultant; Trustee: Cultural
Institutions Retirement Fund, Inc., New
York Botanical Garden, Skowhegan School of
Painting and Sculpture; and Former
Director, Ecohealth, Inc. (biotechnology
company) (until 1996). Mr. Nolen serves
on the Boards of an additional 9 Trusts or
Corporations whose Funds are advised by
Scudder.
Daniel Pierce* (63) Chairman of the Board and Director,
Scudder International Fund, Inc. (1986).
Chairman of the Board and Managing
Director of Scudder, Stevens & Clark, Inc.
Director, Fiduciary Trust Company (bank
and trust company) and Fiduciary Company
Incorporated (bank and trust company).
Mr. Pierce serves on the Boards of an
additional 25 Trusts or Corporations whose
Funds are advised by Scudder.
Kathryn L. Quirk* Vice President, Assistant Secretary and
(44) Director, Scudder International Fund, Inc.
(1996). Managing Director of Scudder,
Stevens & Clark, Inc. Ms. Quirk serves on
the Boards of an additional 34 Trusts or
Corporations whose Funds are advised by
Scudder.
Dr. Gordon Director, Scudder International Fund, Inc.
Shillinglaw (72) (1982). Professor Emeritus of Accounting,
Columbia University Graduate School of
Business. Dr. Shillinglaw serves on the
Boards of an additional 8 Trusts or
Corporations whose Funds are advised by
Scudder.
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________________
* Directors considered by International Fund Inc. and its
counsel to be "interested persons" (as defined in the 1940
Act) of International Fund Inc. or of its investment
manager.
Stockholders of the International Fund are being asked to elect a new slate
of Directors in connection with the Scudder- Zurich alliance for reasons
substantially similar to those set forth in Proposal 3 below.
Expenses of the Reorganization. The expenses relating to the proposed
Reorganization will be borne by Scudder.
ADDITIONAL INFORMATION
As of June 30, 1997, 3,476,331 shares in the aggregate, 6.48% of the
outstanding shares of International Fund were held in the name of Charles Schwab
& Co., 101 Montgomery Street, San Francisco, CA 94104, who may be deemed to be
the beneficial owner of certain of these shares, but disclaims any beneficial
ownership therein. As of June 30, 1997 the Directors and Officers of
International Fund Inc. as a group beneficially owned less than 1% of each class
of shares of the International Fund outstanding. As of June 30, 1997, the
Directors and Officers of Institutional Fund Inc. as a group beneficially owned
less than 1% of the outstanding shares of the International Equity Portfolio. No
persons own beneficially, as of June 30, 1997, 5% or more of the outstanding
shares of the International Equity Portfolio.
Required Vote
Approval of the Reorganization Agreement requires the affirmative vote of a
majority of the International Equity Portfolio's shares outstanding and entitled
to vote thereon. Subject to such approval, the reorganization is currently
scheduled to become effective as of the close of business on December 15, 1997,
but may be postponed by mutual agreement of Institutional Fund Inc. and
International Fund Inc. The Directors unanimously recommend that the
stockholders of the Fund vote in favor of this Proposal 1.
PROPOSAL 2: APPROVAL OF NEW
INVESTMENT MANAGEMENT AGREEMENT
Introduction. Scudder acts as the investment manager to the International
Equity Portfolio (also referred to in Proposals 2, 3 and 4 as the "Fund")
pursuant to an investment management agreement entered into by the Fund and
Scudder (the "Current Investment Management Agreement"). On June 26, 1997,
Scudder entered into a Transaction Agreement (the "Transaction Agreement") with
Zurich Insurance Company ("Zurich") pursuant to which Scudder and Zurich have
agreed to form an alliance. Under the terms of the Transaction Agreement, Zurich
will acquire a majority interest in Scudder, and Zurich Kemper Investments, Inc.
("ZKI"), a Zurich subsidiary, will become part of Scudder. Scudder's name will
be changed to Scudder Kemper Investments, Inc. ("Scudder Kemper"). The foregoing
are referred to as the "Transactions." ZKI, a Chicago-based investment adviser
and the adviser to the Kemper funds, has approximately $80 billion under
management. The headquarters of Scudder Kemper will be in New York. Edmond D.
Villani, Scudder's Chief Executive Officer, will continue as Chief Executive
Officer of Scudder Kemper and will become a member of Zurich's Corporate
Executive Board.
Consummation of the Transactions would constitute an "assignment," as that
term is defined in the 1940 Act, of the Fund's Current Investment Management
Agreement with Scudder. As required by the 1940 Act, the Current Investment
Management Agreement provides for its automatic termination in the event of its
assignment. In anticipation of the Transactions, a new
29
<PAGE>
investment management agreement (the "New Investment Management Agreement,"
together with the Current Investment Management Agreement, the "Investment
Management Agreements") between the Fund and Scudder Kemper is being proposed
for approval by stockholders of the Fund. A copy of the form of the New
Investment Management Agreement is attached hereto as Exhibit A. THE NEW
INVESTMENT MANAGEMENT AGREEMENT IS IN ALL MATERIAL RESPECTS ON THE SAME TERMS AS
THE CURRENT INVESTMENT MANAGEMENT AGREEMENT. Conforming changes are being
recommended to the New Investment Management Agreement in order to promote
consistency among all of the funds currently advised by Scudder and to permit
ease of administration. The material terms of the Current Investment Management
Agreement are described under "Description of the Current Investment Management
Agreement" below.
Stockholders are being asked to approve this Proposal 2 in the event that
the Reorganization, as described in Proposal 1 above, is not consummated.
Board of Directors' Recommendation. On August 6, 1997, the Board of
Institutional Fund Inc. (also referred to in Proposals 2, 3 and 4 as the
"Corporation"), including Non-interested Directors, voted to approve the New
Investment Management Agreement and to recommend its approval to stockholders.
For information about the Board's deliberations and the reasons for its
recommendation, please see "Board of Directors' Evaluation" below.
The Board of the Corporation recommends that its stockholders vote in favor
of the approval of the New Investment Management Agreement for the Fund.
Board of Directors' Evaluation. On June 26, 1997, representatives of
Scudder advised the Non-interested Directors of the Corporation by means of a
telephone conference call that Scudder had entered into the Transaction
Agreement. At that time, Scudder representatives described the general terms of
the proposed Transactions and the perceived benefits for the Scudder
organization and for its investment advisory clients.
Scudder subsequently furnished the Non-interested Directors with additional
information regarding the proposed Transactions, including information regarding
the terms of the proposed Transactions, and information regarding the Zurich and
ZKI organizations. In a series of subsequent telephone conference calls and
in-person meetings, the Non-interested Directors discussed this information
among themselves and with representatives of Scudder and Zurich. They were
assisted in their review of this information by their independent legal counsel
and also consulted with a representative of the Fund's independent auditors and
with an independent consultant knowledgeable in mutual fund industry matters.
In the course of these discussions, Scudder advised the Non- interested
Directors that it did not expect that the proposed Transactions would have a
material effect on the operations of the Fund or its stockholders. Scudder has
advised the Non- interested Directors that the Transaction Agreement, by its
terms, does not contemplate any changes in the structure or operations of the
Fund. Scudder representatives have informed the Directors that Scudder currently
intends to maintain the separate existence of the funds that Scudder and ZKI
manage in their respective distribution channels. Scudder has also advised the
Non-interested Directors that although it currently expects that various
portions of the ZKI organization would be combined with Scudder's operations,
the senior executives of Scudder overseeing those operations will remain largely
unchanged. It is possible, however, that changes in certain personnel currently
involved in providing services to the Fund may result from future efforts to
combine the strengths and efficiencies of both firms. In their discussions with
the Directors, Scudder representatives also emphasized the strengths of the
Zurich organization and its commitment to provide the new Scudder Kemper
organization with the resources necessary to continue to provide high quality
services to the Fund and the other investment advisory clients of the new
Scudder Kemper organization.
The Board of the Corporation was advised that Scudder intends to rely on
Section 15(f) of the 1940 Act, which provides a non-exclusive safe harbor for an
investment adviser to an investment company or any of the investment adviser's
affiliated persons (as defined under the 1940 Act) to receive any amount or
benefit in connection with a change in control of the investment
30
<PAGE>
adviser so long as two conditions are met. First, for a period of three years
after the transaction, at least 75% of the board members of the investment
company must not be "interested persons" of the investment company's investment
adviser or its predecessor adviser. On or prior to the consummation of the
Transactions, the Board, assuming the election of the nominees that you are
being asked to elect in "Proposal 3: Election of Directors," would be in
compliance with this provision of Section 15(f). (See "Proposal 3: Election of
Directors"). Second, an "unfair burden" must not be imposed upon the investment
company as a result of such transaction or any express or implied terms,
conditions or understandings applicable thereto. The term "unfair burden" is
defined in Section 15(f) to include any arrangement during the two-year period
after the transaction whereby the investment adviser, or any interested person
of any such adviser, receives or is entitled to receive any compensation,
directly or indirectly, from the investment company or its shareholders (other
than fees for bona fide investment advisory or other services) or from any
person in connection with the purchase or sale of securities or other property
to, from or on behalf of the investment company (other than bona fide ordinary
compensation as principal underwriter for such investment company). No such
compensation agreements are contemplated in connection with the Transactions.
Scudder has undertaken to pay the costs of preparing and distributing proxy
materials to, and of holding the meeting of, the Fund's stockholders as well as
other fees and expenses in connection with the Transactions, including the fees
and expenses of legal counsel and consultants to the Fund and the Non-interested
Directors.
During the course of their deliberations, the Non-interested Directors
considered a variety of factors, including the nature, quality and extent of the
services furnished by Scudder to the Fund; the necessity of Scudder's
maintaining and enhancing its ability to retain and attract capable personnel to
serve the Fund; the investment record of Scudder in managing the Fund; the
increased complexity of the domestic and international securities markets;
Scudder's profitability from advising the Fund; possible economies of scale;
comparative data as to investment performance, advisory fees and other fees,
including administrative fees, and expense ratios; the risks assumed by Scudder;
the advantages and possible disadvantages to the Fund of having an adviser of
the Fund which also serves other investment companies as well as other accounts;
possible benefits to Scudder from serving as manager to the Fund and from
affiliates of Scudder serving the Fund in various other capacities; current and
developing conditions in the financial services industry, including the entry
into the industry of large and well capitalized companies which are spending and
appear to be prepared to continue to spend substantial sums to engage personnel
and to provide services to competing investment companies; and the financial
resources of Scudder and the continuance of appropriate incentives to assure
that Scudder will continue to furnish high quality services to the Fund.
In addition to the foregoing factors, the Non-interested Directors gave
careful consideration to the likely impact of the Transactions on the Scudder
organization. In this regard, the Non-interested Directors considered, among
other things, the structure of the Transactions which affords Scudder executives
substantial autonomy over Scudder's operations and provides substantial equity
participation and incentives for many Scudder employees; Scudder's and Zurich's
commitment to Scudder's paying compensation adequate to attract and retain top
quality personnel; Zurich's strategy for the development of its asset management
business through Scudder; information regarding the financial resources and
business reputation of Zurich; and the complementary nature of various aspects
of the business of Scudder and the Zurich Kemper organization and the intention
to maintain separate Scudder and Kemper brands in the mutual fund business.
Based on the foregoing, the Non-interested Directors concluded that the
Transactions should cause no reduction in the quality of services provided to
the Fund and believe that the Transactions should enhance Scudder's ability to
provide such services. The Non-interested Directors considered the foregoing
factors with respect to the Fund.
On August 6, 1997, the Directors of the Corporation, including the
Non-interested Directors of the Corporation, approved the New Investment
Management Agreement.
Information Concerning the Transactions and Zurich. Under the Transaction
Agreement, Zurich will pay $866.7 million in cash to acquire two-thirds of
Scudder's outstanding shares and will contribute ZKI to Scudder for additional
shares, following which Zurich will have a 79.1% fully diluted equity interest
in the combined business. Zurich will then transfer a 9.6% fully diluted equity
interest in Scudder Kemper to a defined contribution plan for the benefit of
Scudder and ZKI employees, as well as cash and warrants on Zurich shares for
award to Scudder employees, in each
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<PAGE>
case subject to five-year vesting schedules. After giving effect to the
Transactions, current Scudder stockholders will have a 29.6% fully diluted
equity interest in Scudder Kemper and Zurich will have a 69.5% fully diluted
interest in Scudder Kemper. Scudder's name will be changed to Scudder Kemper
Investments, Inc.
The purchase price for Scudder or for ZKI in the Transactions is subject to
adjustment based on the impact to revenues of non-consenting clients, and will
be reduced if the annualized investment management fee revenues (excluding the
effect of market changes, but taking into account new assets under management)
from clients at the time of closing, as a percentage of such revenues as of June
30, 1997 (the "Revenue Run Rate Percentage"), is less than 90%.
At the closing, Zurich and the other stockholders of Scudder Kemper will
enter into a Second Amended and Restated Security Holders Agreement (the "New
SHA"). Under the New SHA, Scudder stockholders will be entitled to designate
three of the seven members of the Scudder Kemper board of directors and two of
the four members of an Executive Committee, which will be the primary
management-level committee of Scudder Kemper. Zurich will be entitled to
designate the other four members of the Scudder Kemper board and the other two
members of the Executive Committee.
The names, addresses and principal occupations of the initial
Scudder-designated directors of Scudder Kemper are as follows: Lynn S. Birdsong,
345 Park Avenue, New York, New York, Managing Director of Scudder; Cornelia M.
Small, 345 Park Avenue, New York, New York, Managing Director of Scudder; and
Edmond D. Villani, 345 Park Avenue, New York, New York, President, Chief
Executive Officer and Managing Director of Scudder.
The names, addresses and principal occupations of the initial
Zurich-designated directors of Scudder Kemper are as follows: Lawrence W. Cheng,
Mythenquai 2, Zurich, Switzerland, Chief Investment Officer for Investments and
Institutional Asset Management and the corporate functions of Securities and
Real Estate for Zurich; Steven M. Gluckstern, Mythenquai 2, Zurich, Switzerland,
responsible for Reinsurance, Structured Finance, Capital Market Products and
Strategic Investments, and a member of the Corporate Executive Board of Zurich;
Rolf Hueppi, Mythenquai 2, Zurich, Switzerland, Chairman of the Board and Chief
Executive Officer of Zurich; and Markus Rohrbasser, Mythenquai 2, Zurich,
Switzerland, Chief Financial Officer and member of the Corporate Executive Board
of Zurich.
The initial Scudder-designated Executive Committee members will be Messrs.
Birdsong and Villani (Chairman). The initial Zurich-designated Executive
Committee members will be Messrs. Cheng and Rohrbasser.
The New SHA requires the approval of a majority of the Scudder-designated
directors for certain decisions, including changing the name of Scudder Kemper,
effecting an initial public offering before April 15, 2005, causing Scudder
Kemper to engage substantially in non-investment management and related
business, making material acquisitions or divestitures, making material changes
in Scudder Kemper's capital structure, dissolving or liquidating Scudder Kemper,
or entering into certain affiliated transactions with Zurich. The New SHA also
provides for various put and call rights with respect to Scudder Kemper stock
held by current Scudder employees, limitations on Zurich's ability to purchase
other asset management companies outside of Scudder Kemper, rights of Zurich to
repurchase Scudder Kemper stock upon termination of employment of Scudder Kemper
personnel, and registration rights for stock held by continuing Scudder
stockholders.
The Transactions are subject to a number of conditions, including approval
by Scudder stockholders; the Revenue Run Rate Percentages of Scudder and ZKI
being at least 75%; Scudder and ZKI having obtained director and stockholder
approvals from U.S.- registered funds representing 90% of assets of such funds
under management as of June 26, 1997; the absence of any restraining order or
injunction preventing the Transactions, or any litigation challenging the
Transactions that is reasonably likely to result in an injunction or
invalidation of the Transactions, and the continued accuracy of the
representations and warranties contained in the Transaction Agreement. The
Transactions are expected to close during the fourth quarter of 1997.
32
<PAGE>
The information set forth above concerning the Transactions has been
provided to the Corporation by Scudder, and the information set forth below
concerning Zurich has been provided to the Corporation by Zurich.
Founded in 1872, Zurich is a multinational, public corporation organized
under the laws of Switzerland. Its home office is located at Mythenquai 2, 8002
Zurich, Switzerland. Historically, Zurich's earnings have resulted from its
operations as an insurer as well as from its ownership of its subsidiaries and
affiliated companies (the "Zurich Insurance Group"). Zurich and the Zurich
Insurance Group provide an extensive range of insurance products and services,
and have branch offices and subsidiaries in more than 40 countries throughout
the world. Zurich Insurance Group is particularly strong in the insurance of
international companies and organizations. Over the past few years, Zurich's
global presence, particularly in the United States, has been strengthened by
means of selective acquisitions.
Description of the Current Investment Management Agreement. Under the
Current Investment Management Agreement, Scudder provides the Fund with
continuing investment management services. The Investment Manager also
determines which securities shall be purchased, held, or sold, and what portion
of the Fund's assets shall be held uninvested, subject to the Corporation's
Articles of Incorporation, By-Laws, investment policies and restrictions, the
provisions of the 1940 Act, and such policies and instructions as the Directors
may determine.
The Current Investment Management Agreement provides that the Investment
Manager will provide portfolio management services and that the Investment
Manager will place portfolio transactions in accordance with policies expressed
in the Fund's registration statement, pay the Fund's office rent, render
significant administrative services on behalf of the Fund (not otherwise
provided by third parties) necessary for the Fund's operating as an open-end
investment company including, but not limited to, preparing reports to and
meeting materials for the Corporation's Board of Directors and reports and
notices to Fund stockholders; supervising, negotiating contractual arrangements
with, to the extent appropriate, and monitoring the performance of various
third-party service providers to the Fund (such as the Fund's transfer and
pricing agents, fund accounting agent, custodian, accountants and others) and
other persons in any capacity deemed necessary or desirable to Fund operations;
preparing and making filings with the Securities and Exchange Commission (the
"SEC" or the "Commission") and other regulatory and self-regulatory
organizations, including but not limited to, preliminary and definitive proxy
materials, post-effective amendments to the Registration Statement, semi-annual
reports on Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act;
overseeing the tabulation of proxies by the Fund's transfer agent; assisting in
the preparation and filing of the Fund's federal, state and local tax returns;
preparing and filing the Fund's federal excise tax returns pursuant to Section
4982 of the Internal Revenue Code of 1986, as amended; providing assistance with
investor and public relations matters; monitoring the valuation of portfolio
securities and the calculation of net asset value; monitoring the registration
of shares of the Fund under applicable federal and state securities laws;
maintaining or causing to be maintained for the Fund all books, records and
reports and any other information required under the 1940 Act, to the extent
such books, records and reports and other information are not maintained by the
Fund's custodian or other agents of the Fund; assisting in establishing
accounting policies of the Fund; assisting in the resolution of accounting
issues that may arise with respect to the Fund's operations and consulting with
the Fund's independent accountants, legal counsel and the Fund's other agents as
necessary in connection therewith; establishing and monitoring the Fund's
operating expense budgets; reviewing the Fund's bills; processing the payment of
bills that have been approved by an authorized person; assisting the Fund in
determining the amount of dividends and distributions available to be paid by
the Fund to its stockholders, preparing and arranging for the printing of
dividend notices to stockholders, and providing the transfer and dividend paying
agent, the custodian, and the accounting agent with such information as is
required for such parties to effect the payment of dividends and distributions;
and otherwise assisting the Fund in the conduct of its business, subject to the
direction and control of the Corporation's Board of Directors.
Under the Current Investment Management Agreement, the Fund is responsible
for other expenses, including organizational expenses (including out-of-pocket
expenses, but not including the Investment Manager's overhead or employee
costs); brokers' commissions or other costs of acquiring or disposing of any
portfolio securities of the Fund; legal, auditing and accounting expenses;
payment for portfolio pricing or valuation services to pricing agents,
accountants, bankers and other specialists, if any; taxes and governmental fees;
the fees and expenses of the
33
<PAGE>
Fund's transfer agent; expenses of preparing share certificates and any other
expenses, including clerical expenses, of issuance, offering, distribution,
sale, redemption or repurchase of shares; the expenses of and fees for
registering or qualifying securities for sale; the fees and expenses of
Non-interested Directors; the cost of printing and distributing reports, notices
and dividends to current stockholders; and the fees and expenses of the Fund's
custodians, subcustodians, accounting agent, dividend disbursing agents and
registrars. 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 stockholders' and other meetings, the cost
of responding to stockholders' inquiries, and its expenses incurred in
connection with litigation, proceedings and claims and the legal obligation it
may have to indemnify officers and Directors of the Corporation with respect
thereto. The Fund is also responsible for the maintenance of books and records
which are required to be maintained by the Fund's custodian or other agents of
the Corporation; telephone, telex, facsimile, postage and other communications
expenses; any fees, dues and expenses incurred by the Fund in connection with
membership in investment company trade organizations; expenses of printing and
mailing prospectuses and statements of additional information of the Fund and
supplements thereto to current stockholders; costs of stationery; fees payable
to the Investment Manager and to any other Fund advisors or consultants;
expenses relating to investor and public relations; interest charges, bond
premiums and other insurance expense; freight, insurance and other charges in
connection with the shipment of the Fund's portfolio securities; and other
expenses.
The Investment Manager is responsible for the payment of the compensation
and expenses of all Directors, officers and executive employees of the Fund
(including the Fund's share of payroll taxes) affiliated with the Investment
Manager and making available, without expense to the Fund, the services of such
Directors, officers and employees as may duly be elected officers of the
Corporation, subject to their individual consent to serve and to any limitations
imposed by law. The Fund is responsible for the fees and expenses (specifically
including travel expenses relating to Fund business) of Directors not affiliated
with the Investment Manager. Under each Current Investment Management Agreement,
the Investment Manager also pays the Fund's share of payroll taxes, as well as
expenses, such as travel expenses (or an appropriate portion thereof), of
Directors and officers of the Corporation who are Directors, officers or
employees of the Investment Manager, to the extent that such expenses relate to
attendance at meetings of the Board of Directors of the Corporation, or any
committees thereof or advisers thereto, held outside Boston, Massachusetts or
New York, New York. During the Fund's most recent fiscal year, no compensation,
direct or otherwise (other than through fees paid to the Investment Manager),
was paid or became payable by the Corporation to any of its officers or
Directors who were affiliated with the Investment Manager.
In return for the services provided by the Investment Manager as investment
manager, and the expenses it assumes under the Current Investment Management
Agreement, the Fund pays the Investment Manager a management fee at a rate of
0.90% of average daily net assets which is accrued daily and payable monthly. As
of December 31, 1996, the end of the Fund's last fiscal year, the Fund had net
assets of $17,897,508 and paid an aggregate management fee to the Investment
Manager of $0 during such period.
The Current Investment Management Agreement further provides that the
Investment Manager shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Fund in connection with matters to which
such agreement relates, except a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Investment Manager in the
performance of its duties or from reckless disregard by the Investment Manager
of its obligations and duties under such agreement.
The Current Investment Management Agreement may be terminated without
penalty upon sixty (60) days' written notice by either party. The Fund may agree
to terminate its Current Investment Management Agreement either by the vote of a
majority of the outstanding voting securities of the Fund, or by the Board of
Directors. As stated above, the Current Investment Management Agreement
automatically terminates in the event of its assignment.
Scudder has acted as the Investment Manager for the Fund since the Fund
commenced operations on April 3, 1996. The Current Investment Management
Agreement is dated April 3, 1996, and was last approved by the Directors on July
27, 1997 and by the stockholders of the Fund on April 2, 1996 and continues in
34
<PAGE>
effect until July 31, 1998. The Current Investment Management Agreement was last
submitted to stockholders prior to its becoming effective, as required by the
1940 Act.
The New Investment Management Agreement. The New Investment Management
Agreement for the Fund will be dated as of the date of the consummation of the
Transactions, which is expected to occur in the fourth quarter of 1997, but in
no event later than February 28, 1998. The New Investment Management Agreement
will be in effect for an initial term ending on the same date as would the
Current Investment Management Agreement but for the Transactions, and may
continue thereafter from year to year only if specifically approved at least
annually by the vote of "a majority of the outstanding voting securities" of the
Fund, or by the Board and, in either event, the vote of a majority of the Non-
interested Directors, cast in person at a meeting called for such purpose. In
the event that stockholders of the Fund do not approve the New Investment
Management Agreement, the Current Investment Management Agreement will remain in
effect until the closing of the Transactions at which time it would terminate.
In such event, the Board of the Corporation will take such action as it deems to
be in the best interests of the Fund and its stockholders. In the event the
Transactions are not consummated, Scudder will continue to provide services to
the Fund in accordance with the terms of the Current Investment Management
Agreement for such periods as may be approved at least annually by the Board,
including a majority of the Non-interested Directors.
Differences Between the Current and New Investment Management Agreements.
The New Investment Management Agreement is substantially the same as the Current
Investment Management Agreement in all material respects. The principal changes
that have been made are summarized below. The New Investment Management
Agreement reflects conforming changes that have been made in order to promote
consistency among all funds currently advised by Scudder and to permit ease of
administration. For example, in the New Investment Management Agreement, the
term "accounting agents" would be added to the list of service providers to
which the Investment Manager must provide information in connection with the
payment of dividends and distributions.
In addition, the New Investment Management Agreement would clarify that
purchase and sale opportunities which are suitable for more than one client of
the Investment Manager will be allocated by the Investment Manager in an
equitable manner.
Further, the New Investment Management Agreement would clarify the scope of
the licensing provisions governing the use of the Scudder name. Specifically,
the New Investment Management Agreement identifies Scudder Kemper as the
exclusive licensee of the rights to use and sublicense the names "Scudder,"
"Scudder Kemper Investments, Inc.," and "Scudder, Stevens & Clark, Inc."
(together the "Scudder Marks"). Under this license, the Corporation, with
respect to the Fund, has the nonexclusive right to use and sublicense the
Scudder name and marks as part of its name, and to use the Scudder Marks in the
Corporation's investment products and services. This license continues only as
long as the New Investment Management Agreement is in place, and only as long as
Scudder Kemper continues to be a licensee of the Scudder Marks from Scudder
Trust Company, which is the owner and licensor of the Scudder Marks. As a
condition of the license, the Corporation, on behalf of the Fund, undertakes
certain responsibilities and agrees to certain restrictions, such as agreeing
not to challenge the validity of the Scudder Marks or ownership by Scudder Trust
Company and the obligation to use the name within commercially reasonable
standards of quality. In the event the agreement is terminated, the Corporation,
on behalf of the Fund, must not use a name likely to be confused with those
associated with the Scudder Marks.
The New Investment Management Agreement adds conforming language that
describes in greater detail the portfolio management services provided by the
Investment Manager and adds a new section that describes the administrative
responsibilities and duties of the Investment Manager. For example, the section
entitled Portfolio Management Services specifies that the Fund will have the
benefit of the Investment Manager's analysis and research, and that the
Investment Manager will undertake responsibilities such as making records
available to regulators and providing periodic reports to the Board. The section
entitled Administrative Services is new and describes the types of
administrative services that the Investment Manager has been customarily
providing to the Fund. For a fuller explanation of the types of administrative
services, please refer to the second paragraph under "Description of the Current
Investment Management Agreement" in these proxy materials.
35
<PAGE>
Other conforming changes include: deletion of the Investment Manager's
potential responsibility for monitoring the calculation and payment of
distributions to stockholders; addition of a provision clarifying that the New
Investment Management Agreement supersedes all prior agreements; and addition of
a provision replacing New York with Massachusetts as the jurisdiction whose laws
will govern the New Investment Management Agreement.
Investment Manager. Scudder is one of the most experienced investment
counsel firms in the United States. It was established in 1919 as a partnership
and was restructured as a Delaware corporation in 1985. The principal source of
Scudder's income is professional fees received from providing continuing
investment advice. Scudder provides investment counsel for many individuals and
institutions, including insurance companies, endowments, industrial corporations
and financial and banking organizations.
As stated above, Scudder is a Delaware corporation. Daniel Pierce* is the
Chairman of the Board of Scudder, Edmond D. Villani# is President and Chief
Executive Officer of Scudder, Stephen R. Beckwith#, Lynn S. Birdsong#, Nicholas
Bratt#, E. Michael Brown*, Mark S. Casady*, Linda C. Coughlin*, Margaret D.
Hadzima*, Jerard K. Hartman#, Richard A. Holt@, John T. Packard+, Kathryn L.
Quirk#, Cornelia M. Small# and Stephen A. Wohler* are the other members of the
Board of Directors of Scudder (see footnote for symbol key).. The principal
occupation of each of the above named individuals is serving as a Managing
Director of Scudder.
All of the outstanding voting and nonvoting securities of Scudder are held
of record by Stephen R. Beckwith, Juris Padegs#, Daniel Pierce and Edmond D.
Villani in their capacity as the representatives of the beneficial owners of
such securities (the "Representatives"), pursuant to a Security Holders'
Agreement among Scudder, the beneficial owners of securities of Scudder and such
Representatives. Pursuant to the Security Holders' Agreement, the
Representatives have the right to reallocate shares among the beneficial owners
from time to time. Such reallocations will be at net book value in cash
transactions. All Managing Directors of Scudder own voting and nonvoting stock
and all Principals of Scudder own nonvoting stock.
Directors, officers and employees of Scudder from time to time may enter
into transactions with various banks, including the Fund's custodian bank. It is
Scudder's opinion that the terms and conditions of those transactions will not
be influenced by existing or potential custodial or other Fund relationships.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of Scudder,
computes net asset value and provides fund accounting services for the Fund.
Scudder Service Corporation ("SSC"), also a subsidiary of Scudder, is the
transfer, shareholder servicing and dividend-paying agent for the Fund. Scudder
Trust Company ("STC"), an affiliate of Scudder, provides subaccounting and
recordkeeping services for stockholder accounts in certain retirement and
employee benefit plans. For the fiscal year ended December 31, 1997, the fees
paid to SFAC, SSC and STC by the Fund were $0, $15,431 and $0, respectively.
SFAC, SSC and STC will continue to provide fund accounting, transfer
agency, subaccounting and recordkeeping services to the Fund under the current
arrangements if the New Investment Management Agreement is approved, unless the
proposed reorganization is approved.
Exhibit B sets forth the fees and other information regarding other
investment companies advised by Scudder.
Brokerage Commissions on Portfolio Transactions. To the maximum extent
feasible, Scudder places orders for portfolio transactions through Scudder
Investor Services, Inc., Two International Place, Boston, Massachusetts 02110
(the "Distributor") (a corporation registered as a broker/dealer and a
subsidiary of Scudder), which in turn places orders on behalf of
_______________________________
* Two International Place, Boston, Massachusetts
# 345 Park Avenue, New York, New York
+ 101 California Street, San Francisco, California
@ Two Prudential Plaza, 180 North Stetson, Suite 5400,
Chicago, Illinois
36
<PAGE>
the Fund with issuers, underwriters or other brokers and dealers. In selecting
brokers and dealers with which to place portfolio transactions for the Fund,
Scudder will not consider sales of shares of funds currently advised by ZKI,
although it may place such transactions with brokers and dealers that sell
shares of funds currently advised by ZKI. The Distributor receives no
commissions, fees or other remuneration from the Fund for this service.
Allocation of portfolio transactions is supervised by Scudder.
Required Vote. Approval of this Proposal by the Fund requires the
affirmative vote of a "majority of the outstanding voting securities", as
defined above, of the Fund. The Directors of the Corporation recommend that the
stockholders vote in favor of this Proposal 2.
PROPOSAL 3: ELECTION OF DIRECTORS FOR THE CORPORATION
At the Special Meeting, five Directors are to be elected to constitute the
Board of the Corporation. For election of Directors at the Special Meeting, the
Board of Directors has approved the nomination of the following individuals: Dr.
Rosita P. Chang, Edgar R. Fiedler, Peter B. Freeman, Dr. J. D. Hammond and
Richard M. Hunt.
The persons named as proxies on the enclosed proxy card will vote for the
election of the nominees named above unless authority to vote for any or all of
the nominees is withheld in the proxy. Each Director so elected will serve as a
Director of the Corporation until the next meeting of stockholders, if any,
called for the purpose of electing Directors and until the election and
qualification of a successor or until such Director sooner dies, resigns or is
removed as provided in the Articles of Incorporation of the Corporation. Since
the Corporation does not hold annual meetings, Directors will hold office for an
indeterminate period.
Each of the nominees has indicated that he or she is willing to serve as a
Director. If any or all of the nominees should become unavailable for election
due to events not now known or anticipated, the persons named as proxies will
vote for such other nominee or nominees as the Directors may recommend. The
following table sets forth certain information concerning the current Directors
and the nominees. Unless otherwise noted, each of the Directors and nominees has
engaged in the principal occupation listed in the following table for more than
five years, but not necessarily in the same capacity.
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<PAGE>
NOMINEES:
Present Office with the Corporation
(Date Nominee Became Director),
Principal Occupation or
Name (Age) Employment and Directorships
- ---------- ----------------------------
Dr. Rosita P. Chang Professor of Finance, University of Rhode
(42) Island. Dr. Chang serves on the Board of 1
Trust whose Funds are advised by Scudder.
Edgar R. Fiedler* Director (1987). Senior Fellow and
(68) Economic Counsellor, The Conference Board,
Inc.; Formerly Assistant Secretary of the
Treasury for Economic Policy. Director:
The Stanley Works; Zurich-American
Insurance Company; Harris Insight Funds;
and Emerging Mexico Fund. Mr. Fiedler
serves on the Boards of an additional 8
Trusts or Corporations whose Funds are
advised by Scudder.
Peter B. Freeman Director (1991). Trustee, Eastern
(65) Utilities Associates (electric utility
holding company); Director, AMICA Life
Insurance Co.; Director, AMICA Insurance
Co. Formerly: President, Fields Point
Management Co. and Goelet Estate Co.
(private investment management companies);
Former Director, The Providence Journal
Company (multi-media company). Mr. Freeman
serves on the Boards of an additional 9
Trusts or Corporations whose Funds are
advised by Scudder.
Dr. J.D. Hammond Dean, Smeal College of Business
(63) Administration, Pennsylvania State
University; Member of the Board, The
Atlantic Mutual Insurance Co. Former
Trustee, Provident Mutual Life Insurance
Company. Dr. Hammond serves on the Boards
of an additional 2 Trusts or Corporations
whose Funds are advised by Scudder.
Richard M. Hunt University Marshall and Senior Lecturer,
(70) Harvard University; Vice Chairman, American
Council on Germany; Director, Council on
the United States and Italy; Life Trustee,
American Field Service; and Partner,
Elmhurst Investment Trust (family
investment firm). Mr. Hunt serves on the
Boards of an additional 2 Trusts or
Corporations whose Funds are advised by
Scudder.
________________
* Director considered by the Corporation and its counsel to be
an "interested person" (as defined in the 1940 Act) of the
Corporation or of its investment manager because of his
employment by the Investment Manager. Although Mr. Fiedler
is currently not an "interested person" he may be deemed to
be so in the future by the Commission because of his prior
service as a director of Zurich American Insurance Company,
a subsidiary of Zurich. Mr. Fiedler resigned from that
position in July 1997 and has had no further affiliation
with Zurich or any of its affiliates since that date.
38
<PAGE>
CURRENT DIRECTORS
NOT STANDING FOR
RE-ELECTION:
Present Office with the Corporation (Date
Became Director),
Principal Occupation or
Name (Age) Employment and Directorships
- ---------- ----------------------------
Robert W. Lear (80) Director (1989). Executive-in-Residence,
Visiting Professor, Columbia University
Graduate School of Business; Director,
Equitable Capital Partners Enhancement
Yield Funds. Former Director, Cambrex
Corp.
David S. Lee* (63) Chairman of the Board and Director (1994).
Managing Director, Scudder, Stevens &
Clark, Inc.; Trustee Emeritus, New England
Medical Center. Mr. Lee serves on the
Boards of an additional 16 Trusts or
Corporations whose Funds are advised by
Scudder.
Daniel Pierce* (63) President and Director (1990). Chairman
of the Board and Managing Director of
Scudder, Stevens & Clark, Inc. Director,
Fiduciary Trust Company (bank and trust
company) and Fiduciary Company
Incorporated (bank and trust company).
Mr. Pierce serves on the Boards of an
additional 18 Trusts or Corporations whose
Funds are advised by Scudder.
________________
* Directors considered by the Corporation and its counsel to
be "interested persons" (as defined in the 1940 Act) of the
Corporation or of its investment manger because of their
employment by the Investment Manager and, in some cases,
holding offices with the Corporation.
As of June 30, 1997, no nominees to or Directors of the Corporation owned
directly or beneficially any shares of the Fund.
To the best of the Corporation's knowledge, as of June 30, 1997, no person
owned beneficially more than 5% of the Fund's outstanding shares.
Responsibilities of the Board - Board and Committee Meetings. The Board of
Directors of the Corporation is responsible for the general oversight of Fund
business. A majority of the Board's members are not affiliated with Scudder.
These Non-interested Directors have primary responsibility for assuring that the
Fund is managed in the best interests of its stockholders. The Board met four
times in 1996.
The Board of Directors meets at least quarterly to review the investment
performance of the Fund and other operational matters, including policies and
procedures designed to assure compliance with various regulatory requirements.
At least annually, the Non-interested Directors review the fees paid to the
Investment Manager and its affiliates for investment advisory services and other
administrative and shareholder services. In this regard, they evaluate, among
other things, the Fund's investment performance, the quality and efficiency of
the various other services provided, costs incurred by the Investment Manager
and its affiliates, and comparative information regarding fees and expenses of
competitive funds. They are assisted in this process by the Fund's independent
public accountants and by independent legal counsel selected by the
Non-interested Directors. In addition, the Non-interested Directors from time to
time have established and served on task forces and subcommittees focusing on
particular matters such as investment, accounting and shareholder service
issues.
The Board of the Corporation has both an Audit Committee and a Committee on
Independent Directors, the responsibilities of which are described below.
39
<PAGE>
Audit Committee. The Board of the Corporation has an Audit Committee
consisting of the Non-interested Directors. The Audit Committee reviews with
management and the independent accountants for the Fund, among other things, the
scope of the audit and the controls of the Fund and its agents, reviews and
approves in advance the type of services to be rendered by independent
accountants, recommends the selection of independent accountants for the Fund to
the Board and, in general, considers and reports to the Board on matters
regarding the Fund's accounting and bookkeeping practices. The Audit Committee
met once in 1996.
Committee on Independent Directors. The Board of the Corporation has a
Committee on Independent Directors consisting of all the Non-interested
Directors. The Committee is charged with the duty of making all nominations for
Non-interested Directors and consideration of other related matters.
Stockholders' recommendations as to nominees received by management are referred
to the Committee for its consideration and action. The Committee on Independent
Directors met once in 1996.
In addition to the Board and committee meetings listed above, the Directors
of the Corporation attended various other meetings on behalf of the Corporation
during the year, including meetings with their independent legal counsel and
informational meetings.
Executive Officers. In addition to Mr. Pierce, a Director who is also an
officer of the Corporation, the following persons are Executive Officers of the
Corporation:
Present Office with the Corporation; Year First Became
Name (Age) Principal Occupation or Employment (1) an Officer (2)
- ---------- -------------------------------------- --------------
K. Susan Cote (35) Vice President; Principal of 1996
Scudder, Stevens & Clark, Inc.
Carol L. Franklin Vice President; Managing 1996
(44) Director of Scudder, Stevens &
Clark, Inc.
Jerard K. Hartman Vice President; Managing 1996
(64) Director of Scudder, Stevens &
Clark, Inc.
Thomas W. Joseph Vice President and Assistant 1989
(58) Secretary; Principal of Scudder,
Stevens & Clark, Inc.
Thomas F. McDonough Vice President and Secretary; 1989
(50) Principal of Scudder, Stevens &
Clark, Inc.
Pamela A. McGrath Vice President and Treasurer; 1991
(43) Managing Director of Scudder,
Stevens & Clark, Inc.
Kathryn L. Quirk Vice President; Managing 1996
(44) Director of Scudder, Stevens &
Clark, Inc.
___________________
(1) Unless otherwise stated, all of the Executive Officers have
been associated with the Corporation for more than five
years, although not necessarily in the same capacity.
(2) The President, Treasurer and Secretary each holds office
until his or her successor has been duly elected and
qualified, and all other officers hold offices in accordance
with the By-laws of the Corporation.
40
<PAGE>
Compensation of Directors and Officers. The Corporation pays each
Non-interested Director an annual Director's fee plus specified amounts for
Board and committee meetings attended and compensates him or her for expenses
related to Corporation business.
Scudder supervises the Fund's investments, pays the compensation and
certain expenses of its personnel who serve as Directors and officers of the
Corporation and receives a management fee for its services. Several of the
Corporation's officers and Directors are also officers, Directors, employees or
stockholders of Scudder and participate in the fees paid to that firm, although
the Corporation makes no direct payments to them other than for reimbursement of
travel expenses in connection with their attendance at Directors' and committee
meetings.
The following Compensation Table provides in tabular form the following
data:
Column (1) All Directors who receive compensation from the Corporation.
Column (2) Aggregate compensation received by each Director of the
Corporation during the calendar year 1996.
Column (3) Total compensation received by each Director from funds managed
by Scudder (collectively, the "Fund Complex") during the calendar year 1996.
The Directors do not receive any pension or retirement benefits from the
Corporation.
COMPENSATION TABLE
(1) (2) (3)
Aggregate Compensation
Total Compensation From
Scudder Institutional the Corporation and Fund
Name of Director Fund, Inc. Complex Paid to Director
- ---------------- ---------- ------------------------
Edgar R. $17,907 $108,083 (20 Funds)
Fiedler*
Peter B. Freeman $ 9,076 $131,734 (33 Funds)
Robert W. Lear $ 9,076 $33,049 (11 Funds)
* Mr. Fiedler received $17,907 through a deferred compensation program. As of
December 31, 1996, Mr. Fiedler had a total of $420,490 accrued over a
number of years in a deferred compensation program for serving on the Board
of Directors of Scudder Institutional Fund, Inc. and Scudder Fund, Inc.
Required Vote. Election of each of the listed nominees for Director
requires the affirmative vote of a plurality of the votes of the Corporation
cast at the Special Meeting in person or by proxy. This means that the five
nominees receiving the largest number of votes will be elected. The Directors of
the Corporation recommend that the stockholders vote in favor of each of the
nominees listed in this Proposal 3.
PROPOSAL 4: RATIFICATION OR REJECTION
OF THE SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Corporation, including a majority of the
Non-interested Directors, has selected Price Waterhouse LLP to act as
independent accountants of the Fund for the current fiscal year. Price
Waterhouse LLP are independent accountants and have advised the Fund that they
have no direct financial interest or material indirect financial interest in the
Fund. One or more representatives of Price Waterhouse LLP are expected to be
present at the Special Meeting and will have an opportunity to make a statement
if they so desire. Such
41
<PAGE>
representatives are expected to be available to respond to appropriate questions
posed by stockholders or management.
Required Vote. Ratification of the selection of independent accountants
requires the affirmative vote of a majority of the votes cast at the Special
Meeting in person or by proxy. The Directors recommend that the stockholders of
the Fund vote in favor of this Proposal 4.
ADDITIONAL INFORMATION
General. The cost of preparing, printing and mailing the enclosed proxy,
accompanying notice and proxy statement and all other costs incurred in
connection with the solicitation of proxies, including any additional
solicitation made by letter, telephone or telegraph, will be paid by Scudder. In
addition to solicitation by mail, certain officers and representatives of the
Corporation, officers and employees of Scudder and certain financial services
firms and their representatives, who will receive no extra compensation for
their services, may solicit proxies by telephone, telegram or personally.
Shareholder Communications Corporation ("SCC") has been engaged to assist
in the solicitation of proxies. As the Special Meeting date approaches, certain
stockholders of the Fund may receive a telephone call from a representative of
SCC if their vote has not yet been received. Authorization to permit SCC to
execute proxies may be obtained by telephonic or electronically transmitted
instructions from stockholders of the Fund. Proxies that are obtained
telephonically will be recorded in accordance with the procedures set forth
below. The Directors believe that these procedures are reasonably designed to
ensure that the identity of the stockholder casting the vote is accurately
determined and that the voting instructions of the stockholder are accurately
determined.
In all cases where a telephonic proxy is solicited, the SCC representative
is required to ask for each stockholder's full name, address, social security or
employer identification number, title (if the stockholder is authorized to act
on behalf of an entity, such as a corporation), and the number of shares owned
and to confirm that the stockholder has received the proxy statement/prospectus
and card in the mail. If the information solicited agrees with the information
provided to SCC, then the SCC representative has the responsibility to explain
the process, read the proposals listed on the proxy card, and ask for the
stockholder's instructions on each proposal. The SCC representative, although he
or she is permitted to answer questions about the process, is not permitted to
recommend to the stockholder how to vote, other than to read any recommendation
set forth in the proxy statement. SCC will record the stockholder's instructions
on the card. Within 72 hours, the stockholder will be sent a letter or mailgram
to confirm his or her vote and asking the stockholder to call SCC immediately if
his or her instructions are not correctly reflected in the confirmation.
If the stockholder wishes to participate in the Special Meeting, but does
not wish to give his or her proxy by telephone, the stockholder may still submit
the proxy card originally sent with the proxy statement or attend in person.
Should stockholders require additional information regarding the proxy or
replacement proxy cards, they may contact SCC toll-free at 1- 800-733-8481, ext.
488. Any proxy given by a stockholder, whether in writing or by telephone, is
revocable.
Proposals of Stockholders. Stockholders wishing to submit proposals for
inclusion in a proxy statement for a stockholder meeting subsequent to the
Special Meeting, if any, should send their written proposals to the Secretary of
the Corporation, c/o Scudder, Stevens & Clark, Inc., 345 Park Avenue, New York,
NY 10154, within a reasonable time before the solicitation of proxies for such
meeting. The timely submission of a proposal does not guarantee its inclusion.
Other Matters to Come Before the Special Meeting. The Board of Directors is
not aware of any matters that will be presented for action at the Special
Meeting other than the matters set forth herein. Should any other matters
requiring a vote of stockholders arise, the proxy in the accompanying form will
confer upon the person or persons entitled to vote the shares
42
<PAGE>
represented by such proxy the discretionary authority to vote the shares as to
any such other matters in accordance with their best judgment in the interest of
the Corporation and/or Fund.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD(S)
PROMPTLY. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
By order of the Board of Directors,
Thomas F. McDonough
Secretary
43
<PAGE>
Exhibit A
---------
Form of
New Investment Management Agreement
44
<PAGE>
Exhibit A
Name of Fund
345 Park Avenue
New York, New York 10154
, 199_
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
[Name of Series]
Ladies and Gentlemen:
[Name of Corporation] (the "Corporation") has been established as a
Maryland corporation to engage in the business of an investment company.
Pursuant to the Corporation's Articles of Incorporation, as amended from
time-to-time (the "Articles"), the Board of Directors has divided the
Corporation's shares of capital stock, par value $__ per share, (the "Shares")
into separate series, or funds, including [name of series] (the "Fund"). Series
may be abolished and dissolved, and additional series established, from time to
time by action of the Directors.
The Corporation, on behalf of the Fund, has selected you to act as the sole
investment manager of the Fund and to provide certain other services, as more
fully set forth below, and you have indicated that you are willing to act as
such investment manager and to perform such services under the terms and
conditions hereinafter set forth. Accordingly, the Corporation on behalf of the
Fund agrees with you as follows:
1. Delivery of Documents. The Corporation engages in the business of
investing and reinvesting the assets of the Fund in the manner and in accordance
with the investment objectives, policies and restrictions specified in the
currently effective Prospectus (the "Prospectus") and Statement of Additional
Information (the "SAI") relating to the Fund included in the Corporation's
Registration Statement on Form N-1A, as amended from time to time, (the
"Registration Statement") filed by the Corporation 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 Corporation. The Corporation has also furnished you with
copies properly certified or authenticated of each of the following additional
documents related to the Corporation and the Fund:
(a) The Articles dated __________, 19__, as amended to date.
(b) By-Laws of the Corporation as in effect on the date hereof (the "By-Laws").
<PAGE>
(c) Resolutions of the Directors of the Corporation and the shareholders of the
Fund selecting you as investment manager and approving the form of this
Agreement.
The Corporation will furnish you from time to time with copies, properly
certified or authenticated, of all amendments of or supplements, if any, to the
foregoing, including the Prospectus, the SAI and the Registration Statement.
2. Sublicense to Use the Scudder Trademarks. As exclusive licensee of the
rights to use and sublicense the use of the "Scudder" and ["Scudder Kemper
Investments, Inc."/"Scudder, Stevens & Clark, Inc."] trademarks (together, the
"Scudder Marks"), you hereby grant the Corporation a nonexclusive right and
sublicense to use (i) the "Scudder" name and mark as part of the Corporation's
name (the "Fund Name"), and (ii) the Scudder Marks in connection with the
Corporation's investment products and services, in each case only for so long as
this Agreement, any other investment management agreement between you (or any
organization which shall have succeeded to your business as investment manager
("your Successor")) and the Corporation, or any extension, renewal or amendment
hereof or thereof remains in effect, and only for so long as you are a licensee
of the Scudder Marks, provided however, that you agree to use your best efforts
to maintain your license to use and sublicense the Scudder Marks. The
Corporation agrees that it shall have no right to sublicense or assign rights to
use the Scudder Marks, shall acquire no interest in the Scudder Marks other than
the rights granted herein, that all of the Corporation's uses of the Scudder
Marks shall inure to the benefit of Scudder Trust Company as owner and licensor
of the Scudder Marks (the "Trademark Owner"), and that the Corporation shall not
challenge the validity of the Scudder Marks or the Trademark Owner's ownership
thereof. The Corporation further agrees that all services and products it offers
in connection with the Scudder Marks shall meet commercially reasonable
standards of quality, as may be determined by you or the Trademark Owner from
time to time, provided that you acknowledge that the services and products the
Corporation rendered during the one-year period preceding the date of this
Agreement are acceptable. At your reasonable request, the Corporation shall
cooperate with you and the Trademark Owner and shall execute and deliver any and
all documents necessary to maintain and protect (including but not limited to in
connection with any trademark infringement action) the Scudder Marks and/or
enter the Corporation as a registered user thereof. At such time as this
Agreement or any other investment management agreement shall no longer be in
effect between you (or your Successor) and the Corporation, or you no longer are
a licensee of the Scudder Marks, the Corporation shall (to the extent that, and
as soon as, it lawfully can) cease to use the Fund Name or any other name
indicating that it is advised by, managed by or otherwise connected with you (or
your Successor) or the Trademark Owner. In no event shall the Corporation use
the Scudder Marks or any other name or mark confusingly similar thereto
(including, but not limited to, any name or mark that includes the name
"Scudder") if this Agreement or any other investment advisory agreement between
you (or your Successor) and the Fund is terminated.
3. Portfolio Management Services. As manager of the assets of the Fund, you
shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
2
<PAGE>
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 Corporation's Board
of Directors. In connection therewith, you shall use reasonable efforts to
manage the Fund so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Fund shall have
the benefit of the investment analysis and research, the review of current
economic conditions and trends and the consideration of long-range investment
policy generally available to your investment advisory clients. In managing the
Fund in accordance with the requirements set forth in this section 3, you shall
be entitled to receive and act upon advice of counsel to the Corporation or
counsel to you. You shall also make available to the Corporation promptly upon
request all of the Fund's investment records and ledgers as are necessary to
assist the Corporation in complying with the requirements of the 1940 Act and
other applicable laws. To the extent required by law, you shall furnish to
regulatory authorities having the requisite authority any information or reports
in connection with the services provided pursuant to this Agreement which may be
requested in order to ascertain whether the operations of the Corporation are
being conducted in a manner consistent with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
the Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Corporation's Board of Directors periodic reports
on the investment performance of the Fund and on the performance of your
obligations pursuant to this Agreement, and you shall supply such additional
reports and information as the Corporation's officers or Board of Directors
shall reasonably request.
4. Administrative Services. In addition to the portfolio management
services specified above in section 3, you shall furnish at your expense for the
use of the Fund such office space and facilities in the United States as the
Fund may require for its reasonable needs, and you (or one or more of your
affiliates designated by you) shall render to the Corporation administrative
services on behalf of the Fund necessary for operating as an open-end investment
company and not provided by persons not parties to this Agreement including, but
not limited to, preparing reports to and meeting materials for the Corporation's
Board of Directors and reports and notices to Fund shareholders; supervising,
negotiating contractual arrangements with, to the extent appropriate, and
monitoring the performance of, accounting agents, custodians, depositories,
transfer agents and pricing agents, accountants, attorneys, printers,
underwriters, brokers and dealers, insurers and other persons in any capacity
deemed to be necessary or desirable to Fund operations; preparing and making
filings with the Securities and Exchange Commission (the "SEC") and other
regulatory and self-regulatory organizations, including, but not limited to,
preliminary and definitive proxy materials, post-effective amendments to the
Registration Statement, semi-annual reports on Form N-SAR and notices pursuant
3
<PAGE>
to Rule 24f-2 under the 1940 Act; overseeing the tabulation of proxies by the
Fund's transfer agent; assisting in the preparation and filing of the Fund's
federal, state and local tax returns; preparing and filing the Fund's federal
excise tax return pursuant to Section 4982 of the Code; providing assistance
with investor and public relations matters; monitoring the valuation of
portfolio securities and the calculation of net asset value; monitoring the
registration of Shares of the Fund under applicable federal and state securities
laws; maintaining or causing to be maintained for the Fund all books, records
and reports and any other information required under the 1940 Act, to the extent
that such books, records and reports and other information are not maintained by
the Fund's custodian or other agents of the Fund; assisting in establishing the
accounting policies of the Fund; assisting in the resolution of accounting
issues that may arise with respect to the Fund's operations and consulting with
the Fund's independent accountants, legal counsel and the Fund's other agents as
necessary in connection therewith; establishing and monitoring the Fund's
operating expense budgets; reviewing the Fund's bills; processing the payment of
bills that have been approved by an authorized person; assisting the Fund in
determining the amount of dividends and distributions available to be paid by
the Fund to its shareholders, preparing and arranging for the printing of
dividend notices to shareholders, and providing the transfer and dividend paying
agent, the custodian, and the accounting agent with such information as is
required for such parties to effect the payment of dividends and distributions;
and otherwise assisting the Corporation as it may reasonably request in the
conduct of the Fund's business, subject to the direction and control of the
Corporation's Board of Directors. Nothing in this Agreement shall be deemed to
shift to you or to diminish the obligations of any agent of the Fund or any
other person not a party to this Agreement which is obligated to provide
services to the Fund.
5. Allocation of Charges and Expenses. Except as otherwise specifically
provided in this section 5, you shall pay the compensation and expenses of all
Directors, officers and executive employees of the Corporation (including the
Fund's share of payroll taxes) who are affiliated persons of you, and you shall
make available, without expense to the Fund, the services of such of your
directors, officers and employees as may duly be elected officers of the
Corporation, subject to their individual consent to serve and to any limitations
imposed by law. You shall provide at your expense the portfolio management
services described in section 3 hereof and the administrative services described
in section 4 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 5. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Directors and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out-of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Corporation; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent, custodians,
subcustodians, transfer agents, dividend disbursing agents and registrars;
payment for portfolio pricing or valuation services to pricing agents,
4
<PAGE>
accountants, bankers and other specialists, if any; expenses of preparing share
certificates and, except as provided below in this section 5, other expenses in
connection with the issuance, offering, distribution, sale, redemption or
repurchase of securities issued by the Fund; expenses relating to investor and
public relations; expenses and fees of registering or qualifying Shares of the
Fund for sale; interest charges, bond premiums and other insurance expense;
freight, insurance and other charges in connection with the shipment of the
Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Corporation business) of Directors,
officers and employees of the Corporation who are not affiliated persons of you;
brokerage commissions or other costs of acquiring or disposing of any portfolio
securities of the Fund; expenses of printing and distributing reports, notices
and dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of the Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Directors and officers of the Corporation; costs of
shareholders' and other meetings; and travel expenses (or an appropriate portion
thereof) of Directors and officers of the Corporation who are directors,
officers or employees of you to the extent that such expenses relate to
attendance at meetings of the Board of Directors of the Corporation or any
committees thereof or advisors thereto held outside of Boston, Massachusetts or
New York, New York.
You shall not be required to pay expenses of any activity which is
primarily intended to result in sales of Shares of the Fund if and to the extent
that (i) such expenses are required to be borne by a principal underwriter which
acts as the distributor of the Fund's Shares pursuant to an underwriting
agreement which provides that the underwriter shall assume some or all of such
expenses, or (ii) the Corporation on behalf of the Fund shall have adopted a
plan in conformity with Rule 12b-1 under the 1940 Act providing that the Fund
(or some other party) shall assume some or all of such expenses. You shall be
required to pay such of the foregoing sales expenses as are not required to be
paid by the principal underwriter pursuant to the underwriting agreement or are
not permitted to be paid by the Fund (or some other party) pursuant to such a
plan.
6. Management Fee. For all services to be rendered, payments to be made and
costs to be assumed by you as provided in sections 3, 4 and 5 hereof, the
Corporation on behalf of the Fund shall pay you in United States Dollars on the
last day of each month the unpaid balance of a fee equal to the excess of (a)
1/12 of ____ of 1 percent of the average daily net assets as defined below of
the Fund for such month; [provided that, for any calendar month during which the
average of such values exceeds $________, the fee payable for that month based
on the portion of the average of such values in excess of $________ shall be
1/12 of __ of 1 percent of such portion;] [and provided that, for any calendar
month during which the average of such values exceeds $________, the fee payable
for that month based on the portion of the average of such values in excess of
$________ shall be 1/12 of ____ of 1 percent of such portion;] over any
compensation waived by you from time to time (as more fully described below).
You shall be entitled to receive during any month such interim payments of your
fee hereunder as you shall request, provided that no such payment shall exceed
75 percent of the amount of your fee then accrued on the books of the Fund and
unpaid.
The "average daily net assets" of the Fund shall mean the average of the
values placed on the Fund's net assets as of 4:00 p.m. (New York time) on each
day on which the net asset value of the Fund is determined consistent with the
5
<PAGE>
provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of the Fund shall always be determined
pursuant to the applicable provisions of the Articles and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 6, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of 4:00 p.m. (New York time), or as of such other time as the value of
the net assets of the Fund's portfolio may be lawfully determined on that day.
If the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of this
section 6.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Fund's expenses, as if such waiver
or limitation were fully set forth herein.
7. Avoidance of Inconsistent Position; Services Not Exclusive. In
connection with purchases or sales of portfolio securities and other investments
for the account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
Your services to the Fund pursuant to this Agreement are not to be deemed
to be exclusive and it is understood that you may render investment advice,
management and services to others. In acting under this Agreement, you shall be
an independent contractor and not an agent of the Corporation.
8. Limitation of Liability of Manager. As an inducement to your undertaking
to render services pursuant to this Agreement, the Corporation agrees that you
shall not be liable under this Agreement for any error of judgment or mistake of
law or for any loss suffered by the Fund in connection with the matters to which
this Agreement relates, provided that nothing in this Agreement shall be deemed
to protect or purport to protect you against any liability to the Corporation,
the Fund or its shareholders to which you would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of your
duties, or by reason of your reckless disregard of your obligations and duties
hereunder. Any person, even though also employed by you, who may be or become an
employee of and paid by the Fund shall be deemed, when acting within the scope
of his or her employment by the Fund, to be acting in such employment solely for
the Fund and not as your employee or agent.
6
<PAGE>
9. Duration and Termination of This Agreement. This Agreement shall remain
in force until September 30, 19__, 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 Directors 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 Directors of the Corporation, or by the vote of a majority of the
outstanding voting securities of the Fund. The aforesaid requirement that
continuance of this Agreement be "specifically approved at least annually" shall
be construed in a manner consistent with the 1940 Act and the rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
This Agreement may be terminated with respect to the Fund at any time,
without the payment of any penalty, by the vote of a majority of the outstanding
voting securities of the Fund or by the Corporation's Board of Directors on 60
days' written notice to you, or by you on 60 days' written notice to the
Corporation. 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 in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
11. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
In interpreting the provisions of this Agreement, the definitions contained
in Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of the State
of Maryland, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, or in a manner which would cause the Fund to
fail to comply with the requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Corporation on behalf of the Fund.
7
<PAGE>
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 Corporation, whereupon this letter shall become a binding
contract effective as of the date of this Agreement.
Yours very truly,
[NAME OF CORPORATION], on behalf of
Scudder _______________ Fund
By:
______________________________
President
The foregoing Agreement is hereby accepted as of the date
hereof.
SCUDDER KEMPER INVESTMENTS,
INC.
By:
______________________________
Managing Director
8
<PAGE>
Exhibit B
---------
Other Investment Companies
Advised by Scudder
45
<PAGE>
Exhibit B
<TABLE>
<CAPTION>
Investment Objectives and Advisory Fees
For Funds Advised by Scudder, Stevens & Clark, Inc.
<S> <C> <C> <C>
FUND OBJECTIVE FEE RATE ASSETS*
Money Market
Scudder U.S. Treasury Safety, liquidity, and stability of capital 0.500% of net $398,597,054
Money Fund and, consistent therewith, current income. assets+
Scudder Cash Investment Stability of capital while maintaining 0.500% to $250 $1,430,623,516
Trust liquidity of capital and providing current million
income from money market securities. 0.450% next
$250 million
0.400% next
$500 million
0.350%
thereafter +
Scudder Money Market High level of current income consistent with 0.250% of net $384,509,425**
Series preservation of capital and liquidity by assets
investing in a broad range of short-term
money market instruments.
Scudder Government Money High level of current income consistent with 0.250% of net $36,794,563**
Market Series preservation of capital and liquidity by assets
investing exclusively in obligations issued
or guaranteed by the U.S. Government or its
agencies or instrumentalities and in certain
repurchase agreements.
Tax Free Money Market
Scudder Tax Free Money Income exempt from regular federal income 0.500% to $500 $220,245,241
Fund taxes and stability of principal through million
investments in municipal securities. 0.480%
thereafter+
Scudder Tax Free Money High level of current income consistent with 0.250% of net $79,695,218**
Market Series preservation of capital and liquidity, assets
exempt from federal income tax by investing
primarily in high quality municipal
obligations.
Scudder California Tax Stability of capital and the maintenance of 0.500% of net $68,695,680
Free Money Fund a constant net asset value of $1.00 per assets+
share while providing California tax payers
income exempt from both California state
personal and regular federal income tax
through investment in high quality, short-
term tax-exempt California municipal
securities.
- ----------------------
* Assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
** Assets as of 7/31/91.
+ Subject to waivers and/or expense limitations.
<PAGE>
FUND OBJECTIVE FEE RATE ASSETS*
Scudder New York Tax Free Stability of capital and income exempt from 0.500% of net $59,538,652
Money Fund New York state and New York City personal assets+
income taxes and regular federal income tax
through investment in high quality, short-
term municipal securities in New York.
Tax Free
Scudder Limited Term Tax High level of income exempt from regular 0.600% of net $123,660,431
Free Fund federal income tax consistent with a high assets+
degree of principal stability.
Scudder Medium Term Tax High level of income exempt from regular 0.600% to $500 $650,504,081
Free Fund federal income tax and limited principal million
fluctuation through investment primarily in 0.500%
high grade intermediate term municipal thereafter
securities.
Scudder Managed Municipal Income exempt from regular federal income 0.550% to $200 $737,422,861
Bonds tax primarily through investments in high- million
grade long-term municipal securities. 0.500% next
$500 million
0.475%
thereafter
Scudder High Yield Tax High level of income, exempt from regular 0.650% to $300 $293,101,021
Free Fund federal income tax, from an actively managed million
portfolio consisting primarily of investment 0.600%
grade municipal securities. thereafter
Scudder California Tax Income exempt from both California state 0.625% to $200 $288,576,041
Free Fund personal income tax and regular federal million
income tax primarily through investment 0.600%
grade municipal securities. thereafter
Scudder Massachusetts A high level of income exempt from both 0.600% of net $65,505,088
Limited Term Tax Free Massachusetts personal income tax and assets+
Fund regular federal income tax as is consistent
with a high degree of price stability.
Scudder Massachusetts Tax A high level of income exempt from both 0.600% of net $329,842,169
Free Fund Massachusetts personal income tax and assets
regular federal income tax through
investment primarily in long-term investment-
grade municipal securities in Massachusetts.
Scudder New York Tax Free Income exempt from New York state and New 0.625% to $200 $180,647,157
Fund York City personal income taxes and regular million
federal income tax through investment 0.600%
primarily in long-term investment-grade thereafter
municipal securities in New York.
- -----------------------------
+ Subject to waivers and/or expense limitations.
* Assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
2
<PAGE>
FUND OBJECTIVE FEE RATE ASSETS*
Scudder Ohio Tax Free Income exempt from Ohio personal income tax 0.600% of net $84,109,009
Fund and regular federal income tax through assets+
investment primarily in investment-grade
municipal securities in Ohio.
Scudder Pennsylvania Tax Income exempt from Pennsylvania personal 0.600% of net $74,177,997
Free Fund income tax and regular federal income tax assets+
through investment primarily in investment-
grade municipal securities in Pennsylvania.
U.S. Income
Scudder Short Term Bond High level of income consistent with a high 0.600% to $500 $1,468,170,885
Fund degree of principal stability through million
investments primarily in high quality short- 0.500% next
term bonds. $500 million
0.450% next
$500 million
0.400% next
$500 million
0.375% next $1
billion
0.350%
thereafter
Scudder Zero Coupon 2000 High investment returns over a selected 0.600% of net $25,440,414
Fund period as is consistent with investment in assets+
U.S. Government securities and the
minimization of reinvestment risk.
Scudder GNMA Fund High current income and safety of principal 0.650% to $200 $383,008,164
primarily from investment in U.S. Government million
guaranteed mortgage-backed GNMA securities. 0.600% next
$300 million
0.550%
thereafter
Scudder Income Fund A high level of income, consistent with the 0.650% to $200 $578,519,502
prudent investment of capital, through a million
flexible investment program emphasizing high- 0.600% next
grade bonds. $300 million
0.550%
thereafter
Scudder High Yield Bond A high level of current income and capital 0.700% of net $73,523,094
Fund appreciation through investment primarily in assets
below investment-grade domestic debt
securities.
Global Income
Scudder Global Bond Fund Total return with an emphasis on current 0.750% to $1 $217,403,907
income by investing primarily in high-grade billion
bonds denominated in foreign currencies and 0.700%
the U.S. dollar. thereafter+
- -----------------------------------
+ Subject to waivers and/or expense limitations.
* Assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
3
<PAGE>
FUND OBJECTIVE FEE RATE ASSETS*
Scudder International Income primarily by investing in high-grade 0.850% to $1 $235,993,183
Bond Fund international bonds and protection and billion
possible enhancement of principal value by 0.800%
actively managing currency, bond market and thereafter
maturity exposure and by security selection
Scudder Emerging Markets High current income and, secondarily, long- 1.000% of net $304,607,984
Income Fund term capital appreciation by investing assets
primarily in high-yielding debt securities
issued in emerging markets.
Asset Allocation
Scudder Pathway Current income and, secondarily, long-term There will be $13,928,759***
Conservative Portfolio growth of capital by investing substantially no fee as the
in Scudder bond mutual funds, but will have Manager will
some exposure to Scudder equity mutual receive a fee
funds. from the
underlying
funds.
Scudder Pathway Balanced Balance of growth and income by investing in There will be $167,721,722***
Portfolio a mix of Scudder money market, bond and no fee as the
equity mutual funds. Manager will
receive a fee
from the
underlying
funds.
Scudder Pathway Growth Long-term growth of capital by investing There will be $42,234,535***
Portfolio predominantly in Scudder equity mutual funds no fee as the
designed to provide long-term growth. Manager will
receive a fee
from the
underlying
funds.
Scudder Pathway Maximize total return by investing in a There will be $8,983,598***
International Portfolio select mix of established international and no fee as the
global Scudder Funds. Manager will
receive a fee
from the
underlying
funds.
U.S. Growth and Income
Scudder Balanced Fund A balance of growth and income from a 0.700% of net $109,541,542
diversified portfolio of equity and fixed assets+
income securities and long-term preservation
of capital through a quality oriented
investment approach designed to reduce risk.
- --------------------------------
*** Assets as of 6/30/97.
+ Subject to waivers and/or expense limitations.
* Assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
4
<PAGE>
FUND OBJECTIVE FEE RATE ASSETS*
Scudder Growth and Income Long-term growth of capital, current income 0.600% to $500 $4,186,481,205
Fund and growth of income primarily from common million
stocks, preferred stocks and securities 0.550% next
convertible into common stocks. $500 million
0.500% next
$500 million
0.475% next
$500 million
0.450% next $1
billion
0.425% next
$1.5 billion
0.405%
thereafter
U.S. Growth
Scudder Large Company Maximize long-term capital appreciation 0.750% to $500 $1,651,459,797
Value Fund (formerly through a value driven investment program million
Scudder Capital Growth emphasizing common stocks and preferred 0.650% next
Fund) stocks. $500 million
0.600% next
$500 million
0.550%
thereafter
Scudder Value Fund Long-term growth of capital through 0.700% of net $88,874,292
investment in undervalued equity securities. assets
Scudder Small Company Long-term growth of capital by investing 0.750% of net $41,187,186
Value Fund primarily in undervalued equity securities assets
of small U.S. companies.
Scudder Micro Cap Fund Long-term growth of capital by investing 0.750% of net $72,048,339***
primarily in a diversified portfolio of U.S. assets
micro-cap common stocks.
Scudder Classic Growth Long-term growth of capital while keeping 0.700% of net $33,867,066
Fund the value of its shares more stable than assets
other growth mutual funds.
Scudder Large Company Long-term growth of capital through 0.700% of net $221,253,633
Growth Fund (formerly investment primarily in the equity assets
Scudder Quality Growth securities of seasoned, financially strong
Fund) U.S. growth companies.
Scudder Development Fund Long-term growth of capital by investing 1.000% to $500 $861,564,138
primarily in equity securities of emerging million
growth companies. 0.950% next
$500 million
0.900%
thereafter
Scudder 21st Century Long-term growth of capital by investing 1.000% of net $20,942,531***
Growth Fund primarily in the securities of emerging assets+
growth companies poised to be leaders in the
21st century.
- --------------------------------
*** Assets as of 6/30/97.
+ Subject to waivers and/or expense limitations.
* Assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
5
<PAGE>
FUND OBJECTIVE FEE RATE ASSETS*
Global Growth
Scudder Global Fund Long-term growth of capital through Effective $1,604,465,769
investment in a diversified portfolio of 9/11/97:
marketable foreign and domestic securities, 1.000% to $500
primarily equity securities. million
0.950% next
$500 million
0.900%
thereafter
Institutional Long-term growth of capital primarily 0.900% of net $17,897,508
International Equity through a diversified portfolio of assets+
Portfolio marketable foreign equity securities.
Scudder International Long-term growth of capital and current 1.000% of net $25,631,898***
Growth and Income Fund income primarily from foreign equity assets+
securities
Scudder International Long-term growth of capital primarily 0.900% to $500 $2,583,030,686
Fund through a diversified portfolio of million
marketable foreign equity securities. 0.850% next
$500 million
0.800% next $1
billion
0.750% next $1
billion
0.700%
thereafter
Scudder Global Discovery Above-average capital appreciation over the 1.100% of net $350,829,980
Fund long-term by investing primarily in the assets
equity securities of small companies located
throughout the world.
Scudder Emerging Markets Long-term growth of capital primarily 1.25% of net $75,793,693
Growth Fund through equity investments in emerging assets+
markets around the globe.
Scudder Gold Fund Maximum return consistent with investing in 1.000% of net $163,932,814
a portfolio of gold-related equity assets
securities and gold.
Scudder Greater Europe Long-term growth of capital through 1.000% of net $120,300,058
Growth Fund investment primarily in the equity assets
securities of European companies.
Scudder Pacific Long-term growth of capital primarily 1.100% of net $329,391,540
Opportunities Fund through investment in the equity securities assets
of Pacific Basin companies, excluding Japan.
- -------------------------------
*** Assets as of 6/30/97.
+ Subject to waivers and/or expense limitations.
* Assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
6
<PAGE>
FUND OBJECTIVE FEE RATE ASSETS*
Scudder Latin America Long-term capital appreciation through Effective $621,914,690
Fund investment primarily in the securities of 9/11/97:
Latin American issuers. 1.250% to $1
billion
1.150%
thereafter
The Japan Fund, Inc. Long-term capital appreciation through 0.850% to $100 $385,963,962
investment primarily in equity securities of million
Japanese companies. 0.750% next
$200 million
0.700% next
$300 million
0.650%
thereafter
Closed-End Funds
The Argentina Fund, Inc. Long-term capital appreciation through Advisor: $117,596,046
investment primarily in equity securities of Effective
Argentine issuers. 11/1/97:
1.100% of net
assets
Sub-Advisor:
Paid by
Advisor.
0.160% of net
assets
The Brazil Fund, Inc. Long-term capital appreciation through 1.200% to $150 $417,981,869
investment primarily in equity securities of million
Brazilian issuers. 1.050% next
$150 million
1.000%
thereafter
Effective
10/29/97:
1.200% to $150
million
1.050% next
$150 million
1.000% next
$200 million
0.900%
thereafter
Administrator:
Receives an
annual fee of
$50,000
- ----------------------------
* Assets are shown as of a Fund's most recent fiscal year end unless other
indicated.
7
<PAGE>
FUND OBJECTIVE FEE RATE ASSETS*
The Korea Fund, Inc. Long-term capital appreciation through Advisor: $661,690,073
investment primarily in equity securities of 1.150% to $50
Korean companies. million
1.100% next $50
million
1.000% next
$250 million
0.950% next
$400 million
0.900%
thereafter
Sub-Advisor -
Daewoo:
Paid by
Advisor.
0.2875% to $50
million
0.275% next $50
million
0.250% next
$250 million
0.2375% next
$400 million
0.225%
thereafter
The Latin America Dollar High level of current income and, 1.200% of net $94,748,606
Income Fund, Inc. secondarily, capital appreciation through assets
investment principally in dollar-denominated
Latin American debt instruments.
Montgomery Street Income High level of current income consistent with 0.500% to $150 $198,465,822
Securities, Inc. prudent investment risks through a million
diversified portfolio primarily of debt 0.450% next $50
securities. million
0.400%
thereafter
Scudder New Asia Fund, Long-term capital appreciation through 1.250% to $75 $133,363,686
Inc. investment primarily in equity securities of million
Asian companies. 1.150% next
$125 million
1.100%
thereafter
Scudder New Europe Fund, Long-term capital appreciation through 1.250% to $75 $266,418,730
Inc. investment primarily in equity securities of million
companies traded on smaller or emerging 1.150% next
European markets and companies that are $125 million
viewed as likely to benefit from changes and 1.100%
developments throughout Europe. thereafter
Scudder Spain and Long-term capital appreciation through Advisor: $75,127,194
Portugal Fund, Inc. investment primarily in equity securities of 1.000% of net
Spanish & Portuguese issuers assets
Administrator:
0.200% of net
assets
- -----------------------------
* Assets are shown as of a Fund's most recent fiscal year end unless other
indicated.
8
<PAGE>
FUND OBJECTIVE FEE RATE ASSETS*
Scudder World Income High income and, consistent therewith, 1.200% of net $54,488,637
Opportunities Fund, Inc. capital appreciation. assets
Insurance Products
Balanced Portfolio Balance of growth and income consistent with 0.475% of net $88,342,837
long-term preservation of capital through a assets
diversified portfolio of equity and fixed
income securities.
Bond Portfolio High level of income consistent with a high 0.475% of net $65,769,421
quality portfolio of debt securities. assets
Capital Growth Portfolio Long-term capital growth from a portfolio 0.475% to $500 $440,481,308
consisting primarily of equity securities. million
0.450%
thereafter
Global Discovery Above-average capital appreciation over the 0.975% of net $16,757,264
Portfolio long-term by investing primarily in the assets+
equity securities of small companies located
throughout the world.
Growth and Income Long-term growth of capital, current income 0.475% of net $91,091,547
Portfolio and growth of income. assets
International Portfolio Long-term growth of capital primarily 0.875% to $500 $726,038,527
through diversified holdings of marketable million
foreign equity investments. 0.775%
thereafter
Money Market Portfolio Stability of capital and current income from 0.370% of net $97,785,626
a portfolio of money market instruments assets
AARP Funds
AARP High Quality Money Current income and liquidity, consistent 0.350% to $2 $412,126,193
Fund with maintaining stability and safety of billion
principal, through investment in high 0.330% next $2
quality securities. billion
0.300% next $2
billion
0.280% next $2
billion
0.260% next $3
billion
0.250% next $3
billion
0.240%
thereafter
Individual Fund
Fee
0.100% of net
assets
- ------------------------------------------
+ Subject to waivers and/or expense limitations.
* Assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
9
<PAGE>
FUND OBJECTIVE FEE RATE ASSETS*
AARP Balanced Stock and Long-term growth of capital and income, 0.350% to $2 $403,179,939
Bond Fund consistent with a stable share price, billion
through investment in a combination of 0.330% next $2
stocks, bonds and cash reserves. billion
0.300% next $2
billion
0.280% next $2
billion
0.260% next $3
billion
0.250% next $3
billion
0.240%
thereafter
Individual Fund
Fee
0.190% of net
assets
AARP Capital Growth Fund Long-term capital growth, consistent with a 0.350% to $2 $826,136,713
share price more stable than other capital billion
growth funds, through investment primarily 0.330% next $2
in common stocks and securities convertible billion
into common stocks. 0.300% next $2
billion
0.280% next $2
billion
0.260% next $3
billion
0.250% next $3
billion
0.240%
thereafter+
Individual Fund
Fee
0.320% of net
assets
AARP Global Growth Fund Long-term growth of capital, consistent with 0.350% to $2 $77,651,978
a share price more stable than other global billion
equity funds, through investment primarily 0.330% next $2
in a diversified portfolio of equity billion
securities of corporations worldwide. 0.300% next $2
billion
0.280% next $2
billion
0.260% next $3
billion
0.250% next $3
billion
0.240%
thereafter+
Individual Fund
Fee
0.550% of net
assets
- ---------------------------------------
+ Subject to waivers and/or expense limitations.
* Assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
10
<PAGE>
FUND OBJECTIVE FEE RATE ASSETS*
AARP Growth and Income Long-term growth of capital and income, 0.350% to $2 $4,218,983,398
Fund consistent with a stable share price, billion
through investment primarily in common 0.330% next $2
stocks and securities convertible into billion
common stocks. 0.300% next $2
billion
0.280% next $2
billion
0.260% next $3
billion
0.250% next $3
billion
0.240%
thereafter
Individual Fund
Fee
0.190% of net
assets
AARP International Stock Long-term growth of capital, consistent with 0.350% to $2 $12,699,109***
Fund a share price more stable than other billion
international equity funds, through 0.330% next $2
investment primarily in a diversified billion
portfolio of foreign equity securities. 0.300% next $2
billion
0.280% next $2
billion
0.260% next $3
billion
0.250% next $3
billion
0.240%
thereafter+
Individual Fund
Fee
0.600% of net
assets
AARP Small Company Stock Long-term growth of capital, consistent with 0.350% to $2 $25,425,137***
Fund a share price more stable than other small billion
company stock funds, through investment 0.330% next $2
primarily in stocks of small U.S. companies. billion
0.300% next $2
billion
0.280% next $2
billion
0.260% next $3
billion
0.250% next $3
billion
0.240%
thereafter+
Individual Fund
Fee
0.550% of net
assets
- ---------------------------
+ Subject to waivers and/or expense limitations.
** Assets as of 6/30/97.
* Assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
11
<PAGE>
FUND OBJECTIVE FEE RATE ASSETS*
AARP U.S. Stock Index Long-term capital growth and income, 0.350% to $2 $23,917,674***
Fund consistent with greater share price billion
stability than a S&P 500 index fund, by 0.330% next $2
taking an indexing approach to investing in billion
common stocks, emphasizing higher dividend 0.300% next $2
stocks while maintaining investment billion
characteristics otherwise similar to the S&P 0.280% next $2
500 index. billion
0.260% next $3
billion
0.250% next $3
billion
0.240%
thereafter+
Individual Fund
Fee
0.000% of net
assets
AARP Bond Fund for Income High level of current income, consistent 0.350% to $2 $34,951,973***
with greater share price stability than a billion
long term bond, through investment primarily 0.330% next $2
in investment-grade debt securities. billion
0.300% next $2
billion
0.280% next $2
billion
0.260% next $3
billion
0.250% next $3
billion
0.240%
thereafter+
Individual Fund
Fee
0.280% of net
assets
AARP GNMA and U.S. High level of current income, consistent 0.350% to $2 $4,904,439,844
Treasury Fund with greater share price stability than a billion
long-term bond, through investment 0.330% next $2
principally in U.S. Government-guaranteed billion
GNMA securities and U.S. Treasury 0.300% next $2
obligations. billion
0.280% next $2
billion
0.260% next $3
billion
0.250% next $3
billion
0.240%
thereafter
Individual Fund
Fee
0.120% of net
assets
- ---------------------------
+ Subject to waivers and/or expense limitations.
** Assets as of 6/30/97.
* Assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
12
<PAGE>
FUND OBJECTIVE FEE RATE ASSETS*
AARP High Quality Bond High level of income, consistent with 0.350% to $2 $511,905,166
Fund greater share price stability than a long- billion
term bond, through investment primarily in a 0.330% next $2
portfolio of high quality securities billion
0.300% next $2
billion
0.280% next $2
billion
0.260% next $3
billion
0.250% next $3
billion
0.240%
thereafter
Individual Fund
Fee
0.190% of net
assets
AARP Diversified Growth Long-term growth of capital through There will be $36,411,938***
Portfolio investment primarily in AARP stock mutual no fee as the
funds. manager will
receive a fee
from the
underlying
funds.
AARP Diversified Income Current income with modest long-term There will be $34,230,023***
Portfolio appreciation through investment primarily in no fee as the
AARP bond mutual funds. manager will
receive a fee
from the
underlying
funds.
AARP High Quality Tax Current income exempt from federal income 0.350% to $2 $111,264,728
Free Money Fund taxes and liquidity, consistent with billion
maintaining stability and safety of 0.330% next $2
principal, through investment in high- billion
quality municipal securities. 0.300% next $2
billion
0.280% next $2
billion
0.260% next $3
billion
0.250% next $3
billion
0.240%
thereafter
Individual Fund
Fee
0.100% of net
assets
13
<PAGE>
FUND OBJECTIVE FEE RATE ASSETS*
AARP Insured Tax Free High level of income free from federal 0.350% to $2 $1,755,412,222
General Bond Fund income taxes, consistent with greater share billion
price stability than a long-term municipal 0.330% next $2
bond, through investment primarily in billion
municipal securities covered by insurance. 0.300% next $2
billion
0.280% next $2
billion
0.260% next $3
billion
0.250% next $3
billion
0.240%
thereafter
Individual Fund
Fee
0.190% of net
assets
- ---------------------------
* Assets are shown as of a Fund's most recent fiscal year end unless
otherwise indicated.
</TABLE>
14
<PAGE>
Exhibit C
---------
Form of Agreement and Plan of Reorganization
46
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of this 18th day of September, 1997, by and between Scudder International Fund,
Inc. (the "Acquiring Company"), a Maryland Corporation with its principal place
of business at 345 Park Avenue, New York, New York 10154, on behalf of Scudder
International Fund (the "Acquiring Fund"), a separate series of the Acquiring
Company, and Scudder Institutional Fund, Inc. (the "Acquired Company"), on
behalf of Institutional International Equity Portfolio (the "Acquired Fund"), a
separate series of the Acquired Company.
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)of the
Internal Revenue Code of 1986, as amended (the "Code"). The reorganization (the
"Reorganization") will consist of the transfer of all or substantially all of
the assets of the Acquired Fund to the Acquiring Fund in exchange solely for the
Barrett International Shares class (the "Barrett Shares class") of voting shares
of common stock ($0.01 par value per share) of the Acquiring Fund (the
"Acquiring Fund Shares"), the assumption by the Acquiring Fund of all of the
identified and stated liabilities of the Acquired Fund, and the distribution of
the Acquiring Fund Shares to the shareholders of the Acquired Fund in complete
liquidation of the Acquired Fund as provided herein, all upon the terms and
conditions hereinafter set forth in this Agreement.
WHEREAS, the purpose of the Reorganization is to combine the assets of
the Acquiring Fund with those of the Acquired Fund in an attempt to achieve
greater operating economies and increased portfolio diversification;
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND TO THE ACQUIRING FUND IN
EXCHANGE FOR THE ACQUIRING FUND SHARES, THE ASSUMPTION OF ALL OF THE
IDENTIFIED AND STATED ACQUIRED FUND LIABILITIES AND THE LIQUIDATION OF
THE ACQUIRED FUND
1.1 Subject to the terms and conditions herein set forth and on the
basis of the representations and warranties contained herein, the Acquired Fund
agrees to transfer to the Acquiring Fund all or substantially all of the
Acquired Fund's assets as set forth in section 1.2, and the Acquiring Fund
agrees in exchange therefor (i) to deliver to the Acquired Fund that number of
full and fractional Barrett Shares class of Acquiring Fund Shares determined by
dividing the value of the Acquired Fund's net assets, computed in the manner and
<PAGE>
as of the time and date set forth in section 2.1, by the net asset value of one
Acquiring Fund Share of the then issued and outstanding class of the Acquiring
Fund, computed in the manner and as of the time and date set forth in section
2.1; and (ii) to assume all of the identified and stated liabilities of the
Acquired Fund, as set forth in section 1.3. Such transactions shall take place
at the closing provided for in section 3.1 (the "Closing").
1.2 The assets of the Acquired Fund to be acquired by the Acquiring
Fund (collectively "Assets") shall consist of all assets, including, without
limitation, all cash, cash equivalents, securities, commodities and futures
interests and dividends or interest or other receivables that are owned by the
Acquired Fund and any deferred or prepaid expenses shown on the unaudited
statement of assets and liabilities of the Acquired Fund prepared as of the
effective time of the closing (the "Effective Time Statement"), prepared in
accordance with generally accepted accounting principles ("GAAP") applied
consistently with those of the Acquired Fund's most recent audited balance
sheet. The assets shall constitute at least 90% of the fair market value of the
net assets, and at least 70% of the fair market value of the gross assets, held
by Acquired Fund immediately before the Closing (including, for these purposes,
amounts, if any, used by the Acquired Fund to pay its reorganization expenses,
if any, retained by the Acquired Fund to pay its liabilities, and all
redemptions and distributions (except for redemptions and distributions
occurring in the ordinary course of the Acquired Fund's business as a series of
an open-end investment company, as required by Section 22(e) of the Investment
Company Act of 1940, as amended (the "1940 Act"), and not in connection with the
Reorganization) made by the Acquiring Fund immediately prior to the
Reorganization).
1.3 The Acquired Fund will endeavor to discharge all of its known
liabilities and obligations prior to the Closing Date as defined in section 3.1.
The Acquiring Fund shall assume all of the identified and stated liabilities,
expenses, costs, charges and reserves (including,without limitation, expenses
incurred in the ordinary course of business of the Acquired Fund's operations,
such as accounts payable relating to custodian and transfer agency fees,
investment management and administrative fees, legal and audit fees, and
expenses of state securities registration of the Acquired Fund's shares
reflected in the Effective Time Statement).
1.4 On or as soon as practicable prior to the Closing Date as defined
in section 3.1, the Acquired Fund will declare and pay to its shareholders of
record one or more dividends and/or other distributions so that it will have
distributed all of its investment company taxable income (computed without
regard to any deduction for dividends paid) and realized net capital gain, if
any, that has accrued through the Closing Date.
1.5 Immediately after the transfer of assets provided for in section
1.1 (the "Liquidation Time"), the Acquired Fund will distribute to the Acquired
Fund's shareholders of record, determined as of the Valuation Time (the
"Acquired Fund Shareholders"), on a pro rata basis, the Barrett Shares class of
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Acquiring Fund Shares received by the Acquired Fund pursuant to section 1.1 and
will completely liquidate. Such distribution and liquidation will be
accomplished by the transfer of the Acquiring Fund Shares then credited to the
account of the Acquired Fund on the books of the Acquiring Fund to open accounts
on the share records of the Acquiring Fund in the names of the Acquired Fund
Shareholders. The aggregate net asset value of Barrett Shares class of Acquiring
Fund Shares to be so credited to Barrett Shares class Acquired Fund Shareholders
shall be equal to the aggregate net asset value of the Acquired Fund shares
owned by such shareholders as of the Valuation Time. All issued and outstanding
shares of the Acquired Fund will simultaneously be cancelled on the books of the
Acquired Fund, although share certificates representing interests in shares of
the Acquired Fund will represent a number of Barrett Shares class of Acquiring
Fund Shares after the Closing Date as determined in accordance with section 2.2.
The Acquiring Fund will not issue certificates representing Barrett Shares class
of Acquiring Fund Shares in connection with such exchange.
1.6 Ownership of Acquiring Fund Shares will be shown on the books of
the Acquiring Fund. Shares of the Acquiring Fund will be issued in the manner
described in the Acquiring Fund's then-current prospectus and statement of
additional information.
As soon as is reasonably practicable after the Liquidation Time, but
not until the earlier of (i) payment by Acquiring Fund of all assumed
liabilities or (ii) 90 days after the Closing Date, Acquired Fund shall be
dissolved under Maryland law and deregistered under the 1940 Act. The Acquired
Fund shall not conduct any business on and after the Closing Date except in
connection with its liquidation, dissolution and deregistration.
1.7 Any reporting responsibility of the Acquired Fund including,
without limitation, the responsibility for filing of regulatory reports, tax
returns, or other documents with the Securities and Exchange Commission (the
"Commission"), any state securities commission, and any federal, state or local
tax authorities or any other relevant regulatory authority, is and shall remain
the responsibility of the Acquired Fund.
1.8 All books and records of the Acquired Fund, including all books and
records required to be maintained under the 1940 Act and the rules and
regulations thereunder, shall be available to the Acquiring Fund from and after
the Closing Date and shall be turned over to the Acquiring Fund on or prior to
liquidation of Acquired Fund/ as soon as practicable following the Closing Date.
All such books and records shall be available to Acquired Fund thereafter until
Acquired Fund is dissolved and deregistered.
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2. VALUATION
2.1 The value of the Assets shall be computed as of the close of
regular trading on the New York Stock Exchange on the business day immediately
preceding the Closing Date, as defined in Section 3.1 (such time and date being
hereinafter called the "Valuation Time") after the declaration and payment of
any dividends and/or other distributions on that date, using the valuation
procedures set forth in the Acquiring Fund's Charter, as amended, and
then-current prospectus or statement of additional information.
2.2 The number of shares of the Barrett Shares class of the Acquiring
Fund to be issued (including fractional shares, if any) in exchange for the
Assets shall be determined by dividing the value of the Assets with respect to
shares of the Acquired Fund, determined in accordance with section 2.1, by the
net asset value of one Acquiring Fund Share of the then issued and outstanding
class of the Acquiring Fund a determined in accordance with section 2.1.
2.3 All computations of value hereunder shall be made by or under the
direction of each Fund's respective accounting agent, if applicable, in
accordance with its regular practice and the requirements of the 1940 Act and
shall be subject to confirmation by each Fund's respective independent
accountants.
3. CLOSING AND CLOSING DATE
3.1 The Closing of the transactions contemplated by this Agreement
shall be December 15, 1997, or such later date as the parties may agree in
writing (the "Closing Date"). All acts taking place at the Closing shall be
deemed to take place simultaneously as of 4:00 P.M., Eastern time, on the
Closing Date, unless otherwise agreed to by the parties. The Closing shall be
held at the offices of Dechert Price & Rhoads, Ten Post Office Square, Boston,
MA 02109 or at such other place and time as the parties may agree.
3.2 The Acquired Fund shall deliver to the Acquiring Fund on the
Closing Date a schedule of assets.
3.3 Brown Brothers Harriman & Co., as custodian for the Acquired Fund,
shall (a) deliver at the Closing a certificate of an authorized officer stating
that the Assets shall have been delivered in proper form to Brown Brothers
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Harriman & Co., custodian for the Acquiring Fund, prior to or on the Closing
Date and (b) all necessary taxes in connection with the delivery of the Assets,
including all applicable federal and state stock transfer stamps, if any, have
been paid or provision for payment has been made. Acquired Fund's portfolio
securities represented by a certificate or other written instrument shall be
presented by Custodian for Acquired Fund to Custodian for Acquiring Fund for
examination no later than five business days preceding the Closing Date and
transferred and delivered by the Acquired Fund as of the Closing Date by the
Acquired Fund for the account of Acquiring Fund duly endorsed in proper form for
transfer in such condition as to constitute good delivery thereof. Acquired
Fund's portfolio securities and instruments deposited with a securities
depository, as defined in Rule 17f-4 under the 1940 Act, shall be delivered as
of the Closing Date by book entry in accordance with the customary practices of
such depositories and Custodian for Acquiring Fund. The cash to be transferred
by the Acquired Fund shall be delivered by wire transfer of federal funds on the
Closing Date.
3.4 The Transfer Agent, on behalf of the Acquired Fund, shall deliver
at the Closing a certificate of an authorized officer stating that its records
contain the names and addresses of the Acquired Fund Shareholders and the number
and percentage ownership of outstanding shares owned by each such shareholder
immediately prior to the Closing. The Acquiring Fund shall issue and deliver a
confirmation evidencing the Acquiring Fund Shares to be credited on the Closing
Date to the Acquired Fund or provide evidence satisfactory to the Acquired Fund
that such Acquiring Fund Shares have been credited to the Acquired Fund's
account on the books of the Acquiring Fund. At the Closing, each party shall
deliver to the other such bills of sale, checks, assignments, share
certificates, if any, receipts or other documents as such other party or its
counsel may reasonably request to effect the transactions contemplated by this
Agreement.
3.5 In the event that immediately prior to the Valuation Time (a) the
New York Stock Exchange or another primary trading market for portfolio
securities of the Acquiring Fund or the Acquired Fund shall be closed to trading
or trading thereupon shall be restricted, or (b) trading or the reporting of
trading on such Exchange or elsewhere shall be disrupted so that, in the
judgment of the Board of Directors of the Acquiring Company and Board of
Directors of the Acquired Company, accurate appraisal of the value of the net
assets with respect to the Barrett Shares class or any other class of shares of
the Acquiring Fund or the Acquired Fund is impracticable, the Closing Date shall
be postponed until the first business day after the day when trading shall have
been fully resumed and reporting shall have been restored.
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4. REPRESENTATIONS AND WARRANTIES
4.1 The Acquired Company, on behalf of the Acquired Fund, represents
and warrants to the Acquiring Fund as follows:
(a) The Acquired Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland with power
under the Company's charter to own all of its properties and assets and to carry
on its business as it is now being conducted;
(b) The Acquired Company is registered with the Commission as an
open-end management investment company under the Investment Company Act of 1940,
as amended (the "1940 Act"), and such registration is in full force and effect;
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquired Fund of
the transactions contemplated herein, except such as have been obtained under
the Securities Act of 1933, as amended (the "1933 Act"), the Securities Exchange
Act of 1934, as amended (the "1934 Act") and the 1940 Act and such as may be
required by state securities laws;
(d) Other than with respect to contracts entered into in connection
with the portfolio management of the Acquired Fund which shall terminate on or
prior to the Closing Date, the Acquired Company is not, and the execution,
delivery and performance of this Agreement by the Company will not result, in
violation of Maryland law or of the Company's charter, or By-Laws, or of any
material agreement, indenture, instrument, contract, lease or other undertaking
known to counsel to which the Acquired Fund is a party or by which it is bound,
and the execution, delivery and performance of this Agreement by the Acquired
Fund will not result in the acceleration of any obligation, or the imposition of
any penalty, under any agreement, indenture, instrument, contract, lease,
judgment or decree to which the Acquired Fund is a party or by which it is
bound;
(e) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or to its knowledge threatened against the Acquired Fund or any properties or
assets held by it. The Acquired Fund knows of no facts which might form the
basis for the institution of such proceedings which would materially and
adversely affect its business and is not a party to or subject to the provisions
of any order, decree or judgment of any court or governmental body which
materially and adversely affects its business or its ability to consummate the
transactions herein contemplated;
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<PAGE>
(f) The Statements of Assets and Liabilities, Operations, and Changes
in Net Assets, the Financial Highlights, and the Investment Portfolio of the
Acquired Fund at and for the fiscal year ended December 31, 1996, have been
audited by Price Waterhouse L.L.P., independent certified public accountants,
and are in accordance with GAAP consistently applied, and such statements
(copies of which have been furnished to the Acquiring Fund) present fairly, in
all material respects, the financial position of the Acquired Fund as of such
date in accordance with GAAP, and there are no known contingent liabilities of
the Acquired Fund required to be reflected on a balance sheet (including the
notes thereto) in accordance with GAAP as of such date not disclosed therein;
(g) Since December 31, 1996, there has not been any material adverse
change in the Acquired Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business, or any
incurrence by the Acquired Fund of indebtedness maturing more than one year from
the date such indebtedness was incurred except as otherwise disclosed to and
accepted in writing by the Acquiring Fund. For purposes of this subsection (g),
a decline in net asset value per share of the Acquired Fund due to declines in
market values of securities in the Acquired Fund's portfolio, the discharge of
Acquired Fund liabilities, or the redemption of Acquired Fund shares by Acquired
Fund Shareholders shall not constitute a material adverse change;
(h) At the date hereof and at the Closing Date, all federal and other
tax returns and reports of the Acquired Fund required by law to have been filed
by such dates (including any extensions) shall have been filed and are or will
be correct in all material respects, and all federal and other taxes shown as
due or required to be shown as due on said returns and reports shall have been
paid or provision shall have been made for the payment thereof, and, to the best
of the Acquired Fund's knowledge, no such return is currently under audit and no
assessment has been asserted with respect to such returns;
(i) For each taxable year of its operation (including the taxable year
ending on the Closing Date), the Acquired Fund has met the requirements of
Subchapter M of the Code for qualification as a regulated investment company and
has elected to be treated as such, has been eligible to and has computed its
federal income tax under Section 852 of the Code, and will have distributed all
of its investment company taxable income and net capital gain (as defined in the
Code) that has accrued through the Closing Date;
(j) All issued and outstanding shares of the Acquired Fund (i) have
been offered and sold in every state and the District of Columbia in compliance
in all material respects with applicable registration or qualification
requirements of the 1933 Act and state securities laws, (ii) are, and on the
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Closing Date will be, duly and validly issued and outstanding, fully paid and
non-assessable, and (iii) will be held at the time of the Closing by the persons
and in the amounts set forth in the records of the Transfer Agent, as provided
in section 3.3. The Acquired Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any of the Acquired Fund
shares, nor is there outstanding any security convertible into any of the
Acquired Fund shares;
(k) At the Closing Date, the Acquired Fund will have good and
marketable title to the Acquired Fund's assets to be transferred to the
Acquiring Fund pursuant to section 1.2 and full right, power, and authority to
sell, assign, transfer and deliver such assets hereunder free of any liens or
other encumbrances, except those liens or encumbrances as to which the Acquiring
Fund has received notice at or prior to the Closing, and upon delivery and
payment for such assets, the Acquiring Fund will acquire good and marketable
title thereto, subject to no restrictions on the full transfer thereof,
including such restrictions as might arise under the 1933 Act, except those
restrictions as to which the Acquiring Fund has received notice and necessary
documentation at or prior to the Closing;
(l) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Closing Date by all necessary action on the
part of the Directors of the Acquired Company, and, subject to the approval of
the Acquired Fund Shareholders, this Agreement constitutes a valid and binding
obligation of the Acquired Company, on behalf of the Acquired Fund, enforceable
in accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and other laws
relating to or affecting creditors' rights and to general equity principles;
(m) The information to be furnished by the Acquired Fund for use in
applications for orders, registration statements or proxy materials or for use
in any other document filed or to be filed with any federal, state or local
regulatory authority (including the National Association of Securities Dealers,
Inc.), which may be necessary in connection with the transactions contemplated
hereby, shall be accurate and complete in all material respects and shall comply
in all material respects with federal securities and other laws and regulations
applicable thereto; and
(n) The current prospectus and statement of additional information of
the Acquired Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and regulations of
the Commission thereunder and do not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
8
<PAGE>
necessary to make the statements therein, in light of the circumstances under
which they were made, not materially misleading; and
(o) The proxy statement of the Acquired Fund to be included in the
Registration Statement referred to in section 5.7 (the "Proxy Statement"),
insofar as it relates to the Acquired Fund, will, on the effective date of the
Registration Statement and on the Closing Date, not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which such statements are made, not materially misleading;
provided, however, that the representations and warranties in this section shall
not apply to statements in or omissions from the Proxy Statement and the
Registration Statement made in reliance upon and in conformity with information
that was furnished or should have been furnished by the Acquiring Fund for use
therein.
4.2 The Acquiring Company, on behalf of the Acquiring Fund, represents
and warrants to the Acquired Fund as follows:
(a) The Acquiring Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland with power
under the Company's charter, to own all of its properties and assets and to
carry on its business as it is now being conducted;
(b) The Acquiring Company is registered with the Commission as an
open-end management investment company under the 1940 Act, and such registration
is in full force and effect;
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquiring Fund of
the transactions contemplated herein, except such as have been obtained under
the 1933 Act, the 1934 Act and the 1940 Act and such as may be required by state
securities laws;
(d) The Acquiring Company is not, and the execution, delivery and
performance of this Agreement by the Company will not result, in violation of
Maryland law or of the Company's charter, or By-Laws, or of any material
agreement, indenture, instrument, contract, lease or other undertaking known to
counsel to which the Acquiring Fund is a party or by which it is bound, and the
execution, delivery and performance of this Agreement by the Acquiring Fund will
not result in the acceleration of any obligation, or the imposition of any
penalty, under any agreement, indenture, instrument, contract, lease, judgment
or decree to which the Acquiring Fund is a party or by which it is bound;
9
<PAGE>
(e) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or to its knowledge threatened against the Acquiring Fund or any properties or
assets held by it. The Acquiring Fund knows of no facts which might form the
basis for the institution of such proceedings which would materially and
adversely affect its business and is not a party to or subject to the provisions
of any order, decree or judgment of any court or governmental body which
materially and adversely affects its business or its ability to consummate the
transactions herein contemplated;
(f) The Statements of Assets and Liabilities, Operations, and Changes
in Net Assets, the Financial Highlights, and the Investment Portfolio of the
Acquiring Fund at and for the fiscal year ended March 31, 1997 have been audited
by Coopers & Lybrand L.L.P., independent certified public accountants, and are
in accordance with GAAP consistently applied, and such statements ( copies of
which have been furnished to the Acquired Fund) present fairly, in all material
respects, the financial position of the Acquiring Fund as of such date in
accordance with GAAP, and there are no known contingent liabilities of the
Acquiring Fund required to be reflected on a balance sheet (including the notes
thereto) in accordance with GAAP as of such date not disclosed therein;
(g) Since March 31, 1997, there has not been any material adverse
change in the Acquiring Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business, or any
incurrence by the Acquiring Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred except as otherwise disclosed to
and accepted in writing by the Acquired Fund. For purposes of this subsection
(g), a decline in net asset value per share of the Acquiring Fund due to
declines in market values of securities in the Acquiring Fund's portfolio, the
discharge of Acquiring Fund liabilities, or the redemption of Acquiring Fund
shares by Acquiring Fund shareholders shall not constitute a material adverse
change;
(h) At the date hereof and at the Closing Date, all federal and other
tax returns and reports of the Acquiring Fund required by law to have been filed
by such dates (including any extensions) shall have been filed and are or will
be correct in all material respects, and all federal and other taxes shown as
due or required to be shown as due on said returns and reports shall have been
paid or provision shall have been made for the payment thereof, and, to the best
of the Acquiring Fund's knowledge, no such return is currently under audit and
no assessment has been asserted with respect to such returns;
(i) For each taxable year of its operation, the Acquiring Fund has met
the requirements of Subchapter M of the Code for qualification as a regulated
investment company and has elected to be treated as such, has been eligible to
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<PAGE>
and has computed its federal income tax under Section 852 of the Code, and will
do so for the taxable year including the Closing Date;
(j) All issued and outstanding shares of the Acquiring Fund (i) have
been offered and sold in every state and the District of Columbia in compliance
in all material respects with applicable registration or qualification
requirements of the 1933 Act and state securities laws and (ii) are, and on the
Closing Date will be, duly and validly issued and outstanding, fully paid and
non-assessable. The Acquiring Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any of the Acquiring Fund
shares, nor is there outstanding any security convertible into any of the
Acquiring Fund shares;
(k) The Barrett Shares class of Acquiring Fund Shares to be issued and
delivered to the Acquired Fund, for the account of the Acquired Fund
Shareholders, pursuant to the terms of this Agreement, will at the Closing Date
have been duly authorized and, when so issued and delivered, will be duly and
validly issued and outstanding Acquiring Fund Shares, and will be fully paid and
non-assessable;
(l) At the Closing Date, the Acquiring Fund will have good and
marketable title to the Acquiring Fund's assets, free of any liens or other
encumbrances, except those liens or encumbrances as to which the Acquired Fund
has received notice at or prior to the Closing;
(m) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Closing Date by all necessary action on the
part of the Directors of the Acquiring Company and this Agreement will
constitute a valid and binding obligation of the Company, on behalf of the
Acquiring Fund, enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other laws relating to or affecting creditors' rights and to
general equity principles;
(n) The information to be furnished by the Acquiring Fund for use in
applications for orders, registration statements or proxy materials or for use
in any other document filed or to be filed with any federal, state or local
regulatory authority (including the National Association of Securities Dealers,
Inc.), which may be necessary in connection with the transactions contemplated
hereby, shall be accurate and complete in all material respects and shall comply
in all material respects with federal securities and other laws and regulations
applicable thereto;
(o) The current prospectus and statement of additional information of
the Acquiring Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and regulations of
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the Commission thereunder and do not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not materially misleading;
(p) The Proxy Statement to be included in the Registration Statement,
only insofar as it relates to the Acquiring Fund, will, on the effective date of
the Registration Statement and on the Closing Date, not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not materially misleading;
provided, however, that the representations and warranties in this section shall
not apply to statements in or omissions from the Proxy Statement and the
Registration Statement made in reliance upon and in conformity with information
that was furnished or should have been furnished by the Acquired Fund for use
therein; and
(q) The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act and such
of the state securities laws as may be necessary in order to continue its
operations after the Closing Date.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1 The Acquiring Fund and the Acquired Fund each covenants to operate
its business in the ordinary course between the date hereof and the Closing
Date, it being understood that (a) such ordinary course of business will include
(i) the declaration and payment of customary dividends and other distributions,
(ii) such changes as are contemplated by the Funds' normal operations, and (iii)
in the case of the Acquired Fund, preparing for its liquidation, dissolution and
deregistration and (b) each Fund shall retain exclusive control of the
composition of its portfolio until the Closing Date.
5.2 Upon reasonable notice, the Acquiring Fund's officers and agents
shall have reasonable access to the Acquired Fund's books and records necessary
to maintain current knowledge of the Acquired Fund and to ensure that the
representations and warranties made by the Acquired Fund are accurate.
5.3 The Acquired Fund covenants to call a meeting of the Acquired Fund
Shareholders entitled to vote thereon to consider and act upon this Agreement
and to take all other reasonable action necessary to obtain approval of the
transactions contemplated herein. Such meeting shall be scheduled for no later
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<PAGE>
than November 15, 1997.
5.4 The Acquired Fund covenants that shares of the Barrett Shares class
of Acquiring Fund to be issued hereunder are not being acquired for the purpose
of making any distribution thereof other than in accordance with the terms of
this Agreement.
5.5 The Acquired Fund covenants that it will assist the Acquiring Fund
in obtaining such information as the Acquiring Fund reasonably requests
concerning the beneficial ownership of the Acquired Fund Shares and will provide
the Acquiring Fund with a list of affiliates of the Acquired Fund.
5.6 Subject to the provisions of this Agreement, the Acquiring Fund and
the Acquired Fund will each take, or cause to be taken, all actions, and do or
cause to be done, all things reasonably necessary, proper, and/or advisable to
consummate and make effective the transactions contemplated by this Agreement.
5.7 Each Fund covenants to prepare the Registration Statement on Form
N-14 (the "Registration Statement"), in compliance with the 1933 Act, the 1934
Act and the 1940 Act in connection with the meeting of the Acquired Fund
Shareholders to consider approval of this Agreement and the transactions
contemplated herein. The Acquiring Fund will file the Registration Statement,
including the Proxy Statement, with the Commission. The Acquired Fund will
provide the Acquiring Fund with information reasonably necessary for the
preparation of a prospectus, which will include the Proxy Statement referred to
in section 4.1(o), all to be included in the Registration Statement, in
compliance in all material respects with the 1933 Act, the 1934 Act and the 1940
Act.
5.8 The Acquired Fund covenants that it will, from time to time, as and
when reasonably requested by the Acquiring Fund, execute and deliver or cause to
be executed and delivered all such assignments and other instruments, and will
take or cause to be taken such further action as the Acquiring Fund may
reasonably deem necessary or desirable in order to vest in and confirm the
Acquiring Fund's title to and possession of all the assets and otherwise to
carry out the intent and purpose of this Agreement.
5.9 The Acquiring Fund covenants to use all reasonable efforts to
obtain the approvals and authorizations required by the 1933 Act and 1940 Act,
and such of the state securities laws as it deems appropriate in order to
continue its operations after the Closing Date and to consummate the
transactions contemplated herein; provided, however, that the Acquiring Fund may
take such actions it reasonably deems advisable after the Closing Date as
circumstances change.
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5.10 The Acquiring Fund covenants that it will, from time to time, as
and when reasonably requested by the Acquired Fund, execute and deliver or cause
to be executed and delivered all such assignments, assumption agreements,
releases, and other instruments, and will take or cause to be taken such further
action, as the Acquired Fund may reasonably deem necessary or desirable in order
to (i) vest and confirm to the Acquired Fund title to and possession of all
Acquiring Fund shares to be transferred to Acquired Fund pursuant to this
Agreement and (ii) assume the assumed liabilities from the Acquired Fund.
5.11 As soon as reasonably practicable after the Closing, the Acquired
Fund shall make a liquidating distribution to its shareholders consisting of the
Barrett Shares class of Acquiring Fund Shares received at the Closing.
5.12 The Acquiring Fund and the Acquired Fund shall each use its
reasonable best efforts to fulfill or obtain the fulfillment of the conditions
precedent to effect the transactions contemplated by this Agreement as promptly
as practicable.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date, and, in addition thereto, the following further
conditions:
6.1 All representations and warranties of the Acquiring Company, with
respect to the Acquiring Fund, contained in this Agreement shall be true and
correct in all material respects as of the date hereof and, except as they may
be affected by the transactions contemplated by this Agreement, as of the
Closing Date, with the same force and effect as if made on and as of the Closing
Date; and there shall be (i) no pending or threatened litigation brought by any
person (other than Acquiring Fund, its adviser or any of their affiliates)
against the Acquired Fund, the Acquiring Fund or their advisers, directors,
trustees or officers arising out of this Agreement and (ii) no facts known to
the Acquired Fund which the Acquired Fund reasonably believes might result in
such litigation.
6.2 The Acquiring Fund shall have delivered to the Acquired Fund on the
Closing Date a certificate executed in its name by its President or a Vice
President, in a form reasonably satisfactory to the Acquired Fund and dated as
of the Closing Date, to the effect that the representations and warranties of
the Acquiring Company with respect to the Acquiring Fund made in this Agreement
are true and correct on and as of the Closing Date, except as they may be
affected by the transactions contemplated by this Agreement, and as to such
other matters as the Acquired Fund shall reasonably request;
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6.3 The Acquired Fund shall have received on the Closing Date an
opinion of Dechert Price & Rhoads, in a form reasonably satisfactory to the
Acquired Fund, and dated as of the Closing Date, to the effect that:
(a) The Acquiring Company has been duly formed and is an existing
corporation in good standing; (b) the Acquiring Fund has the power to carry on
its business as presently conducted in accordance with the description thereof
in the Trust's registration statement under the 1940 Act; (c) the Agreement has
been duly authorized, executed and delivered by the Company, on behalf of the
Acquiring Fund, and constitutes a valid and legally binding obligation of the
Company, on behalf of the Acquiring Fund, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and laws of general applicability relating to or affecting creditors'
rights and to general equity principles; (d) the execution and delivery of the
Agreement did not, and the exchange of the Acquired Fund's assets for Barrett
Shares class shares of the Acquiring Fund pursuant to the Agreement will not,
violate the Company's charter, or By-laws; and (e) to the knowledge of such
counsel, all regulatory consents, authorizations, approvals or filings required
to be obtained or made by the Acquiring Fund under the Federal laws of the
United States or the laws of the State of Maryland for the exchange of the
Acquired Fund's assets for Barrett Shares class shares of the Acquiring Fund,
pursuant to the Agreement have been obtained or made; and
6.4 The Acquiring Fund shall have performed all of the covenants and
complied with all of the provisions required by this Agreement to be performed
or complied with by the Acquiring Fund on or before the Closing Date.
6.5 The Board of Directors of Acquiring Fund shall have approved the
establishment of a new class of shares of Acquiring Fund to be known as "Barrett
International Shares" or "Barrett Shares" and such class of shares shall be duly
organized and validly existing under the laws of the State of Maryland on or
before the Closing Date.
6.6 The Registration Statement on Form N-1A covering such Barrett
Shares class of Acquiring Fund shall have become effective under the 1933 Act
and no stop orders suspending the effectiveness thereof shall have been issued
and, to the best knowledge of the Acquiring Fund, no investigation or proceeding
for that purpose shall have been instituted or be pending, threatened or
contemplated under the 1933 Act.
15
<PAGE>
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by the
Acquired Fund of all of the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following further
conditions:
7.1 All representations and warranties of the Acquired Company, with
respect to the Acquired Fund, contained in this Agreement shall be true and
correct in all material respects as of the date hereof and, except as they may
be affected by the transactions contemplated by this Agreement, as of the
Closing Date, with the same force and effect as if made on and as of the Closing
Date; and there shall be (i) no pending or threatened litigation brought by any
person (other than Acquired Fund, its adviser or any of their affiliates)
against the Acquiring Fund, the Acquired Fund or their advisers, directors,
trustees or officers arising out of this Agreement and (ii) no facts known to
the Acquiring Fund which the Acquiring Fund reasonably believes might result in
such litigation.
7.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets and liabilities as of the Closing Date,
certified by the Treasurer of the Acquired Fund;
7.3 The Acquired Fund shall have delivered to the Acquiring Fund on the
Closing Date a certificate executed in its name by its President or a Vice
President, in a form reasonably satisfactory to the Acquiring Fund and dated as
of the Closing Date, to the effect that the representations and warranties of
the Acquired Company with respect to the Acquired Fund made in this Agreement
are true and correct on and as of the Closing Date, except as they may be
affected by the transactions contemplated by this Agreement, and as to such
other matters as the Acquiring Fund shall reasonably request;
7.4 The Acquiring Fund shall have received on the Closing Date an
opinion of Dechert Price & Rhoads, in a form reasonably satisfactory to the
Acquiring Fund, and dated as of the Closing Date, to the effect that:
(a) The Acquired Company has been duly formed and is an existing
corporation in good standing; (b) the Acquired Fund has the corporate power to
carry on its business as presently conducted in accordance with the description
thereof in the Company's registration statement under the 1940 Act; (c) the
Agreement has been duly authorized, executed and delivered by the Company, on
behalf of the Acquired Fund, and constitutes a valid and legally binding
obligation of the Company, on behalf of the Acquired Fund, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
16
<PAGE>
transfer, reorganization, moratorium and laws of general applicability relating
to or affecting creditors' rights and to general equity principles; (d) the
execution and delivery of the Agreement did not, and the exchange of the
Acquired Fund's assets for Barrett Shares class shares of the Acquiring Fund
pursuant to the Agreement will not, violate the Company's charter or By-laws;
and (e) to the knowledge of such counsel, all regulatory consents,
authorizations, approvals or filings required to be obtained or made by the
Acquired Fund under the Federal laws of the United States or the laws of the
State of Maryland for the exchange of the Acquired Fund's assets for Barrett
Shares class shares of the Acquiring Fund, pursuant to the Agreement have been
obtained or made; and
7.5 The Acquired Fund shall have performed all of the covenants and
complied with all of the provisions required by this Agreement to be performed
or complied with by the Acquired Fund on or before the Closing Date.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND
THE ACQUIRED FUND
If any of the conditions set forth below have not been met on or before
the Closing Date with respect to the Acquired Fund or the Acquiring Fund, the
other party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement:
8.1 This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
the Acquired Fund in accordance with the provisions of the Acquired Company's
charter, and By-Laws, applicable Maryland law and the 1940 Act, and certified
copies of the resolutions evidencing such approval shall have been delivered to
the Acquiring Fund. Notwithstanding anything herein to the contrary, neither the
Acquiring Fund nor the Acquired Fund may waive the conditions set forth in this
section 8.1;
8.2 On the Closing Date, no action, suit or other proceeding shall be
pending or to its knowledge threatened before any court or governmental agency
in which it is sought to restrain or prohibit, or obtain material damages or
other relief in connection with, this Agreement or the transactions contemplated
herein;
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities deemed necessary by
the Acquiring Fund or the Acquired Fund to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties of the
17
<PAGE>
Acquiring Fund or the Acquired Fund, provided that either party hereto may for
itself waive any of such conditions;
8.4 The Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending, threatened
or contemplated under the 1933 Act; and
8.5 The parties shall have received an opinion of Dechert Price &
Rhoads addressed to each Company substantially to the effect that, based upon
certain facts, assumptions and representations, the transaction contemplated by
this Agreement constitutes a tax-free reorganization for Federal income tax
purposes. The delivery of such opinion is conditioned upon receipt by Dechert
Price & Rhoads of representations it shall request of each Company.
Notwithstanding anything herein to the contrary, neither the Acquiring Fund nor
the Acquired Fund may waive the condition set forth in this section 8.5.
9. INDEMNIFICATION
9.1 The Acquiring Fund agrees to indemnify and hold harmless the
Acquired Fund and each of the Acquired Fund's directors and officers from and
against any and all losses, claims, damages, liabilities or expenses (including,
without limitation, the payment of reasonable legal fees and reasonable costs of
investigation) to which jointly and severally, the Acquired Fund or any of its
directors or officers may become subject, insofar as any such loss, claim damage
liability or expense (or actions with respect thereto) arises out of or is based
on any breach by the Acquiring Fund of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
9.2 The Acquired Fund agrees to indemnify and hold harmless the
Acquiring Fund and each of the Acquiring Fund's directors and officers from and
against any and all losses, claims, damages, liabilities or expenses (including,
without limitation, the payment of reasonable legal fees and reasonable costs of
investigation) to which jointly and severally, the Acquiring Fund or any of its
directors or officers may become subject, insofar as any such loss, claim damage
liability or expense (or actions with respect thereto) arises out of or is based
on any breach by the Acquired Fund of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
18
<PAGE>
10. FEES AND EXPENSES
10.1 The Acquiring Company, on behalf of the Acquiring Fund, and the
Acquired Company, on behalf of the Acquired Fund, represents and warrants to the
other that it has no obligations to pay any brokers or finders fees in
connection with the transactions provided for herein.
10.2 Expenses relating to the transactions provided for herein shall be
borne by Scudder, Stevens and Clark, Inc., investment adviser to each of the
Acquired Fund and the Acquiring Fund. Any such expenses borne by Scudder,
Stevens & Clark, Inc. will be solely and directly related to the reorganization
contemplated by this Agreement, within the meaning of Revenue Ruling 73-54,
1973-1 C.B. 187.
11. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
11.1 The Acquiring Fund and the Acquired Fund agree that neither party
has made any representation, warranty or covenant not set forth herein and that
this Agreement constitutes the entire agreement between the parties.
11.2 Except as specified in the next sentence set forth in this section
11.2, the representations, warranties and covenants contained in this Agreement
or in any document delivered pursuant hereto or in connection herewith shall not
survive the consummation of the transactions contemplated hereunder. The
covenants to be performed after the Closing and the obligations of each of the
Acquired Fund and Acquired Fund in Sections 9.1 and 9.2 shall survive the
Closing.
12. TERMINATION
This Agreement may be terminated and the transactions contemplated
hereby may be abandoned by either party by (i) mutual agreement of the parties,
or (ii) by either party if the Closing shall not have occurred on or before
December 15, 1997, unless such date is extended by mutual agreement of the
parties, or (iii) by either party if the other party shall have materially
breached its obligations under this Agreement or made a material and intentional
misrepresentation herein or in connection herewith. In the event of any such
termination, this Agreement shall become void and there shall be no liability
hereunder on the part of any party or their respective directors/trustees or
officers, except for any such material breach or intentional misrepresentation,
as to each of which all remedies at law or in equity of the party adversely
affected shall survive.
19
<PAGE>
13. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner
as may be mutually agreed upon in writing by the authorized officers of the
Acquired Fund and the Acquiring Fund; provided, however, that following the
meeting of the Acquired Fund Shareholders called by the Acquired Fund pursuant
to section 5.2 of this Agreement, no such amendment may have the effect of
changing the provisions for determining the number of the shares of the Barrett
Shares class of Acquiring Fund to be issued to the Acquired Fund shareholders
under this Agreement to the detriment of such shareholders without their further
approval.
14. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be deemed duly given
if delivered by hand (including by Federal Express or similar express courier)
or transmitted by facsimile or three days after being mailed by prepaid
registered or certified mail, return receipt requested, addressed to the
Acquired Fund, 345 Park Avenue, New York, New York 10154 with a copy to Dechert
Price & Rhoads, Ten Post Office Square, Boston, MA 02109, Attention: Sheldon A.
Jones, Esq., or to the Acquiring Fund, 345 Park Avenue, New York, New York
10154, with a copy to Dechert Price & Rhoads, Ten Post Office Square, Boston, MA
02109, Attention: Sheldon A. Jones, Esq., or to any other address that the
Acquired Fund or the Acquiring Fund shall have last designated by notice to the
other party.
15. HEADINGS; COUNTERPARTS; ASSIGNMENT; LIMITATION OF LIABILITY
15.1 The Article and section headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
15.2 This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
15.3 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and the shareholders of the
Acquiring Fund and the Acquired Fund and their respective successors and
20
<PAGE>
assigns, any rights or remedies under or by reason of this Agreement.
15.4 No series of the Corporation other than the Acquiring Fund and the
Acquired Fund shall be responsible for the obligations of the Corporation
hereunder, and all persons shall look only to the respective assets of each of
the Acquiring Fund and the Acquired Fund to satisfy the obligations of the
Corporation hereunder.
15.5 This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York, without regard to its
principles of conflicts of laws.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its President or Vice President and its seal to be
affixed thereto and attested by its Secretary or Assistant Secretary.
Attest:__________________ Scudder International Fund, Inc.
on behalf of Scudder International Fund
______________________________
By:___________________________
Its:__________________________
Attest:__________________ Scudder Institutional Fund, Inc.
on behalf of Institutional International
Equity Portfolio
By:___________________________
Its:____________________________
21
<PAGE>
PART B
SCUDDER INTERNATIONAL FUND, INC.
_________________________________________________________________
Statement of Additional Information
September __, 1997
_________________________________________________________________
Acquisition of the Assets of By and in Exchange for Shares
Institutional International of Scudder International Fund
Equity Portfolio (a Series of (a Series of Scudder
Scudder Institutional Fund, International Fund, Inc.)
Inc.) 345 Park Avenue
345 Park Avenue New York, New New York, New York 10154
York 10154
This Statement of Additional Information is available to the Stockholders of
Institutional International Equity Portfolio ("International Equity Portfolio")
in connection with a proposed transaction whereby Scudder International Fund, a
series of Scudder International Fund, Inc., ("International Fund") will acquire
all or substantially all of the assets of International Equity Portfolio, a
series of Scudder Institutional Fund, Inc., and certain liabilities, in exchange
for shares of International Fund.
This Statement of Additional Information of Scudder International Fund, Inc.
consists of this cover page and the following documents, each of which was filed
electronically with the Registrant's Registration Statement on Form N-14 on
August 26, 1997 and is incorporated by reference herein:
(1) The Statement of Additional Information of International Fund dated August
1, 1997, containing financial statements of the Fund for the year ended March
31, 1997;
(2) Financial statements and report of independent accountants included in the
December 31, 1996 Annual Report of International Equity Portfolio;
(3) Financial statements included in the June 30, 1996 Semi- Annual Report of
International Equity Portfolio.
This Statement of Additional Information is not a prospectus. A Prospectus/Proxy
Statement dated September __, 1997 relating to the reorganization of
International Equity Portfolio may be obtained by writing the Institutional
International Equity Portfolio at 345 Park Avenue, New York, NY 10154 or by
calling Scudder Investor Services at (800) 854-8525. This Statement of
Additional Information should be read in conjunction with the Prospectus/Proxy
Statement.
47
<PAGE>
PART C
OTHER INFORMATION
Item 15. Indemnification
- -------- ---------------
A policy of insurance covering Scudder, Stevens &
Clark, Inc., its affiliates including Scudder Investor
Services, Inc., and all of the registered investment
companies advised by Scudder, Stevens & Clark, Inc.
insures the Registrant's directors 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 Tenth of the Registrant's Articles of
Incorporation states as follows:
TENTH: Liability and Indemnification
------ -----------------------------
To the fullest extent permitted by the Maryland
General Corporation Law and the Investment Company Act
of 1940, no director or officer of the Corporation
shall be liable to the Corporation or to its
stockholders for damages. The limitation on liability
applies to events occurring at the time a person serves
as a director or officer of the Corporation, whether or
not such person is a director or officer at the time of
any proceeding in which liability is asserted. No
amendment to these Articles of Amendment and
Restatement or repeal of any of its provisions shall
limit or eliminate the benefits provided to directors
and officers under this provision with respect to any
act or omission which occurred prior to such amendment
or repeal.
The Corporation, including its successors and
assigns, shall indemnify its directors and officers and
make advance payment of related expenses to the fullest
extent permitted, and in accordance with the procedures
required by Maryland law, including Section 2-418 of
the Maryland General Corporation law, as may be amended
from time to time, and the Investment Company Act of
1940. They By-Laws may provide that the Corporation
shall indemnify its employees and/or agents in any
manner and within such limits as permitted by
applicable law. Such indemnification shall be in
addition to any other right or claim to which any
director, officer, employee or agent may otherwise be
entitled.
The Corporation may purchase and maintain
insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation
or is or was serving at the request of the Corporation
as a director, officer, partner, trustee, employee or
agent of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise
or employee benefit plan against any liability asserted
against and incurred by such person in any such
capacity or arising out of such person's position,
whether or not the Corporation would have had the power
to indemnify against such liability.
The rights provided to any person by this Article
shall be enforceable against the Corporation by such
person who shall be presumed to have relied upon such
rights in serving or continuing to serve in the
capacities indicated herein. No amendment of these
Articles of Amendment and Restatement shall impair the
rights of any person arising at any time with respect
to events occurring prior to such amendment.
Nothing in these Articles of Amendment and
Restatement shall be deemed to (i) require a waiver of
compliance with any provision of the Securities Act of
1933, as amended, or the Investment Company Act of
1940, as amended, or of any valid rule, regulation or
order of the Securities and Exchange Commission under
those Acts or (ii) protect any director or officer of
the Corporation against any liability to the
Corporation or its stockholder to which he would
48
<PAGE>
otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of his
or her duties or by reason of his or her reckless
disregard of his or her obligations and duties
hereunder.
Article V of Registrant's Amended and Restated By-Laws
states as follows:
INDEMNIFICATION AND INSURANCE
-----------------------------
Section 1. Indemnification of directors and officers. Any person who
was or is a party or is threatened to be made a party in any
threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the
fact that such person is a current or former director or officer of
the corporation, or is or was serving while a director or officer of
the corporation at the request of the corporation as a director,
officer, partner, trustee, employee, agent or fiduciary or another
corporation, partnership, joint venture, trust, enterprise or employee
benefit plan, shall be indemnified by the corporation against
judgments, penalties, fines, excise taxes, settlements and reasonable
expenses (including attorneys' fees) actually incurred by such person
in connection with such action, suit or proceeding to the fullest
extent permissible under the maryland general corporation law, the
securities act of 1933 and the 1940 act, as such statutes are now or
hereafter in force, except that such indemnity shall not protect any
such person against any liability to the corporation or any
stockholder thereof to which such person 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
("disabling conduct").
Section 2. Advances. Any current or former director or officer of the
corporation claiming indemnification within the scope of this article
v shall be entitled to advances from the corporation for payment of
the reasonable expenses incurred by him in connection with proceedings
to which he is a party in the manner and to the fullest extent
permissible under the maryland general corporation law, the securities
act of 1933 and the 1940 act, as such statutes are now or hereafter in
force; provided however, that the person seeking indemnification shall
provide to the corporation a written affirmation of his good faith
belief that the standard of conduct necessary for indemnification by
the corporation has been met and a written undertaking by or on behalf
of the director to repay any such advance if it is ultimately
determined that he is not entitled to indemnification, and provided
further that at least one of the following additional conditions is
met: (1) the person seeking indemnification shall provide a security
in form and amount acceptable to the corporation for his undertaking;
(2) the corporation is insured against losses arising by reason of the
advance; or (3) a majority of a quorum of directors of the corporation
who are neither "interested persons" as defined in section 2(a)(19) of
the 1940 act, as amended, nor parties to the proceeding
("disinterested non-party directors") or independent legal counsel, in
a written opinion, shall determine, based on a review of facts readily
available to the corporation at the time the advance is proposed to be
made, that there is reason to believe that the person seeking
indemnification will ultimately be found to be entitled to
indemnification.
Section 3. Procedure. At the request of any current or former director
or officer, or any employee or agent whom the corporation proposes to
indemnify, the board of directors shall determine, or cause to be
determined, in a manner consistent with the maryland general
corporation law, the securities act of 1933 and the 1940 act, as such
statutes are now or hereafter in force, whether the standards required
by this article v have been met; provided, however, that
indemnification shall be made only following: (1) a final decision on
the merits by a court or other body before whom the proceeding was
brought that the person to be indemnified was not liable by reason of
disabling conduct; or (2) in the absence of such a decision, a
reasonable determination, based upon a review of the facts, that the
person to be indemnified was not liable by reason of disabling
conduct, by (a) the vote of the majority of a quorum of disinterested
non-party directors or (b) an independent legal counsel in a written
opinion.
49
<PAGE>
Section 4. Indemnification of employees and agents. Employees and
agents who are not officers or directors of the corporation may be
indemnified, and reasonable expenses may be advanced to such employees
or agents, in accordance with the procedures set forth in this article
v to the extent permissible under the maryland general corporation
law, the securities act of 1933 and the 1940 act, as such statutes are
now or hereafter in force, and to such further extent, consistent with
the foregoing, as may be provided by action of the board of directors
or by contract.
Section 5. Other rights. The indemnification provided by this article
v shall not be deemed exclusive of any other right, in respect of
indemnification or otherwise, to which those seeking such
indemnification may be entitled under any insurance or other
agreement, vote of stockholders or disinterested directors or
otherwise, both as to action by a director or officer of the
corporation in his official capacity and as to action by such person
in another capacity while holding such office or position, and shall
continue as to a person who has ceased to be a director or officer and
shall inure to the benefit of the heirs, executors and administrators
of such a person.
Section 6. Constituent, resulting or surviving corporations. For the
purposes of this article v, references to the "corporation" shall
include all constituent corporations absorbed in a consolidation or
merger as well as the resulting or surviving corporation so that any
person who is or was a director, officer, employee or agent of a
constituent corporation or is or was serving at the request of a
constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise shall stand in the same position under this article v with
respect to the resulting or surviving corporation as he would if he
had served the resulting or surviving corporation in the same
capacity.
The application of the foregoing provisions is limited by the
following undertaking set forth in the rules promulgated by the
securities and exchange commission:
Insofar as indemnification for liability arising under
the Securities Act of 1933 may be permitted to
directors, 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 Securities Act of 1933 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 director, officer or controlling person of
the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director,
officer or controlling person in connection with the
securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as
expressed in the Act and will be governed by final
adjudication of such issue.
Item 16. Exhibits
1. (a)Articles of Amendment and Restatement of
the Registrant as of January 24, 1991.
(Incorporated by reference to Exhibit 1(a)
to Post-Effective Amendment No. 56 to the
Registration Statement.)
(b) Articles Supplementary dated September
17, 1992. (Incorporated by reference to
Exhibit 1(b) to Post-Effective Amendment
No. 56 to the Registration Statement.)
50
<PAGE>
(c) Articles Supplementary dated December
1, 1992. (Incorporated by reference to
Exhibit 1(c) to Post-Effective Amendment
No. 56 to the Registration Statement.)
(d) Articles Supplementary dated August 3,
1994. (Incorporated by reference to Exhibit
1(d) to Post-Effective Amendment No. 56 to
the Registration Statement.)
(e) Articles Supplementary dated February
20, 1996. (Incorporated by reference to
Exhibit 1(e) to Post-Effective Amendment
No. 56 to the Registration Statement.)
(f) Articles Supplementary dated September
5, 1996. (Incorporated by reference to
Exhibit 1(f) to Post-Effective Amendment
No. 56 to the Registration Statement.)
(g) Articles Supplementary dated December
12, 1996. (Incorporated by reference to
Post -Effective Amendment No. 56 to the
Registration Statement.)
(h) Articles Supplementary dated March 3,
1997. (Incorporated by reference to Post-
Effective Amendment No. 56 to the
Registration Statement.)
2. (a) Amended and Restated By-Laws of the
Registrant dated March 4, 1991.
(Incorporated by reference to Post-
Effective Amendment No. 56 to the
Registration Statement.)
(b) Amended and Restated By-Laws of the
Registrant dated September 20, 1991.
(Incorporated by reference to Post-
Effective Amendment No. 56 to the
Registration Statement.)
(c) Amended and Restated By-Laws of the
Registrant dated December 12, 1991.
(Incorporated by reference to Post-
Effective Amendment No. 56 to the
Registration Statement.)
(d) Amended and Restated By-Laws of the
Registrant dated September 4, 1996.
(Incorporated by reference to Post-
Effective Amendment No. 56 to the
Registration Statement.)
3. Not Applicable.
4. Form of Agreement and Plan of
Reorganization is filed herewith;
5. Not Applicable.
6. (a) Investment Management Agreement
between the Registrant, on behalf of
Scudder International Fund, and Scudder,
Stevens & Clark, Inc. dated December 14,
1990. (Incorporated by reference to Post-
Effective Amendment No. 56 to the
Registration Statement.)
(b) Investment Management Agreement
between the Registrant, on behalf of
Scudder Latin America Fund, and Scudder,
Stevens & Clark, Inc. dated December 7,
1992. (Incorporated by reference to Post-
Effective Amendment No. 56 to the
Registration Statement.)
51
<PAGE>
(c) Investment Management Agreement
between the Registrant, on behalf of
Scudder Pacific Opportunities Fund, and
Scudder, Stevens & Clark, Inc. dated
December 7, 1992. (Incorporated by
reference to Post-Effective Amendment No.
56 to the Registration Statement.)
(d) Investment Management Agreement
between the Registrant, on behalf of
Scudder Greater Europe Growth Fund, and
Scudder, Stevens & Clark, Inc. dated
October 10, 1994. (Incorporated by
reference to Post-Effective Amendment No.
56 to the Registration Statement.)
(e) Investment Management between the
Registrant on behalf of Scudder
International Fund, and Scudder, Stevens &
Clark, Inc. dated September 8, 1994.
(Incorporated by reference to Post-
Effective Amendment No. 56 to the
Registration Statement.)
(f) Investment Management Agreement
between the Registrant, on behalf of
Scudder Emerging Markets Growth Fund and
Scudder, Stevens & Clark, Inc. dated May 8,
1996. (Incorporated by reference to Post-
Effective Amendment No. 56 to the
Registration Statement.)
(g) Investment Management Agreement
between the Registrant, on behalf of
Scudder International Growth and Income
Fund, and Scudder, Stevens & Clark, Inc.
dated June 10, 1997. (Incorporated by
reference to Post-Effective Amendment No.
56 to the Registration Statement.)
(h) Investment Management Agreement
between the Registrant, on behalf of
Scudder International Fund, and Scudder,
Stevens & Clark, Inc. dated September 5,
1996. (Incorporated by reference to Post-
Effective Amendment No. 56 to the
Registration Statement.)
7. (a) Underwriting Agreement between the
Registrant and Scudder Investor Services,
Inc., formerly Scudder Fund Distributors,
Inc., dated July 15, 1985. (Incorporated by
reference to Post-Effective Amendment No.
56 to the Registration Statement.)
(b) Underwriting Agreement between the
Registrant and Scudder Investor Services,
Inc. dated September 17, 1992.
(Incorporated by reference to Post-
Effective Amendment No. 56 to the
Registration Statement.)
8. Not Applicable.
9. (a)(1) Custodian Contract between the
Registrant and Brown Brothers Harriman &
Co. dated April 14, 1986. (Incorporated by
reference to Post-Effective Amendment No.
56 to the Registration Statement.)
(a)(2) Custodian Contract between the
Registrant, on behalf of Scudder Latin
America Fund, and Brown Brothers Harriman &
Co. dated November 25, 1992. (Incorporated
by reference to Post-Effective Amendment
No. 56 to the Registration Statement.)
(a)(3) Custodian Contract between the
Registrant, on behalf of Scudder Pacific
Opportunities Fund, and Brown Brothers
Harriman & Co. dated November 25, 1992.
52
<PAGE>
(Incorporated by reference to Post-
Effective Amendment No. 56 to the
Registration Statement.)
(a)(4) Custodian Contract between the
Registrant, on behalf of Scudder Greater
Europe Growth Fund, and Brown Brothers
Harriman & Co. dated October 10, 1994.
(Incorporated by reference to Post-
Effective Amendment No. 56 to the
Registration Statement.)
(a)(5) Fee schedule for Exhibit 9(a)(1).
(Incorporated by reference to Post-
Effective Amendment No. 56 to the
Registration Statement.)
(a)(6) Revised fee schedule for Exhibit
9(a)(1). (Incorporated by reference to
Post-Effective Amendment No. 56 to the
Registration Statement.)
(a)(7) Custodian Contract between the
Registrant and Brown Brothers Harriman &
Co. dated March 7, 1995. (Incorporated by
reference to Post-Effective Amendment No.
56 to the Registration Statement.)
(a)(8) Fee schedule for Exhibit 9(a)(7).
(Incorporated by reference to Post-
Effective Amendment No. 56 to the
Registration Statement.)
(b)(1) Master Subcustodian Agreement
between Brown Brothers Harriman & Co. and
Morgan Guaranty Trust Company of New York,
Tokyo office, dated November 8, 1976.
(Incorporated by reference to Post-
Effective Amendment No. 56 to the
Registration Statement.)
(b)(2) Fee schedule for Exhibit 9(b)(1).
(Incorporated by reference to Post-
Effective Amendment No. 56 to the
Registration Statement.)
(c)(1) Master Subcustodian Agreement
between Brown Brothers Harriman & Co. and
Morgan Guaranty Trust Company of New York,
Brussels office, dated November 15, 1976.
(Incorporated by reference to Post-
Effective Amendment No. 56 to the
Registration Statement.)
(c)(2) Fee schedule for Exhibit 9(c)(1).
(Incorporated by reference to Post-
Effective Amendment No. 56 to the
Registration Statement.)
(d)(1) Subcustodian Agreement between
Brown Brothers Harriman & Co. and The Bank
of New York, London office, dated January
30, 1979. (Incorporated by reference to
Post-Effective Amendment No. 56 to the
Registration Statement.)
(d)(2) Fee schedule for Exhibit 9(d)(1).
(Incorporated by reference to Post-
Effective Amendment No. 56 to the
Registration Statement.)
(e)(1) Master Subcustodian Agreement
between Brown Brothers Harriman & Co. and
The Chase Manhattan Bank, N.A., Singapore
office, dated June 9, 1980. (Incorporated
by reference to Post-Effective Amendment
No. 56 to the Registration Statement.)
(e)(2) Fee schedule for Exhibit 9(e)(1).
(Incorporated by reference to Post-
Effective Amendment No. 56 to the
Registration Statement.)
53
<PAGE>
(f)(1) Master Subcustodian Agreement
between Brown Brothers Harriman & Co. and
The Chase Manhattan Bank, N.A., Hong Kong
office, dated June 4, 1979. (Incorporated
by reference to Post-Effective Amendment
No. 56 to the Registration Statement.)
(f)(2) Fee schedule for Exhibit 9(f)(1).
(Incorporated by reference to Post-
Effective Amendment No. 56 to the
Registration Statement.)
(g)(1) Master Subcustodian Agreement
between Brown Brothers Harriman & Co. and
Citibank, N.A. New York office, dated July
16, 1981. (Incorporated by reference to
Post-Effective Amendment No. 56 to the
Registration Statement.)
(g)(2) Fee schedule for Exhibit 9(g)(1).
(Incorporated by reference to Post-
Effective Amendment No. 56 to the
Registration Statement.)
10. Not Applicable
11. Opinion and Consent of Ober, Kaler,
Grimes and Shriver dated September 24, 1997 filed
herewith as exhibit 1.
12. Opinion of Dechert Price & Rhoads filed herewith
as exhibit 2.
13. (a)(1) Transfer Agency and Service
Agreement between the Registrant and
Scudder Service Corporation dated October
2, 1989. (Incorporated by reference to Post-
Effective Amendment No. 56 to the
Registration Statement.)
(a)(2) Fee schedule for Exhibit
13(a)(1). (Incorporated by reference to
Post-Effective Amendment No. 56 to the
Registration Statement.)
(a)(3) Service Agreement between
Copeland Associates, Inc. and Scudder
Service Corporation dated June 8, 1995.
(Incorporated by reference to Post-
Effective Amendment No. 56 to the
Registration Statement.)
(b) Letter Agreement between the
Registrant and Cazenove, Inc. dated January
23, 1978, with respect to the pricing of
securities. (Incorporated by reference to
Post-Effective Amendment No. 56 to the
Registration Statement.)
(c)(1) COMPASS Service Agreement between
the Registrant and Scudder Trust Company
dated January 1, 1990. (Incorporated by
reference to Post-Effective Amendment No.
56 to the Registration Statement.)
(c)(2) Fee schedule for Exhibit
(13)(c)(1). (Incorporated by reference to
Post-Effective Amendment No. 56 to the
Registration Statement.)
(c)(3) COMPASS and TRAK 2000 Service
Agreement between the Registrant and
Scudder Trust Company dated October 1,
1995.
(Incorporated by reference to Exhibit
9(c)(3) to Post-Effective Amendment No. 56
to the Registration Statement.)
54
<PAGE>
(d)(1) Shareholder Services Agreement
between the Registrant and Charles Schwab &
Co., Inc. dated June 1, 1990. (Incorporated
by reference to Post-Effective Amendment
No. 56 to the Registration Statement.)
(d)(2) Administrative Services Agreement
between the Registrant and McGladrey &
Pullen, Inc. dated September 30, 1995.
(Incorporated by reference to Exhibit 9(d)(2) to
Post-Effective Amendment No. 56 to the
Registration Statement.)
(e)(1) Fund Accounting Services
Agreement between the Registrant, on behalf
of Scudder Greater Europe Growth Fund, and
Scudder Fund Accounting Corporation dated
October 10, 1994.
(Incorporated by reference to Post-
Effective Amendment No. 56 to the
Registration Statement.)
(e)(2) Fund Accounting Services
Agreement between the Registrant, on behalf
of Scudder International Fund, and Scudder
Fund Accounting Corporation dated April 12,
1995. (Incorporated by reference to Post-
Effective Amendment No. 56 to the
Registration Statement.)
(e)(3) Fund Accounting Services
Agreement between the Registrant, on behalf
of Scudder Latin America Fund dated May 17,
1995.
(Incorporated by reference to Exhibit
9(e)(3) to Post-Effective Amendment No. 56
to the Registration Statement.)
(e)(4) Fund Accounting Services
Agreement between the Registrant, on behalf
of Scudder Pacific Opportunities Fund dated
May 5, 1995.
(Incorporated by reference to Exhibit
9(e)(4) to Post-Effective Amendment No. 56
to the Registration Statement.)
(e)(5) Fund Accounting Services
Agreement between the Registrant, on behalf
of Scudder Emerging Markets Growth Fund
dated May 8, 1996.
(Incorporated by reference to Exhibit
9(e)(5) to Post-Effective Amendment No. 56
to the Registration Statement.)
(e)(6) Fund Accounting Services
Agreement between the Registrant, on behalf
of Scudder International Growth and Income
Fund dated June 3, 1997. (Incorporated by
reference to Post-Effective Amendment No.
56 to the Registration Statement.)
14. (a) Consent of Coopers & Lybrand LLP filed
with the Registrant's Registration
Statement on Form N-14 on August 26, 1997
and incorporated by reference herein.
(b) Consent of Price Waterhouse LLP filed
with the Registant's Registration Statement
on Form N-14 on August 26, 1997 and
incorporated by reference herein.
15. Not Applicable
16. Not Applicable
55
<PAGE>
17. (a) Copy of earlier declaration by
Scudder International Fund, Inc.
registering an indefinite amount of
securities pursuant to Rule 24f-2 under the
Investment Company Act of 1940 filed
herewith as exhibit 3.
(b) Form of proxy card filed herewith
as exhibit 4.
Item 17. Undertakings
(1) The undersigned registrant agrees that prior to any public
reoffering of the securities registered through the use of a
prospectus which is a part of this registration statement by any
person or party who is deemed to be an underwriter within the
meaning of Rule 145(c) of the Securities Act [17 CFR 230.145c],
the reoffering prospectus will contain the information called for
by the applicable registration form for reofferings by persons
who may be deemed underwriters, in addition to the information
called for by the other items of the applicable form.
(2) The undersigned registrant agrees that every prospectus that
is filed under paragraph (1) above will be filed as a part of an
amendment to the registration statement and will not be used
until the amendment is effective, and that, in determining any
liability under the 1933 Act, each post-effective amendment shall
be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
56
<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 Pre-Effective Amendment No. 1 to its Registration
Statement on Form N-14 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston and
the Commonwealth of Massachusetts on the 22th day of September,
1997.
Scudder International Fund, Inc.
By: /s/ Thomas F. McDonough*
------------------------
Thomas F. McDonough, Secretary
*By: /s/ Sheldon A. Jones
----------------------
Sheldon A. Jones
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement on Form N-14 has been signed below by
the following persons in the capacities and on the dates
indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/Daniel Pierce Chairman of the Board
- ----------------
Daniel Pierce and Director September 22, 1997
/s/Paul Bancroft III* Director
- ----------------
Paul Bancroft III September 22, 1997
/s/Nicholas Bratt* Director
- ----------------
Nicholas Bratt September 22, 1997
/s/Thomas J. Devine* Director
- ----------------
Thomas J. Devine September 22, 1997
/s/Keith R. Fox* Director
- ----------------
Keith R. Fox September 22, 1997
/s/William H. Director
Gleysteen, Jr.* September 22, 1997
- ----------------
William H. Gleysteen,
Jr.
/s/David S. Lee* Director
- ----------------
David S. Lee September 22, 1997
/s/William H. Luers* Director
- ----------------
William H. Luers September 22, 1997
/s/ Wilson Nolen* Director
- ----------------
Wilson Nolen September 22, 1997
57
<PAGE>
- ---------------- Director
Kathryn L. Quirk
/s/ Dr. Gordon Director
Shillinglaw* September 22, 1997
- ----------------
Dr. Gordon
Shillinglaw
/s/ Pamela A. McGrath (Principal Financial
- ---------------- and Accounting September 22, 1997
Pamela A. McGrath Officer) Treasurer
*By: /s/ Sheldon A. Jones September 22, 1997
----------------
Sheldon A. Jones
Attorney-in-fact
*Executed pursuant to powers of attorney filed with the
Registrant's Registration Statement on Form N-14 as filed with
the Commission electronically on August 26, 1997.
58
File No. 2-14400
File No. 811-642
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
______
Pre-Effective Amendment No. ________ /_____/
______
Post-Effective Amendment No. 22 /__X__/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
______
Amendment No. 2 /_____/
Scudder International Fund, Inc.
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
345 Park Avenue, New York, NY 10154
-------------------------------------------------- ------
(Address of Principal Executive Offices) (Zip code)
Registrant's Telephone Number, including Area Code 617-482-3990
------------
Alfred G. Harris, Scudder, Stevens & Clark
175 Federal Street, Boston, MA 02110
-------------------------------------------
(Name and Address of Agent for Service)
PURSUANT TO RULE 24f-2 UNDER THE INVESTMENT COMPANY ACT OF 1940,
THE POST-EFFECTIVE AMENDMENT ADDS AN INDEFINITE NUMBER OF SHARES
OF CAPITAL STOCK TO THOSE PREVIOUSLY REGISTERED UNDER THE
SECURITIES ACT OF 1933.
PROXY SCUDDER INSTITUTIONAL INTERNATIONAL EQUITY PORTFOLIO
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Special Meeting of Stockholders - October 23, 1997
The undersigned hereby appoints Edgar R. Fiedler, David S. Lee and Daniel
Pierce and each of them, the proxies of the undersigned, with the power of
substitution to each of them, to vote all shares of the Fund which the
undersigned is entitled to vote at the Special Meeting of Stockholders of the
Fund to be held at the offices of Scudder, Stevens & Clark, Inc., 25th Floor,
345 Park Avenue, New York, New York, 10154 on October 23, 1997 at 8:30 a.m.,
Eastern time, and at any adjournments thereof.
Unless otherwise specified in the squares provided, the undersigned's vote
will be cast FOR each numbered item listed below.
The Board members of your Fund, including those who are not affiliated with
the Fund or Scudder, recommend that you vote FOR each item.
1. To approve an Agreement and Plan of Reorganization;
FOR __ AGAINST __ ABSTAIN __
2. To approve the new Investment Management Agreement between the
Fund and Scudder Kemper Investments, Inc.;
FOR __ AGAINST __ ABSTAIN __
3. The election of Directors;
FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the contrary to vote for all nominees
below) __ listed below ___
Nominees: Dr. Rosita P. Chang, Edgar R. Fiedler, Peter B. Freeman,
Dr. J.D. Hammond and Richard M. Hunt.
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name on the space provided below.)
__________________________________________________
[continued on other side]
<PAGE>
4. Ratification of the selection of Price
Waterhouse LLP as the Fund's independent
accountants. FOR __ AGAINST __ ABSTAIN __
The proxies are authorized to vote in their discretion on any
other business which may properly come before the meeting and any
adjournments thereof.
Please sign exactly as your name or names appear. When signing as attorney,
executor, administrator, trustee or guardian, please give your full title as
such.
___________________________________________
(Signature of Stockholder)
___________________________________________
(Signature of joint owner, if any)
Dated ___________________, 1997
PLEASE SIGN AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.
NO POSTAGE IS REQUIRED.
September 24, 1997
Page 1
September 24, 1997
Scudder International Fund, Inc.
345 Park Place
New York, New York 10154
Ladies and Gentlemen:
We have acted as special Maryland counsel to Scudder International
Fund, Inc. ("Scudder International"), a corporation organized under the
laws of the State of Maryland on June 23, 1975, and having its principal
place of business in New York, New York. Scudder International has six
authorized series of stock, the International Fund series (the
"International Fund Series"), the Latin America Fund series, the Pacific
Opportunities Fund series, the Greater Europe Growth Fund series, the
Emerging Markets Growth Fund series and the International Growth and
Income Fund series. The International Fund Series currently consists of
two hundred million (200,000,000) authorized shares of capital stock,
with a par value of One Cent ($0.01) per share.
Scudder International has filed a registration statement on Form N-14
(the "Registration Statement") with the Securities and Exchange
Commission, relating to, among other things, the registration under the
Securities Act of 1933, as amended (the "Securities Act"), of shares of
the Barrett International Shares class of the International Fund Series.
Shares of the Barrett International Shares class of the International
Fund Series are to be issued pursuant to an Agreement and Plan of
Reorganization (the "Agreement") dated September 18, 1997, between
Scudder International, on behalf of the International Fund Series, and
Scudder Institutional Fund, Inc. ("Scudder Institutional"), a
corporation organized under the laws of the State of Maryland on January
2, 1986, and having its principal place of business in New York, New
York, on behalf of Scudder Institutional's Institutional International
Equity Portfolio series (the "Institutional Fund Series"). Pursuant to
the Agreement (i) the Institutional Fund Series will transfer all or
substantially all of its assets to the International Fund Series in
exchange for shares of the Barrett International Shares class of the
International Fund Series and the assumption by the International Fund
Series of all identified and stated liabilities of the Institutional
Fund Series and (ii) such shares of the Barrett International Shares
class of the International Fund Series will be distributed to the
shareholders of the Institutional Fund Series in complete liquidation of
the Institutional Fund Series.
We understand that, as of the date of this opinion, Scudder
International does not have the authority to issue shares of the Barrett
International Shares class of the International Fund Series because the
Barrett International Shares class of the International Fund Series has
not been created. We understand, however, that prior to the closing
under the Agreement (the "Closing"), the Board of Directors of Scudder
International will adopt resolutions, pursuant to Section 2-208 of the
Maryland General Corporation Law (the "MGCL"), classifying a number of
<PAGE>
September 24, 1997
Page 2
the then unissued shares of the International Fund Series as the Barrett
International Shares class of the International Fund Series and will
cause to be filed articles supplementary (the "Articles Supplementary")
with the Maryland State Department of Assessments and Taxation (the
"Department") in connection with such resolutions. We further understand
that shares of the International Fund Series not classified as the
Barrett International Shares class of the International Fund Series will
be appropriately described in the Articles Supplementary as a separate
class of the International Fund Series. The Registration Statement
provides that the Barrett International Shares class of the
International Fund Series will be identical in all material respects to
the shares of the International Fund Series currently being offered and
sold, except as otherwise described in the Registration Statement. In
rendering the opinion expressed herein, we have assumed that, prior to
the Closing: (i) Scudder International will take the actions described
in this paragraph; (ii) the Articles Supplementary will be prepared and
executed in the manner required by the MGCL; and (iii) the Articles
Supplementary will be filed and accepted for record by the Department.
We further understand that, as of the date of this opinion, the assets
of the Institutional Fund Series of Scudder Institutional constitute all
or substantially all of the assets of Scudder Institutional and that,
contemporaneous with the Closing, Scudder Institutional will file,
pursuant to Section 3-109 of the MGCL, articles of transfer (the
"Articles of Transfer") with the Department. In rendering the opinion
expressed herein, we have assumed that, prior to or contemporaneous with
the Closing, the Articles of Transfer will be prepared and executed in
accordance with the requirements of the MGCL and will be filed and
accepted for record by the Department.
In rendering the opinion set forth below, we have examined originals or
copies, certified or otherwise identified to our satisfaction, of the
following documents:
a. the Charter of Scudder International, as on file with the
Department;
b. the Bylaws of Scudder International;
c. the Agreement;
d. the Registration Statement, including all amendments thereto;
e. a certificate of the Department dated September 23, 1997 as to
Scudder International's good standing in the State of
Maryland; and
f. a certificate of an officer of Scudder International as to the
accuracy and completeness of certain corporate records
presented to us as to certain corporate actions to be taken by
Scudder International in connection with the Agreement.
<PAGE>
September 24, 1997
Page 3
In addition, we have reviewed such other documents and have made such
legal and factual investigations as we have deemed necessary or
appropriate for purposes of rendering the opinions set forth herein. In
our investigation, we have assumed the genuineness of all signatures,
the proper execution of all documents submitted to us as originals, the
conformity to the original documents of all documents submitted to us as
copies, the authenticity of the originals of such copies.
In addition, in rendering the opinion expressed herein, we have assumed
(i) that there have been no modifications of any provision of any
document reviewed by us in connection with the rendering of this
opinion; (ii) the truthfulness of each statement as to all factual
matters otherwise not known to us to be untruthful contained in any
document encompassed within any due diligence review undertaken by us;
(iii) the legal existence of Scudder Institutional; (iv) the due
authorization of Scudder Institutional and Scudder International to
enter into the transactions contemplated by the Agreement and the
Articles of Transfer; (v) the due execution and delivery of Scudder
Institutional and Scudder International of the Agreement; (vi) that the
Articles of Transfer will be duly executed and delivered by Scudder
Institutional and Scudder International; (vii) the legality, validity,
binding effect, and enforceability as to each of Scudder Institutional
and Scudder International of the Agreement; (viii) that the Articles of
Transfer will be legal, valid, binding and enforceable against Scudder
Institutional and Scudder International; (ix) that each of Scudder
Institutional and Scudder International has the legal right and power,
corporate or other, and authority under all applicable laws and
regulations to execute, deliver, and perform all of its obligations
under the Agreement and the Articles of Transfer and (x) that prior to
the Closing, the Board of Directors of Scudder International will adopt
resolutions, pursuant to Section 2-203 of the MGCL, authorizing the
issuance of the Barrett International Shares class of the International
Fund Series pursuant to and in accordance with the terms described in
the Agreement and the Registration Statement.
In rendering the opinion expressed herein, we also have assumed that at
no time prior to and including the date when the shares of the Barrett
International Shares class of the International Fund Series are issued
to the Institutional Fund Series pursuant to the Agreement will (i)
Scudder's Charter, Bylaws or the corporate authorization to issue the
Shares be amended, repealed or revoked or (ii) the total number of the
issued shares of the Barrett International Shares class of the
International Fund Series exceed the number of shares of such class
classified by the Articles Supplementary. We further assume that at all
times (i) the net asset value per share of the Barrett International
Shares class of International Fund Series will exceed One Cent ($0.01)
and (ii) Scudder International will be in good standing with the
Department.
As to matters of law, this opinion is based solely on the MGCL. We
express no opinion herein as to any other laws, statutes, regulations or
ordinances, including, without limitation, the Securities Act of 1933,
as amended (the "Securities Act"), the Investment Company Act of 1940,
as amended (the "Investment Company Act"), or the securities laws of any
state.
<PAGE>
September 24, 1997
Page 4
Based on the foregoing, and subject to the assumptions and
qualifications set forth herein, we are of the opinion that:
1. If and when issued to the Institutional Fund Series pursuant to the
terms of the Agreement and under the circumstances contemplated by the
Registration Statement, the shares of the Barrett International Shares
class of the International Fund Series will be duly and validly issued,
fully paid and non-assessable.
We assume no obligation to advise you of any changes in the foregoing
subsequent to the delivery of this opinion letter. We consent to your
filing of this opinion letter with the Securities and Exchange
Commission (the "SEC") in connection with an amendment to the
Registration Statement which you are about to file pursuant to the
Securities Act.
Sincerely yours,
/s/ Ober, Kaler, Grimes & Shriver,
a Professional Corporation
September 24, 1997
Scudder Institutional Fund, Inc.
in respect of
Institutional International Equity Portfolio
345 Park Avenue
New York, NY 10154
Scudder International Fund
in respect of
Scudder International Fund
345 Park Avenue
New York, NY 10154
Gentlemen:
You have requested our opinion regarding certain federal income tax
consequences to the Institutional International Equity Portfolio ("Target"), a
separate series of Scudder Institutional Fund, Inc. ("Scudder Institutional"),
to the holders of the shares of Scudder Institutional Fund, Inc. (the "shares")
of Target (the "Target shareholders"), and to Scudder International Fund
("Acquiring Fund"), a separate series of Scudder International Fund, Inc.
("Scudder International"), in connection with the proposed transfer of
substantially all of the assets of Target to Acquiring Fund in exchange solely
for voting shares of common stock of Acquiring Fund ("Acquiring Fund shares")
and the assumption by Acquiring Fund of certain liabilities of Target, followed
by the distribution of such Acquiring Fund shares received by Target in complete
liquidation, all pursuant to the Agreement and Plan of Reorganization (the
"Plan") dated as of September 18, 1997 (the "Reorganization").
For purposes of this opinion, we have examined and rely upon (1) the
Plan, (2) the Form N-14, filed by Scudder International on or about September
24, 1997, with the Securities and Exchange Commission, (3) the facts and
representations contained in the letter dated September 24, 1997, addressed to
us from Scudder Institutional, (4) the facts and representations contained in
the letter dated September 24, 1997, addressed to us from Scudder International,
and (5) such other documents and instruments as we have deemed necessary or
appropriate for purposes of rendering this opinion.
This opinion is based upon the Internal Revenue Code of 1986, as
amended (the "Code"), United States Treasury regulations, judicial decisions and
administrative rulings and pronouncements of the Internal Revenue Service, all
<PAGE>
Institutional International Equity Portfolio
Scudder International Fund
September 24, 1997
Page 2
as in effect on the date hereof. This opinion is conditioned upon (a) the
Reorganization taking place in the manner described in the Plan and the Form
N-14 referred to above, (b) the facts and representations contained in the
letters dated September 24, 1997, addressed to us from Scudder Institutional and
Scudder International, respectively, being true and accurate as of the closing
date of the Reorganization, and (c) there being no change in the Code, United
States Treasury regulations, judicial decisions, or administrative rulings and
pronouncements of the Internal Revenue Service between the date hereof and the
closing date of the Reorganization.
Based upon the foregoing, it is our opinion that:
(1) The acquisition by Acquiring Fund of substantially all of the
assets of Target in exchange solely for Acquiring Fund shares and the assumption
by Acquiring Fund of certain liabilities of Target, followed by the distribution
of such Acquiring Fund shares to the Target shareholders in exchange for their
Target shares in complete liquidation of Target, will constitute a
reorganization within the meaning of Section 368(a) of the Code. Acquiring Fund
and Target will each be "a party to a reorganization" within the meaning of
Section 368(b) of the Code.
(2) No gain or loss will be recognized to Target upon the
transfer of substantially all of its assets to Acquiring Fund in exchange
solely for Acquiring Fund shares and the assumption by Acquiring Fund of
certain liabilities of Target, or upon the distribution to the Target
shareholders of the Acquiring Fund shares.
(3) No gain or loss will be recognized by Acquiring Fund upon the
receipt of Target's assets in exchange for Acquiring Fund shares.
(4) The basis of the assets of Target in the hands of Acquiring
Fund will be, in each instance, the same as the basis of those assets in the
hands of Target immediately prior to the Reorganization exchange.
(5) The holding period of Target's assets in the hands of
Acquiring Fund will include the period during which the assets were held by
Target.
(6) No gain or loss will be recognized to the Target shareholders
upon the receipt of Acquiring Fund shares solely in exchange for Target shares.
(7) The basis of the Acquiring Fund shares received by the Target
shareholders will be the same as the basis of the Target shares surrendered in
exchange therefor.
(8) The holding period of the Acquiring Fund shares received by
the Target shareholders will include the holding period of the Target shares
surrendered in exchange therefor, provided that such Target shares were held as
<PAGE>
Institutional International Equity Portfolio
Scudder International Fund
September 24, 1997
Page 3
capital assets in the hands of the Target shareholders upon the date of the
exchange.
We express no opinion as to the federal income tax consequences of the
Reorganization except as expressly set forth above, or as to any transaction
except those consummated in accordance with the Plan.
This opinion must be confirmed by us in writing on the closing date of
the Reorganization or will be deemed to have been withdrawn.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement on Form N-14 filed by Scudder International with the
Securities and Exchange Commission.
Very truly yours,
/s/Dechert Price & Rhoads
Dechert Price & Rhoads
